GAO 

United States Government Accountability Office

Report to Congressional Committees

RECOVERY ACT

Funds Continue to 

Provide Fiscal Relief 

to States and 

Localities, While 

Accountability and 

Reporting Challenges 

Need to Be Fully 

Addressed 

(Appendixes) 

September 2009 

GAO-09-1017SP 
Page i GAO-09-1017SP 

Contents 

Contents 1 

Appendix I: Arizona AZ-1 

Appendix II: California CA-1 

Appendix III: Colorado CO-1 

Appendix IV: District of Columbia DC-1 

Appendix V: Florida FL-1 

Appendix VI: Georgia GA-1 

Appendix VII: Illinois IL-1 

Appendix VIII: Iowa IA-1 

Appendix IX: Massachusetts MA-1 

Appendix X: Michigan MI-1 

Appendix XI: Mississippi MS-1 

Appendix XII: New Jersey NJ-1 

Appendix XIII: New York NY-1 

Appendix XIV: North Carolina NC-1 

Appendix XV: Ohio OH-1 

Appendix XVI: Pennsylvania PA-1 

Appendix XVII: Texas TX-1 

 Recovery Act 
Appendix I: Arizona 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Arizona. The full report on all of our work, which covers 16 

states and the District of Columbia, is available at www.gao.gov/recovery/. 

Overview 

We reviewed two programs in Arizona funded under the Recovery Act—

Highway Infrastructure Investment and the Weatherization Assistance 

Program. We selected these for different reasons. Contracts for highway 

projects using Highway Infrastructure Investment funds have been under 

way in Arizona for several months, and provided an opportunity to review 

financial controls, including the oversight of contracts. The Weatherization 

Assistance Program funding provided a significant addition to the annual 

appropriations for the program assisting more low-income households to 

achieve energy efficiency while providing long-term financial relief. 

Furthermore, it provided an opportunity to determine the state and local 

procedures in place to ensure monitoring, tracking, and measurement of 

weatherization program success. We reviewed contracting procedures and 

examined four specific contracts under Recovery Act Highway 

Infrastructure Investment funds. In addition to these two programs, we 

also updated funding information on three Recovery Act education 

programs with significant funds being disbursed—the U.S. Department of 

Education (Education) State Fiscal Stabilization Fund (SFSF) and 

Recovery Act funds under Title I, Part A, of the Elementary and Secondary 

Education Act of 1965 (ESEA), as amended, and the Individuals with 

Disabilities Education Act (IDEA), Part B. Consistent with the purposes of 

the Recovery Act, funds from the programs we reviewed are being 

directed to help Arizona and local governments stabilize their budgets and 

to stimulate infrastructure development and expand existing programs—

thereby providing needed services and potential jobs. The following 

provides highlights of our review of these funds: 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $522 million in Recovery Act 

funds to Arizona. As of September 1, 2009, the federal government has 

obligated $293 million to Arizona and $18 million has been reimbursed 

by the federal government. 

Page AZ-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix I: Arizona 

• As of September 3, 2009, Arizona has awarded 47 contracts totaling 

$135.1 million for statewide highway projects. Arizona has provided for 

at least one construction contract for Recovery Act highway project in 

each of its 15 counties with all counties receiving at least $100,000 in 

statewide Recovery Act Federal Highway funds and 13 of the 15 

counties each receiving at least $1.8 million. 

• Arizona has awarded only three construction contracts for local 

highway projects because of a lack of local shovel-ready projects. The 

lack of projects was due to some localities’ not understanding the 

allocations that they would receive as well as their unfamiliarity with 

federal highway requirements. 

Weatherization Assistance 

Program 

• The U.S. Department of Energy has allocated to Arizona about $57 

million in funding for the Recovery Act Weatherization Assistance 

Program for a 3-year period. As of September 1, 2009, approximately 

$49 million has been allocated to local service providers to conduct 

weatherization training and make energy efficiency improvements with 

approximately $28.5 million eligible for reimbursement. 

• Arizona expects to expend the full Recovery Act funding allocation 

before the 3-year period and plans to weatherize approximately 6,400 

units statewide, which according to state officials, could result in as 

much as $1.8 million in overall energy savings annually. 

• As of September 11, 2009, Arizona had expended $771,485 of Recovery 

Act weatherization funds, or about 1.4 percent of the total allocation. 

While most local service providers were ready to begin weatherization 

work, they waited until they were provided final Davis-Bacon Act local 

wage requirements. 

Updated Funding 

Information on Education 

Programs 

• Education has awarded Arizona approximately $557 million of the 

state’s approximately $1 billion of SFSF available funds. Of that, 

Arizona had planned to provide approximately $250 million to 

elementary and secondary local education agencies and approximately 

$183 million to public institutions of higher education. As of September 

8, 2009, Arizona had not disbursed any SFSF funds to local education 

agencies or community colleges, but has disbursed approximately $154 

million to the state’s three universities. 

• Additionally, Education has awarded Arizona about $195 million in 

Recovery Act ESEA Title I funds. Arizona has allocated about $185 

million, or 95 percent of these funds, to local education agencies 

Page AZ-2 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

(LEA). Based on information available as of September 8, 2009, 

Arizona has disbursed about $3 million to local education agencies. 

These funds are to be used to help educate disadvantaged youth. 

• Education has also awarded Arizona about $184 million in Recovery 

Act funds under IDEA, Part B. As of September 8, 2009, local education 

agencies have been allocated all $184 million and have received $2.2 

million of the funds. The IDEA funds are to be used to support special 

education and related services for children and youth with disabilities. 

In the face of declining revenues and economic activity, Arizona is using 

Recovery Act funding to help balance the state budget and minimize the 

large program reductions to the fiscal years 2009 and 2010 budgets. 

According to state budget officials, Arizona’s general fund full year 

collections for fiscal year 2009 were $7.69 billion, a decrease of 18.4 

percent compared to fiscal year 2008, after various accounting 

adjustments, such as fund transfers. To address this revenue gap, the state 

reduced its overall general fund appropriations by approximately $1.4 

billion in fiscal year 2009, or 14 percent compared to fiscal year 2008, and 

applied $750 million in Recovery Act funding to reduce expenditures, 

according to the Joint Legislative Budget Committee.2

 However, despite 

these cuts and the Recovery Act federal assistance, Arizona had an 

estimated remaining budget shortfall of $479 million. While the state has a 

balanced budget requirement, according to the budget committee staff, the 

Arizona constitution permits the state to address any year-end shortfall in 

the next fiscal year. As a result, Arizona’s fiscal year 2009 estimated 

shortfall of $479 million was carried over and addressed in the fiscal year 

2010 budget. 

Arizona Using 

Recovery Act Funds 

to Provide Short-Term 

Relief; Anticipates 

Fiscal Challenges to 

Continue after 

Recovery Act Funds 

Expire 

For fiscal year 2010, which began in Arizona on July 1, 2009, Recovery Act 

funding will continue to temporarily stabilize the state budget. As of 

September 4, 2009, Governor Brewer has signed, vetoed or line item 

vetoed all fiscal year 2010 budget bills transmitted to her by the Arizona 

legislature. Arizona’s anticipated shortfall for fiscal year 2010 of $3.16 

billion was largely resolved by the Governor’s actions on the budget bills, 

according to the Joint Legislative Budget Committee. The budget includes 

 

2

In our April 2009 report we noted that Arizona depleted its budget stabilization fund, or 

rainy-day fund. 

Page AZ-3 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Recovery Act funding of approximately $1.13 billion.3 However, according 

to the Governor, the bills did not amount to a comprehensive state 

revenue strategy for fiscal year 2010 and future fiscal years. In particular, 

the Governor exercised line item veto authority on the Department of 

Education and Department of Economic Security reductions, while 

acknowledging this level was higher than the state’s current available 

revenues can sustain. In her transmittal letter, the Governor cited her 

intent to restore education funding and preserve spending levels to meet 

Recovery Act requirements. The Governor vetoed legislation which 

affected funding and the assessment of fees for a number of smaller state 

agencies and commissions and also allowed the 3-year-old temporary 

suspension of the State Equalization Assistance Property Tax, which 

supports K-12 education, to expire, according to the Governor’s budget 

office.4

 As officials explained, because this tax is levied at the local level—

increasing the proportional contribution of local monies to education 

funding—the return of this tax effectively means a decrease in the state’s 

formula contribution to education funding. According to the Governor’s 

budget officials, the legislature had made several additional cuts to state 

support for education funding which would have pushed Arizona below 

the education expenditure level that it must maintain to meet requirements 

for SFSF funds.5

 However, the Governor exercised line item veto authority 

on certain Department of Education reductions in order to maintain 

education expenditures at the required levels. The Joint Legislative Budget 

Committee now estimates a remaining shortfall of approximately $350 

million. The Governor is now planning to call the legislature back into 

session to address the outstanding budgetary challenges. In addition to the 

budget shortfall, reduced revenues have resulted in the state treasurer 

having to make short-term borrowings from other state and local 

 

3

Recovery Act funds used to stabilize the state’s operating budget include approximately 

$816 million in state funds made available as a result of the increased Federal Medical 

Assistance Percentage for Medicaid (discussed in detail in GAO-09-1016) and $311 million 

in SFSF funding. These figures do not include $250 million in SFSF funds for elementary 

and secondary education that were anticipated in fiscal year 2009, but which will now be 

made available in fiscal year 2010. 

4

Arizona Senate Bill 1025: The General Revenue Act. In her transmittal letter, the Governor 

stated her willingness to support a permanent repeal, but as part of a comprehensive 

proposal that addresses the state’s revenue shortfall. 

5

Among other provisions, the Recovery Act requires states to assure that states’ support for 

education will not fall below the levels provided in fiscal year 2006. Also, the return of this 

tax could affect the LEAs’ budgets and LEAs may have to modify their applications for 

SFSF monies. 

Page AZ-4 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

government funds to cover cash deficits in order to continue state 

operations. In addition, the state is preparing to establish an external line 

of credit of $500 million, according to the Governor’s office. 

The Governor has proposed that she and the legislature continue to work 

to address the state’s revenue shortfall. As part of a five-part long-term 

solution to Arizona’s fiscal condition, the Governor has asked the 

legislature to consider a temporary sales tax increase, particularly in light 

of the fact that the Recovery Act funding will expire. The staff of the Joint 

Legislative Budget Committee has estimated that a voter-approved 

temporary sales tax increase of 1 cent for the first 24 months and a halfcent for the following 12 months would generate revenue totaling 

approximately $2.5 billion for fiscal years 2010 through 2013. In addition, 

the Governor called for a state tax reform to promote investment in 

Arizona, revenue stability and job growth and sustainability. According to 

state officials, members of the legislature have proposed individual and 

corporate income tax reductions—estimated to reduce revenue by $400 

million in fiscal years 2012 and 2013—and to permanently repeal the State 

Equalization Assistance Property Tax—estimated to cost $250 million in 

fiscal year 2010 and up to $281 million in fiscal year 2013. 

Arizona is currently looking for additional ways to address its projected 

fiscal challenges and is developing budgetary plans to avoid a sudden drop 

in revenues as the Recovery Act funding period ends, according to 

Governor’s staff members. The $750 million spent in fiscal year 2009 and 

$1.13 billion obligated for fiscal year 2010 to address budget shortfalls 

leave Arizona with only a projected $417 million in Recovery Act funding 

remaining for fiscal year 2011. Current estimates project a deficit between 

$0.89 billion and $2.2 billion in the state’s general fund for fiscal year 2011, 

depending on various budget solutions being considered. The Governor’s 

staff continues to develop plans to work with state agencies on internal 

organizational changes that can help reduce expenditures. In addition, on 

August 17, 2009, the Arizona Senate President established the Arizona 

Budget Commission, which will assess how appropriations are allocated 

by state agencies; streamline the agencies’ organization, operation and 

costs; and create a best-practices management model for state 

government. 

Page AZ-5 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Given Arizona’s budgetary challenges, officials in the Governor’s Office of 

Economic Recovery (OER) and the Arizona State Comptroller expressed 

their concern about having adequate funding to cover the additional 

administrative costs associated with compliance of the Recovery Act 

provisions. States have been given the option to recoup costs for central 

administrative services, such as providing oversight and meeting reporting 

requirements of the Recovery Act, as outlined in Office of Management 

and Budget (OMB) memorandum M-09-18.6

 The OMB memo presented two 

alternative methods—using estimated costs or billing for services. Both 

alternatives are longstanding methods that have been allowed under the 

guidance in OMB Circular A-87. However, as understood by the state’s 

Comptroller, the cost recovery processes that OMB currently allows will 

not cover all the additional administrative costs under the Recovery Act, 

and he expressed two major concerns over the OMB Circular A-87 cost 

allocation methodologies. First, according to the Comptroller, the state 

will not be able to fully recapture the cost of depreciable equipment that is 

dedicated specifically for Recovery Act purposes. For example, equipment 

such as a computer server that is purchased by the state to comply with 

Recovery Act reporting or monitoring would be depreciated over the life 

of the asset and not over the period of Recovery Act programs. The life of 

the asset would be longer than the period of Recovery Act programs, 

resulting in the state receiving an allowance for depreciation for a shorter 

period. Therefore, the state comptroller maintains that Arizona would not 

receive full cost recovery. Second, the traditional cost allocation 

methodologies require that the state charge administrative costs according 

to a formula based on the actual amount of money spent. 

Arizona May Have 

Insufficient Funds to 

Cover Administration 

Costs of Recovery Act 

Oversight without 

Expeditious Review 

of State Proposals 

To address Arizona’s concerns about insufficient funds to cover the 

administrative costs, the Arizona State Comptroller, along with other state 

comptrollers, collaborated with their national association, the National 

Association of State Auditors, Comptrollers, and Treasurers (NASACT), to 

address these issues, and on August 7, 2009, requested on behalf of the 

states, a waiver of certain requirements of OMB Circular A-87. The request 

 

6

OMB Memorandum, M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Act Activities (May 11, 2009), provides that states may charge Recovery Act 

grants up to 0.5 percent of total Recovery Act funds received by the state under cost 

recovery processes under current guidance of OMB Circular A-87, Cost Principles for 

State, Local and Indian Tribal Governments. Under the provisions of OMB Circular A-87, 

states can recoup administrative costs through the Statewide Cost Allocation Plan 

(SWCAP), which is submitted to the Department of Health and Human Services annually 

for review and approval. There are two alternatives, use of estimated costs for centralized 

services, or billed services. 

Page AZ-6 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

asked for a change (1) to increase the allowance for depreciation of assets 

that are dedicated to Recovery Act purposes; and (2) to allow states to 

apply a prorated allocation of central service agency costs based on the 

ratio of state agency Recovery Act funds received as compared to total 

Recovery Act funds received by the state. 

Additionally, Arizona submitted a proposal to the Department of Health 

and Human Services’s (HHS) Division of Cost Allocation to simplify the 

calculation and accounting for central administrative costs related to 

Recovery Act programs.7

 Arizona proposed that it be allowed to base the 

allocation of central service agency costs based on budgeted dollars that 

would not be adjusted to the actual amount of money spent. 

According to the state Comptroller, OMB reviewed the waiver request and 

advised that the request to increase the depreciation allowance was a 

policy issue and would not be treated as a waiver. Regarding the second 

waiver request, OMB advised that the Division of Cost Allocation would 

approve cost allocation methodologies on a state-by-state basis. 

As of September 15, 2009, Arizona is awaiting a decision from OMB on the 

policy issue for depreciation allowance and from HHS for approval of the 

cost allocation methodology. The state, pending a decision from HHS on 

the cost allocation methodology, plans to go forward using the second 

option—billing for services—allowed by OMB Memorandum M-09-18. 

However, the state comptroller is concerned that by the time OMB and 

HHS make a decision, recipients of Recovery Act funds in Arizona will 

have already spent significant portions of these funds leaving the state 

with a much smaller pool of remaining funds from which the state could 

collect the administrative costs. Therefore, the ability of the state to 

collect for all administrative costs could be jeopardized. 

 

7

The Division of Cost Allocation within HHS administers state cost allocation plans, which 

provide a process whereby state central service costs can be identified and assigned to 

benefited activities. 

Page AZ-7 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Recipients of Recovery Act funds are required to submit quarterly reports 

under section 1512 of the act to the federal agencies providing those 

Recovery Act funds. These reports are to include, among other 

requirements, (1) the total amount of Recovery Act funds received by each 

recipient from the federal agency, (2) a list of all projects and activities for 

which Recovery Act funds were expended or obligated, (3) an evaluation 

of the completion status of each project or activity, and (4) an estimate of 

the number jobs created and number of jobs retained by each project or 

activity. Recipients are to submit the first report by October 10, 2009, for 

the quarter ending September 30, 2009. The Recovery Act requires that the 

reporting be done by entities, other than individuals, that receive money 

directly from the federal government. These entities are to submit their 

data using www.federalreporting.gov which will then be made available to 

the public at www.recovery.gov. 

Arizona’s Strategy to 

Meet October 

Reporting Deadline Is 

Based on 

Implementing a 

System Intended to 

Centrally Collect and 

Report Data on State 

Agencies’ Use of 

Recovery Act Funds 

Arizona officials from the Governor’s office explained that the Governor 

envisions her office as the responsible party for Recovery Act funds 

received by the state of Arizona. Therefore, OER plans to centrally collect 

data and to submit these quarterly 1512 reports for the state agencies. 

Some of the benefits envisioned by the Governor for single reporting are 

the ability to expedite the reporting process, provide a common system for 

reporting, and use built-in audit capabilities. Arizona will employ a 

centralized reporting solution that, according to OER officials, will comply 

with OMB reporting guidance. The centralized solution is based on a 

software application known as Stimulus 360 that is customized to meet the 

Recovery Act reporting requirements. State agencies that receive Recovery 

Act funds will send the required reporting data to the OER team. The 

Governor’s OER team will compile this data into a single entry and report 

the information through www.federalreporting.gov, the reporting portal, to 

www.recovery.gov. 

Using this centralized approach, the Governor’s team will extract financial 

data already available from the state’s accounting system on Recovery Act 

funds that state agencies are using, add in any other data from the 

agencies, and upload these combined data into the centralized reporting 

solution. (See figure 1.) According to OER officials, their team will provide 

reporting and auditor resources to review data quality and perform data 

validation and data cleanup. The state comptroller noted that the inherent 

risk of double reporting certain data elements, such as the number of jobs 

created, by both the state agency and other subrecipients, such as a 

vendor performing the work, would be reduced with centralized reporting. 

Page AZ-8 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Figure 1: Arizona’s Centralized Reporting System for October Reporting 

Source: GAO.

State agencies provide reporting information to Arizona Office of Economic Recovery

–web forms, excel templates (primary), and XML documents (future phase)– 

Arizona

Office of 

Economic Recovery

Arizona Centalized 

Solution

Collection and formating 

of Form 1512 data

Reporting 

data sent

Reporting 

data sent

Reporting 

data sent

AZRecovery.gov

Recovery.gov

Project information reported to appropriate state agency

FederalReporting.gov

As an additional check on data accuracy, each state agency will be 

responsible for validating its data prior to submitting it to the state. For 

example, as discussed later in this appendix, data for transportation 

projects are housed in the Arizona Department of Transportation’s 

Page AZ-9 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

(ADOT) existing reporting system, LCPtracker, and will undergo 

numerous levels of review by ADOT prior to reporting these data to OER 

for inclusion in the centralized reporting system. 

To coordinate with and obtain cooperation from the state agencies on 

using the centralized solution, the Governor’s team started meeting in July 

2009 with the directors of state agencies. The Governor’s team explained 

its preference for the centralized reporting method over each state agency 

reporting separately. The team also gathered information on reporting 

requirements and subsequently began planning for a test run of the 

centralized reporting method. According to OER officials, as of September 

8, 2009, all state agencies plan to use the Governor’s centralized reporting 

methodology. 

Recognizing that the state and agencies have focused their limited 

resources in the short term on putting the Recovery Act funds to work in 

Arizona and meeting the October reporting deadline, staff in OER are 

beginning to think about what unique economic impact of Recovery Act 

funds the state would want to track and measure over the long term, 

separately from the federal government data requirements. By doing so, 

the state will be positioned to identify any lessons learned from its 

implementation of the Recovery Act program and to provide 

accountability to the public on the act’s effects. OER staff acknowledged, 

however, that they have limited resources to do longer term planning, but 

are moving forward as resources become available. Determining at the 

start of the Recovery Act program which long term effects to track would 

help the state to ensure it is collecting data from the outset that it will 

need, as well as has the systems and skilled staff in place to complete 

analysis. 

For agencies, localities, and other Recovery Act funding recipients outside 

of OER, considering ways to use collected data and measure long-term 

effects of Recovery Act funding is valuable, assuming resources for 

planning and analysis are available. Officials within the Arizona 

Department of Education stated that they hope to use data to identify 

correlations between uses of program funds and improvements in student 

performance. Consequently, they can continue successful efforts if 

alternative funding is available. Likewise, officials managing the ESEA 

Title I education program acknowledged the benefits of determining 

research questions on final Recovery Act impacts so that they can prepare 

as needed. In addition, officials within the state Department of Commerce 

managing the Recovery Act weatherization funds are positioning the 

Early Identification of 

Key Long-Term 

Recovery Act Impacts 

on the State Could 

Help the State, Its 

Agencies, and 

Localities Ensure 

They Will Have the 

Necessary Data and 

Tools to Ensure 

Accountability 

Page AZ-10 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

department to estimate the amount of energy saved as a result of work 

completed with these funds. These are positive steps consistent with the 

state’s long-term planning objectives. The state could also help to ensure 

that other agencies and localities, as appropriate, are taking such steps to 

make the best use of funds. 

The Recovery Act created the State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in 

state support for education to school districts and public institutions of 

higher education (IHE). The initial award of SFSF funding required each 

state to submit an application to Education that provided several 

assurances. These included assurances that the state will meet 

maintenance-of-effort requirements (or it will be able to comply with 

waiver provisions) and that it will implement strategies to meet certain 

educational requirements, including increasing teacher effectiveness, 

addressing inequities in the distribution of highly qualified teachers, and 

improving the quality of state academic standards and assessments. In 

addition, states were required to make assurances concerning 

accountability, transparency, reporting, and compliance with certain 

federal laws and regulations. States must allocate 81.8 percent of their 

SFSF 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). 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 years 2008 or 2009 levels for state support to school districts or 

public IHEs. When distributing these funds to school districts, states must 

use their primary education funding formula, but they can determine how 

to allocate funds to public IHEs. In general, school districts maintain 

broad discretion in how they can use education stabilization funds, but 

states have some ability to direct IHEs in how to use these funds. 

SFSF Funds Help 

Address Education 

Cuts in Some 

Programs, but K-12 

Funds Delayed 

In July 2009, we reported that the Governor had applied to the U.S. 

Department of Education for SFSF funds that would allow the state to 

offset budget cuts and that Education approved this application. 

According to the Governor’s office, Arizona plans to use the government 

services funds for programs to support children’s services, community 

health centers, and officer salaries in the state’s Department of 

Page AZ-11 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Corrections. As of August 28, 2009, Education had awarded to Arizona 

approximately $557 million of its nearly $1 billion in available SFSF funds. 

The state had planned to provide $433 million to school districts and 

charter schools (otherwise referred to as local education agencies) and 

public IHEs for fiscal year 2009 expenditures, with approximately $250 

million available to local education agencies (LEA) and approximately 

$183 million to public IHEs. However, based on guidance from Education, 

the state now plans to provide some of these funds in fiscal year 2010 

instead, as discussed in the following section. 

Arizona Plans to Make 

First Round of SFSF Funds 

Available to LEAs in Fiscal 

Year 2010 Rather than 2009 

as Planned after Additional 

Guidance from U.S. 

Department of Education 

The OER is creating an application process and deadlines for the LEAs 

and plans to distribute the first round of $250 million SFSF funds to LEAs 

in fiscal year 2010. In our July 2009 report, we reported that because 

Arizona was facing a nearly $3 billion budget deficit, the Governor and 

legislature had backfilled $250 million in general fund appropriation 

reduction for K-12 programs with SFSF funds. However, based on 

communications with Education after the issuance of our report, Arizona 

was not able to effect this budgetary change.8

 Education and OER have 

agreed to procedures that will allow SFSF funds to be utilized in Arizona 

consistent with the intent of the Recovery Act. OER revised its original 

approach and plans to make the SFSF funds available in September 2009, 

upon receipt of applications from LEAs. 

According to the Governor’s office and Joint Legislative Budget 

Committee staff, the postponement in draw down of the funds has 

complicated the state’s budget balancing efforts. In addition, the state had 

to borrow money in order to cover the first monthly state aid payment to 

LEAs in fiscal year 2010 because the SFSF funds were not available, 

according to the Office of the Arizona State Treasurer.9

 Office of the 

 

8

Education advised the state that this action would be inconsistent with some of the 

Recovery Act requirements, as at the time of the state’s initial drawdown request, LEAs had 

not been asked to submit applications for the SFSF funds. In addition the funds would have 

gone to the state’s general fund and only indirectly to LEAs, although Education noted that, 

per the act, the funds must go directly to LEAs. 

9

As part of the fiscal year 2009 budget plans adopted by the Arizona governor and state 

legislature in June 2008, Arizona shifted $602.6 million for K-12 education, effectively 

delaying 2 months of fiscal year 2009 school payments to fiscal year 2010. According to the 

Office of the Treasurer, this was accomplished by rolling over half of the May 2009 and all 

of the June 2009 payments to July 1, 2009. In addition, in May 2009, a further adjustment 

was made for fiscal year 2009, according to the Office of the Treasurer staff, such that the 

remainder of the May 2009 payment was deferred until October 2009. 

Page AZ-12 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Treasurer staff noted this has increased the total amount the state has 

borrowed to maintain cash flow for state operations, and has played a role 

in the state’s bond rating being placed on negative watch by one rating 

agency. Furthermore, according to a Governor’s office budget official, the 

state anticipated challenges to making a scheduled state aid payment to 

school districts for September 2009 due to the state’s cash flow situation. 

Therefore, the state intends to provide up to $300 million in SFSF funds to 

schools in lieu of a September 15 state aid payment, according to a 

Governor’s office budget official. 

SFSF Funds Help 

Institutions of Higher 

Education Avoid Steep 

Tuition Surcharges, and 

Cuts in Personnel and 

Student Services 

Of the $182.8 million in SFSF funds originally planned for public IHEs in 

fiscal year 2009, the Governor allocated about $154 million to the three 

universities in the state and the remaining approximately $29 million to the 

11 eligible community college districts. In fiscal year 2009, the level of 

state support for public IHEs was approximately $1.06 billion.10 As of 

August 3, 2009, the three public universities each had submitted 

applications for SFSF and received the full amount of allocated SFSF 

funds. The three universities requested the SFSF monies as a 

reimbursement for fiscal year 2009 employee benefits, personnel 

services—such as salaries for faculty and instructors—and supplies. As of 

September 8, 2009, the community colleges are in the process of 

completing inter-government agreements with the state with respect to 

their SFSF disbursements. 

According to the Arizona Board of Regents and the three university 

presidents in their SFSF applications, the SFSF funds helped the 

universities absorb budget reductions the state had implemented in order 

to address budget deficits. More specifically, the universities had their 

state support reduced by $29 million in fiscal year 2008 and $163 million in 

fiscal year 2009, amounting to approximately 17 percent of the overall 

state appropriations in fiscal year 2009 for the universities. Faced with 

these reductions, the universities took various actions such as operating 

reductions, academic restructuring, and layoffs and furloughs for faculty, 

 

10Public Higher Education in Arizona is comprised of two systems; the state universities 

and the community colleges. The universities’ governing body is the Arizona Board of 

Regents (ABOR), which provides policy guidance to Arizona State University, Northern 

Arizona University, and the University of Arizona in such areas as academic affairs, 

financial and human resource programs, tuition and financial aid, and strategic planning. 

The community colleges operate independently as districts, each governed by an elected 

board. 

Page AZ-13 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

staff, and administrators. In addition, the universities anticipated an 

average tuition surcharge for the 2009-2010 academic year of $2,051 before 

receiving Recovery Act funding, according to Regents’ staff calculations. 

Table 1 shows the state appropriation reductions and the anticipated 

tuition surcharges for each university for fiscal year 2009. 

Table 1: State Fiscal Stabilization Funding for Arizona’s Public Universities 

Student body 

General fund 

appropriation 

reduction, fiscal 

year 2009 

(dollars in millions)

SFSF funding, 

fiscal year 2009

(dollars in millions)

Anticipated tuition 

surcharge before 

Recovery Act

offset (2009-2010)

Actual tuition 

surcharge

(2009-2010)

Arizona State University 67,082 $66.1 $69.82 $1,609 $510

University of Arizona 38,057 $69.0 $60.82 $2,568 $766

Northern Arizona University 22,307 $19.2 $23.49 $1,975 $422

Source: Arizona Board of Regents. 

According to the three university presidents, the SFSF monies were 

necessary to avoid additional personnel reductions and furloughs and the 

resulting reduction of programs and student services. Furthermore, the 

availability of SFSF monies allowed the universities to significantly reduce 

the tuition surcharges for the 2009-2010 academic year to an average of 

$566, based on Regents’ staff calculation. From this perspective, the state 

universities and Board of Regents executive staff deemed the Recovery 

Act a success. Nevertheless, the tuition calculations show surcharges 

escalating for the 2012-2013 academic year, by approximately $2,693 on 

average, once Recovery Act funding expires. Absent additional state or 

federal funding, the universities will need to develop budget plans to 

explicitly address their anticipated funding challenges. 

Page AZ-14 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

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 ESEA. 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 current statutory and regulatory 

requirements and must obligate 85 percent of the funds by September 30, 

2010.11 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. Education made 

the first half of states’ Recovery Act Title I, Part A funding available on 

April 1, 2009, and announced on September 4, 2009, that it had made the 

second half available. 

Funds Starting to 

Flow to LEAs As 

Arizona Has 

Approved Many 

Applications for 

ESEA Title I Funding 

The state educational agency (SEA) in Arizona has allocated $185 million 

of the $195 million in ESEA Title I Recovery Act funds to LEAs. The SEA 

official said that the remaining $10 million has been set aside for 

administration and reallocation to LEAs. In the ESEA Title I Recovery Act 

funding process, each LEA submits an application that contains a detailed 

plan on how and when the funds will be used, and SEA officials review the 

application to ensure that LEAs’ spending plans comply with applicable 

laws and regulations. When the SEA approves an LEA’s application it also 

obligates ESEA Title I funds to the LEA. As seen in table 2 below, as of 

September 8, 2009, the SEA had approved 84 applications for about $46.3 

million. SEA officials expect to approve all applications and obligate $185 

million of ESEA Title I funds by September 30, 2009. 

 

11LEAs 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 AZ-15 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Table 2: Number and Dollar Value of LEA Applications for Recovery Act ESEA Title I by Status, September 8, 2009 

Number of 

applications

Dollar value 

(in millions) 

Amount of ESEA

Title I Recovery Act

funds disbursed to

LEAs (in millions)

Applications approved by SEA 84 $46.3 $3.0

Applications submitted but not approved 133 38.9 

Applications to be submitted 209 99.4 

Total LEAs eligible for ESEA Title I Recovery Act funds 426 $184.7 

Source: SEA grants management system for Recovery Act funds for state fiscal years 2009 and 2010. 

Note: Totals may not add due to rounding. 

LEAs with approved applications submit monthly cash management 

reports to SEA and the SEA provides funds to them with Recovery Act 

funds for their expected Recovery Act ESEA Title I program expenditures. 

As of September 8, 2009, LEAs had received $3.0 million in ESEA Title I 

Recovery Act funds. SEA officials stated that the grants approved are in 

accordance with ESEA Title I and related statutory and regulatory 

requirements to improve students’ academic achievement, and include 

projects such as hiring specialists to provide strategic and intensive 

reading intervention to students who are not meeting Arizona’s reading 

standards. 

Page AZ-16 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

On August 26, 2009, the SEA applied to Education for the authority to 

grant LEAs’ requests to waive various requirements for ESEA Title I 

Recovery Act funding.12 As we reported in our July 2009 Recovery Act 

report, some LEAs will likely seek waivers from requirements to provide 

funds for public school choice-related transportation and supplemental 

educational services, such as tutoring, because they go unused, and this 

waiver will provide more funding for other ESEA Title I projects in those 

districts.13 As seen in table 3, as of September 8, 2009, a number of the 84 

LEAs with approved applications are requesting waivers for various 

required activities. 

SEA Applied for 

Authority to Approve 

LEAs’ Requests to 

Waive Certain 

Requirements in the 

Use of ESEA Title I 

Recovery Act Funds 

Table 3: Number of LEAs Requesting Waivers 

Number of LEAs

requesting waivers 

Waiver to exclude the Recovery Act funds when calculating the 20 percent requirement for 

transportation and supplemental educational services 23

Waiver to exclude the Recovery Act funds when calculating the per pupil amount (PPA) of 

funds available for supplemental educational services 20

Waiver to exclude the Recovery Act funds when calculating the 10 percent set aside required 

for professional development when an LEA is identified for improvement 16

Waiver that allows a school to factor out some or all of its LEA’s Recovery Act funds when 

calculating the required 10 percent set aside for professional development when a school is 

identified for improvement 18

Waiver to authorize LEAs to offer supplemental educational services in addition to public 

school choice to eligible students in schools in the first year of school improvement Notea

Waiver to authorize LEAs and schools identified for improvement to apply to become 

supplemental educational services providers Notea

Waiver to authorize the SEA to waive the carryover limitation for LEAs more than once every 

three years Notea

Source: SEA grants management system for Recovery Act funds for state fiscal year 2010. 

a

SEA has not asked LEAs if they need the waiver. 

 

12Under ESEA Title I, states are required to establish performance goals and hold their 

ESEA Title I schools accountable for students’ performance by determining whether or not 

schools have made adequate yearly progress (AYP). Schools that have not made AYP goals 

for 3 or more consecutive years must offer students an opportunity to transfer to a higherperforming school (public school choice) or supplemental educational services (SES). 

Districts are required to provide an amount not less than 20 percent of their ESEA Title I, 

Part A allocation to cover public school choice-related transportation costs and SES. 

Unless a waiver is granted, this requirement would apply to ESEA Title I Recovery Act 

funds also. 

13GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses, GAO-09-830SP (Washington, D.C.: July 8, 2009). 

Page AZ-17 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

According to SEA officials, if the SEA’s application to waive Title I 

requirements for LEAs is granted by Education, the SEA will be able to 

decide which LEAs’ requests for waivers should be approved and thereby 

provide flexibility in the use of Title I funds. As of September 8, 2009, 

Education had not granted the SEA authority to grant LEAs waivers but 

Education expects to consider Arizona’s request soon. 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B of IDEA, the major federal statute that supports the provisions 

of special education and related services for children, and youth with 

disabilities. Part B funds programs that ensure preschool and school-aged 

children with disabilities access to a free and appropriate public education 

and is divided into two separate grants—Part B grants to states (for 

school-aged children) and Part B preschool grants (section 619). 

Education made the first half of states’ Recovery Act IDEA funding 

available to state agencies on April 1, 2009, and announced on September 

4, 2009, that it had made the second half available. 

The SEA has allocated all of the $184 million of the Recovery Act IDEA 

Part B funds to LEAs. Specifically, it allocated $178 million to LEAs for 

school-age children and $5.7 million to LEAs with preschool programs for 

preschool grants. To receive Recovery Act funds, each LEA must submit 

an application that outlines how it will use the funds. Subsequently, the 

SEA officials review the application to ensure that spending plans comply 

with applicable laws and regulations. When the SEA approves an 

application, this action also obligates the funds to the LEA. As seen in 

table 4, many LEAs have submitted applications and some have been 

approved. 

Arizona LEAs Have 

Submitted 

Applications for IDEA 

Part B Funding and 

Some Have Been 

Approved, Allowing 

Funds to Flow to the 

LEAs 

Table 4: Number and Dollar Value of LEA Applications for Recovery Act IDEA by Status, September 8, 2009 

Grants for school-age children Grants for preschool programs 

Number of 

applications

Dollar value

(in millions)

Number of 

applications

Dollar value

(in millions)

Applications approved 121 $14.9 45 $1.0

Applications submitted but not approved 149 $36.0 27 $0.8

Applications to be submitted 284 $127.5 114 $3.9

Total LEAs eligible for Recovery Act IDEA 

grants 

554 $178.4 186 $5.7

Source: SEA grants management system for Recovery Act funds for state fiscal years 2009 and 2010. 

Page AZ-18 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Specifically, as of September 8, 2009, the SEA had approved 22 percent of 

the 554 applications for about $14.9 million of Part B grants to states and 

24 percent of the 186 applications for about $1 million of Part B preschool 

grants. LEAs with approved applications submit monthly cash 

management reports to SEA and the SEA provides funds to them with 

Recovery Act funds for their expected Recovery Act IDEA program 

expenditures, and as of September 8, 2009, the LEAs had received $2.2 

million of Recovery Act funds. SEA officials stated that the IDEA grants 

approved are in accordance with statutory and regulatory requirements 

and include projects such as professional development and assistive 

technology that may help the student participate in classroom activities 

(such as special computer software or a device to assist students in 

holding a pencil). 

The Arizona Governor’s office is requesting that its state agencies use a 

centralized reporting methodology and report through the Governor’s 

office. According to SEA officials, they plan to use this reporting 

methodology for Recovery Act funds for both ESEA Title I and IDEA 

funds. The SEA plans to obtain much of the reporting information for the 

LEAs from the existing grants management system that LEAs use for nonRecovery Act grants as LEAs use these same systems for non-Recovery 

Act funds as they do for Recovery Act fund. LEAs currently use this 

system to apply for grants and it already contains much of the information 

required for Recovery Act reporting, such as LEA name, LEA officials’ 

names, award number, and amount disbursed. Any required additional 

information will be collected in a web application that is being developed 

by the Arizona Department of Education Information Technology unit. 

According to state education officials, they do not expect to have 

difficulties meeting Recovery Act reporting requirements. 

SEA Expects to Meet 

Recovery Act 

Reporting 

Requirements 

Primarily through Use 

of Existing Grants 

Management System 

for ESEA Title I and 

IDEA 

Page AZ-19 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Arizona’s SEA has an audit unit (the Arizona Education Audit Unit) that 

performs two functions that help to safeguard Recovery Act funds. The 

audit unit monitors how the SEA and LEAs are correcting problems or 

issues identified during the Single Audits and it also reviews the internal 

controls the LEAs have in place in their financial systems.14 The audit unit 

has developed a system to monitor whether LEAs who receive yearly 

federal funding of $500,000 or more obtain Single Audits, and to monitor 

corrective actions taken by the SEA and LEAs for problems identified in 

their Single Audit reports. For fiscal year 2008, 164 or 29 percent of the 572 

LEAs that were allocated Recovery Act funds had a single audit 

conducted. Audit officials noted that with the additional federal funds that 

LEAs will be receiving due to the Recovery Act, additional LEAs will likely 

exceed the $500,000 threshold in federal funds for fiscal year 2010 and 

thus will be required to have Single Audits. The audit unit also conducts 

fiscal monitoring of a sample of LEAs’ internal controls and in fiscal year 

2009, the audit unit also reviewed the internal controls of 21 LEAs’ 

financial accounting systems. 

Arizona Education 

Audit Unit Has 

Processes to Monitor 

the SEA’s and LEAs’ 

Internal Controls and 

the Corrective 

Actions They Take to 

Address Problems 

Identified through 

Single Audits 

The Arizona Education Audit Unit is currently monitoring the SEA’s and 

LEAs’ responses to Single Audit findings that could affect the safeguarding 

of Recovery Act funds. According to the audit officials, they plan to 

continue their oversight during calendar year 2009 using fiscal year 2008 

Single Audit reports and will also continue their fiscal monitoring reviews. 

The audit unit is monitoring six findings for the SEA that were particular 

to the ESEA Title I and IDEA programs in the fiscal year 2008 Single Audit 

Reports. Specifically, they included the following findings: 

• The SEA did not verify that LEAs complied with ESEA Title I 

requirements by consulting with private schools within their 

boundaries to provide services to eligible private school children, their 

teachers, and their families or to report that there are no eligible 

private schools within the LEA boundaries; 

 

14The Single Audit Act of 1984, as amended (31 U.S.C ch. 75), established the concept of the 

single audit to replace multiple grant audits with one audit of a recipient as a whole. As 

such, a Single Audit is an organization wide audit that focuses on the recipient’s internal 

controls and its compliance with laws and regulations governing federal awards. It requires 

that each state, local government, or nonprofit organization that expends $500,000 or more 

a year in federal awards 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, the entity may elect to have an 

audit of that program. 

Page AZ-20 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

• Some LEA annual financial reports were incomplete or contained 

accounting errors and inconsistent information that prevented the SEA 

from determining whether LEAs met the IDEA program requirement—

that state and local funding cannot be lower than it was in the previous 

2 years; 

• The SEA needed to provide additional documentation to support that it 

verified the number of students with disabilities to validate the 

accuracy of the Report of Children with Disabilities Receiving Special 

Education, Part B (an IDEA program); 

• Some LEAs lacked adequate procedures to ensure compliance with 

Education’s requirements to submit monthly cash management 

reports; 

• The Title I and IDEA grants management system did not have adequate 

controls because it did not require users to periodically change 

passwords, did not always maintain a history of user access, and 

permitted some internal users with access rights that were 

incompatible with their job responsibilities or that enabled them to 

change data without supervisory approval; and 

• The SEA did not comply with the subrecipient monitoring 

requirements of ESEA Title I and IDEA, because it did not obtain 

Single Audit reports within 9 months of the subrecipient’s fiscal yearend, did not retain documents to support that the SEA tried to ensure 

audit requirements were met, and did not issue management decisions 

within 6 months after receipt of subrecipient Single Audit reports. 

According to the audit officials, the SEA has been taking corrective action 

on these findings that will strengthen the safeguards for Recovery Act 

funds. 

Page AZ-21 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

As we previously reported, $522 million was apportioned to Arizona in 

March 2009 for highway infrastructure and other eligible projects. As of 

September 1, 2009, $293 million had been obligated. As of September 1, 

2009, $18 million had been reimbursed by FHWA.15

Almost 72 percent of Recovery Act highway obligations for Arizona have 

been for pavement projects. Specifically, $210 million of the $293 million 

obligated as of September 1, 2009, is being used for pavement projects, 

including $202 million for pavement preservation and roadway widening. 

State officials told us they selected this type of project specifically because 

they knew the projects could be completed within 3 years. Figure 2 shows 

obligations by the types of road and bridge improvements being made. 

Arizona Continues to 

Move Forward with 

Statewide Highway 

Projects, but the Slow 

Pace of Local Projects 

and Impending 

Deadlines Are Cause 

for Concern 

 

15States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

Page AZ-22 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Figure 2: Highway Obligations for Arizona by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($10.5 million)

1%

Bridge replacement ($1.8 million)

New bridge construction ($14.8 million)

New road construction ($8.4 million)

Other ($55.8 million)

Pavement widening ($121.4 million)

41% 3%

27%

5%

4%

19%

Pavement improvement ($80.2 million)

Source: GAO analysis of FHWA data.

Pavement projects total (72 percent, $210 million)

Bridge projects total (9 percent, $27.1 million)

Other (19 percent, $55.8 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

Arizona has Awarded 

Contracts on its Statewide 

Highway Projects and 

Started Construction on 

Many 

As of September 1, 2009, FHWA has obligated 71 percent of the Recovery 

Act funds apportioned to Arizona for statewide highway projects.16 Of 

these Recovery Act funds, most, about $350 million, were to be spent on 

statewide projects, or those highway projects selected by Arizona 

Department of Transportation (ADOT) from Arizona’s 5-year 

transportation plan. The remainder of the highway funds is to be 

suballocated to localities across the state. These statewide projects were 

 

16For the Highway Infrastructure Investment Program, the U.S. Department of 

Transportation has interpreted the term “obligation of funds” to mean the federal 

government’s contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. 

Page AZ-23 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

selected based on a number of factors, including the level of priority of the 

project, the ability of the state to award contracts and begin construction 

in a timely manner, and the location of these projects in economically 

distressed areas of the state. The Recovery Act mandates that 50 percent 

of apportioned Recovery Act funds be obligated within 120 days of 

apportionment (before June 30, 2009). The 50 percent rule applied only to 

funds apportioned to the state and not to the 30 percent of funds required 

by the Recovery Act to be suballocated, primarily based on population, for 

metropolitan, regional, and local use. In addition, states are required to 

ensure that all apportioned funds—including suballocated funds—are 

obligated within 1 year. The Secretary of Transportation is to withdraw 

and redistribute to other states any amount that is not obligated within 

these time frames. As we previously reported, Arizona has met the 50 

percent obligation requirement. By September 1, 2009, approximately 71 

percent of Recovery Act funds had been obligated for statewide highway 

projects. 

Arizona provided for at least one construction contract for a Recovery Act 

highway project in each of its 15 counties (see table 5), with all counties 

getting at least $100,000 in statewide Recovery Act Federal Highway funds 

and 13 of the 15 counties each receiving at least $1.8 million. 

Page AZ-24 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Table 5: Number and Amount of Construction Contracts for Statewide Highway 

Projects in Arizona by County 

County 

Number 

of construction contracts 

Dollar value

of construction contracts

Apache 3 $2,997,320

Cochise 5 7,967,748 

Coconino 5 13,174,891

Gila 5 11,537,077 

Graham 1 133,331

Greenlee 1 567,178

La Paz 2 7,969,226

Maricopa 5 39,903,012

Mojave 3 6,426,321

Navajo 4 8,882,830

Pima 5 7,336,759

Pinal 1 13,133,079 

Santa Cruz 1 1,873,811 

Yavapai 1 1,899,987

Yuma 2 9,360,932 

Statewidea3 1,957,769 

Total 47 $135,121,271

Source: GAO analysis of ADOT data. 

a

Statewide projects are multiple projects in various parts of Arizona with a similar scope. 

Arizona’s original plan was to undertake 41 statewide highway projects 

under the Recovery Act, but due to significant underbidding by 

contractors, Arizona has, as of August 30, 2009, been able to add 

2 additional statewide highway projects, both roadway widening projects, 

in Maricopa County, Arizona’s most populous. In addition, Arizona is 

hoping to add even more Recovery Act projects with the existing cost 

savings, which, as of August 30, 2009, were about $60 million. ADOT 

officials believe that this underbidding is caused by the current low levels 

of economic activity in the construction industry due to the state’s 

economic downturn, as well as lower prices for commodities like asphalt 

and oil. 

Arizona officials told us that, for the most part, Arizona’s statewide 

projects could be started quickly and completed within 3 years. All of the 

statewide highway projects undertaken by Arizona were already on the 

State Transportation Improvement Plan (STIP). ADOT officials told us 

Page AZ-25 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

that most of the projects that the state undertook with Recovery Act funds 

were relatively simple and able to be completed within 3 years, such as 

pavement preservation, roadway widening, and lighting and signage (see 

figure 3). 

Figure 3: Map Depicting Arizona’s Initial Statewide Recovery Act Highway Projects 

Source: Arizona Department of Transportation (data and map).

Other

Bridge 

Pavement preservation

Reconstruct roadway

Roadway widening

Lighting and signage

Type of project

Miles

0 20 40 60 80

Cochise

Coconino

Gila

Graham

Greenlee

La Paz

Maricopa

Mohave Navajo

Pima

Pinal

Yavapai

Yuma

Apache

Santa Cruz

• 

• 

• 

• 

• 

• 

• • • 

• 

• • 

• 

• 

• 

• 

• • 

• 

• • 

• • • 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• • 

• 

• 

• 

• 

Cordes 

Junction

Bitter Springs

Kayenta Mexican Water

North Rim

Grand Canyon Tuba City

Cameron

Ganado

Chambers

Sanders Winslow

Eagar

Pine

Payson

Globe

Superior

Winkelman Clifton

Safford

Willcox

Picacho

Tucson

Mesa Phoenix

New River

Surprise

Gila Bend

Why

Nogales

Benson

Tombstone

Sunizona

Yuma

Quartzsite

Lake Havasu City

Kingman

Prescott

Wickenburg

Sedona

Flagstaff

• 

Page AZ-26 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

In contrast to the rapid awarding of contracts that the statewide Recovery 

Act highway projects have seen, three construction contracts for 

suballocated local projects have been awarded as of September 1, 2009. 

ADOT and FHWA both indicated that local projects have lagged behind 

statewide projects because of a lack of local shovel-ready projects. The 

lack of projects was due to some localities’ not having an understanding of 

the allocations that they would receive as well as the unfamiliarity of some 

local agencies with federal highway requirements. Under the Recovery Act 

in Arizona, about $157 million was suballocated to localities for federal 

highway construction. These funds were allocated to regional bodies 

known as Metropolitan Planning Organizations17 (MPO) members of which 

decide the highway projects they will undertake. Table 6 shows the 

distribution of funds across these regional bodies as well as the number of 

contracts awarded and total dollars obligated for these locality-led 

projects. 

Arizona Has Awarded Only 

Three Construction 

Contracts for Local 

Highway Projects Due to a 

Lack of Shovel-Ready 

Projects, Among Other 

Reasons, Which Could 

Pose Challenges in 

Meeting Recovery Act 

Time Lines 

Table 6: Localities’ Total Recovery Act Allocations, Number of Construction Contracts Awarded, and Total Funds Obligated 

for Construction as of September 1, 2009 

Region 

Total

allocation

Number 

of construction 

contracts awarded 

Total funds 

obligated for 

construction

Maricopa Region $104,578,340 0 0

Pima Region 34,876,167 1 $276,000

Northern Arizona Counsel of Governments 4,112,608 0 0

Central Yavapai Metropolitan Planning Organization 1,283,485 0 0

Western Arizona Council of Governments 2,464,687 0 0

Central Arizona Association of Governments 3,258,973 0 0

South Eastern Arizona Governments Organization 2,795,080 0 0

Yuma Metropolitan Planning Organization 2,257,052 2 $2,075,000

Flagstaff Metropolitan Planning Organization 961,128 0 0

Total $156,587,520 3 $2,351,000

Source: GAO analysis of ADOT and FHWA data. 

 

17Metropolitan planning organizations, federally mandated regional organizations, 

representing local governments and working in coordination with state departments of 

transportation, 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. 

Page AZ-27 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

When the Recovery Act was enacted, localities submitted a number of 

what they considered to be shovel-ready projects to ADOT for its approval 

and subsequent FHWA obligation of funds. An ADOT official told us that 

the department did not approve any projects and sent them back to the 

localities because either the scope of the project was too large; the project 

would exceed the localities’ Recovery Act allocation; or the project was 

not designed to meet federal requirements. To explain, prior to the 

Recovery Act, Arizona had a program called the Highway Users Revenue 

Fund (HURF) exchange program. Through this program, local agencies 

sent their Federal Aid highway funds to ADOT in exchange for state funds. 

This allowed ADOT to design and administer highway projects to federal 

standards, including federal environmental standards, with which they 

have considerable experience, and allowed localities to use their own 

experience with the state standards to design and build highway projects 

to state standards. However, the HURF exchange program was suspended 

due to lack of funds in September 2008, so the Recovery Act represented 

the first time in years that many localities would have to design highway 

projects to federal specifications. To address the problems above, ADOT 

and FHWA held a number of training sessions to educate localities on their 

responsibilities under the Recovery Act. According to state and local 

officials we interviewed, nevertheless, some localities were still confused 

about the federal requirements they had to meet, particularly the 

environmental clearance requirements. 

Because of the suspension of the HURF exchange program, which meant 

that localities would have to design federal highway projects on their own, 

and recognizing that the Recovery Act would represent a large amount of 

work for the localities to redesign and prepare highway projects to meet 

federal standards, ADOT has required that many localities work with 

management consultants to help design and submit for obligation their 

highway projects undertaken through the act. According to agency 

officials, these consultants are costing localities from 5 percent to 15 

percent of their allocations under the act. ADOT said that the management 

consultants provide localities the means and expertise to design highway 

projects to federal standards, and concluded that were it not for the 

consultants, these local agencies would not be able to meet the March 

2010 obligation deadline.18

 

18The Recovery Act mandates that all apportioned funds, including suballocated funds, 

need to be obligated by, March 2010, 1 year from apportionment. 

Page AZ-28 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Despite having the benefit of the management consultants to help them 

design their Recovery Act highway projects, ADOT and two of the local 

officials we spoke with are still concerned that meeting the March 2010 

obligation deadline could be a challenge. To address this concern, ADOT 

has instituted an internal deadline of December 2, 2009, by which they 

expect to receive submissions from all localities regarding the highway 

projects that they propose to undertake under the Recovery Act. Without 

this internal, statewide deadline, ADOT was concerned that there could be 

a glut of submissions to the agency and to FHWA requesting obligations 

just prior to the March 2010 deadline. According to an ADOT official, by 

moving the date forward to December, they can process all of the 

suballocated projects and send them on to FHWA for obligation and still 

meet the Recovery Act time frames. In addition, ADOT is considering 

actions that could be taken in the event localities are unable to submit 

shovel-ready projects by the March 2010 deadline. According to 

management consultants who are working with the localities, meeting the 

December time frame will be a major challenge, but they will submit as 

many of their highway proposals to ADOT as quickly as they can. 

Page AZ-29 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Arizona’s Department of 

Transportation Does Not 

Anticipate Problems in 

Meeting Recovery Act 

Reporting Requirements 

and Intends to Participate 

in Centralized Statewide 

Reporting 

To meet Recovery Act reporting requirements, the state has mandated in 

all of its contracts relating to Recovery Act highway work that all 

contractors shall report monthly to ADOT on the number of jobs created 

and preserved. The state has implemented the use of a database, 

LCPtracker, that allows contractors to simply enter financial and 

employment information into this database and submit that information 

electronically to ADOT. The agency is then able to transfer that 

information to the FHWA, as mandated by the Recovery Act. According to 

an agency official, ADOT is able to sort all contractor information, 

determine any penalties that need to be applied for incomplete or 

incorrect reporting, and run reports on the numbers of jobs created and 

preserved, as well as the wages paid for this Recovery Act work. Figure 4 

shows an interface of the database with various reports that are able to be 

generated using contractor-supplied reporting information. 

Page AZ-30 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Figure 4: ADOT Database Used to Receive Recovery Act Information from Contractors and Report to FHWA and Descriptions 

of Database Report Mechanisms 

Source: GAO analysis of Arizona Department of Transportation information.

Monthly Recipient Project Status Report – Information on the status of all Recovery Act projects. These data will be used for 

meeting the reporting requirements of Sections 1201 and 1512 and are due to FHWA no later than the 20th day of each month for 

the preceding month’s data.

Monthly Employment Report – Monthly employment information on each 

ARRA project is used by States for meeting the reporting requirements of 

Sections 1201 and 1512. In order for States to fulfill their reporting obligations, 

the States must collect and analyze certain employment data for each ARRA 

funded contract.

Missing non-prevailing wage data – A report showing each Recovery Act-funded project and associated 

non-prevailing wage data.

To gain perspective on this issue, we visited three statewide highway 

projects in various areas in Arizona. Among other topics, we asked 

contractors working on these projects about their experiences in reporting 

wage and employment information to ADOT and whether they had 

experienced any problems in working with ADOT’s reporting system, 

LCPtracker. For all three projects, the contractors hired laborers from the 

areas where the projects were located, and reported having no problems 

Page AZ-31 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

in identifying and reporting the numbers of jobs created and preserved by

their work on the Recovery Act projects. ADOT officials and contractors

told us this is due, in large part, to training that ADOT conducted in the 

use of LCPtracker, which was used in a limited manner prior to Recovery 

Act projects, but made mandatory for all contractors working on Recovery 

Act projects. 

rk 

kept 

he 

 have 

ation, so no financial 

penalties have been levied on contractors. 

o 

anges 

A 

on 

hem 

Both the state and the contractors conduct numerous levels of review in 

order to verify the number of jobs reported as well as the wages paid to 

workers on Recovery Act highway projects. For example, one contractor

we spoke with said she conducts periodic interviews with laborers on a 

highway project to determine that what the contractor reported to ADOT 

in monthly employment reports through LCPtracker was in fact the wo

that the laborer was doing on that particular day, as well as that those 

laborers were paid accurately according to Davis-Bacon Act prevailing 

wage requirements. In addition, ADOT officials told us they are conducting

periodic site visits to determine that the number of laborers working on a 

particular day match the number that the contractor submits to ADOT in 

those monthly reports. In addition, according to ADOT officials, they visit

the site of Recovery Act highway projects and examine the records 

by the contractors to verify that the number and type of jobs being 

reported to ADOT accurately reflect the number and type of jobs on t

individual projects. When contractors do not report this information 

properly, a number of financial penalties are triggered that ADOT can 

impose on the contractors. As of September 4, 2009, no contractors

been found to misreport this required inform

FHWA’s Arizona Division has also developed an inspection plan specific t

Recovery Act highway projects. These inspections, conducted by FHWA 

staff, cover multiple levels of the project, including traffic control, ch

to the contracts, material testing, and other construction activities. 

Inspections will be based on FHWA’s assessment of the risk of each 

project, with new and reconstruction projects having the highest risk due

to higher project costs, among other factors. FHWA considers pavement 

preservation projects with a cost of over $5 million as medium risk, and

miscellaneous projects with a cost under $5 million as low risk. FHW

plans for approximately half of all Recovery Act highway projects in 

Arizona to have an initial inspection, which will be completed before 30

percent of the highway project is complete. FHWA plans intermediate 

inspections for a sample of the Recovery Act highway projects based 

findings from initial inspections; the size, complexity, and scope of a 

project; and other factors. These inspections, when FHWA deems t

Page AZ-32 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

necessary, will occur when the project is 30 percent to 95 percent 

complete. Some projects will receive a final inspection to determine t

the project was completed in a manner that conformed to the plans, 

specifications, and authorized changes. If FHWA fin

hat 

ds that a project is not 

in compliance, it will then take corrective actions. 

y 

g 

ry 

hat 

e’s 

isted 

for some time, and he does not foresee this becoming a major issue. 

r 

e 

n 

nd 

were 

d 

e 

ed 

y Act 

rded 

Competitively 

ADOT intends to send information on the number of jobs created and 

preserved as well as other financial and performance metrics required b

OMB both to FHWA, as required by the Recovery Act, as well as to the 

Governor’s office, to be part of Arizona’s planned centralized reportin

system. The data integrity manager at ADOT does not think that the 

Recovery Act poses any new challenges to ADOT in terms of either 

reporting to FHWA, which ADOT has done for years prior to the Recove

Act, or to the state for centralized reporting, which the agency has also 

done in the past. The issue of centralized reporting, however, is one t

the Arizona State Comptroller’s Office said might present a problem 

because ADOT uses different accounting codes than are used in the stat

system, and reconciling those codes might become a challenge. But an 

ADOT official said that the issue of different accounting codes has ex

We selected a total of four contracts, worth a total of $40.7 million, to 

discuss with ADOT contracting officials to determine how the contracts 

were being awarded. ADOT awarded these contracts to conduct work in 

support of Recovery Act highway projects. We selected two contracts fo

work to be conducted in urban areas, and two contracts for work to b

conducted in rural areas. According to an agency official, each of the

contracts we reviewed was awarded competitively. For each of the 

contracts, the agency official stated that a project development process, a

FHWA/ADOT operating partnership, ADOT standard specifications, a

Recovery Act specifications were followed when the contracts were 

awarded. Further, the official said specific Recovery Act objectives 

included in the solicitations that resulted in the contracts awarded 

pursuant to the act. Among other things, according to the ADOT standar

specifications, prior to submitting a bid, ADOT will have to prequalify a 

bidder (unless waived by ADOT). The official indicated that all bidders for 

the contracts we reviewed were prequalified. Additionally, ADOT provided

information to potential bidders on its Web site that explicitly stated that 

by submitting a bid for a Recovery Act funded project, the bidder agrees to 

be bound by conditions and reporting requirements in the contract, which 

identifies penalties for noncompliance. According to an ADOT official, th

Contracts We Review

Indicate That ADOT 

Contracts for Recover

Work Were Awa

Page AZ-33 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

work on the contracts we reviewed was awarded using unit fixed price 

me 

iency 

sealing 

ram 

these households to spend their money on other needs, according 

to DOE. The Recovery Act appropriation represents a significant increase 

cent 

, 

ctors 

se the 

or 

ing 

tial 

workers for any differences if Labor establishes a higher prevailing wage 

rate for weatherization activities. Labor then surveyed five types of 

 

contracts. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program enables low-inco

families to reduce their utility bills by making long-term energy effic

improvements to their homes by, for example, installing insulation, 

leaks, and modernizing heating equipment, air circulation fans, or 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 prog

allows 

Determining 

Weatherization Wag

Rates Has Delayed 

Contracts; Arizona 

Has Procedures i

Place to Monitor an

Report Program 

Results, but Is S

Uncertain for a program that has received about $225 million per year in re

years. 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, and territories

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE has provided to the states $2.3 billion of the $5 billion in

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires

all laborers and mechanics employed by contractors and subcontra

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis-Bacon Act.19 Becau

Davis-Bacon Act had not previously applied to weatherization, the 

Department of Labor (Labor) has not established prevailing wage rates f

weatherization work. In July 2009, DOE and Labor issued a joint 

memorandum to Weatherization Assistance Program grantees authoriz

them to begin weatherizing homes using Recovery Act funds, provided 

they pay construction workers at least Labor’s wage rates for residen

construction, or an appropriate alternative category, and compensate

e 

n 

d 

till 

 about 

Counting Jobs 

Created 

19The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

Page AZ-34 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

“interested parties” about labor rates for weatherization work.20 The 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009. 

, 

staff 

f 

l 

therize 

s 

ay 

he state 

o 

lly. 

weatherized in the previous 3 years using regular program and other 

 

DOE has allocated approximately $57 million to Arizona for the Recovery 

Act Weatherization Assistance Program over a 3-year period (2009-2012)

with about $10 million of the total allocation to support initial ramp up 

activities, such as training center expansion, curricula development, 

training, and equipment purchases. On June 5, 2009, DOE approved 

Arizona’s Recovery Act Weatherization Assistance Program plan and the 

Arizona Department of Commerce (ADOC) allocated about $49 million of 

the approximate $57 million to local service providers to conduct ramp up 

and weatherization activities. Approximately $28.5 million, or about half o

the total allocation, is currently eligible for reimbursement. ADOC is the 

prime recipient as defined by OMB, while the subrecipients are the loca

service providers and the contractors that conduct the weatherization 

work. ADOC obligates funding to local service providers to wea

low-income households by making long-term energy efficiency 

improvements, such as installing insulation or modernizing heating and 

cooling systems.21 After a local service provider determines that a home i

eligible22 to receive weatherization work, the local service provider m

employ in-house construction crews, hire contractors, or use a 

combination of both approaches to make the improvements. As t

does not have a centralized procurement system for purchasing 

weatherization materials, local service providers are delegated the 

responsibility of procuring their weatherization materials. ADOC officials

expect to expend the full allocation before the 3-year period and plan t

weatherize 6,409 units statewide, which, according to ADOC officials, 

could result in as much as $1.8 million in overall energy savings annua

This is an almost threefold increase beyond the total number of units 

Recovery Act

20The five types of interested parties are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

ent of 

s 

n as 

s Were 

Established 

Arizona Departm

Commerce Had 

Weatherization Contract

Ready to Go as Soo

Davis-Bacon Wage 

Requirement

21Building rehabilitation projects that are in a state of disrepair where failure is imminent 

and the condition cannot be resolved cost-effectively are beyond the scope of the 

Weatherization Assistance Program. 

22A household is eligible for Recovery Act weatherization services if they are at or below 

200 percent of the federal poverty level. Priority service is given to the elderly, people with 

disabilities, families with children, or high residential energy users, and households with a 

high energy burden. 

Page AZ-35 GAO-09-1017SP 
Appendix I: Arizona 

sources of funding.23 Table7 shows Arizona’s local service providers, their 

obligated funding amounts, the number of units they expect to weatherize 

from 2009 through 2012, and the cities and counties they serve. 

Table 7: Arizona Local Service Provider Funding Obligations, Projected Number of Weatherized Units (2009-2012), and the 

Cities and Counties Served 

Arizona local service provider Funding obligation

Projected 

number of units County/city served 

Maricopa County Human Services 

Department, Community Service Division 

$11,911,987 1,604 Maricopa County coverage except 

cities of Phoenix and Mesa 

Northern Arizona Council of Governments 

(NACOG) 

7,500,359 997 Apache, Navajo, Coconino, and 

Yavapai Counties 

City of Phoenix Neighborhood Services 

Department 

7,222,865 960 City of Phoenix 

Western Arizona Council of Governments 

(WACOG) 

5,911,442 778 Yuma, La Paz, and Mohave Counties 

Tucson Urban League, Inc. 4,749,363 618 Cities of Tucson and South Tucson 

Southeastern Arizona Community Action 

Program (SEACAP) 

4,654,446 603 Graham, Greenlee, Cochise and 

Santa Cruz Counties 

Community Action Human Resource Agency 

(CAHRA) 

2,269,618 275 Pinal County 

Gila County Community Action Program 1,744,457 204 Gila County 

Pima County, Community Development and 

Neighborhood Conservation Department 

1,705,544 199 Pima County coverage except cities of 

Tucson and South Tucson 

Mesa Community Action Network (Mesa CAN) 1,500,512 171 City of Mesa 

Total $49,170,593 6,409

Source: GAO analysis of ADOC data. 

As of September 11, 2009, Arizona had expended $771,485 of Recovery Act 

weatherization funds, or about 1.4 percent of the total allocation. 

According to ADOC, while most local service providers were ready to 

begin weatherization work, they had to wait until they were provided final 

Davis-Bacon local wage requirements before they could proceed because 

most providers did not have an existing in-house Davis-Bacon compliance 

officer providing them guidance on wage rates, and they preferred to avoid 

having to reconcile if wages in the awarded contracts differed from the 

required rates. Local service providers submitted their city’s or county’s 

 

23Local service providers partner with and receive other sources of funding from local, 

state, and federal utility and energy programs to maximize the return on investment for 

energy conservation-related activities, such as the Weatherization Assistance Program.

Page AZ-36 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

weatherization wage surveys directly to Labor and received final wage 

determinations on August 30, 2009. State and local service providers we 

met with have incorporated the Davis-Bacon Act requirements in their 

contracts stipulating that all laborers and mechanics employed by 

contractors and subcontractors for Recovery Act-funded weatherization 

work be paid the prevailing wage for their skill set in their locality. For 

example, the average hourly wage rate for heating and cooling installation 

workers in Arizona was about $16.00, however, using the Davis-Bacon 

prevailing wage determination, the hourly wage for those same workers 

will be $24.38 in Maricopa County and $15.63 in Pima County. The final 

wage rates differ amongst the weatherization specialties and vary 

throughout the state of Arizona as determined by Labor. According to 

ADOC officials, the effect of the increased wages will not change the 

number of homes expected to be weatherized. 

The City of Phoenix decided not to wait on the Davis-Bacon wage 

determination and began weatherizing eligible homes because Phoenix 

officials conducted their own wage determination analysis, consulted with 

their long-established Davis-Bacon compliance officer on relevant DOE 

and Recovery Act guidance, and were prepared to reconcile any wage 

differences. ADOC officials stated that they did not have concerns about 

the City of Phoenix moving forward prior to a final prevailing wage 

determination as they believe Phoenix officials were capable of meeting 

requirements and reconciling any wage differences. According to Phoenix 

officials, in mid-August, a three-bedroom single-family home was the first 

Recovery Act-funded weatherization project completed in Phoenix. The 

home had shade screens installed, an evaporative cooler removed, and a 

gas stove replaced that was found to be emitting potentially dangerous 

levels of carbon monoxide. This weatherization work resulted in a safer 

and more energy efficient home, which is expected to decrease the 

family’s energy bill by 30 to 40 percent. Phoenix officials added that the 

project employed 6 full-time and 12 part-time workers over a 2-week 

period. 

Page AZ-37 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

States and localities have had to increase the number of support activities 

needed to manage the increased funding and program requirements under 

the Recovery Act. According to ADOC officials, their organization ramped 

up from 5 to a total of 12 full-time staff to support Recovery Act 

requirements. Three of the seven program administration staff were hired 

to ensure Davis-Bacon compliance, weatherization database management, 

and general administration. Four of the five energy monitors were hired to 

assist with the additional weatherization monitoring and inspections. 

ADOC has also provided funding to hire two additional weatherization 

training center consultants and one contractor to conduct public outreach 

activities. Also, the number of energy auditors qualified to support 

weatherization monitoring and inspections is expected to increase from 

137 to about 250 before the end of the 3-year Recovery Act period. In an 

effort to support more weatherization activities and effectively administer 

the program, Northern Arizona Council of Governments officials have 

proposed to establish two satellite field offices in rural communities to 

increase their capacity to conduct and monitor weatherization activities 

and provide local outreach while minimizing travel time and the 

associated costs. 

Recovery Act Funding and 

Program Requirements 

Result in Increased State 

and Local Support and 

Training to Effectively 

Manage Weatherization 

Activities 

Furthermore, ADOC has partnered with a local training center that is 

recognized as one of twelve National Weatherization Training Centers in 

the nation to develop additional courses and expand existing facilities 

necessary to train the number of weatherization contractors and auditors 

required to meet the Recovery Act weatherization program goals for 

Arizona.24 ADOC has obligated $300,000 of the approximate total of $10 

million, or 3 percent, in Recovery Act training and technical assistance 

funding to the training center. By late September 2009, the center plans to 

spend (1) $40,000 of this amount to expand the training classroom space 

to accommodate the increased contractors requiring basic and advanced 

weatherization training, (2) $10,000 to develop training curricula, and (3) 

$250,000 to expand the training center’s capabilities to include a larger 

laboratory for conducting hands-on diagnostic and heat performance 

testing and demonstrations. 

 

24The Southwest Building Science Training Center, in Phoenix, is one of twelve National 

Weatherization Training Centers, providing beginner and advanced classroom-style and 

hands-on weatherization training to contractors in California, Nevada, and Arizona. 

Page AZ-38 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Specifically, the increase in the number of contractors needed requires 

that they be trained and certified to conduct weatherization work.25

Training center officials told us that a large number of contractors have 

expressed interest in becoming weatherization contractors. According to 

training officials, they have screened potential weatherization contractor 

viability by explaining the training and materials costs and type of 

activities involved in becoming a weatherization contractor as well as the 

training process, and provided hands-on experience to ensure they are 

highly motivated to remain in and succeed as a weatherization contractor. 

The weatherization training entails receiving hands-on training and testing 

in energy principles, heat performance, health and safety, diagnostics, and 

applied repair. Furthermore, if contractors are interested in becoming a 

certified energy auditor, they must complete one required course in 

building performance auditing. According to the training center officials, 

before the Recovery Act, they were training about four to six contractors 

per month, but now are training 20 to 40 weatherization professionals per 

month, a tenfold increase since June 2009. Since early January 2009, 52 

people have completed weatherization training and more than 70 energy 

auditors have been certified at both the state and local levels. ADOC has 

also obligated $150,000 in Recovery Act training and technical assistance 

funding to establish a free statewide weatherization contractor mentorship 

program designed to ensure the field readiness of every new 

weatherization contractor in Arizona. Specifically, experienced 

weatherization contractors approved and managed by the training center 

will mentor new weatherization contractors on the program and technical 

requirements, work techniques, and other aspects of successfully 

completing weatherization jobs. 

State and Local Agencies 

Have Procedures for 

Monitoring Work Achieved 

and Uses of Recovery Act 

Weatherization Funds 

Arizona has two key state and local procedures in place to ensure 

monitoring, tracking, and measurement of weatherization program 

success. These procedures involve multi-tiered monitoring and inspections 

and the statewide participation in an ADOC-developed weatherization 

Web-based reporting database. First, three levels of monitoring and 

inspections occur during the weatherization process: (1) by the contractor 

who made the improvements, (2) by the local service provider who 

employed the contractor or in-house crew, and (3) by the state who 

 

25In Arizona, Building Performance Institute (BPI) certification is recommended, but not 

required to be a weatherization technician, monitor, or inspector. BPI certified 

professionals diagnose, evaluate, and optimize the critical performance factors of a 

building that can impact health, safety, comfort, energy efficiency, and durability. 

Page AZ-39 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

oversees the program and subrecipients. Contractors, local service 

providers, and ADOC officials conduct 100 percent mandatory file reviews 

on proposed weatherization projects to monitor whether contractors are 

making cost-effective improvements and that no opportunities are missed 

to further weatherize the eligible homes. Contractors and service 

providers also conduct 100 percent of the mandatory physical inspections 

for all completed weatherization jobs to ensure that the weatherization 

work meets safety and program requirements as well as results in energy 

savings. Also, according to ADOC, it regularly conducts physical 

inspections on about 20 percent of the weatherized homes, thereby 

exceeding the DOE requirement of conducting physical inspections on 5 

percent of homes. 

Second, the state and local service providers utilize a state-developed, 

Web-based reporting database to centralize audit data, facilitate the 

inspection process, and reduce the risk of fraud by weatherization 

contractors. Data collected during weatherization audits are entered into 

the Web-based reporting database and are only accessible by the 

contractor entering the data, its respective local service provider, and 

ADOC until they are submitted for state review at which point, data 

manipulation cannot be made. According to state officials, these internal 

control features, linking field-based work with a Web-based database and 

limiting accessibility to audit data, ensure proper monitoring and data 

integrity, and are essential in tracking the quantity and quality of 

weatherization work throughout the state. 

According to ADOC officials, they conduct risk assessments of their local 

service providers and if any are determined to be at risk as a result of low 

weatherization production activities compared to funding received or 

noncompliance with health, safety, and program requirements, or if 

inspection files are incomplete, these weatherization contractors will 

receive additional oversight until they are in compliance and have reduced 

or eliminated their program risks. According to ADOC officials, one local 

service provider is currently undergoing increased monitoring to correct 

management and in-house crew deficiencies that resulted in inaccurate 

data collection and reporting and poor quality weatherization 

workmanship. The increased monitoring will continue for at least 2 

months after the local service provider demonstrates better program 

administration and contract work compliance. The Arizona Office of the 

Auditor General has not audited the Weatherization Assistance Program as 

a major program in the Single Audit for the last 5 years and, therefore, 

cannot determine whether there are any internal control weaknesses in 

the state program. However, according to ADOC officials, the normal 

Page AZ-40 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

monitoring of their state weatherization program and independent 

program reviews of their local weatherization service providers have not 

identified internal control weaknesses for 9 of their 10 local service 

providers. Although state and training center officials consider the 

program’s principal risk to be the fast-growing number of weatherization 

contractors requiring increased oversight, they believe these risks are 

mitigated by the following: 

1. Rigorous contractor vetting process conducted by the national training 

center. This process identifies viable and long-term weatherization 

professionals. 

2. Requirement to have contractor weatherization training and auditor 

certification to conduct and monitor state-funded weatherization 

activities. 

3. Limiting of new contractors to one weatherization job at a time until 

they prove reliable, when they can then eventually be given up to five 

jobs. 

4. State and local inspection framework and procedures conducted at 

multiple levels and performed at various phases of weatherization 

work. 

5. Requirement to use the state’s weatherization Web-based reporting 

system capturing mandatory monitoring and reporting information. 

6. Proven abilities of state and local program management who have 

successfully accomplished weatherization activities, some for more 

than 25 years. 

City of Phoenix officials described two additional mechanisms they use to 

minimize weatherization contractor-related risks and to ensure their 

program success. First, they subsidize half of the required training costs 

for individuals who have demonstrated that they can be long-term, viable 

weatherization contractors. Second, the Phoenix program officials require 

that all new weatherization contractors participate in a city-managed 

weatherization mentoring program designed to assess their ability to 

conduct the weatherization field work and meet reporting requirements. 

In addition to taking steps to monitor the use of funds, state officials are 

using performance measures to determine the effectiveness of Recovery 

Act weatherization funds that will meet and extend beyond the DOE 

required performance measurements. For example, ADOC officials have 

partnered with local utility companies to access 5 years of utility data to 

compare the pre and post energy consumption of weatherized homes to 

analyze whether improvements are achieving energy effectiveness over 

time. The tracking of post-weatherization energy savings will provide onPage AZ-41 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

going feedback to weatherization staff, highlighting measures or processes 

that provide high returns. According to ADOC, local operational changes 

can be based on this information, thereby improving cost-effectiveness. 

ADOC Expects to Meet 

Federal Reporting 

Requirements and to Use 

the State’s Centralized 

Reporting Process 

ADOC is responsible for reporting on performance measures required 

under the Recovery Act to DOE, including the program expenditures, the 

number of homes weatherized, the number of jobs created and preserved, 

and the energy savings achieved. Currently, local service providers report 

to ADOC on regular Weatherization Assistance Program activity quarterly, 

but are now expected to report on Recovery Act-related activities monthly. 

In order to meet such requirements, ADOC plans to report performance 

measurement data collected in the ADOC Web-based reporting database 

described above to both DOE and to the Governor’s centralized statewide 

reporting system quarterly. While ADOC officials expect all subrecipients 

to adjust as necessary to comply with Recovery Act Section 1512 reporting 

requirements,26 ADOC does not anticipate any issues with local service 

providers’ ability to comply in a timely manner, because of their 

established Web-based reporting structure and monitoring procedures. 

ADOC plans to report actual figures on program expenditures, 

weatherization units completed, and the number of jobs created and 

preserved for the first report due in October 2009. 

Despite Guidance, Local 

Officials Remain Uncertain 

about How to Accurately 

Count Jobs Created and 

Need Further Clarification 

from ADOC 

According to state and local officials, some local service providers remain 

uncertain about how to accurately count jobs created and need further 

clarification from ADOC. ADOC is developing an alternative methodology 

to assist local service providers in properly counting and tracking the 

number of jobs created as required by the Recovery Act reporting 

requirements. Currently, weatherization reports track the number of 

housing units completed, not hours worked. ADOC officials anticipate that 

local service providers would have difficulty gathering this information 

because contractors have tracked and reported housing units completed, 

use of funds, and the results of work completed, rather than the number of 

hours worked or number of jobs created. Furthermore, local service 

 

26Office of Management and Budget (OMB) Memorandum M-09-21 Implementing Guidance 

for the Reports on Use of Funds Pursuant to the American Reinvestment Act of 2009 

(June 22, 2009) provides guidance for carrying out the federal reporting requirements 

included in Section 1512 of the Recovery Act. However, this guidance does not impact 

other program-specific requirements in the Recovery Act and, as a result, agencies may 

issue additional and similar reporting requirements. 

Page AZ-42 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

providers expressed concern that smaller contractors may not have the 

tracking mechanisms and administrative controls in place to manage the 

different reporting requirements and administrative tasks required of them 

to be in compliance. 

In an effort to have consistent and cost-effective reporting from 

subrecipients, ADOC officials are developing an alternative way to 

determine the number of weatherization jobs created in order to comply 

with Recovery Act requirements without increasing reporting burdens on 

the contractors conducting the work. Their alternative methodology for 

determining the number of jobs created will use a statewide average 

number of hours it takes to complete different weatherization job tasks 

(such as duct insulation, window replacements, and weather stripping of 

doors), then apply those averages to the contracted work completed to 

generate the total number of Recovery Act-related hours worked which 

can be translated into the number of full-time equivalent jobs created. 

ADOC officials are currently sending out surveys to local service providers 

to obtain average number of hours worked for different weatherization 

tasks. ADOC officials plan to discuss this alternative for measuring the 

number of jobs created with DOE officials before the end of September. 

ADOC officials believe that this alternative will be an easier and more costeffective way to count the number of weatherization hours worked and 

number of weatherization jobs created in their state, however, it is too 

early to assess whether this alternative methodology can successfully 

assist state and local officials in meeting Recovery Act reporting 

requirements. 

We provided the Governor of Arizona with a draft of this appendix on 

September 8, 2009. The Director of the Office of Economic Recovery 

responded for the Governor on September 16, 2009. Also, on September 

10, 2009, we received technical comments from the State of Arizona’s 

Office of the Auditor General. The state agreed with our draft and 

provided some clarifying information which we incorporated. 

State Comments on 

This Summary 

Page AZ-43 GAO-09-1017SP Recovery Act
Appendix I: Arizona 

Eileen Larence, (202) 512-6510 or larencee@gao.gov 

Charles Jeszeck, (202) 512-7036 or jeszeckc@gao.gov 

In addition to the contacts named above, Steven Calvo, Assistant Director; 

Lisa Brownson, auditor-in-charge; Rebecca Bolnick; Aisha Cabrer; Steven 

Rabinowitz; Jeff Schmerling; and Ann Walker made major contributions to 

this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page AZ-44 GAO-09-1017SP Recovery Act
Appendix II: California 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in California. The full report covering all of GAO’s work in 16 

states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

GAO’s work in California focused on specific programs funded under the 

Recovery Act, as well as general issues involving the effect of Recovery 

Act funds on the state’s budget and the state’s readiness to report on the 

use and effect of these funds by program. The programs we reviewed—

Highway Infrastructure Investment funds, Transit Capital Assistance 

Program, Weatherization Assistance Program, and the Workforce 

Investment Act (WIA) Youth Program—were selected primarily because 

they recently have begun disbursing funds to states or include existing 

programs receiving significant amounts of Recovery Act funds. For 

example, the Transit Capital Assistance funds had a September 1, 2009, 

deadline for obligating a portion of the funds. Additionally, the WIA Youth 

program had a summer employment component which was under way 

during our review. In addition to these programs, we also updated funding 

information on three Recovery Act education programs with significant 

funds being disbursed—the U.S. Department of Education (Education) 

State Fiscal Stabilization Fund (SFSF) and Recovery Act funds under Title 

I, Part A, of the Elementary and Secondary Education Act of 1965 (ESEA), 

as amended, and the Individuals with Disabilities Education Act (IDEA), 

Part B. Consistent with the purposes of the Recovery Act, program funds 

are being directed to help California state and local governments stabilize 

their budgets and to stimulate infrastructure development and expand 

existing programs—thereby providing needed services and potential jobs. 

With the programs, GAO focused on how funds were being used; how 

safeguards were being implemented, including those related to 

procurement of goods and services; and how results were being assessed. 

Our review in California covered the following areas: 

State Budget Stabilization • On July 24, the state enacted $24 billion in additional budget measures, 

including $16 billion in cuts to programs, to balance its fiscal year 

2009-10 budget. 

Page CA-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix II: California 

• While its immediate fiscal crisis is resolved, the long-term fiscal 

outlook is still of concern. 

State Reporting under 

Section 1512 

• The state intends to centrally report for all California agencies and 

their subrecipients of Recovery Act funds. 

• The state developed and is now testing a reporting tool to collect data 

from state agencies and then upload that information to the federal 

government. 

• While the state Recovery Act Task Force is confident that they will 

meet Recovery Act deadlines, the quality of the data, especially from 

subrecipients, is uncertain. 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $2.570 billion in Recovery Act 

funds to California. 

• As of September 1, 2009, the federal government has obligated $1.978 

billion to California, and $22 million had been reimbursed by the 

federal government. 

• As of September 1, California had awarded contracts for 185 projects 

worth $1.245 billion and advertised an additional 180 projects for bid. 

The majority of these projects involve pavement widening and 

improvement projects, but the state is also using highway 

infrastructure funds for numerous safety and transportation 

enhancement projects. 

Transit Capital Assistance 

Program 

• DOT’s Federal Transit Administration (FTA) apportioned $1.002 billion 

in Recovery Act funds to California and urbanized areas in the state. 

• As of September 1, 2009, FTA has obligated $911 million to California 

and urbanized areas in the state. 

• As part of our current review, we visited four local transit agencies—

the Los Angeles County Metropolitan Transit Authority; the Orange 

County Transportation Authority; the San Joaquin Regional Rail 

Commission; and the San Joaquin Regional Transit District. 

Selected Education 

Programs 

• As of August 28, 2009, California has distributed about $3.7 billion in 

Recovery Act funding to local education agencies (LEA), special 

Page CA-2 GAO-09-1017SP Recovery Act
Appendix II: California 

education learning plan areas2 (SELPA), and institutes of higher 

education through three education programs. This includes SFSF 

education stabilization funds ($2.5 billion to K-12 and about $268 

million to each of the state’s university systems), ESEA Title I funds 

($450 million), and IDEA Part B funds ($269 million). 

• The state’s cash management practices for education funds, 

particularly ESEA Title I Recovery Act funding, continue to be a 

concern and will require close monitoring. 

Weatherization Assistance 

Program 

• California has received 50 percent—about $93 million—of its Recovery 

Act weatherization allocation, and it has obligated about $9.4 million of 

these funds for various planning, procurement, and training purposes. 

As of August 31, 2009, the state had paid invoices totaling 

approximately $1.4 million. 

• California plans to weatherize 50,330 homes with Recovery Act funds. 

However, state officials decided not to spend these funds to 

weatherize homes until prevailing wage rate determinations under the 

Davis-Bacon Act were resolved by the Department of Labor, which 

occurred on September 3, 2009. State officials now hope to issue, by 

the end of September 2009, contract amendments allowing service 

providers to begin weatherizing homes with these funds. 

Workforce Investment Act 

Youth Program 

• The U.S. Department of Labor (Labor) allotted about $187 million to 

California in WIA Youth Recovery Act funds. 

• The state has allocated about $159 million to the 49 local workforce 

investment areas in the state after reserving 15 percent for statewide 

activities. As of August 20, 2009, local agencies had drawn down $31 

million. California reported to Labor on August 15 that 14,078 youth 

participants were involved in the summer employment activities of the 

WIA Youth Program under the Recovery Act. 

• The two local workforce investment areas we visited in California, the 

City and County of San Francisco and the City of Los Angeles, differed 

in scope, size, and approach in providing their Recovery Act summer 

youth employment programs under WIA. 

 

2

SELPAs are made up of LEAs and county offices of education within particular geographic 

areas. Small LEAs join together so they can receive IDEA funding to provide a full range of 

services to students with special needs. 

Page CA-3 GAO-09-1017SP Recovery Act
Appendix II: California 

As discussed in our last report, California was not able to revise its budget 

prior to the new fiscal year that began on July 1. As a result, the state was 

unable to avoid severe cash deficits, which forced the Controller’s Office 

to start issuing registered warrants, called IOUs, beginning on July 2 to 

meet the state’s payment obligations.3

 After extensive negotiations 

between the Governor and Legislature, on July 24, the Legislature passed 

amendments authorizing $16.1 billion in cuts to the 2009-10 fiscal year 

budget, bringing the total budget cuts enacted by the state since February 

to $31 billion. These cuts, combined with tax increases of $12.5 billion, 

over $8 billion in Recovery Act funds, and other budgetary actions shown 

in table 1, were made to balance California’s budget this year. 

California’s Fiscal 

Year 2010 Budget 

Resolves the 

Immediate Fiscal 

Crisis, but Long-Term 

Fiscal Prospects 

Remain of Concern 

Table 1: Overview of Actions to Close California’s Budget Gap During 2009 

Dollars in millions 

February 

budget 

agreement

July 

amendments Total

Percent 

of total

Budget cuts $14,893 $16,125 $31,018 51.7 

Fund shifts, deferring expenses, 

borrowing, and other actions 402 8,034 8,436 14.1 

Tax increases 12,513 - 12,513 20.9 

Recovery Act funds 8,016 - 8,016 13.3 

Total $35,824 $24,159 $59,983 100 

Source: California Department of Finance. 

While the $16.1 billion in budget cuts enacted by the Legislature in July 

were widespread, some cuts are dependent upon future federal actions. 

For example, $1 billion of the cuts to Medi-Cal (the state’s Medicaid 

program), shown in table 2, are based on the assumption that the state can 

obtain reimbursements of certain payments from federal programs4

 and 

 

3

According to the California Controller’s Web site, a total of $1.95 billion in registered 

warrants have been issued since July 2. A registered warrant is a “promise to pay,” with 

interest, that is issued by the state when there is not enough cash to meet all of its payment 

obligations. Based on the recommendation of the Pooled Money Investment Board (PMIB), 

the State started redeeming IOUs on September 4, 2009. The interest rate is 3.75 percent 

per year. 

4

Examples provided by officials from the California Department of Finance include Social 

Security Disability Insurance payments that they believe should have been paid by 

Medicare, duplicate Part B Medicare premium payments caused by systemic errors, and 

adjustments to payments in connection with Medicare prescription drug coverage. 

Page CA-4 GAO-09-1017SP Recovery Act
Appendix II: California 

receipt of additional federal funds under existing initiatives. The remaining 

cuts are expected to be achieved through program savings during the year. 

Another budget solution relies on delaying state payroll payments by 1 day 

to push the expense into the 2010-11 fiscal year. In addition, some cuts 

could be overturned by lawsuits challenging their legitimacy. 

Table 2: Overview of California 2009-10 Budget Cuts Enacted in July 

Dollars in millions 

General fund program Dollars Percent of total

K-12 and community colleges $6,519.1 40.4

Higher education 1,999.8 12.4

Shift in funds from local redevelopment agencies to education 1,700.0 10.5

Medi-Cal 1,381.8 8.6

Employee compensation 846.1 6.8

Corrections and rehabilitation 785.5 4.9

CalWorks 509.6 3.2

Supplemental Security Income/State Supplementary Payment Program 108.2 0.6

Developmental services 284.0 1.8

In-home supportive services 263.5 1.6

Healthy families 178.6 1.1

Mental health 163.9 1.0

Courts 168.6 1.0

Child welfare services and foster care 120.6 0.7

Other 1,095.3 6.8

Total $16,124.6 100

Source: California Department of Finance. 

Despite the state’s budget challenges, the state does not anticipate having 

to request any maintenance-of-effort waivers in any programs having such 

requirements,5

 according to state Recovery Act Task Force (Task Force) 

officials. However, some agencies, such as the California Department of 

Education (CDE), may request certain waivers for specific Recovery Act 

programs. For example, officials in several school districts we contacted 

are requesting that CDE submit a request for a blanket waiver allowing 

 

5

Some Recovery Act programs require that states agree to maintenance-of-effort 

requirements in the level of state spending for programs to which the requirement applies, 

unless the maintenance-of-effort requirements are waived. 

Page CA-5 GAO-09-1017SP Recovery Act
Appendix II: California 

school districts to carry over more than 15 percent of the ESEA Title I 

Recovery Act funds received this year into the next fiscal year. 

State officials believe that the newly revised budget will provide a solution 

to the state’s cash shortage for the remainder of this fiscal year. On August 

13, the California Controller announced that the Department of Finance’s 

revised cash projections from the new budget, coupled with the state 

Treasurer’s assurances that California can secure revenue anticipation 

loans, would provide sufficient cash for the state to stop issuing IOUs on 

September 4. 

California’s budget situation is likely to remain challenging for some time 

to come. Preliminary projections by California’s Department of Finance 

indicate an additional $7 billion budget shortfall during the next fiscal year 

and potentially larger shortfalls in future years. This outlook is shared by 

the state’s Legislative Analyst’s Office, whose officials told us that they 

expect the state to experience cash flow deficits over the next 3 to 5 years, 

which may require significant borrowings and delayed tax refunds and 

other payments. 

The severity of California’s budget situation is compounded by a limited 

rainy-day fund.6

 At the time of our last report, the state expected to end 

the 2008-09 fiscal year with $1.5 billion in budget reserve funds and the 

2009-10 fiscal year with $4.5 billion. However, according to Californ

Department of Finance, the state actually ended the last fiscal year with a 

deficit of $4.5 billion. The Legislature’s amendments to the 2009-10 budget 

eliminated the deficit but left the state with little cushion going forward. 

The Governor used his line item veto authority to cut an additional $489 

million to give the state a small cushion to respond to unforeseen events. 

This cushion, however, could be eliminated if the Governor’s line item 

vetoes or other budget cuts are overturned in the courts as a result of 

ongoing or anticipated future lawsuits. 

ia’s 

 

The lack of rainy-day funds makes planning for the end of the Recovery 

Act funds even more challenging. Further exacerbating the challenge is 

that, according to State officials, temporary State tax increases enacted as 

part of the February 2009 budget agreement, unless amended, will end in 

6

According to Department of Finance officials, California has not had funds in the separate 

rainy-day reserve account for several years. California’s budget reserve consists of a line 

item in the General Fund budget officially called the Special Fund for Economic 

Uncertainties. 

Page CA-6 GAO-09-1017SP Recovery Act
Appendix II: California 

2011, around the same time that Recovery Act funds have been depleted. 

Nevertheless, Department of Finance officials cited several initiatives that 

could be considered as a way to assist the state with the decline of 

Recovery Act funds. These initiatives include 

• pursuing reforms in a variety of programs and processes to generate 

additional budget savings;7

• transitioning seniors and persons with disabilities served by Medi-Cal 

from a “fee-for-service” model to a “managed care” model to help 

achieve greater savings; 

• pursuing various options to stimulate the state’s economy, including 

expanding private-public partnership on redevelopment projects, 

changing some rules to lower corporate taxes, and expediting 

infrastructure project initiation; and 

• looking for ways to change the state’s tax and revenue structure to 

produce a less volatile revenue stream.8

Oversight of and reporting for Recovery Act funds requires considerable 

investment by numerous state entities. For example, the State Auditor’s 

Office estimated its cost for audit and oversight activities of Recovery Act 

funds at over $6.5 million through fiscal year 2010-11. As we have 

previously reported, the state has implemented both internal and external 

audit and control activities to help oversee Recovery Act funds. In addition 

to the State Auditor’s efforts, the Department of Finance is conducting 

readiness reviews, and the state’s Recovery Act Inspector General, whose 

office has been charged with helping to prevent and detect fraud, waste, 

and abuse involving Recovery Act funds, is attempting to monitor all 

Recovery Act funds flowing into the state either through state agencies or 

directly as local grants. The Controller, Treasurer, Office of the State Chief 

Information Officer (CIO), and individual state agencies’ internal control 

functions are all also involved in oversight activities. In addition, the state 

is incurring considerable expense in developing its Section 1512 reporting 

tool for quarterly reports to OMB, as discussed in the next section. 

Oversight Activities 

Continue Despite 

State Officials’ 

Concerns over Cost 

Reimbursements 

 

7

Specific examples cited are the Temporary Assistance for Needy Families (TANF) 

program, In-home Health Supportive Services program, Department of Corrections and 

Rehabilitation, and state contracting processes. 

8

The state has a bipartisan Tax Commission studying options that could report out its 

findings soon. Then, the Governor could convene a special session of the Legislature to 

take up Tax Commission recommendations. 

Page CA-7 GAO-09-1017SP Recovery Act
Appendix II: California 

State officials expressed frustration in their attempt to obtain 

reimbursement for their costs of oversight over Recovery Act funds, made 

more critical by the state’s difficult budget environment. Under OMB’s 

Recovery Act guidance, states are allowed to recover central 

administration costs, such as those discussed above, subject to a limit of 

0.5 percent of the Recovery Act funds received by the state. OMB 

guidance9

 issued on May 11 detailed a process which involves modifying 

the Statewide Cost Allocation Plans (SWCAP) approved by the 

Department of Health and Human Services’ (HHS) Division of Cost 

Allocation (DCA), to recoup Recovery Act related administrative costs, 

including expediting SWCAP’s typical reimbursement procedures. 

However, Task Force officials told us that the new SWCAP process will 

not allow them to claim many of their oversight costs or obtain funding in 

advance. Specifically, based on the Task Force’s interpretation of OMB 

guidance, they raised the following concerns about using a modified 

SWCAP process for Recovery Act reimbursement: 

• Only a limited number of activities will qualify for the supplemental 

Recovery Act administrative funding. For example, according to Task 

Force officials, if the state did not perform any specific administrative 

activities related to the increased Medicaid Federal Medical Assistance 

Percentage (FMAP) Recovery Act funds, then it could not claim the 0.5 

percent administrative fee for the Medicaid Recovery Act funds 

flowing into the state, even if some Recovery Act activities, such as 

those performed by the state’s Recovery Act Inspector General, help 

deter fraud, waste, and abuse in Medicaid, as well as in other 

programs. As a result, preliminary calculations by the Department of 

Finance estimate that the state will recover, at best, 25 percent of their 

administrative costs associated with the Recovery Act. 

 

9

OMB Memorandum M-09-18 titled Payments to State Grantees for Administrative Costs 

of Recovery Act Activities states that “central administrative costs incurred by State 

recipients in the management and administration of Recovery Act programs are allowable 

costs under the current guidance of OMB Circular A-87.... Generally, these costs are 

recovered as indirect costs to the programs. The methodology used to reimburse State 

recipients for central administrative costs is captured in the indirect cost rates provided for 

in OMB Circular A-87.... Under the provisions of OMB Circular A-87, States can recoup 

Recovery Act administrative costs through the State-wide Cost Allocation Plan (SWCAP), 

which is submitted to the Department of Health and Human Services (HHS) annually for 

review and approval. The costs can either be included as ‘centralized services’ costs 

(commonly known as ‘Section I costs’) or as ‘billed services’ costs (commonly known as 

‘Section II costs’). These costs can be included in the SWCAP as an addendum plan 

pertaining only to Recovery Act programs and activities, thus providing transparency to the 

total amount of Recovery Act administrative costs and its allocation to the programs.” 

Page CA-8 GAO-09-1017SP Recovery Act
Appendix II: California 

• Under SWCAP, states are reimbursed after administrative costs have 

been incurred, which in the case of California, could exacerbate its 

already strained cash flow situation. Task Force members said that 

although the state’s operations are not currently impacted by the 

inability to obtain administrative funding, in a few months, operations 

could be impacted by cash flow issues. 

• SWCAP is based on years of operating history, which provides a basis 

for estimating costs and obtaining reimbursement. That history, 

however, may not be applicable to Recovery Act administration. 

Task Force members said that these concerns are shared by budget 

officials in other states, and accordingly, the Task Force is working 

through the National Association of State Budget Officers and the National 

Association of State Auditors, Controllers, and Treasurers to obtain 

approval from OMB and HHS to use a further modified SWCAP process. 

California has proposed modifications that would allow states to draw 

administrative funds immediately using either the Governor’s 

discretionary portion of SFSF funds or, if such funds are not available, 

through an advance payment from the federal government.10 The Task 

Force members told us that authority to use an alternative process has not 

yet been granted, although significant time has been spent working with 

OMB and DCA officials on this issue, and even if granted, it would not 

allow the state to claim the full amount of its oversight costs. 

 

10California decided to commit its entire $1.1 billion allocation of SFSF government 

services funds (the discretionary portion of SFSF funds) to paying for California’s 

Department of Corrections and Rehabilitation (CDCR) payroll costs and not for oversight 

costs. As discussed in our last report, CDCR spent its first drawdown of $727 million in the 

2008-09 fiscal year on payroll. According to California Department of Finance officials, 

CDCR is slated to receive another $358 million in September which, similarly, will be used 

for payroll. 

Page CA-9 GAO-09-1017SP Recovery Act
Appendix II: California 

As the Recovery Act’s first quarterly recipient reporting date approaches 

on October 10, the state is working to develop a centralized statewide 

reporting mechanism in time to meet this deadline.11 The state plans to 

centrally report for all state agencies receiving Recovery Act funds, 

including the total amount of funds received and amounts spent on 

projects and activities, the status of specific projects and activities, 

estimates of jobs created or retained, and details on sub-awards and other 

payments.12 The first quarterly report will summarize Recovery Act activity 

from the date of enactment through September 30, 2009, and each 

successive quarterly report will present cumulative information through 

that quarter. 

California Is 

Developing a Tool to 

Centrally Submit 

Section 1512 

Information, but 

Ability to Capture 

Subrecipient Data Is 

Unknown 

As discussed in our last report, California was attempting to procure a 

reporting system from an outside vendor because the state does not have a 

centralized data management and accounting system that is capable of 

tracking Recovery Act activities across state agencies. However, the 

state’s attempts to procure an off-the-shelf system have not been 

successful because none of the 18 vendors bidding on the project had a 

system that would meet the state’s requirements without extensive 

modifications. Consequently, the state’s CIO, as a member of the Task 

Force, is leading an in-house effort to develop a custom software system 

that can be used to upload the state’s data to the central nationwide data 

collection system at the FederalReporting.gov Web site until a final 

solution is found. 

 

11Section 1512 of the Recovery Act requires recipients to report on the use of Recovery Act 

funding and provide detailed information on projects and activities funded by the Recovery 

Act. Pub. L. No. 111-5. Sec. 1512. 123 Stat. 115.287 (Feb. 17, 2009). Recipients are required 

to report no later than the 10th day after the end of each calendar quarter, beginning the 

quarter ending on September 30, 2009. Under OMB guidance, prime recipients, such as 

state agencies, have the 11th through the 21st day to review and correct data. The federal 

government will report out to the public 30 days after the quarter ends. Further 

implementation guidance on Section 1512 reporting is contained in OMB Memorandum M09-21, which was released on June 22, 2009. 

12Recipient reports will include payments to subrecipients and vendors. A vendor is defined 

as a dealer, distributor, merchant, or other seller providing goods or services required for 

the conduct of a federal program. Additional data elements were identified for vendor 

payments when reporting expenditures of more than $25,000. These include the vendor’s 

Dun and Bradstreet Universal Numbering System (DUNS) number, payment amount, and 

purchase description. A requirement was also added for subrecipients to report the DUNS 

number or name and ZIP code of the vendor’s headquarters for payments to vendors in 

excess of $25,000. 

Page CA-10 GAO-09-1017SP Recovery Act
Appendix II: California 

The state’s interim centralized reporting tool will be fed data from each 

state agency and then uploaded to the national FederalReporting.gov Web 

site. According to CIO officials, the state agencies and grantees are 

responsible for the quality of their data submissions to the centralized 

reporting tool. However, some state agency officials told us they are facing 

challenges in developing their own reporting systems, especially with 

regard to the quality and completeness of information received from 

subrecipients. These concerns are discussed in more detail in the programspecific sections of this report. 

CIO and other Task Force officials are conducting several dry runs in 

August and September to identify and resolve issues prior to the final 

reporting in October. For example, in mid-August the CIO conducted a dry 

run with three state agencies that, according to CIO officials, went very 

well overall and resulted in the development team identifying some minor 

issues. According to CIO officials, this dry run was particularly useful 

because the development team was able to test all three methods that 

state agencies have available to submit data to the centralized reporting 

tool, including through Excel spreadsheets, an online Web form, or 

directly as an XML spreadsheet.13 Similarly, CIO would like to conduct a 

dry run with the FederalReporting.gov site prior to October to test 

whether it can accept the state’s data. 

CIO and Task Force officials intend to perform some high-level quality 

checks of the information that will be submitted to the centralized 

reporting tool by state agencies. For example, CIO plans to review agency 

submissions to identify missing data and also cross-check the activity 

reported with Recovery Act receipt data reported by the state Controller’s 

Office to identify potential gaps. Further, depending on the results of 

future dry runs, CIO may expand the use of data integrity checks on 

agency data submissions before the final submission. 

 

13XML (Extensible Markup Language) is a set of rules for encoding documents 

electronically. 

Page CA-11 GAO-09-1017SP Recovery Act
Appendix II: California 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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, which include ensuring the project 

meets all environmental requirements associated with the National 

Environmental Policy Act (NEPA), paying a prevailing wage in accordance 

with federal Davis-Bacon Act requirements, complying with goals to 

ensure disadvantaged businesses are not discriminated against in the 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America program requirements. While the 

maximum federal fund share of highway infrastructure investment 

projects under the existing federal-aid highways program is generally 80 

percent, under the Recovery Act, it is 100 percent. 

California Continues 

to Award Highway 

Contracts Using 

Existing Contracting 

Procedures and 

Internal Controls to 

Ensure Appropriate 

Use of Funds 

As we reported in April 2009, $2.570 billion was apportioned to California 

in March 2009 for highway infrastructure and other eligible projects. As of 

September 1, 2009, $1.978 billion had been obligated14 and $22 million had 

been reimbursed by Federal Highway Administration (FHWA).15

Funds Obligated for 

Highway Projects in 

California Continue to 

Grow 

The majority of Recovery Act highway obligations for California have been 

for pavement widening and improvement projects. Specifically, 67 percent 

($1.316 billion) of the $1.978 billion obligated to California as of September 

1, 2009, is being used for pavement widening and improvement projects, 

while 31 percent ($614 million) is being used for safety and transportation 

enhancement projects and 2 percent ($48 million) is being used for bridge 

replacement and improvement projects. As we reported in July 2009, state 

 

14For the Highway Infrastructure Investment Program, the U.S. Department of 

Transportation has interpreted the term obligation of funds to mean the federal 

government’s contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. This 

amount does not include obligations associated with the $27 million of apportioned funds 

that were transferred from FHWA to the Federal Transit Administration (FTA) for transit 

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

made available for transit projects to FTA. 

15States request reimbursement from FHWA as they make payments to contractors working 

on approved projects. 

Page CA-12 GAO-09-1017SP Recovery Act
Appendix II: California 

officials told us they prioritized projects that could be started quickly in 

selecting projects to receive Recovery Act funds. Figure 1 shows 

obligations in California by the types of road and bridge improvements 

being made. 

Figure 1: Highway Obligations for California by Project Improvement Type as of 

September 1, 2009 

1%

Bridge improvement ($24 million)

1%

Bridge replacement ($24.3 million)

0%

New road construction ($5.3 million)

Other ($613.9 million)

Pavement widening ($274.3 million)

52%

14%

31%

Pavement improvement ($1,036.7 million)

Source: GAO analysis of FHWA data.

Pavement projects total (67 percent, $1,316.2 million)

Bridge projects total (2 percent, $48.3 million)

Other (31 percent, $613.9 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

As of September 1, 2009, California’s Department of Transportation 

(Caltrans), had awarded 185 contracts for state and local highway 

projects, 96 of which had begun construction and 13 of which had 

completed construction. The total value of the contracts awarded is $1.245 

billion.16 An additional 180 projects for state and local highway projects 

 

16The total amount of Recovery Act funds obligated for these projects is $1.104 billion. The 

total value of the contracts awarded exceeds the obligation total due to the contribution of 

local agency, state, and other federal funds to the overall financing of these projects. 

Page CA-13 GAO-09-1017SP Recovery Act
Appendix II: California 

were advertised or in the bid review process. Caltrans expects to place an 

additional 429 planned projects out to bid over the next 2 fiscal years. 

California Has Contracting 

Procedures in Place 

Intended to Ensure 

Appropriate Use of Funds 

According to state officials, the state has well-defined contract 

requirements for all highway projects, and Caltrans awards all highway 

contracts competitively to the lowest responsive and responsible bidder. 

Caltrans reviews all low bids to ascertain that the potential contractor’s 

estimated costs are balanced across the length of the contract and match 

historical prices for similar work. Caltrans officials stated that, in order to 

be awarded a contract, potential contractors must possess the appropriate 

licenses and bonds; pass safety and record checks; and demonstrate their 

experience completing similar work. Contractors are required to report 

during the solicitation process whether they have been found “not 

responsible” under evaluations in any previous solicitation. Caltrans 

officials stated that contracts are normally awarded as fixed unit price, 

wherein the price for certain items may be adjustable. For example, if the 

price of oil increases or decreases more than a prespecified percentage, 

Caltrans can make adjustments to an existing contract. State officials told 

us that Caltrans oversees construction contracts administrated by local 

agencies on the state highway system to ensure compliance with 

applicable state and federal regulations and Caltrans standards and 

practices. Officials stated that Caltrans also provides procedural and 

policy guidance on contract administration to local agencies completing 

projects that are not located on the state highway system. In addition, 

Caltrans officials stated that they added requirements specific to the 

Recovery Act, such as reporting requirements, to the Recovery Act 

contracts. Caltrans officials stated that for contracts drafted prior to 

enactment of the Recovery Act, but funded in part by Recovery Act 

appropriations, reporting requirements were appended to the contracts. 

We selected two contracts to review and discussed them with the relevant 

contracting officials in greater depth.17 At the state level, Caltrans awarded 

a contract to resurface, restore, and rehabilitate a segment of Interstate 80 

in Solano County, California. This contract was awarded on April 21, 2009, 

at a total value of $13.4 million, with a start date of May 19, 2009. At the 

local level, the City of Seaside awarded a contract to rehabilitate a section 

of Del Monte Boulevard. This contract was awarded on July 16, 2009, at a 

total value of $168,000. (See table 3.) 

 

17We reported on the projects associated with these two contracts in our July 2009 report. 

Page CA-14 GAO-09-1017SP Recovery Act
Appendix II: California 

Table 3: Summary of Contract Information for Two Highway Projects Visited 

Interstate 80 Project—Road Resurfacing, Restoration and Rehabilitation in Solano 

County, Calif. 

• Estimated contract value: $13.4 million 

• Fixed unit price contract awarded competitively; 13 bidders 

• Estimated project duration: May to November 2009 

Del Monte Boulevard Project—Pavement Rehabilitation in Seaside, Calif. 

• Estimated contract value: $168,000 

• Fixed unit price contract awarded competitively; 5 bidders 

• Estimated project duration: September to October 2009 

Source: GAO analysis. 

The Caltrans official in charge of contract oversight for the Interstate 80 

project stated that Caltrans follows the standard procedures set forth in 

the Caltrans Construction Manual, which Caltrans uses to monitor all of its 

state highway contracts.18 For example, to ensure the work performed 

matches contract specifications and meets quality standards established in 

the contract, Caltrans reviews materials testing reports submitted monthly 

by the contractor and independently conducts inspections and materials 

testing. The Caltrans resident engineer for each project also verifies that 

work performed by the contractor matches contract specifications. 

According to the project manager for the Del Monte Boulevard pavement 

rehabilitation project, the City of Seaside relies on Caltrans district office 

engineers to provide guidance regarding project oversight. The project 

manager monitors 100 percent of the invoices that contractors submit to 

ensure invoice requests for reimbursement match work performed and 

that work performed matches contract specifications. City officials stated 

that the city inspects and manages ongoing work and relies on consultants 

for materials testing and engineering support. Caltrans officials stated that 

these oversight procedures are standard for local road projects. 

 

18The Caltrans Construction Manual establishes policies and processes for the construction 

phase of Caltrans projects. The manual includes information on contract administration, 

sampling and testing, environmental requirements, and employment practices. The manual 

also includes information on contract administration for projects administered by local 

agencies for roads on the state highway system. Caltrans officials stated that the 

construction manual includes FHWA contract oversight provisions and has FHWA 

approval. 

Page CA-15 GAO-09-1017SP Recovery Act
Appendix II: California 

Caltrans Is Preparing for 

Reporting Required by 

Recovery Act Section 1512, 

but Has Concerns about 

Subcontractor Data 

Quality 

Caltrans has been collecting employment data and information on project 

implementation and expenditures and is preparing to provide compiled 

data for Section 1512 reporting to the CIO and the rest of the Task Force. 

According to Caltrans officials, Caltrans is modifying its data collection 

system to comply with OMB guidance on Section 1512 reporting. As we 

reported in July 2009, Caltrans requires contractors to collect and report 

information, including number of workers and payroll amounts, on a 

monthly basis. In addition to reporting this information for their own 

employees, contractors are also required to gather and report 

subcontractor data to Caltrans. Caltrans officials stated that they may have 

difficulty obtaining consistent data at the subcontractor level because 

Caltrans does not have direct visibility over data collection at the 

subcontractor level. Officials stated that Caltrans may assess the reliability 

and accuracy of contractor data in the future. 

Page CA-16 GAO-09-1017SP Recovery Act
Appendix II: California 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.19 The majority of the public transit funds, $6.9 billion 

(82 percent), were apportioned for the Transit Capital Assistance Program, 

with $6.0 billion designated for the urbanized area formula grant program 

and $766 million designated for the nonurbanized area formula grant 

program.20 Under the urbanized area formula grant program, Recovery Act 

funds were apportioned to 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 the states under the nonurbanized area formula grant 

program 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. Up to 10 percent of apportioned Recovery Act funds 

may also be used for operating expenses.21 Under the Recovery Act, the 

maximum federal fund share for projects under the Transit Capital 

Assistance Program is 100 percent.22

Transit Agencies in 

California Are 

Beginning to Use 

Transit Capital 

Assistance Recovery 

Act Funding, but 

Some Have Concerns 

about Section 1512 

Reporting 

Requirements 

Funds appropriated through the Transit Capital Assistance Program must 

be used in accordance with Recovery Act requirements, including the 

following: 

 

19The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

20Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

21The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

22The federal share under the existing formula grant program is generally 80 percent. 

Page CA-17 GAO-09-1017SP Recovery Act
Appendix II: California 

• Fifty percent of Recovery Act funds apportioned to urbanized areas or 

states are to be obligated within 180 days of apportionment (before 

September 1, 2009) and the remaining apportioned funds are to be 

obligated within 1 year. The Secretary of Transportation is to withdraw 

and redistribute to other urbanized areas or states any amount that is 

not obligated within these time frames.23

• Project sponsors must submit periodic reports, as required under the 

maintenance-of-effort for transportation projects section (1201(c) of 

the Recovery Act) on the amount of federal funds appropriated, 

allocated, obligated, and outlayed; the number of projects put out to 

bid, awarded, or work has begun or completed; project status; and the 

number of jobs created or sustained. In addition, grantees must report 

detailed information on any subcontractors or subgrants awarded by 

the grantee. 

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

submit to FTA for Recovery Act funding.24 FTA reviews the project 

sponsor’s grant applications to ensure that projects meet the eligibility 

requirements and then obligates the Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure disadvantaged businesses 

are not discriminated against in the awarding of contracts. 

 

23Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

24Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and metropolitan planning organizations designated for the area. 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 Program and the approved 

State Transportation Improvement Program (STIP). 

Page CA-18 GAO-09-1017SP Recovery Act
Appendix II: California 

In March 2009, $1.002 billion in Transit Capital Assistance Recovery Act 

funds were apportioned to California and urbanized areas in the state for 

transit projects. As of September 1, 2009, $911 million had been obligated. 

California’s six largest urbanized areas were apportioned approximately 

$764.7 million in Transit Capital Assistance funding, or 78 percent of 

California’s total apportionment. The largest urbanized area in California 

(Los Angeles-Long Beach-Santa Ana) was apportioned about 50 percent of 

these funds, or $388.5 million. In addition to apportionments to urbanized 

areas, approximately $34 million was apportioned to nonurbanized areas 

in California and will be administered by Caltrans. 

FTA Found That Recovery 

Act Obligation Deadline 

Was Met 

All of the urbanized areas in California and Caltrans, on behalf of the 

state’s nonurbanized areas, submitted grant applications in time for FTA to 

obligate at least 50 percent of the amount apportioned to each by the 

September 1 deadline.25 As of September 1, 2009, FTA concluded that the 

50 percent obligation requirement had been met for California and 

urbanized areas located in the state. For ten urbanized areas—Bakersfield, 

Indio-Cathedral City-Palm Springs, Lancaster-Palmdale, Mission Viejo, San 

Jose, San Diego, Santa Rosa, Stockton, Temecula-Murrieta, and VictorvilleHesperia-Apple Valley—FTA obligated 100 percent of their respective 

apportionments. FTA was also able to obligate 100 percent of funds 

apportioned under the nonurbanized area formula grant program to 

Caltrans. 

Selected Transit Agencies 

in California Are Using 

Transit Capital Assistance 

Recovery Act Funds for 

Preventive Maintenance, 

Capital Costs, and Access 

Enhancements 

Caltrans and four transit agencies we visited—Los Angeles County 

Metropolitan Transportation Authority (Metro), Orange County 

Transportation Authority (OCTA), San Joaquin Regional Rail Commission, 

and San Joaquin Regional Transit District (San Joaquin RTD)—are using 

their Transit Capital Assistance Recovery Act funds for a variety of capital 

projects. For example, Metro distributed its Transit Capital Assistance 

Recovery Act funds, approximately $226 million, among eight projects, 

including an overhaul of its aging bus fleet, the purchase of 140 

compressed natural gas buses, improvements to electrical support systems 

for its rail line, and enhancements to a rail station entrance. (See table 4.) 

While Metro chose to fund multiple projects, the San Joaquin Regional Rail 

 

25For the Transit Capital Assistance 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. 

Page CA-19 GAO-09-1017SP Recovery Act
Appendix II: California 

Commission dedicated its funds, approximately $3 million, to a single 

project to construct new track and upgrade the railbed for San Joaquin’s 

regional commuter trains. FTA Region IX, which includes California, 

provided guidance to local transit agencies on selecting projects, which 

emphasized selection of projects that could be started quickly. Officials at 

the four transit agencies we visited stated that they used this guidance in 

their project selection process. 

Table 4: Overview of Los Angles County Metropolitan Transportation Authority Transit Capital Assistance Projects 

Project name Project description Cost

Metro Blue Line traction 

power station 

Replacement of up to 20 aging traction power substations. New substations are expected 

to consume approximately 5 percent less energy than existing stations. 

$62,785,048

Bus replacement Procurement of 90 45-foot compressed natural gas composite buses. 60,000,000

Bus Midlife Program 

(preventive maintenance) 

Approximately 376 buses with an average age of 8 years in service have accumulated at 

least 40 percent of their useful life and will be overhauled, including repower of engine 

packages, suspension replacement/repair work, and operator control panel refurbishment.

47,000,000

Electrify CNG 

compression 

Electrification of all system compressors to comply with regional air quality regulations. 28,000,000

Bus replacement Procurement of 50 (30-to 32-foot) compressed natural gas buses. 24,000,000

Replacement of fiber 

optics 

Purchase of fiber optic transmission equipment to replace the existing communications 

system equipment for the Metro Rail system. 

2,500,000

Metro transit enhancement 

project 

Improvements along the El Monte and Harbor Busway Stations. 1,030,644

Red Line station egress 

project 

Design and construction of stairway entrances to the 7th Street and Metro Center Station 

to meet fire and safety requirements. 

800,000

Total $226,155,692

Source: Los Angeles County Metropolitan Transportation Authority. 

Note: Metro used its Recovery Act Transit Capital Assistance Program apportionment to fund eight 

capital projects. Of these projects, one, the Bus Midlife Program, is being completed by Metro 

employees, while the remaining seven projects will be contracted. Metro reported that seven of the 

eight projects are under way, on schedule, and on budget. As of August 2009, Metro was still 

preparing to issue the request for proposals for the Metro Transit Enhancement project. 

Transit agencies we visited are also using Transit Capital Assistance funds 

for preventive maintenance, as the Recovery Act funds could be spent 

quickly and the work could be performed primarily by agency employees 

rather than contractors.26 For example, OCTA is using approximately 60 

percent of its Transit Capital Assistance Recovery Act funds, about $45.5 

 

26Under FTA circular 9030.1c, preventive maintenance is an eligible grant activity and is 

classified under capital project activities. Preventive maintenance costs are defined as all 

maintenance costs. 

Page CA-20 GAO-09-1017SP Recovery Act
Appendix II: California 

million, for preventive maintenance, which includes vehicle fleet and bus 

facility maintenance, as well as the salaries and benefits of employees 

performing such tasks. (See fig. 2.) According to OCTA officials, funding 

projects to expand service was not desirable because it would create longterm operating costs that could not be sustained. 

Figure 2: Examples of Projects Selected by the Orange County Transportation Authority 

Maintenance and repair of bus fleet

Source: Orange County Transportation Authority.

Application of joint sealant at a bus base

Officials from all four agencies we met with reported that Recovery Act 

funds allowed them to fund projects that otherwise would have not been 

funded this fiscal year because state and local funding sources were 

suspended or fell short. For instance, officials at the San Joaquin RTD told 

us that Transit Capital Assistance Recovery Act funds are being used 

largely to fill the funding gap for capital expenses that were previously 

funded by State Transit Assistance funds and local tax revenue.27 San 

Joaquin RTD and OCTA also plan to use Transit Capital Assistance 

Recovery Act funds to compensate funding shortfalls for operating 

expenses. While OCTA plans to use some of the allowed 10 percent of the 

Los Angeles-Long Beach-Santa Ana urbanized area apportionment for 

 

27Some state funding for transit purposes is supported through two funding sources: (1) the 

State Transit Assistance fund, which is derived from a statewide sales tax on gasoline and 

diesel fuel, and (2) the Local Transportation Fund, which is derived from one-quarter of a 

cent of the general sales tax collected statewide. 

Page CA-21 GAO-09-1017SP Recovery Act
Appendix II: California 

operating expenses and the San Joaquin RTD is considering using some of 

the 10 percent allowance for the Stockton urbanized area, Metro officials 

stated that time constraints imposed by the Recovery Act requirement to 

obligate at least 50 percent of the urbanized area’s apportionment by 

September 1, 2009, made it difficult to include the 10 percent allowance in 

their grant applications to FTA. Metro developed its grant application 

before the announcement that operating expenses were eligible, and 

according to Metro officials, it could have taken up to 3 months to amend 

their state and regional transportation planning documents to include use 

of funding for operations, which could have resulted in missing the 

September 1 deadline. According to transit agency officials, their 

budgetary challenges may continue, in part, due to the elimination of the 

State Transit Assistance fund for fiscal years 2010 through 2013. In 

addition, transit agencies may receive less revenue from local funding 

sources such as sales taxes. 

Some transit agencies also received funds for projects through the transfer 

of Recovery Act highway funding.28 FHWA transferred $27.2 million in 

highway funds to FTA for use on transit projects in California, nearly 10 

percent of the total funds transferred from FHWA to FTA nationwide. 

Caltrans and regional transit agencies worked with MPOs to identify 

transit projects to complete with transferred funds. For example, in 

Stockton, the San Joaquin Regional Rail Commission worked with its MPO 

to identify an eligible project, and both entities coordinated with Caltrans 

to execute the transfer of approximately $1.7 million. Under the 

nonurbanized area program, Caltrans funded two transit projects with 

approximately $2 million in transferred highway funds. 

Selected Regional Transit 

Agencies and Caltrans Are 

Using Existing Policies and 

Procedures to Monitor 

Transit Capital Assistance 

Funds 

The transit agencies we visited and Caltrans are using existing processes 

and controls to monitor Recovery Act funds under the Transit Capital 

Assistance Program. For instance, Metro, OCTA, the San Joaquin Regional 

Rail Commission, the San Joaquin RTD, and Caltrans are all using existing 

processes to manage Recovery Act contracts, including following FTA 

contract management procedures. These procedures include 

• inspections to verify that work performed on projects adheres to 

contract specifications; 

 

28Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made 

available for transit projects to FTA. 

Page CA-22 GAO-09-1017SP Recovery Act
Appendix II: California 

• supervisory reviews of purchase orders and invoices to ensure items 

are properly billed and authorized; and 

• reconciliations of receipts and payments to accounting records to 

ensure the completeness and accuracy of the records for each project. 

While control policies were similar across transit agencies we visited and 

at Caltrans, the level of internal assessment of the management of 

Recovery Act funds varied. (See table 5.) While all four transit agencies we 

visited and Caltrans were subject to various external audits—such as 

Single Audits, financial statement audits, and FTA’s triennial review29—the 

two largest transit agencies we visited, Metro and OCTA, and Caltrans had 

internal audit departments and conducted risk assessments on an annual 

or biennial basis to develop their annual audit plans. Transit agency 

officials at the two agencies told us that the management of Recovery Act 

funds has been classified as “high risk” or “moderate to high risk” in their 

fiscal year 2009 risk assessments. 

Table 5: Examples of Internal Control Policies at Selected California Transit Agencies 

Internal controls 

Transit agency 

External 

audits Internal audits

Risk 

assessments Inspections 

Supervisory 

reviews Reconciliations

Caltrans 9 9 9 9 9 9

Los Angeles County 

Metropolitan Transportation 

Authority (Metro) 

9 9 9 9 9 9

Orange County 

Transportation Authority 

(OCTA) 

9 9 9 9 9 9

San Joaquin Regional Transit 

District 9 9 9 9

San Joaquin Regional Rail 

Commission 9 9 9 9

Source: GAO analysis of interviews with transit agency and Caltrans officials. 

 

29FTA’s triennial review evaluates urbanized area formula grantees’ performance at least 

once every 3 years in carrying out transit programs, including adherence to statutory and 

administrative requirements. 

Page CA-23 GAO-09-1017SP Recovery Act
Appendix II: California 

Caltrans and regional transit officials charged with implementing Section 

1512 reporting guidance expressed confusion about aspects of reporting 

requirements and stated that they would like additional guidance from 

FTA on how to interpret OMB’s guidance on Section 1512. For example, 

officials at transit agencies we visited were not sure whether to classify 

contractors performing work on Recovery Act-funded projects as vendors 

or subrecipients—a distinction that may impact the information included 

in recipient reports and the amount of information transit agencies are 

required to collect from contractors performing Recovery Act-funded 

work.30 While some transit agencies had sought clarification or additional 

guidance on reporting from FTA or other transit agencies, all were still 

developing plans to implement Section 1512 reporting requirements. 

Caltrans, which is responsible for gathering Section 1512 reporting data 

from nonurbanized area grant recipients, provided guidance to entities 

that will report information to Caltrans. Caltrans officials stated that they 

have also sought clarification and received guidance on Section 1512 

reporting requirements from the Task Force. 

Selected Transit Agencies 

Face Challenges 

Interpreting and 

Implementing Latest 

Section 1512 Reporting 

Guidance, Including 

Reporting Information 

about Jobs Created 

All four transit agencies we visited were still determining how to apply 

Section 1512 reporting guidance to calculate direct jobs created from 

Recovery Act-funded contracts. Methodologies for estimating direct job 

data to report to OMB differed across transit agencies. For instance, 

officials at OCTA plan to calculate direct jobs by dividing the average 

payroll of an OCTA employee into the total dollars spent on each Recovery 

Act-funded project. Additionally, OCTA officials stated that they only plan 

to include direct hours worked by contractors in their jobs estimates. By 

contrast, officials at the San Joaquin RTD plan to base job estimates 

primarily on specific hour and pay data pulled from internal payroll 

systems and certified payroll documents completed by contractors and 

subcontractors. The San Joaquin RTD plans to include all hours of 

contractors working on Recovery Act-funded projects in their direct job 

estimates. 

In addition to reporting job and spending data to OMB, transit agencies are 

also required under Recovery Act section 1201(c) to submit periodic 

reports to FTA on the status of Recovery Act funds. The four transit 

 

30OMB guidance on Section 1512 of the Recovery Act states that prime grant recipients are 

required to report different data elements for vendors and subrecipients. According to 

transit agency officials, contractors do not have the required registrations needed for 

subrecipient reporting and it may be difficult for some contractors to obtain this 

information in time for the October 10, 2009, Recovery Act Section 1512 reporting deadline. 

Page CA-24 GAO-09-1017SP Recovery Act
Appendix II: California 

agencies we visited reported to FTA for the first time on August 16, 2009. 

Agency officials told us they did not experience problems collecting the 

data to report to FTA for the reporting deadline. Transit agencies for 

which FTA obligated Recovery Act funds by July 31, 2009, were required 

to report in August on the status of these funds, including the amount 

obligated and expended, the number of contracts and their 

implementation status, and number of hours associated with direct jobs 

created or maintained by all projects and activities funded by the grant. 

The Recovery Act created a State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHEs).31 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 

school districts or public IHEs. When distributing these funds to school 

districts, states must use their primary education funding formula, but they 

can determine how to allocate funds to public IHEs. In general, school 

districts maintain broad discretion in how they can use stabilization funds, 

but states have some ability to direct IHEs in how to use these funds. 

Most Education 

Funds Awarded to 

California Have Been 

Drawn Down; 

Concerns Remain 

about Cash 

Management and 

Section 1512 

Reporting 

The Recovery Act provides $10 billion to help local educational agencies 

(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 (ESEA) of 1965. The Recovery Act requires 

these additional funds to be distributed through states to LEAs using 

 

31The initial award of SFSF funding required each state to submit an application to the U.S. 

Department of Education that provides several assurances, including that the state will 

meet maintenance-of-effort requirements (or it will be able to comply with waiver 

provisions) and that it will implement strategies to meet certain educational requirements, 

such as increasing teacher effectiveness, addressing inequities in the distribution of highly 

qualified teachers, and improving the quality of state academic standards and assessments. 

In addition, states were required to make assurances concerning accountability, 

transparency, reporting, and compliance with certain federal laws and regulations. States 

must allocate 81.8 percent of their SFSF 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). 

Page CA-25 GAO-09-1017SP Recovery Act
Appendix II: California 

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 current statutory and 

regulatory requirements and must obligate 85 percent of these funds by 

September 30, 2010.32 The U.S. Department of 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. The U.S. Department of Education made the first 

half of states’ Recovery Act ESEA Title I, Part A funding available on April 

1, 2009 and announced on September 4, 2009 that it had made the second 

half available. 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of the Individuals with Disabilities Education Act (IDEA), 

the major federal statute that supports the provisions of early intervention 

and special education and related services for infants, toddlers, children, 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). 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. The U.S. Department of 

Education made the first half of states’ Recovery Act IDEA funding 

available to state agencies on April 1, 2009 and announced on September 

4, 2009 that it had made the second half available. 

As of August 28, 2009, California has distributed about $3.7 billion in 

Recovery Act funding to LEAs, special education learning plan areas 

(SELPA)33, and IHEs through three education programs. This includes 

SFSF education stabilization funds (about $2.5 billion to K-12 schools and 

about $268 million to each of the state’s two university systems), Recovery 

Act ESEA Title I funds ($450 million), and IDEA Part B funds ($269 

million). 

 

32LEAs 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. 

33SELPAs are made up of LEAs and county offices of education within particular 

geographic areas. Small LEAs join together so they can receive IDEA funding to provide a 

full range of services to students with special needs. 

Page CA-26 GAO-09-1017SP Recovery Act
Appendix II: California 

Funds Have Been 

Distributed to K-12 

Schools and Universities, 

but Not Yet to Community 

Colleges 

The California Department of Education (CDE) released the first phase of 

Recovery Act education funds to LEAs and SELPAs beginning in late May 

2009, with the second phase, depending on the program, expected to be 

distributed to LEAs and SELPAs later in 2009 through early 2010. 

According to CDE officials, they will not know how much of the funding 

has been obligated or spent until LEAs and SELPAs submit the data to 

CDE as part of the required Recovery Act Section 1512 report to be 

released on October 10, 2009. (See table 6.) 

Table 6: Recovery Act SFSF, ESEA Title I, and IDEA Funding for Education, as of August 28, 2009 

Dollars in millions 

Program 

Made available

by Education

Drawn down

by California 

Distributed to

LEAs or IHEs 

ESEA Title I $562.5 $450.3 $450.3

IDEA, Part B 633.9 268.9 268.9

SFSF Education Stabilization 3,266.6 3,020.2 3,020.2

Total $4,463.0 $3,739.4 $3,739.4

Source: GAO analysis of CDE and Education data. 

As we previously reported in July 2009, California’s two university systems 

received a total of $537 million in SFSF funds in May 2009. The funding 

was spent primarily on personnel costs, in part to avert layoffs resulting 

from state budget cuts. Officials from both systems said they are not 

certain how much they will receive in SFSF funding for state fiscal year 

2009-10. Officials from both systems said they again plan to use the 

Recovery Act funding for personnel costs, in part to avert layoffs in light of 

continuing state funding reductions. 

California’s initial SFSF funding to IHEs did not include funding for the 

state’s community college system, as mentioned in our prior report. 

However, in response to increased budget cuts, the state submitted an 

amended SFSF application that revised the higher education allocation 

going forward to include community colleges. According to a community 

college system official, they originally expected the amount to be about 

$130 million but, because of state budget revisions, now expect it to be 

considerably less. The official said the SFSF funding they receive will be 

spent to restore state budget cuts to student services, such as counseling 

and orientation, and to instructional services such as tutoring. 

Page CA-27 GAO-09-1017SP Recovery Act
Appendix II: California 

As we previously reported, concerns exist regarding CDE and LEA ESEA 

Title I cash management practices. Specifically, both the U.S. Department 

of Education (Education) Office of the Inspector General and the 

California State Auditor have raised issues about early drawdowns and the 

calculation and remittance of interest on the cash balances.34 These 

concerns extend to CDE’s drawdown of ESEA Title I Recovery Act 

funding and the release of $450 million of the funds to LEAs on May 28, 

2009. According to CDE officials, the drawdown of ESEA Title I Recovery 

Act funds was in advance of its normally scheduled drawdown of school 

year 2008-09 regular Title I funds. As a result, CDE anticipated that the 

LEAs would be ready to use these funds quickly under approved Title I 

plans for the current school year. However, in August, when we contacted 

the 10 LEAs that received the largest amounts of ESEA Title I Recovery 

Act funding, we found that all reported maintaining large Title I Recovery 

Act cash balances. Each of these LEAs had received between $4.5 million 

and $140.5 million in ESEA Title I funds in early June, with a total of more 

than $200 million received by all 10. As of August 7, only three reported 

spending a small fraction of the funds received. Seven LEAs reported not 

spending any of the funds received. Further, officials in two of the LEAs 

we contacted pointed out that part of the ESEA Title I Recovery Act 

funding will pay salaries—which typically extend over several months or 

longer—and officials in all 10 LEAs said they planned to spend the funds 

over the course of this and next fiscal year, thus continuing to maintain 

considerable unspent Recovery Act cash balances. Any such cash balances 

will require the calculation and remittance of interest to the federal 

government. 

ESEA Title I Recovery Act 

Cash Management 

Continues to Be a Concern 

In responding to our concerns about the drawdown and distribution of 

ESEA Title I Recovery Act funds to LEAs and the appropriate calculation 

of interest on the cash balances, CDE officials told us that they had 

 

34Both the California State Auditor and the Education Inspector General have recently cited 

deficiencies in CDE and LEA ESEA Title I cash management. The Single Audit issued by 

the State Auditor in May 2009 found that CDE had disbursed over $1.6 billion to LEAs 

during the fiscal year ending June 30, 2008, with no assurances that the LEAs minimized the 

time between the receipt and disbursement of federal funds, as required by federal 

regulations. The report also noted that CDE did not ensure that interest earned on federal 

program advances is returned on at least a quarterly basis. (See State of California Internal 

Control and State Federal Compliance Audit Report for the Fiscal Year Ended June 30, 

2008, May 2009, Report 2008-002.) Additionally, the Education Inspector General reported 

in March 2009 that CDE needed to strengthen controls to ensure that LEAs correctly 

calculate and promptly remit interest earned on federal cash advances. (See EDIG/A09H0020, March 2009.) 

Page CA-28 GAO-09-1017SP Recovery Act
Appendix II: California 

conducted an informal survey of 180 LEAs in July 2009 to determine 

whether LEAs were maintaining ESEA Title I cash balances. According to 

CDE officials, nearly all of the 64 LEAs responding reported having spent 

more regular ESEA Title I funds than they received—thus having 

unreimbursed expenses rather than cash balances. Further, CDE told us 

that they determined that the unreimbursed expenses would largely offset 

the ESEA Title I Recovery Act fund cash balances for the majority of these 

LEAs and they believe that the calculation of interest on the Recovery Act 

balances would incorporate this offset. We discussed this issue with 

Education officials, but they have yet to make a final determination of 

whether such unreimbursed expenses can be offset against ESEA Title I 

Recovery Act balances for the purpose of calculating interest due to the 

federal government. 

CDE has taken several actions in an effort to address its overall cash 

management issues and help ensure that LEAs properly calculate interest 

on cash balances. In a December 2008 letter, CDE notified LEAs of federal 

cash management requirements and advised them to coordinate with their 

county Office of Education and call CDE with any questions, which, 

according to CDE officials, numerous LEAs did. Additionally, as we 

previously reported, CDE implemented a pilot program to help them 

monitor LEA compliance with federal cash management requirements 

which uses a Web-based quarterly reporting process to track LEA cash 

balances. The pilot program is scheduled to commence in October 2009. 

However, it does not include monitoring of ESEA Title I funds, which will 

be phased in after the cash management system and processes are better 

understood and operating as intended. 

Nine of the LEAs we contacted told us they have processes in place to 

calculate and remit interest on unused ESEA Title I funds. However, we 

found that the processes for calculating interest and remitting payment 

varied from location to location at the 10 LEAs we contacted. For 

example, some LEAs calculate interest using a daily cash balance, while 

some calculate it using a monthly cash balance. Additionally, one LEA we 

contacted sends a single interest check to CDE covering all programs, but 

includes back up documentation for each program, while another sends 

separate checks for each program. 

CDE officials told us they are attempting to respond to LEA cash 

management concerns by 

• selectively monitoring LEA compliance with cash management 

requirements by reviewing LEAs’ reported federal cash balances, 

Page CA-29 GAO-09-1017SP Recovery Act
Appendix II: California 

calculating interest, and posting interest remittances in CDE’s 

accounting records, and 

• conducting periodic open teleconference forums to answer LEA 

questions about Recovery Act funding, including cash management 

requirements. 

Although CDE has taken several steps to notify and inform LEAs of their 

cash management responsibilities, LEA officials reported receiving varying 

degrees of guidance.35 Officials from five LEAs reported receiving 

guidance ranging from a single notice from CDE to multiple letters, em

and bulletins from CDE, Education and their local County Office of 

Education. Officials in three LEAs reported they had been part of the 

Education Inspector General’s audit discussed earlier, and had received

guidance during that process. Officials from one LEA we contacted said 

they had not received any guidance. In light of the inconsistent guidance 

reported by LEAs, CDE should consider formalizing its cash management 

guidance to ensure that all LEAs are fully informed. This guidanc

incorporate, once available, Education’s final determination of the earlier 

described offset issue. 

ails 

e should 

 

CDE Is Preparing for 

Reporting Required by 

Recovery Act Section 1512 

but Is Concerned about 

Reporting Deadlines 

CDE officials said they are currently working on a Recovery Act reporting 

system in response to state and OMB guidance on Recovery Act Section 

1512 requirements. According to CDE officials, two CDE working groups 

have been formed to develop the reporting system. The groups meet every 

2 weeks and coordinate with and submit data to the Task Force. Officials 

said the reporting system will be ready for internal testing in early 

September 2009, and the LEAs will begin submitting data to CIO in midSeptember. However, CDE officials said they are still working on the 

specifications of internal control measures to ensure accurate and 

complete information, and are still developing their policies and 

procedures for documenting data quality reviews. 

Officials also expressed general concern about getting the LEAs to report 

Recovery Act information, as well as CDE’s ability—given the limited time 

available—to validate the information received to ensure its reliability. 

They said they are aware that data can be verified until October 21, 2009, 

after it is entered into the FederalReporting.gov Web site. However, the 

35The Task Force has also taken steps to provide guidance on cash management and two 

Recovery Act bulletins were issued to state agencies in August related to cash management 

rules and training opportunities. 

Page CA-30 GAO-09-1017SP Recovery Act
Appendix II: California 

state deadline for submitting data is September 28, 2009, and there will be 

limited opportunity to review the data after that. Additionally, they said 

that while they were aware that data can be updated and corrected in 

subsequent reporting cycles, they would prefer to enter the correct data 

the first time around and believe they are mandated to do so. Finally, CDE 

officials said that although they have received helpful advice from CIO, 

they remain concerned about the reporting deadlines. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or 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. 

The Majority of 

California’s 

Weatherization Funds 

Have Not Been 

Obligated or Spent 

As of September 14, 2009, DOE had approved the weatherization plans of 

all but two of the states, the District of Columbia, the territories, and 

Indian tribes—including all 16 states and the District of Columbia in our 

review. DOE has provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis-Bacon Act.36 Because the 

Davis-Bacon Act had not previously applied to weatherization, the 

Department of Labor (Labor) had not established a prevailing wage rate 

for weatherization work. In 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 

 

36The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

Page CA-31 GAO-09-1017SP Recovery Act
Appendix II: California 

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. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.37 The 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009. 

California has received 50 percent—about $93 million—of its Recovery 

Act weatherization allocation. As of August 31, 2009, the California 

Department of Community Services and Development (CSD), 38 the state 

agency responsible for administering the program in California, had 

obligated about $9.4 million of these funds for purposes such as state and 

local planning, training and technical assistance, and procurement,39 and it 

had spent about $1.4 million.40 California plans to spend its entire 

Recovery Act weatherization allocation—about $186 million—6 months 

prior to its federal deadline of March 2012 for spending these funds. 

California plans to weatherize 50,330 homes with its allocation. 

 

CSD is currently using Recovery Act funds to train weatherization 

workers, including making enhancements to the state training program. 

According to CSD officials, California’s local service providers are also 

developing marketing and outreach strategies and negotiating with 

potential contractors and suppliers, including educating them about 

opportunities to participate in the weatherization program. These officials 

told us that some service providers are also hiring and training 

37The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

38CSD delivers weatherization services through a network of local service providers, 

including community action agencies, nonprofit organizations, and local governments. 

39California does not have centralized procurement of weatherization materials with 

established prices and suppliers; instead, procurement is delegated to local service 

providers. 

40CSD officials clarified that, in reporting the amount of weatherization funds spent in 

California, they can only report the amount drawn through the Controller’s Office as of a 

particular date, which is generally not the amount actually spent by service providers and 

contractors as of that date. They explained that this is because the weatherization program 

typically reimburses claims for expenses already incurred by service providers and 

contractors. Therefore, funds are only drawn from the Controller’s Office whenever a 

service provider submits an invoice to the state for reimbursement, and this occurs 

monthly. Meanwhile, service providers and contractors continue to spend funds on 

weatherization-related activities. 

Page CA-32 GAO-09-1017SP Recovery Act
Appendix II: California 

administrative staff and weatherization workers.41 CSD also plans to add 

staff, including fiscal and program auditors and information technology 

consultants, to help administer the increased funds. 

California’s Use of 

Weatherization Funds Has 

Been Limited by DavisBacon Act Prevailing Wage 

Requirements and Other 

Factors 

CSD officials decided not to spend Recovery Act funds to weatherize 

homes until Labor had established a prevailing wage rate, as determined 

under the Davis-Bacon Act for weatherization work. On September 3, 

2009, Labor provided CSD with prevailing wage rates for weatherization 

work in California. CSD officials explained that they waited to spend these 

funds because the prevailing wage determinations could pose staffing 

challenges for the state’s service providers and their contractors, who 

typically use the same workers for a variety of weatherization programs, 

which, other than the Recovery Act program, are not subject to prevailing 

wage requirements. According to CSD, depending on the wage rate 

determinations, these organizations might be forced to alter their service 

delivery strategies, such as by paying the same workers different rates 

from project to project or by dedicating their highest-paid workers to 

Recovery Act projects. CSD officials also stated concerns that 

weatherizing homes prior to the wage rate determinations could increase 

the liability risks of service providers and CSD for non-compliance with 

the Davis-Bacon Act. In addition, they noted that weatherizing homes prior 

to the wage rate determinations could create an administrative burden 

associated with making retroactive payments to workers receiving less 

than the wage rates. As a result, service providers have not yet certified 

any contractors to perform weatherization activities, including contractors 

they have used in the past. CSD officials told us that, now that Labor has 

established prevailing wage rates for weatherization work, they hope to 

issue, by the end of September 2009, contract amendments to their service 

providers that would allow them to begin weatherizing homes with 

Recovery Act funds. They said that they continue to receive many 

questions about the Davis-Bacon Act from their service providers and that 

concerns are still emerging in response to evolving directives and 

guidance from Labor and DOE. 

On July 29, 2009, CSD sent a letter to DOE detailing many of its general 

concerns about the Recovery Act weatherization program, as well as 

 

41Some service providers in California outsource 100 percent of their weatherization 

activities, but most are hybrids, conducting traditional weatherization services in-house 

and outsourcing specialty services. 

Page CA-33 GAO-09-1017SP Recovery Act
Appendix II: California 

issues regarding compliance with the Davis-Bacon Act. The concerns are 

in the areas of payroll certification, workforce development, monitoring 

frequency, energy-efficiency measures, reporting requirements, dwelling 

assessments, leasing and purchasing vehicles, and program and fiscal 

benchmarks. Regarding these concerns, CSD officials told us that, as of 

September 8, 2009, DOE had only fully addressed the concern about 

payroll certification. Some of these concerns are discussed in further 

detail below. 

• Payroll certification. The letter requested that DOE confirm whether 

CSD would be required to directly perform weekly payroll certification 

of all service providers and contractors to ensure compliance with the 

Davis-Bacon Act, as opposed to CSD’s plan to require service providers 

to obtain independent, third-party payroll certification. CSD requested 

that DOE provide any requirement in writing so that it could justify 

additional staff to conduct certification activities. 

• Workforce development. The letter requested that DOE confirm 

whether CSD could request an exemption from the Davis-Bacon Act 

requirements for weatherization workers hired through its federal, 

state, and local workforce development partnerships aimed at creating 

training and employment opportunities for youth and dislocated 

workers. It stated that the Davis-Bacon Act threatens to weaken or 

eliminate workforce development as a significant component of 

California’s weatherization program. CSD officials told us that this is 

because paying high, prevailing wages to the inexperienced, entry-level 

workers typically hired through these programs could have a negative 

financial impact on service providers and their contractors and also 

threaten their more experienced, full-service workers, who could be 

paid the same rates. 

• Monitoring frequency. The letter requested that DOE confirm 

whether CSD would be required to perform on-site monitoring of 

service providers on a quarterly basis, as suggested by DOE officials 

during a recent site visit to CSD. The letter stated that quarterly 

reporting would require CSD to increase its staffing significantly and 

requested that DOE provide any such requirement in writing so that it 

could justify additional staff to conduct reporting activities. CSD 

officials told us that they are concerned that they may not have enough 

staff to conduct quarterly reviews, since they currently conduct such 

reviews annually. On the other hand, they noted that they already 

collect data for such reviews and already have a standardized method 

for analyzing these data. 

Page CA-34 GAO-09-1017SP Recovery Act
Appendix II: California 

• Program and fiscal benchmarks. The letter requested that DOE 

provide the program and fiscal benchmarks and timeline required for 

California to receive the final 50 percent of its allocation so that CSD 

can include the benchmarks in the contracts with service providers 

that it plans to issue in September 2009. 

The estimates for jobs created and homes weatherized that are currently 

in the state weatherization plan could change based on revisions to the 

local weatherization plans prepared by service providers. Any revisions 

were due to CSD by August 31, 2009. However, in mid-August, CSD 

advised its service providers that future revisions, including the estimates 

for jobs created and homes weatherized, would be allowed in response to 

the prevailing wage rate determination and other requirements impacting 

planning. CSD officials stated that, if revisions are submitted, they would 

either be due to the impact of the Davis-Bacon Act or the overall costs of 

required performance measures. 

California Has a Variety of 

Accountability Approaches 

to Monitor the Use of 

Weatherization Funds 

CSD has processes aimed at ensuring that weatherization funds are used 

for their intended purposes and in accordance with the Recovery Act. For 

example, prior to receiving Recovery Act funding, CSD formed a team—

chaired by the Chief Deputy Director and including key managers and 

staff—to design and implement work plans to help ensure compliance 

with OMB, DOE, and related state requirements and Recovery Act goals. 

CSD also has an internal auditing group that conducts an ongoing internal 

risk assessment specific to Recovery Act funds. In response to a Recovery 

Act readiness review conducted by the California Department of Finance, 

CSD audit and program staff have conducted internal and external risk 

assessments, resulting in a corrective action plan that the team evaluates 

weekly. These risk assessments include a review of all service providers to 

identify those that may warrant more intensive monitoring or other special 

conditions; as of September 8, 2009, CSD had identified four service 

providers whose Recovery Act funding could be subject to special 

conditions and/or distributed to another agency. CSD has provided service 

providers with contract requirements, provisions, and related guidance 

specific to the Recovery Act. In addition, CSD has required fraud training 

for its entire staff and is providing training and technical assistance for 

service providers, including mandatory training regarding Recovery Act 

accountability and transparency requirements, OMB principles, contract 

procurement standards, internal controls, direct and indirect cost 

principals, and audit requirements. 

Page CA-35 GAO-09-1017SP Recovery Act
Appendix II: California 

CSD’s oversight of its existing weatherization program includes a 

combination of monthly, quarterly, and annual desk reviews; routine onsite program monitoring; and an annual review of independent auditors’ 

reports. CSD currently conducts annual on-site monitoring of service 

providers and requires them to ensure that all contractors’ postinstallation 

work meets standards; CSD plans to increase the frequency of the 

postinstallation inspections to a quarterly basis. CSD also plans to review 

service providers for program compliance, track expenditures, document 

support time spent on projects, and conduct field inspections of 5 to 20 

percent of weatherized homes once the Recovery Act funds are provided 

to service providers. The state’s most recent Single Audit report did not 

include the weatherization program because it was too small to warrant 

coverage. However, CSD officials told us that they review Single Audit 

reports for service providers and that they follow up with them regarding 

findings. 

CSD Officials Expect to Be 

Able to Meet Section 1512 

Reporting Requirements, 

but Have Concerns about 

DOE Performance 

Reporting Requirements 

CSD officials told us that they anticipate no problems tracking the number 

of jobs created or retained on either a monthly or quarterly basis because 

their service providers have many years of experience administering the 

program and CSD has already provided guidance to weatherization 

contractors on how to measure employee full-time equivalents. For all 

reporting purposes, CSD requires the service providers to provide 

information directly to CSD, which then reviews it for accuracy and 

completeness. For example, CSD conducts monthly data quality reviews 

on expenditures. CSD then reports information on behalf of the program 

to state officials, OMB, and DOE. Regarding the Section 1512 reporting 

requirements, CSD is California’s prime recipient, and the service 

providers are the subrecipients. CSD plans to report all Section 1512 

information to the state’s Task Force, which will then report all state data 

to OMB. CSD officials believe they will meet the Section 1512 reporting 

requirements in a timely manner. 

As of September 8, 2009, California had not begun measuring the impact of 

its weatherization program because no homes in California had been 

weatherized with Recovery Act funds. However, CSD officials told us that 

if DOE requires additional performance measures, then costs could 

increase if the measures require changes to procurement practices, extra 

equipment and training for weatherization crews, quality assurance 

changes, or increased monitoring of contractors. CSD officials are waiting 

for final federal guidance on additional performance measures, especially 

regarding energy savings. For example, these officials anticipate that DOE 

will propose a new methodology for measuring energy savings and, as a 

Page CA-36 GAO-09-1017SP Recovery Act
Appendix II: California 

result, they have not issued any state guidance to assist service providers 

in understanding reporting requirements for this performance measure. 

They recommended that, in order to obtain credible information on energy 

savings, DOE should negotiate agreements to obtain energy usage data 

directly from utilities. They also recommended that DOE provide guidance 

that allows for standardized reporting and, therefore, the comparison of 

information across all states. 

The Recovery Act provides an additional $1.2 billion in funds for the 

Workforce Investment Act (WIA) Youth Program, including summer 

employment. Administered by the Department of Labor (Labor), the WIA 

Youth program is designed to provide low-income in-school and out-ofschool 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

California Used 

Recovery Act Funds 

to Expand Summer 

Youth Services, but 

Faced Some 

Challenges 

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,42 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.43 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job; (2) learn 

 

42H.R. Rep. No. 111-16, at 448 (2009). 

43Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

Page CA-37 GAO-09-1017SP Recovery Act
Appendix II: California 

work readiness skills on the job; and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.44 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Labor allotted about $187 million to California in WIA Youth Recovery Act 

funds. The WIA Youth program is administered by the state Employment 

Development Department (EDD) in California. After reserving 15 percent 

of the $187 million for statewide activities, the state allocated the 

remainder, about $159 million, to the 49 local workforce investment areas 

in the state. EDD officials said that they have not set targets for either 

enrollment in summer youth employment activities or the amount of 

money to be spent by a certain date, although the Governor issued a letter 

encouraging the local agencies to expend the majority of funds on summer 

activities. California officials reported to Labor on August 15 that the 49 

local areas had used Recovery Act funds to enroll 33,789 youth in the WIA 

Youth program, of which 14,078 were placed in summer employment 

 

44Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page CA-38 GAO-09-1017SP Recovery Act
Appendix II: California 

activities. However, local area officials we visited in Los Angeles and San 

Francisco said that they will not have complete results on their summer 

youth employment activities until October. Recovery Act funds must be 

expended by June 30, 2011, and, based on past experience, EDD thinks it 

is very likely that the state will spend all of these funds by that date. Each 

of California’s 49 local areas are free to determine how much of their 

Recovery Act WIA Youth funding will be spent on summer activities. 

Recovery Act Summer 

Youth Work Activities in 

Two Local Areas in 

California Differed in 

Scope, Size, and Approach 

Two local areas we visited, the City and County of San Francisco and the 

City of Los Angeles, had different levels of experience in providing 

summer youth employment programs prior to the Recovery Act and used 

different approaches to provide the programs, as described in table 7. For 

example, Los Angeles implemented its summer youth employment 

activities in two phases, while San Francisco used one period for summer 

employment activities. 

Page CA-39 GAO-09-1017SP Recovery Act
Appendix II: California 

Table 7: Description of WIA Youth Programs Reviewed by GAO 

City Los Angeles San Francisco 

Administering agencies Los Angeles Community Development 

Department (LACDD) 

San Francisco Office of Economic and 

Workforce Development 

Recovery Act WIA Youth Program funding 

allocation 

$20.3 million $2.3 million 

Locally planned allocation for WIA Youth 

summer employment activities 

$11.1 million $1.1 million 

Locally targeted number of WIA summer 

youth participants 

5,550 455 

Prior Experience with a stand- alone 

summer youth employment program 

Yes No, but previous experience with youth 

employment programs 

Program duration Two phases from May 1, 2009, to 

September 30, 2009 

June 29 to August 29, 2009 

Service providers A “mixed model” using city agencies and 

15 community- based organizations 

Nine community-based organizations 

Eligibility determination Determined by the service providers and 

reviewed by the Los Angeles Community 

Development Department (LACDD) 

Determined by the service providers and 

reviewed by the San Francisco Human 

Services Agency 

Monitored by the state Yes Yes 

Youth hours and payment Up to 140 hours at $8 an hour (Youth ages 

20 to 25 could work more hours) 

In-school youth up to 130 hours and out-ofschool youth up to 170 a hours at $9.79 an 

hour 

Type of employment Mostly public and nonprofit sector with 

private-for-profit providing less than 2 

percent of the jobs; included healthcare, 

construction, and green jobs 

Mostly public and nonprofit sector with 

private-for-profit providing about 10 percent 

of the jobs; included clerical, teacher’s aid, 

and maintenance jobs 

Summer youth participants in green jobs 422 youth participants hired through one 

service provider with emphasis on greencollar jobs 

Seven youth participants in green 

technology/construction jobs, with a total of 

47 green jobs officials identified in various 

industries; officials encountered difficulties 

defining and developing green jobs 

Source: GAO analysis based on information provided by the California Employment Development Department, Los Angeles Community 

Development Department, and San Francisco Office of Economic and Workforce Development. 

At the local agencies in San Francisco and Los Angeles, we visited two 

selected service providers in each city and spoke with 24 youth 

participants at six work sites in San Francisco and Los Angeles. We also 

spoke with six youth participants who had completed the program in Los 

Angeles. In San Francisco, we visited Larkin Street Youth Services, a 

nonprofit agency that is an established WIA service provider, and the 

Vietnamese Youth Development Council, a nonprofit agency that is a 

service provider new to the WIA program. We spoke to youth participants 

assigned to work sites through Larkin Street Youth Services, the Bayview 

Opera House/Urban YMCA, the African American Art & Culture Complex, 

Page CA-40 GAO-09-1017SP Recovery Act
Appendix II: California 

and a retail store. In Los Angeles, we visited two experienced service 

providers: the Boyle Heights Technology Center, a city-managed service 

provider, which completed its Recovery Act funded summer youth 

employment program on June 30, and the Los Angeles Conservation 

Corps, a nonprofit agency specializing in green jobs. We spoke to youth 

participants who had finished their employment at the Boyle Heights 

Technology Center, White Memorial Hospital, and East Los Angeles 

College and to youth participants assigned to work sites through Clean 

and Green and Million Trees LA. In San Francisco and Los Angeles, we 

also spoke with work site supervisors or employers, depending on 

availability. 

As previously noted, the WIA Youth program is designed to provide lowincome, in-school and out-of-school youth, who have additional barriers to 

success, with services that lead to educational achievement and successful 

employment, among other goals. Local areas may design summer 

employment opportunities funded by the Recovery Act 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. We asked youth participants 

about the types of work experiences they had during their summer 

employment, which included a variety of positions such as teachers’ aids, 

clerical positions, and green jobs, and received positive feedback. 

Page CA-41 GAO-09-1017SP Recovery Act
Appendix II: California 

Figure 3: Examples of Youth Participants at Summer Youth Employment Activities in Los Angeles 

Youth providing child care at a local hospital 

Source: Photographs provided by the Boyle Heights Technology Youth Center, Youth Opportunity Movement, Los Angeles Community

Development Department. 

Youth working at the L.A. Conservation Corps. 

In addition to the work experience component, both San Francisco and 

Los Angeles programs also provided training in work readiness, financial 

literacy, and workplace safety. The two programs, however, differed in the 

other types of allowable WIA Youth activities they provided. San Francisco 

officials estimated that, given the short duration of the program, only 

about 15 percent of the youth received structured academic training as 

part of their program. Los Angeles officials said that none of the youth 

received academic training through the summer youth employment 

programs funded by the Recovery Act. Instead, Los Angeles directed youth 

with academic training needs to two locally funded “Work and Learn” 

summer youth employment programs, which included structured 

academic training and had a target enrollment of 2,000 youth participants. 

Los Angeles officials said the infusion of Recovery Act funds allowed the 

city of Los Angeles to expand these programs, which operate at local 

expense. With respect to optional occupational training, San Francisco 

officials said that approximately 20 percent of their youth received 

training in areas of construction project management, youth work, 

philanthropy, and grant management and small business operations. Los 

Angeles officials said that, although none of their youth received formal 

Page CA-42 GAO-09-1017SP Recovery Act
Appendix II: California 

WIA-defined occupational skills training,45 youth were introduced to the 

fields of health care, green jobs, and construction and trades. 

Figure 4: Examples of Youth Participants at Summer Youth Employment Activities in Los Angeles 

Youth working at an engineering association

Source: Photographs provided by the Boyle Heights Technology Youth Center, Youth Opportunity Movement, Los Angeles Community

Development Department. 

Youth helping prepare packets for the Aids Walk

The selected summer youth employment programs we reviewed had 

mixed results in developing, as Labor encouraged, work experiences that 

introduced youth to opportunities in “green” educational and career 

pathways. San Francisco officials said they had difficulties in defining and 

developing green jobs, although they had hoped to define them as 

recycling, landscaping, solar panel installation, weatherization, and green 

construction. San Francisco officials said they identified seven youth 

participants as working in green technology and construction jobs. 

Officials also identified 47 green jobs that included not only organic 

farming and landscaping, but also clerical, customer service, and sales 

Mixed Results in Developing 

Green Jobs 

 

45According to Labor’s Training and Employment Guidance Letter 17-05 (Feb. 17, 2006) 

Attachment B, occupational skills training should be (1) outcome-oriented and focused on 

a long-term goal as specified in the Individual Service Strategy, (2) be long-term in nature 

and commence upon program exit rather than being short-term training that is part of 

services received while enrolled in Employment and Training Act-funded youth programs, 

and (3) result in attainment of a certificate awarded in recognition of an individual’s 

attainment of measurable technical or occupation skills necessary to gain employment or 

advance within an occupation. 

Page CA-43 GAO-09-1017SP Recovery Act
Appendix II: California 

positions at green industries, as well as janitorial and landscaping 

positions at government agencies. Los Angeles, however, contracted with 

one service provider, the Los Angeles Conservation Corps, with an 

emphasis on providing green jobs. This service provider had 422 youth 

participants during Phase II of the summer youth employment program, 

most of whom engaged in green jobs, which, as defined by the service 

provider, included planting trees, cleaning streets and alleys, and other 

green activities. Sponsors of the Los Angeles Conservation Corps include 

federal agencies, such as the Environmental Protection Agency and the 

U.S. Forest Service, and private entities, such as Shell Oil and the Sierra 

Club. One of the employers under the Los Angeles Conservation Corps 

was the Million Trees LA project, a city of Los Angeles project that works 

with the U.S. Forest Service on its Urban Forest Project. 

While the state did not provide enrollment or spending targets for summer 

youth employment activities, San Francisco and Los Angeles officials 

developed their own enrollment targets for their summer youth 

employment programs. Los Angeles officials also said they planned to 

spend all their WIA Recovery Act Youth funds by June 30, 2010. At the time 

of our site visits in August 2009, neither San Francisco nor Los Angeles 

had met their own summer enrollment targets. 

Challenges in Meeting 

Enrollment 

San Francisco officials told us that they had enrolled about 392 youth (86 

percent of the target), and although the program was ongoing at the time 

of our visit, they expect to fall short of their goal of enrolling 455 youth. 

San Francisco officials stated that they were able to identify enough youth 

participants, but not enough work sites. They cited the short time frames 

to develop their programs as a challenge, which officials identified at the 

outset. San Francisco contracted with two organizations for work site 

development, both of which conducted on-site orientation and monitored 

visits with each work site prior to youth being placed there. The visits 

were designed to provide program orientation, assess work sites for safety 

regulations, and explain and verify work site requirements. 

At the time of our visit, Los Angeles had met about 90 percent of their 

targeted enrollments in the first two phases of its summer youth 

employment activities,46 and officials believed they would meet their 

 

46Los Angeles also provided summer employment for 2,000 youth participants through two 

locally funded programs, Learn and Earn and LA Scholars, which offered work experience 

with academic components. 

Page CA-44 GAO-09-1017SP Recovery Act
Appendix II: California 

overall goal to have all funds obligated or expended by June 30, 2010. For 

Phase I (May to June 30, 2009), Los Angeles had a target enrollment of 

1,250 youth participants; approximately 1,100 youth completed the 

employment activities (88 percent of their goal), although Los Angeles 

officials said they are still collecting and collating the data from this phase. 

For Phase II (July 1 to September 30), Los Angeles officials had a target 

enrollment of 4,300 youth participants. Enrollment as of August 7, 2009, 

was 3,910, or 91 percent of the goal. Despite not being at their enrollment 

goal in August, Los Angeles officials anticipate reaching their overall 

enrollment goal by September 30. Beyond the Labor-defined summer 

period of May 1 to September 30,47 Phase III, called the Reconnections 

Academy, is planned to run from October 1 through December 31 and has 

a goal of providing 1,000 positions to 21 to 24 year olds. In addition, a 

Phase IV is planned for the year-round program. Los Angeles said that 

their plan is to spend all of their Recovery Act WIA Youth funds by June 

30, 2010, and the current plan is to spend 80 percent of the funds by 

September 30, 2009, at the end of Phase II. Subsequent to our visit, Los 

Angeles officials reported that, as of August 31, 2009, 5,300 youth were 

enrolled in summer youth employment activities, or about 95 percent of 

their goal. 

Los Angeles officials said they did not face any major issues in developing 

summer youth work sites. The city has previously provided locally funded 

summer youth employment activities under an umbrella program known 

as Hire LA’s Youth, which complemented the year-round WIA program. 

The request for proposal for this city-funded 2009 summer youth 

employment program was released in October 2008 and closed in 

December 2008. Thus, according to Los Angeles Community Development 

Department (LACDD) officials, when the Recovery Act provided WIA 

funds for youth summer employment in 2009, Los Angeles was already 

fully engaged in developing work sites and service providers for summer 

youth employment programs. 

San Francisco and Los Angeles officials believe that they had successfully 

targeted out-of-school youth and reached out to youth ages 22 to 24. Of the 

youth currently enrolled in the San Francisco program, 178 out of the 392 

youth (about 45 percent) were out-of-school youth. Additionally, 67 out of 

Successes with Out-of-School 

Youth and Youth Ages 22 to 24 

 

47Labor’s Training and Employment Guidance Letter 14-08 (Mar. 18, 2009): 23. 

Page CA-45 GAO-09-1017SP Recovery Act
Appendix II: California 

the 392 youth (about 17 percent) were between the ages of 22 and 24.48

According to a San Francisco official, younger participants are directed to 

the Mayor’s youth employment program, which serves high school youth. 

One of the service providers we interviewed, Larkin Street Youth Services, 

focused on the homeless youth population of San Francisco. Larkin Street 

Youth Services officials said that their population is largely an out-ofschool youth population. Only 4 of the 50 youth participating with this 

service provider were under the age of 18. 

Los Angeles officials told us that they are still collecting demographics on 

their participants to determine whether they met their goal of out-of 

school youth constituting at least 30 percent of the program participants.49

Officials at the city-based service provider we visited said that they 

focused entirely on out-of-school youth for the WIA summer youth 

employment activities. Los Angeles officials told us that they are also still 

gathering data on the number of summer youth program participants ages 

21 to 24. Phase III of the youth employment activities, however, will focus 

on this age group, with a goal of targeting 1,000 participants. 

State and Selected Local 

Agencies Have Procedures 

for Monitoring Recovery 

Act WIA Youth Summer 

Funds and Contracts 

The state and local workforce investment agencies that we visited have 

monitoring procedures over the use of Recovery Act WIA Youth funds in 

place. While the state and local agencies have similar monitoring 

procedures (see table 8), the performance of these monitoring efforts 

differ in important ways. For example, EDD plans to conduct visits to 

work sites established by each of the 49 local areas in the state. EDD 

officials told us that, during these site visits, they review a nonstatistical 

sample of participant case files and interview participants and work site 

supervisors to confirm proper documentation for participant work 

permits, verify participant eligibility, and ensure that participants are 

provided meaningful employment opportunities. EDD also reviews 

program administration and operations and examines contract 

procurements, expenditure reports, expense payments, and small 

purchases. EDD officials stated that they typically select for review work 

sites that have a high level of risk. They base risk on factors such as 

geographic location, the type of work being conducted, and the age of the 

participants. EDD issues a written report of its findings to the local 

 

48As noted above, the Recovery Act extended eligibility through age 24 for youth receiving 

services funded by the act. 

49The 30 percent goal was included in the service provider contracts. 

Page CA-46 GAO-09-1017SP Recovery Act
Appendix II: California 

agencies, which then must respond with corrective action plans 

addressing any compliance or deficiency issues raised in the report. 

Table 8: Examples of Oversight Activities at California State and Select Local Workforce Agencies 

State agency Local agencies 

Employment 

Development Department 

(EDD) 

Los Angeles Community 

Development Department 

(LACDD) 

San Francisco Office of 

Economic and Workforce 

Development 

External audits (e.g., Single Audits) 

conducted 9 9 9

Risk assessments on work sites 

performed 9

Recovery Act-specific training provided 9 9 9

Youth participant eligibility verified 9 9 9

Work site checked for safety 9 9 9

Participant payroll verified 9 9 9

Meaningful work and adequacy of 

supervision assessed 9 9 9

Source: GAO analysis of information provided by the California Employment Development Department, Los Angeles Community 

Development Department, and San Francisco Office of Economic and Workforce Development. 

Note: All monitoring activities are conducted on a sample basis. 

The local agencies we visited have adopted many of the state’s monitoring 

tools for their own monitoring purposes, including many of the interview 

questionnaires for participants and supervisors, and supplement these 

tools with their own procedures. San Francisco officials told us that their 

compliance specialists visit service providers to inspect work sites for 

safety and suitability. They also review a sample of case files, interview 

participants, and provide guidance on reporting requirements. San 

Francisco contracted its payroll and work site certification functions to 

the Japanese Community Youth Center, a nonprofit agency. San Francisco 

officials also hold weekly meetings with all service providers to review 

participant timesheets and address any concerns raised by the providers. 

Los Angeles officials told us that they visit a sample of their work sites to 

ensure that they comply with workplace safety requirements. These 

officials stated that, in addition, their service providers’ many years of 

experience with the city’s summer program and its work sites provides 

another level of control. Los Angeles has already conducted one 

programmatic monitoring visit of its service providers, including case file 

reviews, monitoring work sites, and interviewing participants and work 

site supervisors. LACDD also plans to review 10 percent of all the case 

Page CA-47 GAO-09-1017SP Recovery Act
Appendix II: California 

files for its summer program to check that participants meet eligibility 

requirements, and it plans to visit 10 percent of its work sites. Service 

providers have 30 days to respond to and implement corrective actions for 

any findings. The city negotiates a time frame with contractors for 

correcting any unresolved findings, based on the amount of work required 

to resolve them. 

We reviewed monitoring approaches at each of the four service providers 

that we visited. Since the Boyle Heights Technology Center in Los Angeles 

is a city-run service provider, it is responsible for implementing LACDD’s 

internal control procedures, as described above. Alternatively, the Los 

Angeles Conservation Corps has two internal auditors and an audit 

committee that leads its internal monitoring efforts, including eligibility 

and payroll documentation of participants. In San Francisco, officials with 

Larkin Street Youth Services told us that they conduct a risk assessment of 

their internal controls for accounts payable, payroll, information 

technology, and revenue procedures. Officials at the Vietnamese Youth 

Development Center in San Francisco explained that, although the WIA 

Youth program is their first federally funded program, they have extensive 

experience offering summer youth employment programs, in general, and 

therefore, they already have safeguards in place to ensure that youth are 

provided meaningful employment opportunities. For example, in 

connection with their earlier programs, the Vietnamese Youth 

Development Center required all program supervisors to attend an 

orientation that included guidance on safety issues and job 

responsibilities. 

We reviewed two of the contracts awarded by the city of Los Angeles to 

service providers for its summer program and discussed the contracts with 

local officials. According to local officials, one contract is with the Los 

Angeles Unified School District for a maximum of $225,000, and the other 

is with the Los Angeles Conservation Corps for an amount not to exceed 

an estimated price of $845,000—both involve providing workplace training 

for youth participants. (See table 9 for information on LACDD’s preaward 

and contracting procedures for these two contracts.) According to 

LACDD, Los Angeles added a requirement to an existing contract with the 

Los Angeles Unified School District. This modification enabled the district 

to quickly begin the first phase of its summer youth program on May 1, 

2009. Labor granted a waiver to California on the competitive requirement. 

This waiver allowed LACDD to select an existing youth service provider 

and modify its current contract amount by up to 150 percent of the original 

contract price. Other contracts were also modified in this manner during 

the first phase. The official also said that the services to be performed 

Page CA-48 GAO-09-1017SP Recovery Act
Appendix II: California 

under the program were awarded pursuant to a cost-reimbursement 

contract with a line item price of $2,000 per participant, with an estimated 

price of $225,000 to serve approximately 113 youth participants. LACDD 

decided to use a cost reimbursement contract, rather than a fixed-price 

contract, to account for possible changes in the number of participants 

enrolled in the program. According to LACDD officials, this program met 

its target of 113 enrollees. The other contract we reviewed and discussed 

with local officials was with the Los Angeles Conservation Corps, which 

was competitively awarded during the second phase of the Los Angeles 

summer youth program. Los Angeles workforce officials selected a total of 

15 service providers out of the 22 that had submitted offers. The Los 

Angeles Conservation Corps contract was also a cost reimbursement 

contract with a not-to-exceed estimated price of $845,000, serving a total 

of 422 youth participants. 

Page CA-49 GAO-09-1017SP Recovery Act
Appendix II: California 

Table 9: Preaward and Contracting Procedures Used by the Los Angeles Community Development Department (LACDD) in 

Contracts Reviewed by Local Officials and GAO 

LACDD stated it took the following steps before awarding the contracts: 

9 Verified that the bidder or offeror was in good standing by reviewing the debarred bidders list of federal and state agencies, 

checking with the special investigation section of the California Bureau of Contract Administration, and ensuring that the 

bidder did not have outstanding claims with the city’s financial management division. 

9 Confirmed that the bidder or offeror submitted a completed bid or proposal, including all necessary attachments and a 

signature from an authorized representative. 

9 Scored the bid or proposal using evaluation factors that considered demonstrated ability, such as prior experience providing 

youth programs and positive performance in recent years, as well as service design and approach. 

Once the contract was awarded, LACDD monitored contract performance by: 

9 Internal monitoring of files and fiscal transactions. 

9 Conducting bimonthly compliance monitoring, made recommendations, tracked open findings from prior year fiscal review, 

and followed up on status of single audit reports. 

9 Tracked compliance with contract terms and conditions and provided technical assistance to assist contractors to improve 

their operations and performance. 

9 Verified that appropriate funding allocations are used, adequate and auditable financial records are maintained, costs are 

allowable, and contract provisions and regulations are complied with. 

9 Validated a closeout report to general ledger and sampled expenditures reported. 

9 Compared amounts of expenditures claimed on the expenditure reports to the general ledger, and selected a sample of 

expenditures from the general ledger and examined their supporting documentation. 

9 Evaluated internal controls based on fiscal review checklist completed by contractors. 

Source: GAO analysis of information provided by Los Angeles Community Development Department. 

California Does Not 

Anticipate Problems with 

Recovery Act Reporting 

Requirements for the WIA 

Summer Youth Program, 

but Work Readiness 

Measures Differ 

California officials said that they do not anticipate any problems reporting 

Recovery Act WIA Youth program results as required by Section 1512 of 

the act. As defined by OMB guidance on Section 1512 reporting 

requirements, California is the prime recipient of WIA Youth Recovery Act 

funds, and the 49 local areas are the subrecipients. California has not 

delegated reporting responsibilities under Section 1512 to the 

subrecipients. EDD officials stated they will rely on guidance provided by 

Labor and the state to comply with Section 1512 reporting requirements, 

Page CA-50 GAO-09-1017SP Recovery Act
Appendix II: California 

and do not anticipate any challenges in collecting data from subrecipients 

or in reporting this data to the Task Force.50

The Recovery Act provided that, of the WIA Youth program measures, only 

the work readiness measure,51 is required to assess the outcomes of the 

summer-only employment for youth served with Recovery Act funds. 

Within the parameters set forth in federal agency guidance, local areas 

may determine their methodology to measure work readiness gains. San 

Francisco and Los Angeles will use different methodologies for measuring 

work readiness, including assessing different factors in different ways. 

San Francisco will assess all of its participants using its Work Readiness 

Assessment, which includes participant self-identified goals, self 

evaluation, a basic math and reading skills assessment, and a pre- and 

post- Secretary’s Commission on Achieving Necessary Skills52 (SCANS) 

evaluation. A participant’s final assessment will be completed by the work 

 

50EDD uses their Job Training Automation (JTA) system to track subrecipient data by 

reviewing accrued reports, cash disbursements, and contracts. EDD’s Workforce Services 

Branch and Fiscal Programs Division, as well as the local workforce investment boards, 

other state agencies, and community based organizations enter data into and retrieve data 

from the JTA system. Over 200 program partners rely on information from the JTA system 

to meet local, state, and Federal Management Information System requirements. The JTA 

system tracks program client participation in the relevant programs, reports program 

expenditures and obligations, and administers the WIA required Eligible Training Provider 

List. 

51A work readiness skills goal, according to Labor’s Training and Employment Guidance 

Letter 17-05 (Feb. 17, 2006) Attachment B, is 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). Work readiness skills 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. They also include positive work habits, attitudes, and behaviors such 

as punctuality, regular attendance, presenting a neat appearance, getting along and 

working well 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. This 

category also entails developing motivation and adaptability, obtaining effective coping and 

problem-solving skills, and acquiring an improved self image.” 

52In 1990, the Secretary of Labor appointed a commission to determine the skills our young 

people need to succeed in the world of work. The commission’s fundamental purpose was 

to encourage a high-performance economy characterized by high-skill, high-wage 

employment. Although the commission completed its work in 1992, according to Labor, its 

findings and recommendations continue to be a valuable source of information for 

individuals and organizations involved in education and workforce development. 

Page CA-51 GAO-09-1017SP Recovery Act
Appendix II: California 

site supervisor and will include a five-point rating system on 15 factors, 

such as attendance, punctuality, team member participation, 

understanding workplace expectations, problem solving, responsibility, 

listening, and speaking. Work site supervisors assess youth participants on 

the frequency the measure is demonstrated, such as never, hardly ever, 

sometimes, usually, or always. The assessment also includes five 

additional skills the work site supervisors identify as specific to the 

participant’s job. For these five skills, the youth participants are rated on 

level of performance such as unsatisfactory, marginal, average, above 

average, and outstanding. 

In Los Angeles, all participants will be assessed on work readiness skills 

and at least 50 percent will be assessed for basic skills using the 

Comprehensive Adult Student Assessment Systems (CASAS).53 Los 

Angeles will use two sets of tools based on SCANS skills to measure work 

readiness. Preassessment will be completed using the Individual Service 

Strategy, which requires the youth participant to answer questions about 

career aspirations, educational goals, and hopes for the summer work 

experience, among other questions. There is also a pre- and 

postassessment based on the work site supervisor’s evaluation of progress 

completed on the work site evaluation form. This pre- and postassessment 

is a four-point rating system—with ratings for needs development, 

competent, proficient, or advanced—which evaluates the level at which 

the participants perform at least four of six factors, such as interacting 

with co-workers, accepting direction and criticism, attendance and 

appearance, speaking, listening, and self- management. Los Angeles also 

provides a Job Keeping Skills Checklist designed for older youth who have 

been in the workforce previously, as well as administers an exit survey of 

youth participants. 

We provided the Governor of California with a draft of this appendix on 

September 8, 2009. 

California state officials generally agreed with our draft and provided 

some clarifying information, which we incorporated, as appropriate. 

State Comments on 

This Summary 

 

53According to Labor’s Training and Employment Guidance Letter 17-05 (Feb. 17, 2006), 

CASAS scores can be used to estimate basic adult educational levels. 

Page CA-52 GAO-09-1017SP Recovery Act
Appendix II: California 

Linda Calbom, (206) 287-4809 or calboml@gao.gov 

Randy Williamson, (206) 287-4860 or williamsonr@gao.gov 

In addition to the contacts named above, Paul Aussendorf, Assistant 

Director; Joonho Choi; Michelle Everett; Chad Gorman; Richard Griswold; 

Don Hunts; Delwen Jones; Al Larpenteur; Susan Lawless; Brooke Leary; 

Heather MacLeod; Eddie Uyekawa; and Lacy Vong made major 

contributions to this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page CA-53 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

The following summarizes GAO’s work on its third bimonthly review of 

American Recovery and Reinvestment Act (Recovery Act)1

 spending in 

Colorado. The full report on all of our work, which covers 16 states and 

the District of Columbia, is available at www.gao.gov/recovery/. 

Overview 

Colorado is targeting Recovery Act funds to help restore the state’s budget 

and to meet key program needs during the current budget crisis. Our work 

in Colorado focused on specific Recovery Act programs, including a 

detailed review of three programs—State Fiscal Stabilization Fund (SFSF), 

Transit Capital Assistance, and Weatherization Assistance. We reviewed 

these programs in detail for different reasons. The state has allocated 

major portions of SFSF funds to institutions of higher education (IHE), 

and we therefore reviewed this program. We included transit funds 

because of a Recovery Act deadline for obligating a portion of funds by 

September 1, 2009, in addition to the fact that the state received a 

significant amount of transit funds. Finally, we included the 

weatherization program in our review because of the large influx of funds 

the state received and the increased risks associated with managing those 

funds. In addition to the detailed review of these three programs, we 

updated funding information for three other programs—Highway 

Infrastructure Investment; Individuals with Disabilities Education Act 

(IDEA), Part B; and Title I, Part A, of the Elementary and Secondary 

Education Act (ESEA) of 1965. For all programs, we identified the use of 

Recovery Act funds; examined safeguards over these funds, including 

those related to procurement of goods and services; and considered how 

the effects of Recovery Act spending would be reported by the state of 

Colorado. 

Budget stabilization: As we reported in July 2009, Colorado estimated it 

will receive a total of $3.5 billion in Recovery Act funds.2

 While Recovery 

Act funds helped Colorado balance its budget for fiscal year 2009 and will 

provide additional support for the state’s budgets in fiscal years 2010 and 

2011, the state still faces significant revenue shortfalls in those 2 years. As 

a result, the state has made $318 million in budget cuts in the fiscal year 

2010 budget and anticipates making more drastic cuts in fiscal year 2011. 

Page CO-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

2

GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses (Colorado), GAO-09-830SP (Washington, D.C.: July 8, 2009). 

 Recovery Act 
Appendix III: Colorado 

In summary, for the Recovery Act programs we reviewed, we found the 

following: 

• U.S. Department of Education (Education) State Fiscal 

Stabilization Fund (SFSF). Education has allocated $760 million in 

SFSF funding to Colorado and Colorado plans to spend the majority of 

the funds on higher education. As of September 2, 2009, state IHEs had 

been reimbursed $155 million from SFSF funds. The two state 

institutions we reviewed used the funds to restore teaching positions 

and programs and to limit tuition increases. Recent budget cuts at the 

state level have caused the state to plan to reallocate $81 million in 

SFSF funds from K-12 to higher education in fiscal year 2010. The 

budget cuts decreased the state’s spending on higher education below 

levels required to meet Recovery Act requirements. As a result, on 

September 9, 2009, the state submitted a request to Education to waive 

the requirement to maintain state education spending at certain levels 

in fiscal year 2010. 

• Transit Capital Assistance. The U.S. Department of 

Transportation’s (DOT) Federal Transit Administration (FTA) 

apportioned $103 million in Recovery Act Transit Capital Assistance 

funds to Colorado and urbanized areas in the state. Of that total, $90.2 

million was apportioned to urbanized areas and the remaining $12.5 

million was apportioned to the state for spending in nonurbanized or 

rural areas. As of September 1, 2009, FTA had obligated $96.3 million 

for the state and urbanized areas in Colorado. Officials from Colorado 

transit agencies told us they directed Recovery Act funds toward highpriority projects that were facing a funding shortfall, including capital 

maintenance, safety improvements, and light rail projects. 

• Weatherization Assistance Program. The U.S. Department of 

Energy (DOE) allocated about $79.5 million in Recovery Act 

weatherization funding to Colorado, as we reported in July 2009. As of 

September 15, 2009, DOE had provided almost $39.8 million to the 

state and Colorado had obligated $17.3 million of these funds, of which 

about $4.1 million had been spent. Colorado’s weatherization plan was 

approved by DOE on August 13, 2009. Officials from some 

weatherization agencies in Colorado were concerned that Davis-Bacon 

Act wage requirements have increased the wages that they will pay for 

weatherization work, potentially limiting the amount of weatherization 

activities that can be completed in Colorado. 

• Highway Infrastructure Investment funds. DOT’s Federal Highway 

Administration (FHWA) initially apportioned almost $404 million in 

Page CO-2 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Recovery Act funds to Colorado. Of these funds, $18.6 million was 

transferred to FTA for transit projects, leaving $385 million for 

highway projects in the state. As of September 1, 2009, FHWA had 

obligated almost $290 million for Colorado projects and about $16.5 

million had been reimbursed by the federal government. 

• Individuals with Disabilities Education Act (IDEA) Part B. As of 

August 31, 2009, Education had allocated $154 million to Colorado for 

IDEA Part B. As of the same date, Colorado had reimbursed almost 

$4.1 million in Part B funds to local education agencies (LEA). 

• Title I, Part A, Elementary and Secondary Education Act 

(ESEA) of 1965. As of August 31, 2009, Education had awarded 

Colorado $111 million for ESEA Title I, Part A and Colorado had 

reimbursed almost $280,000 in ESEA Title I, Part A funds to LEAs. 

• General administrative costs. The Office of Management and 

Budget (OMB) released guidance on May 11, 2009, allowing states to 

recover costs related to central administrative activities to manage 

Recovery Act programs and funds.3

 Such activities include oversight of 

the state’s reporting and auditing of Recovery Act programs. Colorado 

submitted a cost allocation plan to the Department of Health and 

Human Services Division of Cost Allocation (DCA), the agency 

charged with approving such plans, on August 13, 2009. State officials 

expect DCA to review the plan within 60 days; as of September 14, 

2009, the plan had not been approved. The State Controller is 

concerned that timing and methodology difficulties will delay its 

approval, thereby delaying the state’s ability to recover these costs and 

hindering the state’s ability to oversee Recovery Act programs and 

funds. 

Contracting: Colorado has taken several steps to facilitate the timely and 

efficient management of Recovery Act contracts. First, legislation was 

enacted permitting a waiver of its procurement code requirements under 

certain circumstances, although the state has not yet used the waiver.4

Second, the State Purchasing Office developed and provided procurement 

guidance regarding the use of Recovery Act funds. Third, Colorado 

identified the need to hire 16 staff in the Department of Personnel and 

 

3

OMB memorandum, M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Act Activities (Washington, D.C., May 11, 2009). 

4

2009 Colo. Legis. Serv. Ch. 285 (S.B. 09-297) (West). 

Page CO-3 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Administration and several state agencies in the areas of purchasing, 

accounting, contracts, and risk management; the state plans to use general 

administrative funds to pay for some of these staff and program 

administrative funds for others. Finally, Colorado implemented a new 

Contract Management System on July 1, 2009, to facilitate centralized data 

collection and reporting on all state contracts. Various Colorado agencies 

have begun awarding Recovery Act contracts, including the Colorado 

Department of Transportation (CDOT) and the Governor’s Energy Office. 

Reporting: Colorado is planning to use a centralized process to report 

Recovery Act data to OMB rather than having state agencies report 

individually. However, a number of unresolved issues may affect 

Colorado’s ability to report to OMB in a complete and timely manner. For 

example, Colorado’s centralized reporting process is new and testing is 

ongoing, which may lead to problems when the state tries to upload data 

to OMB’s online portal, www.federalreporting.gov, by the October 10, 

2009, deadline. The Office of the State Controller has issued guidance on 

Recovery Act reporting, and the state is conducting meetings with state 

agencies to train them in the new policies and systems for reporting. 

As Colorado faces continued declining revenues compared to forecasts, 

Recovery Act funding helped the state balance its fiscal year 2009 budget, 

which ended June 30, 2009, and has also been a major factor in closing the 

gap for the current year’s (fiscal year 2010) $19 billion budget. However, 

on August 25, 2009, the Governor made cuts to balance the fiscal year 2010 

budget, and state officials anticipate that continuing revenue shortfalls and 

increasing program caseloads will likely require even deeper cuts for fiscal 

year 2011. During the same year, the state will have to manage the fact that 

Recovery Act funds will be reduced or eliminated and these funding 

sources will no longer be available to support the state’s budget. 

While Recovery Act 

Funds Have Helped 

Colorado’s Budgets, 

Revenue Shortfalls 

Will Continue and 

Need to Be Addressed 

Although Recovery Act funds are helping stabilize the state’s budgets, they 

are not expected to make up entirely for the state’s lost revenue over the 

next 2 fiscal years and the state has begun to make budget cuts.5

 As we 

reported in July, in May 2009, Colorado adopted a balanced budget for 

fiscal year 2010 based on the state’s March 2009 economic forecast. To 

 

5

The use of Recovery Act funds must comply with specific program requirements but also, 

in some cases, enables states to free up state funds to address their projected budget 

shortfalls. 

Page CO-4 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

help balance the budget, state officials included more than $500 million in 

Recovery Act funds, including SFSF funding for education (over $150 

million) and funds made available as a result of the increased Federal 

Medical Assistance Percentage (FMAP, over $340 million).6

 The state’s 

June 2009 economic forecast, however, indicated that revenues would 

decline further than expected and would be insufficient to cover the fiscal 

year 2010 budget. As a result, in August 2009, the Governor presented a 

budget-balancing plan totaling $318 million in cuts and adjustments, which 

included $258 million in general fund reductions, $40.6 million in cash fund 

transfers, and $19 million in other adjustments. As a result of these 

changes, state officials expect 300 full-time equivalent jobs to be 

eliminated.7

For fiscal year 2011, state officials are very concerned that state revenues 

will continue to decline and demand for services will continue to increase 

at the same time that the elimination or reduction of Recovery Act funding 

occurs. State projections show that lower revenues will contribute to a 

budget shortfall in fiscal year 2011 of several hundred million dollars. 

Revenues will not return to fiscal year 2008 levels until fiscal year 2012.8

During that time, state officials expect caseload increases in Medicaid and 

Corrections, as well as increases in higher education and K-12 

enrollments. At the same time these fiscal challenges exist, major 

Recovery Act funds will be ending. In particular, the additional Recovery 

Act funding for Medicaid FMAP is scheduled to end December 31, 2010, 

and Colorado has allocated its SFSF funds over 3 years, ending in fiscal 

year 2011. As a result, Colorado officials expect that they will need to find 

additional revenue sources and/or make further budget cuts. State officials 

anticipate that even if economic recovery is underway, budgetary 

shortfalls will be “brutal” and “painful” through fiscal year 2011 and the 

fiscal situation will not improve until fiscal year 2012. 

 

6

FMAP is discussed in detail in GAO-09-1016. 

7

Programs that were not part of this budget-balancing plan were (1) K-12 education, which 

the Governor identified as protected by the Colorado Constitution, and (2) CDOT and the 

Colorado Department of Labor and Employment, which receive no general fund monies. 

Budget cuts were in addition to actions taken prior to the start of fiscal year 2010 to reduce 

the budget, such as instituting four furlough days for nonessential state employees, 

transferring funds from cash funds to the general fund, using $45 million of the SFSF funds 

to balance the budget, and reducing the statutory reserve from 4 percent to 2 percent. 

8

Revenue forecasts are from the Legislative Council’s June 22, 2009, forecast. 

Page CO-5 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

As a result of the state’s current budget challenges, the Colorado General 

Assembly created an interim commission to study long term fiscal 

stability.9

 The joint resolution creating the commission directs it to study 

the fiscal stability of the state, including solutions for education and 

transportation funding, affordable access to health care, state-owned 

assets, and the creation of a rainy day fund. The resolution also calls for 

the commission to develop a strategic plan for state fiscal stability and to 

present any written findings and recommended legislation by November 6, 

2009. According to Legislative Council staff, the commission plans to 

discuss state constitutional provisions that constrain legislative options by 

limiting tax increases or mandating increased funding levels for programs 

such as K-12 education. 

The Recovery Act created 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 

be used to alleviate shortfalls in state support for education to school 

districts and public IHEs. The initial award of SFSF funding required each 

state to submit an application to the U.S. Department of Education 

(Education) that provides several assurances, including that the state will 

meet maintenance-of-effort requirements (or it will be able to comply with 

waiver provisions) and that it will implement strategies to meet certain 

educational requirements, such as increasing teacher effectiveness, 

addressing inequities in the distribution of highly qualified teachers, and 

improving the quality of state academic standards and assessments. In 

addition, states were required to make assurances concerning 

accountability, transparency, reporting, and compliance with certain 

federal laws and regulations. States must allocate 81.8 percent of their 

SFSF 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). 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 school districts or public 

IHEs. When distributing these funds to school districts, states must use 

their primary education funding formula, but they can determine how to 

SFSF Funds Continue 

to Support Higher 

Education but Budget 

Cuts Have Caused the 

State to Seek a Waiver 

from State Spending 

Requirements 

 

9

Colorado Senate Joint Resolution 09-044, adopted in May 2009. 

Page CO-6 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

allocate funds to public IHEs. In general, school districts maintain broad 

discretion in how they can use stabilization funds, but states have some 

ability to direct IHEs in how to use these funds. 

Colorado Plans to Spend a 

Majority of Stabilization 

Funds on Higher 

Education and Is Seeking a 

Waiver from the 

Maintenance-of-Effort 

Requirement 

As we reported in July 2009, Colorado has been allocated more than $760 

million in SFSF funds, $622 million of which will be education stabilization 

funds and $138 million of which will be government services funds. 

Initially, the state planned to allocate the majority of its SFSF education 

stabilization funds to higher education ($452 million over a 3-year period) 

and the remaining $170 million over a 2-year period to the state’s K-12 

system. Given the state’s emphasis on using SFSF to fund higher 

education, we focused our work for our third bimonthly review on IHEs. 

We met with officials from the University of Colorado System, the largest 

4-year college system in Colorado, and the Colorado Community College 

System, a system of 13 2-year community colleges, to discuss their use of 

SFSF funds. As both college systems allocate funds to their individual 

campuses, we also met with officials from the University of Colorado at 

Boulder, one of the universities under the University of Colorado System, 

and from Red Rocks Community College, one of the community colleges 

under the Colorado Community College System. 

Because of a recent $81 million budget cut in the state’s general fund 

contribution to higher education for fiscal year 2010, Colorado plans to 

allocate more SFSF funds to higher education than it had originally 

planned. Colorado had allocated about $302 million of the education 

stabilization funds in fiscal year 2010, with $150.7 million going to higher 

education and $152 million going to K-12 education programs. However, 

on August 25, 2009, the Governor, in the fiscal year 2010 budget-balancing 

plan submitted to the Colorado General Assembly, cut $81 million from 

the state’s $660 million general fund contribution to higher education, 

causing the state’s share of funding to fall below the SFSF maintenance-ofeffort level (2006 funding level) required under the Recovery Act.10 As a 

result, the state has requested a waiver from Education of the SFSF state 

maintenance-of-effort funding requirement for fiscal year 2010. The state 

plans to offset the budget cuts by targeting additional SFSF funds to 

higher education and decreasing the SFSF funds for K-12 by $80.8 

 

10In cutting the budget, the Governor’s budget office cited statutory authority that 

authorizes the Governor to suspend or discontinue, in whole or in part, the functions or 

services of any department, board, bureau, or agency of the state government during any 

fiscal period when there are not sufficient revenues available for expenditures. 

Page CO-7 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

million.11 Assuming that the waiver is granted, Colorado expects to 

allocate a total of $320.5 million in fiscal year 2010, with $231.5 million 

going to higher education and $89 million to K-12. This will leave $150.7

million in SFSF funds for higher education in fiscal year 2011. 

SFSF funds have had a significant effect on higher education programs 

s 

sed 

s 

e 

n 

t 

ly 

s. Further, 

The use of SFSF funds also enabled Colorado to significantly limit 

ld have 

ublic 

do 

 

and staffing in Colorado. As of September 2, 2009, IHEs had spent (been

reimbursed) $155 million in fiscal years 2009 and 2010.12 Colorado official

told us that the use of SFSF funds in fiscal years 2009 and 2010 has 

prevented layoffs, protected academic programs, and avoided increa

class size. For example, University of Colorado System officials said that 

its share of SFSF funding, $50 million in fiscal year 2009, prevented layoffs 

and reductions in some programs. According to officials, budget cuts 

would have been “horrible” without SFSF funding. Similarly, Red Rock

Community College officials said that in fiscal year 2009, without its shar

of the $25.3 million of SFSF funds allocated to the Colorado Community 

College System, the college would have had difficulty meeting certificatio

requirements for some of its programs due to increasing enrollment and 

associated costs. Officials said that enrollment at the college increased 

almost 18 percent over the last two-year period as a result of poor 

employment opportunities and the need for retraining in the curren

economy. At the same time, many of the college’s classes are relative

expensive career and technical education courses that have costly 

instructional materials and require small class size to meet the 

accreditation requirements of certain career-focused profession

in fiscal year 2010, officials said they would have had to make significant 

cuts in positions beginning in the fall of 2009 if they had not received SFSF

funds. 

potential tuition increases in fiscal year 2010. Tuition increases cou

been greater in fiscal year 2010, but Colorado’s Governor, citing the 

Recovery Act section that discusses mitigating tuition increases for p

IHEs, vetoed a portion of the state’s fiscal year 2010 appropriations bill 

that would have allowed tuition increases greater than 9 percent. Colora

also required IHEs to sign letters of assurance that included limitations on 

11According to a state official, this reduction will not cause the state funding to drop below 

the state maintenance-of-effort level required for K-12. 

12The state has allocated funds to LEAs for 2010, but according to Colorado officials, they 

have not yet spent SFSF funds. 

Page CO-8 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

tuition increases. For example, the University of Colorado System limited 

tuition increases at its institutions to an 8.5 percent average. Officials said, 

drawing a comparison to tuition increases of 25 percent that resulted from 

similarly severe budget cuts to higher education in the mid-2000s, that the 

increase could have been significantly larger without SFSF funds and the 

Governor’s guidance. Officials at Red Rocks Community College said 

SFSF funds have had a similar impact on tuition at their school. They s

the college’s tuition increase of 9 percent, or $7 per credit hour, could have

been 15 percent without SFSF funds. 

aid 

Officials from both college systems expressed concern about future 

ned 

ls 

to 

fficials representing the University of Colorado System and Red Rocks 

he 

nity 

of 

r external 

 codes 

ct 

University of Colorado 

or 

funding levels for fiscal year 2012, the year after the state’s final plan

distribution of SFSF funds to IHEs. University of Colorado System officia

said they were planning for the cliff effect that will happen when Recovery 

Act funds end by trying to develop revenue-enhancing programs in the 

interim. Colorado Community College System officials also expressed 

concerns about the exhaustion of SFSF funds, but said they are hoping 

get additional revenues from new gaming tax revenues earmarked for 

community colleges that they say may be commensurate with SFSF 

funding. 

O

Community College said that they have added specific internal controls to

manage Recovery Act funds, augmenting the institutions’ established 

control environments and procedures. Officials with the University of 

Colorado System told us that the institution has extensive control 

procedures, as well as fiscal and purchasing policies approved by t

President of the University of Colorado at Boulder. Red Rocks Commu

College officials said their established controls include monthly budgetary 

and transactional reviews at all levels, direct control and oversight of all 

fiscal activities by the Vice President of Administrative Services and the 

Controller, and anonymous tip and online reporting. Both the University 

Colorado System and Red Rocks Community College officials said they 

have staff with extensive financial experience to manage Recovery Act 

funds, as well as personnel with certified public accountant licenses and

auditing backgrounds. According to these officials, no material 

weaknesses in internal controls have been reported by internal o

auditors. Additional controls over Recovery Act funds installed at 

University of Colorado System institutions include new accounting

to track Recovery Act funds, a designated point person to coordinate all 

Recovery Act-funded activities, and new written guidance on Recovery A

funds. Red Rocks Community College officials said that the college added 

System and Red Rocks 

Community College Plan

to Use Existing and 

Additional Controls f

Recovery Act Funds 

Page CO-9 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

an additional review of all expenses to be charged to Recovery Act grant 

funds. In addition, the financial status of Recovery Act funds will be 

monitored through unique organization and account codes in the coll

system. 

ege 

he Recovery Act appropriated $8.4 billion to fund public transit 

ital 

billion 

la grant 

 some 

rtioned 

e 

 

T State Transit throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Cap

Assistance Program.13 The majority of the public transit funds—$6.9 

(82 percent)—was apportioned for the Transit Capital Assistance 

Program, with $6.0 billion designated for the urbanized area formu

program and $766 million designated for the nonurbanized area formula 

grant program.14 Under the urbanized area formula grant program, 

Recovery Act funds were apportioned to urbanized areas—which in

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 under the nonurbanized area formula 

grant program 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. Up to 10 percent of appo

Recovery Act funds may also be used for operating expenses.15 Under th

Authorities Ar

Recovery Act Funds 

for High-Priority 

Projects 

e Using 

13The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment Program and the Capital Investment Grant Program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment Program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant Program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

14Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

15The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

Page CO-10 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Recovery Act, the maximum federal fund share for projects under the 

Transit Capital Assistance Program is 100 percent.16

The State and Urbanized 

Areas Have Met Recovery 

Act Obligation Dates for 

Transit Capital Assistance 

Funds and Transit 

Agencies Are Directing 

Funds to High-Priority 

Projects 

In March 2009, FTA apportioned $103 million in Transit Capital Assistance 

Recovery Act funds to the state and urbanized areas in Colorado for 

transit projects. Of that amount, $90.2 million was apportioned to 

urbanized areas and the remaining $12.5 million was apportioned to the 

state to use in nonurbanized or rural areas.17 The Recovery Act requires 

that 50 percent of funds apportioned to urbanized areas or states must be 

obligated within 180 days (before September 1, 2009) and that the 

remaining apportioned funds are to be obligated within 1 year. The 

Secretary of Transportation is to withdraw and redistribute to other 

urbanized areas or states any amount that is not obligated within these 

time frames. As of September 1, 2009, FTA concluded that the 50 percent 

obligation requirement had been met for the state and urbanized areas 

located in the state. Specifically, $96.3 million of the total funds, or almost 

94 percent, had been obligated.18 Seventy percent of Recovery Act Transit 

Capital Assistance Program obligations in Colorado have been made in the 

greater Denver metropolitan area for capital improvements or projects to 

extend light rail service. 

We reviewed one urban and one rural transit agency in Colorado that are 

receiving a large portion of Transit Capital Assistance funds. The urban 

transit agency we reviewed is the Regional Transportation District (RTD), 

which covers the Denver metropolitan area and is the state’s largest transit 

agency. RTD received $72.1 million in Transit Capital Assistance Recovery 

 

16The federal share under the existing formula grant program is generally 80 percent. 

17CDOT’s Transit Unit manages the state’s nonurbanized Transit Capital Assistance formula 

programs in rural areas with populations less than 50,000. 

18For the Transit Capital Assistance Program, DOT 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. 

Page CO-11 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Act funds.19 The rural transit agency we reviewed is Summit County, which 

received $10.3 million in Transit Capital Assistance Recovery Act funds 

through CDOT. 

Officials from RTD and CDOT told us they directed Recovery Act funds 

toward high-priority projects that were facing a funding shortfall. Among 

other things, these projects involve capital maintenance, safety 

improvements, infrastructure to support operating improvements, and 

light rail projects. For example, RTD is using $17.1 million in Recovery Act 

funds to replace aging farebox equipment on its buses, $10.2 million to 

conduct preventive maintenance on its bus and rail fleet, and $7.6 million 

to create queue jumps (infrastructure that helps buses bypass traffic at 

certain intersections) along U.S. Highway 36. RTD officials stated that the 

projects they are planning to fund with Recovery Act dollars are needed 

projects that, because of financial constraints, would likely have been 

deferred. Moreover, RTD officials told us that they had implemented a 

service reduction totaling over $4.5 million before receiving Recovery Act 

funds, so these funds have enabled them to preserve jobs and avoid even 

larger service reductions. CDOT is using $10.3 million in Recovery Act 

funds to construct a bus maintenance facility in rural Summit County, a 

mountainous area west of Denver, and is also planning a $2.2 million 

project that will provide new buses and related equipment to rural transit 

authorities throughout the state.20 CDOT and Summit County officials 

stated that the planned bus maintenance facility is very important to the 

ongoing maintenance of the transit fleet in Summit County and will help 

the county improve and expand maintenance services. These officials told 

us that without Recovery Act funding, the new facility may never have 

been built—Summit County would have done the minimum repairs needed 

for safety to keep using it but would probably have had to contract out 

some of its maintenance. 

 

19RTD also received $18.6 million in Recovery Act funds transferred from FHWA to FTA 

through DOT’s flexible funding provisions. Flexible funds are legislatively-specified funds 

that may be used either for highway or transit purposes. The Denver Regional Council of 

Governments (DRCOG, the Denver area’s large Metropolitan Planning Organization) 

requested this transfer. FTA has obligated 100 percent of these funds; the $18.6 million will 

be used to provide partial funding for Denver Union Station, a $500 million multi-modal 

transit hub. In particular, the funds will be used to pay for a part of the design and 

construction of bus bays at Denver Union Station. 

20FTA has not obligated funds for the $2.2 million project to buy buses and other vehicles. 

CDOT officials stated that they expect to submit the project to FTA by December 30, 2009; 

FTA officials stated that they expect to obligate funds for this project by March 5, 2010. 

Page CO-12 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

In selecting projects to fund with Recovery Act dollars, RTD and CDOT 

screened projects according to whether they were critical projects that 

could be undertaken quickly and would offset funding shortfalls. RTD also 

followed an existing formula they use for allocating funds among various 

transit projects, directing 60 percent of available funds to capital 

improvements, including preventive maintenance and projects to improve 

safety, and 40 percent to projects extending light rail service. CDOT 

selected eligible projects based, among other things, on the extent to 

which they would (1) increase transportation options and transit ridership, 

(2) increase mobility on congested portions of the state highway system, 

and (3) leverage funding from other sources. For example, CDOT selected 

the $10.3 million bus maintenance construction project because this 

project was identified as one of the state’s highest rural transit priorities in 

2008 and as a high priority in the state’s long-range transit plan. The 

project also leverages local funds as Summit County has agreed to pay 31 

percent of the total project cost since the facility will be used to service 

nontransit vehicles in addition to transit buses. As of August 31, 2009, two 

RTD Capital Assistance project contracts and one CDOT grant had been 

awarded; no projects had been completed. 

Both RTD and CDOT reported that they expect to realize bid savings on 

some of the Recovery Act project contracts and grants and that they will 

redirect any savings to other Transit Capital Assistance projects. For 

example, on July 31, 2009, CDOT awarded a contract to Summit County to 

competitively bid the bus maintenance facility project, according to CDOT 

officials. The county has awarded the contract to a company that bid $8.4 

million, about $1.9 million less than the estimated cost of $10.3 million, 

potentially freeing up funds for other projects. 

RTD is not considering using Recovery Act funds to cover operating 

expenses, although CDOT is considering using some funds to cover 

operating shortfalls in rural parts of the state. On June 24, 2009, Congress 

enacted the Supplemental Appropriations Act, which provided that up to 

10 percent of apportioned Recovery Act Transit Capital Assistance funds 

could be used for operating expenses.21 Despite the provision allowing 

Recovery Act funds for operating expenses, RTD officials told us that they 

do not plan to use any of the Recovery Act funds for operating expenses 

because they want every available dollar to go to specific planned 

projects. CDOT stated that they are studying whether any of their transit 

 

21Pub. L. No. 111-32, § 1202, 123 Stat. 1859, 1908 (June 24, 2009). 

Page CO-13 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

contractors in rural parts of the state need funding to cover operating 

shortfalls because such shortfalls may lead to layoffs or service 

reductions. CDOT recently proposed to its Transportation Commission 

that a process be established to offer operating funds to its grantees in 

rural areas according to need. The commission approved CDOT’s proposal 

and, as of September 1, 2009, CDOT continued to gather data to assess 

grantee needs. 

RTD and CDOT Plan to 

Use Existing Internal 

Controls to Manage 

Recovery Act Funds 

RTD and CDOT plan to use their existing internal controls and processes 

to manage and expend Recovery Act funds. For example, RTD is using its 

standard accounting system with established procedures and controls to 

manage Recovery Act funds, as it has done with federal grants received in 

the past. According to officials, RTD’s Board of Directors reviews and 

approves all projects, which provides an additional level of control over 

projects selected for Recovery Act funds. To meet Single Audit Act 

requirements,22 RTD is reviewed annually by external auditors. We 

reviewed RTD’s audit reports for the last 3 calendar years and found no 

material weaknesses or significant deficiencies identified for financial 

statements or for federal awards. In 2008, FTA reviewed RTD’s compliance 

with statutory and administrative requirements, as is required every 3 

years, a process known as a triennial review.23 The 2008 review identified 

deficiencies in four areas, which RTD has taken action to correct. CDOT is 

also using existing processes to manage Recovery Act funds and projects. 

CDOT was recently reviewed by an external consultant to assess 

compliance with federal requirements for several federally funded 

programs, including Transit Capital Assistance. The July 2009 report 

identified deficiencies in nine areas, including program management, grant 

administration, financial management, and Buy American requirements. 

 

22The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507), requires that each 

state, local government, or nonprofit organization that expends $500,000 or more a year in 

federal awards 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, the entity may elect to have an audit of that 

program. 

23The requirements for reviews of Urbanized Area Formula Grant activities are contained in 

49 U.S.C 5307(i) and consist of reviewing grantees’ compliance with federal requirements 

in 23 areas. This process is described in a recent GAO report, GAO, Public Transportation: 

FTA’s Triennial Review Program Has Improved, but Assessments of Grantees’ 

Performance Could Be Enhanced, GAO-09-603 (Washington, D.C.: June 30, 2009). 

Page CO-14 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

CDOT and FTA officials told us that CDOT is working to correct the 

deficiencies. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which DOE administers through each 

of the states, the District of Columbia, and seven territories and Indian 

tribes. The program 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, or 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. 

Colorado Is Going 

Forward with 

Weatherization 

Activities but DavisBacon Act 

Requirements May 

Limit Amount of 

Weatherization Work 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories, 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE has provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis-Bacon Act.24 Because the 

Davis-Bacon Act had not previously applied to weatherization, the 

Department of Labor (Labor) had not established a prevailing wage rate 

for weatherization work. In 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. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.25 The 

 

24The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

25The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page CO-15 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009. 

Colorado’s Plan for 

Recovery Act 

Weatherization Funds Has 

Been Approved by DOE 

and Colorado Is Going 

Forward with 

Weatherization Activities 

DOE approved Colorado’s weatherization plan for Recovery Act funds on 

August 13, 2009,26 and as of September 15, 2009, DOE had provided almost 

$39.8 million in weatherization funds to Colorado, 50 percent of the total 

$79.5 million in Recovery Act weatherization funding that Colorado will 

receive over a 3-year period. In Colorado, the Governor’s Energy Office is 

responsible for administering the weatherization program and the office 

contracts with local administering agencies to implement weatherization 

activities in various regions across the state.27 These agencies, in turn, 

either conduct weatherization work in-house or contract for 

weatherization activities with local contractors. From June through 

September 2009, Colorado awarded 10 contracts to local administering 

agencies to conduct weatherization activities throughout the state. In 

addition, the Governor’s Energy Office plans to award one statewide 

contract to a local administering agency to conduct weatherization 

activities at multi-family units. As of September 15, 2009, the Governor’s 

Energy Office had obligated $17.3 million or 22 percent of its total 

weatherization funds, of which about $4.1 million had been spent. We 

visited two local administering agencies: Arapahoe County, a local 

government agency that conducts weatherization activities in Arapahoe 

and Adams Counties in the Denver metropolitan area; and Housing 

Resources of Western Colorado, a nonprofit agency that conducts 

weatherization activities in the western part of the state. We selected these 

two agencies to visit because they received varying amounts of Recovery 

Act funds, one covers an urban area and one covers a rural area, and they 

have varying performance records. 

 

26In our last Recovery Act report, GAO-09-830SP, we reported that officials from the 

Governor’s Energy Office were concerned about a potential delay in DOE’s approval of 

their weatherization plan. According to these officials, DOE had told Colorado that they 

were planning to approve Colorado’s plan on July 1, 2009, the same day that some of the 

Governor’s Energy Office’s contracts with local administering agencies were scheduled to 

begin. While DOE was delayed in approving Colorado’s plan, officials from the Governor’s 

Energy Office told us that the delay did not affect weatherization activities in Colorado and 

that they were able to move forward with contracts based on the award amount even 

though the plan was not yet approved. 

27State officials told us that the contracts between the Governor’s Energy Office and the 

local administering agencies are considered grant contracts and are therefore not subject 

to the procurement code nor do they need to be competed. The local administering 

agencies follow their own procurement processes to award contracts to local contractors. 

Page CO-16 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

In Colorado, the Governor’s Energy Office and the local administering 

agencies together are using Recovery Act weatherization funds for a 

variety of activities, including training weatherization workers, conducting 

energy audits of homes eligible for weatherization funds, purchasing 

equipment and materials, and weatherizing qualified homes. For example, 

officials from Arapahoe County told us that they are using Recovery Act 

funds for basic weatherization activities, such as installing insulation, as 

shown in figure 1. The picture on the left shows a technician blowing 

insulation into the walls of a home in Aurora, Colorado, while the picture 

on the right shows the holes that the insulation is blown into; once 

insulation is installed, the holes are filled and sealed. Arapahoe County 

conducts most weatherization activities in-house but officials said they 

plan to award contracts to about six contractors in the next few years to 

help with the expanded weatherization program.28 Similarly, officials from 

Housing Resources of Western Colorado are using Recovery Act funds to 

install energy-efficient appliances and insulation, among other 

weatherization activities. They conduct all weatherization activities inhouse and do not plan to award any contracts for weatherization work.29

 

28Arapahoe County does not plan to hire any contractors to conduct Recovery Act 

weatherization work; rather, they plan to have contractors conduct weatherization work 

using other sources of weatherization funding. 

29Housing Resources of Western Colorado currently uses a contractor to conduct some 

administrative activities. In the past, Housing Resources of Western Colorado contracted 

with another agency to conduct weatherization work in Southwestern Colorado. However, 

the Governor’s Energy Office is contracting with a new local administering agency to 

conduct weatherization activities in that area of the state. 

Page CO-17 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Figure 1: Arapahoe County Weatherization Worker Installing Insulation at a Home in Aurora, Colorado 

Source: GAO.

Page CO-18 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Of the 10 local administering agencies that the Governor’s Energy Office is 

contracting with, 8 are legacy agencies that the office has contracted with 

in the past and 2 are new agencies.30 One of the legacy local administering 

agencies, which provides weatherization services in Denver and Jefferson 

Counties, was only awarded a 6-month interim contract because officials 

from the Governor’s Energy Office had concerns about the agency’s 

performance. The Governor’s Energy Office discovered, through a partial 

audit in 2009, that the agency had reported units as completed despite 

ongoing work, demonstrated cost allocation problems, and overextended 

its budget and thus had to furlough staff for the month of June 2009. 

Officials in the Governor’s Energy Office plan to competitively award the 

contract this fall with a new contract to begin in January 2010, shortly 

before the 6-month contract ends. The legacy agency will be able to 

compete for the new contract but will not be given preferred status, which 

would have provided the agency with additional points when the 

Governor’s Energy Office scores the grant applications.31 In the meantime, 

officials from the Governor’s Energy Office have increased their 

monitoring of the agency and are conducting a full financial audit. 

According to officials, they can terminate the interim contract if any 

significant issues are discovered. 

 

30As we reported previously in July 2009, when the Governor’s Energy Office first learned 

that they would be receiving an influx of weatherization funds from the Recovery Act and 

began developing its state plan for spending the funds, officials from the office talked to 

the local administering agencies to determine how much weatherization funding the 

agencies believed they could reasonably spend. In 2008, Colorado received almost $5.5 

million from DOE for the weatherization program, compared to almost $80 million 

allocated under the Recovery Act, and officials from the Governor’s Energy Office 

recognized that not all agencies may be equipped to handle the resulting influx of funds. In 

compiling the numbers from the agencies, officials at the Governor’s Energy Office 

determined that there was a gap between available Recovery Act funds and the amount of 

work the agencies believed they could deliver, so the office initiated two new requests for 

applications and has awarded contracts to two new agencies to fill in the gaps to conduct 

weatherization work in certain regions of the state. 

31In selecting a subgrantee, grantees are to give preference to any agency that has or is 

currently administering an effective program, as defined in regulation. 10 C.F.R. § 

440.15(a)(3). When scoring local administering agencies’ applications for weatherization 

contracts, the Governor’s Energy Office plans to give a 15-point bonus to all agencies in 

good standing. 

Page CO-19 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Some weatherization officials in Colorado are concerned about DavisBacon Act wage requirements, noting that paying prevailing wages may 

increase the cost of weatherizing homes, thereby limiting the amount of 

weatherization activities that can be completed. Officials from the 

Governor’s Energy Office told us that they did not wait for Labor to 

establish Colorado’s weatherization wage rates before awarding contracts 

to local administering agencies. They said that the local agencies selected 

the “best-available” wage rate to pay weatherization workers in the interim 

as well as taking additional steps to comply with the Davis-Bacon Act, 

such as implementing weekly payroll. They said that any difference in 

wages would be paid retroactively once weatherization wage rates were 

issued; Labor issued the weatherization wage rates for Colorado on 

September 1, 2009.32 In some cases, the new weatherization wage rates are 

higher than the rates the local administering agencies were paying 

weatherization workers in the past. 

Davis-Bacon Act Wage 

Requirements May Limit 

Amount of Weatherization 

Activities in Colorado 

Because of the increased weatherization wages, the Governor’s Energy 

Office may adjust one of its weatherization performance measures so as 

not to limit the amount of weatherization activities the local administering 

agencies can complete in Colorado. The office uses two performance 

measures to track Recovery Act weatherization funds: (1) the amount of 

funds spent per home; and (2) a savings to investment ratio for each 

weatherization measure. DOE and the Governor’s Energy Office require 

weatherization measures to be cost-effective or they cannot be installed. 

While DOE requires a cost-benefit ratio of 1:1 for all weatherization work 

(i.e., for every $1 that is spent on weatherization measures, at least $1 

must be saved over the life of the measure) the Governor’s Energy Office 

requires a cost-benefit ratio of 1:1.7 for insulation measures and a ratio of 

1:1.2 for furnaces and energy-efficient appliances. However, because the 

increased weatherization wages required for Recovery Act funds make 

some weatherization measures less cost-effective, the Governor’s Energy 

Office requested approval from DOE on September 9, 2009, to move to a 

1:1 cost-benefit ratio in Colorado so as not to limit the amount of 

weatherization activities. Officials from the Governor’s Energy Office told 

us that they have to get approval from DOE to make any changes to their 

savings to investment ratios even though their proposed ratio meets DOE’s 

 

32The Governor’s Energy Office directed all of the local administering agencies to complete 

the Labor weatherization survey. The two agencies we visited told us that they completed 

the survey. 

Page CO-20 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

minimum requirement because their plan is approved with the higher 

ratios. 

Officials at the two local administering agencies we visited told us that 

they had concerns about Davis-Bacon Act wage rates and one agency, 

Arapahoe County, decided to conduct all Recovery Act weatherization 

work in-house rather than awarding contracts because of the 

requirements. Because Arapahoe County is a local government entity, its 

staff will not be affected by Davis-Bacon Act but any contractors would be 

subject to the requirements, which could have increased the cost of the 

weatherization contracts.33 However, Arapahoe County is receiving nonRecovery Act weatherization funding that is not subject to Davis-Bacon 

Act wage requirements, so they plan to use contractors for a portion of 

that work instead of for Recovery Act work, as initially planned, to avoid 

the wage requirements. Officials from Housing Resources of Western 

Colorado were concerned that, because Colorado’s weatherization wages 

are higher than what they were previously paying, weatherization work 

will not be as cost-effective, resulting in fewer weatherization measures 

being installed in each home.34

Colorado Is Using Existing 

Controls to Manage the 

Use of Recovery Act 

Weatherization Funds and 

Plans to Increase 

Monitoring 

The Governor’s Energy Office is using its existing internal controls to 

manage Recovery Act weatherization funds but is planning to increase its 

site visits to local administering agencies to monitor the programs and 

funds. Officials in the Governor’s Energy Office told us that they plan to 

conduct monthly visits to all agencies, in contrast to the semiannual or 

annual visits they made in the past, and that they plan to do more 

comprehensive monitoring of each agency twice per year. When the 

Governor’s Energy Office visits local administering agencies, it sends staff 

from multiple disciplines, which allows for cross-functional monitoring of 

different aspects of the weatherization program. Officials plan to inspect 

at least 5 percent of all weatherized units, as has been done in the past, 

and will inspect additional units if any issues are discovered. Officials at 

the two local administering agencies we visited said that following 

 

33Davis-Bacon Act prevailing wage requirements do not apply to local government 

employees. 29 C.F.R. § 5.2 (h); see also Department of Labor Advisory Letter to Department 

of Energy, dated June 1, 2009. 

34According to officials, because there was no weatherization wage rate before the DavisBacon Act weatherization wage rates were released, Housing Resources of Western 

Colorado paid weatherization workers the Davis-Bacon Act labor wage rate in the interim. 

Page CO-21 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

completion of weatherization work on every unit, a final inspection is 

done by a person who was not involved with the initial energy audit of the 

unit. In addition, as we discussed in our previous report, the Governor’s 

Energy Office is implementing a new Web-based tracking system that 

officials hope will help them track weatherization activities in real-time 

and assist in identifying problems at their inception. However, officials at 

one of the local agencies we visited had some concerns about using the 

new system, which were mainly related to new required data elements that 

they did not previously track. 

As we previously reported, Colorado is receiving a large amount of 

Highway Infrastructure Investment and education funds, which the state 

continues to spend. Colorado is receiving about $385 million in Highway 

Infrastructure Investment Recovery Act funds, of which $289,604,854 had 

been obligated as of September 1, 2009. In addition, the U.S. Department 

of Education (Education) provided, as of August 31, 2009, the state’s $154 

million allocation for IDEA Part B, of which $4,091,882 had been 

reimbursed to local education agencies (LEA). Colorado was awarded 

about $111 million in funding for Title I, Part A, of the ESEA, of which 

$278,962 had been reimbursed to LEAs as of August 31, 2009. 

Colorado Continues 

to Spend Highway and 

Education Funds 

CDOT Projects Are Under 

Way with 41 Contracts 

Awarded and 36 of 92 

Planned Projects Located 

in Economically 

Distressed Areas 

The Recovery Act apportions funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through existing Federal-Aid Highway Program mechanisms and 

states must follow the requirements of the existing program including 

planning, environmental review, contracting, and other requirements. 

However, the federal fund share of highway infrastructure investment 

projects under the Recovery Act is as much as 100 percent, while the 

federal share under the existing Federal-Aid Highway Program is usually 

80 percent. 

Page CO-22 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

As we previously reported, DOT apportioned $403,924,130 to Colorado in 

March 2009 for highway or other eligible projects.35 As of September 1, 

2009, $289,604,854 had been obligated and $16,455,759 had been 

reimbursed by FHWA.36 Fifty-six percent of Recovery Act highway 

obligations for Colorado have been for pavement improvement projects. 

Specifically, over $161 million of the funds obligated for Colorado projects 

as of September 1, 2009, is being used for projects such as reconstructing 

or rehabilitating deteriorated roads. State officials told us they selected a 

large percentage of resurfacing and other pavement improvement projects 

because they did not require extensive environmental clearances, were 

quick to design, could be quickly obligated and advertised for bid, could 

employ people quickly, and could be completed within 3 years. In addition, 

about $71.4 million, about 25 percent of Colorado Recovery Act highway 

obligations, has been for pavement widening. As of August 31, 2009, CDOT 

reported that contracts for 41 of the 92 planned Recovery Act projects had 

been awarded, 37 of these were under construction, and construction was 

completed on 3 projects.37

 

35This does not include obligations associated with $18.6 million of apportioned funds that 

were transferred from FHWA to FTA for transit projects. Generally, FHWA has authority 

pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made available for transit projects to 

FTA. 

36DOT has interpreted the term “obligation of funds” to mean the federal government’s 

contractual commitment to pay for the federal share of the project. This commitment 

occurs at the time the federal government signs a project agreement. States request 

reimbursement from FHWA as the state makes payments to contractors working on 

approved projects. 

37CDOT initially planned 92 projects, but plans to present new projects to the 

Transportation Commission later in September; at that time it will remove 1 project from 

the list of certified projects and may add more. 

Page CO-23 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Figure 2: Highway Obligations for Colorado by Project Improvement Type as of 

September 1, 2009 

Bridge replacement ($19.3 million)

New road construction ($15.7 million)

Other ($21.9 million)

Pavement widening ($71.4 million)

56%

25%

8%

Pavement improvement ($161.3 million)

5%

7%

Source: GAO analysis of FHWA data.

Pavement projects total (86 percent, $248.3 million)

Bridge projects total (7 percent, $19.3 million)

Other (8 percent, $21.9 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

The Recovery Act directs states to prioritize projects in economically 

distressed areas and CDOT is planning to complete a total of about 36 

Recovery Act projects in such areas.38 However, as we reported in July 

2009, selecting projects in economically distressed areas was not initially 

one of CDOT’s top priorities when CDOT and its local partners began 

 

38Economically distressed areas are defined by the Public Works and Economic 

Development Act of 1965, as amended (42 U.S.C. § 3161). According to this act, to qualify 

as an economically distressed area, the 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 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-term or long-term changes in economic conditions. GAO recommended in our 

July 2009 report that the Secretary of Transportation develop clear guidance on identifying 

and giving priority to economically distressed areas. 

Page CO-24 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

planning in anticipation of the Recovery Act in December 2008, before the 

Recovery Act was passed. Figure 3 shows planned projects by county and 

by economically distressed county. 

Figure 3: Planned Recovery Act Highway Projects in Colorado by County 

20 0 20 40 60 10

Miles

10 0 10 20 5 30

Miles

Economically distressed counties

Counties not economically distressed

Source: GAO analysis of CDOT data.

WELD

YUMA

LINCOLN

PUEBLO

BENT

KIOWA

LOGAN

EL PASO

TELLER

WASHINGTON

KIT CARSON

DELTA

CHEYENNE

PROWERS

MORGAN

CONEJOS ARCHULETA COSTILLA

CROWLEY

PHILLIPS

ALAMOSA

LAKE

PARK

ARAPAHOE

ADAMS

JEFFERSON

RIO

GRANDE

SEDGWICK

SAN

JUAN

OURAY

BACA

OTERO

CUSTER

ELBERT

CLEAR

CREEK

DOUGLAS

FREMONT

LAS ANIMAS

HUERFANO

SAGUACHE

GUNNISON

MESA

MOFFAT

RIO BLANCO

ROUTT

JACKSON

GARFIELD

MONTROSE

SAN MIGUEL

MONTEZUMA

LA PLATA

MINERAL

HINSDALE

DOLORES

PITKIN

EAGLE SUMMIT

GRAND

GILPIN

LARIMER

BOULDER

DENVER

BROOMFIELD

CHAFFEE

PARK

CLEAR

CREEK

GILPIN

ARAPAHOE JEFFERSON

ELBERT

DOUGLAS

BROOMFIELD

LARIMER

BOULDER

WELD

ADAMS

DENVER

CDOT project

Transportation Management Area project

CDOT/Transportation Management Area project

Note: Data points exceed total planned projects because two planned projects have more than one 

location. 

As of August 31, 2009, Colorado had awarded contracts at a total value of 

$39,360,281 less than the engineers’ estimates, according to CDOT 

officials. CDOT officials reported that bids for 32 of the 41 awarded 

Page CO-25 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Recovery Act projects had come in lower than the engineers’ estimates. 

CDOT officials told us that the low bids are due to the economic 

recession—since many contractors are in need of work, they are 

submitting lower bids. FHWA has been deobligating funds as a result of 

contracts being awarded for less than originally estimated. CDOT plans to 

use these savings for additional projects, including projects in 

economically distressed areas of the state. In September 2009, CDOT will 

present a list of potential additional projects to the Transportation 

Commission, including potential projects in economically distressed areas. 

Colorado Continues to 

Spend Recovery Act 

Funding for IDEA Part B 

The Recovery Act provided supplemental funding for programs authorized 

by Part B of IDEA, the major federal statute that supports the provisions of 

early intervention and special education and related services for children 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-age children with disabilities access to a free and appropriate 

public education and is divided into two separate grants—Part B grants to 

states (for school-age children) and Part B preschool grants (section 619). 

Education provided the first half of Colorado’s $154 million IDEA 

Recovery Act allocation for Part B grants on April 1, 2009, under 

Colorado’s existing application.39 Education released the second half of 

these funds to Colorado on August 31, 2009. As of August 31, 2009, 

Colorado had reimbursed $4,091,882 in Part B funds for school-age 

children to LEAs. 

Colorado Continues to 

Spend Elementary and 

Secondary Education Act 

Funds Allocated for ESEA 

Title I, Part A and Received 

Waivers from Some 

Spending Requirements 

The Recovery Act provides $10 billion to help LEAs educate disadvantaged 

youth by making additional funds available beyond those regularly 

allocated through ESEA Title I, Part A. 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 current statutory and regulatory 

requirements and must obligate 85 percent of the funds by September 30, 

2010.40 Education is advising LEAs to use the funds in ways that will build 

 

39During our second bimonthly review of Recovery Act spending in Colorado, we reviewed 

IDEA Part C, which we did not review during this cycle. 

40LEAs 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 CO-26 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

the agencies’ long-term capacity to serve disadvantaged youth, such as 

through providing professional development to teachers. In addition, there 

are requirements related to the amount of ESEA Title I, Part A funds that 

LEAs must spend on various services, such as public school choice-related 

transportation and supplemental educational services.41 Education made 

the first half of Colorado’s $111 million ESEA Title I, Part A Recovery Act 

allocation available on April 1, 2009, under the state’s ESEA consolidated 

application and the second half on August 31, 2009. Each LEA submits 

individual applications to the Colorado Department of Education to access 

its Title I, Part A funds. As of August 31, 2009, Colorado had reimbursed 

$278,962 in ESEA Title I, Part A funds to LEAs. 

Colorado has received four waivers from Education from some of the 

spending requirements associated with ESEA Title I, Part A Recovery Act 

funds. In July 2009, the Colorado Department of Education requested 

waivers from some of these spending requirements to provide LEAs with 

more flexibility in spending Recovery Act funds. 

On August 11, 2009, the Colorado Department of Education received 

approval from Education for the following waivers for which LEAs can 

apply to the state: 

• Waiver of the requirement for LEAs to spend an amount equal to 20 

percent of their fiscal year 2009 ESEA Title I, Part A, Subpart 2 funds 

for public school choice-related transportation and supplemental 

educational services;42

• Waiver of the requirement for LEAs identified for improvement43 to 

spend 10 percent of their fiscal year 2009 ESEA Title I, Part A, Subpart 

2 funds on professional development;44

 

41Schools that have missed academic achievement targets for 3 consecutive years must 

offer students public school choice or supplemental educational services, which are 

additional academic services, such as tutoring or remediation, designed to increase the 

academic achievement of students. 

4220 U.S.C. § 6316(b)(10). 

43An LEA is identified for improvement if it has missed academic achievement targets for 2 

consecutive years. 

4420 U.S.C. § 6316(c)(7)(A)(iii). 

Page CO-27 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

• Waiver of professional development spending requirements for schools 

that are identified for improvement. Like LEAs, schools in 

improvement are also required to spend 10 percent of their fiscal year 

2009 ESEA Title I, Part A funds on professional development;45 and 

• Waiver of inclusion of some or all of ESEA Title I, Part A Recovery Act 

funds in calculating the per-pupil amount for supplemental educational 

services.46 An agency’s allocation would be doubled with ESEA Title I, 

Part A Recovery Act funds, which would therefore increase the 

amount the state would have to spend for supplemental educational 

services on each student. This waiver allows Recovery Act funds to be 

excluded from the per-pupil calculations for 1 year. 

While Education approved these waivers for Colorado, each LEA must 

individually apply for the waivers to the Colorado Department of 

Education, which plans to review each LEA’s request to ensure that the 

LEA provides all the information required by Education. There are several 

different assurances that LEAs must agree to, such as assuring that they 

will comply with statutory and regulatory obligations for the funds; use the 

funds freed up by the waiver to address needs identified based on data, 

such as statewide or formative assessment results; and comply with all of 

their other ESEA Title I, Part A funds or amend their existing applications 

to reflect the strategies they intend to use to address those needs. As of 

August 31, 2009, the Colorado Department of Education had received 39 

applications for waivers, as follows: 

• Twelve requests to waive the requirement that LEAs spend an amount 

equal to 20 percent for school choice-transportation and supplemental 

educational services; 

• Nine requests to waive the requirement that LEAs identified for 

improvement spend 10 percent for professional development; 

• Eight requests to waive the requirement that schools identified for 

improvement spend 10 percent for professional development; and 

• Ten requests to waive the requirement that LEAs include some or all of 

the ESEA Title I, Part A Recovery Act funds in calculating the per-pupil 

amount for supplemental educational services. 

 

4520 U.S.C. § 6316(b)(3)(A)(iii). 

46Under ESEA, the amount that an LEA provides for supplemental educational services for 

each child is the lesser of the amount of: the agency’s Title I, Part A, Subpart 2 allocation 

divided by the number of children below the poverty level in the LEA or the actual costs of 

the supplemental educational services received by the child. 20 U.S.C. § 6316(e)(6). 

Page CO-28 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

According to Education guidance, the Colorado Department of Education 

may not deny a request from an LEA to implement the waiver if the LEA’s 

request includes all of the required information and meets all conditions 

on the Colorado Department of Education’s waiver. 

State officials have identified the need to pay for central administrative 

activities, such as reporting on and auditing Recovery Act programs, to 

help ensure that Recovery Act funds are spent in an accountable and 

transparent way. States do not generally recover central administrative 

costs upfront, but instead are reimbursed for such expenses after they are 

incurred. OMB’s May 11, 2009, guidance allows each state to recover 

central administrative costs associated with Recovery Act activities. As a 

follow up to this guidance, the federal Division of Cost Allocation (DCA) 

within the Department of Health and Human Services issued a set of 

frequently asked questions on how states should prepare an addendum to 

their cost allocation plans to recover these central administrative costs. 

Colorado’s Controller has developed such an addendum, but has, in 

conjunction with several other controllers and the National Association of 

State Auditors, Comptrollers, and Treasurers (NASACT), identified what 

they consider several difficulties in implementing the OMB and DCA 

guidance. On August 7, 2009, NASACT sent a letter to OMB requesting that 

OMB waive certain depreciation and cost allocation methods for Recovery 

Act funds. According to Colorado officials, however, OMB has recently 

stated that each state will have to submit its individual waiver request. 

Colorado Is 

Concerned about 

Funding Availability 

to Meet the 

Accountability and 

Transparency 

Functions of the 

Recovery Act 

Colorado officials are concerned that the state does not have the 

necessary resources to oversee the state’s use of Recovery Act funds in 

addition to its normal government activities. In particular, officials believe 

budget and staffing cuts facing the government will affect the state’s 

ability to fill vacant positions needed to conduct functions related to the 

oversight of Recovery Act funds. Colorado officials have identified two 

primary functions related to Recovery Act funds that are conducted by 

central state offices that do not receive direct Recovery Act funding to pay 

for those functions. These two functions include oversight of the state’s 

Recovery Act activities, including developing a centralized reporting 

process to meet Recovery Act reporting requirements, and auditing 

Recovery Act spending. According to state officials, several state offices 

are involved in overseeing the state’s management and use of Recovery 

Act funds and for ensuring the overall accountability and transparency of 

the state’s processes through reporting on its Recovery Act activities. 

These offices include the Governor’s Recovery Office; Office of 

Information Technology; the Office of State Planning and Budgeting; the 

Page CO-29 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Department of Personnel and Administration (DPA), which houses the 

Office of the State Controller and the State Purchasing Office; the Office of 

the Treasurer; and others. State officials have estimated that they will need 

an additional $1.8 million in fiscal year 2010 to pay for this oversight. In 

addition, the State Auditor is responsible for conducting independent 

financial and performance audits of state funds, including Recovery Act 

funds, spent by the state’s agencies, colleges, and universities, and is also 

responsible for performing the state’s Single Audit, which reviews 

programs that spend federal funds in excess of a certain amount. As we 

reported in July 2009, the State Auditor believes the audit workload 

related to the Recovery Act for fiscal year 2009 is manageable. However, 

the State Auditor is concerned that her office will require advance funding 

in fiscal year 2010 to award contracts for the additional audit work related 

to the Recovery Act. The bulk of Recovery Act funds will be spent in fiscal 

years 2010 and 2011, and the State Auditor has estimated that it will cost 

an additional $446,000 in fiscal year 2010 to cover the increased audit costs 

related to the Recovery Act. 

OMB released guidance on May 11, 2009, allowing states to use existing 

processes under OMB Circular A-87 to recover costs related to central 

administrative services and limiting the amount recovered to 0.5 percent 

of the total Recovery Act funds received by the state.47 OMB Circular A-87 

requires states to submit a statewide cost allocation plan that identifies 

and assigns central administrative costs to activities or programs that 

receive the benefits of the central activities, using a consistent cost 

allocation basis.48 On July 2, 2009, DCA issued a set of frequently asked 

questions to provide guidance to states on how to prepare an addendum to 

state cost allocation plans under the OMB memo. The addendum to the 

cost allocation plan must be approved by DCA. 

Colorado submitted an addendum to its cost allocation plan to DCA on 

August 13, 2009, but the State Controller is concerned that certain 

difficulties will delay the approval of the plan and therefore delay the 

state’s recovery of the funds needed to pay for activities conducted by 

 

47OMB Circular A-87 establishes a choice of two methodologies states may use to 

reimburse state recipients for central administrative costs and provide a uniform approach 

for determining costs and promote effective program delivery and efficiency. 

48A statewide cost allocation plan identifies, accumulates, and allocates costs incurred by 

agencies or develops billing rates based on the allowable costs of services provided by a 

governmental unit to its departments and agencies. The costs of these services may be 

allocated or billed to benefiting agencies. 

Page CO-30 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

central state offices, including oversight of the state’s reporting to meet 

Recovery Act requirements and auditing of Recovery Act programs. The 

Controller has identified three areas in which Colorado may have 

difficulties getting its cost allocation plan approved in a timely manner, as 

follows: 

• Cost allocation method. Colorado officials believe that the activities 

conducted by central state offices related to Recovery Act 

requirements benefit all Recovery Act programs. Therefore, the state’s 

cost allocation plan allocates central oversight and related 

administrative costs based on the ratio of state agency Recovery Act 

funds received to the total Recovery Act funds received by the state, 

rather than varying the allocation depending on how much a program 

benefits from the central service. According to the Controller, this 

allocation method meets the requirements of OMB Circular A-87 to 

allocate costs to benefiting activities, but he is unsure whether DCA 

agrees and believes it may delay the approval of Colorado’s plan. 

• Time to approve the state’s plan. According to Colorado’s 

Controller, DCA has informed states that it will try to review individual 

cost allocation plans on a case-by-case basis within 60 days of their 

submission rather than approve a model cost allocation plan upfront 

that would allow states to start recovering central administrative costs 

now. The Controller is concerned that this case-by-case review could 

cause delays in approving Colorado’s cost allocation plan. According 

to the Controller, states cannot start recovering funds until their 

statewide cost allocation plans and subsequent state agency plans are 

approved. Once Recovery Act funds are spent, states cannot recoup 

central administrative costs; therefore, any delay hinders the state’s 

ability to recoup costs. 

• Cash flow. The Controller said that the state needs a pool of funding 

from which to pay for central administrative costs prior to recouping 

costs. However, the state does not have such a pool of cash available49

and it is the Controller’s understanding that the existing processes 

outlined in OMB’s May 11, 2009, guidance will not allow the state to 

recover central administrative costs before the costs are incurred. The 

Controller has proposed “borrowing” funds from the government 

 

49According to the Controller, the state legislature must approve any uses of the state’s 

statutory reserve and the legislature is not in session until January 2010; similarly, the state 

can borrow funds from its pool of investment funds, but cannot do so without guarantee of 

repayment. 

Page CO-31 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

services portion of the SFSF funds to pay for these central 

administrative costs, but the state has not heard from Education 

whether this is an allowable use of those funds. The borrowed funds 

would be repaid when the oversight costs are recovered from the 

Recovery Act grants. According to state officials, the state has set 

aside these SFSF funds in case they are needed for borrowing to cover 

central administrative costs. 

On August 7, 2009, NASACT sent a letter to OMB requesting a waiver for 

two A-87 requirements regarding (1) certain depreciation methods and (2) 

requirements for cost allocation in accordance with relative benefits 

received. According to NASACT, the waiver is necessary to implement the 

cost recovery guidance in a timely manner. However, according to 

Colorado officials, OMB has recently stated that each state should submit 

a letter requesting a waiver. The state has not yet submitted this letter; the 

State Controller said that he is awaiting an OMB response on the concepts 

included in the NASACT letter before he sends the request. 

The Colorado state government has begun awarding numerous contracts 

funded with Recovery Act dollars in various program areas such as 

Highway Infrastructure Investment and the Weatherization Assistance 

Program. To facilitate the timely and efficient management of Recovery 

Act contracts, various Colorado government officials have taken several 

steps since passage of the Recovery Act. First, state officials informed us 

that legislation was enacted permitting a waiver of procurement code 

requirements to the extent the waiver is necessary to expedite the use of 

Recovery Act funds in a transparent and accountable way or to the extent 

strict adherence to the code would substantially impede Colorado’s ability 

to spend the money in a manner or within the time required by the 

Recovery Act.50 Second, the Director of the State Purchasing Office 

provided procurement guidance to state agencies regarding the use of 

funds received under the Recovery Act. The State Purchasing Office has 

delegated different levels of authority for contracting to state agencies, 

such as the Colorado Department of Labor and Employment, Governor’s 

Energy Office, and IHEs, depending on their management capacity to 

handle contracting responsibilities. Third, the Executive Director of DPA 

analyzed state agency personnel needs to facilitate Recovery Act 

implementation in the areas of purchasing, accounting, contracts, and risk 

mitigation. Finally, the State Controller is using a new Contract 

Colorado Has 

Developed Guidance 

for Recovery Act 

Procurement and Will 

Use a New Contract 

Management System 

to Track Recovery Act 

Contracts 

 

502009 Colo. Legis. Serv. Ch. 285 (SB09-297) (West). 

Page CO-32 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Management System designed to facilitate centralized data collection and 

reporting on all state contracts to separately track and report on contracts 

funded with Recovery Act dollars. 

To begin assessing Colorado’s management of Recovery Act funds carried 

out by contractors, we selected five contracts for initial review. They 

consist of two Highway Infrastructure contracts awarded by CDOT, two 

Weatherization Assistance Program contracts awarded by the Governor’s 

Energy Office, and one contract awarded by the Governor. We reviewed 

contract documentation, interviewed selected contract awarding and 

oversight officials, and visited one transportation site and two 

weatherization sites where project work was ongoing. We examined 

guidance developed by the Director of the State Purchasing Office that 

was provided to state agencies regarding their use of funds received under 

the Recovery Act. We also interviewed state officials involved in 

developing (1) 2009 legislation allowing waivers of established 

procurement requirements, (2) the state’s new Contract Management 

System, and (3) the state’s analysis of projected staffing shortfalls. 

Colorado Recovery Act 

Procurement Waiver Has 

Not Yet Been Used 

State officials informed us that on May 20, 2009, the state enacted 

legislation establishing a process for waiving state procurement 

requirements if funding for a procurement action includes money received 

under the Recovery Act. According to state officials, the procurement 

waiver had not yet been used as of September 14, 2009, nor had any 

agencies requested use of the waiver. According to a state legal official 

familiar with development of the legislation, there was no specific aspect 

of the procurement code that the legislature believed needed revision, but 

the legislature wanted to provide a “safety valve” in case the state 

encountered any procurement impediments to spending Recovery Act 

funds. They did not want Colorado to lose Recovery funds because 

procurement or contracting provisions prevented their expenditure within 

Recovery Act required time frames. 

In order to ensure that any procurement waiver did not compromise 

transparency or accountability, state officials said that they built controls 

into the waiver. Waiver requests must be in response to a clear need; made 

in writing by the agency’s executive director; made public on the state’s 

Web site; and reviewed and approved by the Executive Director of DPA 

and the Colorado Attorney General. Furthermore, officials told us that 

such requests cannot be used to waive an entire process; rather, the 

written request for a waiver must describe the new process that will be 

followed and the way in which strict compliance with the procurement 

Page CO-33 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

code is unworkable. According to state officials, the basis for requesting a 

procurement waiver could be very broad (e.g., to shorten procurement 

time frames by a couple of days) but the methods by which to apply for a 

waiver and have it approved are tight. 

Colorado Developed 

Additional Procurement 

Guidance for State 

Agencies 

In June 2009, the Director of DPA’s State Purchasing Office developed and 

provided to state agencies procurement guidance regarding the use of 

Recovery Act funds. Updated in August 2009, this guidance reiterates the 

goals of the Recovery Act, lists planning principles that agencies should 

follow to award Recovery Act contracts and grants, specifies requirements 

for evaluating and awarding contracts and grants, and identifies 

supplemental contract clauses specific to the Recovery Act that are now 

required in Recovery Act contracts. The Colorado guidance restates a 

number of the goals of the Recovery Act including the preservation and 

creation of jobs and promotion of economic recovery, and the investment 

in transportation, environmental protection, and other infrastructure that 

will provide long-term economic benefits. It also states that agencies that 

award Recovery Act contracts and grants obtain maximum competition; 

minimize vendors’ cost, schedule, and performance risks; and ensure that 

an adequate number of sufficiently-trained staff are available to plan, 

evaluate, award, and monitor contracts and grants. The guidance 

specifically discourages agencies from using noncompetitive (e.g., sole 

source) procurements, unless fully justified.51 In addition, the guidance 

states that, to the maximum extent practicable, Recovery Act contracts 

should be awarded as fixed price contracts. It also addresses detailed state 

reporting requirements established in Section 1512 of the Recovery Act as 

well as the Buy American and prevailing wage requirements. 

On August 21, 2009, the State Controller’s office issued Recovery Act 

Supplemental Provisions for Contractors who receive Recovery Act funds. 

The office also provided guidance to agencies and IHEs on how these 

supplemental provisions should be used with existing contracts, grants, 

and purchase orders and with new Recovery Act contracts, grants, and 

purchase orders, and how agencies and IHEs should address new 

guidance on reporting issued by OMB. 

 

51According to Colorado’s Recovery Act procurement guidance, in those circumstances 

where an agency determines that it must use a noncompetitive contract, the agency must 

fully justify this action and provide evidence in the contract file that appropriate action has 

been taken to protect the taxpayer. Procurement officials stated that use of a 

noncompetitive contract must also be approved by officials in Colorado’s Recovery Office. 

Page CO-34 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Procurement 

Requirements Have 

Created Staffing Shortages 

at State Agencies, 

According to State 

Officials 

Procurement requirements associated with Recovery Act contracts and 

grants have created staffing shortages at some Colorado agencies, 

according to officials. On April 28, 2009, DPA reported on the results of a 

survey it conducted of the personnel needs necessary to facilitate 

implementation of the Recovery Act in the areas of purchasing, 

accounting, contracts, and risk mitigation. The survey involved DPA as 

well as the Governor’s Energy Office, Department of Local Affairs, and 

Colorado Department of Education. These three agencies were surveyed 

because DPA expects a significant increase above the normal level of 

contracts that the agencies—with DPA assistance—will award, given the 

increase in Recovery Act funds and the agencies’ limited delegations of 

procurement authority. 

The results of the survey indicated that, altogether, DPA and the other 

three agencies need a total of 16 staff at an estimated total annual cost of 

almost $1.1 million to handle the increase in purchasing and contract 

administration and oversight expected with the influx of Recovery Act 

funding. Specifically, the survey found that DPA needs a total of six staff, 

including three in purchasing and three in contracts; the Governor’s 

Energy Office needs a total of eight staff, including three in purchasing, 

three in accounting, and two attorneys to negotiate and assist in 

monitoring contracts; the Department of Local Affairs needs an internal 

auditor to assist with risk mitigation; and the Colorado Department of 

Education needs one purchasing agent. In addition, the Colorado 

Department of Education indicated that it submitted a separate request for 

one accountant and one accounting technician. According to a budget 

official, the results of this survey have not been approved through the 

state’s budget process and therefore are estimated needs. 

On August 27, 2009, DPA officials informed us that the specific analysis 

cited above had not been updated but that personnel needs associated 

with Recovery Act work were now being addressed through the 

Controller’s statewide cost allocation plan. The Director of the State 

Purchasing Office said that some agencies such as the Governor’s Energy 

Office and Department of Local Affairs have some administrative funding 

available that is being used to pay for this staffing. For example, he said 

that the Governor’s Energy Office is using administrative funds to hire 

employees on a “temporary” basis. In contrast, the Controller pointed out 

that the state’s central agencies such as DPA currently do not have any 

funding for such purposes and are awaiting approval of the state’s cost 

allocation plan. In addition, the Office of the State Controller does not 

have any Recovery Act administrative funding available and therefore 

Page CO-35 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

cannot fill two current vacancies that are directly related to Recovery Act 

oversight. 

Agencies Plan to Use 

Colorado’s New 

Centralized Contract 

Management System to 

Track Recovery Act 

Contracts 

On July 1, 2009, Colorado implemented a new statewide Contract 

Management System, which is being used to track all state contracts, 

including those for Recovery Act activities and funds. Contracting officials 

in DPA said that from 1994 until June 30, 2009, Colorado used a 

decentralized data collection system embedded within the state’s Colorado 

Financial Reporting System (COFRS) to monitor and report on contracts. 

They described this system as being decentralized with each state agency 

tracking contract data separately. For example, Colorado’s IHEs each 

conducted contract monitoring and reporting independently while other 

agencies used Microsoft Access or Excel spreadsheets to track their 

contracts. Contracting officials said that in 2007, the Colorado legislature 

called for a new contracts database and that when the state received 

Recovery Act funds in 2009, state officials decided to use the state’s new 

system to gather data on those contracts. 

Contracting officials said that all agencies and IHEs are required to report 

all contract and grant information into the Contract Management System 

regardless of dollar value or purpose. They stated that the new system 

generally involves eight steps: (1) determination of a need for a contract, 

(2) application of the procurement process, (3) contract creation, (4) 

contract negotiation, (5) contract review and approval, (6) contract 

monitoring, (7) contract payments, and (8) contract closeout. Officials in 

the Colorado State Purchasing Office also stated that they are primarily 

responsible, in most cases, for the first five steps of the procurement 

process leading to the award of contracts subject to the state procurement 

code. Once a contract is awarded, primary responsibility for contract 

administration, or the final three steps of the process, rests with the 

agency program staff. Contracting officials told us that they are now 

providing training on the Contract Management System to about 200 

employees at agencies and IHEs who are involved in contract 

administration. 

Colorado’s Recovery Act 

Contracts Reflect Diverse 

Situations 

Colorado has already awarded a number of Recovery Act contracts for a 

variety of programs and these contracts reflect diverse needs and 

contracting situations. In each case, we reviewed the contract and 

discussed it with officials, as follows: 

Page CO-36 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

• Johnson Village North Project. On May 6, 2009, CDOT awarded the 

Johnson Village North project contract to conduct work in support of 

the Highway Infrastructure Investment program. The contract has a 

total value of $5.2 million with a project start date of July 13, 2009, and 

a projected completion date of October 23, 2009. The contract was 

awarded to repave 12.6 miles of mountainous highway and includes 

work related to curbs, gutters, signs, and traffic control. According to 

the CDOT awarding official, the contract was awarded competitively 

following CDOT’s contracting procedures; five bidders submitted 

sealed proposals and CDOT selected the low bid, which was 23 

percent lower than the agency’s estimate for the work. The official told 

us that the work was awarded using a fixed unit price contract. The 

contract includes a provision for the contractor to provide information 

to the state to meet its Recovery Act reporting requirements, according 

to an agency official. The official said that contract oversight personnel 

were assigned before the contract was awarded and that oversight 

would be performed in accordance with CDOT project administration 

standards. A project engineer as well as inspectors and materials 

testers will oversee the project and measure compliance with the 

contract specifications before providing contractor payments. 

• C-470 Project. On May 27, 2009, CDOT awarded the C-470 project 

contract to conduct work in support of the Highway Infrastructure 

Investment program. The contract has a total value of $25.8 million 

with a project start date of July 9, 2009, and a projected completion 

date of August 15, 2010. The contract was awarded to remove existing 

asphalt pavement patches, remove and replace concrete slab, seal 

concrete pavement cracks, and conduct asphalt overlay and guardrail 

construction on highway C-470 in the Denver metropolitan area. 

According to the CDOT awarding official, the contract was awarded 

competitively following CDOT’s contracting procedures; seven bidders 

submitted sealed proposals and CDOT selected the lowest bid, which 

was 15 percent lower than the agency’s estimate for the work. The 

official told us that the work was awarded using a fixed unit price 

contract. Like the Johnson Village North project, the official stated that 

the contract includes a provision for the contractor to provide 

information to the state to meet its Recovery Act reporting 

requirements. The official said that contract oversight personnel were 

assigned before the contract was awarded and that oversight would be 

performed in accordance with CDOT project administration standards. 

A project engineer as well as inspectors and materials testers will 

oversee the project and measure compliance with the contract 

specifications before providing contractor payments. 

Page CO-37 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

• Arapahoe County Weatherization Division. On April 17, 2009, the 

Governor’s Energy Office awarded a contract for support of the 

Weatherization Assistance Program to the Arapahoe County 

Weatherization Division. This contract has a total value of $2.9 million 

with a project start date of July 1, 2009, and a projected completion 

date of June 30, 2010. The contract was awarded as a fixed price 

contract. It provides for weatherizing 641 housing units at a cost of 

$4,562.52 per unit. According to officials from the Governor’s Energy 

Office, the contract was not competitively awarded because it is 

considered a grant agreement and such agreements with local 

administering agencies, such as Arapahoe County, are not subject to 

the state’s procurement code and thus not required to be awarded 

competitively. The contracts were competitively awarded to Arapahoe 

County and other local administering agencies in 1997 but have not 

been competed since this time, according to officials. However, 

beginning in fiscal year 2011, officials from the Governor’s Energy 

Office told us that they are planning on competing future contracts for 

weatherization services. They also stated that the Arapahoe County 

contract did not contain a provision for the contractor to provide 

information to the state to meet its Recovery Act reporting 

requirements, according to an official from the Governor’s Energy 

Office, but will be modified to incorporate such requirements. 

Arapahoe County officials told us that inspectors conduct oversight of 

weatherization work through a final inspection process that follows 

completion of work at each housing unit. In addition, the Governor’s 

Energy Office annually inspects a minimum of 5 percent of all housing 

units. 

• Housing Resources of Western Colorado. On April 28, 2009, the 

Governor’s Energy Office awarded a contract for support of the 

Weatherization Assistance Program to Housing Resources of Western 

Colorado. This contract has a total value of almost $1.3 million with a 

project start date of July 1, 2009, and a projected completion date of 

June 30, 2010. The contract was awarded as a fixed price contract. It 

provides for weatherizing 325 housing units at a cost of $3,913.60 per 

unit. The contract calls for the installation of weatherization measures, 

such as insulating homes, correcting air leaks, repairing windows and 

doors, and purchasing energy-efficient appliances. Like Arapahoe 

County, the contract was not competitively awarded but will be 

competed starting in fiscal year 2011, according to state officials. The 

contract did not contain a provision for the contractor to provide 

information to the state to meet its Recovery Act reporting 

requirements, but will be modified to incorporate such requirements, 

according to an official from the Governor’s Energy Office. Also 

Page CO-38 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

similar to Arapahoe County, inspectors from Housing Resources of 

Western Colorado conduct oversight of weatherization work following 

completion of work at each housing unit and the Governor’s Energy 

Office annually inspects a minimum of 5 percent of all housing units. 

• Governor’s legal services contract. On April 2, 2009, the Governor 

of Colorado entered into a contract with an international law firm to 

represent the Governor’s Office in analyzing the Recovery Act. More 

specifically, a state official said that the law firm agreed to help the 

Governor and his representatives complete the certifications required 

in the Recovery Act in order for Colorado to receive and distribute its 

full share of Recovery Act funds in the most transparent and efficient 

manner possible. In addition, according to this official, the firm waived 

its standard practice of requiring a retainer and agreed to provide the 

services of three attorneys at an hourly rate discounted from its 

standard rate for attorneys. According to state officials, this contract 

was not competitively awarded because the state’s procurement 

requirements contain an exception for elected officials to use solesource contracts. 

Colorado Recovery officials are planning to use centralized reporting to 

meet Recovery Act reporting requirements. Section 1512 of the Recovery 

Act requires that, no later than 10 days after the end of each calendar 

quarter, every entity that received Recovery Act funds from a federal 

agency report on those funds. This reporting requirement applies to any 

entity, including states that received Recovery Act funds directly from the 

federal government and includes funds received through a grant, loan, or 

contract.52 This report must include 

• the total amount of Recovery Act funds received from that federal 

agency; 

• the amount of Recovery Act funds expended or obligated to projects or 

activities; 

Colorado Plans to 

Report Centrally but 

Unresolved Issues 

May Affect Its Ability 

to Report Recovery 

Act Data to OMB in a 

Complete and Timely 

Manner 

• a detailed list of all projects or activities for which Recovery Act funds 

were expended or obligated, including the name and description of 

each project or activity; an evaluation of the completion status of each 

project or activity, and an estimate of the number of jobs created and 

retained by each project or activity; and certain other information for 

infrastructure investments made by state and local governments; and 

 

52This reporting requirement does not apply to individuals. 

Page CO-39 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

• certain detailed information on any subcontracts or subgrants awarded 

by the recipient, including information required to comply with the 

Federal Funding Accountability and Transparency Act of 2006.53

The first deadline for these reports is October 10, 2009. 

To ensure that the Section 1512 reporting requirements are carried out, 

OMB issued guidance on June 22, 2009, describing how recipients and 

subrecipients of Recovery Act funds are to report on their use of those 

funds.54 Generally, prime recipients—nonfederal entities that receive 

Recovery Act funds from federal agencies—are to submit information to 

www.federalreporting.gov, an online portal that will collect Recovery Act 

information. Subrecipients—any nonfederal entity that is responsible for 

program requirements and spends federal funds awarded by a prime 

recipient—may or may not be delegated reporting responsibility by a 

prime recipient. The June guidance also identified the data elements to be 

reported, including project description and status, expenditure amount, 

and job narrative and number. These data elements were updated by OMB 

in August 2009 and include almost 100 items. 

While Colorado Recovery officials determined that a centralized process 

provides more control and ability to prevent duplicate reporting than the 

alternate decentralized process described in OMB guidance, unresolved 

issues with the processes and procedures being developed and their 

integration with OMB’s online portal may affect the completeness and 

timeliness of the state’s report. Unresolved issues include being able to 

upload consolidated data to OMB and completing the development and 

testing of the elements that will be used in the centralized process to 

collect data from grant recipients, including the compilation of jobs data. 

We discussed these issues with officials in the Recovery Office and the 

Controller’s office and with officials in several state agencies who will be 

responsible for implementing the reporting procedures being developed. 

 

53Pub. L. No. 109-282, 120 Stat. 1186 (Sept. 26, 2006). 

54OMB memorandum, M-09-21, Implementing Guidance for the Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (Washington, D.C., 

June 22, 2009). 

Page CO-40 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Colorado is planning on centrally reporting Recovery Act data to OMB 

rather than having state recipients and subrecipients report to 

www.federalreporting.gov individually. Colorado officials believe that a 

centralized process is necessary to oversee data collection, improve data 

quality, ensure completeness, and prevent duplication of data. In addition, 

a centralized process allows the state to capture data and report on its 

own Recovery Web site. Because of the numerous state agencies involved, 

potentially large numbers of Recovery Act projects, and many data 

elements that must be reported to OMB, state officials believe that 

creating a process to collect and report most of the data through a central 

location would increase the overall reliability of the data. To emphasize 

the importance of the process, the Governor’s Recovery Office assigned a 

staff member to focus on Recovery Act reporting requirements and 

coordinate the activities of the different offices providing reporting 

information to ensure reporting occurs as required by OMB. 

Colorado Is Developing a 

Centralized Process for 

Reporting Recovery Act 

Data to OMB 

To report centrally, Colorado’s Controller and the Governor’s Office of 

Information Technology are developing new processes and procedures 

that will collect Recovery Act data to report to OMB. The State Controller 

issued a series of three alerts in May, July, and August 2009 explaining the 

state’s policies and accounting and reporting requirements, defining prime 

recipients and subrecipients from the state perspective, and directing state 

agencies to use the centralized process.55 The alerts set up a coding 

structure in the state’s accounting system to track Recovery Act funds 

awarded to, and expended by, state agencies and external subrecipients 

that receive Recovery Act funds from the state agencies. The most recent 

alert describes how the state’s new Contract Management System will be 

used to input Recovery Act nonfinancial information, such as jobs created 

or retained and subrecipient’s congressional district. According to state 

officials, they had to develop new capabilities in the Contract Management 

System to capture and report Recovery Act data. As shown in figure 4, the 

state will gather agencies’ financial data from the state’s accounting 

 

55Office of the State Controller, Alert #184, Coding Requirements Established for Recovery 

Act Monies, Compensated Absences Liability, and Electronic Funds Transfers for 

Employee Reimbursements, May 13, 2009; Alert #185, Recovery Act Funds-Schedule of 

Expenditures of Federal Awards Reporting Requirements, New Recovery Act Grant 

Tracking Requirements, Recovery Act Oversight Costs: Recent Guidance from Health and 

Human Services Division of Cost Allocation, Revised Fiscal Rule 5-1: Travel Effective 

July 1, 2009, Electronic Funds Transfer Travel Reimbursement COFRS Programming 

Changed on July 6, 2009, Lease-Purchase Threshold Increased with Passage of HB09-

1218, Office of State Controller Staffing Changes, July 10, 2009; and Alert #186, Recovery 

Act Policies and Additional Recovery Act Grant Tracking Requirements, August 4, 2009. 

Page CO-41 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

system, COFRS, and nonfinancial data from the state’s Contract 

Management System, and consolidate the data in the state’s Financial Data 

Warehouse (FDW).56 Data for agencies that do not use COFRS as their 

primary system, such as CDOT and IHEs, will be collected separately in 

the warehouse. Data on jobs will be gathered by prime recipients from all 

state agencies for vendors and subrecipients using manually prepared 

summary documents. 

epared 

Figure 4: Colorado’s Planned Process for Reporting Recovery Act Data to OMB 

State 

agencies

using COFRS

State 

agencies not 

using COFRS

(IHEs, CDOT)

Job information

Job information

COFRS–financial 

information

Collect financial and 

nonfinancial 

information

Contract Management 

System–nonfinancial 

information

Colorado’s

Financial Data

Warehouse

www.federalreporting.gov www.recovery.gov

Source: GAO analysis of state information.

Note: State agencies can act as either a recipient or an internal recipient of Recovery Act funds. Job 

information is gathered and submitted by the primary recipients. 

Once the state’s Recovery Act data are gathered centrally, the state plans 

to upload the data to www.federalreporting.gov. State agencies are 

responsible for reviewing and verifying their information once it is 

 

56FDW is a Web-based reporting tool that allows the state’s users to pull data on a daily 

basis. 

Page CO-42 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

compiled and reported by the state. OMB’s June 22, 2009, guidance 

provided a timeline for agencies to review their data and make any 

necessary corrections. For the first cycle, recipient reports are due by 

October 10, 2009, state corrections can be made from October 11 through 

October 21, and corrections from federal agency reviews can be made 

from October 22 through October 29. Final reports will be posted on the 

www.recovery.gov Web site on October 30, 2009. To prepare state 

agencies for reporting, officials with the Governor’s Recovery Office and 

the Controller’s office have been meeting with state agencies to provide 

briefings and answer questions specific to each agency on what their roles 

and responsibilities will be relative to reporting data and reviewing the 

data on the Web site. 

Colorado’s centralized reporting process does not apply to local entities 

that receive Recovery Act funds directly from federal agencies, which is 

explained in the Controller’s alerts. According to state officials, the state 

has no authority over local entities, such as RTD and other transit 

agencies, that receive Recovery Act funds directly from federal agencies 

rather than through a state agency. The state cannot dictate the reporting 

of such entities, but it is expected that the local entities will report directly 

to OMB. 

Colorado Faces Challenges 

in Developing Its 

Reporting Process and 

Unresolved Issues May 

Affect Colorado’s Ability to 

Report during the 

Recovery Act’s First 

Quarterly Reporting Cycle 

Colorado officials face two primary challenges in developing the state’s 

process to consolidate and report the necessary Recovery Act information 

to OMB, which may limit the state’s ability to ensure the completeness and 

timeliness of the reported information. First, state officials are working to 

resolve certain security control issues related to the uploading of 

Colorado’s data to www.federalreporting.gov, and second, Colorado’s plan 

for submitting data to OMB is in the process of being developed and 

tested. 

Colorado officials are working on security control issues that must be 

resolved before the state will be able to upload agency data to OMB’s Web 

site. According to OMB’s June 22, 2009, guidance, part of the security 

measures require recipients to register on the OMB Web site to be able to 

submit and review the information. To do this, the recipients must be 

registered in the federal government’s Central Contractor Registration 

(CCR) database and must also have a Dun and Bradstreet (DUNS) 

Page CO-43 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

number.57 A users’ guide posted on www.recovery.gov identifies various 

steps that the state will have to take before it will be able to upload the 

state agencies’ Recovery Act information.58 Based on the user guide, the 

Controller has informed the state agencies of the actions they must take 

immediately for the state to be able to meet OMB’s reporting deadline. 

These actions include updating their DUNS and CCR information on the 

respective Web sites. Of particular importance is updating the CCR 

information for each agency’s point of contact. According to the user 

guide, the agency points of contact will have to provide authorization on 

www.federalreporting.gov before the state can report all grant award 

information associated with the DUNS numbers for the respective 

agencies. Without the authorization from the points of contact, the state 

will not be able to upload the data. To further that process, the Controller 

has instructed all state agencies to identify all awards of Recovery Act 

funds so that an inventory of applicable DUNS numbers can be compiled. 

The inventory is critical for the identification of all authorizations that 

must be obtained from the points of contact. 

According to state officials, they have learned that other states planning to 

do centralized reporting have also identified significant limitations with 

the security design of the www.federalreporting.gov Web site. According 

to Colorado officials, the Recovery Accountability and Transparency 

Board has proposed an enhancement to the system that would address 

many of the states’ centralized reporting concerns. The main feature of the 

enhancements is that the state could more easily upload its data by making 

one data submission without the currently required multiple points of 

contact authorization. State officials did not have information on any 

milestones for the enhancements that are being developed. State officials 

said that they plan to use the new process for uploading data, but will 

proceed with the actions they are currently taking to report centrally as a 

backup strategy for reporting should the board’s proposed uploading 

process not be available. 

 

57A DUNS number is a unique number that identifies businesses, including government 

agencies. 

58Recovery Accountability and Transparency Board, ARRA In-bound Recipient Reporting 

FederalReporting.gov Recipient Point of Contact/DUNS Administrator User GuideRegistration and Next Steps Version 1.0 (undated). 

Page CO-44 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

In addition to security challenges, Colorado’s process for centralized 

reporting involves new codes, reports, and programs to gather the 

information necessary to meet OMB’s requirements and not all elements of 

the process have been fully developed or tested. Testing of the process is 

ongoing, as is development of various data formats and data accumulation 

media. For example, the formats for inputting the nonfinancial information 

into the Contract Management System and for compiling and uploading 

the information from the FDW to the OMB Web site have not been 

finalized. In addition, revisions will need to be made to the process state 

agencies had planned to use to review their data because of changes to the 

OMB Web site announced by the Recovery Accountability and 

Transparency Board on September 14, 2009. Colorado officials initially 

told us that for the first quarterly reporting cycle, the state agencies could 

review their data on www.recovery.gov. The data were expected to be 

available on October 11, 2009. However, according to the September 14 

announcement, all data will now be displayed on October 30, 2009, which, 

according to state officials, will not allow state agencies to review their 

data as planned. Because of the change, the Controller’s office is now 

working to develop the capability for agencies to review their Recovery 

Act financial data in FDW and nonfinancial data in the Contract 

Management System before it is submitted to www.federalreporting.gov. 

The Controller stated that he is uncertain whether his office has the 

resources to accomplish that task. Finally, because testing of Colorado’s 

system is ongoing, it is uncertain whether the state will be able to report 

its data as scheduled. The Controller has set October 7, 2009, as the date 

the state’s information will be uploaded to OMB. Until testing is 

completed, the Controller’s office will not know how much time will be 

required to consolidate the data after the end of the month and whether 

there will be sufficient time before October 7, 2009, to consolidate all of 

the data. 

We provided officials in the Colorado Governor’s Recovery Office, as well 

as other pertinent state officials, with a draft of this appendix for 

comment. State officials agreed with this summary of Colorado’s Recovery 

efforts to date. The officials provided technical comments, which were 

incorporated into the appendix, as appropriate. 

Colorado’s Comments 

on this Summary 

Page CO-45 GAO-09-1017SP Recovery Act
Appendix III: Colorado 

Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov 

Brian Lepore, (202) 512-4523 or leporeb@gao.gov 

In addition to the contacts named above, Paul Begnaud, Steve Gaty, Kathy 

Hale, Kay Harnish-Ladd, Susan Iott, Jennifer Leone, Tony Padilla, Kathleen 

Richardson, Lesley Rinner, and Mary Welch made significant contributions 

to this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page CO-46 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of the American Recovery and Reinvestment Act (Recovery Act)1

spending in the District of Columbia (District). The full report on all of our 

work in 16 states and the District is available at www.gao.gov/recovery/. 

Overview 

In the District, we reviewed three Recovery Act programs funded by the 

U.S. Department of Education (Education), and the Transit Capital 

Assistance program funded by the U.S. Department of Transportation’s 

Federal Transit Administration (FTA). These programs were selected 

primarily because they include existing programs receiving significant 

amounts of Recovery Act funds. In addition, Education has designated the 

District’s Office of the State Superintendent for Education (OSSE) as a 

high-risk grantee, for weaknesses related to financial management and 

grants management for several of the programs receiving Recovery Act 

funds. Further, the Transit Capital Assistance funds had a September 1, 

2009, deadline for obligating a portion of the funds, and also provided an 

opportunity to review nonstate entities that receive Recovery Act funds. 

We also reviewed contracting procedures and examined four contracts 

awarded with Recovery Act funds—two for highway infrastructure 

projects, and two for public housing projects—to examine how District 

agencies were implementing the Recovery Act. Consistent with the 

purposes of the Recovery Act, funds from the programs we reviewed are 

being directed to help the District stabilize its budget and to stimulate 

infrastructure development and expand existing programs—thereby 

providing needed services and potentially jobs. We focused on how funds 

were being used; how safeguards were being implemented, including those 

related to procurement of goods and services; and how the District plans 

to meet the Recovery Act reporting requirements. The funds include the 

following: 

• U.S. Department of Education (Education) State Fiscal 

Stabilization Fund: As of August 28, 2009, Education had awarded 

the District about $65.3 million of the District’s total Education State 

Fiscal Stabilization Fund (SFSF) allocation of about $89.3 million. As 

of September 1, 2009, the District had not allocated any of these funds 

to local education agencies (LEA). An OSSE official told us that the 

District plans to submit a revised SFSF application to Education that 

proposes increasing the percentage of SFSF funds to school districts 

Page DC-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix IV: District of Columbia 

to restore the District’s fiscal year 2010 funding for elementary and 

secondary education to the fiscal year 2008 funding level. 

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

of 1965 (ESEA): Education allocated about $37.6 million in Recovery 

Act funds to the District to be used to help improve teaching, learning, 

and academic achievement for students from families that live in 

poverty. As of September 1, 2009, the District had made preliminary 

allocations of $33.8 million to LEAs, which have not drawn down these 

funds. The remaining $3.8 million was set aside for school recognition 

financial awards, school improvement, and administration. 

• Individuals with Disabilities Education Act (IDEA), Parts B and 

C: Education allocated about $18.8 million to the District to be used to 

support early intervention, special education, and related services for 

infants, toddlers, children, and youth with disabilities. As of September 

1, 2009, the District has made preliminary allocations of the $16.7 

million in IDEA Part B funds to LEAs, which had not yet drawn down 

these funds. The remaining $2.1 million are IDEA Part C funds that had 

not been allocated as of September 1, 2009. 

• Transit Capital Assistance Program: FTA apportioned $214.6 

million of Recovery Act Transit Capital Assistance funding to the 

National Capital Region, which consists of Washington, D.C., and 

surrounding counties in Maryland and Virginia. As of September 1, 

2009, FTA had obligated almost 100 percent of the apportioned funds 

for transit projects in the DC/Maryland/Virginia Urbanized Area. The 

Washington Metropolitan Area Transit Authority (WMATA), the 

National Capital Region’s largest recipient of Recovery Act Transit 

Capital Assistance funding, was apportioned $201.8 million in grants 

that it plans to use to fund capital projects, such as equipment 

purchases, station upgrades, and purchases of buses and vans. 

• Highway Infrastructure Investment Funds: The U.S. Department 

of Transportation’s Federal Highway Administration (FHWA) 

apportioned $124 million to the District in March 2009 for highway 

infrastructure and other eligible projects. As of September 1, 2009, 

$115.7 million had been obligated. The District Department of 

Transportation (DDOT) is using its apportioned funds for 15 “shovel 

ready” projects to repave streets and interstates, rehabilitate bridges, 

improve and replace sidewalks and roadways, and expand the city’s 

bike-share program. We selected one contract and one task order for 

two ongoing projects to discuss in greater depth with the relevant 

agency contracting officials. The task order was for a streetlight 

Page DC-2 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

upgrade on Dalecarlia Parkway, Northwest Washington D.C., and the 

contract was for sidewalk repair at various locations in the District. 

• Public Housing Capital Fund: The U.S. Department of Housing and 

Urban Development (HUD) has allocated $27 million to the District of 

Columbia Housing Authority (DCHA). DCHA plans to use the Recovery 

Act funds on 18 projects that include the rehabilitation of nearly 2,000 

housing units and the installation of new energy-efficient projects at 

public housing facilities. As of September 3, 2009, 9 of the projects 

were underway. We selected two contracts to discuss in greater depth 

with the relevant agency contracting officials. The first contract we 

reviewed was for balcony repairs at the Greenleaf Gardens public 

housing community, and the second contract we reviewed was for 

kitchen and bathroom upgrades at the Benning Terrace public housing 

community. 

The infusion of Recovery Act funds has helped mitigate the negative 

effects of the recession on the District’s budget. On June 22, 2009, the 

District revised its revenue projections downward for fiscal year 2009 and 

subsequent years.2

 As a result, the District faced a $190 million projected 

revenue shortfall for fiscal year 2009, and a $150 million projected shortfall 

for fiscal year 2010. Since fiscal year 2009 was nearly three-quarters 

completed at the time of the June 2009 revenue revision, District officials 

decided that it was too late to attempt to increase revenues by increasing 

taxes or fees. District officials decided to make up the $190 million gap 

with funds from its general fund balance.3

 For fiscal year 2010, the District 

eliminated its $150 million budget gap through a combination of savings 

from reduced spending by District agencies, using $36 million in Recovery 

Act SFSF funds, as well as funds from the District’s general fund, and new 

revenue proposals, as discussed below. 

Recovery Act Funds 

Have Helped the 

District Close Its 

Budget Gap 

To balance its fiscal year 2010 budget, the District will eliminate 250 fulltime equivalent positions through a combination of layoffs and attrition. In 

addition, the chancellor of the District of Columbia Public Schools (DCPS) 

recently announced that an unspecified number of teachers would be laid 

off as a result of a funding shortfall in the District’s fiscal year 2010 

 

2

The District’s fiscal year begins on October 1 and ends on September 30. 

3

The District’s general fund is the fund that is supported by local revenue, including taxes 

and nontax revenue. The funds used by the District to close the budget gap were not 

dedicated for specific policy goals or for emergency cash reserves. 

Page DC-3 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

education budget. District officials noted that without the Recovery Act 

funds, job cuts would have been much larger. For example, according to 

District officials, hundreds of additional teaching positions would have 

been eliminated without the Recovery Act funds. 

In addition to the expenditure reductions and additional Recovery Act 

funding, the District enacted the Budget Support Emergency Act of 2009, 

which included a sales tax increase, along with increased taxes on 

gasoline and cigarettes, to help close its 2010 budget gap. The Act also 

postponed the increase in income tax deduction levels, which should 

result in increased revenue to the District. District officials told us that 

they decided not to use the District’s Rainy Day fund to close its budget 

gaps because by law if the Rainy Day funds are used they must be paid 

back in full over the following 2 years—with one half of the funds being 

repaid in the first year and the remainder of the funds repaid in the second 

year. According to the District’s Chief of Budget Execution, District 

officials decided to use a combination of spending reductions, general 

fund balance, and some revenue proposals to help close the budget gaps 

for fiscal years 2009 and 2010, instead of tapping the Rainy Day fund. The 

District has had to prepare for the effects of the drop-off in Recovery Act 

funds beginning in fiscal year 2011, because, officials explained, the 

District is required by law to maintain a 5-year balanced budget. As a 

result, District officials have fully accounted for the future decrease in 

Recovery Act funds in budgets for fiscal years 2011 to 2013. 

District officials have been working with the U.S. Department of Health 

and Human Services (HHS) to develop a cost-allocation plan for 

reimbursement of Recovery Act central administrative costs, based on 

OMB’s guidance. Once the plan is completed, the District will apply for 

reimbursement of allowable Recovery Act administrative costs. 

Education has allocated Recovery Act funds to the District for three 

programs—SFSF, ESEA Title I, and IDEA, as discussed in the following 

sections. 

Allocation of 

Recovery Act 

Education Funds and 

Distribution of 

Guidance to LEAs Are 

in Early Stages 

Page DC-4 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

The Recovery Act created a State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHE). The initial award of SFSF funding required each state to submit an 

application to Education that provides several assurances, including that 

the state will meet maintenance-of-effort requirements (or the state will be 

able to comply with waiver provisions) and that it will implement 

strategies to meet certain educational requirements, such as increasing 

teacher effectiveness, addressing inequities in the distribution of highly 

qualified teachers, and improving the quality of state academic standards 

and assessments. In addition, states were required to make assurances 

concerning accountability, transparency, reporting, and compliance with 

certain federal laws and regulations. States must allocate 81.8 percent of 

their SFSF 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). 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 school 

districts or public IHEs. When distributing these funds to school districts, 

states must use their primary education funding formula, but they can 

determine how to allocate funds to public IHEs. In general, school districts 

maintain broad discretion in how they can use stabilization funds, but 

states have some ability to direct IHEs in how to use these funds. 

The District Plans to Use 

Additional SFSF Funds to 

Help Address Shortfalls in 

Funding for Elementary 

and Secondary Education 

On June 16, 2009, Education approved the District’s application for SFSF 

funds and as of August 28, 2009, Education had awarded the District $49 

million in education stabilization funds out of a total SFSF allocation of 

$73.1 million.4

 Due to unanticipated shortfalls in the District’s projected 

revenue for fiscal year 2010, OSSE plans to modify its SFSF application to 

allocate a larger percentage of SFSF funds to restore the District’s fiscal 

year 2010 funding for elementary and secondary education to the fiscal 

year 2008 funding level. The approved SFSF application included $17.9 

million to restore the level of the District’s support for elementary and 

 

4

As of August 28, 2009, Education had also awarded the District $16.3 million in SFSF funds 

for the government services fund. 

Page DC-5 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

secondary education in fiscal year 2009 to fiscal year 2008 levels, and 

indicated that no SFSF funds would be needed to restore District funding 

for fiscal year 2010.5

 In addition, the District had initially allocated 20 

percent of the government services fund for elementary and secondary 

education; however, an OSSE official told us that OSSE anticipates that 

the District will allocate an additional 40 percent of the government 

services fund for this purpose (for a total of 60 percent of the funds).6

OSSE has not yet provided guidance to LEAs on the use of SFSF funding. 

OSSE Has Made 

Preliminary Allocations of 

ESEA Title I Recovery Act 

Funds to LEAs 

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 (ESEA) of 1965. 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 current statutory and regulatory 

requirements and must obligate 85 percent of the funds by September 30, 

2010.7

 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. Education made 

the first half of states’ Recovery Act ESEA Title I, Part A funding available 

on April 1, 2009, and announced on September 4, 2009, that it had made 

the second half available. 

As of September 4, 2009, the District had received $37.6 million in ESEA 

Title I Recovery Act funds, and OSSE had allocated $33.8 million across 51 

of its 58 LEAs, with the largest LEA, the District of Columbia Public 

 

5

The District also plans to use about $1.4 million of SFSF funds to restore funding in fiscal 

years 2009 and 2010 to its sole IHE, the University of the District of Columbia. After 

restoring education spending through 2011, any remaining education funds will be 

distributed across LEAs in accordance with the District’s ESEA Title I funding formula. 

6

The additional 40 percent being allocated to education was previously designated as 

“undetermined.” The District has not changed its proposed use of the remaining 40 percent 

of the government services fund, which is to assist low- and moderate-income residents 

with down payments and closing costs on their first homes. 

7

LEAs 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 DC-6 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

Schools (DCPS), receiving $23.4 million.8 The District plans to use the 

remaining funds as follows—$1.9 million for school recognition financial 

awards, $1.5 million for school improvement activities, and $400,000 for 

state administration. Before any ESEA Title I Recovery Act funds are 

distributed, OSSE requires LEAs to submit an application that describes 

how the funds will be used and provide assurances that the uses will 

comply with the Recovery Act. According to OSSE officials, all LEAs that 

are eligible to receive ESEA Title I Recovery Act funds have submitted 

their assurances regarding the management, use, and reporting of ESEA 

Title I Recovery Act funds. On September 11, 2009, OSSE distributed the 

applications for the LEAs to describe their specific plans for expenditures 

of ESEA Title I Recovery Act funds. OSSE officials told us that while the 

LEAs could obligate ESEA Title I Recovery Act funds and expend their 

own funds without an approved plan, LEAs could not submit receipts for 

reimbursement until OSSE approved the LEAs’ individual plans for 

expenditures. An OSSE official noted that some LEAs have ESEA Title I 

carry over funds from prior years that should be expended by the LEAs 

before the funds expire on September 30, 2009, and prior to expending any 

new ESEA Title I funds, including Recovery Act funds. 

OSSE Plans to Offer 

Additional Training on 

ESEA Title I Recovery Act 

Funds and Has Yet to 

Determine Monitoring 

Protocols 

OSSE provided Web-based training sessions in June and July 2009 on 

allowable uses of ESEA Title I Recovery Act funds, the purpose and 

guiding principles of the Recovery Act education funds, and a brief 

introduction to tracking and reporting the funds. According to OSSE 

officials, representatives from 28 LEAs participated in the training, 

including representatives from the 3 LEAs we visited. Officials from 2 of 

the LEAs we visited reported that the Web-based training was informative 

and useful. OSSE also held a four-day grants-management training course 

that included information on Recovery Act fund management, as well as 

management of other federal funds. At the training course, OSSE 

distributed information packets that included each LEA’s allocation of 

ESEA Title I Recovery Act funds, as well as guidance on the appropriate 

uses of these funds, and information on tracking and reporting 

expenditures. Further, an OSSE official told us that OSSE plans to conduct 

mandatory Web-based technical assistance on tracking and reporting 

ESEA Title I Recovery Act funds in September 2009, and as needed by the 

 

8

Five of the seven LEAs that did not receive ESEA Title I allocations do not serve children 

ages 5 to 17, but serve either preschool-age children or adults. One LEA was eligible for 

ESEA, Title I Recovery Act funds but opted out. The other LEA was not eligible, based on 

the District’s ESEA, Title I eligibility criteria. 

Page DC-7 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

LEAs. The official told us that OSSE had received guidance from 

Education on tracking jobs created and saved with Recovery Act funds, 

however OSSE is still comparing the Education guidance with the 

District’s internal reporting requirements. 

Officials from the LEAs we visited shared their preliminary plans for using 

ESEA Title I Recovery Act funds. Officials from all three LEAs we visited 

told us that some ESEA Title I Recovery Act funds would be used for 

activities to supplement the school day, such as after-school programs. 

One of the three LEAs we visited has obligated ESEA Title I Recovery Act 

funds. Officials from that LEA told us that the LEA obligated the funds to 

hire a consultant to help them target academic interventions aimed at 

improving student skills, such as reading and math skills. According to the 

LEA officials, the consultant will use data to determine the effectiveness of 

interventions on specific student populations, as well as evaluate the costeffectiveness of such actions. 

OSSE officials told us that they would finalize their ESEA Title I 

monitoring protocols and schedule in September 2009. As of September 

11, 2009, OSSE officials had not determined the methodology for 

monitoring the LEAs’ use of ESEA Title I Recovery Act funds. However, 

OSSE officials told us that their monitoring would be partially based on 

risk assessments accomplished through their ongoing collection and 

review of financial data, such as the rate money has been expended, and 

reimbursement requests that OSSE determined were for unallowable or 

disallowed expenses.9

 In addition, OSSE plans to use the quarterly reports 

submitted by the LEAs, as well as information from other sources—such 

as audits and past monitoring visits—to complete their risk assessments. 

While OSSE has not determined the relevant risk of the individual charter 

school LEAs, an OSSE official told us such an assessment was a priority 

for OSSE. 

Education has designated OSSE as a high-risk grantee due to weaknesses 

in financial management and grants management, including ESEA Title I. 

On July 31, 2009, OSSE submitted a corrective action plan report to 

Education addressing these concerns. The report describes five working 

groups and their plans, including time frames, to address findings 

 

9

According to OSSE officials, some LEA reimbursement requests are disallowed because 

the LEA has overspent in a budgetary category. 

Page DC-8 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

concerning financial support services, business support services, grant 

allocations, grant monitoring, and grant reporting. 

OSSE Made Preliminary 

Allocations of IDEA 

Recovery Act Funds to 

LEAs 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of the Individuals with Disabilities Education Act (IDEA), 

the major federal statute that supports the provisions of early intervention 

and special education and related services for infants, toddlers, children, 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). 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. Education made the first half of 

states’ Recovery Act IDEA funding available to state agencies on April 1, 

2009, and announced on September 4, 2009, that it had made the second 

half available. 

OSSE has determined the preliminary IDEA Part B Recovery Act 

allocations to the LEAs. However, these preliminary amounts have not 

been adjusted in consideration of an August 17, 2009, proposal by 

Education to increase the amount state education agencies are allowed to 

set aside for administration. The allocated amounts are also expected to 

change after enrollment audits are complete. OSSE allocated about $13.3 

million of its federal fiscal year 2009 IDEA Part B Recovery Act funds to 

the District’s largest LEA, DCPS, which serves about 64 percent of the 

District’s public school students, and serves as the IDEA LEA for 17 of the 

District’s charter school LEAs. As of September 11, 2009, OSSE had not 

finalized the application the LEAs must complete describing their specific 

plans for expenditures of IDEA Recovery Act funds. An OSSE official told 

us that while the LEAs could obligate IDEA Recovery Act funds and 

expend their own funds, they could not receive reimbursements until 

OSSE approved the LEAs’ individual plans for expenditures. 

OSSE officials told us that they held Web-based sessions in June and July 

2009, related to IDEA funds in general with limited information on 

Recovery Act funds, and on IDEA Recovery Act funds, respectively. While 

34 LEAs attended the more general Web-based training, only 5 LEAs 

participated in the Web-based guidance session focused on IDEA 

Recovery Act funds. This second session included information on the 

guiding principles of Recovery Act funds for education, time frames for 

accessing and using the funds, and allowable uses of the funds, with 

Page DC-9 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

examples. Officials from one LEA we visited told us that they had not 

received any information on IDEA Recovery Act funds and had not 

participated in any Web-based sessions for these funds, officials from a 

second LEA told us that the staff person who may have attended had since 

left the LEA, and an official with the third LEA we visited told us that 

someone from the LEA had participated. 

Education has designated OSSE as a high-risk grantee, for weaknesses 

related to financial management and grants management, including IDEA. 

OSSE officials noted that Education may hold $500,000 of OSSE’s fiscal 

year 2009 IDEA, Part B state-level funds, generally used for administration 

of IDEA funds. This action was due to noncompliance found in the fiscal 

year 2007 single audit. On July 31, 2009, OSSE submitted a corrective 

action plan report to Education outlining how it plans to address the 

various findings. The report describes five working groups and their plans, 

including time frames, to address findings concerning financial support 

services, business support services, grant allocations, grant monitoring, 

and grant reporting. The corrective action plan report notes that 33 

findings have been resolved and 169 findings remain unresolved. Many of 

the findings are long-standing weaknesses. Nine unresolved issues or areas 

of concern are related to OSSE’s administration of IDEA Recovery Act 

funds, including OSSE’s process for determining IDEA allocations across 

LEAs. OSSE’s initial grant application for its LEAs includes a section with 

additional Recovery Act assurances to inform and ensure that the LEAs 

will be held accountable for spending these funds appropriately. 

OSSE Plans to Safeguard 

Recovery Act Funds Are in 

Early Phases 

OSSE plans on holding LEAs accountable for Recovery Act funds by 

reviewing all LEA applications for Recovery Act grants for SFSF, ESEA 

Title I, and IDEA funds, and by monitoring the use of the funds. An OSSE 

official told us that relevant LEA information will be posted to the agency 

Web site including LEA allocations and draw down rates. LEAs must 

submit grant applications to OSSE in order to request and receive 

Recovery Act funds. As part of the applications, an LEA is required to 

provide a signed statement that the LEA agrees to take adequate and 

appropriate steps to ensure that it has the capacity to comply with the 

Recovery Act requirements, as well as administer each Recovery Act 

program in accordance with all applicable statutes and regulations. The 

grant applications require the LEA to provide OSSE a description of how 

the LEA will spend its requested grant funds in accordance with the 

requirements and objectives of the Recovery Act. According to OSSE 

officials, they plan to review each application and determine if the LEA’s 

Page DC-10 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

expenditure plan complies with the allowed uses of funds under the 

Recovery Act. 

OSSE uses its reimbursement tracking system as its principal monitoring 

tool to ensure expenditures made using federal grant funds, including 

SFSF, ESEA Title I and IDEA funds, are allowable. According to an OSSE 

official, the reimbursement tracking system was developed in February 

2009, and LEAs began implementing the system in April 2009. The system 

is centralized, so OSSE can track all reimbursement requests submitted by 

LEAs, and payments made to LEAs. The system allows OSSE to track and 

report on expenditures for individual grants, as well as for all OSSE grants. 

An LEA spends its own funds in accordance with its grant application, 

after which the LEA submits a reimbursement request to OSSE that 

describes what the funds were spent on and how much was spent. OSSE 

officials review the reimbursement request and compare it to the LEA’s 

grant application. If the costs are consistent with the LEA’s expenditure 

plan, OSSE reimburses the LEA. If the costs are questionable or they are 

unallowable based on the application and Education guidelines, OSSE 

contacts the LEA to resolve the discrepancy, and arranges for technical 

assistance, if needed. Payment to the LEA is only made after the 

discrepancy is resolved. If the discrepancy is not resolved, the LEA will 

not receive its requested funds. 

The reimbursement system is linked to OSSE’s subgrantee budget tracking 

system, which uses many linked spreadsheets to produce summary reports 

of the District LEAs’ budget information. It tracks the amount an LEA has 

expended and compares it to the LEA’s application, budget, and setasides.10 By comparing the three factors, OSSE officials monitor the cash 

flow of the LEA and provide technical assistance if warranted. OSSE 

officials stated that the two systems enable the agency to gather data on 

LEA drawdown rates and track LEA reimbursement requests. OSSE can 

analyze the data to identify problem areas that LEAs have in grant funding 

management. Because the reimbursement system has only recently been 

implemented, not enough data have been collected to analyze LEA 

performance. 

 

10Set-asides are grant amounts that are held by the LEA to be used for specific projects, as 

allowed or required by the federal program. 

Page DC-11 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

OSSE is a prime recipient of Recovery Act funds as defined by OMB’s 

guidance.11 The Office of the City Administrator (OCA) provided guidance 

to all District agency directors that required them to assign grant managers 

to each Recovery Act grant. Grant managers are responsible for ensuring 

that all required information for the grant, including data from 

subrecipients and vendors, is submitted to OCA in accordance with the 

Recovery Act Section 1512 recipient reporting requirements. OSSE 

officials stated that they had assigned grant managers to SFSF, ESEA Title 

I and IDEA grants. 

OSSE Is Preparing to Meet 

Recovery Act Recipient 

Reporting Requirements 

According to an OSSE official, LEAs were provided written guidance 

about OMB reporting requirements, as well as the LEAs’ responsibilities 

for meeting those requirements, during the recent four-day training course. 

An OSSE official also told us that OSSE will collect the required 

information from LEAs, and then enter the information into the District’s 

centralized Web-based system. OSSE officials also told us they were 

considering other ways in which to measure the impact of the Recovery 

Act funds directly on students, as well as indirectly on parents and the 

community. 

The District’s Inspector 

General Plans to Provide 

Additional Oversight of 

OSSE’s IDEA Recovery Act 

Management Practices 

The District’s Office of Inspector General (OIG) fiscal year 2010 audit and 

inspection plan, issued August 31, 2009, includes a focus on Recovery Act 

spending by District agencies. If resources permit, the OIG plans to audit 

the Recovery Act funds appropriated for IDEA. The objectives would be to 

determine whether (1) OSSE properly managed and distributed Recovery 

Act funds to LEAs and (2) DCPS used Recovery Act funds for their 

intended purposes. The OIG is reviewing DCPS’ use of IDEA funds 

because of the past problems identified in DCPS’ handling of IDEA funds, 

and to protect the District from incurring disallowed costs, and 

subsequently reimbursing the federal government for those disallowed 

costs. The OIG also plans to review whether OSSE ensures an appropriate 

level of accountability and transparency for OSSE-received Recovery Act 

funds. 

 

11OMB Memorandum, M-09-21, Implementing Guidance for the Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009). 

Page DC-12 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.12 The majority of the public transit funds, $6.9 billion 

(82 percent), were apportioned for the Transit Capital Assistance Program, 

with $6.0 billion designated for the urbanized area formula grant program 

and $766 million designated for the nonurbanized area formula grant 

program.13 Under the urbanized area formula grant program, Recovery Act 

funds were apportioned to urbanized areas—which in some cases include 

a metropolitan area that spans multiple states—throughout the country 

according to existing program formulas. The Recovery Act funds were also 

apportioned to the states under the nonurbanized area formula grant 

program 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. Up to 10 percent of apportioned Recovery Act funds 

may also be used for operating expenses.14 Under the Recovery Act, the 

maximum federal fund share for projects under the Transit Capital 

Assistance Program is 100 percent.15

DC/Maryland/Virginia 

Urbanized Area Has 

Met a Key Recovery 

Act Obligation 

Deadline for Transit 

Projects 

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

 

12The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

13Urbanized areas are defined as areas encompassing a population of not less than 50,000 

people that has been defined and designated in the most recent decennial census as an 

“urbanized area” by the Secretary of Commerce. Nonurbanized areas are defined as areas 

encompassing a population of fewer then 50,000 people. 

14The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

15The federal share under the existing formula grant program is generally 80 percent. 

Page DC-13 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

will submit to FTA for Recovery Act funding.16 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet the eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon 

requirements, and comply with goals to ensure disadvantaged businesses 

are not discriminated against in the awarding of contracts. 

Funds appropriated through the Transit Capital Assistance Program must 

be used in accordance with Recovery Act requirements. Specifically, 50 

percent of Recovery Act funds apportioned to urbanized areas or states 

are to be obligated within 180 days of apportionment (before September 1, 

2009) and the remaining apportioned funds are to be obligated within 1 

year. The Secretary of Transportation is to withdraw and redistribute to 

other urbanized areas or states any amount that is not obligated within 

these time frames.17

FTA apportioned $214.6 million in Transit Capital Assistance program 

funds to the National Capital Region in March 2009. The National Capital 

Region includes transit agencies serving the District and surrounding 

counties in Maryland and Virginia. The transit agencies within the region 

include the Washington Metropolitan Area Transit Authority (WMATA), 

the Maryland Transit Administration (MTA), the Potomac and 

Rappahannock Transportation Commission (PRTC), the Virginia Railway 

Express (VRE), and Fredericksburg Regional Transit (FRED). According 

to FTA, as of September 1, 2009, FTA had obligated $213.0 million of the 

 

16Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and metropolitan planning organizations designated for the area. MPOs 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 Program (TIP) and the approved 

State Transportation Improvement Program (STIP). 

17Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

Page DC-14 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

Transit Capital Assistance funds (99.3 percent) apportioned to the 

National Capital Region, thus meeting the Recovery Act requirement that 

50 percent of the funds be obligated by September 1, 2009. 

WMATA Has Started 

Awarding Contracts for 

Recovery Act Transit 

Projects 

Within the National Capital Region, we focused on WMATA’s use of 

Recovery Act funds because it was apportioned the largest amount of 

Recovery Act transit funding. WMATA operates the second largest rail 

transit system, sixth largest bus network, and eighth largest paratransit 

network in the United States. As of August 18, 2009, WMATA was awarded 

$201.8 million in Recovery Act funds, $182.5 million for the purchase of 47 

buses, 74 vans, and station upgrades, and $17.7 million for rail 

improvement and equipment purchases. 

WMATA Used a New 

Strategic Prioritization 

Process to Select Recovery 

Act Projects 

WMATA developed a new strategic prioritization process for selecting 

projects that met Recovery Act requirements and supported WMATA’s 

short-term needs and long-term goals. Through this process, WMATA 

identified about $530 million in shovel-ready projects. Agency officials 

stated that the strategic prioritization process began with WMATA 

analyzing over $11 billion worth of capital projects needed to maintain, 

expand, and improve WMATA’s three transit services—Metrorail, 

Metrobus, and MetroAccess paratransit service. To identify projects for 

Recovery Act funding, WMATA identified projects that were ready to start, 

eligible for federal funding, and could not be implemented without 

additional funds. These projects were then refined and prioritized based 

on how well they linked to WMATA’s five strategic goals and 12 strategic 

objectives. The projects selected included the replacement of WMATA’s 

oldest buses, construction of a new bus body and paint shop, replacement 

of the Southeastern bus garage, replacement of crumbling platforms at 

select Metrorail stations, purchase of new communications equipment for 

the operations control center, and upgrades to the three oldest Metrorail 

stations. The following figure shows the distribution of capital projects for 

FTA Recovery Act formula grants by category. 

Page DC-15 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

Figure 1: WMATA’s Planned Use of Recovery Act Funds 

5%

10%

20%

6%

10%

15%

33%

1%

Funds for reprogramming

Information technology

Maintenance facilities

Safety and security

Passenger facilities

Operations systems

Maintenance and repair equipment

Vehicles and vehicle parts

Source: GAO analysis based on WMATA data as of August 18, 2009.

Note: According to a WMATA official, some of the funds in the Operations Systems, Maintenance and 

Repair Equipment, Passenger Facilities, Maintenance Facilities, and Vehicles and Vehicle Parts 

program categories will be used for safety projects. 

WMATA officials stated that they are in the early stages of implementing 

the 30 projects supported with Recovery Act funds, and have awarded 

about 70 contracts for Recovery Act funds. According to WMATA officials, 

WMATA has begun awarding contracts for the replacement of the oldest 

buses with new hybrid/electric buses, expansion and replacement of the 

MetroAccess paratransit fleet, and purchase and reconditioning of 

emergency tunnel evacuation carts. Since contracts on these projects were 

only recently awarded, it is too early to tell whether the projects are on 

schedule. 

Page DC-16 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

WMATA officials stated that they used its new strategic prioritization 

process to guide the agency’s application for about $122 million in 

additional Recovery Act funding in the form of discretionary grants. 

WMATA has already been selected to receive $9.6 million in funds over 3 

years through the Transit Security Grant Program.18 According to WMATA 

officials, the Transit Security Grant funds will be used to hire 20 full-time 

officers to form five antiterrorism teams, fund the purchase of vehicles 

and specialty equipment and provide training. Additionally, WMATA 

officials stated that they are applying for discretionary grants for the 

following two programs: 

WMATA Is Applying for 

about $122 Million in 

Additional Recovery Act 

Funding 

• The Transportation Investments Generating Economic 

Recovery program (TIGER):19 WMATA officials stated that they 

have contributed to the development of the TIGER grant proposal 

submitted by the Washington Council of Governments, which was 

approved by the Transportation Planning Board (TPB) on July 15, 

2009.20 This proposal consists of a variety of services and 

infrastructure improvements such as a new transit-way, a bike-sharing 

system, and enhanced bus service. WMATA officials noted that while 

some of the projects within this proposal would aid WMATA-operated 

services, WMATA would not directly implement or manage them. 

WMATA officials added that they are preparing a separate TIGER grant 

proposal to request about $90 million in funds for construction of bus 

facilities that would support enhanced bus service in the TIGER grant. 

 

18The Recovery Act provided $150 million for the Transit Security Grant Program. 

19The Recovery Act appropriated $1.5 billion of discretionary grant funds to be awarded by 

the Department of Transportation for capital investments in surface transportation 

infrastructure projects. The Department of Transportation refers to these grants as “Grants 

for Transportation Investment Generating Economic Recovery” or “TIGER Discretionary 

Grants.” According to the National Capital Region’s Transportation Planning Board 

officials, National Capital Region TIGER projects, which are developed in conjunction with 

local jurisdictions, consist of: (1) K Street Transitway from 9th to 23rd Street, N.W.; (2) 

enhanced bus service (example—dedicated bus lanes); (3) a bike-sharing system; (4) 

improvements to two Metrorail stations (example—high-speed elevators) and the creation 

of one new transit center at the Takoma/Langley Transit Center; (5) existing and planned 

managed High Occupancy Vehicle / High Occupancy Toll lanes; and (6) additional bus 

priority treatments across two Potomac River crossings and along three arterials. 

20The TPB is the National Capital Region’s metropolitan planning organization. The TPB 

oversees project selections, including Recovery Act project selections, through a formal 

approval process called the TIP, a 6-year financial program that describes the schedule for 

obligating federal funds to state and local projects. 

Page DC-17 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

• Transit Investments in Greenhouse Gas and Energy Reduction 

program:21 WMATA officials stated that they also submitted an 

application for $22.4 million that would be used to fund the installation 

of more energy-efficient lighting in 50 underground Metrorail stations 

and 112 adjacent tunnels, as well as lighting upgrades in center tracks, 

platform edges, along escalators, and in retaining walls. Award 

announcements for this program are planned for September 2009. 

WMATA has Developed 

Procedures to Track 

Recovery Act Funds and 

Intends to Use Its Existing 

System to Meet Recovery 

Act Reporting 

Requirements 

According to WMATA officials, they have developed a process to track 

funding by project using their existing accounting system. Recovery Act 

funds received by WMATA are assigned a unique fund number. WMATA 

uses this fund number to identify Recovery Act funding sources to keep 

sources segregated. All transactions are tagged with a specific project 

identification (ID) code. WMATA officials said they have also developed a 

Recovery Act-specific project ID and all payments using Recovery Act 

funds are tracked using that ID. A unique project ID is assigned to each 

Recovery Act-funded project at inception and is used for individual 

transactions as they are processed through WMATA’s accounting system. 

WMATA officials stated that they have established a hierarchy of roles and 

responsibilities to coordinate management to comply with Recovery Act 

objectives. The designation of roles brings together key offices to manage 

financial controls covering contract and project spending, monitoring, and 

reporting. WMATA designated the agency’s Chief Administrative Officer 

(CAO) as the overall Recovery Act program manager. Existing project 

management and financial reporting processes remain intact, but are 

coordinated through the CAO. 

According to WMATA officials, the agency should not have a problem in 

meeting the recipient reporting requirements under section 1512 of the 

Recovery Act, because WMATA has already provided similar information 

to the House Committee on Transportation and Infrastructure. At the 

Committee’s request, WMATA has submitted reports in April, May, June 

and July 2009. WMATA officials told us that they have already established 

the reporting procedures that will enable the agency to collect and report 

the recipient data required by the Recovery Act. WMATA officials also told 

 

21Public transportation agencies are eligible to receive Transit Investments for Greenhouse 

Gas and Energy Reduction (TIGGER) Program grants. TIGGER grants are for projects that 

either reduce energy consumption or greenhouse gas emissions through a capital 

investment. 

Page DC-18 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

us they were considering developing performance measures that could be 

used to assess the impact of the Recovery Act funds. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

regional and local use. Highway funds are apportioned to states through 

federal-aid highway program mechanisms, and states must follow the 

existing program requirements, which include ensuring the project meets 

all environmental requirements associated with the National 

Environmental Policy Act (NEPA), paying a prevailing wage in accordance 

with federal Davis-Bacon Act requirements, complying with goals to 

ensure disadvantaged businesses are not discriminated against in the 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America 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. 

The District Is Using 

Existing Contracting 

and Oversight 

Procedures for 

Recovery Act 

Highway Funds 

The District was apportioned $124 million in March 2009 for highway 

infrastructure and other eligible projects. As of September 1, 2009, $115.7 

million had been obligated. The U.S. Department of Transportation has 

interpreted the term “obligation of funds” to mean the federal 

government’s contractual commitment to pay for the federal share of the 

project. This commitment occurs at the time the federal government 

approves a project and a grant agreement is executed. The District 

Department of Transportation (DDOT) is using its apportioned funds for 

15 “shovel ready” projects to repave streets and interstates, rehabilitate 

bridges, improve and replace sidewalks and roadways, and expand the 

city’s bike-share program. Figure 2 shows obligations by the types of road 

and bridge improvements being made in the District. States request 

reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. The first project to be completed was the 

repaving of Interstate 395 in the District. As of September 1, 2009, $556,440 

had been reimbursed by FHWA. 

Page DC-19 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

Figure 2: Highway Obligations for the District of Columbia by Project Improvement 

Type as of September 1, 2009 

Bridge improvement ($35.9 million)

Other ($33.1 million)

Pavement widening ($4.5 million)

37%

4%

29%

Pavement improvement ($42.3 million)

31%

Source: GAO analysis of FHWA data.

Pavement projects total (40 percent, $46.8 million)

Bridge projects total (31 percent, $35.9 million)

Other (29 percent, $33.1 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

According to DDOT’s Chief Contracting Officer, no changes have been 

made to the contract or financial management processes specifically for 

Recovery Act contracts because DDOT officials deemed its existing 

processes as suitable to track the use of the funds. According to the same 

official, DDOT uses a competitive bid process for awarding highway 

contracts. Each bidder’s qualifications are reviewed before a contract is 

awarded. The review process analyzes information on the bidder’s past 

contracts, financial information, personnel, equipment, and past 

performance history, including checking references and conducting site 

visits to the contractor’s ongoing projects. 

Prior to awarding contracts for projects funded with Recovery Act funds, 

DDOT held a prebidding conference with potential bidders that described 

the bidding process and additional reporting requirements mandated by 

the Recovery Act. DDOT officials have also participated in a roundtable 

discussion given by the District’s Office of Contracting and Procurement 

Page DC-20 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

to discuss Recovery Act projects. DDOT’s Chief Contracting Officer stated 

that DDOT has seen an increase in bids for Recovery Act projects, 

including bids from new contractors, and that thus far it has accepted the 

lowest bids for each project. 

As discussed in our July 2009 report, DDOT has procedures in place to 

track the expenditure of Recovery Act funds.22 According to DDOT 

officials, they are using their existing system to track Recovery Act funds. 

In addition, DDOT officials assigned unique labels to Recovery Act funds 

that tie to Recovery Act—related projects, allowing DDOT to separately 

track and identify funds. DDOT’s financial management system is also 

integrated with FHWA’s financial management system, providing an 

additional layer of oversight. 

We selected one contract and one task order for two ongoing projects to 

discuss in greater depth with the relevant agency contracting officials. See 

table 1 below for a summary of contract information for the two projects. 

Table 1: Key Information for Two District Highway Projects Reviewed 

Projected cost Project start

Expected 

completion

Streetlight upgrade on 

Dalecarlia Parkway, 

Northwest Washington, D.C. $2,182,469 April 2009 January 2010

Sidewalk repair at various 

locations in the District $3,500,000 June 2009 December 2009

Source: DDOT. 

We reviewed a task order for a streetlight upgrade on Dalecarlia Parkway, 

Northwest Washington D.C. A task order was issued on April 13, 2009, for 

an amount not to exceed $2,182,469. The project started on April 13, 2009, 

and is projected to be completed by January 20, 2010. The task order 

requires the contractor to furnish all necessary labor, equipment, 

materials, and other incidentals for upgrading street lights on Dalecarlia 

Parkway and to furnish and install fixtures and cables. According to 

DDOT’s Chief Contracting Officer, to expedite the project an order for the 

work was placed against an existing indefinite delivery / indefinite quantity 

(IDIQ) contract, which was awarded competitively. The Chief Contracting 

 

22GAO, 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). 

Page DC-21 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

Officer also stated that DDOT saved money by not having to advertise a 

new contract and prepare new contract documents. 

The second contract we reviewed was for sidewalk repair at various 

locations in the District. A task order for this work was issued on June 11, 

2009, for an amount not to exceed $3,500,000 with a project start date of 

June 11, 2009, and a projected completion date of December 17, 2009. The 

task order requires the contractor to construct new sidewalks and replace 

existing sidewalks in locations to be determined in the order. According to 

a DDOT official an existing IDIQ competitively-awarded contract was 

modified to expedite the project. The official also noted that because 

DDOT had to identify shovel-ready projects to be funded with Recovery 

Act money, both projects already had a design in place which could be 

easily added to an existing DDOT IDIQ contract. 

According to DDOT officials, both the task order and contract require the 

contractor to provide DDOT with information to support the agency’s 

Recovery Act reporting requirements regarding job creation. As required 

by the District’s Chief Procurement Officer, DDOT has added specific 

clauses in its Recovery Act contracts that describe the specific Recovery 

Act reporting requirements, provide the reporting template and give 

specific instructions on how to complete the report, and advise the 

contractors that GAO and the relevant Inspector General have the ability 

to examine the contractors’ records and interview the contractors’ 

employees. According to DDOT officials, the clauses require the 

contractor to report the number of direct on-the-project jobs for its 

workforce and the workforce of its subcontractors during the reporting 

month. 

In addition, according to a DDOT official, the agency has standard 

procedures for oversight on all contracts. These procedures include 

having DDOT personnel or qualified consultants retained by DDOT, or 

both, perform regular inspections on each project. After the project 

manager receives the schedule for the project and approves it, an 

inspection plan is generated. The inspection plan includes site visits and 

reviews of materials and personnel being used on the project. DDOT 

personnel or qualified consultants are on-site on a daily basis checking on 

the status of the project. They are responsible for generating a daily report 

that describes the number of tasks completed that day, and the number of 

people and types of equipment used on the project. DDOT personnel or 

qualified consultants are also required to verify the reports with the 

contractor so there will not be any conflicting views on any issues that 

may arise. In addition, according to the same official, the DDOT 

Page DC-22 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

contracting staff holds regular meetings with the contractor, where issues 

and action items are discussed. 

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.23 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. Recovery Act requirements specify that public housing 

agencies must obligate funds within 1 year of the date on which they are 

made available to public housing agencies, expend at least 60 percent of 

funds within 2 years, and expend 100 percent of the funds within 3 years. 

Public housing agencies are expected to give priority to projects where 

contracts can be awarded based on bids within 120 days from the date on 

which the funds are made available, as well as projects that rehabilitate 

vacant units, or those already underway or included in their current 

required 5-year capital fund plans. 

The District Is Using 

Existing Contracting 

and Oversight 

Procedures for 

Recovery Act Public 

Housing Capital 

Funds 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million); 

• gap financing for projects that are stalled due to financing issues ($200 

million); 

• public housing transformation ($100 million); and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

will be threshold-based, meaning applications that meet all the threshold 

 

23Public housing agencies receive money directly from the federal government (HUD). 

Funds awarded to the public housing agencies do not pass through the District’s budget. 

Page DC-23 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

requirements will be funded in order of receipt. If funds are available after 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

HUD has allocated $27 million to DCHA. As of September 5, 2009, DCHA 

had obligated about $5 million or about 19 percent of the $27 million it 

received in capital grant funds, and drawn down about $1.5 million from 

DCHA’s Electronic Line of Credit Control System account with HUD. 

DCHA plans to use the Recovery Act funds on 18 projects that include the 

rehabilitation of nearly 2,000 housing units and the installation of new 

energy-efficient projects at public housing facilities. As of September 3, 

2009, 9 of the projects were underway. 

DCHA is using its existing contract-management procedures to monitor 

the use of Recovery Act funds.24 According to a DCHA contracting official, 

no changes have been made to contract or financial management 

processes specifically for Recovery Act contracts because DCHA believes 

its existing processes are suitable to monitor the use of the funds. 

According to the same official, DCHA uses job-order contracting to 

establish a competitive bid process for awarding housing contracts.25

DCHA officials stated that job-order contracting procedures minimize 

unnecessary engineering, design, and other procurement processes by 

awarding long-term contracts to contractors for a wide array of project 

improvements and renovations. According to DCHA officials, DCHA 

currently has 11 job-order contracts and assesses each of the contractor’s 

qualifications, current workload, and past performance in order to decide 

which contractor will be awarded a job order for each specific Recovery 

Act project. 

As discussed in our July 2009 report, DCHA has procedures in place to 

track the expenditure of Recovery Act funds. According to DCHA officials, 

its existing accounting system is used to track Recovery Act funds. DCHA 

 

24According to the District’s Chief Procurement Officer, DCHA is exempt from both the 

District of Columbia Procurement Practices Act of 1985, and the District Office of 

Contracting and Procurement authority. 

25A Job Order Contract is a specially designed indefinite quantity contract that is awarded 

on a periodic basis to one or more contractors. 

Page DC-24 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

officials stated that Recovery Act funds have an “S” at the end of their 

accounting code and can be identified by project number and task order. 

We selected two contracts to discuss in greater depth with the relevant 

agency contracting officials. See table 2 below for a summary of contract 

information for the two contracts. 

Table 2: Key Information for Two Public Housing Capital Projects Reviewed 

Projected cost Project start

Expected 

completion

Balcony repairs at Greenleaf 

Gardens 

$1,259,424 March 2009 November 2009

Kitchen and bathroom upgrade 

at Benning Terrace 

$839,798 August 2009 May 2010

Source: DCHA. 

The first contract we reviewed was for balcony repairs at the Greenleaf 

Gardens public housing community. The job order was placed on March 

27, 2009, for an amount not to exceed $1,259,424. The project started on 

March 27, 2009, and is projected to be completed by November 28, 2009. 

The job order requires the contractor to repair concrete balconies and 

rails, remove and reinstall metal balcony rails, and paint all rails, walls, 

ceilings, and floors. According to a DCHA official, the use of job-order 

contracting helps expedite the award of the project by awarding the work 

as a job order on an existing contract. 

The second contract we reviewed was for kitchen and bathroom upgrades 

at the Benning Terrace public housing community. The job order was 

placed on August 4, 2009, for an amount not to exceed $839,798. The 

project started on August 4, 2009, and has a projected completion date of 

May 1, 2010. The job order requires the contractor to furnish all necessary 

labor, tools, transportation, supervision, material, and equipment required 

to renovate 84 kitchens and bathrooms at the Benning Terrace property. 

According to DCHA officials, the agency has already been collecting the 

information necessary to meet its Recovery Act reporting requirement 

regarding job creation. Specifically, DCHA is already required to comply 

with the Section 3 HUD mandate that requires recipients of HUD funds, to 

the greatest extent possible, to provide job training, employment, and 

contract opportunities for low- or very-low-income residents in connection 

with projects and activities in their neighborhoods. DCHA has been 

Page DC-25 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

collecting the number of jobs created and retained by contractors or 

subcontractors on all projects. 

In addition, according to a DCHA official, the agency has standard 

procedures for oversight on all contracts. These procedures include 

having DCHA contracting personnel perform regular inspections on each 

project. Contractors must also file a weekly progress report. DCHA’s 

project inspectors and the contractors have to agree on the level of project 

completion each week and sign a certification document, in order to 

ensure there will not be any conflicts about what work has been 

completed and appropriate payments are made. In addition, according to 

DCHA officials, before projects are started in a particular housing 

community, the residents are consulted and continue to remain involved 

throughout the life of the project. DCHA also sometimes hires community 

residents as project monitors. 

The Office of the City Administrator (OCA) has taken several actions to 

address the recipient reporting requirements in section 1512 of the 

Recovery Act.26 OCA has designed a centralized Web-based system to 

collect all required data and submit them into federalreporting.gov, the 

Web site the federal government established for recipients to report 

Recovery Act data. OCA considered two approaches for meeting the 

Recovery Act reporting requirements—developing the software 

application internally or purchasing a Recovery Act reporting package 

offered by several firms. OCA researched six commercial vendors that 

provide software to support recipient reporting data collection. After 

consulting with senior District officials and the Office of the Chief 

Technology Officer (OCTO), OCA officials decided that developing a 

recipient reporting system internally would better ensure accountability 

and the need for rapid implementation. Also, OCTO staff had experience in 

developing similar systems for the District government. The system is 

based on an approach the District has used for several other applications, 

and is available only to District officials responsible for Recovery Act 

funds, at reporting.dc.gov beginning September 1, 2009. 

The District Has Made 

Preparations for 

Meeting Recovery Act 

Reporting 

Requirements 

All District agencies are considered prime recipients for reporting 

purposes. On July 23, 2009, OCA issued guidance to all District agency 

directors discussing the requirements of Section 1512 and the 

 

26Pub. L. No. 111-5, div A, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

Page DC-26 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

responsibilities agencies have regarding the requirements.27 The guidance 

defines multiple tiers of accountability and the responsibilities assigned to 

each tier. Each tier consists of positions that are held accountable for 

recipient reporting data management and collection or for quality 

assurance. Specifically, the guidance instructs agency directors to assign 

an individual staff member as the grant manager for each Recovery Act 

grant award received by the agency. The grant manager is responsible for 

day-to-day management of the grant including submitting required 

reporting data accurately and within the deadlines. In addition, the grant 

manager is responsible for submitting required information for 

subrecipients and vendors for that grant. Grant managers can choose to 

submit data for subrecipients or delegate the responsibility to 

subrecipients to submit data directly. The guidance instructed all agency 

directors to either declare that the agency has not received and does not 

expect to receive any Recovery Act funds or provide a list of all Recovery 

Act grants expected by the agency, and the identities of all responsible 

parties. 

OCA and OCTO developed a Web-based system to serve as a central 

repository for the Recovery Act data the District plans to submit directly 

to federalreporting.gov. According to District officials, setting up its own 

Web site (reporting.dc.gov) allows OCA to review the aggregate data 

before it is submitted to federalreporting.gov. Grant managers will use the 

OCA Web site starting September 1, 2009, to enter all required data as the 

prime recipient. OCA conducted three Recovery Act training sessions for 

grant managers during August 2009 on the reporting.dc.gov tool and 

overall expectations for Recovery Act grant reporting. In addition, OCTO 

has held several sessions with grant managers specifically on how to use 

the reporting.dc.gov tool. The training included a review of the reporting 

requirements, key tasks, and instructions on how to use the new system. 

The District plans on testing the system beginning September 1, 2009. 

Grant managers will create an account at OCA’s Web site and submit 

required Recovery Act recipient reporting data through August 31, 2009. 

The test will give OCTO a chance to test the system and resolve issues 

before the actual reporting date. Grant managers are required to input the 

data every month, so reviewers perform quality reviews and detect errors 

 

27Office of the City Administrator memo: ARRA 09-2, Defining Accountabilities for 

Implementing the American Recovery and Reinvestment Act Reporting Requirements 

(July 23, 2009). 

Page DC-27 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

and omissions as soon as possible, instead of waiting until the end of a 

quarter to review the data. OCTO officials stated that they developed 

quality and data controls into the system. 

Two key components of the District’s oversight efforts to safeguard 

Recovery Act funds have encountered delays or cutbacks that could 

impede the District’s efforts to correct previously identified internal 

control weaknesses in programs that are receiving Recovery Act funds. 

The District uses the single audit28 to aid in determining whether the 

District’s internal controls provide reasonable assurances that there is 

reliable reporting for federal funds, that accountability is maintained over 

assets, and that operations are effective and efficient. The District’s fiscal 

year 2008 Single Audit was required to be submitted to the federal 

government by June 30, 2009; however, as of September 11, 2009, it had 

not been completed by the District’s auditors. According to District 

officials, the fiscal year 2008 Single Audit was delayed because some 

District agencies had difficulties in providing requested documentation to 

the external auditor to complete the single audit. The District was granted 

an extension for completing the fiscal year 2007 single audit by the 

Department of Health and Human Services. However, an Office of Integrity 

and Oversight (OIO) official stated that the department did not grant the 

District an extension for completing the fiscal year 2008 Single Audit. The 

official stated that the District was expecting the extension to be approved 

as had happened in previous years. The official stated that the 2008 Single 

Audit may be completed in late-September 2009. 

Key Efforts to 

Safeguard the 

District’s Use of 

Recovery Act Funds 

Have Been Delayed or 

Cutback 

In our July 2009 report, we stated that the District relies on Single Audit 

findings as a key source of oversight of its agencies. Untimely single audit 

reporting deadlines and delays in the completion of single audit reports 

make it difficult for the District to resolve material weaknesses before 

 

28The Single Audit Act, as amended (31 U.S.C. §§ 7501-7507), requires states, local 

governments, and nonprofit organizations expending more than $500,000 in federal awards 

in a year to obtain an audit for that year in accordance with the requirements set forth in 

the act. A Single Audit consists of (1) an audit and opinions on the fair presentation of the 

financial statements and the Schedule of Expenditures of Federal Awards; (2) gaining an 

understanding of and testing internal control over financial reporting and the entity’s 

compliance with laws, regulations, and contract or grant provisions that have a direct and 

material effect on certain federal programs (i.e., the program requirements); and (3) an 

audit and an opinion on compliance with applicable program requirements for certain 

federal programs. 

Page DC-28 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

more federal funds, including Recovery Act funds are received. Therefore, 

because the District has not received its single audit findings, these federal 

funds are subject to the same material weaknesses from the previous year 

and are at risk of mismanagement, fraud, waste, and abuse. Both the 

District’s past single audits and District OIG reports have identified 

numerous internal control weaknesses in four District programs that are 

receiving Recovery Act funds. 

The District has also cut back plans to conduct a comprehensive review of 

internal controls in all District agencies. In our July 2009 report, we noted 

that although the District government and agencies have various internal 

controls, the controls are not integrated or included in a citywide internal 

control program. Past reports from the OIG have identified numerous 

weaknesses in the District’s internal controls. In September 2008, the 

Office of the Chief Financial Officer (OCFO) contracted with an 

independent accounting firm to identify areas in the office with internal 

control problems and deficiencies. The District planned to have the firm 

expand its review to District agencies after it completed its OCFO 

assessment. On August 17, 2009, an OCFO official informed us that review 

will be limited to just the OCFO and the firm will not expand its review to 

District agencies. The contract expires at the end of September 2009. 

According to District officials, funding concerns prompted the District 

Council to reduce the length of the contract, which officials stated is 

unlikely to be extended. The official added that the OCFO’s new Chief 

Risk Officer will be addressing internal control risks by developing an 

internal control program for the OCFO. 

Both District OIG reports and Single Audit reports have identified internal 

control weaknesses. The most recent Single Audit report, for fiscal year 

2007, identified 89 material weaknesses in internal controls over both 

financial reporting and compliance with requirements applicable to major 

federal programs. There were material weaknesses in financial reporting 

found in the District’s Medicaid program and DCPS. The single audit 

report identified material weaknesses in compliance with requirements 

applicable to major federal programs including Medicaid’s Federal Medical 

Assistance Percentage (FMAP), ESEA Title I Education grants, and 

Workforce Investment Act programs, all of which are receiving Recovery 

Act funds. The findings were significant enough to result in a qualified 

opinion for that section report. Fiscal year 2008 single audit findings were 

not available to examine at the time of our review. 

Page DC-29 GAO-09-1017SP Recovery Act
Appendix IV: District of Columbia 

The District’s OIG’s fiscal year 2010 audit and inspection plan was issued 

on August 31, 2009. The plan focuses on providing additional oversight on 

Recovery Act spending at District agencies. The plan includes audits of the 

following areas: 

• qualifications and background checks for contracting officials; 

• Recovery Act funds appropriated for IDEA; 

• FMAP increase under the Recovery Act; and 

• DDOT construction contracts awarded under the Recovery Act. 

Additionally, the OIG is recommending that the Comprehensive Annual 

Financial Report auditors expand their scope to cover spending of 

Recovery Act funds by District agencies. The OIG stated that the plans can 

only be initiated provided there are adequate resources to support the 

work. 

We provided the Office of the Mayor of the District, the District agencies 

for the programs we examined, and WMATA with a draft of this summary 

on September 8, 2009. On September 10 and 11, 2009, the Office of the 

Mayor, the District agencies, and WMATA provided technical comments, 

which we have incorporated where appropriate. 

William O. Jenkins, Jr., (202) 512-8757 or jenkinswo@gao.gov 

In addition to the contact named above, John Hansen, Assistant Director; 

Mark Tremba, analyst-in-charge; Laurel Beedon; Sunny Chang; Marisol 

Cruz; Nagla’a El-Hodiri; Linda Miller; Justin Monroe; Melissa 

Schermerhorn; and Kathy Smith made major contributions to this report. 

The District OIG Plans on 

Providing Additional 

Recovery Act Oversight If 

Resources Permit 

District Comments on 

This Summary 

GAO Contact 

Staff 

Acknowledgments 

Page DC-30 GAO-09-1017SP Recovery Act
Appendix V: Florida 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act) 

spending in Florida.1

 The full report covering all of our work in 16 states 

and the District of Columbia is available at www.gao.gov/recovery. 

Overview 

GAO’s work focused on three federal programs funded under the 

Recovery Act: the Workforce Investment Act (WIA) Youth Program, the 

Weatherization Assistance Program, and the Highway Infrastructure 

Investment Program. These programs were selected primarily because 

they have begun disbursing Recovery Act funds or are existing programs 

that are receiving significant amounts of these funds. Specifically, we 

selected WIA because a summer youth program was implemented in 

Florida this summer with Recovery Act funds. We selected the 

weatherization program based on discussions with the Florida Chief 

Inspector General, who considers the program high risk; and we selected 

the Highway Infrastructure Investment Program because it is one of the 

largest programs receiving Recovery Act funds flowing to the state and 

localities. Consistent with the purposes of the Recovery Act, funds from 

the programs we reviewed are being directed to help Florida and local 

governments stabilize their budgets and stimulate infrastructure 

development and expand existing programs intended to provide needed 

services and jobs. 

We conducted site visits at two regional workforce boards for WIA in 

Broward and Hillsborough Counties because these boards are among the 

largest recipients of Recovery Act WIA dollars in the state and had the 

highest numbers of anticipated participants. In these counties we visited 

two contractors administering summer youth programs. We selected two 

contracts managed by Florida Department of Transportation (FDOT) 

district offices located in Lake City in Columbia County and Chipley in 

Washington County because they were among the largest dollar contracts 

that had been awarded as of July 20, 2009. 

The following provides highlights from our review: 

WIA Youth Program • The state of Florida received almost $43 million for WIA youth 

activities under the Recovery Act and set a goal of serving 16,000 youth 

Page FL-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix V: Florida 

in 2009 through its WIA summer employment activities for youth 

program. As of August 15, 2009, the Agency for Workforce Innovation 

estimates that it has expended $22.3 million or 52 percent of its total 

and in its July 31, 2009 report to the Department of Labor (Labor) said 

it had served 11,902 youth. 

• The agency expects to meet its enrollment goal by the end of the 

summer program. However, Broward and Hillsborough counties’ 

summer youth programs overcame several implementation challenges. 

Both counties were challenged by recruiting participants under tight 

time frames, and other factors, such as screening applicants for 

eligibility. 

• Broward County and Hillsborough County workforce boards have 

taken steps to monitor activities performed with Recovery Act WIA 

Youth funds, such as work experience and work-based learning 

activities. However, Hillsborough County’s on-site monitoring 

activities for older participants is limited in comparison to Broward 

County. Employers and youth we talked with praised the summer 

youth programs in Broward and Hillsborough counties, but data on the 

extent to which youth achieved gains in work readiness are not yet 

available. 

Weatherization Assistance 

Program 

• The Department of Energy (DOE) has allocated about $176 million 

over 3 years to Florida for the Recovery Act Weatherization Assistance 

Program to weatherize over 19,000 homes. On June 18, 2009, DOE had 

provided to the state about $88 million, or about half the total fund 

allocation. As of August 31, 2009, the Florida Department of 

Community Affairs (DCA) had obligated about $4.2 million and 

expended about $1.1 million of the initial $88 million allocated by 

DOE. 

• Florida has begun using Recovery Act weatherization funds to increase 

the capacity of local providers to weatherize homes. Florida is 

intending to implement training and internal controls to help ensure 

quality and oversight of Recovery Act spending on weatherization. 

However, as of August 31, 2009, Florida has not yet started 

weatherizing homes. 

• Recovery Act funds for weatherization have created jobs in Florida. 

State officials still have questions about reporting requirements and 

concerns about the required documentation for the Davis-Bacon Act. 

Recovery Act funding has created 109 jobs. 

Page FL-2 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $1.35 billion in Recovery Act 

funds to Florida. As of September 1, 2009, the federal government has 

obligated $1 billion, and $196,000 has been reimbursed by FHWA to the 

state for payments to contractors. 

• While some progress has been made in awarding contracts for 

statewide highway projects (25 contracts out of 45 FHWA-approved 

projects, totaling $726 million as of August 28, 2009), few contracts 

have been awarded by localities (5 contracts out of the 395 FHWAapproved contracts, totaling $1 million). According to state officials, 

unlike the state’s funds, which were required to be obligated before 

June 30, 2009, funds that were suballocated to local agencies were not 

subject to the 120-day rule. As a result, the local agencies were given 

more time to obligate funds, advertise bids, and award contracts. 

• State officials consider current processes and procedures adequate for 

highway contract solicitation and management, and the Florida 

Department of Transportation districts use consultants to assist with 

project monitoring. To report data on jobs created, the Florida 

Department of Transportation has developed an automated system, 

which was put into operation on May 29, 2009. For the months of June 

and July, the Florida Department of Transportation reported to FHWA 

that a total of 155 jobs were created as a direct result of Recovery Actfunded highway projects. 

Updated Information on 

Safeguards and 

Transparency 

• Florida continues to take steps to provide safeguards and 

transparency. State Inspectors General have provided fraud training, 

prepared agencies to implement reporting requirements, and assessed 

internal controls, among other activities. Florida’s Office of Economic 

Recovery continues to develop a database to collect Recovery Act data 

from state agencies that it will then upload to the federal database. 

While the fiscal year 2009 Single Audit is currently under way, the state 

auditor is awaiting additional federal guidance from the Office of 

Management and Budget (OMB) on Single Audits on Recovery Act 

programs. 

Page FL-3 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Florida’s fiscal condition is expected to improve slowly beginning in 

spring 2010, according to Florida’s August 2009 projections. However, 

declines in general revenues persist while expenditure pressures continue 

due to increased demands for some services, such as Medicaid, education, 

and prison construction. For example, collection of sales tax—the largest 

component of the state’s general revenue budget—are projected to fall as 

a result of reductions in consumer and business purchases for state fiscal 

year 2009-2010. Nevertheless, state estimates and national economic data 

suggest that economic conditions may improve beginning later this 

calendar year or early next year.2

 For example, the Florida legislature’s 

Office of Economic and Demographic Research reports that despite a 

weakening employment picture, falling housing prices could attract buyers 

and lead to an improvement in the economy.3

 Moreover, Florida’s fiscal 

year 2010-2011 revenue collections forecast remains positive, marking an 

end to 4 consecutive years of declining revenue. However, predicting the 

future course of the economy is uncertain, especially given the current 

degree of economic disruption. 

While Its Economy 

Remains Sluggish, 

Florida Plans Ahead 

for Funds Expiration, 

but with Concerns 

Regarding Costs of 

Recovery Act-Related 

Oversight 

State agencies are beginning preparation of their state fiscal year 2010-

2011 budget requests in light of fiscal stress while planning for when 

Recovery Act funds will no longer be available. (Florida’s fiscal year runs 

from July 1 through June 30.) For the upcoming fiscal year 2010-2011 

budget, Florida budget officials said they project using $2.5 billion in 

Recovery Act funds. For this current fiscal year, a year-end shortfall is 

currently not expected, according to an August 2009 Florida General 

Revenue Estimating Conference.4

 In our July 2009 report, we noted that 

Florida closed a $4.8 billion budget gap in the current fiscal year 2009-2010 

 

2

Although some economists have pointed to signs of economic improvement, associations 

representing states have also reported that, in general, states’ fiscal conditions historically 

lag behind any national economic recovery. 

3

The Florida Legislature, Office of Economic and Demographic Research, Florida: An 

Economic Overview (Tallahassee, Fla., Aug. 4, 2009). 

4

Florida uses the General Revenue Estimating Conference for forecasting revenues. 

Comprised of one member from each of the staffs of the Office of the Governor, the Senate, 

the House of Representatives, and the Division of Economic and Demographic Research, a 

major purpose for the conference is to provide a common ground with respect to the funds 

available for budgeting. The General Revenue Fund is Florida’s primary operating fund that 

is subject to annual allocation through the legislative process, funding programs such as 

education and human services. 

Page FL-4 GAO-09-1017SP Recovery Act
Appendix V: Florida 

General Revenue Fund in part, by using about $1.6 billion of the $5.3 

billion in Recovery Act funds.5

As part of its annual budget process, state agencies will receive 

instructions for developing long-range program plans that include 

strategies for when projected federal outlays to states and localities under 

the Recovery Act are expected to substantially decrease after 2011, 

according to state budget officials. As we reported in July, Florida has also 

planned for this “cliff effect” by increasing revenue producing initiatives—

such as a cigarette surcharge, motor vehicle fees, and court fees—that are 

expected to produce more than $2 billion in new general revenues on a 

recurring basis beginning in 2009-2010—while at the same time reducing 

state expenditures. Ultimately, Florida state officials see the current fiscal 

constraints as cyclical (short term) rather than structural (long term), so 

they believe as the economy improves, the state will be prepared for when 

Recovery Act funds will no longer be available. 

State officials said that Florida may not utilize the federal process for 

identifying administrative costs related to Recovery Act activities because 

the state has already appropriated and prescribed the use of Recovery Act 

funds for fiscal year 2009-2010 for programs and services. According to 

OMB guidance, central administrative costs incurred by state recipients in 

the management and administration of Recovery Act programs are 

allowable costs that can be recovered out of program funds as indirect 

costs to the program.6

 Florida executive branch officials said this 

challenge is due in part to audit and reporting requirements of the 

Recovery Act, even though the state did not budget some or any of the 

Recovery Act funds for administrative activities. For example, to comply 

with Recovery Act reporting requirements, the Florida Office of Economic 

 

5

Florida enacted a $66.5 billion budget for 2009-2010 before the start of its July 1 fiscal year 

and in doing so, used Recovery Act funds, withdrew some of its available reserves, cut 

spending, and raised additional sources of revenue. As we reported in July, Florida 

budgeted a total of $5.3 billion of Recovery Act funds or about 8 percent of its budget. 

Recovery Act funds used to stabilize the state’s operating budget included funds made 

available as a result of increased Federal Medical Assistance Percentage and State Fiscal 

Stabilization Fund monies. 

6

OMB guidelines state that the budgeted or estimated administrative cost amount for 

administrative or indirect costs should not be in excess of 0.5 percent of total Recovery Act 

funds received by the State. Based on OMB guidance, a state is to modify its Statewide Cost 

Allocation Plan (SWCAP) to allow for charge backs for costs associated with centralized 

services. See OMB, Memorandum M-09-18: Payments to State Grantees for 

Administrative Costs of Recovery Act Activities (May 11, 2009). 

Page FL-5 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Recovery is developing a reporting system to compile information from 

agencies and upload it to the federal system. State officials said they have 

reservations about requesting funds for oversight from already 

appropriated sums to programs. As a result, a senior official said the state 

is considering absorbing Recovery Act administrative costs within existing 

state resources rather than seeking reimbursement through the federal 

process and shifting funds from programs and services. 

The Recovery Act provides an additional $1.2 billion in funds for the 

Workforce Investment Act (WIA) Youth program, including summer 

employment. Administered by the U.S. Department of Labor (Labor), the 

WIA Youth program is designed to provide low-income in-school and outof-school youth 14 to 21 years old,7

 who have additional barriers to 

success, with services that lead to educational achievement and successful 

employment, among other goals. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

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,8

 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth program requires a summer employme

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.

Broward and 

Hillsborough 

Counties’ Summer 

Youth Programs 

Overcame Several 

Implementation 

Challenges but Do 

Not Yet Know If 

Participants Met Work 

Readiness Measures 

nt 

 

9

 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. A key 

7

An out-of-school youth is an individual who (a) is an eligible youth who is a school 

dropout; or (b) is an eligible youth who has either graduated from high school or holds a 

General Educational Development (GED) credential, but is basic skills deficient, is 

unemployed, or underemployed. 

8

H.R. Rep. No. 111-16, at 448 (2009). 

9

Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 2009). 

Page FL-6 GAO-09-1017SP Recovery Act
Appendix V: Florida 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job, (2) learn 

work readiness skills on the job, and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.10 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Florida Expects to Meet Its 

WIA Youth Enrollment 

Goal 

The state of Florida received almost $43 million for WIA youth activities 

under the Recovery Act and set a goal of serving 16,000 youth in 2009 

through its WIA summer employment activities for youth program. A 45-

member board appointed by the Governor oversees and monitors the 

administration of the state’s workforce policy, programs, and services. 

These programs are carried out by the 24 business-led Regional Workforce 

Boards and Florida’s Agency for Workforce Innovation, which operates 

the state’s workforce system. As of August 15, the Agency for Workforce 

 

10Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page FL-7 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Innovation estimates that it has expended $22.3 million or 52 percent of its 

total and in its July 31, 2009 report to Labor, said it had served 11,902 

youth. The agency attributed the lower number of reported youth placed 

to late reporting by some local programs and expects to meet its 

enrollment goal by the end of the summer program. Table 1 shows 

selected characteristics of youth in the program. 

Table 1: Selected Characteristics of Youth in Florida’s Summer Youth Program as 

of July 31, 2009 

Category Number of youth

Youth age 22 to 24 1,245

Youth age 19 to 21 3,190

Youth age 14 to 18 7,467

Total 11,902

Out-of-school youth 5,371

Source: Florida Agency for Workforce Innovation. 

According to a state Agency for Workforce Innovation official, the state 

workforce agency will collect and ensure the validity of Recovery Act data 

collected on the summer programs. The official told us that Florida did not 

delegate subrecipient quarterly reporting requirements to local workforce 

boards, and they would collect the required information using its existing 

reporting system. Once the quarterly reporting process begins in 

September, agency staff will review the submitted data remotely and will 

go onsite to the workforce boards and review case samples for data 

validation. The official also told us that the agency already has staff out in 

the field working with workforce boards to ensure the validity of the first 

quarterly reports. 

Broward and Hillsborough 

Counties Used Recovery 

Act Funds to Expand 

Summer Youth Services 

We selected two regional workforce boards—Workforce One, 

Employment Solutions (Broward County) and the Tampa Bay WorkForce 

Alliance (Hillsborough County). We evaluated their implementation of the 

Recovery Act-funded summer youth program in Florida because these 

boards are among the largest recipients of Recovery Act WIA Youth funds 

in the state and had the highest numbers of anticipated participants. In 

addition, each program represented a different geographic region of the 

state. Table 2 shows the amount of funds Hillsborough County and 

Broward County received and how much they have expended to date as of 

August 31, 2009. 

Page FL-8 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Table 2: Allocations Workforce Boards Received and Funds Expended as of August 

31, 2009 

Workforce board Funds received Funds expended

Broward County $2,362,791 $2,321,460

Hillsborough County $2,534,737 $792,076

Source: Workforce boards. 

Both Broward and Hillsborough counties took advantage of the Recovery 

Act’s extended age eligibility by operating work experience programs for 

older youth—Broward for ages 19 to 24 and Hillsborough for ages 20 to 24. 

Each county provided work-readiness training for participants covering 

soft employment skills, such as appropriate dress and showing up for 

work on time. Both used pre- and post-tests to measure learning gains by 

training participants. At the completion of their work-readiness training, 

participants were placed in a wide variety of jobs with public, private, and 

nonprofit employers.11 Neither county identified “green” jobs for youth 

placement because officials said there is currently no federal or state 

definition of what constitutes a “green” job,12 and neither county offered 

academic or occupational skills training as part of their summer youth 

programs. Broward officials told us they did not offer academic or 

occupational skills because they felt that in these economic times a 

job/work experience would be most valuable for the older youth. In 

addition to its work experience program for older youth, Hillsborough 

County is using its Recovery Act funds on a separate work-based learning 

program for younger participants.13 For this program, Hillsborough County 

enrolled 803 youth ages 17 to 19 in a 4-week Employment and Leadership 

Exploration program.14 The instruction covered business ethics and 

 

11In Broward County the types of jobs filled include library page, clerical, camp counselor 

and recreation aide, cafeteria and teacher assistant, and custodial. In Hillsborough County 

the types of jobs filled include Boys & Girls Club youth development specialist, customer 

sales and service, cashier, clerical, and hotel worker. 

12Hillsborough County also offered an optional 12-hour green training initiative to create 

awareness among participants in its work-based learning experience titled “Your Role in 

the Green Economy.” A national certification is issued to participants who pass the test at 

the conclusion of the program. 

13Broward County is using its general revenues to fund its younger summer youth program. 

14According to Hillsborough officials, program administration was competitively contracted 

out to nine public or nonprofit groups. Officials told us that contractors are paid based on 

documented deliverables such as the pre- and post-tests, trainee skill assessments, and 

program completion. 

Page FL-9 GAO-09-1017SP Recovery Act
Appendix V: Florida 

business simulation models during the first 2 weeks, with pre- and posttests administered to measure learning gains. In the third and fourth 

weeks, participants formed teams and applied the skills learned to create a 

simulated online magazine of their choice. Participants also completed a 

skills assessment and participated in one onsite visit to an employer. (See 

table 3 for more information on participants and placements.) 

Table 3: Selected Data on Broward County’s and Hillsborough County’s Summer Youth Programs 

Broward County Hillsborough County

Total participants 724 1049

Employment and Leadership Exploration program N/A 803

Work Experience program 724 246

Type of participants 

Out-of-school youth 722 565

Youth 22-24 years old 152 97

Percentage of work experience jobs available by sectora

Public 52 14

Private 17 66

Nonprofit 31 21

Source: Workforce boards. 

a

Numbers may not total to 100 percent due to rounding. 

Broward and Hillsborough 

Counties Were Both 

Challenged by Recruiting 

Participants under Tight 

Time Frames and Other 

Factors 

Broward County set a goal of 900 participants for its work experience 

program and faced recruiting challenges, exacerbated by time constraints. 

Youth were initially unresponsive to Broward’s offer to pay $7.21 per hour 

to participants. A Broward official told us that the pay was not competitive 

with local businesses. However, after the Workforce Board raised the 

hourly wage to $9.00, more than 3,000 applications were submitted by the 

deadline, forcing the county to reduce the goal for the number of 

participants from 900 to 724 because of the higher wage. The response was 

so overwhelming during the final 2 weeks of the application period (which 

ran from March 3 to May 29) that officials said they worked weekends to 

meet their time frames. 

Determining participant eligibility and, at least initially, paying participants 

were also problems cited by Broward officials. Officials said youth often 

had difficulty producing eligibility information, for example, income 

information and proof of Selective Service registration, and had to return 

several times to produce the necessary paperwork. Broward officials said 

Page FL-10 GAO-09-1017SP Recovery Act
Appendix V: Florida 

if they operate a summer youth program again, they would use One-Stop 

staff to oversee the eligibility process. In addition to determining 

eligibility, some employers required youth background checks and some 

checks revealed multiple offenses, including theft and fraud, making the 

youth hard to place. 

Broward County also initially had issues paying participants. The county 

wanted to use direct deposit for payment and encouraged participants to 

open accounts at a local credit union or bank. However, many youth 

wanted to receive their pay via a popular pre-paid debit card, and there 

were initial problems getting paychecks credited to those cards. In other 

instances, banks kept portions of paychecks that were direct deposited 

into overdrawn accounts to recover the overdrawn amounts. 

Finally, for Broward County, there were some issues with employers when 

participants reported on the first scheduled day of work. Some employers 

pulled out of the program,15 others asked for more employees than they 

needed and then sent some back to the workforce board, and others used 

the first work day to interview participants rather then put them to work. 

As a result, Broward officials had to find new work assignments for some 

participants. 

Hillsborough County greatly exceeded its recruiting goals for its work 

experience program, but officials said they struggled with the 60-day time 

frame they had from the time Labor issued its program guidance to the 

time they launched their programs. Hillsborough set a goal of 60 to 80 

participants for its work experience program and 1,000 participants for its 

work-based learning program. Initially, Hillsborough officials anticipated a 

rush of applications but no rush materialized. To boost enrollment, 

officials began advertising on radio, television news programs, movie 

theaters, and many other places. As a result, they enrolled 803 participants 

in the work-based learning program and enrolled 246 in the work 

experience program, greatly exceeding their 80-participant goal. The 

limited time to get the program up and running was cited by officials as 

one of their biggest challenges. 

 

15Officials told us that some employers pulled out of the program because they did not like 

the way the youth presented themselves the first day, they did not think the youth had the 

skills to perform the required work, or the employer’s business had taken a turn for the 

worse since they first requested the youth and they no longer needed the help. 

Page FL-11 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Hillsborough County did not report any issues in gathering eligibility 

information and in some cases used wage information from the 

Unemployment Insurance system to verify income. The county found that 

some of the program participants failed employer and other eligibility 

requirements: Some employers required background checks, and all work 

experience participants were screened for drugs. Of the 246 participants 

placed in work experience jobs by Hillsborough, 15 were terminated 

because they failed the drug test. In contrast to Broward, Hillsborough 

County didn’t experience any problems using pre-paid debit cards or 

paychecks, primarily for older participants. Hillsborough County officials 

took steps to avoid problems with employers pulling out of the program by 

pre-screening youth for level of education and work experience, and then 

allowing employers to interview participants at two job fairs in advance of 

start dates and make the decisions on who they wanted to hire. 

Work-Site Monitoring of 

Older Youth Was More 

Extensive in Broward 

County than in 

Hillsborough County 

In Broward County, workforce officials said WIA program advisors visit 

each of the 280 work sites regularly. Officials said 26 WIA program 

advisors visit each site at least twice a week to speak with supervisors, 

obtain time sheets, and provide feedback to participants. The WIA 

program advisors document their site visit in notes placed in each 

participant’s case file. Workforce officials said they also tasked work-site 

supervisors with conducting job performance evaluations for each 

participant after one week of work using a standardized evaluation form to 

rate the participant. Supervisors can also provide comments on the 

individual’s strengths and weaknesses.16 The performance evaluation 

results are shared with the participant. Officials told us that a second 

performance evaluation will be administered 6 weeks into the program, 

and both evaluations, like the pre- and post-tests, would be used to assess 

any gains in work-readiness skills during the summer youth programprovided employment. 

A Hillsborough official also told us they developed a work-site monitoring 

plan and instituted it in mid August after receiving feedback from Labor in 

late July.17 The Hillsborough County official said that business consultants 

are to visit each of the 52 work sites once during the two and one-half 

 

16The performance evaluation form is signed by the supervisor, the summer youth program 

participant, and the WIA summer youth program advisor. 

17Hillsborough’s summer youth program for 20-24 year olds started July 14 and will end 

September 30. 

Page FL-12 GAO-09-1017SP Recovery Act
Appendix V: Florida 

month period. According to Hillsborough’s monitoring plan, consultants 

are to assess whether the site meets health and safety standards, 

determine if participants’ job descriptions match work assigned, and elicit 

from the work-site supervisors their experience with time- or recordkeeping processes and if any type of performance evaluation will be 

completed for the employee. In addition, the monitoring plan calls for the 

WIA Youth program staff to interview one participant at each work site. 

Interview topics to be covered include whether the supervisor provides 

feedback, if someone is in charge when the supervisor is not around, and 

whether the participant signs in and out every day. A Hillsborough official 

told us that youth have an opportunity to address work-site issues when 

they come to the workforce board to collect their pay checks every 2 

weeks. Both youth and employers are expected to contact the WIA 

program staff when issues arise. A monitoring plan summary shows that 

work-site visits were conducted between August 1 and August 31, 2009. 

For its work-based learning program for 17-19 year olds, the Hillsborough 

County workforce board is monitoring the performance of contractors 

who administer the program. According to officials, monitoring began with 

Hillsborough County workforce officials from procurement, 

programmatic, and WIA Youth program departments conducting a review 

of 13 competing proposals. Officials told us a thorough on-site inspection 

was conducted prior to awarding 9 contracts.18 We reviewed 2 of the 9 

work-based learning site contracts, discussed the contracts with 

workforce board officials, and interviewed officials at the two 

corresponding sites. According to workforce board officials, the contracts 

we reviewed were cost-reimbursement contracts with a fixed-price 

agreement for a maximum amount of deliverables. Each contract 

contained a detailed description of services to be provided by the 

contractor and a list of deliverables for which supporting documentation 

was required for payment. According to Hillsborough County workforce 

officials, ongoing monitoring of contractors consists of two WIA career 

managers, under the direction of a WIA supervisor, who visit the workbased learning sites twice a week to observe, examine, and collect 

documentation, such as time sheets. WIA managers are responsible for 

collecting these documents to verify contractor performance for 

compensation purposes and to assess the work readiness of the youth 

participants. 

 

18There were a total of 10 work-based learning sites, but only a total of 9 contracts were 

awarded, since one learning site was a Hillsborough workforce facility. 

Page FL-13 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Broward County and Hillsborough County use different approaches to 

measure youths’ gains in work readiness. Within the restrictions set by 

federal agency guidance, local boards may determine the methodology 

used to measure work readiness gains as required for Recovery Act funds. 

Although both counties use pre- and post-tests, each county’s test differed 

in length and content. Broward used a 30-question multiple choice and 

true/false test; Hillsborough used a 10-question multiple choice test.19

Hillsborough’s test focused on what to do in an interview; Broward’s test 

focused on work-related skills and behaviors. As mentioned previously, 

Broward also uses performance evaluations at the work site to assess 

participants’ work readiness. Although both counties have administered 

their pre- and post-tests and Broward has conducted its performance 

evaluations, neither have completed their assessments of work-readiness 

gains. Officials said they will not have results until the youth complete 

their programs, the latest being in September 2009. 

The Counties Took 

Different Approaches in 

Measuring Gains in Work 

Readiness of Youth 

Although data on gains in work readiness is not yet available, work-based 

learning supervisors and employers we interviewed said summer youth 

programs have been a success. In Broward County, we spoke with 

employers and youth at two different work sites and found they were very 

pleased with the program. At one work site, the employer told us he is 

planning to offer positions to 7 of the 17 summer youth program 

participants when their summer program ends. At the second work site, 

one participant shared a slide presentation of a project plan and campaign 

she developed to help the company “go green.” The participant had 

presented her plan to the CEO, and her employment had been extended 2 

weeks so she could assist with the implementation of her project. In 

addition, we also spoke with two contract work-based learning site 

supervisors in Hillsborough County, who said the work-based learning 

experience, introduced youth to business principals and ethics, 

encouraged teamwork, and broadened their horizons. Furthermore, the 20- 

to 24-year old youth we spoke to said they felt the job fair process used to 

match employers and participants was very well organized, that they were 

able to learn valuable new skills in their work experience jobs, and would 

participate again if the program is offered next summer. 

 

19In Hillsborough County younger youth were given a Junior Achievement pre- and posttest. 

Page FL-14 GAO-09-1017SP Recovery Act
Appendix V: Florida 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or air 

conditioning. 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. 

Florida Is Funding 

Local Service 

Providers and 

Program 

Infrastructure, but 

Has Not Yet Started 

Weatherizing Homes 

As of September 14, 2009, DOE had approved the weatherization plans of 

all but two of the states, the District of Columbia, the territories, and 

Indian tribes—including all 16 states and the District of Columbia in our 

review. DOE has provided to the states almost $2.3 billion of the $5 billion 

in weatherization funding under the Recovery Act. Use of the Recovery 

Act weatherization funds is subject to Section 1606 of the act, which 

requires all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing 

wage, including fringe benefits, as determined under the Davis-Bacon 

Act.20 Because the Davis-Bacon Act had not previously applied to 

weatherization, Labor had not established a prevailing wage rate for 

weatherization work. In 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 difference if Labor established a higher local prevailing 

wage rate for weatherization activities. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.21 Labor 

completed establishing prevailing wage rates in all of the 50 states and the 

District of Columbia by September 3, 2009. As of September 4, 2009, Labor 

had posted wage rates for 44 states, including Florida. 

 

20The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

21The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page FL-15 GAO-09-1017SP Recovery Act
Appendix V: Florida 

DOE has allocated about $176 million over 3 years to Florida for the 

Recovery Act Weatherization Assistance Program. On June 18, 2009, DOE 

approved Florida’s state plan for the program for 2009-2012 and had 

provided a total of about $88 million, or half the state’s allocation. The 

state’s Department of Community Affairs (DCA) is responsible for 

administering the program. As stated in the state plan, DCA’s goals include 

weatherizing at least 19,090 dwellings, which according to a DCA official 

could result in as much as $5.7 million in overall energy savings annually. 

Of the $176 million the state will receive, the planned allocation includes 

about $137 million for weatherization of homes and about $30 million for 

training and technical assistance. 

DCA awards contracts to local service providers, which include nonprofit 

organizations or local governments, to assist low-income households by 

making long-term energy efficiency improvements to their residences, 

including measures such as installing insulation, sealing leaks around 

doors and windows, or modernizing heating equipment and air circulating 

fans. Once a local service provider determines that a household is eligible 

for the program, it sends an inspector to the home to determine if it is 

suitable for improvements and to perform an energy audit to identify 

appropriate improvements.22 Once the inspector has completed the home 

inspection and energy audit, they prepare a work order that lists the 

improvements to be made to the home. The local service providers may 

employ either in-house construction crews or use contractors or a 

combination of both to make the home improvements. When completed, 

the improvements are checked by an inspector. 

Florida Has Begun Using 

Recovery Act 

Weatherization Funds to 

Increase the Capacity of 

Local Providers to 

Weatherize Homes 

As of August 31, 2009, DCA had obligated about $4.2 million and expended 

about $1.1 million of the initial $88 million provided by DOE for the 

Weatherization Assistance Program on expenses such as payroll for DCA 

staff, contracts with local service providers to expand their capacity to 

weatherize homes, training and travel for new DCA and local provider 

staff, and supplies. 

DCA has obligated about $3.6 million of the $4.2 million to award initial 

contracts to 26 of its 29 current local service providers, and used about $1 

 

22Homes that are in disrepair, such as those needing a new roof, are considered unsuitable 

for improvements because the poor condition of the home would result in damage to the 

improvements or render them ineffective. 

Page FL-16 GAO-09-1017SP Recovery Act
Appendix V: Florida 

million of the $1.1 million expended for these same contracts. These local 

service providers can use the funds for nonproduction weatherization 

operating costs, such as planning, hiring staff, sending inspectors to 

training, purchasing equipment, obtaining liability insurance, and verifying 

income eligibility for clients on their waiting lists for weatherization. The 

funds may also be used to conduct the home inspections and energy 

audits. DCA officials explained that once a local service provider meets 

performance measures detailed in the DCA contract, DCA will award the 

providers a final contract to weatherize homes. DCA officials said they 

expect to award these final contracts by early September 2009.23

Of the $4.2 million obligated, $498,750 is provided for training home 

inspectors. To meet increased production goals—weatherizing an 

additional 19,090 homes over the next 3 years—the number of inspectors 

employed by local service providers could significantly increase from 39 to 

more than 100, according to DCA officials. To address the need for 

training, DCA awarded a contract to the University of Central Florida 

Solar Energy Center to develop and provide weatherization inspector 

training. 

Florida Is Implementing 

Training and Internal 

Controls to Help Ensure 

Quality and Oversight of 

Recovery Act Spending 

DCA officials said they plan to increase oversight and monitoring of 

Recovery Act weatherization funds by increasing DCA staff and by 

performing more audits of local service providers. They plan to award 

contracts for field inspectors, fiscal monitors, and monitoring and 

technical assistance for compliance with Davis-Bacon Act requirements. 

Local service providers that administer the weatherization program have 

inspectors who perform home inspections to determine needed 

weatherization services and afterward, to determine if work is completed. 

DCA awarded a contract to the University of Central Florida Solar Energy 

Center to provide 1 week of training and field testing for up to 150 

inspectors and new hires that will include an introduction to 

weatherization, health and safety issues, building diagnostics and guidance 

on weatherizing homes. A DCA official told us that as of August 24, 2009, 

two training sessions had been held at the Solar Energy Center with 34 

attendees, including at least one home inspector from each of the 28 local 

service providers awarded contracts by DCA. According to DCA officials, 

 

23According to DCA officials, as of August 17, 2009, DCA had delivered the contracts to the 

local service providers. At least three of the local service providers had met the 

benchmarks in their capacity contracts. As of September 4, 2009, DCA had obligated funds 

for one of the three local service providers, which can begin weatherizing homes. 

Page FL-17 GAO-09-1017SP Recovery Act
Appendix V: Florida 

two additional sessions have been scheduled to begin late August and 

early September. 

To add an extra layer of home inspection over and above what is done by 

local service providers and to conduct compliance monitoring of these 

providers, a DCA official said the agency will hire contractors. DCA’s goal 

is to have contractor-provided field inspectors in place in all 67 Florida 

counties. These contractors will ensure that at least 50 percent of the 

weatherized homes funded by the Recovery Act are inspected by DCA. 

DOE guidelines require DCA to inspect at least 5 percent of all 

weatherized homes. For this statewide inspection program, DCA issued a 

request for proposals on July 13, 2009. Proposals were due to DCA by 

August 7, 2009, and the anticipated award date is September 11, 2009. In 

addition to conducting field inspections, these contractors are to review 

100 percent of local service providers’ files to ensure they contain the 

correct documentary support for each home weatherization project, 

including such paperwork as invoices, building permits, and resident 

income verification. Monitoring of contractors will be done by in-house 

DCA staff, which DCA plans to hire. In addition to the contractor-led 

inspections, DCA staff will inspect other homes to achieve its goal of 

having 60 percent of the homes weatherized with Recovery Act funds 

inspected, according to a DCA official. 

Lastly, DCA plans to issue requests for proposals for contractors who will 

provide local service providers with 

• fiscal monitoring and technical assistance on implementing program 

procedures, establishing and maintaining files, developing internal 

controls and accounting protocols, correcting problems reported by 

the Inspector General and independent auditors; 

• oversight, training, and technical assistance on the Davis-Bacon Act 

wage and reporting requirements; and 

• procurement training because procurement for services and goods is 

done locally, not statewide. 

Prior to the Recovery Act, most local service providers in Florida did not 

receive enough federal weatherization funding to be subject to the Single 

Audit Act / A-133 requirements: each provider would have had to expend 

at least $500,000 in federal funding. With the allocation of additional 

weatherization funding through the Recovery Act, all local service 

providers in Florida will meet the funding threshold and be subject to 

single audit. The DCA Inspector General told us her office has allocated 

600 hours to auditing Recovery Act weatherization projects during the 

Page FL-18 GAO-09-1017SP Recovery Act
Appendix V: Florida 

2009-2010 state fiscal year. According to the Inspector General, a risk 

assessment was used to develop the audit plan, which includes evaluating 

internal processes and implementation of Recovery Act guidelines for 

accountability and transparency. The Inspector General said these audits 

will cover the DCA program office, DCA statewide contractors, and local 

service providers. The Inspector General plans to enter into a contract 

with an individual who will work full time on Recovery Act Weatherization 

Assistance Program audits and reallocate another existing employee’s 

work half time to the audits. 

In June 2009, the Inspector General issued a weatherization program audit 

report that identified internal control weaknesses. Although the report did 

not focus on Recovery Act funds, the Inspector General told us the 

findings are still applicable. For example, one of the three local service 

providers reviewed could not provide complete and accurate supporting 

documentation for incurred expenses reimbursed by DCA, and submitted 

final status reports prior to completion of work. The Inspector General 

said DCA’s plan to use a contractor to implement a statewide inspection 

plan for Recovery Act weatherization projects should correct this control 

weakness. DCA considers its principal risk for Recovery Act spending to 

be poor quality work. The risk is mitigated by the fact that 28 of the 29 

local service providers have previous experience managing weatherization 

of homes—some for as many as 30 years. 

Recovery Act Funds for 

Weatherization have 

Created Jobs in Florida, 

but State Officials Still 

Have Questions about 

Reporting Requirements 

and Compliance with the 

Davis-Bacon Act 

DCA has started collecting performance measurement data on the number 

of jobs created and retained with Recovery Act funds for weatherization. 

DCA officials told us that as of August 27, 2009, 109 jobs have been created 

or retained in Florida as a result of the Recovery Act weatherization funds. 

DCA will also measure energy savings, and plans to track kilowatts used 

before and after weatherization, primarily with information from utility 

companies. DCA officials said they are using kilowatts used versus dollars 

saved because the cost of a unit of energy can vary over time and location. 

DCA officials said measuring actual kilowatts saved will be more accurate 

than DOE’s methodology for calculating energy savings, which looks at 

total cost savings from all the energy efficiency improvements that could 

be made to a home versus the actual changes made to the home. 

DCA officials stated that they will be reporting the results of expenditures 

of Recovery Act Weatherization Assistance Program funds to both DOE 

and OMB as required. DCA is responsible for reporting on performance 

measures to DOE, including jobs created and retained, documentation to 

Page FL-19 GAO-09-1017SP Recovery Act
Appendix V: Florida 

support compliance with the Davis-Bacon Act, number of homes 

weatherized, and energy savings achieved. Currently, DCA reports 

quarterly to DOE on the non-Recovery Act-funded Weatherization 

Assistance Program. DCA officials stated that they are still waiting for final 

DOE guidance, but anticipated that Recovery Act reporting will be 

monthly. DCA will also report as required by OMB on jobs created and 

retained.24 DCA officials said they will enter the information in the state’s 

new automated Web-based Recovery Act reporting system. Currently, this 

new reporting system is being populated and tested. 

To meet DOE and OMB reporting requirements, DCA plans to collect 

performance measurement data from local service providers using its 

Web-based eGrants system, an existing grant administration tool. DCA 

program staff will monitor the system to ensure local service providers 

report by the 15th of each month. In addition, DCA plans to validate data 

submitted before reporting it to the DOE and the state Web-based 

Recovery Act reporting system by using planned statewide contracts for 

financial monitoring and field inspections. These contractors will validate 

data submitted to DCA on information such as number of jobs created and 

retained, number of homes weatherized, and number of individuals served 

by the units weatherized (e.g., size of family), according to DCA officials.25

The DCA Inspector General will also be responsible for validating job data 

submitted by DCA to the state’s Recovery Act Web-based reporting 

system. 

DCA officials expressed concerns about the application of the DavisBacon Act to Recovery Act weatherization projects, which was not 

applicable to non-Recovery Act weatherization projects.26 They have 

questions about increased documentation that local service providers may 

need to collect to support the certified payroll and prevailing wages and 

benefits information required by Labor. According to DCA officials, many 

 

24According to state officials, in the state of Florida as defined by OMB, DCA is considered 

the prime recipient and the local service providers and statewide contractors are 

considered the subrecipients of Recovery Act weatherization funds. 

25According to DCA officials, they will obtain information directly from the utility 

companies on the energy savings for homes weatherized with Recovery Act funds. 

26The Recovery Act requires all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing wages as 

determined under the Davis-Bacon Act. Recovery Act, div. A, title XVI, §1606. Under the 

Davis-Bacon Act, Labor determines the prevailing wage for projects of a similar character 

in the locality. 40 U.S.C. §§ 3142-3148. 

Page FL-20 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Florida contractors, particularly smaller firms, have shared concerns 

about the documentation and administrative tasks they must perform to be 

in compliance. Officials told us that the DCA contracts awarded to local 

service providers will stipulate that all laborers and mechanics employed 

by contractors and subcontractors for Recovery Act-funded 

weatherization work be paid not less than the prevailing wage for their 

skill set based on the county where the project is located and as listed on 

Labor’s Web site.27 DCA officials said current prevailing wages for 

construction workers in Florida are significantly above minimum wage, 

and they believe the results of the new Labor weatherization wage and 

benefit survey for weatherization construction workers will mirror those 

rates. On September 2, 2009, Labor published the new wage and benefit 

survey results for weatherization workers in Florida. The wages averaged 

about $14 to $15 per hour, while the state’s hourly minimum wage rate is 

$7.25. DCA officials received but did not complete the Labor survey on 

wages because the survey was for local service providers to complete. 

DCA officials also said they do not have information on which 

organizations or businesses in the state of Florida were surveyed other 

than their local service providers. As of August 28, 2009, 13 of the 28 local 

service providers had provided DCA with a copy of the completed survey 

they retuned to Labor. 

DCA has not issued guidance to local service providers on final Recovery 

Act reporting requirements because officials said they are waiting for final 

guidance from DOE and OMB. The DCA officials said final contracts 

awarded to local service providers for actual weatherization of homes will 

include a provision stating that the contracts are subject to change in 

reporting requirements for Davis-Bacon as guidance is received from OMB 

and DOE. A local service provider we interviewed stated that DCA has 

made them aware that final reporting requirements, including those 

related to the Davis-Bacon Act, are subject to change until guidance is 

finalized by OMB and DOE. 

 

27www.dol.gov/esa/whd/recovery/dbsurvey/weather.htm. 

Page FL-21 GAO-09-1017SP Recovery Act
Appendix V: Florida 

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the FederalAid 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, which include ensuring the project 

meets all environmental requirements associated with the National 

Environmental Policy Act (NEPA), paying a prevailing wage in accordance 

with federal Davis-Bacon Act requirements, complying with goals to 

ensure disadvantaged businesses are not discriminated against in the 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America 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. 

While Some Progress 

Has Been Made in 

Awarding Statewide 

Highway Contracts, 

Few Local Contracts 

Have Been Awarded; 

Yet, State Officials 

Said Monitoring and 

Reporting Processes 

Are in Place 

The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $1.35 billion in Recovery Act funds to 

Florida. As of September 1, 2009, the federal government has obligated28 $1 

billion and $196,000 has been reimbursed29 by the FHWA. The state, in 

turn, allocated $902 million—67 percent—to statewide projects; and $404 

million30—30 percent—was suballocated to local agencies, which includes, 

but is not limited to, a county, an incorporated municipality, or a 

metropolitan planning organization (MPO) based on population;31 and the 

remaining $40 million—3 percent—to local highway enhancement 

projects, such as sidewalk construction. According to the Florida 

 

28For the Highway Infrastructure Investment Program, the U.S. DOT has interpreted the 

term obligation of funds to mean the federal government’s contractual commitment to pay 

for the federal share of the project. This commitment occurs at the time the federal 

government signs a project agreement. 

29States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

30Of the $404 million allocated to local agencies, the federal government has obligated $270 

million and $81,400 has been reimbursed by the FHWA. 

31MPOs, federally mandated regional organizations, representing local governments and 

working in coordination with state departments of transportation, 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. 

Page FL-22 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Department of Transportation (FDOT), FHWA has approved 519 Recovery 

Act-funded projects proposed by Florida, and as of August 28, 2009, 25 of 

45 statewide highway construction contracts with a total value of $726 

million had been awarded.32 In addition, as of September 1, 2009, 5 out of 

395 local projects have been awarded contracts with a total value of $1 

million. 

Almost 40 percent of Recovery Act highway obligations for Florida have 

been for pavement widening projects. Specifically, $401 million of the $1 

billion obligated for Florida as of September 1, 2009, is being used for 

highway widening projects that will add capacity to existing highways and 

interstates. Figure 1 shows obligations by the types of road and bridge 

improvements being made. 

 

32The state dedicated over 67 percent or $902 million of its $1.35 billion in apportioned 

Recovery Act funds to these projects. 

Page FL-23 GAO-09-1017SP Recovery Act
Appendix V: Florida 

Figure 1: Highway Obligations for Florida by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($54.8 million)

New bridge construction ($89.6 million)

Other ($165.9 million)

Pavement widening ($401.1 million)

New road construction ($116.4 million)

Pavement improvement ($173.2 million)

40%

17%

12%

9%

5%

17%

Source: GAO analysis of FHWA data.

Pavement projects total (69 percent, $690.7 million)

Bridge projects total (14 percent, $144.3 million)

Other (17 percent, $165.9 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

Florida’s Focus on 

Capacity May Explain Rate 

of Progress in Awarding 

Contracts 

In an August 6, 2009, letter to the Governor of Florida, the Chairman of the 

U.S. House of Representative’s Committee on Transportation and 

Infrastructure expressed concern about Florida’s progress in spending the 

transportation funding provided by the Recovery Act for transportation 

projects. In their joint response to the Chairman, the FDOT Secretary and 

Special Advisor to the Governor noted that Florida selected projects with 

the greatest economic impact, such as increasing road capacity, as a way 

to explain the pace of obligations. (Even though Florida was among the 

last to begin seeking obligation of Recovery Act transportation funds, it 

was one of the first states to meet the act’s requirement to obligate 50 

percent of the apportioned funds before the June 30, 2009 deadline.) In 

addition, state officials said because most of the statewide projects are 

large in scale and involve federal-aid roadways, they face more federal 

requirements relating to environmental issues and acquisition of rights of 

way and thus require more time before bids can be requested and 

contracts can be awarded. For example, they noted that many other states 

Page FL-24 GAO-09-1017SP Recovery Act
Appendix V: Florida 

are using Recovery Act money to resurface roads—less complicated 

projects to initiate. In Florida, officials said design drawings and 

environmental impact studies may need updating before a detailed scope 

of work can be prepared for requests for proposals (RFP), thus delaying 

the bid advertisement process. In addition, new construction requires 

more preparation onsite. For example, in Nassau County, Florida, a 

projected $26 million Recovery Act project will add two lanes to provide 

four 12-foot-wide travel lanes to State Road 200, a primary commuter and 

hurricane evacuation route. However, starting the project will require 

phased construction including temporary pavement and median 

construction for business and residential access. In Okaloosa County, 

Florida, state officials said utility companies must relocate utility and gas 

lines and crews must remove trees from rights of way before construction 

can begin on a projected $25 million project to widen sections of State 

Roads 85 and 123. FDOT officials said that even though many of these 

major projects are ongoing, they required the funding provided by the 

Recovery Act to proceed with the next phase in design, RFPs, and on-site 

preparation. 

While large-scale, statewide projects require more time, FDOT officials 

said the state had little need to invest Recovery Act funds in more quickly 

bid paving or bridge projects because Florida’s roads were in good 

condition. According to the officials, 2 percent of highways eligible for 

federal-aid were reported in poor condition and less than 1 percent of 

bridges were categorized as in need of critical repairs. State officials said 

Recovery Act money is better invested in increasing road capacity and 

improving traffic flow. For example, the $26 million Recovery Act funded 

construction project in Nassau County between Callahan and Fernandina 

Beach should provide about 6 miles of four travel lanes, 4-foot wide 

bicycle lanes, and a 5-foot-wide sidewalk on each side of the road in the 

urban section. The improvements will facilitate hurricane evacuation and 

provide an alternative route for tourists and truck traffic traveling between 

Interstates 10 and 95, officials said, as well as a connector between east 

and west Nassau County. 

Officials said that at the local level, many of the contracts have not been 

awarded because localities were given more time to bid the projects. 

Under the act, states are required to ensure that all apportioned funds—

including suballocated funds—are obligated within 1 year. Fifty percent of 

the funds apportioned to the state had to be obligated within 120 days of 

the apportionment (i.e., before June 30, 2009). However, unlike the states’ 

funds, the funds that were suballocated to local agencies were not 

required to meet the 120-day rule. As a result, the local agencies were 

Page FL-25 GAO-09-1017SP Recovery Act
Appendix V: Florida 

given more time to obtain approval of grant agreements, advertise bids, 

and award contracts. FDOT officials said their local agency program 

administrators are working closely with local agencies to provide 

assistance in bid advertisement and contract award processes. However, 

state officials emphasized that the local agencies are responsible for 

advertising and awarding contracts for the projects. 

State Officials Consider 

Current Processes and 

Procedures Adequate for 

Highway Contract 

Solicitation and 

Management 

FDOT is a decentralized state agency, and many of its contract-monitoring 

functions are performed by its seven district offices and Florida’s Turnpike 

Enterprise.33 To obtain an understanding of Florida’s highway contracting 

procedures and processes, we selected two statewide contracts that were 

awarded as of July 20, 2009, to review—a $25 million contract managed by 

the Chipley FDOT District Office in Washington County and a $26 million 

contract managed by the Lake City FDOT District Office in Columbia 

County. According to FDOT officials, controls and oversight of the two 

projects included ensuring that 

• contractors who submitted bids met prequalification requirements, 

which included assessment of contractor’s ability, prior work history, 

financial capability, and record checks for debarment and suspension, 

• contracts were awarded on a fixed-price and competitive basis, 

• contract requirements were linked to Recovery Act objectives, and 

• trained personnel were in place when the contracts were awarded. 

According to state officials, Florida requires all contractors to meet 

specific qualifications before bidding on state construction projects 

costing in excess of $250,000. Officials explained that the prequalification 

process saves time during bid reviews by establishing contractor 

competency and adequate financial resources to perform the work while 

awaiting reimbursement from the FDOT. State officials said Florida 

advertised both projects for 60 days and received nine bids total; both 

contracts were awarded at 50 percent less than estimated project bid 

amounts. In addition, in both instances, the contracts were awarded to the 

lowest responsive bid. Lastly, both contracts contained specific provisions 

for contractor compliance with Recovery Act reporting requirements. 

 

33FDOT District Offices and the Florida Turnpike Enterprise are located in Bartow (Polk 

County), Lake City (Columbia County), Chipley (Washington County), Fort Lauderdale 

(Broward County), Deland (Volusia County), Miami (Miami-Dade), Tampa (Hillsborough 

County), and Ocoee (Orange County), Florida. 

Page FL-26 GAO-09-1017SP Recovery Act
Appendix V: Florida 

While district offices typically have responsibility for managing highway 

construction projects from start to completion, FDOT officials said private 

consultants are used to assist. Chipley and Lake City district offices have 

contracted with private consultants and other companies to assist in 

overseeing the Recovery Act-funded projects reviewed here. According to 

FDOT officials, consultants will perform about 80 percent of daily project 

management duties for the two district offices. Consultants will provide 

routine monitoring and inspection of the highway projects to ensure 

compliance with the state’s quality standards and with specific 

performance requirements in the construction contract. Within the district 

offices, project managers will perform daily reviews of the work of the 

consultants to ensure that they are also in compliance with the terms of its 

contracts and conducting adequate inspections of the contractors’ work. 

For example, according to state officials in the Lake City District Office, 

project managers should spend about 20 percent of their time providing 

oversight of the consultants, and the office has adequate resources to 

manage this workload. 

FDOT Districts Use 

Consultants to Assist with 

Project Monitoring 

FDOT Developed 

Automated System to 

Report Data on Jobs 

Created 

In addition to other reporting requirements, the Recovery Act requires 

states to report on the number of direct jobs created or sustained, indirect 

jobs (to the extent possible), and total increase in employment since the 

act. The FDOT Office of Inspector General is responsible for ensuring 

compliance with the act’s reporting requirements, and has developed an 

automated system—which was placed into operation on May 29, 2009—

that captures and reports by contract the total number of employees, 

hours worked, and contractor’s payroll amounts. For the months of June 

and July, the FDOT reported to FHWA that a total of 155 jobs were created 

as a direct result of Recovery Act-funded highway projects. FDOT officials 

stated FHWA will report data on the number of indirect jobs that were 

created. FDOT officials said they will also enter the information in the 

state’s new automated Web-based Recovery Act reporting system. 

Florida’s Inspectors General reported taking a number of actions to 

provide oversight of Recovery Act funds. These included (1) providing 

fraud training; (2) reviewing reporting requirements, providing briefings, 

and monitoring agencies’ progress toward implementation; (3) developing 

or modifying databases for reporting and planning to ensure data quality; 

(4) reviewing whether respective agencies had appropriate internal 

controls in place for the use of Recovery Act funds; (5) carrying out 

reviews of contracts and files of authorized projects; and (6) allocating 

staff and/or including oversight of Recovery Act funds in their work plans. 

Inspectors General 

Continue to Take 

Steps to Provide 

Oversight of Recovery 

Act Funds 

Page FL-27 GAO-09-1017SP Recovery Act
Appendix V: Florida 

For example, as a partner in one effort, the Office of the Chief Inspector 

General helped train 459 government auditors, investigators, Inspectors 

General, and procurement employees on detecting fraud as of September 

9, 2009. The Florida Department of Law Enforcement (FDLE) reviewed all 

Recovery Act reporting requirements and helped modify the agency’s data 

system to capture required Recovery Act data. FDLE also assigned an 

auditor to provide independent oversight and monitoring of Recovery Act 

funding and added this oversight to its work plan. At the Agency for 

Workforce Innovation, the Inspector General initiated an internal audit of 

Recovery Act monitoring by the agency’s program areas. And last, the 

Office of the Inspector General at the Florida Department of 

Transportation conducted a post-authorization file review of Recovery Act 

funded transportation projects in a number of the state’s transportation 

districts. 

The Florida Office of Economic Recovery has provided agencies with 

guidance on reporting requirements. It has done this through a series of 

conference calls and a memo released in early September, which outlines 

the basic requirements, plans, and time lines for agencies to meet the 

requirements of the Recovery Act. According to the head of the office, the 

recovery czar, Florida is waiting to finalize its guidance because officials 

want to make certain they fully understand the federal approach, which 

they believe has been shifting. State staff have broadly participated in the 

OMB Webinars.34

Florida Has Efforts 

Under Way to Meet 

Recovery Act 

Reporting 

Requirements 

Agencies receiving Recovery Act funds will compile the information 

required for Recovery Act reporting. Florida is developing a reporting 

system which will gather this information and upload it to the federal 

system. Each agency will have the option to delegate data entry to 

subrecipients or to enter Recovery Act information for them. 

Subrecipients will be required to use the state system for funds where the 

recipient is a state agency. Entities that are not state agencies but are 

recipients of Recovery Act funds directly from a federal agency will not 

report to the state system but directly to the federal system. According to 

the Recovery Czar, the state has begun gathering identifying information 

such as award numbers and loading it into the database that will comprise 

the initial data load of the state reporting system. The Recovery Czar said 

 

34Seven Webinars in total covered such topics as how to calculate and report job creation 

estimates and reporting from the perspective of the subrecipient. 

Page FL-28 GAO-09-1017SP Recovery Act
Appendix V: Florida 

his office has identified all 15 state agencies which are Recovery Act 

recipients subject to reporting requirements; loaded subrecipient 

information for 12 of the 15; and will be loading the others in the near 

future. 

Officials have developed a draft data quality protocol and plan to have 

staff review the information in the state reporting system. At the agency 

level, the protocols require agencies to clearly communicate reporting 

requirements to subrecipients, including the data elements and the 

mechanics of the reporting process, and to have a process for verifying the 

information submitted, among other things. The draft protocols suggest 

that at the state level there will be reviews of summary level reports to 

look for outliers as well as evaluations of period-to-period changes. These 

would be coupled with procedures to identify and/or eliminate potential 

double counting due to delegation of reporting responsibility to 

subrecipients. According to the Recovery Czar, these protocols have not 

been finalized and will likely change when tested against the realities of 

data reporting. 

To prepare for recipient reporting, the Recovery Czar said his office has 

performed an initial pilot by having three agencies provide the data to 

populate the state database. Dry runs and submission of test data to OMB 

are planned once they have the capability of receiving it. Staff have 

developed large and complex systems in the past, according to the 

Recovery Czar, and are developing and testing a system to generate the 

data extract required for inputs to the federal system. 

Florida state officials have a number of concerns regarding Recovery Act 

reporting requirements. A major concern pertains to duplicate reporting. 

According to Florida Office of Economic Recovery meeting summaries, 

some federal agencies informed their state counterpart agencies that they 

should report information directly to the federal agency, in addition to, or 

instead of the federal site for data collection. Other concerns were the 

amount of work required to implement the reporting requirements; the 

fact that OMB guidance has left many questions unanswered—for 

example, which identifier to use for reporting on FHWA construction 

projects, and the logistics of uploading data to the federal site. Based on 

available guidance, Florida originally understood that it would be able to 

upload information on all awards across all agencies in a single transfer, 

but learned later that data would have to be uploaded separately for each 

Page FL-29 GAO-09-1017SP Recovery Act
Appendix V: Florida 

agency.35 Finally, Florida officials said they are concerned that lack of 

clarity on how to calculate the number of jobs retained and created—for 

instance, the number of hours that constitute full-time work—could lead 

to inconsistencies among the states and recipient entities. 

The Florida Auditor General’s office is awaiting additional OMB guidance 

on the Single Audit process. Officials said they need clarification of the 

required testing of internal controls at state agencies for fiscal years 2009 

and 2010 under the Recovery Act. The Single Audit, a key accountability 

mechanism, assists in determining whether expenditures of federal funds 

are in compliance with applicable laws and regulations and the 

effectiveness of key internal controls related to the Recovery Act.36

Although OMB provided guidance to states in August 2009,37 officials in the 

Auditor General’s office said it does not appear to reflect the final 

expectations for testing, time frames, and reporting on internal controls 

related to the Recovery Act. Similarly, Florida officials said the August 

guidance does not yet clearly address OMB audit requirements for 

Recovery Act reporting. Given that Recovery Act funds are to be 

distributed quickly, GAO reported that effective internal controls are 

critical to help ensure effective and efficient use of resources, compliance 

with laws and regulations, and accountability, including preparing reliable 

financial statements and other financial reports. The Auditor General’s 

office is awaiting the issuance of the next addendum to OMB’s Circular A133 Compliance Supplement, which is due September 30, 2009. Meanwhile, 

the fiscal year 2009 single audit is under way and the Auditor General’s 

office officials said they are concerned the September guidance will 

contain requirements they did not anticipate in planning their work, 

necessitating additional work on an accelerated time frame. Without more 

clearly defined and complete federal guidance, the officials said they have 

not yet established plans for fiscal year 2010 interim testing. 

State Auditor 

Awaiting Additional 

OMB Guidance for 

Single Audit on 

Recovery Act 

Programs 

 

35According to Florida officials, they are continuing to work with OMB and others as these 

issues evolve. 

36In Florida, the Auditor General is appointed by Florida’s legislature and serves as the 

state’s independent auditor for the Single Audit. 

37OMB, “OMB Circular A-133 Compliance Supplement- Addendum #1” (June 2009). 

Although it is dated June 2009, OMB did not make the guidance available until August 2009. 

Page FL-30 GAO-09-1017SP Recovery Act
Appendix V: Florida 

We provided the Special Advisor to Governor Charlie Crist, Florida Office 

of Economic Recovery, with a draft of this appendix on September 8, 2009, 

and he responded on September 10, 2009. The Florida official generally 

concurred with the information in the appendix and provided technical 

suggestions that were incorporated, as appropriate. 

Andrew Sherrill, (202) 512-7252 or sherrilla@gao.gov 

Zina Merritt, (202) 512-5257 or merrittz@gao.gov 

In addition to the contacts named above, Fannie Bivins, Patrick di Battista, 

Lisa Galvan-Trevino, Kevin Kumanga, Frank Minore, Brenda Ross, Cherie’ 

Starck, and James Whitcomb made major contributions to this report. 

Susan Ashoff assisted with writing, and Amy Anderson, Rachel Frisk, and 

Kenrick Isaac assisted with quality assurance. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page FL-31 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act) 

spending in Georgia.1

 The full report on all of our work, which covers 16 

states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

We reviewed three programs in Georgia funded under the Recovery Act—

the Transit Capital Assistance Program, the Weatherization Assistance 

Program, and the Workforce Investment Act (WIA) Youth Program. We 

selected these programs for different reasons. The Transit Capital 

Assistance Program had a September 1, 2009, deadline for obligating a 

portion of the funds and provided an opportunity to review nonstate 

entities that received Recovery Act funds. Georgia received a substantial 

increase in Weatherization Assistance Program funds, and work got under 

way in late August 2009. The focus of the WIA Youth Program in Georgia 

was a summer employment program that was well under way. For these 

programs, we focused on how funds were being used; how safeguards 

were being implemented, including those related to the procurement of 

goods and services; and how results were being assessed. In addition to 

these three programs, we also updated information on Highway 

Infrastructure Investment funds because significant Recovery Act funds 

had been obligated. We reviewed five contracts financed with Recovery 

Act Highway Infrastructure Investment funds and four contracts under the 

WIA Youth Program. Consistent with the purposes of the Recovery Act, 

funds from the programs we reviewed are being directed to help Georgia 

and local entities stabilize their budgets and to stimulate infrastructure 

development and expand existing programs—thereby providing needed 

services and potential jobs. The following provides highlights of our 

review of these funds: 

Transit Capital Assistance 

Program 

• The U.S. Department of Transportation’s Federal Transit 

Administration (FTA) apportioned $141 million in Recovery Act funds 

to Georgia and urbanized areas located in the state. As of September 1, 

2009, FTA had obligated $120 million. 

Page GA-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix VI: Georgia 

• As of September 1, 2009, FTA concluded that the 50 percent obligation 

requirement had been met for Georgia and urbanized areas located in 

the state. 

• The Metropolitan Atlanta Rapid Transit Authority (MARTA), the 

largest transit agency in Georgia, will use the majority of its $55.4 

million to fund a fire protection system upgrade and preventive 

maintenance. 

Weatherization Assistance 

Program 

• The U.S. Department of Energy (DOE) allocated about $125 million in 

Recovery Act weatherization funding to Georgia for a 3-year period. As 

of September 1, 2009, DOE had provided $62.4 million to Georgia, and 

the state had obligated $22.9 million of these funds. 

• Georgia has awarded contracts to all 22 service providers that it plans 

to use to weatherize homes, and weatherization activities got under 

way in late August 2009. With the Recovery Act funds, the state 

expects to weatherize at least 13,000 homes. 

WIA Youth Program • The U.S. Department of Labor (Labor) allotted about $31.4 million in 

WIA youth Recovery Act funds to Georgia. According to Labor, $16 

million had been expended in the state as of August 31, 2009. 

• As of September 15, 2009, the local workforce boards had received 

more than 30,000 applications, and 10,717 youth had been enrolled in 

summer youth programs statewide. Georgia exceeded its target of 

serving 10,253 youth. 

• The three workforce boards we interviewed focused on offering youth 

summer work experience. Work sites included government agencies, a 

private company that packages supplies for health-care providers, and 

a nonprofit organization that recycles computers. 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s Federal Highway 

Administration (FHWA) apportioned $932 million in Recovery Act 

funds to Georgia for highway infrastructure and other eligible projects. 

As of September 1, 2009, $546 million had been obligated, and $10 

million had been reimbursed by FHWA. 

• Almost 70 percent of Recovery Act highway obligations for Georgia 

have been for pavement projects. Specifically, $376 million of the $546 

million obligated as of September 1, 2009, is being used for pavement 

Page GA-2 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

improvement, pavement widening, and new road construction 

projects. 

• The Georgia Department of Transportation (GDOT) is completing its 

second, and final, phase of Recovery Act planning. As of September 1, 

2009, the state had awarded 108 contracts with a total value of $391 

million. 

Georgia’s fiscal condition continues to decline, as evidenced by the 

following: 

• The state’s net revenue collections for June 2009 were 15.7 percent 

less than they were in June 2008, representing a decrease of 

approximately $255 million in total taxes and other revenue. Because 

the state did not meet its revenue projections for fiscal year 2009 

(which ended June 30, 2009), the Governor’s Office of Planning and 

Budget started fiscal year 2010 by withholding 5 percent of agencies’ 

state general fund allotments and requiring employees to take 3 

furlough days during the first half of the fiscal year.2

Georgia Made Budget 

Cuts in Face of 

Continuing Fiscal 

Challenges and Plans 

More Cuts 

• Unemployment in Georgia continues to increase, with the state 

reporting a 10.3 percent unemployment rate in July 2009 compared 

with 6.2 percent in July 2008. The unemployment insurance benefits 

paid out in June 2009 were $167 million, about $100 million more than 

benefits paid in June 2008. The increase in unemployment claims has 

started to deplete the state’s unemployment trust fund. As of 

November 2008, the trust fund contained $1 billion; by August 2009, 

the balance had decreased to $431 million, a 59 percent reduction. 

Georgia is preparing for the cessation of Recovery Act funding by 

continuing to reduce state spending levels. The Governor’s Office of 

Planning and Budget has asked each state agency to provide budget 

reduction plans of 4 percent, 6 percent, and 8 percent for the amended 

fiscal year 2010 and fiscal year 2011 budgets. The office has instructed 

state agencies to consider the fiscal year 2010 funding reductions as 

 

2

According to state budget officials, the only exceptions to the 5 percent budget cut were 

the Medicaid, PeachCare (the state’s health program for children), and Education 

programs—which were cut by 3 percent—and the Georgia Department of Behavioral 

Health & Developmental Disabilities (the department that provides mental health services), 

which was not cut at all. Medicaid Federal Medical Assistance Percentage grant awards 

under the Recovery Act are discussed in detail in GAO-09-1016. 

Page GA-3 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

permanent reductions for future years and stated that any need for 

additional funding should be accomplished with a redistribution of 

existing funds within an agency’s budget. For the fiscal year 2011 budget, 

the state has implemented a new process requiring agencies to rate each of 

their programs in the following areas using a scale of one to five: whether 

it is a core state service, whether it is of strategic importance, the numbers 

of Georgians served, the relationship between funding and level of service 

(that is, the impact of a 10 percent cut in state funding on services), its 

performance relative to recognized industry standards, and the proportion 

of funding from state sources. The Governor’s Office of Planning and 

Budget will use the score for each state program to help prioritize 

decisions. 

Given its fiscal challenges, Georgia is seeking to recover administrative 

costs associated with overseeing Recovery Act funds. States may recoup 

costs for central administrative services such as oversight and reporting, 

as provided in the May 11, 2009, U. S. Office of Management and Budget 

(OMB) guidance.3

 The guidance discusses two ways that states might 

recoup central administrative costs through State-wide Cost Allocation 

Plans (SWCAP), which states submit to the U.S. Department of Health and 

Human Services (HHS) annually. States may estimate costs for centralized 

services or describe their methodology for billing services. The guidance 

states that any estimated cost amount should not exceed 0.5 percent of the 

total Recovery Act funds received by the state. On July 22, 2009, Georgia 

officials submitted a number of questions about this guidance; for 

example, they asked if the allowed 0.5 percent was an aggregate cap or a 

limitation on individual awards and if the 0.5 percent could be captured 

after funds were obligated, but not expensed. On August 3, 2009, HHS 

provided answers to some questions and referred Georgia to OMB for 

responses to the rest. Georgia officials are also working through the 

National Association of State Auditors, Comptrollers and Treasurers to get 

additional guidance on recouping administrative costs. 

While awaiting further guidance, Georgia has begun developing an 

addendum to its SWCAP for Recovery Act oversight costs.4

 The state plans 

 

3

See OMB Memorandum, M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Act Activities (May 11, 2009). 

4

Georgia is behind on its SWCAP plans. It is currently working from its 2004 plan. The State 

Auditor cited the state’s failure to prepare and submit a SWCAP plan as a finding in its 2008 

Single Audit report. 

Page GA-4 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

to submit the addendum to HHS for approval at the end of September 

2009. The state plans to use both alternatives for cost reimbursement by 

billing for certain services and estimating the costs of centralized services. 

The Georgia Recovery Act Accountability Officer has informed state 

agencies that they are to set aside 0.5 percent of their Recovery Act funds 

for the state’s administrative costs. The state took this step prior to the 

approval of its SWCAP addendum to provide agencies the opportunity to 

plan for the possibility of such expenses. With the 0.5 percent, the state 

hopes to cover costs associated with additional Recovery Act audits to be 

conducted by the State Auditor and Inspector General; the State 

Accounting Office’s oversight of Recovery Act reporting; maintaining 

Georgia’s Recovery Act Web site to promote transparency; and general 

oversight of Recovery Act funds by the office of the Recovery Czar.5

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing FTA grant programs, 

including the Transit Capital Assistance Program.6

 The majority of the 

public transit funds—$6.9 billion (82 percent)—was apportioned for the 

Transit Capital Assistance Program, with $6.0 billion designated for the 

urbanized area formula grant program and $766 million designated for the 

nonurbanized area formula grant program.7

 Under the urbanized area 

formula grant program, Recovery Act funds were apportioned to 

urbanized areas—which in some cases include a metropolitan area that 

spans multiple states—throughout the country according to existing 

More Than Half of 

Georgia’s Transit 

Capital Assistance 

Program Funds Have 

Been Obligated for a 

Variety of Projects 

 

5

For the fiscal year 2009 Single Audit report, the State Auditor estimates its workload will 

increase by about 3,500 audit hours because of new internal control and program 

requirements associated with the Recovery Act. For this Single Audit report, the State 

Auditor plans to audit Recovery Act funds expended at four state agencies, including the 

Georgia Departments of Labor and Transportation. 

6

The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

7

Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

Page GA-5 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

program formulas. Recovery Act funds were also apportioned to states 

under the nonurbanized area formula grant program 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. Up to 10 

percent of apportioned Recovery Act funds may also be used for operating 

expenses.8

 Under the Recovery Act, the maximum federal fund share for 

projects under the Transit Capital Assistance Program is 100 percent.9

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

submit to FTA for Recovery Act funding.10 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure disadvantaged businesses 

are not discriminated against in the awarding of contracts. 

Fifty percent of Recovery Act funds apportioned to urbanized areas or 

states are to be obligated within 180 days of apportionment (before Sept. 

 

8

The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

9

The federal share under the existing formula grant program is generally 80 percent. 

10Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and MPOs designated for the area. MPOs 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 plan and the approved State Transportation Improvement Program (STIP). 

Page GA-6 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

1, 2009) and the remaining apportioned funds are to be obligated within 1 

year. The Secretary of Transportation is to withdraw and redistribute to 

other urbanized areas or states any amount that is not obligated within 

these time frames.11 In March 2009, $141 million in Recovery Act Transit 

Capital Assistance Program funds were apportioned to Georgia and 

urbanized areas located in the state for transit projects.12 As of September 

1, 2009, FTA concluded that the 50 percent obligation requirement had 

been met for Georgia and urbanized areas located in the state. For the 

Transit Capital Assistance 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. As of September 1, 2009, FTA had obligated $120 

million. 

Transit Providers in 

Georgia Are Funding 

Vehicle Replacements and 

Preventive Maintenance 

Recipients of funds from the Transit Capital Assistance Program include 

both GDOT and transit providers. More specifically, GDOT is the recipient 

of $37.9 million for the small urban areas under 200,000 and rural areas in 

Georgia. It oversees seven small urban transit agencies and 90 rural transit 

providers. In March 2009, GDOT issued a call for projects to the small 

urban and rural transit providers in the state. They were asked to submit a 

list of projects that were (1) eligible for Recovery Act funds, (2) ready for 

implementation (“shovel ready”) with all planning and environmental 

program requirements completed, and (3) included in their region’s 

transportation improvement plans. In June 2009, the state selected a 

number of projects, including construction of a transportation facility in 

Albany, Georgia. To ensure that all of the Recovery Act funds are 

obligated, GDOT announced another call for projects on September 15, 

2009. 

We visited two transit providers that are Recovery Act recipients, MARTA 

and Gwinnett County, to discuss how they planned to use and safeguard 

the funds. MARTA received a $55.4 million Transit Capital Assistance 

grant, while Gwinnett County received about $9.4 million. The urbanized 

area intends to use the maximum 10 percent of Transit Capital Assistance 

Program funding apportioned to the urbanized area for operating expenses 

 

11Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

12The jurisdiction of some urbanized areas within this state crosses into at least one other 

state. Therefore, some urbanized areas are included in multiple state totals. 

Page GA-7 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

and the remaining grant money to fund capital projects. Table 1 describes 

the various capital projects that MARTA and Gwinnett County selected. 

MARTA officials told us they focused on projects that were a high priority 

and that enabled them to address safety concerns identified in a recent 

facility audit. According to Gwinnett County officials, they focused on 

existing priorities for safety and operations and projects most likely to 

provide local economic benefits. 

Table 1: Recovery Act Projects Selected by MARTA and Gwinnett County 

Project Project description 

Estimated

project cost

MARTA 

Fire protection system upgrade Comprehensive upgrade or replacement of the fire protection 

system at MARTA transit facilities systemwide $27.3 million

Preventive maintenance Ongoing maintenance of transit vehicles, facilities, and equipment 

to keep them in good operating order 20 million

Bus purchase Acquisition of 18 clean fuel-powered buses 7.6 million

Security enhancements Upgrade and renovation of lighting in rail passenger stations to 

increase security, safety, and energy efficiency 555,000

Gwinnett County 

Bus overhaul Mid-lifecycle overhaul of 28 transit buses, including complete 

engine overhaul and body work 3.7 million

Installation of audio-video and 

surveillance equipment 

Technology will help to more effectively manage the fleet, increase 

system security and safety, and provide customers with real-time 

transit service information 3.3 million

Pedestrian access and walkways Will provide safe access and enhanced ADA access by improving 

bus stop access; includes installing or upgrading walkway 

connections, shelters, and signs 1.5 million

Bus shelters Install bus shelters at high-activity bus stops 800,000

Paratransit buses Replacing two obsolete paratransit buses currently operating 

beyond the typical useful service life 161,000

Sources: MARTA and Gwinnett County Transit. 

Page GA-8 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Due to a recent review that had multiple findings, GDOT’s administration 

of Recovery Act transit grants will be closely scrutinized by FTA.13 FTA’s 

final report, dated June 29, 2009, noted nine material weaknesses and four 

significant deficiencies, including that GDOT did not adequately monitor 

its subgrantees and did not have adequate entity-level controls for grants 

management.14 FTA delayed the obligation of Recovery Act funds to GDOT 

until it submitted an acceptable corrective action plan, which it did on July 

29, 2009. Among other corrective actions, GDOT hired a consultant to 

review and revise its transit oversight process and has been seeking a 

transportation consultant to help improve its oversight of the state’s small 

urban, intercity, and rural transit programs and assist with management 

and execution of projects, programs, and grants related to the Recovery 

Act. FTA accepted GDOT’s corrective action plan on August 7, 2009, 

subject to implementation progress. FTA will continue to monitor GDOT 

through monthly status meetings and on-site reviews every 2 months. In 

addition, FTA has developed an oversight strategy to monitor how GDOT 

is implementing the plan through an FTA triennial review scheduled for 

the week of September 7, 2009, and during its follow-up financial 

management oversight review scheduled for 2010.15

GDOT Plans to Modify 

Current Oversight 

Processes for Recovery 

Act Grant Funding in 

Response to an FTA 

Review; the Transit 

Providers We Interviewed 

Will Use Existing 

Processes 

Both MARTA and Gwinnett County intend to administer their Recovery 

Act funds using existing internal control procedures. FTA most recently 

reviewed MARTA’s internal control procedures for federally funded transit 

projects in March 2009 as part of a financial management oversight review. 

As a result of advisory comments from that review, MARTA has been 

updating its accounting policies and procedures manual. According to 

Gwinnett County officials, the county will use its current, standard 

internal control procedures for all transit projects. According to the 

officials, FTA vets these internal controls through the triennial review 

 

13The financial management oversight review examined the effectiveness of GDOT’s 

internal controls as they related to compliance with FTA requirements for financial 

management systems. 

14A material weakness is a deficiency or deficiencies in internal control that raises a 

reasonable possibility that a material misstatement of the entity’s financial statements will 

not be prevented or detected on a timely basis. Significant deficiencies are less severe than 

material weaknesses, yet important enough to merit attention by those charged with 

governance. 

15FTA’s triennial review program evaluates grantee adherence to federal requirements at 

least once every 3 years. See GAO, Public Transportation: FTA’s Triennial Review 

Program Has Improved, But Assessments of Grantees’ Performance Could Be Enhanced, 

GAO-09-603 (Washington, D.C.: June 30, 2009). 

Page GA-9 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

process, which was most recently completed in May 2008. The final report 

for the 2008 review identified deficiencies in 9 of 23 areas, including 

financial and technical. Gwinnett County agreed to correct all deficiencies 

by September 2008. All corrective actions were officially closed in October 

2008. 

Project Sponsors Must 

Meet FTA Reporting 

Requirements 

Project sponsors must submit periodic reports, as required under the 

maintenance-of-effort for transportation projects section (§1201(c) of the 

Recovery Act) on the amount of federal funds appropriated, allocated, 

obligated, and outlayed; the number of projects put out to bid, awarded, or 

on which work has begun or been completed; project status; and the 

number of jobs created or retained. In addition, grantees must report 

detailed information on any subcontractors or subgrants awarded by the 

grantee. Because FTA had obligated money for Gwinnett County projects 

before July 31, 2009, the transit provider was required to submit its report 

in August 2009, which it did. The report contained information on the total 

amount of funds awarded, the number of contract solicitations issued 

related to funds under the grant, and the estimated amount of funds 

associated with the contract solicitations. GDOT and MARTA are not 

required to submit their first 1201(c) reports until February 2010. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which DOE administers through each 

of the states, the District of Columbia, and seven territories and Indian 

tribes. The program 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, or 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. 

Georgia Is Taking 

Steps to Get Its 

Weatherization 

Assistance Program 

Under Way and 

Safeguard Funds 

As of September 14, 2009, DOE had approved the weatherization plans of 

all but two of the states, the District of Columbia, the territories, and 

Indian tribes—including all 16 states and the District of Columbia in our 

review. DOE had provided to the states almost $2.3 billion of the $5 billion 

in weatherization funding under the Recovery Act. Use of the Recovery 

Act weatherization funds is subject to Section 1606 of the act, which 

Page GA-10 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

requires all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing 

wage, including fringe benefits, as determined under the Davis-Bacon 

Act.16 Because the Davis-Bacon Act had not previously applied to 

weatherization, Labor had not established a prevailing wage rate for 

weatherization work. In 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 for weatherization activities. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.17 The 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009.

Under the Recovery Act, the Georgia Environmental Facilities Authority 

(GEFA), the state agency that administers the Weatherization Assistance 

Program, will receive approximately $125 million. With the funding, GEFA 

expects to weatherize at least an additional 13,000 units over the next 2 to 

3 years. DOE approved Georgia’s weatherization plan on June 26, 2009, for 

a project period of April 1, 2009, through March 31, 2012. As of September 

1, 2009, the state had received $62.4 million (50 percent of its 

weatherization allocation), obligated $22.9 million, and spent about $9,000. 

GEFA Has Awarded 

Contracts for Recovery Act 

Weatherization Projects, 

and Work Began in August 

GEFA has awarded contracts to service providers, and weatherization 

work is under way. GEFA is using the same 22 service providers—

comprising a combination of community action agencies, nonprofit 

agencies, and local governments—that currently provide weatherization 

services under the state’s non-Recovery Act weatherization program. 

GEFA gave each service provider 10 percent of the service provider’s total 

allocation to help with implementation costs such as hiring staff, renting 

additional space, training employees, and procuring vehicles, field 

equipment, and services. As of September 10, 2009, all 22 service providers 

had been awarded contracts. According to GEFA officials, each service 

 

16The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

17The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page GA-11 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

provider received an advance of 25 percent of its total allocation upon 

contract award. Each of the providers will be responsible for hiring 

subcontractors to conduct weatherization work, which began in late 

August 2009. 

As part of its implementation strategy, GEFA plans to contract with a 

vendor to provide training to its service providers. The training will 

include a combination of field training and training at the vendor’s 

facilities in Atlanta. The vendor will provide classes, a circuit rider (a 

trainer that will spend 1 to 2 days in the field answering questions and 

providing on-site assistance), a Web site, and technical assistance. These 

classes began in early September 2009. The vendor is hoping to train all 

new crew members 30 to 120 days after they begin working for a service 

provider. 

Despite Uncertainty about 

Davis-Bacon Act 

Requirements, 

Weatherization Work Will 

Proceed as Planned 

Although weatherization work is under way, service providers expressed 

concerns about wage rate determinations and other Davis-Bacon Act 

requirements. Officials at weatherization agencies across the state 

received a survey from Labor in July 2009, which was used to determine 

the Davis-Bacon Act prevailing wage for weatherization workers. Labor 

set the wage rates in Georgia on August 29, 2009. Consistent with guidance 

from DOE and Labor, GEFA did not withhold funding to the service 

providers while the prevailing wage was being set. 

However, at the preaward kick-off meeting that GEFA held on August 5 

and 6, 2009 (which we attended), the service providers expressed 

confusion about the Davis-Bacon Act requirements and how they would 

apply to the weatherization program. Specifically, the service providers 

were concerned about the requirements for a weekly payroll and were 

confused as to which employees would fall under the act’s guidelines. 

Some of the service providers discussed signing contracts for each 

individual house to limit the contract amount to below the Davis-Bacon 

Act threshold of $2,000. 

As part of its monitoring efforts, GEFA is requiring each service provider 

to submit reports on compliance with Davis-Bacon Act requirements (as 

discussed below in more detail). GEFA is hiring a fiscal monitor who will 

be responsible for gauging the subrecipients’ and vendors’ compliance 

with the Davis-Bacon Act, along with other provisions of the Recovery Act. 

Page GA-12 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

State Officials Established 

Risk-Assessment, Fiscal, 

and Performance 

Monitoring Processes for 

Service Providers 

Receiving Weatherization 

Funds 

GEFA has taken a number of steps to monitor the use of Recovery Act 

weatherization funds. First, the agency completed a risk assessment of its 

service providers that involved assessing the level of performance at each 

provider and rating their performance as high, standard, or at risk. In 

addition, GEFA examined the providers’ internal controls, audited 

financial statements, and previous history with federal awards. Second, 

GEFA has established financial reporting requirements. Each of the 

service providers must submit a monthly financial report that includes all 

reimbursable expenses for production completed during the previous 

month, such as administrative costs, labor, and materials. Each of the 

providers also must provide a regular invoice that tracks expenses to date 

and the contract balance. GEFA is planning to implement an online tool to 

collect these invoices by the first quarter of 2010. According to GEFA 

officials, the online system will make it easier for them to identify 

potential “red flags” and track the progress of the providers. As noted 

above, GEFA will hire a fiscal monitor to review the financial records of 

the subrecipients and vendors for accuracy. 

Third, GEFA plans to contract with a vendor to monitor whether the 

service providers are in compliance with all applicable DOE regulations 

and other requirements, including the policies and procedures in the 

Georgia Weatherization Assistance Program’s operations manual. For 

purposes of monitoring, the state is being divided into 12 territories. Each 

territory will house a weatherization educator and a weatherization 

inspector. The weatherization educator will review file documentation, 

report problems, and work with the service provider to prevent errors in 

future reporting by providing educational opportunities to the service 

provider’s staff and contractors. The educator also will provide 

information to the homeowner about the need for weatherization, its 

benefits, and the procedures that will occur during the process. This 

homeowner education component is new for Georgia’s Recovery Act 

weatherization program. Monthly, the weatherization inspector will 

randomly select at least 10 percent of the homes in each county to 

evaluate the service providers’ work. 

Fourth, GEFA has developed a process intended to replace ineffective 

weatherization providers. GEFA plans to replace any service provider that 

does not meet its contractual obligations—for example, by failing to 

maintain adequate fiscal controls and accounting procedures, filing late or 

inaccurate financial and programmatic reports, misusing program funds, 

failing to adhere to the schedule for goals and objectives, or not providing 

quality weatherization. GEFA’s service provider contract included 

language describing the terms for terminating the contract. GEFA plans to 

Page GA-13 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

issue a request for information to identify potential replacement providers 

and has developed a policy for selecting replacements. The policy states 

that GEFA will consider the potential provider’s (1) experience and 

performance in weatherization or housing renovation activities; (2) 

experience in assisting low-income persons in the area to be served; and 

(3) capacity to undertake a timely and effective weatherization program. 

State Has Plans to Assess 

the Impact of Recovery 

Act Weatherization Funds 

GEFA plans to use a number of performance measures to determine the 

impact of Recovery Act weatherization funds. In addition to measuring 

home energy savings after weatherization based on DOE’s methodology, it 

plans to track the number of units weatherized, the number of people 

assisted, and the number of jobs created and retained. The service 

providers are responsible for reporting this data to GEFA in monthly 

reports. Specifically, the service providers will provide information 

including the types of housing units served, information on the clients, and 

the estimated energy savings. Additionally, the service providers have to 

provide regular reports separate from the monthly financial and 

production reports to GEFA that are intended to track the impact of the 

funds. The reports must include jobs created and retained by state and 

local contractors, hours trained, and equipment purchases exceeding 

$5,000. 

The Recovery Act provides an additional $1.2 billion in funds for the WIA 

Youth Program, including summer employment. Administered by 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

Georgia Used 

Recovery Act Funds 

to Expand Summer 

Youth Services, but 

Implementation 

Methods Varied 

across the State 

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,18 the conferees stated they were particularly interested 

 

18H.R. Rep. No. 111-16, at 448 (2009). 

Page GA-14 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth Program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.19 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job; (2) learn 

work readiness skills on the job; and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.20 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

 

19U.S. Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

20Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page GA-15 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Labor allotted about $31.4 million to Georgia in WIA Youth Recovery Act 

funds. The Georgia Department of Labor (GDOL), which is the state’s 

administering agency, allocated $26.7 million of these funds to local 

workforce boards. According to Labor, $16 million had been expended in 

the state as of August 31, 2009. GDOL encouraged local areas to spend 

their funding quickly, but wisely and in accordance with the rules and 

regulations governing the funds. The local workforce boards we 

interviewed—the Atlanta Regional Workforce Board, Coastal Workforce 

Services, and the Richmond/Burke Job Training Authority—had a goal of 

spending the majority of their funds by September 30, 2009.21

Local Workforce Areas 

Largely Met the Georgia 

Department of Labor’s 

Participant Targets 

As of September 15, 2009, the state had served 10,717 youth through its 

Recovery Act funded summer youth program, exceeding its target of 

10,253 youth. The state set enrollment targets for each of the state’s 20 

workforce boards. The state developed these targets by dividing the 

allocation amount for each workforce board by $2,600, which was the 

amount that the state estimated would be required to serve one youth. As 

shown in table 2, 11 of the workforce boards have exceeded their targets, 

while 9 are still below their targeted levels of enrollment. For example, the 

Macon/Bibb workforce board adopted a policy that limited participants’ 

work hours to 20 hours per week, which allowed it to increase the number 

of youth served. State officials explained that boards below their targets 

may be slow in entering data into the state’s tracking system. However, in 

some cases, other circumstances have delayed enrollment. For example, 

the Southwest Georgia workforce board began the second phase of the 

program focusing on older youth in August 2009. 

 

21We visited the Atlanta Regional Workforce Board and Coastal Workforce Services and 

interviewed officials at the Richmond/Burke Job Training Authority. We also interviewed 

five service providers and one contractor who provided payroll and workers’ compensation 

services. In addition, we visited four work sites. We selected these local areas based on the 

amount of WIA youth funds they received and geographic distribution. 

Page GA-16 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Table 2: Projected and Enrolled Youth by Workforce Area, as of September 15, 2009 

Local area 

Projected number of

 youth to be served

Number of

applications received

Number of 

youth enrolled 

Percentage of

target enrolled

Macon/Bibba 244 1,176 554 227

Atlanta Regional 1,184 1,784 1,637 138

Coastal 535 4,739 722 135

Lower Chattahoochee 355 1,800 464 131

Northeast Georgia 610 3,020 785 129

East Central Georgia 324 600 409 126

Fulton 252 400 289 115

South Georgia 331 512 368 111

Heart of Georgia 607 2,477 636 105

Atlanta 1,055 3,000 1,098 104

Cobb Works 445 1,484 447 100

DeKalb 895 1,200 836 93

Southeast Georgia 168 509 153 91

Northwest 820 1,301 741 90

Richmond/Burke 394 1,320 352 89

Middle Georgia 298 967 232 78

Georgia Mountainsb264 536 181 69

Southwest Georgiac704 1,700 404 57

West Central Georgiab578 1,458 316 55

Middle Flintb190 339 93 49

Total 10,253 30,322 10,717 105

Source: Georgia Department of Labor. 

a

The Macon/Bibb workforce board adopted a policy that limited the participants’ work hours to 20 

hours per week, which allowed the board to serve more youth. 

b

This workforce board is taking advantage of a waiver from Labor to serve older youth through March 

2010. 

c

TheSouthwest Georgia workforce board began a second phase of the program focusing on older 

youth in August 2009. 

Implementation 

Approaches Varied across 

Georgia’s Local Workforce 

Areas 

The local workforce boards implemented their WIA summer youth 

programs in a variety of ways across the state. As shown in table 3, the 

local entities we interviewed differed in the length of their programs, 

wages paid, and whether they operated the program in-house or 

contracted with service providers. 

Page GA-17 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Table 3: Overview of Selected Local Workforce Boards 

Atlanta Regional Coastal Richmond/Burke 

Number of counties 

served 

7 9 2 

Program implementation Contracted with service providers 

(Nine previous providers and one 

new provider for payroll) 

Contracted with service providers 

(Three previous providers) 

Managed in-house by the 

workforce board 

Program design Focused on work experience Focused on work experience Focused on work experience with 

academic portion for younger 

youth 

Length of program 4 to 8 weeks, depending on 

service provider 

120 hours per youth 30 hours per week for 7 weeks 

Length of work 

readiness training and 

incentives paid 

6 to 20 hours 

Unpaid to $175 

3 to 5 days 

$75 to $150 

1 week 

Unpaid 

Identifying youth and 

determining eligibility 

Determined by service providers Board centrally identified youth 

and provided a prescreened list to 

service providers, who were 

responsible for determining final 

eligibility 

Conducted in-house by workforce 

board staff 

Identifying work sites Service providers and workforce 

board identified and recruited 

Service providers identified and 

recruited 

Workforce board identified and 

recruited 

Wage range Minimum wage to $14 Minimum wage to $7.55 Minimum wage 

Source: GAO. 

Of the three workforce boards we interviewed, two stated they did not 

have trouble recruiting work sites. These two areas relied on their service 

providers to identify various work sites for the youth. For example, one of 

the service providers for the Atlanta Regional Workforce Board contacted 

local Chambers of Commerce, business associations, and faith-based 

agencies and advertised in local newspapers. One service provider for 

Coastal Workforce Services was affiliated with the city of Savannah and 

worked to develop work sites within other city departments, such as storm 

water management services and economic development. While neither 

board had problems recruiting work sites, their service providers reported 

some difficulty placing youth 14 to 15 years old. The other area, 

Richmond/Burke Job Training Authority, had challenges recruiting private 

companies as work sites. The board overcame the challenge of placing 

younger youth by adding an academic portion to the younger youth’s 

summer program. The board developed a classroom learning experience 

for youth 14 to 15 years old that focused on skills such as searching and 

applying for colleges and jobs. Youth enrolled in the program spent 12 

hours a week in the classroom and 18 hours a week with an employer. 

Recruiting Work Sites 

Page GA-18 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

The boards we interviewed took a number of different steps to ensure that 

their work sites were safe. The Atlanta Regional Workforce Board 

contracted with a vendor to provide workers’ compensation insurance. 

Prior to providing the insurance, the vendor assessed the safety of each 

work site. The other two workforce boards (or their service providers) 

used a risk-based approach to determine which work sites to visit. All 

three local workforce boards assessed the safety of the work sites either 

through monitoring visits or work site agreements validating the safety of 

the site. 

All three boards we interviewed designed their summer youth programs to 

focus on work experience, rather than academic training. The service 

providers we interviewed used different processes to match youth with 

work sites. Some service providers held job fairs or had youth interview at 

the various sites, while other service providers placed youth at work sites 

based on their interests and only involved the work sites in the process 

upon request. The Richmond/Burke Job Training Authority determined the 

youth’s interest and then had the youth contact the work site to schedule 

an interview. 

The three boards we interviewed offered a variety of work opportunities. 

More specifically, we found the following examples: 

• About 100 youth participated in a summer learning program offered by 

a service provider. Youth at this site received training and work 

experience in the areas of drama, video production, and other visual 

arts. These youth worked with industry professionals in these areas 

and were expected to complete a project related to their area of study. 

For example, the youth in the drama program were responsible for 

developing and producing a play that was held at the end of the 

summer program. They also attended occupational workshops and 

participated in basic life and career skills training. 

• A private company in the health-care sector employed youth in its 

warehouse, where the youth learned to gather the supplies that would 

be packaged for health-care providers. 

• Some youth worked at various county or city government agencies. 

For example, one site was a county library, at which the youth 

categorized materials, among other tasks. 

• A youth center utilized youth participants as summer camp counselors 

and administrative clerks. 

Page GA-19 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

GDOL provided the local areas with some guidance on how to identify 

green jobs, including summarizing guidance provided by Labor and listing 

examples of green jobs. Despite this guidance, local officials expressed 

confusion about the definition of a green job. Some local workforce board 

officials suggested that while a site might be considered a green work site, 

the work experience opportunity for the youth might not be a green job. 

For example, an organic food company was considered a green employer; 

however, at least one of the youth was performing clerical duties. GDOL 

officials noted that it was correct to classify this work experience as a 

green job based on guidance from Labor. In addition, officials at one 

service provider told us they thought it was more important to find 

meaningful work experiences for the youth than it was to focus on 

identifying and developing green jobs. 

All three workforce boards we interviewed identified some green work 

sites but estimated they were a small portion of the total number of job 

opportunities. For instance, the Atlanta Regional Workforce Board worked 

with a local technical college to develop a 4-week water management 

camp for youth. This camp combined work experience and classroom 

activities in bioscience and environmental science to help youth develop 

marketable skills applicable to the water quality management industry. 

Coastal Workforce Services recruited a nonprofit organization that 

developed a computer refurbishing and recycling program for at-risk youth 

to learn how to refurbish computers that would have ended up in land fills 

(see fig. 1). The program combined work experience and classroom 

activities. The Richmond/Burke Job Training Authority placed some youth 

at the Burke County Forestry Commission, where they performed clerical 

and office duties. 

Page GA-20 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Figure 1: Computer Recycling Program at a Nonprofit Organization 

Source: GAO.

Georgia did not have challenges recruiting youth. Local workforce boards 

across the state received more than 30,000 applications for about 10,000 

slots. According to the local workforce boards we interviewed, they 

recruited youth through the school systems, the state’s foster care agency, 

the juvenile justice system, one-stop career centers, and other sources. 

Each of the local workforce boards we interviewed developed a checklist 

to determine the youth’s eligibility to participate in the program. Each one 

outlined the income eligibility requirements and barriers to employment, 

such as the need for additional assistance to complete an educational 

program or secure employment. 

Recruiting and Determining 

Eligibility of Youth 

Consistent with the Fair Labor Standards Act, GDOL required that youth 

be paid the federal minimum wage.22 However, the wage range varied 

across the three workforce boards we interviewed. Two workforce boards 

consistently paid youth at or slightly above the federal minimum wage. 

The other workforce board paid wages that varied from the minimum 

wage to $14 an hour. Local workforce board officials explained that wages 

were set at $12 or higher to match the wages of other employees at the 

work site with the same job description but not in the summer youth 

program. 

Youth Wages and Length of 

Program 

 

22The federal minimum wage changed from $6.55 to $7.25, effective July 24, 2009. 

Page GA-21 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

The local workforce boards we visited also served youth for varying 

lengths of time. Two of the local workforce boards we interviewed set a 

standard for the number of hours a youth could work during the summer 

youth program, while one did not. For example, in the Coastal region, 

youth could work up to 120 hours, spread over 6 weeks. Similarly, in the 

Richmond/Burke area, youth were required to work for 30 hours per week 

for 7 weeks to complete the program. However, the Atlanta Regional 

Workforce Board did not set a time frame. In some instances, youth 

worked about 8 weeks, while others worked 4 to 5 weeks. 

State and Local Areas 

Have Implemented 

Multiple Monitoring Tools 

The summer youth programs were monitored at the state and local level. 

GDOL plans to conduct a three-phase monitoring approach for the 

summer youth programs.23 The first phase consisted of a preprogram 

assessment to determine each local workforce board’s readiness to 

implement a summer youth program. This phase concluded on June 1, 

2009. GDOL conducted informal discussions with local area workforce 

boards to ensure the boards were acting in accordance with the Recovery 

Act. The second phase included monitoring work sites and reviewing 

program and financial records. More specifically, GDOL staff visited a 

sample of work sites and randomly tested participant eligibility. These 

reviews are scheduled to be completed by September 30, 2009. To guide its 

monitoring efforts, GDOL created a monitoring tool that addressed areas 

such as programmatic design and oversight, transparency, file reviews, 

work site evaluation, and contract monitoring activities. In December 

2009, GDOL plans to complete the third phase, which will focus on 

reporting and closing out the program. 

GDOL identified a number of findings during its phase-two monitoring 

visits and will include corrective actions plans for the local workforce 

boards in the final reports, which are scheduled to be completed by 

October 31, 2009. More specifically, at the local workforce boards we 

interviewed, GDOL identified issues related to contracting, overobligation 

of funds, and time sheet signatures. Due to the timing of the reviews, the 

department was able to work with some local workforce boards to correct 

some findings prior to the completion of their summer youth programs. 

Table 4 describes some of the findings that GDOL had at each local 

workforce board we interviewed. 

 

23These monitoring efforts were in addition to the normal monitoring process, in which 

each local workforce board is reviewed annually. 

Page GA-22 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Table 4: Georgia Department of Labor’s Findings at Local Workforce Boards We Interviewed 

Workforce board Status of finding GDOL finding Local workforce board’s response 

Preliminary Amendments to service provider contracts 

did not include some of the required 

Recovery Act language (for example, 

language requiring the provider to ensure 

that work sites adhere to applicable federal 

and state wage, labor, and workers’ 

compensation laws). 

According to Atlanta Regional Workforce 

Board officials, they did not receive from 

GDOL the contract language GDOL told 

them they needed to include. 

Atlanta Regional 

Workforce Board 

Preliminary The board overobligated its funding and 

went over its enrollment target by 

approximately 470 youth. The issue arose 

because the board did not turn away any 

eligible youth. 

GDOL is working with the board to identify 

weaknesses in its financial and management 

information systems. 

According to Atlanta Regional Workforce 

Board officials, non-Recovery Act WIA 

funding will be used to meet its 

overobligation, which means that a large 

portion of youth served with non-Recovery 

Act WIA funding will be recruited from the 

Recovery Act summer youth program. 

Coastal Workforce 

Services 

Preliminary GDOL raised concerns about the 

meaningfulness of the board’s work 

readiness measure. 

GDOL and board officials worked to 

develop a more meaningful measure. 

Final Agreements with educational service 

providers did not include some of the 

required Recovery Act language (for 

example, language on Recovery Act wage 

rate requirements). 

Workforce board has 90 days to respond 

to the final monitoring report. 

Richmond/Burke Job 

Training Authority 

Final Some time sheets did not have supervisor 

signatures. 

Workforce board has 90 days to respond 

to the final monitoring report. 

Sources: Georgia Department of Labor and workforce board officials. 

Note: GDOL sent a final monitoring report to the Richmond/Burke Job Training Authority on August 

31, 2009. The results of GDOL’s monitoring visits to the Atlanta Regional Workforce Board and 

Coastal Workforce Services are still preliminary. 

The three local workforce boards we interviewed stated they had 

monitoring efforts in place for the service providers and work sites. For 

example, the Atlanta Regional Workforce Board developed a monitoring 

plan for its summer youth service providers. These service providers were 

visited at least twice over the course of the summer and in one case five 

times between June 11, 2009, and July 31, 2009. These reviews consisted of 

desk and contract reviews, reviews of participant and work site files, and 

interviews with youth participants, service provider staff, and work site 

supervisors, among others. Coastal Workforce Services planned to review 

100 percent of its work sites over the course of the program and review 

eligibility of all participants before paying final invoices to service 

providers. The Richmond/Burke Job Training Authority stated that 25 

percent of the work sites would be monitored. 

Page GA-23 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Work Readiness Measures 

Varied among Local 

Workforce Boards 

Consistent with federal program guidance, GDOL allowed the three local 

areas we interviewed to determine their own work readiness performance 

measure. GDOL issued guidance to help local workforce boards develop 

the measure. According to the GDOL training provided to the workforce 

boards, youth have attained work readiness if they demonstrate a 

measurable increase in 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.24 The local workforce boards were given flexibility in 

defining goals and choosing an assessment tool. They record the date and 

the outcome of the work readiness measure in the information system the 

state uses to manage the WIA programs (they enter “yes” or “no” under the 

category “Attained Recovery Act Work Readiness Increase”). The state 

plans to track other outcome measures in this system, such as youth hired 

into unsubsidized employment. 

The Atlanta Regional Workforce Board allowed its service providers to 

choose from one of three different measures of work readiness. The first 

measure would require the youth to pass a postparticipation test one level 

above the preparticipation test benchmark using a series of assessments 

that measure applied math, reading, and other skills. The second 

measurement would require the youth to earn Georgia WorkReady 

Certification, which is an assessment of skills in math, reading, and work 

habits. The third measure makes use of the work site supervisor’s 

performance evaluation as the pre-, mid-, and post-test measure, with 

youth passing this measurement if they were rated higher at the end of the 

summer than they were at the beginning. The two service providers we 

visited used the third measure, relying on evaluations by the supervisor. 

The form they used asked the supervisor to rate the youth on work 

performance, work behavior, and critical thinking skills, among other 

things. For a youth to be deemed work ready, the providers were looking 

for a 50 percent increase in evaluated skills. 

In response to a monitoring finding, Coastal Workforce Services worked 

with GDOL to develop an evaluation that supervisors were asked to 

complete at the end of each pay period. The survey rated the youth in 10 

areas, including overall performance, quality of work, and ability to solve 

 

24Local areas’ work readiness measures should include, among other things, a 

preassessment to identify work readiness skills at the start of the experience and a 

postassessment to determine attainment of goals. 

Page GA-24 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

problems. The board decided to use the first survey as the “pretest” 

measure and the last survey as the “posttest” measure. Youth were deemed 

to have attained work readiness if there was an increase in their rating by 

the end of the summer. The workforce board did not set a specific goal for 

improvement. 

The Richmond/Burke Job Training Authority used two methods to 

determine if youth had attained work readiness. The first was to have 

youth take the same test at the beginning and end of the summer. The test 

covered 15 competencies such as preparing a resume, job interviewing, 

completing tasks effectively, and demonstrating a positive attitude. The 

youth would attain work readiness if they passed one competency that 

they previously failed. If the youth failed this measure or did not take the 

tests, the youth’s work readiness would be determined using supervisor 

evaluations. For example, the form required supervisors to rate youth as 

“poor,” “average,” or “exceeds” in areas such as completing tasks 

effectively and being punctual. 

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the FederalAid 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, which include ensuring the project 

meets all environmental requirements associated with the National 

Environmental Policy Act (NEPA), paying a prevailing wage in accordance 

with federal Davis-Bacon Act requirements, complying with goals to 

ensure disadvantaged businesses are not discriminated against in the 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America 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. 

Recovery Act Funds 

in Georgia Continue 

to Be Obligated for 

Federal-Aid Highway 

Projects 

As we reported in July 2009, $932 million was apportioned to Georgia in 

March 2009 for highway infrastructure and other eligible projects.25 As of 

 

25GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses (Georgia), GAO-09-830SP (Washington, D.C.: July 8, 2009). 

Page GA-25 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

September 1, 2009, $546 million had been obligated.26 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 contractual agreement to pay for the federal share of the 

project. This commitment occurs at the time the federal government signs 

a project agreement. As of September 1, 2009, $10 million had been 

reimbursed by FHWA.27

Almost 70 percent of Recovery Act highway obligations for Georgia have 

been for pavement projects. Specifically, $376 million of the $546 million 

obligated as of September 1, 2009, is being used for pavement 

improvement, pavement widening, and new road construction projects. 

Another $49 million was obligated for bridge projects. State officials told 

us they selected projects based on various factors, including eligibility 

requirements, whether the project was shovel ready, and geographic 

dispersion across the state. Figure 2 shows obligations by the types of 

road and bridge improvements being made. 

 

26This does not include obligations associated with $25 million of apportioned funds that 

were transferred from FHWA to FTA for transit projects. Generally, FHWA has authority 

pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made available for transit projects to 

FTA. 

27States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

Page GA-26 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Figure 2: Highway Obligations for Georgia by Project Improvement Type, as of 

September 1, 2009 

Bridge replacement ($49.1 million)

Other ($120.9 million)

Pavement widening ($79.9 million)

New road construction ($110.3 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($185.9 million)

34%

20%

15%

9%

22%

Pavement projects total (69 percent, $376.1 million)

Bridge projects total (9 percent, $49.1 million)

Other (22 percent, $120.9 million)

Note: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. 

GDOT is completing its second, and final, phase of Recovery Act planning. 

The final list of projects was approved by the State Transportation Board 

in August 2009. Projects selected include safety improvements, bridge 

repair, and interstate rehabilitation. GDOT officials noted they might add 

more projects if, as we discuss later, bids continue to come in as low as 

they have in recent months. As of September 1, 2009, the department had 

awarded 108 contracts with a total value of $391 million.28

We selected five highway contracts to discuss in greater depth with the 

relevant contracting officials—three state-administered projects in 

Charlton, Fulton, and Greene Counties and two locally administered 

 

28This amount represents only those contracts awarded by the Georgia Department of 

Transportation. Some localities within Georgia also may have awarded contracts with 

Recovery Act funds. 

Page GA-27 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

projects in Gwinnett County.29 We focused on how the contracts were 

awarded and how they will be monitored. The three contracts GDOT 

awarded were for pavement improvement projects (grading, repaving, and 

road marking) on state road sections in three counties. The department 

awarded the contracts on May 29, 2009, with a projected completion date 

of April 30, 2010, for all three contracts. According to department officials, 

the contracts were awarded competitively to contractors on the state’s 

prequalified list.30 The officials stated that the successful bids were from 

12 percent to 26 percent lower than the department’s estimate for the 

work, in part because of the reduced cost of materials. As we discussed i

our July 2009 report, GDOT has established internal controls intended

safeguard Recovery Act projects.

n 

 to 

 

31 Contract engineers are to perform 

monthly construction audits on all Recovery Act projects, and on-site 

inspectors will review project progress daily. In addition, GDOT’s internal 

audit department plans to perform compliance testing on selected 

contracts. 

Gwinnett County’s two projects are intended to manage traffic more 

effectively through the use of surveillance equipment and remote traffic 

signal controls. The contracts were awarded on July 21, 2009, with a 

projected completion date of October 28, 2011. According to county 

officials, the county awarded the contracts competitively to the lowest, 

responsive bidders. Only contractors that are on GDOT’s prequalified list 

could bid on the projects. County officials stated that bids came in from 30 

percent to 35 percent lower than the county’s original estimates. 

According to county officials, the projects will be overseen by an 

engineering firm hired to monitor and validate completed work compared 

with contract requirements. More specifically, the firm will provide 

construction engineering supervision services such as interpretation of 

specifications, testing and material certification, contract changes, 

construction documentation, and intermediate and final inspections. 

29We selected the state-administered highway projects based on geographic distribution 

and total award amounts (more than $2 million). We selected the two Gwinnett County 

projects because they were described in our July 2009 report. 

30As stated on GDOT’s subcontractor application, in order to be added to the state’s 

prequalified contractor’s list, the contractor must receive a favorable review of its 

application, which includes disclosure of general company information, work history, 

company management structure, past job performance evaluations, fixed assets, claims of 

damage or violations, and reference letters. 

31GAO-09-830SP. 

Page GA-28 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

GDOT has created an electronic application to meet FHWA reporting 

requirements on the use of Recovery Act funds. The data collected from 

subrecipients include the number of employees working on a project for 

the month, the number of hours worked on the project for the month, and 

the total payroll for the project that month. In addition to the data 

reported to FHWA on jobs created, GDOT tracks performance measures 

such as the percentage of construction projects completed within the 

expected completion period and percentage of state highways with 

pavements that meet or exceed minimum standards for the Governor’s 

Office of Planning and Budget. 

Since our last Recovery Act report, Georgia has decided to decentralize 

Recovery Act reporting. Although individual state agencies will be 

responsible for reporting, the State Accounting Office is taking a number 

of steps to prepare agencies. 

Although Reporting 

Will Be Decentralized, 

Georgia Has Been 

Preparing State 

Agencies for 

Recovery Act 

Reporting 

Georgia Has Instituted a 

Decentralized Reporting 

Approach 

Since the issuance of OMB’s June 22, 2009, guidance, Georgia has modified 

its approach to Recovery Act reporting.32 We reported in July 2009 that the 

State Accounting Office planned to use a Web-based system to capture 

information from state agencies and then centrally report the data to 

OMB.33 However, on August 7, 2009, the State Accounting Office issued a 

memorandum instituting a decentralized approach to Recovery Act 

reporting. The reasons for the change in approach included the following: 

• OMB’s guidance clarified that “prime recipients” (that is, the state 

agencies) were responsible for recipient and subrecipient data, not the 

state. 

 

32OMB Memorandum, M-09-21, Implementing Guidance for the Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009). 

33GAO-09-830SP. 

Page GA-29 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

• Decentralized reporting would avoid duplication of effort because 

several state agencies were required to report additional information 

to federal agencies. 

• Funds needed to adequately develop a long-term centralized data 

warehouse had not materialized as anticipated. 

• Many state agencies had requested permission to pursue a 

decentralized reporting approach. 

Figure 3 illustrates the decentralized Recovery Act reporting approach in 

Georgia. 

approach in 

Figure 3: Decentralized Recovery Act Reporting Structure in Georgia 

Source: GAO.

SubrecipientSubrecipientSubrecipientSubrecipient

Lead state agency

(prime recipient)

OMB

The August 7, 2009, memorandum from the State Accounting Office 

further established the roles and responsibilities of state agencies and 

their subrecipients. Each state agency, institution, or authority that 

received the initial award of Recovery Act funds is responsible for 

Page GA-30 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

reporting required information into OMB’s Web reporting system

Agencies generally will not be allowed to delegate the reporting 

responsibility to subrecipients, so that the state will have better c

over the accuracy, timeliness, and completeness of the reported 

information. Agency heads and chief financial officers will be held 

accountable for the accuracy, completeness, and timeliness of reporting. 

As a standard internal control to ensure a proper level of review, the State 

Accounting Office will require a certification of the data from each agency 

head and chief financial officer prior to submission to OMB. By signing th

certification, the agency head and chief financial officer confirm th

the report does not contain any misleading information or untrue 

statement of material fact, (2) the report does not omit any requi

information, and (3) the agency has designed and evaluated the 

effectiveness of its internal controls over reporting to provide

. 

ontrol 

e 

at (1) 

red 

 reasonable 

assurance about the reliability and preparation of the report. 

ort that 

s 

stakeholders. The exact format of the report still has not been determined. 

 due on 

down 

 plans 

er 

agency staff involved in Recovery Act reporting. It will focus on the 

 

Although individual state agencies will be responsible for Recovery Act 

reporting to OMB, the state still will collect some information centrally. 

The State Accounting Office plans to develop a state summary rep

will capture consolidated Recovery Act information for Georgia’

Recovery Act Web site, the Governor, the legislature, and other 

The state’s Recovery Act implementation team and State Accounting 

Office plan to work with state agencies to help them prepare for Recovery

Act reporting and monitor their submissions.34 For the first report

October 10, 2009, the implementation team plans to hold weekly 

“countdown” meetings from August 26, 2009, to November 15, 2009, to 

help prepare state agencies for the reporting deadline. At these count

meetings, agency officials will have an opportunity to ask questions, 

propose different scenarios for discussion, and discuss lessons learned 

after their initial submission. In addition, the State Accounting Office

to provide training to state agencies. The training will be targeted to 

Recovery Act reporting coordinators, chief financial officers, and oth

Recovery Act

 to 

covery Act 

Reporting 

Georgia Plans to Provide

Technical Assistance

State Agencies and 

Monitor Re

34As noted in our April 2009 report, Georgia’s Recovery Act implementation team includes a 

senior management team, officials from various state agencies, and a group to support 

accountability and transparency. GAO, 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). 

Page GA-31 GAO-09-1017SP 
Appendix VI: Georgia 

reporting requirements and include a detailed example of how to complete 

OMB’s data collection tool. 

Officials from the State Accounting Office also plan to work individually 

with selected agency heads and chief financial officers to assess their 

agencies’ reporting readiness. The State Accounting Office started 

conducting these readiness reviews in early September 2009. These 

reviews will be mandatory for seven agencies selected based on factors 

such as the amount of Recovery Act funds received. The State Accounting 

Office has developed a questionnaire to help agencies prepare for these 

reviews. The agency will have 60 minutes to present to a team of 

reviewers, including staff from the State Accounting Office, Governor’s 

Office of Planning and Budget, and other agency heads. The presentations 

are to focus on the following: 

• how the agency plans to collect the information for the reports, 

• the controls in place to review and validate the prime recipient data 

and data from subrecipients, 

• the certification and submission process, and 

• postsubmission data quality reviews. 

The State Accounting Office may ask other state agencies to present their 

process and procedures for Recovery Act reporting, as necessary. 

The State Accounting Office plans to monitor state agencies’ Recovery Act 

reporting using a risk-based approach; that is, it developed an audit risk 

tool to prioritize resources and identify high-risk agencies. The tool 

identifies high-risk agencies based on the following criteria: (1) award 

amount, (2) prior audit findings, (3) operational process or system 

complexity, (4) new program, (5) number of subrecipients or vendors, (6) 

lack of manpower or resources, and (7) analysis of the risk-management 

plans required by the Governor’s Office of Planning and Budget.35 Each of 

 

35As stated in our July 2009 report, the Governor’s Office of Planning and Budget required 

state agencies receiving Recovery Act funds to complete risk management plans. The State 

Accounting Office plans to evaluate these plans to help it determine where to apply audit 

resources. Some of the risks identified by state agencies included risks associated with 

reporting requirements, subrecipient issues, information system issues, and insufficient 

staff. See GAO-09-830SP. 

Page GA-32 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

these criteria will be graded using a three-level scale (high, medium, and 

low risk). A composite score will be derived to determine the overall audit 

risk of the agency. The State Accounting Office plans to contract with an 

accounting firm to assist with Recovery Act monitoring. The plan is for the 

selected firm to perform reviews of agency internal controls and perform 

detailed testing based upon the risks and agencies identified in the ranking 

tool. 

State Agencies or Other 

Direct Recipients Are 

Taking Steps to Prepare 

for Recovery Act 

Reporting 

State agencies are taking a number of different steps to prepare for 

Recovery Act reporting. For the Federal-Aid highway program, GDOT has 

developed an electronic tool to capture data from subrecipients. 

Information on jobs created and retained is collected from subrecipients 

on a monthly basis and includes the number of employees working on the 

project each month, number of hours worked on the project, and the total 

payroll for the month. GDOT field personnel and headquarters staff in the 

construction division review the data. The internal audit department will 

perform spot checks of contractor employment records. 

In contrast to the highway program, where GDOT is responsible for all of 

the Recovery Act reporting in the state, both GDOT and transit providers 

that are recipients of Transit Capital Assistance grants are responsible for 

Recovery Act reporting (see fig. 4). GDOT will report data supplied by the 

small urban and rural transit providers it oversees. To date, GDOT has not 

issued guidance on Recovery Act reporting to its subrecipients. To capture 

the data from its subrecipients, the department plans to use a system 

similar to the one it has developed for the highway program. GDOT’s 

internal audit department plans to perform a review of the data submitted 

to OMB. Among other things, it will verify reported projects, subrecipients, 

and vendors; analyze the reasonableness of job impact numbers; and 

identify missing data that should be reported. 

Page GA-33 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Figure 4: Transit Recovery Act Reporting Structure for GDOT and Transit Providers 

in Metropolitan Atlanta 

Source: GAO.

OMB

Clayton

MARTA

Georgia Regional

Transportation

Authority

Cobb

Douglas

Gwinnett

Cherokee

Henry

GDOT

Small

urban Rural

Metro Atlanta area

Counties

Both of the transit providers with which we spoke still were determining 

how to meet Recovery Act reporting requirements. For example, after 

reviewing guidance from FTA and OMB, Gwinnett County had not yet 

determined how it would account for job creation among its contractors. 

Officials cited their bus overhaul project as an example of how 

complicated it could be to estimate jobs. The bus overhaul work was 

awarded to a single contractor with subcontracts for engine overhaul, 

cooling system upgrades, and bus paint and body work. Gwinnett County 

plans to work with its contractors to come up with a methodology for 

estimating jobs created. MARTA had formed a working group to develop 

plans for Recovery Act reporting. For activities such as preventive 

maintenance, it plans to use the factors in the OMB guidance to convert 

staff hours to full-time equivalents. For its fire prevention system upgrade, 

it has issued an addendum to the proposed contract documents requiring 

Page GA-34 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

information on jobs created and retained. Officials noted that it was 

unclear if they should track jobs associated with their bus purchase. FTA’s 

guidance on its reporting requirements indicated that transit providers did 

not need to report jobs associated with the vehicle manufacturing process 

because they were indirect jobs; however, OMB’s guidance did not clearly 

indicate that jobs associated with vehicle procurements were indirect 

jobs. 

For the weatherization program, GEFA will report data supplied by its 

service providers. According to GEFA officials, its contracts with service 

providers require them to provide GEFA with a report on the use of 

Recovery Act funding within 5 days of the end of each quarter. These 

reports are to include the total amount of funds received and spent; a list 

of the projects and activities funded, including a program description, 

completion status, and an estimate of the jobs created or retained; and 

details on subawards and other payments. GEFA officials are developing 

an electronic data collection tool to meet reporting requirements. This tool 

is projected to be implemented by September 30, 2009. All of the service 

providers must use the tool and certify that the information presented is 

correct. According to GEFA officials, the agency has not yet provided 

guidance to its service providers on Recovery Act reporting, but a webinar 

is planned for September 24, 2009. 

For the WIA Youth Program, GDOL will be responsible for submitting 

information supplied by the local workforce boards. The local workforce 

boards will be required to submit data as of August 30, 2009. GDOL set this 

early cutoff date in order to have the data ready by October 10, 2009, as 

required. The department issued an OMB-developed spreadsheet for the 

local workforce boards to complete and guidance on August 28, 2009. The 

department plans to assess data quality during its regular monitoring 

visits, which include a financial component. 

We provided the Governor of Georgia with a draft of this appendix on 

September 8, 2009, and a representative from the Governor’s office 

responded on September 9, 2009. The official agreed with our draft, stating 

that it accurately reflects the current status of the Recovery Act program 

in Georgia. 

Georgia’s Comments 

on This Summary 

Page GA-35 GAO-09-1017SP Recovery Act
Appendix VI: Georgia 

Terri Rivera Russell, (404) 679-1925 or russellt@gao.gov 

Alicia Puente Cackley, (202) 512-7022 or cackleya@gao.gov 

In addition to the contacts named above, Paige Smith, Assistant Director; 

Nadine Garrick, analyst-in-charge; Chase Cook; Erica Harrison; Marc 

Molino; Daniel Newman; Barbara Roesmann; David Shoemaker; and 

Robyn Trotter made major contributions to this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page GA-36 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Illinois. The full report on all of our work, which covers 16 

states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

GAO’s work in Illinois updated funding information on three education 

and one public housing program, and focused on three other programs 

funded under the Recovery Act—Highway Infrastructure Investment, the 

Transit Capital Assistance Program, and the Workforce Investment Act 

(WIA) Youth Program. The three programs we focused on were selected 

for different reasons: 

• Illinois developed its own criteria to define economically distressed 

areas for projects to be funded with Highway Infrastructure 

Investment funds. We followed up to determine if Illinois reassigned 

any of its transportation projects in light of any feedback from federal 

or state officials pertaining to the state’s criteria in identifying 

distressed areas. In addition, highway contracts have been underway 

in Illinois and provided an opportunity to review oversight procedures 

for use of Recovery Act funds. 

• The deadline for obligating a portion of Transit Capital Assistance 

funds was September 1, 2009, and, further, this program provided an 

opportunity to review non-state entities that receive Recovery Act 

funds. 

• The Recovery Act provided funding for WIA Youth Program activities 

including summer employment and, therefore, provided an 

opportunity to review a program that was well underway in Illinois. 

For these three programs in Illinois, GAO focused on how funds were 

being used; how safeguards were being implemented, including those 

related to procurement of goods and services; and how results were being 

assessed. Consistent with the purposes of the Recovery Act, funds from 

the programs we reviewed are being directed to help Illinois and local 

governments stabilize their budgets, stimulate infrastructure development 

and expand existing programs. 

Page IL-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix VII: Illinois 

• Three education programs under the Recovery Act. The U.S. 

Department of Education (Education) has awarded Illinois 

approximately $1.5 billion in U.S. Department of Education State 

Fiscal Stabilization Fund (SFSF) funds. These funds have helped 

the state restore its school districts’ funding shortages. As of 

September 1, 2009, local educational agencies (LEAs) have drawn 

down $1.2 billion. Additionally, Education has awarded Illinois $210 

million in Recovery Act funds under Title I, Part A, of the 

Elementary and Secondary Education Act (ESEA) of 1965.

These funds are to be used to help educate disadvantaged youth; for 

example, through providing professional development to teachers on 

how to relate to this special population. Based on information 

available as of September 1, 2009, LEAs have drawn down $431,500. 

Education has also awarded Illinois $253 million of its Recovery Act 

funds under the Individuals with Disabilities Education Act 

(IDEA), Part B. These funds are to be used to support special 

education and related services for infants, toddlers, children, and 

youth with disabilities. Illinois LEAs have drawn down $1.4 million in 

IDEA funds as of September 1, 2009. While the first half were available 

as of April 1, 2009, Education announced on September 4, 2009 that the 

second half of Title I and IDEA Recovery Act funds were available. 

• Highway Infrastructure Investment. The U.S. Department of 

Transportation’s (DOT) Federal Highway Administration (FHWA) 

apportioned $936 million in Recovery Act funds to Illinois for highway 

infrastructure projects. As of September 1, 2009, $736 million had been 

obligated and $200 million, the most of any state in the country, had 

been reimbursed by the federal government. 

• Transit Capital Assistance Program. The U.S. Department of 

Transportation’s Federal Transit Administration (FTA) apportioned 

$375.5 million in Recovery Act funds to Illinois and urbanized areas 

located in the state. Of this amount, $354.3 million was for urbanized 

areas, and $21.2 million was for non-urbanized areas. As of September 

1, 2009, the federal government’s obligation for Illinois and urbanized 

areas located in Illinois was $360.9 million. 

• Workforce Investment Act Youth Program. The U.S. Department 

of Labor (Labor) allotted about $62 million to Illinois in Workforce 

Investment Act Youth Program Recovery Act funds. The state has 

allocated about $53 million to local workforce investment boards, and 

as of September 1, 2009, expended about $22 million. As of the end of 

August, almost 13,000 youth had been placed in summer employment 

activities across the state. Illinois expects to meet its target for youth 

Page IL-2 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

summer employment activities of 15,000 youth, and the local 

workforce area in the state receiving the most funds—the Chicago 

local workforce area—has met its target of 7,300 youth. We found that 

the type of summer employment opportunities varied across the two 

workforce areas we visited and included positions such as office 

assistants, teacher’s aides, camp counselor assistants, and clerical 

aides. 

• Public Housing Capital Fund. Illinois has 99 public housing agencies 

that, in total, have received $221 million in Recovery Act-funded, 

Public Housing Capital Fund formula grants. As of September 5, 2009, 

83 of these public housing agencies have obligated a total of $76 

million and 56 have drawn down a total $6 million. 

Recipient Reporting: States and localities are among those receiving 

Recovery Act funds directly from federal agencies that are expected to 

report quarterly on a number of measures—including use of the funds, an 

estimate of the number of jobs created and the number of jobs retained. In 

preparation for these reporting requirements, Illinois issued guidance 

since our last report requiring state agencies to develop procedures for 

collecting, entering, reviewing and reconciling these data elements. The 

state is also in the process of conducting a trial run of the reporting 

process for state agencies required to report on the impact of the act. In 

reviewing plans for complying with recipient reporting, we found that 

state and local agencies varied in their approach to, and understanding of, 

reporting requirements. For example, the Illinois State Board of Education 

is currently working on a collection tool that will be used by LEAs in 

reporting Recovery Act required data elements to the Board, while 

officials from transit agencies told us that they largely had existing 

systems in place to report required information. Local workforce board 

officials told us that while they are tracking required information for 

reporting, they were unclear on how to report potential jobs created or 

retained through the WIA program’s summer youth component. 

Page IL-3 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Large decreases in Illinois’ state revenues in fiscal year 2009 contributed to 

an anticipated shortfall of $3.7 billion that will be carried into fiscal year 

2010, which began on July 1, 2009. The budget for fiscal year 2010 was 

passed in July 2009, appropriating $26.1 billion against $29.3 billion in 

estimated revenues and transfers in as well as $2.8 billion in statutory 

transfers out, such as debt payments. The appropriation for fiscal year 

2010 is over $4 billion less than that of fiscal year 2009, although the fiscal 

year 2010 appropriation does not include funds to pay down the estimated 

$3.9 billion backlog in unpaid bills from fiscal year 2009. The state 

borrowed $1.250 billion in August 2009 to assist in paying down this 

backlog of bills. The $29.3 billion in revenue budgeted for fiscal year 2010 

is about $150 million more than estimated fiscal year 2009 revenues. 

However, state revenue sources have declined significantly since fiscal 

year 2008. See Table 1. Budgeted state revenue sources in fiscal year 2010 

are nearly $3 billion less than those earned in fiscal year 2008. Federal 

revenue sources increased substantially over the same time period, from 

$4.815 billion in fiscal year 2008 to a budgeted $7.131 billion in fiscal year 

2010. 

As Illinois Begins 

Fiscal Year 2010 

Facing Fiscal Stress, 

Recovery Act Funds 

Continue to Provide 

Financial Relief 

Table 1: State of Illinois Revenue Summary for Fiscal Years 2008, 2009 and 2010 (in billions of dollars) 

Fiscal Year

2008 Actual

Fiscal Year 2009 

Estimated as of 9/9/09 

Fiscal Year 2010

Budget as of 7/15/09

Total Revenues 27.759 27.551 27.078

State Sources 22.944 20.984 19.947

Federal Sources 4.815 6.567 7.131

Statutory Transfers In 1.900 1.593 2.221

Total Operating Revenues Plus Transfers In 29.659 29.144 29.299

Source: Illinois Governor’s Office data. 

The fiscal year 2010 budget included $3.4 billion in borrowing to cover 

required pension costs, which would make additional funds available for 

other needs. The General Assembly granted the Governor discretion over 

these additional funds by allocating $2.2 billion to human services 

programs and $1.2 billion to undesignated programs in lump sums, as 

opposed to specific line items, requiring the Governor to make the final 

decision as to which programs to fund. 

Governor Quinn also signed a 6-year, $31 billion capital budget in July 

2009, funded by bonds from the state in addition to federal and local 

matching funds. State officials expect over $3.7 billion in Recovery Act 

funding for projects included in the capital budget, depending upon the 

Page IL-4 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

extent to which the state obtains additional grant money available through 

the Act. The state’s anticipated contribution to the overall plan is $13 

billion. The capital plan calls for increases in a variety of motorist fees, in 

addition to the September 1, 2009 increases to sales taxes on candy, 

alcoholic beverages and other products to support the bonds. State 

officials also anticipated a new revenue stream of $300 million annually 

from video gaming terminals to support the bonds, although revenues 

from the terminals were expected to be limited in fiscal year 2010 while 

the new program was implemented. 

Recovery Act funds continued to assist the state in stabilizing its 

distressed financial condition. According to the Commission on 

Government Forecasting and Accountability, the receipt of Recovery Act 

funds allowed Illinois to avoid its largest ever 1-year decrease in revenue 

in fiscal year 2009. State officials expected the receipt of Recovery Act 

funding to allow the state to include an additional $1.965 billion in services 

in the fiscal year 2010 budget. This includes $1.016 billion from SFSF and 

$949 million made available as a result of the increased FMAP, compared 

to $1.039 billion from SFSF and $1.145 billion2

 made available as a result of 

the increased FMAP in fiscal year 2009. State officials said that the state 

did not have any reserve funds available from prior years. 

An official from the Illinois Office of Management and Budget said that the 

state is likely to seek an increase in tax revenues later in fiscal year 2010 

and expected to see enhanced revenues as a result of an economic 

recovery from the recession over the next two fiscal years. This official 

anticipated that the revenue increases would provide the support 

necessary to transition into fiscal year 2011 when SFSF from the Recovery 

Act are not expected to be available. This state official also acknowledged 

that the state is likely to maintain a balance of approximately $3.7 billion 

in unpaid bills at the end of fiscal year 2010. While this is a decrease from 

the expected balance of $3.9 billion in unpaid bills at the end of fiscal year 

2009, any balance at the end of fiscal year 2010 will still affect the budget 

for fiscal year 2011. The state has also formed a Pension Modernization 

Task Force to consider options for pension reform, as its pension plans 

contended with over $54 billion in unfunded liabilities as of the state’s 

most recently published calculation at the end of fiscal year 2008. 

 

2

Of the $1.145 billion made available as a result of the increased FMAP in fiscal year 2009, 

$527 million was made available by the increased FMAP and $618 million was made 

available to assist in decreasing the state’s Medicaid payment cycle to 30 days. 

Page IL-5 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Following the federal Office of Management and Budget’s (OMB) guidance 

on central administrative costs, an official from the Illinois Governor’s 

Office said that Illinois had not determined the method by which to submit 

reimbursement requests3

. However, this official noted that the state was 

leaning towards the billed services option because of the fluidity 

remaining in the fiscal year 2010 budget. The alternate option would rely 

on budgeted or estimated costs instead of actual costs, which would 

present a challenge for Illinois while its budget was still undergoing 

changes. The decision as to which method to use in claiming 

reimbursement for administrative costs was being delayed upon advice 

from the state’s contractor for Statewide Cost Allocation Plan issues, who 

suggested that further legislation may be required in order for the state to 

comply with OMB’s guidance. According to the official, the contractor 

advised the state that applying for reimbursement of administrative costs 

would be premature before the passage of H.R. 2182, currently under 

consideration in Congress4

. The state sought clarification from the U.S. 

Department of Health and Human Services to address this concern, but as 

of September 10, 2009 had not received a response. The official confirmed 

that the state has identified programs for which it could eventually receive 

reimbursement for administrative costs and believed that the costs would 

fall within OMB’s defined limit of 0.5 percent of Recovery Act funds 

received. This official further stated that Illinois may have been better 

positioned to monitor Recovery Act activities more aggressively and 

proactively if the funding for the administrative costs of doing so were 

more readily available. 

 

3

OMB Memorandum, M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Activities, provides two alternatives for states to recoup costs for central 

administrative services, such as oversight and reporting. Alternative 1, Use of Estimated 

Costs for Centralized Services, authorizes the state to use budgeted or estimated costs in 

the submission of Statewide Cost Allocation Plans (SWCAP). Alternative 2, Billed Services, 

allows a state to submit the methodology for identifying, recording and charging 

administrative costs. 

4

H.R. 2182, 111th Cong. (2009). H.R. 2182 passed in the House of Representatives on May 

19, 2009, but, as of September 8, 2009, had not passed the Senate. As passed by the House, 

H.R. 2182 would allow state and local governments to set aside 0.5 percent of Recovery Act 

funds, in addition to funds already allocated to administrative expenditures, to conduct 

planning and oversight to prevent and detect waste, frauds, and abuse. 

Page IL-6 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

State Fiscal 

Stabilization Fund 

Largest Disbursement 

of Recovery Act 

Education Funds 

SFSF The Recovery Act created a State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHE). The initial award of SFSF funding required each state to submit an 

application to the U.S. Department of Education that provides several 

assurances, including that the state will meet maintenance-of-effort 

requirements (or it will be able to comply with waiver provisions) and that 

it will implement strategies to meet certain educational requirements, such 

as increasing teacher effectiveness, addressing inequities in the 

distribution of highly qualified teachers, and improving the quality of state 

academic standards and assessments. In addition, states were required to 

make assurances concerning accountability, transparency, reporting, and 

compliance with certain federal laws and regulations. States must allocate 

81.8 percent of their SFSF 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). 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 

school districts or public IHEs. When distributing these funds to school 

districts, states must use their primary education funding formula, but they 

can determine how to allocate funds to public IHEs. In general, school 

districts maintain broad discretion in how they can use stabilization funds, 

but states have some ability to direct IHEs in how to use these funds. 

ESEA Title I The Recovery Act provides $10 billion to help local educational agencies 

(LEA) educate disadvantaged youth by making additional funds available 

beyond those regularly allocated through Title I, Part A of the Elementary 

and Secondary Education Act (ESEA) of 1965. The Recovery Act requires 

Page IL-7 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

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 current statutory and 

regulatory requirements and must obligate 85 percent of these funds by 

September 30, 2010.5

 The U.S. Department of 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. The U.S. Department of Education made the first 

half of states’ Recovery Act ESEA Title I, Part A funding available on April 

1, 2009 and announced on September 4, 2009 that it had made the second 

half available. 

IDEA The Recovery Act provided supplemental funding for programs authorized 

by Part B of the Individuals with Disabilities Education Act (IDEA), the 

major federal statute that supports the provisions of early intervention and 

special education and related services for infants, toddlers, children, and 

youth with disabilities. Part B funds programs that ensure preschool and 

school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). The U.S. Department of Education made the first half of 

states’ Recovery Act IDEA funding available to state agencies on April 1, 

2009 and announced on September 4, 2009 that it had made the second 

half available. 

Illinois’ Allocation of 

Recovery Act Funds from 

the Department of 

Education 

As of September 1, 2009, Illinois had been awarded $1.5 billion, $210 

million, and $253 million in SFSF; ESEA Title I, Part A; and IDEA, Part B 

Recovery Act funds, respectively. Of these amounts, approximately $1.2 

billion in SFSF; $431,500 in Title I, Part A; and $1.4 million in IDEA, Part B 

funds have been disbursed to LEAs. Illinois did not use any SFSF funds to 

restore funding to public institutions of higher education (IHEs) for fiscal 

year 2009. 

 

5

LEAs 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 IL-8 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

In fiscal year 2010, both LEAs and IHEs will receive SFSF funds to offset 

cuts in state education funding. SFSF distributions in 2010 are estimated to 

represent about 13 percent of the state’s spending of $7.3 billion in general 

funds on K-12 education. The state’s total fiscal year 2010 budget for K-12 

education is projected to be approximately $11 billion, of which about $2.3 

billion represents non-Recovery Act federal spending. In fiscal year 2010, 

the Governor plans to also use all SFSF government services funds for 

education. Eighty-six percent of government services funds will be used to 

fund LEAs and 14 percent will be used for public higher education. Table 2 

below shows how funds were awarded and disbursed for three Education 

programs in Illinois. 

Table 2: Awards and Disbursements of IDEA- Part B, SFSF, and ESEA Title I- Part A 

Recovery Act Funds 

Program 

Name—2009 Funding 

Amount 

Awarded to State 

Amount State

Disbursed to LEAs

IDEA—Part B $253 million $1.4 million

SFSF 1.5 billion 1.2 billion

ESEA Title I—Part A $210 million $431,500

Source: GAO analysis of U.S. Department of Education data and Illinois State Board of Education data. 

There was little Recovery Act activity related to the ESEA Title I and IDEA 

programs in Illinois in fiscal year 2009. Only four LEAs applied for 2009 

ESEA Title I Recovery Act funds, and 11 LEAs applied for 2009 IDEA 

Recovery Act funds. Local officials said that they did not apply for these 

funds in 2009 because of a burdensome application process over a 

relatively short time span, in addition to the fact that the funds available in 

fiscal year 2009 would still be available in fiscal year 2010. 

OIG Reviewing Illinois 

Education Recovery Act 

Internal Controls 

The U.S. Department of Education’s Office of the Inspector General (OIG), 

Chicago/Kansas City/Dallas Region, is currently reviewing the internal 

controls used by entities in Illinois—such as LEAs —that are responsible 

for handling Recovery Act funds. This review will be performed in two 

phases. Phase I determines whether entities charged with responsibility 

for overseeing Recovery Act funds have designed internal control systems 

that are sufficient to provide reasonable assurance of compliance with the 

Recovery Act, program regulations, and guidance. During Phase II, 

reviewers will test controls to determine whether they are effective, and 

determine whether the entity is complying with applicable laws and 

regulations. 

Page IL-9 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

The scope of the review will be limited to controls over data quality, cash 

management, sub-recipient monitoring, and use of Recovery Act funds for 

the SFSF, ESEA Title I, and IDEA programs. The OIG has selected a small, 

medium, and large LEA for its detailed fieldwork. It will also include the 

Illinois State Board of Education’s (ISBE’s) role in distributing these funds 

in the scope of its review. The OIG plans to release its Phase I report on 

September 30, 2009. 

Funds Distribution, Cash 

Management, and 

Reporting 

ISBE is using the SFSF stabilization education funds to fill budget 

shortfalls in its General State Aid payments to LEAs. Therefore, ISBE 

officials explained, IBSE is required by state law to distribute these funds 

on a predetermined schedule of payments—semi-monthly, in equal 

installments on the 10th and 20th of each month. However, SFSF funds are 

federal funds governed by the applicable federal cash management rules.6

In general, these rules require executive agencies implementing federal 

assistance programs and states participating in them to minimize the time 

elapsing between the transfer of federal funds to a state and the 

disbursement of those funds by the state and the time elapsing between a 

state’s disbursement of federal funds to subgrantees, such as LEAs, and 

the disbursement of those funds by subgrantees.7

ISBE has used SFSF funds for its semi-monthly payments to LEAs since 

April 2009, but has not documented cash needs for these payments as 

required prior to making the semi-monthly disbursements. State officials 

explained that ISBE does not have the ability to identify specific cash 

 

6

The Cash Management Improvement Act of 1990, as amended, requires the Secretary of 

the Treasury, along with the states, to establish equitable funds transfer procedures so that 

federal financial assistance is paid to states in a timely manner and funds are not 

withdrawn from Treasury earlier than they are needed by the states for grant program 

purposes. The act requires that states pay interest to the federal government if they draw 

down funds in advance of need and requires the federal government to pay interest to 

states if federal program agencies do not make program payments in a timely manner. The 

Department of the Treasury promulgates regulations to implement these requirements. 31 

C.F.R. pt. 205. However, cash management by subgrantees, such as LEAs, is subject to 

Department of Education grant administration regulations, which may require subgrantees 

to remit to the U.S. government interest earned on excess balances. See 34 C.F.R. §§ 74.22, 

80.21. 

7

For the Department of Education, see 34 C.F.R. § 80.21(b). The specific requirements can 

vary depending on whether the program (1) is listed in the Catalogue of Federal Domestic 

Assistance, (2) meets the threshold for a major federal assistance program, and (3) is 

covered by an agreement between the U.S. Treasury Department and the state, among 

other circumstances. 

Page IL-10 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

needs from LEAs prior to distributing SFSF. Failure to adequately manage 

cash needs could result in two possible adverse effects on the federal 

government. First, ISBE may draw down SFSF funds unnecessarily by not 

minimizing the time elapsing between its drawdown and its payments to 

LEAs, effectively borrowing money from the federal government contrary 

to the general cash management rules. Second, the federal government 

may be subsidizing excess cash balances by LEAs if ISBE makes 

unnecessary payments to the LEAs and the LEAs do not then remit 

interest on the balances to the federal government. 

ISBE, as part of its quarterly expenditure reporting process, completes a 

Cash Summary report designed to identify excess cash balances 

maintained by LEAs. According to state officials, LEAs are considered to 

be maintaining excess cash balances when they do not expend the funds 

they receive within the established timeframe. Cash management by ISBE 

and LEAs in Illinois is an issue we intend to continue addressing in future 

reports. The OIG is also currently evaluating Illinois’ timeliness in 

monitoring excess cash among LEAs. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through federal-aid highway program mechanisms and states 

must follow the existing program requirements, which include ensuring 

the project meets all environmental requirements associated with the 

National Environmental Policy Act (NEPA), paying a prevailing wage in 

accordance with federal Davis-Bacon Act requirements, complying with 

goals to ensure disadvantaged businesses are not discriminated against in 

the awarding of construction contracts, and using American-made iron 

and steel in accordance with Buy America 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. 

Illinois Is Managing 

Highway Projects and 

Will Be Asked to 

Review Its 

Determinations of 

Economically 

Distressed Areas 

Illinois was apportioned $936 million in March 2009 for highway 

infrastructure and other eligible projects. As of September 1, 2009, $736 

million has been obligated. For the Highway Infrastructure Program, the 

U.S. Department of Transportation has interpreted the term obligation of 

funds to mean the federal government’s contractual commitment to pay 

Page IL-11 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

for the federal share of the project. This commitment occurs at the time 

the federal government signs a project agreement. As of September 1, 

2009, $200 million has been reimbursed by FHWA, the highest amount for 

any state in the country. States request reimbursement from FHWA as the 

state makes payments to contractors working on approved projects. 

The majority of Highway Infrastructure Investment funds apportioned to 

Illinois under the Recovery Act have been obligated, but some funds 

remain unobligated at both the state and local levels. At the state level, 

about $38 million in funds available for highways have not been obligated 

largely because contractors’ bids came in below estimated costs. At the 

local level, less than half of the funds available for highway projects have 

been obligated. As of September 1, 2009, a total of $736 million had been 

obligated in Illinois, resulting in 423 highway projects. See Table 3 for data 

on the amount of allocated, obligated, and unobligated funds. 

Table 3: Illinois’s Highway Funds Allocated, Obligated, and Unobligated 

Allocated Obligated Unobligated

70 percent for use on state highways $654,914,893 $616,685,395 $ 38,229,498

30 percent of apportioned funds suballocated for 

metropolitan, regional and local use 

280,677,811 118,825,790 161,852,021

Total $935,592,704 $735,511,185 $200,081,519

Source: GAO analysis of FHWA data. 

About 78 percent of Recovery Act highway obligations are for Illinois’s 

highway pavement projects, compared with 9 percent for bridges and 12 

percent for other projects. Specifically, $577 million of the $736 million 

obligated for Illinois state highway projects as of September 1, 2009, is 

being used for highway pavement projects. This includes $554 million for 

pavement improvements, such as resurfacing. State officials told us they 

selected pavement improvement projects because these types of projects 

can be completed quickly and can create jobs immediately. Figure 1 shows 

obligations by the types of road and bridge improvements being made. 

Page IL-12 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Figure 1: Highway Obligations for Illinois by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($53 million)

Other ($90.8 million)

1%

Pavement widening ($4.8 million)

New road construction ($18.4 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($553.9 million)

Pavement projects total (78 percent, $577.1 million)

Bridge projects total (9 percent, $67.6 million)

Other (12 percent, $90.8 million)

75%

3%

7%

12%

1%

Bridge replacement ($10.3 million)

1%

New bridge construction ($4.3 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

Funds appropriated for highway infrastructure spending must be used as 

required by the Recovery Act. States are required to do the following: 

• Ensure that 50 percent of apportioned Recovery Act funds were 

obligated within 120 days of apportionment (before June 30, 2009). The 

50 percent rule applies only to funds apportioned to the state and not 

to the 30 percent of funds required by the Recovery Act to be 

suballocated, primarily based on population, for metropolitan, 

regional, and local use. In addition, states are required to ensure that 

all apportioned funds—including suballocated funds—are obligated 

within 1 year. The Secretary of Transportation is to withdraw and 

redistribute to other states any amount that is not obligated within 

these time frames.8

 

8

Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009). 

Page IL-13 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

• Give priority to projects that can be completed within 3 years and to 

projects that are located in economically distressed areas. Distressed 

areas are defined by the Public Works and Economic Development Act 

of 1965, as amended.9

 According to this act, to qualify as economically 

distressed, the 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 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. 10

• 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 30, 2010.11

FHWA Will Ask Illinois to 

Review Its Economically 

Distressed Areas 

As of September 1, 2009, Illinois DOT had contracts for 197 of its 223 

Recovery Act highway construction projects, or 88 percent, in the 85 

counties that the state classified as economically distressed. These were 

the same projects the state had reported in June 2009, except for three 

new projects in distressed counties that previously had projects. To 

determine which counties would be considered economically distressed, 

Illinois developed its own criteria, based on the Recovery Act provision 

that a distressed area can be one that has experienced a special need 

arising from severe unemployment or economic adjustment problems 

arising from severe changes in economic conditions, as determined by the 

Secretary of Commerce. Illinois’s criteria reflected the most current data 

available to the state based on changes in unemployment for each of the 

 

9

42 U.S.C. § 3161 

1042 U.S.C. § 3161(a). Eligibility must be supported using the most recent federal data 

available or, in the absence of recent federal data, by the most recent data available 

through the government of the state in which the area is located. Federal data that may be 

used include data reported by the Bureau of Economic Analysis, the Bureau of Labor 

Statistics, the Census Bureau, the Bureau of Indian Affairs, or any other federal source 

determined by the Secretary of Commerce to be appropriate (42 U.S.C. § 3161(d)). 

11Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009). 

Page IL-14 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

state’s 102 counties.12 Use of these criteria allowed the state to focus its 

Recovery Act projects on areas that were most severely affected by the 

recent economic downturn, according to Illinois Department of 

Transportation (IDOT) officials. The state could have used the original 

criteria described by FHWA and supported by maps of each county on 

FHWA’s website. Using those criteria, Illinois would have had 87 of its 223 

Recovery Act projects, or 39 percent, in the 74 counties that FHWA 

classified as economically distressed. FHWA has since issued additional 

guidance which clarifies the special need criteria, changing the locations 

that can be classified as economically distressed. 

Use of Illinois’s criteria led the state to identify several distressed areas in 

more populous areas of the state that were not originally identified as 

economically distressed under FHWA’s criteria. By FHWA’s criteria, 12 of 

the 15 most populous counties in the state were not economically 

distressed. These included the Chicago area (Cook County and its five 

collar counties) where IDOT put 95 projects, plus several other counties 

with smaller population centers, such as Champaign-Urbana, 

Bloomington, Peoria, Rock Island-Moline, and Springfield. While most of 

the available funds are already obligated, IDOT officials said they would 

consider placing projects in the 35 distressed counties, according to 

Illinois criteria, that have no projects. 

We recommended in our July report that the Secretary of Transportation, 

in consultation with the Secretary of Commerce, develop (1) clear 

guidance on identifying and giving priority to economically distressed 

areas, and (2) more consistent procedures for FHWA to use in reviewing 

and approving states’ criteria for designating distressed areas. In response 

to the recommendation, FHWA, in consultation with the Department of 

Commerce, developed guidance that addresses our recommendation. In 

particular, FHWA’s August 2009 guidance directs states to give priority to 

projects that are located in an economically distressed area and can be 

completed within the 3-year timeframe over other projects. In the 

guidance, FHWA also directs states to maintain information as to how they 

identified, vetted, examined, and selected projects located in economically 

distressed areas. In addition, FHWA’s guidance sets out criteria that states 

may use to identify economically distressed areas based on “special need.” 

 

12IDOT classified counties as economically distressed based on (1) whether the 2008 yearend unemployment rate was at or above the statewide average, (2) whether the change in 

the unemployment rate between 2007 and 2008 was at or above the statewide average, or 

(3) whether the number of unemployed persons for 2008 had grown by 500 or more. 

Page IL-15 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

The criteria aligns closely with criteria used by the Department of 

Commerce’s Economic Development Administration (EDA) in designating 

special needs areas 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. According to 

EDA, while the agency traditionally approves special needs designations 

on a case-by-case basis for its own grant program, it does not have the 

resources to do so for the purpose of Recovery Act highway funding.13

Rather, in supplemental guidance issued August 24, 2009, FHWA required 

states to document their reliance on “special need” criteria and provide the 

documentation to FHWA Division Offices, thereby making the designation 

of new “special need” areas for the for Recovery Act highway funding “self 

executing” by the states, meaning the states will apply the criteria laid out 

in the guidance to identify these areas. We plan to continue to monitor 

FHWA’s and the states’ implementation of the economically distressed 

area requirement, including the states’ application of the special needs 

criteria, in our future reviews. FHWA Illinois Division Office officials said 

they notified an Illinois DOT official about release of the new guidance in 

early September 2009 but had not yet discussed its application with state 

officials. FHWA Division Office officials said they will ask Illinois DOT 

officials to reassess their determinations of economically distressed areas 

in the state. 

State Officials Expect to 

Meet the State’s 

Maintenance-of-Effort 

Requirement 

Illinois state officials were satisfied with the state’s ability to maintain 

spending levels for transportation. Illinois passed a capital plan on July 13, 

2009, that should fund transportation infrastructure projects, even if the 

state has an unexpected revenue shortfall. As such, while DOT is 

continuing to enforce the Recovery Act requirement that states maintain 

their February 2009 level of effort, Illinois officials say they expect to meet 

their maintenance-of-effort requirements. 

States are required to certify that the state will maintain the level of 

spending that it had planned on the day the Recovery Act was enacted. 

Because the state’s initial certification submitted in March 2009 contained 

extra explanatory language and required an adjustment in an amount 

computed for the state’s maintenance of effort, the state was asked to 

resubmit its certification with revisions. As we reported in July 2009, 

 

13FHWA’s guidance specifies that special needs determinations will be solely for Recovery 

Act highway funding and will not apply to EDA grant programs. 

Page IL-16 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Illinois resubmitted its certification on May 20, 2009, to the DOT and DOT 

concluded that the form of the Illinois’s resubmitted certification was 

consistent with its additional guidance. FHWA has gathered data to 

evaluate Illinois’s method of calculating the amounts it planned to expend 

for the covered programs to determine if the state’s calculation complies 

with DOT guidance, but, according to FHWA Illinois Division officials, 

FHWA has not yet completed its evaluation. 

Illinois Is Using Existing 

Contracting and Oversight 

Procedures to Oversee 

Recovery Act Highway 

Funds 

According to state officials, Illinois uses the same contracting procedures 

for Recovery Act projects as it does for all other highway construction 

projects. According to officials, the City of Chicago, which awards 

contracts for its own projects, also follows its normal contracting 

procedures. A contract in each area is discussed below (see Tables 4 and 

5). Both entities use construction performance bonds to assure the work is 

completed satisfactorily. According to officials, both entities also 

incorporate the Recovery Act requirements into the written contracts. 

Illinois DOT has implemented enhanced oversight procedures for 

Recovery Act highway funds. Specifically, the services of consultants have 

been retained to assist management with additional oversight activities. 

Using a risk-based selection approach to oversight, the goal is to conduct 

additional on-site reviews of 25 percent of state let state projects, 40 

percent of state let local projects, and 100 percent of local let local 

projects, including the City of Chicago. The enhanced oversight includes 

additional documentation reviews, materials testing and independent 

weight checks. These activities are being coordinated and overseen by inhouse management. 

Table 4: Summary of Contract Information for State Administered Contract 

Grundy County—11 Miles of Milling and Resurfacing on IL Route 47 from IL Route 

113 to Interstate 55 

• Cost—$2,270,771 

• Project start—August 2009 

• Expected completion—40 working days 

Source: Illinois Department of Transportation data. 

IDOT awards and manages contracts related to Recovery Act construction 

projects in Illinois outside of the City of Chicago. According to IDOT 

officials, to perform the work for this project, the new contract was 

awarded competitively, using a fixed-price contract. The contract was 

reviewed by FHWA before the award to ensure it met Recovery Act 

requirements. Agency officials stated that IDOT construction 

Page IL-17 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

requirements, which are located in the IDOT Construction Manual, were 

followed when the contract was awarded. The officials also stated that the 

federal suspension and debarment list maintained by the General Services 

Administration (GSA) is not checked prior to contract award; however, 

contractors and subcontractors are required to certify that they have not 

been disbarred or suspended. According to officials, DOT regulations state 

that participants in the program are not required to make the check, but 

are encouraged to develop a procedure to verify eligibility. Illinois DOT is 

developing a procedure to verify whether or not contractors are on the 

GSA “Excluded Parties List System” (EPLS) prior to contract award and 

will check all Recovery Act contractors (including Aeronautics) against 

the EPLS to ensure no contracts were awarded to debarred/suspended 

contractors. Additionally, Illinois DOT is exploring the possibility of 

automating the procedure to verify whether or not contractors are on the 

GSA EPLS prior to contract award. 

According to agency officials, the agency has standard procedures for 

monitoring construction projects. Inspectors will review the work and 

check material quantities, and conduct spot interviews with employees to 

ensure employees are paid the prevailing wage rates. 

Table 5: Summary of Contract Information for Locally Administered Contract 

Chicago Project—9 miles of Arterial Streets Resurfacing—North Area 

• Cost—$7,985,964 

• Project start—July 2009 

• Expected completion—December 2009 

Source: Chicago Department of Transportation data. 

The Chicago Department of Transportation (CDOT) manages Chicago 

construction projects. The Chicago Department of Procurement Services 

awards the contracts, and for the Chicago project we identified, according 

to officials, a new contract was awarded to perform the project work. 

According to CDOT officials, the contract was awarded competitively, 

using a fixed-price contract. Agency officials stated that they followed 

their usual contracting procedures of conducting pre-bid meetings, and 

providing the bidders with the terms and conditions for construction 

contracts, instruction and execution documents, and detailed 

specifications in the bid books that the bidders receive. CDOT officials 

stated that they check a city suspension and debarment list, and that 

contractors and subcontractors are required to certify that they have not 

been disbarred or suspended. They also stated that IDOT reviews the 

contracts before they are awarded to ensure they meet the Recovery Act 

Page IL-18 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

requirements. According to officials, the contract includes requirements 

for the contractor to report monthly employment data as required by 

Section 1512 of the Recovery Act. According to agency officials, the 

agency 

• has standard procedures for monitoring construction projects; 

• has job site inspections conducted by resident engineers and the 

material quantities are reviewed; and 

• utilizes compliance officers and IDOT engineers to conduct site visits 

as well. 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.14 The majority of the public transit funds—$6.9 billion 

(82 percent)—was apportioned for the Transit Capital Assistance 

Program, with $6.0 billion designated for the urbanized area formula grant 

program and $766 million designated for the nonurbanized area formula 

grant program. 15 Under the urbanized area formula grant program, 

Recovery Act funds were apportioned to 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 under the nonurbanized area formula 

grant program 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. Up to 10 percent of apportioned 

Most Illinois Transit 

Agency Urbanized 

Area Formula 

Program Funds Have 

Been Obligated 

 

14The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

15Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

Page IL-19 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Recovery Act funds may also be used for operating expenses.16 Under the 

Recovery Act, the maximum federal fund share for projects under the 

Transit Capital Assistance Program is 100 percent.17

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

submit to FTA for Recovery Act funding.18 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure disadvantaged businesses 

are not discriminated against when awarding contracts. 

Funds appropriated through the Transit Capital Assistance Program must 

be used in accordance with Recovery Act requirements, including the 

following: 

• Fifty percent of Recovery Act funds apportioned to urbanized areas or 

states are to be obligated within 180 days of apportionment (before 

 

16The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

17The federal share under the existing formula grant program is generally 80 percent. 

18Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and metropolitan planning organizations designated for the area. 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 TIP and the approved State Transportation Improvement 

Program (STIP). 

Page IL-20 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Sept 1, 2009) and the remaining apportioned funds are to be obligated 

within 1 year. The Secretary of Transportation is to withdraw and 

redistribute to other urbanized areas or states any amount that is not 

obligated within these time frames.19

• State governors must certify that the state will maintain the level of 

state spending for the types of transportation projects, including 

transit 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 30, 2010.20 This requirement applies only to state 

funding for transportation projects. The Department of Transportation 

will treat this maintenance-of-effort requirement through one 

consolidated certification from the governor, which must identify state 

funding for all transportation projects. 

• Project sponsors must submit periodic reports, as required under the 

maintenance-of-effort for transportation projects section (§1201(c) of 

the Recovery Act) on the amount of federal funds appropriated, 

allocated, obligated and outlayed; the number of projects put out to 

bid, awarded, or work has begun or completed; project status; and the 

number of jobs created or sustained. In addition, grantees must report 

detailed information on any subcontractors or subgrants awarded by 

the grantee. 

The Recovery Act requires that 50 percent of the funds apportioned to 

urbanized areas or states for the Transit Capital Assistance Program be 

obligated before September 1, 2009. FTA concluded that, as of September 

1, 2009, the 50 percent obligation requirement had been met for Illinois 

and urbanized areas located in the state. More specifically, 

• In March 2009, a total of $354.3 million in Transit Capital Assistance 

Recovery Act funds was apportioned to urbanized areas in Illinois. As 

of September 1, 2009, $349.4 million, or 99 percent had been obligated 

by FTA. 21

 

19Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

20Pub. L. No. 111-5, §1201(a), 123 Stat. 115, 212 (Feb. 17, 2009). 

21For the Transit Capital Assistance Program, the U.S. Department of Transportation has 

interpreted the term obligation of funds to mean the federal government’s contractual 

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

time the federal government signs a grant agreement. 

Page IL-21 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

• Over 90 percent of these funds, $327.6 million, were apportioned to the 

Chicago region, and within the Chicago region, the Regional 

Transportation Authority allocated funds among three transit 

agencies—the Chicago Transit Authority (CTA), Metra (the commuter 

rail system), and Pace (the suburban bus system)—according to an 

existing regional formula. As of September 1, 2009, $325.6 million, or 

99 percent of the funds apportioned to the Chicago region, had been 

obligated.22

• Other urbanized areas in Illinois also received apportionments. A total 

of $26.7 million in urbanized area formula funds was apportioned to 

other urban areas in, or partially in, Illinois.23 All of these areas have 

met the 50 percent obligation requirement. 

Large Transit Agencies 

Have Emphasized Repair 

and Rehabilitation of 

Vehicles 

A significant portion of Recovery Act Transit Capital Assistance program 

obligations for the urbanized areas in Illinois have been for the repair and 

rehabilitation of transit vehicles, including the Chicago Transit Authority’s 

use of $75.2 million to overhaul and rehabilitate bus and rail fleet cars, and 

Metra’s use of $71 million to rebuild aging locomotives. Local transit 

officials told us they selected these projects for a large percentage of 

funding due to their agency’s large maintenance backlogs. Transit agencies 

will also use the funds for other purposes. Metra, for example, will use 

funds to repair tracks and structures, upgrade signal systems, rehabilitate 

several stations, replace air conditioning units on rail cars, and build 

additional station parking. The agency will apply $6.8 million to pay most 

of the cost of the new station and intermodal facility on its Rock Island 

District at 35th Street in Chicago. The CTA also will use funds to repair 

track and buy 50 hybrid buses, and expects that all of its Recovery Act 

capital projects will be completed by the end of 2010. 

According to transit agency officials, identifying projects for Recovery Act 

funds was not difficult. Both the CTA and Metra had future planned 

projects identified in the regional transportation plan that were not yet 

funded, but could quickly be implemented. Projects they could quickly 

 

22Illinois also received a significant amount of Recovery Act transit assistance under the 

Fixed Guideway program. Specifically, the Chicago Transit Authority (CTA) has received 

$48.9 million, and Metra, the Chicago regional commuter railroad, received 46.6 million. 

Illinois’ Fixed Guideway funds are 100 percent obligated. 

23The jurisdiction of some urbanized areas within this state crosses into at least one other 

state. These urbanized areas are reflected in each state that it is located. Therefore, some 

urbanized areas are included in multiple state totals. 

Page IL-22 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

advance were selected, placed in a revised regional plan, and submitted to 

FTA for approval. Both agencies have ongoing contracts funded by federal 

grants and are familiar with federal project requirements, which facilitated 

the process. 

Illinois Has Met the 

Obligation Requirement 

for Nonurbanized Areas 

Illinois was apportioned about $21.2 million in Recovery Act Funds for the 

nonurbanized area formula grant program. The state of Illinois is the 

primary recipient of nonurbanized area funds, and small transit agencies 

will receive Recovery Act funds through IDOT. IDOT has obtained an $11.5 

million grant, primarily to buy 74 new buses and 24 paratransit vehicles for 

these small agencies, to meet the 50 percent obligation requirement. For 

the remaining nonurbanized area funds, IDOT is working with small transit 

providers to identify which additional infrastructure projects are shovelready, and plans to submit these in a second proposal. 

Lack of a Capital Transit 

Program in Illinois 

Eliminates the 

Maintenance-of-Effort 

Requirement 

The Recovery Act includes provisions for the maintenance-of-effort on the 

part of states, specifically to continue funding existing programs at the 

planned level, and not reduce their level of financial effort. In the case of 

Illinois, the state did not have a capital program for transit for the 5 years 

prior to the passage of the Recovery Act, and the state was not providing 

capital funds to transit districts. As a result, Illinois effectively has no 

maintenance-of-effort threshold to meet. Illinois has not transferred any 

Recovery Act highway funds into transit programs. 

Page IL-23 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

The Recovery Act provides an additional $1.2 billion in funds for 

Workforce Investment Act (WIA) Youth Program activities, including 

summer employment. 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

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,24 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.25 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job (2) learn 

work readiness skills on the job, and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.26 Labor’s guidance 

Illinois Expects to 

Meet Its Participation 

and Expenditure 

Targets for Youth 

Placed in WIA 

Summer Employment 

Activities and Has 

Begun to Monitor Use 

of Recovery Act 

Funds 

 

24H.R. Rep. No. 111-16, at 448 (2009). 

25Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

26Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page IL-24 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Illinois Expects to Meet 

Expenditure and 

Participation Targets 

Illinois was awarded a total of about $62 million in Recovery Act funds for 

the WIA Youth Program. The Department of Commerce and Economic 

Opportunity (DCEO), the state’s workforce agency, set aside 15 percent of 

this amount for statewide activities and allocated the remaining funds to 

the local workforce investment areas. As of September 1, 2009, about $22 

million of the $62 million had been expended across the state, with 

$270,000 of this amount expended from the state’s 15 percent set-aside for 

statewide youth activities. In addition, a total of about $57 million had 

been obligated by the state as of that date, including nearly $4 million from 

the state’s 15 percent set-aside. 

State officials told us that they expect to meet participation targets for 

youth placed in summer employment activities. The state targeted 15,000 

youth to be placed in Recovery Act-funded WIA summer youth 

employment activities. As of August 31, Illinois reported that almost 13,000 

participants had been placed in summer employment activities across the 

state. DCEO officials told us that they expect the state to meet its target of 

15,000 youth placed in employment activities as more participant reports 

come in from local workforce areas. The Chicago local workforce area 

targeted 7,300 youth to be placed in summer employment activities, and 

surpassed this target in August. Department of Family and Support 

Services (DFSS) officials we spoke with told us that they were able to 

work with a total of 34 contractors to help meet this target. The GrundyPage IL-25 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Livingston-Kankakee local workforce area targeted 205 youth for summer 

employment activities, and a local workforce board official told us that the 

area was able to place 75 of the targeted 205 youth for the summer. 

According to officials, the area was not able to achieve its target largely 

due to eligibility—either youth that were recruited by contractors not 

being eligible, or youth that may have been eligible failing to submit the 

required documentation. However, in addition to the 175 currently 

enrolled, 130 youth served through the traditional year-round program are 

having summer employment activities supplemented by Recovery Act 

funds. 

DCEO did not set a spending target for local areas’ Recovery Act funding 

for the WIA Youth Program but the agency issued guidance in May and 

June advising local workforce investment areas to expend significant 

Recovery Act funds in the summer of 2009, so long as they have the 

necessary infrastructure in place to quickly implement programming. The 

two local workforce areas we visited—Chicago and Grundy-LivingstonKankakee—had set spending targets for summer youth employment 

activities in their areas. The Chicago local workforce area, which was 

allocated about $17 million in Recovery Act WIA Youth funds, set a target 

to expend its entire allocation by September 30. According to officials we 

met with from the Chicago Workforce Investment Board and the Chicago 

DFSS, they expect to meet this target.27As of September 10, about 50 

percent of the area’s allocation had been expended. The GrundyLivingston-Kankakee local workforce area targeted about $400,000 of its 

roughly $900,000 Recovery Act WIA Youth Program allocation to be 

expended by September 30. Officials from the local workforce investment 

board stated that they expect about $370,000 to be expended by that date. 

However, this local workforce area also used Recovery Act funds to cover 

youth from the WIA year-round program who were enrolled in summer 

employment activities. According to a program official, a total of about 

$195,000 in additional Recovery Act funds will be spent for this purpose by 

September 30. 

 

27The WIA Youth Program in Chicago is implemented by the Chicago Department of Family 

Support Services in coordination with the Chicago Workforce Investment Board. 

Page IL-26 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Officials from both local workforce areas we visited told us that 

challenges existed in determining and documenting WIA youth eligibility. 

Officials told us that they had a limited amount of time to determine 

whether youth applying for summer employment were eligible, and to 

obtain the necessary documentation from them. In the Chicago local 

workforce area, DFSS officials also faced a large number of applications, 

as a total of about 79,000 youth had applied for summer youth employment 

opportunities. To address these issues, DFSS officials told us that they 

provided training to their contractors on WIA eligibility, assigned a liaison 

to each contractor to provide assistance, and conducted file reviews for 

youth selected for employment by contractors to ensure that eligibility 

criteria were met. They also utilized other employees within the 

department to adequately implement eligibility tasks. A GrundyLivingston-Kankakee Workforce Board official told us that, for new 

contractors—those not part of the WIA year-round program—a staff 

member was assigned to go on-site to assist the contractor in determining 

eligibility and obtaining proper documentation from youth. Board officials 

explained that the limited amount of time for youth to provide 

documentation contributed to the workforce area’s inability to meet its 

target for youth participation. Finally, a contractor for WIA summer youth 

employment activities in the Grundy-Livingston-Kankakee workforce area 

also stated that eligibility restrictions–low-income youth without 

additional employment barriers were not eligible to participate in the 

program—added another challenge in recruiting and enrolling youth.28

Local Workforce Areas 

Faced Challenges Related 

to WIA Youth Eligibility 

and Took Steps to Address 

Them 

Summer Youth 

Employment 

Encompassed Various 

Demographic Categories 

and Sectors 

WIA summer youth employment activities in Illinois encompassed various 

demographic categories, such as out-of-school and older youth, and in 

some cases, incorporated academic or occupational skills training. For 

example, as of August 31, a little less than half of all youth participants 

placed in employment activities across the state were out-of-school youth. 

Further, while about two-thirds of participants statewide were youth 14 to 

18 years of age, about 10 percent were older youth—ranging from 22 to 24 

years of age. We also found participation by various demographic 

categories at the local workforce areas we visited. In Chicago, more than 

half of youth placed in employment activities as of September 1 were outof-school youth, and a little less than 10 percent were older youth. In the 

 

28One or more of the following barriers to employment must be demonstrated for eligibility: 

(1) school dropout; (2) basic literacy skills deficiency; (3) homeless, runaway, or foster 

child; (4) pregnant or a parent; (5) an offender; or (6) needs help completing an educational 

program or securing and holding a job. 

Page IL-27 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

Grundy-Livingston-Kankakee workforce area, a little less than half of the 

youth were out-of-school youth, and a little over 5 percent were older 

youth. See Table 6 for data on the age of youth placed in summer 

employment activities across the state. 

Table 6: Age of Illinois Youth Placed in Summer Employment Activities, as of 

August 31, 2009 

Category Number of youth Percentage

Youth age 14 to 18 8,152 63

Youth age 19 to 21 3,420 26

Youth age 22 to 24 1,384 11

Total 12,956 100

Source: Illinois Department of Commerce and Economic Opportunity data. 

According to officials in both workforce areas, about one-fourth of the 

youth received academic skills training as part of their summer work 

employment. In the Chicago local workforce area, DFSS officials also told 

us that one-fourth to one-half received occupational skills training in areas 

such as hospitality, marketing, and health and nutrition. Further, one 

contractor we spoke with in Chicago included a financial literacy 

component for younger youth to teach them how to manage their finances, 

and youth spent the first week of their summer experience learning life 

skills, such as how to prepare for a job and address issues in the 

workplace. In the Grundy-Livingston-Kankakee workforce area, officials 

told us that occupational skills training was not required and, instead, was 

offered informally by contractors. These officials estimated that about 

one-half of the youth they placed were receiving training of this type. 

WIA youth summer program participants were also placed in a range of 

jobs at the two local workforce areas we visited. In the Chicago local 

workforce area, contractors had flexibility in designing their own summer 

program based on the types of jobs they wanted to offer and the youth 

they wanted to target. Overall, youth were employed in a variety of work 

sites, such as Chicago Public Schools, City Colleges of Chicago, the 

Chicago Park District, local museums, retail stores, hotels, and community 

centers. The jobs included positions such as office assistants, teacher’s 

aides, data entry positions, and clerical aides, and some included 

supervisory positions of other summer youth participants. One worksite 

we visited-—the Museum of Science and Industry—-enrolled youth as peer 

educators who facilitated science activities to youth and young children at 

various locations across the city, such as libraries and schools. The 

Page IL-28 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

museum also enrolled some participants as staff who supervised youth 

presenting science activities at the museum. Another work site we visited 

employed youth at a retail clothing store, where they assisted with 

customer service and various retail tasks, such as inventory and 

cataloging. 

In the Grundy-Livingston-Kankakee workforce area, youth were employed 

in jobs such as office assistants, camp counselor assistants, and 

groundskeepers at various worksites such as a local park district, 

community resource center, and community college. At one worksite we 

visited, older youth were mentoring and tutoring younger youth on basic 

education skills, such as math and reading. At both local workforce areas, 

officials stated that some youth were participating in green jobs, such as 

recycling positions at park districts. One contractor we interviewed in 

Chicago had about 25 percent of youth employed in green jobs. In the 

Grundy-Livingston-Kankakee workforce area, about one-fourth of 

employers had youth enrolled in green jobs. Officials in both local 

workforce areas did not identify any issues with how to define a green job. 

However, they primarily defined jobs as green based on their own criteria 

or criteria they identified as appropriate. 

State and Local Efforts to 

Monitor WIA Youth 

Summer Employment 

Focus on File Reviews and 

Site Visits 

The Illinois Department of Commerce and Economic Opportunity 

indicated that staff has begun to monitor aspects of the Recovery Actfunded summer youth employment activities, such as whether youth have 

met eligibility requirements of the program, and the extent to which work 

sites are adhering to workplace safety guidelines and federal/state wage 

laws. The state will utilize similar procedures for monitoring and oversight 

of Recovery Act WIA funds as it does for other WIA funds. For example, 

according to officials, the agency utilizes a file review instrument and 

samples files from all 26 local workforce areas to check that eligibility 

requirements are being met. The agency also conducts site visits to the 

local workforce areas to verify information such as participation and 

completion rates. However, the fiscal year 2008 Statewide Single Audit 

contained a finding that the agency did not adequately document 

supervisory reviews of on-site monitoring procedures for the program, and 

did not communicate findings to sub-recipients in a timely manner. The 

agency noted to us that in the process of monitoring summer employment 

activities thus far, it has encountered some eligibility documentation 

issues, such as participant files missing signatures or documentation of 

citizenship status. The agency has notified local workforce areas that they 

must produce documentation to prove compliance with eligibility, or costs 

associated with their program participants will not be reimbursed. The 

Page IL-29 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

agency is also conducting additional file reviews where eligibility issues 

have been found to determine the costs that could be disallowed. Further, 

officials indicated that, as of August 31, programmatic monitoring plans 

were incorporated into the state’s automated system for WIA file reviews. 

The two local workforce areas we visited relied primarily on file reviews 

and site visits to conduct monitoring of Recovery Act-funded summer 

youth activities. Chicago’s DFSS officials explained that, in addition to 

providing training on WIA eligibility to summer youth contractors, DFSS 

officials conducted file reviews of youth placed in summer employment 

activities to confirm that the proper eligibility documents were in place. 

DFSS officials stated that the department also has an auditing unit that will 

be conducting file reviews of 20 percent of the applications submitted for 

summer youth employment. Furthermore, of the two contractors we 

visited in Chicago, one used a checklist for documenting youth eligibility, 

and the other required youth to meet with in-house staff members that 

typically work with youth on the WIA-year-round program, to obtain the 

necessary documentation. Officials from the latter contractor also told us 

that they hired eight additional staff to assist with determining eligibility, 

among other program implementation tasks. As mentioned earlier, 

officials with the Grundy-Livingston-Kankakee Workforce Board told us 

that for new contractors—those not part of the WIA year-round program—

a staff member was assigned to go on-site to assist the contractor in 

determining eligibility and obtaining proper documentation from youth, 

and conducted file reviews to ensure the necessary documents were in 

place. 

Both local workforce areas also utilized site visits to monitor whether 

youth had meaningful work, and whether worksites met safety 

requirements. In Chicago, DFSS officials told us that a liaison assigned to 

the contractor and staff from the monitoring division of the department 

conduct announced and unannounced site visits to work sites. After a site 

visit, a report is completed that describes whether youth employment 

activities correspond to descriptions submitted by the contractor, 

timesheets are completed on a weekly basis, and the extent to which 

participants have completed work readiness requirements. According to 

officials in the Grundy-Livingston-Kankakee workforce area, workforce 

board staff conducts two site visits to each worksite over the course of the 

summer and fills out a similar report for each visit. We also found that 

contractors conduct site visits to their work sites. For example, one 

contractor that has multiple work sites in Chicago told us that staff 

conducts weekly site visits to ensure that youth are performing meaningful 

Page IL-30 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

work. Similarly, a contractor we interviewed in Kankakee also told us that 

staff members visit each work site twice throughout the summer. 

State and Local Workforce 

Areas Are Attempting to 

Measure Program 

Outcomes 

State and local officials we spoke with stated that they are attempting to 

measure the outcome of Recovery Act-funded summer youth employment 

activities. The Recovery Act specifies that, of the WIA Youth Program 

performance measures, only the work readiness measure is required to 

assess the effectiveness of summer-only employment for youth. Work 

readiness focuses on personal traits—such as work ethic and 

professionalism—and communication and interpersonal skills. 

In Illinois, local workforce boards are required to utilize the WorkNet 

system to measure work readiness. The system contains an online portal 

with a work readiness feature that requires youth to take a pre-test, work 

through several modules such as interviewing and workplace skills, and 

then take a post-test to measure work readiness gains. In addition to 

tracking the work readiness measure, Illinois also plans to rely on existing 

systems that track measures under the traditional WIA year-round 

program to track more information on summer employment activities, 

such as the number of participants enrolled and completion rates, per 

Labor’s requirements. A DCEO official told us that a few modifications 

were made to reporting fields based on program features in the Recovery 

Act. For example, the agency made changes to account for youth ages 22 

to 24 since they became eligible for WIA Youth Program activities through 

funds made available under the Recovery Act. Workforce Investment 

Board officials from both local areas we visited told us that they will also 

be tracking work readiness, and participation and completion rates 

through their existing systems, and will also be attempting to track the 

extent to which any youth are hired on permanently after their summer 

employment activities are over. Officials in both workforce areas 

explained that since the end-date for summer employment activities is 

September 30, 2009, information on all youth would not be available until 

after that date. 

Page IL-31 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

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.29 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. Recovery Act requirements specify that public housing 

agencies must obligate funds within 1 year of the date on which they are 

made available to public housing agencies, expend at least 60 percent of 

funds within 2 years, and expend 100 percent of the funds within 3 years. 

Public housing agencies are expected to give priority to projects that can 

award contracts based on bids within 120 days from the date on which the 

funds are made available, as well as projects that rehabilitate vacant units, 

or those already under way or included in their current required 5-year 

capital fund plans. 

Illinois Public 

Housing Agencies 

Continue to Obligate 

and Draw Down 

Recovery Act 

Formula Grants 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million), 

• gap financing for projects that are stalled due to financing issues ($200 

million), 

• public housing transformation ($100 million), and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

will be threshold based, meaning applications that meet all the threshold 

requirements will be funded in order of receipt. If funds are available after 

 

29Public housing agencies receive money directly from the federal government (HUD). 

Funds awarded to the public housing agencies do not pass through the state budget. 

Page IL-32 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

Illinois has 99 public housing agencies that have received Recovery Act 

formula grants. In total, these public housing agencies received $221 

million in Public Housing Capital Fund formula grants (see fig. 4). As of 

September 5, 2009, 83 of these public housing agencies have obligated $76 

million and 56 have drawn down $6 million. We visited two public housing 

agencies in Illinois for our July report. They are the Chicago Housing 

Authority and the Housing Authority for LaSalle County. We will provide 

updated information on these housing agencies in a future report. 

Figure 2: Percentage of Public Housing Capital Funds Allocated by HUD that Have Been Obligated and Drawn Down in 

Illinois, as of September 5, 2009 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

100%

$221,498,521

Funds obligated 

by public housing agencies

34.2%

$75,704,050

Funds drawn down

by public housing agencies

2.8%

$6,266,406

83

56

Number of public housing agencies

Source: GAO analysis of HUD data.

99

Page IL-33 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

States and localities are among those receiving Recovery Act funds 

directly from federal agencies that are responsible for tracking and 

reporting on those funds.30 More specifically, they 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. 

The jobs created and jobs retained numbers are part of the recipient 

reports required under section 1512(c) of the Recovery Act and will be 

submitted by recipients starting in October 2009. In preparation for 

reporting, Illinois has disseminated guidance to state agencies on federal 

reporting requirements, including preliminary guidance on jobs created 

and retained. Since our last report, the state’s Recovery Act Executive 

Committee issued a memorandum to state agencies requiring that they 

develop procedures and reconciliations for the collection of data 

elements, entry of data, and review of data.31 The Executive Committee 

has also sent a questionnaire to state agencies inquiring about award 

amounts, number of subrecipients and related contract information, 

project status documentation, and job creation information to assess

potential timeliness and accuracy of reporting. Further, Illinois is in the 

process of utilizing the templates made available through 

federalreporting.gov to conduct a ‘test run’ by each of the state agencies 

required to report on the impact of the act on October 10th. According to

state officials, the main benefit of conducting the test run is that it 

provide additional information for the state to proactively identify areas 

where reporting and technical questions still exist. It will also allow

state to identify misconceptions or conflicts to previously issued guidan

and provide clarifications prior to the October deadline. The reporting 

deadline for the test run was September 9, 2009. As of September 15th

, 

specific results from the test run had not yet been co

State and Local 

Agencies We Met with 

Varied in Their 

Approaches to, and 

Understanding of, 

Recipient Reporting 

Requirements 

 the 

will 

 the 

ce 

mpletely finalized. 

 

Education Programs The Governor’s Office has directed ISBE to perform certain functions 

related to the administration of Recovery Act SFSF funds, including 

collection of data and reporting, in meeting the requirements of Section 

1512. ISBE is currently working on a collection tool that will be used by 

LEAs in reporting Recovery Act required data elements to ISBE. The 

electronic expenditure reports generated will be collected along with 

30Pub. L. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

31The Recovery Act Executive Committee is comprised of state executives, including the 

Deputy Chief of Staff for Economic Recovery, the Chief Internal Auditor, the Budget 

Director, and the Chief Information Officer 

Page IL-34 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

required Recovery Act data on jobs saved, created, and vendor 

information. ISBE will capture and forward all of these required data to 

federalreporting.gov. ISBE officials have also met with staff in the 

Governor’s office responsible for Recovery Act reporting to ensure that 

they are adequately prepared. ISBE has also received guidance from the 

state on job creation and retention, and officials have attended all OMB 

Recovery Act reporting online seminars to ensure they are familiar with, 

and meeting, OMB requirements. Lastly, ISBE is working with a technical 

assistance team from the U.S. Department of Education Risk Management 

Service office to resolve questions and issues related to the Recovery Act, 

including reporting. 

Highway Infrastructure 

Investment 

For highway projects, Illinois collects and reports employment data and 

information related to project implementation and expenditures. Illinois 

transportation officials stated that they require contractors and 

subcontractors to submit monthly employment information, including the 

number of employees, the amount they are paid, and hours worked. 

According to Illinois Department of Transportation officials, they use a 

Web application called IDOT American Recovery and Reinvestment Act—

Contractor/Consultant Reporting to track the number of jobs created 

through Recovery Act highway funds. This contractor reporting system 

was originally developed around FHWA’s Recovery Act monthly 

employment data requirements, but is being modified to capture additional 

data specified in OMB’s recent guidance.32 For any project that receives 

FHWA Recovery Act funds, the state must require its contractors to report 

on its own workforce as well as the workforces of any subcontractors that 

were active for the reporting month, and to report data quarterly to OMB’s 

federalreporting.gov Web site. 

Both state and local highway officials were unclear on how to treat one 

reporting requirement described in OMB’s guidance. The requirement calls 

for recipients and subrecipients to report the names and compensation for 

each of their five most highly compensated officers for the calendar year 

in which the award is given. State and local officials stated that while this 

could apply for contractors, they were uncertain as to how it should be 

applied to government agencies. IDOT officials said they had asked FHWA 

for clarification. In September 2009, FHWA provided guidance explaining 

 

32Recent OMB reporting guidance includes its June 22, 2009, memo and a recipient 

reporting data model (version 2.0 and version 3.0). 

Page IL-35 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

that this reporting requirement only applies to certain recipients—

contractors working for a state or local agency do not have to report and 

state or local governments only have to report if they meet specific 

reporting thresholds.33 Illinois governments do not meet those reporting 

thresholds, according to an Illinois DOT official. 

Transit Capital Assistance The Recovery Act also provides reporting requirements for transit 

agencies to track funds they receive. Officials from the large transit 

agencies we visited for this review—the Chicago Transit Authority and 

Metra—did not consider the reporting requirements to present compliance 

problems. Officials from both agencies said existing information systems 

could readily segregate Recovery Act funds and accommodate the 

reporting requirements. For example, Metra’s existing grants tracking 

system produces detailed reports on the financial status of all projects by 

funding source, including Recovery Act funding. Likewise, IDOT officials 

said that existing systems can be used to collect and report the transit 

information required under the Recovery Act. 

WIA Summer Youth 

Activities 

For WIA summer youth employment activities, officials with the 

Department of Commerce and Economic Opportunity told us that they are 

not delegating any Section 1512 reporting to subrecipients, and expect that 

this will avoid any potential double-counting. Officials told us that they are 

confident in the agency’s ability to report on the amount of funds spent 

using the agency’s own system, which tracks information on obligations 

and expenditures. However, officials told us that specific information 

regarding vendors of subrecipients—entities that the local workforce 

boards contract with—may not be readily available or easily verified. They 

also told us that the agency is working on a system or a Web site to 

capture this information, but the details of how this information will be 

collected had not been finalized at the time of our meeting. Officials at 

both local workforce areas we visited told us that they are tracking jobs 

created or retained through use of Recovery Act funds either at their local 

offices or by vendors to support implementation of the program, but are 

 

33A state or local government would meet the reporting threshold if it received 80 percent 

or more of its annual gross revenues in the preceding fiscal year from federal awards, and it 

received $25 million or more in annual gross revenues in the preceding fiscal year from 

federal awards, and the public does not have access to the information through Securities 

and Exchange Commission or Internal Revenue Service filings as specified in the Federal 

Funding Accountability and Transparency Act of 2006. 

Page IL-36 GAO-09-1017SP Recovery Act
Appendix VII: Illinois 

not clear on how to report this information due to little guidance they have 

seen. Further, officials are attempting to track the number of youth hired 

permanently with employers after their summer employment activities are 

completed, but are also unsure of how to report this information. They 

anticipate receiving additional guidance from the Department of 

Commerce and Economic Opportunity. 

We provided the Office of the Governor of Illinois with a draft of this 

appendix on September 11, 2009. The Deputy Chief of Staff responded for 

the Governor on September 14, 2009. The state concurred with our 

statements and observations. The official also provided technical 

suggestions that were incorporated, as appropriate. 

Leslie Aronovitz, (312) 220-7712 or aronovitzl@gao.gov 

Cindy Bascetta, (202) 512-7114 or bascettac@gao.gov 

In addition to the contacts named above Paul Schmidt, Assistant Director; 

Tarek Mahmassani, analyst-in-charge; Rick Calhoon; Dean Campbell; 

Robert Ciszewski; Roberta Rickey; and Rosemary Torres Lerma made 

major contributions to this report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page IL-37 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

The following summarizes our work on the third of our bimonthly reviews 

of American Recovery and Reinvestment Act (Recovery Act)1

 spending in 

Iowa. The full report on all of our work, which covers 16 states and the 

District of Columbia, is available at http://www.gao.gov/recovery/. 

Overview 

Our work in Iowa examined the state’s actions to stabilize its budget, to 

report on Recovery Act results to the federal Office of Management and 

Budget (OMB), and to monitor controls over Recovery Act funds. We 

updated funding information on Recovery Act education programs. In 

addition, for three programs—higher education, highway infrastructure, 

and weatherization—we reviewed the use of Recovery Act funds; the 

implementation of safeguards over these funds, including those related to 

the procurement of goods and services; and efforts to assess results from 

the use of these funds. We selected these three programs because they are 

among the programs receiving the greatest amount of Recovery Act funds 

in Iowa and have recently begun to disburse or are already using 

significant amounts of Recovery Act funds. Specifically, Iowa institutions 

of higher education have received their first disbursements of Recovery 

Act funds, providing the opportunity to examine the use of Recovery Act 

funds by nonstate entities. Iowa has obligated funds for several highway 

infrastructure projects, providing an opportunity to review contract 

administration for four selected projects—two state-administered and two 

locally administered—located in different highway districts and counties. 

Finally, Iowa’s Weatherization Assistance Program has received 50 percent 

of its total Department of Energy (DOE) allocation, providing the 

opportunity to examine the use of some of these funds and review Iowa’s 

program to weatherize more than 7,000 homes of low-income residents. 

Consistent with the purposes of the Recovery Act, funds from the 

programs we reviewed are being directed to help Iowa and its local 

governments stabilize their budgets and promote economic recovery—

thereby providing needed services and potentially creating and saving 

jobs. In addition, the use of Recovery Act funds must comply with specific 

program requirements but also, in some cases, enables states to free up 

state funds to address their projected budget shortfall. The following 

provides highlights of our review: 

Page IA-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix VIII: Iowa 

Education Programs 

Funded under the 

Recovery Act 

• As of August 31, 2009, the U.S. Department of Education (Education) 

has made available about $439.1 million of the total $566.6 million in 

Recovery Act funds Iowa expects to use for education. 

• As of August 31, 2009, Education had made available to Iowa about 

$51.5 million in Recovery Act funds under Title I, Part A, of the 

Elementary and Secondary Education Act (ESEA) of 1965. The Iowa 

Department of Education had disbursed about $16.2 million to school 

districts. These funds are to be used to help educate disadvantaged 

youth. 

• As of August 31, 2009, Education had also made available to Iowa 

about $126.2 million in Recovery Act funds under the Individuals with 

Disabilities Education Act (IDEA), Part B. The Iowa Department of 

Education had disbursed about $25.2 million to school districts and 

area education agencies. These funds support special education and 

related services for children and youth with disabilities. 

• As of August 31, 2009, Education had made available to Iowa about 

$261.4 million of the $388.9 million in State Fiscal Stabilization Fund 

(SFSF) funds for education stabilization and government services 

funds that Iowa plans to use for education. Iowa had disbursed about 

$40 million to school districts, $13.2 million to public universities, and 

$4.3 million to community colleges. Iowa plans to use these funds to 

restore state aid to school districts and community colleges and to 

restore state appropriations to public universities. Iowa plans to use an 

additional $83.5 million in SFSF government services funds for other 

programs, including public assistance and Medicaid. 

Institutions of Higher 

Education 

• Of the $388.9 million in SFSF funds Iowa plans to use for education, it 

is using approximately $105 million to support institutions of higher 

education—about $79.4 million for public universities, and about $25.6 

million for community colleges. As of August 31, 2009, public 

universities had received about $13.2 million, and community colleges 

had received about $4.3 million in SFSF funds. The two institutions of 

higher education that we visited are using Recovery Act funds to 

stabilize their budgets, mitigate tuition increases, and save jobs. 

Highway Infrastructure 

Investment Program 

• The U.S. Department of Transportation’s Federal Highway 

Administration (FHWA) apportioned $358 million in Recovery Act 

funds to Iowa. As of September 1, 2009, the federal government had 

Page IA-2 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

obligated $320 million for Iowa projects,2 and Iowa had been 

reimbursed $91 million for work submitted for payment by highway 

contractors.3

• According to state transportation officials, citing Iowa’s most recent 

report to the U.S. House Committee on Transportation and 

Infrastructure, the Recovery Act funded 2,724 highway contractor 

employees in July 2009. Officials said that, cumulatively, Iowa’s 

Department of Transportation has reported to the committee that the 

Recovery Act has funded more than 363,000 hours of work. 

• Iowa transportation officials estimated that for projects completed as 

of August 17, 2009, Recovery Act funding has contributed to the repair 

of more than 110 miles of state, county, and city roads. 

Weatherization Assistance 

Program 

• The U.S. Department of Energy (DOE) allocated $80 million in 

Recovery Act funds to Iowa for the Weatherization Assistance 

Program. Iowa plans to use these funds to help more than 7,000 lowincome families reduce their utility bills by making long-term energyefficient improvements to their homes. 

• As of August 31, 2009, Iowa had received about $40.4 million, or 50 

percent of its total DOE allocation, but had spent only about 5 percent 

of the funding received. No homes had been weatherized using 

Recovery Act funds, but Iowa has used funds to provide training and 

technical assistance and purchase vehicles and equipment—“ramp up” 

activities—that will be used when the Recovery Act Weatherization 

Program is fully implemented in the state. 

• Home weatherization activities were on hold in Iowa until August 19 

when the Department of Labor (Labor) established a prevailing wage 

rate for weatherization work in the state. On August 20, state officials 

received notification that prevailing wages had been determined and 

notified local agencies that they could accept bids and issue contracts 

for weatherization. 

 

2

This does not include obligations associated with $0.6 million of apportioned funds that 

were transferred from FHWA to the Federal Transit Administration (FTA) for transit 

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

funds made available for transit projects to FTA. 

3

States request reimbursement from FHWA as they make payments to contractors working 

on approved projects. 

Page IA-3 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Iowa’s use of approximately $710.3 million in Recovery Act funds for fiscal 

years 2009 and 2010 has helped stabilize its state budgets for these fiscal 

years by replacing some of the state’s lost tax revenues.4

 The Iowa 

Department of Management expects the fiscal year 2009 budget to be 

balanced after the Iowa Department of Management reconciles the books 

in September 2009, while the Legislative Services Agency expects a yearend revenue shortfall for the fiscal year 2009 budget. Senior officials from 

the Iowa Department of Management indicated that, in addition to the use 

of Recovery Act funds as allocated by the General Assembly, the Governor 

has the authority to transfer up to $50 million from Iowa’s Economic 

Emergency Fund to balance the fiscal year 2009 budget. Additionally, state 

officials expect a reduction in revenues for the state budget in fiscal years 

2010 and 2011. The Governor also has the authority to continue controls 

on certain administrative expenditures and to implement across-the-board 

reductions in agency budgets if the Iowa Revenue Estimating Conference 

(REC) reduces revenue projections for fiscal year 2010 according to state 

officials. Further, some agencies are planning for furloughs and layoffs in 

fiscal year 2010.5

 Depending on the decision by the REC, the state is also 

considering the need for further reductions in agencies’ budgets in fiscal 

year 2011. 

While Recovery Act 

Funds Helped Iowa 

Respond to Declining 

Revenues, the State Is 

Planning for the 

Possibility of 

Additional Budget 

Shortfalls 

As of July 2009, state officials reported that gross General Fund receipts 

for fiscal year 2009 had declined more than previously expected,6

 primarily 

due to a reduction in revenues collected from personal income, corporate 

income, and taxes on insurance premiums. Iowa had already used 

approximately $166.2 million in Recovery Act funds to offset revenue 

losses in fiscal year 2009, thereby avoiding layoffs, program cuts, and 

furloughs. Nonetheless, in the Iowa Department of Management’s monthly 

2009 General Fund receipts memorandum, budget officials reported that 

year-to-date gross fiscal year 2009 receipts for Iowa’s General Fund were 

about $57.7 million below the March 2009 revenue projections made by the 

REC. Similarly, the Iowa Legislative Services Agency reported on July 1, 

 

4

The use of Recovery Act funds must comply with specific program requirements but also, 

in some cases, enables states to free up state funds to address their projected budget 

shortfalls. 

5

The REC, which is comprised of the Governor or a designee, the director of the Legislative 

Services Agency or a designee, and a third member agreed to by the other two, convenes 

quarterly to prepare the state’s estimates of tax-receipt revenues for use in preparing the 

annual budget. 

6

Iowa’s fiscal year begins July 1 and ends June 30. 

Page IA-4 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

2009 that fiscal year 2009 revenues could be as much as $161 million below 

projections.7

 If additional funding is needed, state officials said that they 

cannot use Recovery Act funds because the General Assembly did not 

provide the statutory authority for the Governor to use Recovery Act funds 

to mitigate such shortfalls. However, senior officials from the Iowa 

Department of Management said that the Governor has the authority to 

transfer up to $50 million from Iowa’s Economic Emergency Fund to 

balance the state’s fiscal year 2009 budget, and to continue controls on 

certain administrative expenditures such as association memberships and 

out-of-state travel. In addition, senior officials from the Iowa Department 

of Management said that the Governor can call a special session of the 

General Assembly; however, the Governor has indicated that he would not 

schedule a special session. Senior officials from the Iowa Department of 

Management expect that the fiscal year 2009 budget will be balanced when 

the Iowa Department of Management closes the fiscal year 2009 books, 

because refunds are lower than projected by the REC and the return of 

appropriated funds from state agencies are higher than expected due to 

non-program expenditure controls. 

While senior officials from the Iowa Department of Management said that 

the state’s fiscal year 2010 budget is balanced using current revenue 

projections from the REC, the REC could lower its estimate of revenues 

available for fiscal year 2010 at its next meeting, which is scheduled to 

occur on October 7, 2009. According to senior officials from the Iowa 

Department of Management, the Governor’s executive authority provides 

various options to address any resulting projected shortfalls in the state’s 

budget. For example, the Governor may implement across-the-board 

reductions in the state’s General Fund appropriations through an 

Executive Order,8

 increase efficiencies in programs and services, or 

continue current controls on certain expenditures such as out-of-state 

travel. Senior officials from the Iowa Department of Management said that 

 

7

According to state budget officials, the Governor’s calculations for the gross fiscal year 

2009 General Fund receipts currently do not include estimated tax refunds for taxpayers, 

receipts of additional federal funds, and transfers of surplus funds from agencies. Such 

information will not be completed by state budget officials until the state finishes 

processing revenues and expenses for fiscal year 2009, which should occur by the end of 

September 2009. According to officials from the Legislative Services Agency, the agency’s 

calculations for fiscal year 2009 revenues include estimated tax refunds for taxpayers and 

monthly transfers to Iowa’s school infrastructure refund account. 

8

In December 2008, because of declining revenue projections, the Governor directed an 

across-the-board 1.5 percent reduction in the state’s General Fund appropriations. 

Page IA-5 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

the Governor also has the authority to call the General Assembly into a 

special session to address budgetary issues. Iowa plans to use 

approximately $544.1 million in Recovery Act funds in fiscal year 2010 for, 

among other things, maintaining funding levels for existing education and 

health care programs.9

 However, senior officials from the Iowa 

Department of Management noted that if the estimated revenues are 

lowered, and the Governor implements an across-the-board reduction in 

General Fund appropriations, some state agencies may have to begin 

laying off state workers during the fiscal year. Furthermore, a few state 

agencies are already developing contingency plans for furloughs of state 

employees throughout fiscal year 2010. 

At the direction of the Governor, Iowa’s budget director sent a letter on 

July 23, 2009 to state agencies requiring that they draft a “status quo” 

General Fund budget request for fiscal year 2011, in view of a potential 

decline in General Fund revenues. Each agency was requested to limit its 

fiscal year 2011 budget to its 2010 General Fund expenditures, after 

adjusting for certain one-time appropriations, such as those from 

Recovery Act funds. Additionally, senior officials the Iowa Department of 

Management suggested that agencies draft recommendations for reducing 

the General Fund appropriation from their fiscal year 2010 appropriation. 

According to senior officials from the Iowa Department of Management, 

agencies are required to submit their budget requests to the Governor by 

October 1, 2009. The Governor will then use the agencies’ requests and 

revenue estimates from the December 2009 REC to formulate a 

consolidated fiscal year 2011 budget proposal for consideration by the 

General Assembly. 

Additionally, state officials are seeking ways to improve government 

efficiency. For example, to make the delivery of state services more 

efficient, the Governor has hired a performance-review consultant to 

identify operational efficiencies and cost savings, such as eliminating any 

duplicate government services provided by different state agencies. State 

officials also said they planned to seek public input for identifying cost 

savings and to develop a Web site for the public to track state plans for 

streamlining government operations. Similarly, the bipartisan State 

Government Reorganization Commission, made up of 10 General 

 

9

Recovery Act funds used to maintain funding levels include, but are not limited to, Federal 

Medical Assistance Percentage funds (discussed in GAO-09-1016) and State Fiscal 

Stabilization Fund monies. 

Page IA-6 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Assembly members, held its first meeting on September 9, 2009. The 

Commission is to consider options for reorganizing state government to 

improve efficiency, modernize processes, eliminate duplication, reduce 

costs, and increase accountability. It is also to address the expanded use 

of the Internet and other technology. It is scheduled to meet again on 

December 10, 2009. 

Senior officials from the Iowa Department of Management said that Iowa 

does not plan to take advantage of the federal OMB’s recent memorandum 

on recouping administrative costs related to Recovery Act activities 

because the General Assembly has already appropriated and prescribed 

the use of Recovery Act funds for fiscal years 2009 and 2010.10

Consequently, according to senior officials from the Iowa Department of 

Management, the Governor does not have the authority to reallocate such 

funds for administrative costs. Senior officials from the Iowa Department 

of Management added that the General Assembly had already allocated 

$400,000 in the fiscal year 2010 budget for the central administration of 

Recovery Act funds in Iowa, and noted that state agencies are already 

spending most Recovery Act funds. 

Through a Recovery Act implementation working group, the Iowa 

Department of Management is developing a centralized database to report 

Recovery Act information—funds received and expended, and 

performance measures, such as jobs created and saved—to OMB, other 

federal entities, and the general public, as required by section 1512 of the 

Recovery Act.11 However, state officials said that they need specific 

answers from OMB to help them report information centrally. Iowa is 

implementing procedures and controls in its centralized database to help 

ensure the completeness, accuracy, and consistency of the information it 

reports. In addition to the Recovery Act database, Iowa’s “Results Iowa” 

Web site provides information about Iowa’s efforts towards achieving 

results in areas such as workforce development, economic growth, health 

care, and education and may offer an additional opportunity to 

demonstrate results of Recovery Act funding. 

Iowa Is Developing a 

Centralized Database 

to Report Financial 

and Performance 

Information on the 

Recovery Act to OMB 

 

10OMB, Memorandum M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Activities (May 11, 2009). 

11Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

Page IA-7 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Iowa’s Executive Working 

Group Is Collaborating 

with State Agencies and 

Localities to Create a 

Centralized Database for 

Reporting on the Recovery 

Act 

In March 2009, Iowa established a Recovery Act implementation executive 

working group to provide a coordinated process for (1) reporting on 

Recovery Act funds available to Iowa through various federal grants and 

(2) tracking the federal requirements and deadlines associated with those 

grants. The implementation working group comprises representatives 

from nearly two dozen state agencies, led by the executive working group, 

and assisted by groups that will focus on implementation issues such as 

budget and tracking, intergovernmental coordination, and 

communications. Officials from this group told us that they are working 

with Iowa agency officials to create a centralized database to collect and 

summarize Recovery Act information, such as funds received and 

expended and the number of jobs created and saved, to be reported to 

OMB and the general public. Iowa officials noted that their first priority is 

to report on funds received and expended by state agencies and then those 

funds received directly by localities throughout the state. 

To centralize reporting on the Recovery Act, Iowa officials told us that 

they are developing a Web-based system that is to collect and summarize 

financial and performance information by state agencies and localities 

receiving funds through state distributions to communicate how Recovery 

Act funds are being used in Iowa, as well as the results of those funds. To 

facilitate this process, Iowa officials told us that they provided instructions 

to state agencies, and are building instructions into their database program 

on how to account for and report Recovery Act funds, among other things. 

Iowa officials also completed a summary of data element descriptions to 

help ensure the consistency of the data reported. To help ensure their 

readiness to report on Recovery Act funding by October 10, 2009, Iowa 

officials planned to perform two tests of their Recovery Act reporting 

system. From August 13 through 21, 2009, Iowa tested the appropriateness 

of the data elements and reviewed controls over Recovery Act 

subrecipients who have been delegated reporting responsibilities under 

section 1512 of the Recovery Act. The results of the first test revealed 

program errors, such as difficulties in uploading spreadsheet data, that 

Iowa officials plan to promptly correct. For the second test, to be held 

September 8 through 18, 2009, all agencies are required to report Recovery 

Act funds received in the state’s reporting database. 

In addition, Iowa officials told us that they have created a working group 

to develop a consistent methodology to measure jobs created and saved 

from Recovery Act funds as well as from Iowa’s I-JOBS program—a state 

program to invest in infrastructure—and federal flood recovery. 

Consistently measuring jobs created and saved can help provide greater 

transparency of the benefits of these programs. 

Page IA-8 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

According to officials with the Iowa executive working group, they are 

developing internal controls to help ensure that information reported to 

OMB and the general public from Iowa’s centralized reporting database is 

accurate. For example, all Recovery Act funds are identified by unique 

codes in state agencies’ accounting systems. In addition, data validation 

processes are being built into the database to help reviewers identify and 

correct any inaccurate data. As an added measure, the executive working 

group plans to reconcile Recovery Act funds received against expenditures 

using reports generated from the Recovery Act reporting database as well 

as Iowa’s existing accounting system. The executive working group also 

plans to incorporate a tracking function into the database so the state can 

identify Recovery Act recipients and subrecipients and notify appropriate 

officials if reporting time frames are not met. 

Iowa Is Developing 

Internal Controls to Help 

Ensure Accurate Reporting 

of Recovery Act Results 

As a way to help improve the completeness, accuracy, and consistency of 

the information, state agency and locality officials will be required to 

certify their approval of their agency’s Recovery Act Section 1512 

information prior to submission. For example, Iowa transportation 

officials told us that it has a dedicated group that is responsible for 

reviewing Iowa transportation information before it is submitted. 

Similarly, Iowa education officials told us that they are developing policies 

and procedures for the Recovery Act to improve the quality of the 

information. 

Iowa Seeks More Specific 

Information from OMB on 

Reporting the Results of 

the Recovery Act 

Since June 22, 2009, OMB has provided guidance on the reporting 

requirements of the Recovery Act, including how to calculate the number 

of jobs created and saved. Iowa officials told us that they have asked OMB 

for specific guidance on the reporting requirements included in Section 

1512 of the Recovery Act but as of September 11, 2009, OMB had not 

responded. For example, the state would like to confirm that it may use a 

single Dun & Bradstreet, or D-U-N-S, number because the state intends to 

report Section 1512 information centrally.12 State officials are also seeking 

an answer on whether OMB would serve as Iowa’s sponsor so that Iowa 

officials could access the federal Central Contractor Registration (CCR) 

database13 to help them validate that Recovery Act subrecipients are 

 

12The D-U-N-S number is used by the federal government to identify business organizations. 

13The CCR is the primary federal registrant database that collects, validates, stores, and 

disseminates data in support of federal agencies’ acquisition missions, including agency 

contract and assistance awards. 

Page IA-9 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

registered in the CCR system, and use this information to verify whether 

its subrecipient data is consistent with federal data requirements. 

“Results Iowa” Web Site 

Provides Opportunities for 

Iowa to Demonstrate 

Results of Recovery Act 

Funding 

Iowa created the “Results Iowa” Web site, http://www.resultsiowa.org, to 

provide information about its efforts toward achieving results in areas 

such as workforce development, economic growth, health care, and 

education. Furthermore, for each state agency under the authority of the 

Governor, “Results Iowa” provides strategic and performance plans linking 

agency programs and strategies to specific performance goals, as well as 

performance reports detailing agencies’ progress on such goals. 

Additionally, “Results Iowa” allows agencies to highlight and update 

selected performance measures as desired. The “Results Iowa” Web site is 

an existing reporting mechanism that could demonstrate the effects of 

Recovery Act funding on agency programs and initiatives. 

As a next step, Iowa could use “Results Iowa” to demonstrate how 

Recovery Act funding is affecting key performance measures, such as the 

state’s unemployment and other key economic indicators. Iowa could also 

modify agency documents, including strategic and performance plans and 

performance reports, to demonstrate how Recovery Act funding is 

affecting progress towards achieving agency wide performance goals, and 

send guidance to agencies on how to integrate the use of Recovery Act 

funding into performance plans. Furthermore, Iowa could integrate 

information from the “Results Iowa” Web site with its Economic Recovery 

Web site’s proposed “dashboard” feature14—a user-friendly search 

capability that is to provide detailed information on how and where 

Recovery Act funds are spent. Such efforts would enable the state to link 

Recovery Act spending for specific programs to statewide and agency 

wide performance goals, which, in turn, would allow Iowa to better 

demonstrate to citizens, state officials, and other policymakers how the 

Recovery Act is affecting Iowa’s government and economic climate. In 

response, state officials agreed that using “Results Iowa” to demonstrate 

the effect of Recovery Act funding could help to integrate this information 

onto Iowa’s Economic Recovery Web site. However, they acknowledged 

that resources were limited and not generally available to immediately 

modify the “Results Iowa” Web site. State officials also agreed that 

acknowledging the receipt of Recovery Act funds in state agency 

 

14http://recovery.iowa.gov (downloaded on Sept. 9, 2009). 

Page IA-10 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

performance plans was important and said they would consider providing 

guidance to agencies to adjust their plans to reflect these funds. 

The Office of the State Auditor is in the final stages of updating its 2009 

audit plan. State audit officials expect to complete the audit plan shortly 

after the state’s fiscal year 2009 accounting records are closed in 

September 2009. According to state audit officials, their audit plan reflects 

the increased risk associated with Recovery Act funding, as well as agency 

risk assessments submitted by agency auditors. In addition, state audit 

officials told us that although their appropriation was recently reduced by 

30 percent, this reduction is not expected to affect their ability to oversee 

Recovery Act funds because of their ability to bill state agencies directly 

for work associated with auditing federal funds. However, this reduction 

to the State Auditor’s appropriation will likely result in a qualified opinion 

on the state of Iowa comprehensive annual financial report because the 

Office of the State Auditor may not be able to conduct enough audit work 

on certain state agencies to issue an unqualified opinion. 

Iowa’s State Auditor 

and Iowa 

Accountability and 

Transparency Board 

Continue to Monitor 

Controls over 

Recovery Act Funds 

As we reported in April and July 2009, the Governor created the Iowa 

Accountability and Transparency Board (Iowa Board). The Iowa Board 

has several purposes: ensure that Iowa meets or exceeds the 

accountability and transparency requirements of the Recovery Act; 

monitor Iowa’s use of Recovery Act funds to prevent fraud, waste, and 

abuse; and make recommendations to the Governor, as needed, to ensure 

that best practices are implemented. Most recently, the Iowa Board has 

created an Internal Control Evaluation Team (Evaluation Team) 

composed of representatives from Iowa’s Department of Management, the 

Auditor’s Office, and the Legislative Services Agency to perform an 

internal control evaluation of state agencies receiving Recovery Act funds. 

To assess agencies’ risk levels, the evaluation team has reviewed agencies’ 

single audit reports and risk assessment questionnaires filled out by state 

agency officials and has prepared a report for the Iowa Board that 

includes recommendations for improvement.15

 

15The Single Audit Act of 1984, as amended (31 U.S.C. ch. 75), requires that each state, local 

government, or nonprofit organization that expends $500,000 or more a year in federal 

awards 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, the entity may elect to have an audit of that 

program. 

Page IA-11 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

The report from the Evaluation Team identified six high-priority programs 

from the 82 programs surveyed that the Evaluation Team expects will have 

some difficulty in fully complying with the accountability and 

transparency requirements in the Recovery Act. The six high-priority 

programs are as follows:16

• Office of Energy Independence—State Energy Program, 

• Office of Energy Independence—Energy Efficiency and Conservation 

Block Grants, 

• Office of Energy Independence—Energy Efficient Appliance Rebates 

Program, 

• Department of Education—State Fiscal Stabilization Fund, 

• Department of Human Rights—Weatherization Assistance Program, 

and 

• Iowa Utilities Board—State Electricity Regulatory Assistance Grant. 

The primary reasons for recommending additional technical monitoring 

for these programs were that they received a significant increase in 

funding, were newly created, or have personnel with limited experience. 

The Evaluation Team’s Internal Controls Evaluation made three 

recommendations for the Iowa Board. First, all agencies receiving 

Recovery Act funding should receive training in internal controls and 

procurement from the U.S. Department of Energy Office of the Inspector 

General and the U.S. Department of Justice Antitrust Division. Second, 

each agency ranked as a high priority should implement a comprehensive 

accountability plan to review Recovery Act activities. Third, an internal 

agency team should conduct reviews of all high priority agencies to ensure 

that agencies are complying with the accountability plan. 

 

16Nine programs were not included in the risk assessment because funding had not yet 

been awarded or the federal guidelines have not been issued. These programs will be 

reviewed as awards are made or guidelines issued. 

Page IA-12 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Iowa will use approximately $566.6 million in Recovery Act funds for 

education through three U.S. Department of Education (Education) 

programs: (1) Title I, Part A, of the Elementary and Secondary Education 

Act of 1965 (ESEA); (2) Individuals with Disabilities Education Act 

(IDEA), Part B; and (3) the State Fiscal Stabilization Fund (SFSF) for 

education stabilization and government services. The majority of this 

amount—about $478.8 million—will be disbursed to school districts and 

institutions of higher education by the end of fiscal year 2010. As of August 

31, 2009, about $439.1 million of these funds had been made available to 

the Iowa Department of Education and the Department of Management, 

which had disbursed approximately $98.9 million to school districts, 

area education agencies,17 and institutions of higher education, as seen in 

figure 1. 

Iowa Is Disbursing 

Education Recovery 

Act Funds and 

Expects to Disburse 

Most Funds by the 

End of Fiscal Year 

2010 

 

17Iowa’s 10 regional area education agencies, which were established by the Iowa 

legislature in 1974 to provide equitable and economical educational opportunities for 

Iowa’s children, partner with public and some private schools to provide education and 

instructional support services. 

Page IA-13 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Figure 1: Recovery Act Education Funding Allocated, Made Available, and 

Disbursed in Iowa, as of August 31, 2009 

0

50

100

150

200

250

300

350

400

450

Title I, Part A IDEA, Part B SFSF

Dollars (in millions)

Source: GAO analysis of Iowa Department of Education and Board of Regents data.

Program

Total allocated to Iowa

Total made available to Iowa

Total disbursed

51.5 51.5

16.2

126.2 126.2

25.2

388.9

261.4

57.5

Note: In this figure, SFSF funds include only funds for education stabilization and government 

services that have been designated for school districts, community colleges, and public universities. 

ESEA Title I, Part A. The Recovery Act provides $10 billion nationally to 

help school districts educate disadvantaged youth by making additional 

funds available beyond those regularly allocated through ESEA Title I, 

Part A. The Recovery Act requires these additional funds to be distributed 

through states to school districts 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, school districts 

are required to comply with current statutory and regulatory requirements 

and must obligate 85 percent of these funds by September 30, 2010.18

Education is advising school districts to use the funds in ways that will 

 

18School districts 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 IA-14 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

build their long-term capacity to serve disadvantaged youth, such as 

through providing professional development to teachers. Education made 

the first half of states’ Recovery Act ESEA Title I, Part A, funding available 

on April 1, 2009, and announced on September 4, 2009, that it had made 

the second half available. 

As of August 31, 2009, Education had made available to the Iowa 

Department of Education its estimated $51.5 million ESEA Title I, Part A, 

allocation under the Recovery Act. In turn, the Iowa Department of 

Education had disbursed a total of $16.2 million to school districts through 

two of six planned disbursements to school districts. The next 

disbursement to districts is planned for October 1, 2009, and the Iowa 

Department of Education plans to disburse the majority of its ESEA Title I, 

Part A, funds—or an additional $24.3 million—before the end of the state’s 

fiscal year 2010. 

IDEA, Part B. The Recovery Act provided supplemental funding for 

programs authorized by IDEA, Part B, the major federal statute that 

supports the provisions of early intervention and special education and 

related services for children and youth with disabilities. IDEA, Part B, 

funds programs that ensure preschool and school-aged children with 

disabilities have access to a free and appropriate public education and is 

divided into two separate grants—Part B grants to states (for school-age 

children) and Part B preschool grants (section 619). Education made the 

first half of states’ Recovery Act IDEA funding available to state agencies 

on April 1, 2009, and announced on September 4, 2009, that it had made 

the second half available. 

As of August 31, 2009, Education had made available to the Iowa 

Department of Education its estimated $126.2 million IDEA, Part B, 

allocation under the Recovery Act. In turn, the Iowa Department of 

Education had disbursed a total of about $25.2 million to school districts 

and area education agencies in the first of five planned disbursements. The 

next disbursement to districts and area education agencies is planned for 

October 1, 2009, and the Iowa Department of Education plans to disburse 

approximately an additional 40 percent of its allocation of IDEA, Part B, 

funds—or an additional $50.4 million—in state fiscal year 2010. 

State Fiscal Stabilization Fund (SFSF). 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 be used to alleviate shortfalls in 

Page IA-15 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

state support for education to school districts and public institutions of 

higher education. The initial award of SFSF funding required each state to 

submit an application to Education that provides several assurances, 

including that the state will meet maintenance-of-effort requirements (or it 

will be able to comply with waiver provisions) and that it will implement 

strategies to meet certain educational requirements, such as increasing 

teacher effectiveness, addressing inequities in the distribution of highly 

qualified teachers, and improving the quality of state academic standards 

and assessments. In addition, states were required to make assurances 

concerning accountability, transparency, reporting, and compliance with 

certain federal laws and regulations. States must allocate 81.8 percent of 

their SFSF funds to support education (these funds are referred to as 

education stabilization funds), and 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). 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 school 

districts or public institutions of higher education. When distributing these 

funds to school districts, states must use their primary education funding 

formula, but they can determine how to allocate funds to public 

institutions of higher education. In general, school districts maintain broad 

discretion in how they can use stabilization funds, but states have some 

ability to direct institutions of higher education in how to use these funds. 

Education allocated to Iowa a total of about $472.3 million in SFSF funds, 

of which about $386.4 million is specifically for education stabilization and 

about $86 million is for government services. In total, Iowa plans to use 

approximately $388.9 million of SFSF funds for education. As of August 

31, 2009 Iowa had disbursed a total of about $40 million to school districts, 

$13.2 million to public universities, and $4.3 million to community 

colleges. Specifically: 

• As of August 31, 2009, two-thirds of Iowa’s SFSF education 

stabilization funds—or about $258.9 million—was made available to 

the state. The Iowa Department of Education and the Department of 

Management have begun disbursing education stabilization funds. As 

of August 31, the Iowa Department of Education had disbursed a total 

of $40 million in education stabilization funds to school districts and 

about $3.9 million to community colleges. The Department of 

Management had disbursed about $13.2 million to public universities. 

According to education officials, these funds are replacing reduced 

Page IA-16 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

state aid payments to districts and community colleges, and replacing 

lost state appropriations for public universities. 

• As of August 31, all $86 million in SFSF government services funds had 

been made available to Iowa. Of this amount, $2.5 million will go to 

community colleges, and the Iowa Department of Education had 

already disbursed about $420,000 of those funds to community 

colleges. Iowa plans to use the rest of the government services funds 

for such programs as public assistance, public safety, and Medicaid. 

Iowa has allocated a total of approximately $63.4 million in 

government services funds for fiscal year 2010. 

Iowa plans to provide approximately $105 million of its SFSF funds to 

higher education. Specifically, Iowa’s three public universities—Iowa State 

University, the University of Iowa, and the University of Northern Iowa—

will share approximately $79.4 million in SFSF education stabilization 

funds, and its 15 community colleges will share $23.1 million in SFSF 

education stabilization funds and $2.5 million in SFSF government 

services funds. Funds are being disbursed to each university and 

community college in 12 monthly payments, the first of which went out in 

July 2009. As of August 31, 2009, public universities had received about 

$13.2 million, and community colleges had received $4.3 million in SFSF 

funds. Iowa’s public universities receive about 51 percent of their 

operating budgets from tuition and fees, about 43 percent from state 

appropriations, and the rest from other sources. The Board of Regents, 

which governs Iowa’s public universities, divided the SFSF funds among 

the state’s three universities in proportion to the size of each university’s 

budget.19 The Iowa Department of Education, which oversees Iowa’s 

community colleges, divided the community college SFSF funds among 

the state’s 15 community colleges according to its usual state aid formula, 

which is based on a statutory formula. Iowa community colleges receive 

about 47 percent of their operating revenue from tuition, 37 percent from 

state aid, 5 percent from local communities, and the rest from other 

sources. 

University and 

Community College 

Officials Said They 

Will Use Recovery Act 

Funds to Stabilize 

Budgets, Mitigate 

Tuition Increases, and 

Save Jobs 

 

19The Iowa Board of Regents also governs two special schools: the Iowa Braille and Sight 

Saving School and the Iowa School for the Deaf. The Board of Regents allocated SFSF 

funds for these two special schools to put them on par with the general K-12 education 

system in Iowa, and allocated the remaining SFSF funds to Iowa’s public universities. 

Page IA-17 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

We visited two institutions of higher education: Iowa State University in 

Ames and Southwestern Community College in Creston. We selected these 

institutions to include one university and one community college located 

in a rural area. As of August 31, 2009, these two institutions had received 

about 17 percent of their allocation. (See table 1 for SFSF funds allocated 

and disbursed.) 

Table 1: Recovery Act Allocations and Disbursements to Selected Institutions of Higher Education, as of August 31, 2009 

Dollars in thousands 

Institution 

Allocations 

and disbursements 

SFSF education 

stabilization funds 

SFSF government

services funds

Iowa State University Allocated $31,600 $0

Disbursed 5,270 0

Southwestern Community College Allocated 570 60

Disbursed 90 10

Source: GAO analysis of Iowa Department of Education and Board of Regents data. 

Institutions of Higher 

Education Plan to Spend 

All SFSF Funds in Fiscal 

Year 2010 to Pay Salaries 

and Sustain Academic 

Services and Programs 

In December 2008, to balance the state’s budget, the Governor issued an 

executive order for a mid-year 1.5 percent across-the-board reduction in 

its General Fund appropriations for the 2009 state fiscal year. As a result of 

this and other reductions in state funding, Iowa State University’s $519 

million fiscal year 2009 budget was reduced by about $7.2 million, and 

Southwestern Community College’s $10.2 million fiscal year 2009 budget 

was reduced by $67,581. For fiscal year 2010, as state funding levels 

continued to decline, Iowa State University’s budget was reduced to $502.7 

million, a decrease of 3.1 percent compared with the initial fiscal year 2009 

budget. Southwestern Community College’s 2010 state aid was reduced in 

total by about $600,000, representing about a 6 percent reduction to its 

operating budget compared to fiscal year 2009. 

Iowa State University and Southwestern Community College will both 

receive SFSF funds equal to or greater than the reduction to their 2010 

state appropriations: $31.6 million and $630,027, respectively. In addition, 

according to officials at Iowa State University, appropriating legislation 

directed public universities to obligate or spend all SFSF funds by the end 

of fiscal year 2010, or return the funds to the state. Southwestern 

Community College plans to use all of its $630,027 SFSF allocation in fiscal 

year 2010 to pay salaries and employee benefits. According to the 

Southwestern Community College chief financial officer, about 76 percent 

of the school’s budget is for salaries. Iowa State University plans to spend 

Page IA-18 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

about $22.2 million, or 70 percent, of its $31.6 million SFSF allocation, to 

pay salaries. Other expenses being paid for with SFSF funds include 

building repairs ($4.0 million), supplies and services ($3.6 million), and 

equipment ($1.1 million). 

Iowa institutions of higher education plan to use SFSF funds to sustain 

key educational programs and services even as enrollment increased and 

budgets declined. For example, Iowa State University’s enrollment for the 

2008-2009 school year increased by 2.5 percent over the prior year. 

Southwestern Community College’s enrollment for the 2009–2010 school 

year increased by at least 7 percent over the prior year. Iowa State 

University attributed much of its increased enrollment to an increase in 

nonresident students, while Southwestern Community College attributed 

its increased enrollment to layoffs in the local economy and students 

returning to school to learn new skills. Officials from both schools said 

that they expect enrollment to continue to increase at least through the 

current academic year. Southwestern Community College is using its SFSF 

funds to preserve associate degree and trade programs, which are critical 

to students directly affected by the downturn in the economy. For 

example, Southwestern Community College’s School of Nursing has a 

waiting list for enrollment, and the institution plans to use SFSF funds to 

hire one nursing instructor. Iowa State University used SFSF funds to hire 

about 10 new veterinary medicine faculty in 2009 to educate an anticipated 

influx of veterinary medicine students. Under an agreement with a 

university in another state, veterinary medicine students will attend the 

out-of-state university for their first 2 years after which they will transfer 

to Iowa State University to complete their training. 

Two Institutions of Higher 

Education Are Tracking 

SFSF Funds Using Existing 

Systems and Methods 

Both Iowa State University and Southwestern Community College have 

established new accounts within their existing accounting systems for 

SFSF education stabilization and government services funds and plan to 

separately track and monitor SFSF funds using existing processes and 

procedures. Iowa State University sends monthly reports to the Board of 

Regents and the Department of Management on its use of SFSF funds. 

Iowa State University officials said they have received guidance on the use 

of SFSF funds from the Iowa Board of Regents. As a matter of practice for 

SFSF funds, the Board of Regents will approve all university infrastructure 

expenditures of $500,000 or greater. Southwestern Community College’s 

chief financial officer said that she will prepare all reporting on the use of 

Recovery Act funds and maintain file copies of supporting documentation 

and reports submitted to the Iowa Department of Education. She said she 

is also responsible for assuring the accurate recording of all deposits and 

Page IA-19 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

payments. According to the chief financial officer, the college’s accounts 

receivable department will deposit SFSF funds into the appropriate 

accounts and the payroll department will verify all payees and the 

amounts paid using SFSF funds. 

While Higher Education 

Institutions Report 

Positive Results from 

Recovery Act Funds, They 

Plan to Improve Efficiency 

in Anticipation of Ongoing 

Fiscal Constraints 

Officials at the Iowa institutions of higher education we visited told us 

they have not yet reported on the use and results of Recovery Act funds 

under Section 1512 because they are awaiting specific guidance on how to 

report to Iowa’s centralized reporting database. In the meantime, officials 

told us, they have identified some savings and efficiencies from the use of 

these funds. The universities and community colleges report annually to 

the state on performance and funding. For example, community colleges 

provide data to the state that are published in an annual Condition of 

Iowa’s Community Colleges Report—a summary of fiscal and tuition data 

and enrollment and graduation rates. 

Iowa State University and Southwestern Community College officials also 

told us that SFSF funds have allowed them to save jobs, based on their 

own estimates. Iowa State University identified about 50 professional, 

scientific, and other positions for potential layoffs by the end of state fiscal 

year 2010. If the university determines that some layoffs are necessary, it 

will use SFSF funds to pay employees’ salaries until the time that the 

layoffs become effective. The university is also using SFSF funds to pay 

the salaries of 210 employees that accepted an offer to retire by January 

31, 2010—thereby temporarily saving these jobs according to school 

officials. A Southwestern Community College official estimated that SFSF 

funds allowed the school to save seven jobs. 

SFSF funds also allowed Iowa State University and Southwestern 

Community College to limit tuition increases. The Board of Regents 

increased tuition for academic year 2009-2010 by 4.2 percent for resident 

undergraduate students at the three public universities, including Iowa 

State University. According to the Iowa Board of Regents, however, 

without SFSF funds, tuition might have increased by as much as 8 percent 

at state universities to offset the loss of state appropriations. Historically, 

when state budgets have declined, Iowa State University’s tuition has 

increased significantly. For example, according to Iowa State University 

officials, when state budgets declined in the early 2000s, the university 

raised tuition and fees by 18.5 percent, followed by a 17.6 percent tuition 

hike in the following year. For Southwestern Community College, the 

result of the 2010 budget shortfall was a potential $19 tuition increase per 

credit hour. (Annual tuition increases have averaged $5.72 per credit hour 

Page IA-20 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

for the past 9 years.) However, SFSF funds allowed Southwestern 

Community College to limit the tuition increase to $5.50 per credit hour, 

about a $14 reduction for students compared to the potential increase. 

SFSF funds have also provided institutions of higher education the 

opportunity to plan strategically for the long term by restructuring for 

greater efficiency and avoiding the funding cliff effect (i.e., the shortfall 

when Recovery Act funds are spent). Iowa State University asked each of 

its departments to submit plans for reducing costs by a total of $38.8 

million, an amount equal to the university’s 2009 and 2010 budget cuts. 

Southwestern Community College also asked its departments to submit 

plans to reduce their budgets by 5 percent (a percentage greater than the 

2009 statewide reduction, in anticipation of future budget cuts). 

Department plans included proposals for staff reductions and process 

improvements. 

To reduce costs, both institutions have allowed vacant positions to remain 

unfilled and reduced staffing levels through attrition and some layoffs. 

Iowa State University also identified for layoffs 25 of about 800 

professional and scientific staff, and, as discussed earlier, officials 

reported that 210 general services employees will retire by January 31, 

2010, under the university’s early retirement incentive offer. SFSF funds 

will be used to pay the salaries of these employees up to their retirement 

date. Southwestern Community College reduced the number of instructors 

from 48 to 43: 2 instructors left voluntarily, 2 retired, and 1 was laid off. 

Both Iowa State University and Southwestern Community College plan to 

retain or hire adjunct professors or lecturers—adjunct faculty and 

lecturers do not have full or permanent status and therefore are less 

costly. Iowa State University plans to use technology, such as adding 

computers or streaming video, to provide classroom instruction. 

Southwestern Community College reduced its printing costs by 

eliminating paper copies of the course catalog and student handbook—

now both are available only online. 

Iowa State University officials told us that they do not expect to have a 

funding cliff in 2010 because the university has reduced its payroll through 

retirements and layoffs and has reengineered education by increasing 

faculty workload and class size. Southwestern Community College’s 

strategy to avoid a funding cliff includes avoiding any new long-term costs 

and to plan and operate under the assumption that state funds will be cut 

again. According to Southwestern Community College, it is important that 

the school budget conservatively because it is a small, rural school and 

therefore has fewer funding resources. 

Page IA-21 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

The U.S. Department of Transportation’s Federal Highway Administration 

(FHWA) apportioned $358 million in Recovery Acts funds to Iowa for 

highway construction. As of September 1, 2009, the federal government 

had obligated $320 million for Iowa projects, and Iowa had been 

reimbursed $91 million for work submitted for payment by highway 

contractors. According to state transportation officials, citing the state’s 

most recent report to the U.S. House Committee on Transportation and 

Infrastructure, the Recovery Act funded 2,724 highway contractor 

employees in July. Officials said, cumulatively, the department has 

reported that more than 363,000 hours of work have been funded by the 

Recovery Act. In addition, transportation officials estimate that Recovery 

Act funding contributed to the repair of more than 110 miles of state, 

county, and city roads. 

Iowa Has Awarded 

Most of Its Highway 

Recovery Act Funds, 

and Reports Funding 

over 2,700 Contractor 

Employees in July 

2009 

The Recovery Act provides funding to the states to restore, repair, and 

construct highways, and conduct other activities allowed under the 

Federal-Aid Highway Surface Transportation Program. The act requires 

that 30 percent of these funds be suballocated for projects in metropolitan 

and other areas of the state. Highway funds are apportioned to the states 

through existing federal-aid highway program mechanisms, and states 

must follow existing program requirements, which include ensuring the 

project meets all environmental requirements associated with the National 

Environmental Policy Act, paying a prevailing wage in accordance with 

federal Davis-Bacon requirements, complying with goals to ensure 

disadvantaged businesses are not discriminated against in the awarding of 

construction contracts, and using American-made iron and steel in 

accordance with Buy America 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. 

To receive Recovery Act funds for highway infrastructure spending, states 

must meet certain requirements. For example, the states must do the 

following: 

• Ensure that 50 percent of apportioned Recovery Act funds were 

obligated within 120 days of apportionment (before June 30, 2009). The 

50 percent rule applies only to funds apportioned to the state and not 

to the 30 percent of funds required by the Recovery Act to be 

suballocated primarily based on population, for metropolitan, regional, 

and local use. In addition, states are required to ensure that all 

apportioned funds—including suballocated funds—are obligated 

within 1 year. The Secretary of Transportation is to withdraw and 

Page IA-22 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

redistribute to other states any amount that is not obligated within 

these time frames. 

• Give priority to projects that can be completed within 3 years and to 

projects located in economically distressed areas. 

• Certify that the state will maintain the level of spending (maintenance 

of effort) 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 30, 2010.20

Iowa has met, or is in the process of meeting, these requirements, and the 

U.S. Department of Transportation is currently validating Iowa’s 

maintenance-of-effort calculations—the amount of state funds Iowa 

planned to expend for the covered programs through September 30, 2010. 

Iowa has also initiated I-JOBS, an $830 million state-funded program to 

invest in infrastructure. A key component of this program is $115 million 

for transportation projects across the state, including $50 million for 

bridge safety, $45 million for city streets and secondary roads, and the 

remainder for enhancing public transit and recreational trails. As of 

September 1, 55 bridge safety projects under the state’s jurisdiction had 

been approved for I-JOBS funding in fiscal years 2010 and 2011. 

Almost 90 Percent of 

Highway Recovery Act 

Funds Has Been Obligated 

for Iowa Highway Projects 

As we previously reported, Iowa was apportioned $358 million for highway 

infrastructure and other eligible projects. As of September 1, 2009, $320 

million had been obligated (about 90 percent of available funds) for 183 

highway projects in 83 of the state’s 99 counties.21 For those projects 

where funds have been awarded, Iowa Department of Transportation 

officials reported that 139 projects, representing $268 million, had begun. 

As of September 1, 2009, $91 million had been paid to contractors and 

reimbursed by FHWA.22 Officials estimated that Iowa will spend and be 

 

20Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009). 

21For the Highway Infrastructure Investment Program, the U.S. Department of 

Transportation has interpreted the term obligation of funds to mean the federal 

government’s contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. 

22A state requests reimbursement from FHWA as it makes payments to contractors working 

on approved projects. 

Page IA-23 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

reimbursed a total of about $215 million of its Recovery Act transportation 

funds by the end of December 2009. 

About 87 percent of Recovery Act highway obligations for Iowa have been 

for pavement improvement projects. Specifically, $277 million of the $320 

million obligated to Iowa, as of September 1, 2009, was being used for 

pavement improvement projects, such as the $1.5 million patching and 

resurfacing of 6.4 miles of County Route G35 in Cass County, Iowa 

(discussed below). Additionally, $20 million is being used for bridge 

replacements, such as the $1.1 million for Iowa State Route 92 bridge over 

Keg Creek near Treynor, Pottawattamie County, Iowa (discussed below). 

Figure 2 shows obligations by the types of road and bridge improvements 

being made. 

Figure 2: Highway Obligations for Iowa by Project Improvement Type as of 

September 1, 2009 

0%

Bridge improvement ($0.5 million)

2%

Other ($7.3 million)

New road construction ($14.4 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($276.8 million)

Pavement projects total (91 percent, $291.2 million)

Bridge projects total (6 percent, $20.9 million)

Other (2 percent, $7.3 million)

Bridge replacement ($20.3 million)

0%

New bridge construction ($0.1 million)

87%

5%

6%

Note: Totals may not add due to rounding. "Other" includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

Page IA-24 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

Iowa Department of 

Transportation Is Using 

Existing Procedures for 

Internal Controls and 

Contract Administration of 

Highway Projects 

State program agencies, such as the Iowa Department of Transportation, 

are responsible for establishing internal controls and procedures to ensure 

that their agencies spend funds as intended by law. Among other things, 

the department is responsible for ensuring contract award and 

performance are in accordance with established standards and conducted 

in compliance with laws and regulations. It is also responsible for 

maintaining important contract and financial documentation. 

The Iowa Department of Transportation has detailed procedures for the 

administration and inspection of work performed by contractors, 

including written contracting procedures, contractor qualification 

standards, and material and construction specifications and guidelines. 

For example, the manual provides detailed guidance on how to sample 

and analyze materials such as freshly mixed concrete. The manual also 

requires that all of the materials used in highway construction in the state 

be listed on the state’s list of approved manufacturers and brand names. 

All of this information is published in hard copy, online, and on compact 

discs. The state and local governments also employ construction and 

material inspectors and technicians, and construction engineers, to 

review, measure, and accept work performed by contractors. According to 

officials at the Iowa Department of Transportation, each item of work has 

a method of measurement and basis of payment, as well as various 

associated construction and materials specifications. The Iowa State 

Auditor’s Single Audit Report for 2008 does not identify any material 

weaknesses in the Department of Transportation’s highway planning and 

construction program. 

In addition, according to agencies officials, to help achieve consistent 

contracting procedures across the state, the Iowa Department of 

Transportation requires that all Recovery Act–funded highway projects be 

advertised and bid centrally through the state contracts office. For 

example, the department review includes ensuring that only contractors 

that have been prequalified are requested to bid on projects. 

As part of our assessment for this cycle, we reviewed four highway 

infrastructure projects—two resurfacing projects, a grading project, and a 

bridge replacement project—to determine if the contracting process for 

these projects reflected the state’s published procedures. Two of these 

projects were state-administered projects and two were locally 

administered; they are located in different state highway districts and 

different counties. The following describes these projects: 

Page IA-25 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

• Project 1. The Cass County Board of Supervisors, in southwest Iowa, 

awarded a contract to patch and resurface 6.4 miles of County Route 

G35. This $1.5 million project is being administered locally by the Cass 

County engineer. 

• Project 2. The Iowa Department of Transportation awarded a 

contract to replace the Iowa State Route 92 bridge over Keg Creek, 3 

miles west of Treynor, in Pottawattamie County, Iowa. This $1.14 

million project is being administered by Iowa Department of 

Transportation District 4. 

• Project 3. The Iowa Department of Transportation awarded a 

contract to regrade a 2.6 mile segment of Iowa State Route 141, 

northwest of Mapleton, in western Iowa’s Monona County. This $2.27 

million project to reduce snow blockage along this route is being 

administered by Iowa Department of Transportation District 3. 

• Project 4. The Polk County Board of Supervisors awarded a contract 

to resurface 6 miles of N.W. 118th Avenue in northern Polk County, 

north of the Des Moines metro area, in central Iowa. This $2.1 million 

project, administered by the Polk County engineer, has been 

completed. 

We reviewed these contracts and confirmed with state and county 

highway officials that all four contracts 

• were competitively awarded to the lowest qualified bidder; 

• were for a fixed price; 

• considered only prescreened, qualified contractors; 

• established financial penalties for failure to start or complete work, as 

contracted; 

• required reporting of contractor staff and hours worked on the project; 

and 

• were regularly monitored and inspected by qualified state or local 

engineers and inspectors. 

Iowa’s Department of 

Transportation Reports 

That the Recovery Act 

Funded More Than 2,700 

Contractor Employees in 

July 2009 

Like other Iowa agencies, the Department of Transportation has not yet 

reported under Section 1512 of the Recovery Act. However, the 

department continues to report project, financial, and employment 

information to FHWA. This reporting is required by the Recovery Act to 

provide greater accountability and transparency and includes, among 

other things, monthly reporting of contracts awarded, projects in process, 

employees working and employee hours worked. Also the department 

reports this information to the U.S. House of Representatives’ Committee 

Page IA-26 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

on Transportation and Infrastructure. In addition, the department’s Web 

site provides weekly updates on projects funded and contracts awarded 

under the Recovery Act, and Recovery Act funds spent on each project. 

To support these reporting requirements, the Iowa Department of 

Transportation established its own centralized reporting system, in 

addition to the state’s centralized reporting system, which allows the 

department’s district offices, local governments, and contractors to enter 

and verify required Recovery Act financial and employment data. This 

information provides the basis for the department’s report to the state’s 

central system, FHWA, the House Committee on Transportation and 

Infrastructure, the Iowa public, and the media. 

In July 2009, according to state transportation officials, citing Iowa’s most 

recent report to the House Committee on Transportation and 

Infrastructure, the Recovery Act funded 2,724 highway contractor 

employees. For the same period, transportation officials said that more 

than 160,000 hours of work were funded by the Recovery Act. Officials 

said that, cumulatively, Iowa’s Department of Transportation has reported 

to the committee that more than 363,000 hours of highway employee work 

have been funded by the Recovery Act. Iowa transportation officials 

estimate that for projects completed as of August 17, 2009, Recovery Act 

funding has contributed to the repair of more than 110 miles of state, 

county, and city roads. 

Iowa has for years operated a Weatherization Assistance Program that 

receives funding from several sources, including the U.S. Department of 

Energy (DOE). Each year, Iowa uses this funding to weatherize 

approximately 2,000 homes of low-income clients. The Division of 

Community Action Agencies manages the state’s Weatherization 

Assistance Program, and it, in turn, relies on 18 local agencies, all 

experienced in weatherization work, to carry out the program at the local 

level. In 2009, Iowa received $8.6 million in regular weatherization funding 

from DOE. However, the amount significantly increased when the 

Recovery Act provided a large increase in weatherization funding later in 

the year. Using the Recovery Act funding, DOE allocated $80.8 million for 

the Weatherization Assistance Program to be used over a 3-year period. 

Iowa plans to use these funds to weatherize an additional 7,196 homes. 

Use of Weatherization 

Funds Has Been 

Limited because of 

Delay in Setting 

Prevailing Wages for 

Workers 

On July 2, 2009, DOE approved Iowa’s weatherization plan under the 

Recovery Act and released an additional $32.3 million of the total $80.8 

million allocated to the state. As of August 31, 2009, Iowa had been 

Page IA-27 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

awarded about $40.4 million, or 50 percent of its total DOE allocation, but 

had spent only about 5 percent of the funding received. Furthermore, no 

homes had been weatherized using Recovery Act funds. Instead, Iowa has 

used these funds to provide training and technical assistance and purchase 

vehicles and equipment—”ramp up” activities—that will be used when the 

Recovery Act Weatherization Program is fully implemented in the state. 

According to state weatherization officials, they refrained from spending 

Recovery Act funds on weatherization work until the U.S. Department of 

Labor (Labor) established the prevailing wage rates for weatherization 

workers covered by the Recovery Act Weatherization Assistance 

Program.23 State officials told us that they and all 18 local agencies that 

manage the Weatherization Assistance Program responded to the Labor 

survey to gather wage and benefit data on weatherization workers in Iowa 

by the requested date. The officials understood that the prevailing wages 

for Iowa would be available by July 25, 2009. On July 24, they received 

notice from Labor that the wage rates would be delayed, but should be 

available by August 14, 2009. On August 19, 2009 Labor established a 

prevailing wage rate for weatherization work in the state. On August 20, 

2009 state officials received notification that prevailing wages had been 

determined and notified local agencies that they could accept bids and 

issue contracts for weatherization. 

Because the requirement that workers be paid at least the prevailing 

wages, as determined by the Davis-Bacon Act, had not previously applied 

to the weatherization program and prevailing wages were not yet 

established, state officials provided general guidance to the local agencies 

on the overall requirements of the Davis-Bacon Act and on completing the 

Labor survey. However, officials told us that they were reluctant to 

implement the Recovery Act Weatherization Assistance Program without 

knowing the wages that local agencies and contractors who do the work 

must be paid and because they had limited experience with the DavisBacon Act. Many of the weatherization contractors are small companies 

that employ few full-time staff, and most do not provide benefits to their 

employees. According to these officials, if wages and benefits paid to 

weatherization workers turned out to be less than the prevailing wages, 

 

23Use of Recovery Act weatherization funds is subject to Section 1606 of the act, which 

requires all laborers and mechanics employed by contractors and subcontractors on 

Recovery Act projects to be paid at least the prevailing wage, including fringe benefits, as 

determined under the Davis-Bacon Act. See Pub. L. No. 111-5, § 1606, 123 Stat. 115, 303 

(Feb. 17, 2009).

Page IA-28 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

the contractors would be liable for back payments. These back payments 

could be burdensome, especially for the smaller contractors, and might 

also give the appearance that contractors intentionally underpaid their 

employees. Furthermore, under the Davis Bacon Act, the local agencies or 

contractors must prepare a certified payroll each week and pay 

weatherization workers on a weekly basis. Both of these requirements are 

new to the Iowa program. Therefore, while waiting for Labor to determine 

the Davis-Bacon wage issues, Iowa continued to use program funds made 

available through annual DOE appropriations to weatherize homes. 

Recovery Act 

Weatherization Funds Will 

Be Monitored Largely by 

Existing Program Controls 

According to state weatherization officials we spoke with, Iowa did not 

complete a risk-based assessment of the local agencies that implement its 

weatherization program primarily because all the agencies have 

demonstrated successful track records implementing a weatherization 

program, as evidenced in annual evaluations. These officials also consider 

existing program controls sufficient to ensure that weatherization funds 

are used for their intended purpose. Seventeen of the 18 agencies that 

implement the Weatherization Assistance Program have done so for more 

than 25 years, and the newest agency has implemented the program since 

2006. In addition, state officials informally assess each local agency’s 

performance on a continuing basis. 

Controls over the Weatherization Assistance Program require the state to 

conduct an annual fiscal evaluation of each local agency. An on-site fiscal 

evaluation is completed under an established audit process and includes 

an examination of documents and records pertaining to salaries, materials, 

equipment, and indirect costs charged to the Weatherization Assistance 

Program. According to state officials, the same fiscal evaluation will be 

completed at all local agencies that receive Recovery Act funds. In 

addition, according to state officials, each local agency is contractually 

required to segregate, track, and maintain Recovery Act funds 

independently of other revenue streams. We found that the following audit 

steps are included in the state’s fiscal evaluation: 

• A sample of files is reviewed to determine if expenses charged to the 

program are adequately documented and comply with established 

limits. The review includes a sample of invoices for materials and labor 

charges and a review of timesheets and payroll ledgers. 

• Inventory data for equipment costing $5,000 or more are reviewed and 

tracked from year to year to assure that the local agency retains the 

equipment and is properly accounting for the equipment on hand. 

Page IA-29 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

• The agency’s procedures for handling interest earned on cash deposits 

is reviewed to assure that the agency complies with federal rules 

governing the amount of interest the agency may retain. For the 

Weatherization Assistance Program, interest amounts up to $100 per 

year may be retained. 

• A sample of transactions for costs typically allocated to several 

programs (such as copiers and phones) is reviewed to determine if the 

cost allocation plan and procedures provide for a fair and equitable 

distribution of costs. 

Iowa Officials Plan to Use 

Existing Performance 

Measures to Monitor the 

Results of Weatherization 

Funds 

State officials will use the existing program performance measures, such 

as the number of homes weatherized and the resulting energy savings, to 

evaluate the Iowa Recovery Act Weatherization Assistance Program from 

an overall perspective and to assess the performance of each local agency. 

In addition, according to state officials, the local agencies are 

contractually required to track and report data on the effect of Recovery 

Act funds, such as the number of jobs created, to the Division of 

Community Action Agencies. The division, in turn, will report this 

information to the state’s data center operated by the Iowa Department of 

Management. While state weatherization officials are confident that they 

will be able to track and measure the effect of Recovery Act funding, they 

are awaiting guidance on the specific items they are to measure and 

report. 

Under current DOE requirements, which will continue to be followed 

under the Recovery Act program, each local agency must inspect all 

homes weatherized to ensure that all work was completed properly, all 

materials used were of good quality and installed properly, and no health 

or safety problems were created. The state is required to inspect at least 5 

percent of the homes weatherized by each local agency, but according to 

state officials, they typically inspect 7 percent to 9 percent of all homes 

weatherized. State officials are also required to annually assess each 

agency’s performance. During this annual assessment, officials evaluate 

each agency’s house inspection process and determine the number of 

homes weatherized, the resulting energy savings, and the attendance of the 

agency’s staff at training sessions and state meetings. In addition, state 

officials plan to conduct several monitoring visits to each local agency 

each year to determine how well each agency is spending Recovery Act 

funds and how well it is tracking and reporting required data, such as the 

number of jobs created. The state will be adding five staff to assist with 

the monitoring of Recovery Act weatherization funding—two new staff 

have already been hired in the Division of Community Action Agencies and 

Page IA-30 GAO-09-1017SP Recovery Act
Appendix VIII: Iowa 

another has been reassigned to the program. Two new staff to assist in 

monitoring the local agencies’ fiscal controls over weatherization will be 

added in the near future. 

We provided the Governor of Iowa with a draft of this appendix on 

September 9, 2009. The Director, Iowa Office of State-Federal Relations, 

and the Director for Performance Results, Department of Management, 

responded for the Governor on September 14, 2009. Officials agreed with 

our findings. The officials also offered technical suggestions, which we 

have incorporated, as appropriate. 

Lisa Shames, (202) 512-3841 or shamesl@gao.gov 

In addition to the contacts named above, Thomas Cook, Assistant 

Director; Christine Frye, analyst-in-charge; James Cooksey; Daniel Egan; 

Ronald Maxon; Marietta Mayfield; Mark Ryan; and Carol Herrnstadt 

Shulman made key contributions to this report. 

State Comments on 

This Summary 

GAO Contact 

Staff 

Acknowledgments 

Page IA-31 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Massachusetts. The full report on all of our work, which 

covers 16 states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

We reviewed three programs in Massachusetts funded under the Recovery 

Act—Highway Infrastructure Investment funds, Transit Capital Assistance 

funds, and the Workforce Investment Act (WIA) Youth Program. We 

selected these programs for different reasons: 

• Contracts for highway projects using Highway Infrastructure 

Investment funds have been under way in Massachusetts for several 

months and provided an opportunity to review financial controls, 

including oversight of contracts. 

• The Transit Capital Assistance funds had a September 1, 2009, deadline 

for obligating a portion of the funds and, further, provided an 

opportunity to review nonstate entities that receive Recovery Act 

funds. 

• The WIA Youth Program in Massachusetts is largely directed toward a 

summer employment program and, therefore, was in full operation. 

With all of these programs, we focused on how funds were being used; 

how safeguards were being implemented, including those related to 

procurement of goods and services; and how results were being assessed. 

We reviewed contracting procedures and examined two specific contracts 

under both the Recovery Act Highway Infrastructure Investment funds and 

the WIA Youth Program. In addition to these three programs, we also 

updated funding information on three Recovery Act education programs 

where significant funds are being disbursed—the U.S. Department of 

Education (Education) State Fiscal Stabilization Fund (SFSF) and 

Recovery Act funds under Title I, Part A, of the Elementary and Secondary 

Education Act of 1965 (ESEA), as amended, and the Individuals with 

Disabilities Education Act (IDEA), Part B. Consistent with the purposes of 

the Recovery Act, funds from the programs we reviewed are being 

directed to help Massachusetts and local governments stabilize their 

Page MA-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix IX: Massachusetts 

budgets and to stimulate infrastructure development and expand existing 

programs—thereby providing needed services and potential jobs. 

Following are the highlights of our review of these funds: 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $438 million in Recovery Act 

funds to Massachusetts. As of September 1, 2009, the federal 

government has obligated $203.2 million to Massachusetts and $4.8 

million has been reimbursed by the federal government.2

 As of 

September 12, 2009, Massachusetts had awarded contracts or 

advertised for bids on 39 projects. 

• Most of the projects involve road paving, but the state is beginning to 

advertise more complex projects, such as a project making safety and 

mobility improvements at four major intersections along the 

Dorchester Avenue corridor in Dorchester. 

• The commonwealth anticipates that the additional funds suballocated 

to urban areas will be obligated by the March 2, 2010, deadline. 

• State officials have some concerns about Massachusetts’s ability to 

meet its transportation maintenance-of-effort requirement because of 

the commonwealth’s difficult budget situation. 

Transit Capital Assistance 

Funds 

• DOT’s Federal Transit Administration (FTA) apportioned $290 million 

in Recovery Act funds to Massachusetts and urbanized areas located in 

the state. As of September 1, 2009, FTA has obligated $206 million. 

• The Massachusetts Bay Transportation Authority (MBTA), the largest 

transit provider in New England, will use the first round of funding for 

a series of projects worth $112.6 million that include facility 

improvements, fleet enhancements, and capital improvement projects, 

as well as an enhancement of the MBTA’s Silver Line rapid transit 

service. 

• FTA found that the September 1, 2009, 50 percent obligation 

requirement was met. 

 

2

Transportation has interpreted “obligation of funds” to mean the federal government’s 

commitment to pay for the federal share of the project. 

Page MA-2 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

WIA Youth Program • The U.S. Department of Labor allotted about $24.8 million to 

Massachusetts in WIA youth Recovery Act funds. The commonwealth 

allocated $21.1 million to local workforce boards, and as of September 

5, 2009, the local boards have drawn down about $11 million and 

served 6,850 youth. 

• While the commonwealth met its goal of serving 6,500 youth, programs 

faced challenges in getting youth on board in the initial weeks of the 

summer. One reason for the delay was that youth had difficulty 

supplying suitable documentation of eligibility. 

Updated Funding 

Information on Education 

Programs 

• Education has awarded Massachusetts about $726 million, or about 73 

percent of its total SFSF allocation. As of September 4, 2009, the 

commonwealth has distributed $412 million to local educational 

agencies, helping the state restore aid to school districts. 

• Additionally, Education has awarded Massachusetts all of its Recovery 

Act funds under Title I, Part A, of ESEA, as amended—about $164 

million. Based on information available as of September 4, 2009, the 

commonwealth has allocated $78 million to local educational agencies 

and about $2 million has been drawn down by local educational 

agencies (LEA). These funds are to be used to help improve teaching, 

learning, and academic achievement for students in families that live in 

poverty. 

• Education has also awarded Massachusetts all of its Recovery Act 

funds under the Individuals with Disabilities Education Act (IDEA), 

Part B—about $291 million. Massachusetts has allocated $145 million 

to LEAs, which have drawn down almost $10 million as of 

September 4, 2009. These funds are to be used to support special 

education and related services for children, as well as youth with 

disabilities. 

Page MA-3 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

In our July 2009 report, we noted that the commonwealth of 

Massachusetts needed to close a significant budget gap (approximately $4 

billion from its $28 billion budget) during fiscal year 2009, which ended on 

June 30, 2009. This gap was largely driven by lower-than-expected revenue 

collections and was addressed by a combination of budget cuts and use of 

funding sources, such as Recovery Act funds and state rainy-day funds.3

 As 

fiscal year 2009 closed, revenue collections have continued to be less than 

anticipated, while supplemental funding was requested for some 

programs.4

 For example, according to the state’s budget director, the 

state’s Medicaid program experienced higher-than-expected claims and 

utilization, and these additions to the budget gap require further state 

action heading into fiscal year 2010. The fiscal year 2010 budget was 

signed by the Governor on June 29, 2009, prior to the start of the new 

fiscal year. Fiscal year 2010 revenue estimates were lowered by more than 

$1.5 billion after the Governor submitted his initial fiscal year 2010 budget 

proposal. The spending level during fiscal year 2010 is projected to be 

lower than the past 2 fiscal years.5

 The Executive Office for 

Administration and Finance is evaluating fiscal risks for the fiscal year 

2010 budget and beyond by working with state agencies on spending 

plans. State officials noted that they will be closely monitoring revenues 

throughout fiscal year 2010. Another area requiring close attention i

state’s Medicaid program, as enrollments and costs have risen during 

past se

As Massachusetts 

Begins Its Fiscal Year 

2010 Facing Fiscal 

Stress, Recovery Act 

Funds Continue to 

Provide Fiscal Relief 

s the 

the 

veral years. 

 

The commonwealth plans to continue to use Recovery Act funds along 

with state rainy-day funds during state fiscal year 2010 to help balance its 

operating budget. The use of Recovery Act funds must comply with 

specific program requirements but also, in some cases, enables states to 

free up state funds to address their projected budget shortfalls. The state 

plans to use Recovery Act funds to a greater extent in fiscal year 2010 than 

it did in fiscal year 2009. In fiscal year 2009, the commonwealth used $1.4 

billion in Recovery Act funds to stabilize its budget, while the 

3

Massachusetts officials refer to rainy-day funds—reserves built up during more favorable 

economic conditions to be used during difficult economic times—as stabilization funds. 

However, to avoid confusion with the Recovery Act’s State Fiscal Stabilization Fund, we 

will use the term rainy-day funds. 

4

State revenues for fiscal year 2009 were $177 million lower than the revised benchmark 

levels set in May, and the total fiscal year 2009 revenue gap was more than $3.2 billion. 

5

The projected budget for fiscal year 2010 is $27 billion compared to $27.5 billion in 

spending during fiscal year 2009 and $28 billion in spending in fiscal year 2008 (dollars are 

not adjusted for inflation). 

Page MA-4 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

commonwealth plans to use at least $1.7 billion in fiscal year 2010 for the 

same purpose.6

 State rainy-day funds will also be used to help stabilize the 

state’s budget but to a lesser extent than in fiscal year 2009. The 

commonwealth used $1.39 billion in state rainy-day funds during fiscal 

year 2009, while the state budget for fiscal year 2010 assumes the use of 

$214 million in rainy-day funds. This leaves the state with a projected 

rainy-day fund balance of $571 million at the end of fiscal year 2010 

compared with $2.1 billion at the beginning of fiscal year 2009. 

The state is preparing for when Recovery Act funds will no longer be 

available by trying to stabilize the state budget through a combination of 

spending reduction and revenue generating strategies. During its fiscal 

year 2010 spending plan process, the Executive Office for Administration 

and Finance issued spending caps for each state secretariat to help ensure 

that state spending levels are aligned with future revenue projections. The 

state has also capped the number of employees at each department to help 

prevent payroll increases or reduce payroll spending. In addition, state 

officials are encouraging state departments to minimize the need for 

forced layoffs by lowering personnel costs in creative ways, such as 

through reduced work hours, job sharing, and voluntary furloughs. Also, 

during the past fiscal year, the state instituted a policy that employees paid 

from Recovery Act funds would work only as long as those funds were 

available. Furthermore, state officials are preparing agencies for possible 

midyear budget reductions in the event that a new budget gap emerges 

during the course of the fiscal year.7

 In addition to spending reductions, 

the appropriations act for fiscal year 2010 increased a state sales tax from 

5 percent to 6.25 percent, effective August 1, 2009, among other changes.8

Senior state officials have expressed concern about their ability, given the 

tight budget, to pay for extra oversight and reporting activities needed on 

Recovery Act funds. U.S. Office of Management and Budget (OMB) 

guidance discusses two options states have to recoup costs for central 

 

6

Recovery Act funds used to stabilize the state’s operating budget include funds made 

available as a result of the Federal Medical Assistance Percentage funds (discussed in 

detail in GAO-09-1016), State Fiscal Stabilization Fund funds, and Temporary Assistance 

for Needy Families contingency funds. 

7

According to a state official, the Governor may invoke his power to make budget 

reductions if revenue collections are below levels assumed in the budget. 

8

Mass. Gen. Laws ch. 64H, § 2. 

Page MA-5 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

administrative services, such as oversight and reporting.9 The 

commonwealth plans to use the “billed services” option, which charges 

agencies for central services and allocates them to federal grants. Such 

services include both personnel and information technology system costs 

for central oversight and reporting, such as staff within the newly created 

Office of Infrastructure Investment and the Office of the State Auditor. 

However, for two reasons, state officials were concerned that this 

methodology, although preferred, would not enable the state to recoup 

additional administrative costs of Recovery Act implementation: 

• Small grants may require significant central resources, while larger 

grants may require proportionally fewer central resources, but this 

approach, which includes a 0.5 percent limit on the amount allowed to 

be recouped, may not adequately cover the state’s costs if Recovery 

Act programs may not be combined. 

• The depreciation rules for information systems would require them to 

allocate costs over the 5-year life of the system created for tracking 

Recovery Act funds, yet the costs could be recovered only over the 

shorter period during which they will receive funds. 

As a result, the commonwealth submitted a proposal to the Division of 

Cost Allocation, Department of Health and Human Services (HHS), to try 

to improve flexibility in the formula to calculate and account for these 

central administrative costs.10 According to state officials, they received 

approval for their cost allocation proposal from the Division of Cost 

Allocation on August 10, 2009, although it included limitations on the 

depreciation methodology proposed.11 In addition, the National 

Association of State Auditors, Comptrollers and Treasurers, representing 

all states, submitted a waiver proposal to OMB related to the depreciation 

methodology for cost recovery, among other issues. OMB approval for this 

waiver proposal is pending. 

 

9

OMB Memorandum M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Act Activities (May 11, 2009). 

10The Division of Cost Allocation within HHS administers state cost allocation plans, which 

provide a process whereby state central service costs can be identified and assigned to 

benefited activities. The Massachusetts submission proposes to amend the 

commonwealth’s 2010 statewide cost allocation plan. 

11The commonwealth submitted an amendment to its Statewide Cost Allocation Plan on 

June 8, 2009. The Division of Cost Allocation at HHS responded back to the state with a 

series of questions, to which the state responded. 

Page MA-6 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

To report on Recovery Act funds as required under the Recovery Act, the 

commonwealth designed ways to collect data and review data quality for 

public reporting on both federal and state government Web sites. Senior 

officials noted that the commonwealth is committed not only to providing 

timely information on Recovery Act spending to meet federal reporting 

requirements as outlined in Recovery Act section 1512,12 but also to 

achieving the Governor’s commitment to providing transparent 

information on the state’s recovery Web site. Recovery Act reporting 

requirements include identifying the entities receiving Recovery Act 

dollars—and the dollar amounts—projects or activities being funded, 

projects’ status, and an estimate of the number of jobs created and the 

number of jobs retained by the projects and activities. The lead state 

organization for developing reporting processes, the Office of 

Infrastructure Investment, is hiring a manager to develop reporting 

protocols and oversee Recovery Act reporting. The state also appointed a 

“reporting” lead within each secretariat to serve as a single point of 

contact on reporting issues. Information will be gathered from both prime 

funding recipients, such as state agencies, as well as subrecipients, such as 

private contractors. State officials expressed concerns that public 

reporting of Recovery Act funds will be challenging, especially reporting 

on funds going to private and nonprofit entities that lack experience with 

such reporting or that lack the administrative capacity to produce reports. 

Also, officials noted that the definition of a “project” still required 

clarification, and if not clarified, aggregating this information to meet 

federal reporting requirements will be difficult. 

Massachusetts Is 

Focusing on 

Developing Statewide 

Recovery Act 

Reporting Procedures 

One key required element in the Recovery Act is reporting an estimate of 

the number of jobs created and the number of jobs retained by projects 

and activities. Senior state officials noted that they awaited further federal 

guidance on job reporting methodologies. They said that for some federal 

agencies, guidance is clear, but facing an October deadline, they decided 

to move ahead with developing job counting methodologies across state 

agencies. The commonwealth’s Executive Office of Labor and Workforce 

Development took the lead. State officials said the state may develop three 

or four different methodologies for job counting, depending on the 

program area. They also said that some entities, such as those familiar 

with Davis-Bacon Act job reporting requirements, will have an easier time 

reporting on jobs compared to entities in education or health care, for 

 

12Pub. L. No. 111-5, 123 Stat. 115, 287 (Feb. 17, 2009). 

Page MA-7 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

example, where they do not have certified payrolls from which to draw 

these data. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through federal-aid highway program mechanisms, and states 

must follow the requirements of the existing program, which include 

ensuring the project meets all environmental requirements associated with 

the National Environmental Policy Act paying a prevailing wage in 

accordance with federal Davis-Bacon Act requirements, complying with 

goals to ensure disadvantaged businesses are not discriminated against in 

the awarding of construction contracts, and using American-made iron 

and steel in accordance with Buy America 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. 

Massachusetts Is 

Managing Highway 

Projects but Faces 

Challenges Regarding 

Funds Suballocated to 

Urbanized Areas 

Massachusetts was apportioned $438 million in March 2009 for highway 

infrastructure and other eligible projects. As of September 1, 2009, $203.2 

million has been obligated. 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 approves a project 

and a project agreement is executed. As of September 1, 2009, $4.8 million 

has been reimbursed by FHWA. States request reimbursement from FHWA 

as the state makes payments to contractors working on approved projects. 

Almost 85 percent of Recovery Act highway obligations for Massachusetts 

have been for pavement improvement. As of September 1, 2009, $173.5 

million of the $203.2 million obligated in Massachusetts is being used for 

pavement improvement. Figure 1 shows obligations by the types of road 

and bridge improvements being made. 

Page MA-8 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Figure 1: Percentage of Highway Obligations for Massachusetts by Project Type as 

of September 1, 2009 

1%

Bridge improvement ($2.5 million)

Other ($20.6 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($173.5 million)

Pavement projects total (85 percent, $173.5 million)

Bridge projects total (5 percent, $9.2 million)

Other (10 percent, $20.6 million)

Bridge replacement ($6.7 million)

85%

3%

10%

Note: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. Totals may not add due to rounding. 

Highway Infrastructure Investment funds appropriated under the 

Recovery Act continue to be obligated to projects, but the types of 

projects are increasing in both size and complexity. The first several 

projects were limited largely to paving, but more recent projects included 

intersection improvements and design and construction of a new 

interchange. In our July 2009 report, we stated that due to “use-it-or-loseit” requirements, Recovery Act funds had initially been obligated for small, 

short-term projects that require little lead time for planning and design, 

such as repaving and resurfacing projects that can be completed within 2 

years, and the majority of the cost estimates for first-round projects came 

in at less than $5 million per project. As the Massachusetts Executive 

Office of Transportation (EOT) continues to select projects, the projects 

have increased in terms of both funding amounts and complexity. New 

projects include the reconstruction of Dorchester Avenue in Dorchester 

and construction of the North Bank Bridge. The reconstruction of 

Dorchester Avenue in Dorchester, which FHWA has approved, is 

estimated to cost $15 million and will make safety and mobility 

improvements at four major intersections along the Dorchester Avenue 

Page MA-9 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

corridor in Dorchester. The North Bank Bridge, a pedestrian bridge that 

will connect Cambridge and Charlestown, is estimated to cost $30 million 

to $36 million, according to an official at the EOT. Recovery Act funding 

for the North Bank Bridge project is currently under review by FHWA and 

is contingent upon the state’s completion of the transfer of $30.5 million to 

the Massachusetts Department of Conservation and Recreation as part of 

its approximately $100 million mitigation commitment for enhancement 

projects for the Central Artery Tunnel, commonly known as the “Big Dig.” 

According to an FHWA official, in order for the North Bank Bridge to be 

funded under Recovery Act funds, the transfer of $30.5 million must be 

made prior to March 2, 2010. 

Funds appropriated for highway infrastructure spending must be used as 

required by the Recovery Act. States are required to do the following: 

• Ensure that 50 percent of apportioned Recovery Act funds were 

obligated within 120 days of apportionment (before June 30, 2009). The 

50 percent rule applies only to funds apportioned to the state and not 

to the 30 percent of funds required by the Recovery Act to be 

suballocated, primarily based on population, for metropolitan, 

regional, and local use. In addition, states are required to ensure that 

all apportioned funds—including suballocated funds—are obligated 

within 1 year. The Secretary of DOT is to withdraw and redistribute to 

other states any amount that is not obligated within these time 

frames.13

• Give priority to projects that can be completed within 3 years and to 

projects located in economically distressed areas. Distressed areas are 

defined by the Public Works and Economic Development Act of 1965, 

as amended.14 According to this act, to qualify as an economically 

distressed area, the 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 the Secretary of Commerce 

determines has experienced or is about to experience a “special need” 

arising from actual or threatened severe unemployment or economic 

 

13Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009). 

1442 U.S.C. § 3161 

Page MA-10 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

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

in economic conditions.15

• 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 was required to identify the 

amount of funds the state plans to expend from state sources from 

February 17, 2009, through September 30, 2010.16

Massachusetts Is Working 

toward Having Funds 

Obligated to Suballocated 

Areas but Faces Capacity 

Challenges 

As mentioned earlier, states were required to suballocate 30 percent of 

their apportionment to metropolitan and other areas of the state. As of 

September 1, 2009, $31 million for 7 projects have been obligated as part of 

Massachusetts’s 30 percent suballocation. According to the Economic 

Stimulus Coordinator at the Massachusetts Executive Office of 

Transportation (EOT), which oversees highway projects, there were 

several reasons for obligating only 24 percent of these funds thus far. 

Massachusetts Highway Department (MassHighway) faces challenges with 

staffing and with the multistep nature of the process.17 MassHighway’s 

existing project planning and design personnel have been strained by the 

increased workload associated with Recovery Act projects and the state’s 

recently implemented Accelerated Bridge Program.18 Additionally, the 

state works collaboratively with the metropolitan planning organizations 

(MPO),19 who serve as regional transportation planning and programming 

 

1542 U.S.C. § 3161(a). Eligibility must be supported using the most recent federal data 

available or, in the absence of recent federal data, by the most recent data available 

through the government of the state in which the area is located. Federal data that may be 

used include data reported by the Bureau of Economic Analysis, the Bureau of Labor 

Statistics, the Census Bureau, the Bureau of Indian Affairs, or any other federal source 

determined by the Secretary of Commerce to be appropriate (42 U.S.C. § 3161(d)). As of 

August 29, 2009, Massachusetts obligated an estimated total of $80.6 million to three 

projects located in the state’s only economically distressed area. 

16Pub. L. No. 111-5, § 1201(a) 123 Stat. 115, 212 (Feb. 17, 2009). 

17EOT oversees MassHighway, which is responsible for highway projects. 

18In May 2008, Governor Deval Patrick introduced the $3 billion Accelerated Bridge 

Program to reduce the commonwealth’s growing backlog of structurally deficient bridges. 

19MPOs are federally mandated regional organizations, representing local governments and 

working in coordination with state departments of transportation, and 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. 

Page MA-11 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

agencies, to identify projects for urbanized areas. The state and MPOs are 

working to balance the preferences of individual cities and their broader 

region. According to one MPO staff member, all federally funded highway 

projects must be reviewed by MassHighway at various stages, and an MPO 

official stated that the state-MPO approval process does not lend itself to 

obligating new funds within a short time frame. Despite challenges, the 

state and MPO officials are in the process of identifying projects that are 

ready to go and predict they will have no difficulty meeting the March 2010 

deadline for the obligation of these funds. 

The EOT Economic Stimulus Coordinator also said there was some initial 

confusion around obligating the 30 percent suballocation to urban areas 

and that EOT received instruction from FHWA. The FHWA Massachusetts 

Division Administrator said that to ensure continued progress in 

advancing the federally funded statewide road and bridge projects on the 

state’s transportation improvement program while pursuing Recovery Act 

projects, FHWA encouraged EOT to first focus on obligating the state 

apportionment of the Recovery Act highway funds by the June 29, 2009, 

deadline because these projects were more likely to be shovel ready. This 

strategy allowed the state to set priorities for obligating the 30 percent 

suballocation while fully addressing all federal requirements. According to 

this FHWA official MassHighway has made strides in improving the quality 

and completeness of their final project submissions for their regular 

federal aid program projects and improved their ability to cut the time 

from award to notice to proceed significantly. FHWA wanted to make sure 

that quality, timeliness and readiness of projects not be compromised 

while the state identified and vetted Recovery Act project priorities. 

State Concerns about 

Meeting the Maintenanceof-Effort Requirement 

States were required to certify that the state will maintain the level of 

spending that it had planned on February 17, 2009, the day the Recovery 

Act was enacted. As part of the certification review, DOT will evaluate 

Massachusetts’s method of calculating the amounts it planned to expend 

for the covered programs to determine if the state’s calculation complies 

with DOT guidance. Massachusetts officials are awaiting the results of this 

review. Massachusetts state officials continue to express concern about 

the state’s ability to maintain spending levels for transportation. According 

to the Governor’s Deputy Chief Counsel, the requirement that the state 

commit to spend in the future what it planned to spend on February 17, 

2009, puts the state in a difficult position since the state transportation 

spending plan in February 2009 was based on a 5-year capital plan that 

was developed before the state’s revenues dropped significantly. The state 

would like to reserve the right to scale down its capital spending plan in 

Page MA-12 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

line with debt affordability analysis updates, but DOT is continuing to 

enforce the Recovery Act requirement that states maintain their February 

2009 level of effort. Although the state realizes it is too early to gauge 

whether it will be able to meet its maintenance-of-effort requirements, the 

Deputy Chief Counsel stated that the commonwealth would like to 

maintain a continuing dialogue with DOT officials to see if they can alter 

the maintenance-of-effort requirements given the significant change in the 

state’s fiscal situation. According to DOT, no provision for a waiver or 

relief is provided in the Recovery Act. 

Massachusetts Is Using 

Existing Contracting and 

Oversight Procedures for 

Recovery Act Highway 

Funds 

EOT has controls and processes in place for the use of Recovery Act 

funds. According to MassHighway documents and a MassHighway 

contracting official, the state uses an established competitive bid process 

for awarding all highway contracts, including the two Recovery Act 

highway projects we reviewed (see table 1), and all bidders must be 

prequalified by MassHighway. The annual prequalification process 

requires each contractor to submit a completed application, original 

bonding letter, and power of attorney from a surety company. According 

to a MassHighway contracting official, after tabulating all bids and 

analyzing their material soundness, MassHighway awards a unit price 

contract to the lowest bidder.20 The contracts we examined, and as 

confirmed by a MassHighway contracting official, contained additional 

language that was inserted to explain the Recovery Act requirements, 

notice of providing access to relevant federal inspectors general, and 

whistleblower protection. 

Table 1: Key Contract Information for Two Highway Projects 

Characteristic Adams project Swansea project 

Description 1.5 miles of road resurfacing and sidewalk 

reconstruction on Route 116 

Resurfacing of 5.7 miles of Route 6 from 

Somerset to Rehobeth 

Estimated cost $2,199,456 $4,159,044 

Project start April 2009 April 2009 

Estimated completion July 2010 August 2010 

Source: GAO analysis of Massachusetts Highway Department information. 

 

20According to an official at MassHighway, with unit price contracts at MassHighway, unit 

prices are fixed for quantities within 25 percent over or under the specified quantity. 

Page MA-13 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

EOT officials stated they have an online database that allows 

transportation officials to segregate, itemize, and track Recovery Act 

funds. A MassHighway contracting official stated that all safeguards and 

contract management are overseen by MassHighway engineers in 

MassHighway’s district offices. District office engineers provide oversight 

based on an established Standards of Procedure guide and meet with 

officials from the MassHighway construction office every other month. 

Oversight personnel are assigned to a contract after the contract is 

awarded. A MassHighway contracting official said that the Resident 

Engineer, an employee of the MassHighway district office, directly 

oversees projects within the districts. As we observed, the Resident 

Engineer keeps a daily diary of each project to record the number of hours 

worked by employees, the number and type of equipment used, and the 

amount of building materials used that day. This information is then 

entered into an online system that tracks the daily expenditures of the job 

and prepares reports, which we also observed. 

Reporting on Recovery Act 

Results Continues to 

Evolve 

Massachusetts continues to collect and report employment data and data 

related to project implementation and expenditures. Data relating to 

transportation projects is now available through the state’s recovery Web 

site. As we reported in July 2009, Massachusetts transportation officials 

require contractors and subcontractors to submit monthly employment 

information, including the number of employees, hours worked, and 

payroll. However, it is unclear how this information will be used to 

identify new and existing employees and how to ensure that one employee 

working on two different projects is counted as one job created and not 

two. 

According to the Economic Stimulus Coordinator at EOT, EOT uses the 

Equitable Business Opportunity (EBO) system to track the number of jobs 

created through Recovery Act highway funds. EBO is a Web-based 

contractor payroll information system. Massachusetts has integrated the 

monthly employment data collection forms from the FHWA with the EBO 

system to calculate number of workers and hours worked per project. The 

FHWA form collects data from contractors, consultants, and the states. 

For any project or activity that receives FHWA Recovery Act funds, the 

state must complete the FHWA forms for any month where associated 

employment occurs. The EOT official said that EOT submits the 

employment data to FHWA on the 20th of each month, and that FHWA’s 

format for reporting this data has changed four times since EOT began 

reporting after projects were approved. Additionally, the EOT official 

Page MA-14 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

expressed concern that after submitting the monthly reports, there has 

been no feedback and little additional guidance from FHWA. 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.21 The majority of the public transit funds—$6.9 billion 

(82 percent)—was apportioned for the Transit Capital Assistance 

Program, with $6.0 billion designated for the urbanized area formula grant 

program and $766 million designated for the nonurbanized area formula 

grant program.22 Under the urbanized area formula grant program, 

Recovery Act funds were apportioned to 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 under the nonurbanized area formula 

grant program 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. Up to 10 percent of apportioned 

Recovery Act funds may also be used for operating expenses.23 Under the 

Recovery Act, the maximum federal fund share for projects under the 

Transit Capital Assistance Program is 100 percent.24

FTA Found Key 

Recovery Act 

Obligation Deadline 

Was Met, and 

Massachusetts Will 

Use Funds for Fleet 

Improvements and 

Intermodal 

Enhancements 

 

21The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

22Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

23The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

24The federal share under the existing formula grant program is generally 80 percent. 

Page MA-15 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

submit to FTA for Recovery Act funding.25 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure disadvantaged business are 

not discriminated against in the awarding of contracts. 

In March 2009, $290 million in Recovery Act Transit Capital Assistance 

funds was apportioned to Massachusetts and urbanized areas located in 

the state for transit projects.26 As of September 1, 2009, FTA concluded 

that the 50 percent obligation requirement had been met for Massachusetts 

and urbanized areas located in the state. Under the Recovery Act, 

Massachusetts’s only large urbanized area was apportioned $199.8 million 

in Transit Capital Assistance funding. An additional $37.9 million was 

apportioned to medium-size urbanized areas with populations of 200,000 

to 999,999, and $9.2 million was apportioned to small urbanized areas with 

populations of 50,000 to 199,999. In addition, the state was apportioned 

$5.2 million for transit projects in nonurbanized areas. Transit Capital 

 

25Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of DOT, having an 

urbanized area population of more than 200,000, or upon request from the Governor and 

MPO designated for the area. 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 Program (TIP) and the approved State Transportation Improvement Program 

(STIP). 

26The total apportionment includes funds apportioned to other states because some 

urbanized areas cross state boundaries. For example, the Providence, RI-MA urbanized 

area includes the Rhode Island Public Transit Authority and two transit agencies located in 

southeastern Massachusetts—the Greater Attleboro Taunton Regional Transit Authority 

and the Southeast Regional Transit Authority. 

Page MA-16 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Assistance funds are administered by transit agencies who are designated 

recipients of this funding. The transit agencies in the urbanized area meet 

to develop an agreement that spells out how the apportionment will be 

divided among the various transit agencies in the urbanized area.27 The 

state administers a smaller portion of the federal transit aid for projects in 

smaller communities and rural areas of the state. 

Massachusetts Transit 

Agencies Have Used 

Transit Capital Assistance 

Apportionments for Fleet 

Improvements and 

Intermodal Access 

Enhancements 

Massachusetts transit agencies are using Recovery Act funding to finance 

a variety of fleet enhancement and capital improvement projects that 

include replacing aging bus fleets with hybrid vehicles, installing 

automatic vehicle locator systems on buses, adding solar panels to bus 

shelters, and developing plans for a regional interoperable rail fare system 

to allow transit users to transfer between several different transit agency 

systems using one fare card. According to the Executive Director of the 

Massachusetts Association of Regional Transit Authorities, Recovery Act 

funding has allowed Massachusetts transit agencies to fund projects that 

they otherwise would not have been able to afford. For example, 

according to the Massachusetts Bay Transportation Authority (MBTA), 

funds have been obligated for projects worth $112.6 million, including a 

series of smaller preventive maintenance projects, fleet enhancements, 

and capital improvements, as well as an enhancement of MBTA’s Silver 

Line rapid transit service. MBTA officials told us they have received final 

approval from FTA and are preparing bid announcements and 

procurement packages.28 MBTA expects the first delivery of paratransit 

vans funded under the Recovery Act in September 2009, and transit 

construction projects are expected to be under way in the fall of 2009 and 

completed by October 2011. According to an MBTA official, the federal 

transit capital funds are drawn down through the FTA’s Web-based 

Electronic Clearing House Operations System. MBTA is required to 

reimburse vendors within 3 days of receiving the federal funds, but in 

practice, MBTA generally pays its vendors the same day it draws down the 

federal funds. 

 

27In Massachusetts, transit agencies are independent, quasi-public authorities. 

28According to FTA officials, transit projects recommended for Recovery Act funding are 

initially submitted to FTA for review and comment. Once all comments are addressed by 

the transit agency, the project list is forwarded to the U.S. Department of Labor (Labor) for 

certification, a process that may take up to 60 days. Labor reviews transit grant 

applications to gauge the impact of the planned project on local transit workers. Once 

Labor certifies the application, FTA “approves” funding and the project is obligated. 

Page MA-17 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

According to another transit agency we spoke with—the Pioneer Valley 

Transit Authority (PVTA), which serves 24 communities in Hampden and 

Hampshire Counties—funding has been obligated for projects worth $16.3 

million, including purchasing 29 new buses, installing solar panels on rural 

bus shelters to provide security lighting, making improvements to transit 

facilities, and installing bicycle racks on buses (see table 2). PVTA officials 

report they have awarded contracts for projects worth $10.7 million, 

including contracts for purchasing bicycle racks and repairing 

maintenance facilities. PVTA officials expect these projects to be 

completed by the first of the year and the remaining projects to be 

completed by the end of 2010. 

Table 2: Pioneer Valley Transit Authority Transit Capital Assistance Grant Application 

Project description Estimated cost

Purchase bus shelters $25,000

Purchase bicycle access, facilities and equipment on buses 80,000

Buy 16 35-foot replacement buses 5,934,500

Buy 18 replacement vans 990,000

Buy 13 40-foot replacement buses 4,810,000

Acquire 130 mobile fare-collection units 2,600,000

Acquire 200 mobile survey and security units 740,000

Renovate administration and maintenance facility 847,953

Renovate storage facility 82,000

Renovate yards and shops 150,000

Estimated total cost $16,259,453

Source: GAO analysis of FTA data. 

In addition, PVTA officials reported they have plans to purchase new 

buses through a pre-existing contract awarded by another public transit 

agency. Under this process, referred to by PVTA officials as piggyback 

procurement, one transit agency may assign some or all of its existing 

contract rights to another transit agency to purchase all or a portion of 

that contract’s supplies, equipment, or services under the same contract 

terms and pricing as originally advertised, competed, evaluated, and 

awarded. PVTA officials told us that piggyback procurement is in the best 

interest of the agency because, they believe, it saves time and money by 

lowering per-unit costs and avoiding the lengthy procurement process. 

According to these officials, they obtain a copy of the contract from the 

originating transit agency and review it for compliance with FTA 

procurement regulations. According to the administrator for FTA Region I, 

Page MA-18 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

piggyback procurement is a common practice among public transit 

agencies. 

State EOT and transit agency officials we spoke with told us they used 

several key criteria for selecting transit projects to be funded under the 

Recovery Act, including shovel readiness (project readiness), short- and 

long-term jobs creation, economic development, regional equity, and 

modal equity.29 According to transit officials, projects are placed on the 

Transportation Improvement Program after considerable input from EOT 

and the regional MPO. Furthermore, according to an EOT official, transit 

agencies, in conjunction with the regional MPO, conduct extensive 

outreach with key community stakeholders, including private bus 

companies, taxi companies, and advocates for disabled and elderly transit 

users, to gauge public opinion on proposed projects. 

FTA Found That 

Massachusetts and Its 

Urbanized Areas Have Met 

the 50 Percent Obligation 

Requirement 

Funds appropriated through the Transit Capital Assistance Program must 

be used as required by the Recovery Act; specific provisions include the 

following: 

• Fifty percent of Recovery Act funds apportioned to urbanized areas or 

states were to be obligated within 180 days of apportionment (before 

September 1, 2009) and the remaining apportioned funds are to be 

obligated within 1 year. The Secretary of Transportation must 

withdraw and redistribute to other urbanized areas or states any 

amount that is not obligated within these time frames.30

• Project sponsors must submit periodic reports, as required under the 

maintenance-of-effort for transportation projects section (§ 1201(c) of 

the Recovery Act) on the amount of federal funds appropriated, 

allocated, obligated, and outlayed; the number of projects put out to 

bid, awarded, or work has begun or completed; project status; and the 

number of jobs created or sustained. In addition, grantees must report 

detailed information on any subcontractors or subgrants awarded by 

the grantee. 

FTA found that the requirement to obligate 50 percent of the transit funds 

apportioned for Massachusetts transit projects within 180 days has been 

 

29Modal equity refers to the practice of ensuring that all modes of transportation are given 

equal consideration in deciding where to obligate federal funds. 

30Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

Page MA-19 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

met.31 In order to get projects through the approval process quickly, the 

regional FTA administrator encouraged transit agencies to “bundle” 

multiple projects together under one grant application.32 For example, FTA 

provided informal guidance to MBTA to encourage the bundling of 

multiple projects for each Recovery Act program (see table 3). MBTA is 

expected to receive approximately $232 million in Recovery Act funds 

($181 million of Transit Capital Assistance urbanized area funds and $52 

million of Fixed Guideway Infrastructure Investment funds). According to 

the FTA Region I Administrator, without bundling, MBTA could have filed 

18 separate Recovery Act applications for 18 separate projects. According 

to this official, bundling projects reduces the number of grants that need 

to be managed and reported on and reduces the number of grants needing 

FTA approval and Department of Labor certification. Thus, bundling 

projects could reduce the time it takes to get an application through the 

approval process. In addition, bundling grants provides flexibility to transit 

agencies by providing them with the ability to shift grant funds among 

projects within the same grant. In instances where favorable bid 

conditions result in excess funds, bundling provides an opportunity to 

move funds to another project within the same grant that may cost more 

than the original estimate. According to this official, given the advantages 

of bundling, FTA tries to promote bundling projects to all transit agencies 

in Region I. 

 

31The 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 approves a project and a project 

agreement is executed. 

32Region I FTA officials encourage public transit agencies to combine several projects into 

one application to expedite the approval process and provide flexibility to grant recipients 

to move excess funds from one project to another. 

Page MA-20 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Table 3: MBTA Transit Capital Assistance Grant Applications 

Project description Estimated cost

First grant application 

RIDE vehicles - procurement of 108 vans $5,500,000

MBTA - replace and repair fencing 3,800,000

Back Bay Station - improve ventilation and air quality in lobby area 3,000,000

Construction of enhanced bicycle parking facilities at up to 50 stations 4,803,250

Bus stop amenities (e.g., shelters, benches, signage, pavement markings, and amenities related to the 

Americans with Disabilities Act) between Ashmont and Ruggles Station 7,825,000

Silver Line and Dudley-South Station - new bus stops at Chinatown and South Station, queue jumper lanes, 

traffic signal priority, and real-time arrival system 1,700,000

Total first grant $26,628,250

Second grant application 

MBTA - various bus facility improvements (e.g., bus washing equipment, pavement repairs, and heating, 

cooling, and lighting systems at five bus garages) $14,636,188

Fitchburg double-tracking project between West Acton and Ayer, including Littleton Station work 39,810,000

Procurement of 25 articulated 60-foot hybrid buses to replace aging buses 30,700,000

Silver Line - reconstruct Essex Street ramps 800,000

Total second grant $85,946,188

Source: GAO analysis of MBTA data. 

Massachusetts transferred $12.8 million in Recovery Act highway funding 

to fund a transit project in Franklin County. The EOT Economic Stimulus 

Coordinator told us the decision to transfer money from highway projects 

to transit projects was a joint decision between EOT and the Franklin 

Regional Transit Authority and was chosen because the community of 

Greenfield, in Franklin County, needed the funds to upgrade its 

maintenance facilities to address safety concerns and ease significant 

congestion. Because Greenfield lacks a transportation depot, riders 

assemble at city hall to catch the bus, causing traffic delays. According to 

an EOT official, this situation has caused significant congestion around 

city hall and raised concern for the safety of riders who stand by the side 

of the road in a busy section of the city. This official said that the planned 

intermodal facility that will be funded with the $12.8 million is expected to 

reduce the congestion and ease safety concerns by providing a central bus 

depot for riders that will be also be a staging point for eventually 

connecting the community to high-speed rail. 

Page MA-21 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

MBTA and PVTA have developed budget codes to track Recovery Act 

funding to segregate it from funding for projects under their regular 

formula grants. PVTA maintains an internal tracking system that mirrors 

FTA’s Transportation Electronic Award Management system that enables 

them to track expenditures in finer detail.33 MBTA has devised new “mode 

codes” within the MBTA accounting system for Recovery Act funding and 

has created a separate bank account for Recovery Act-funded projects, 

which enables them to write separate checks for these expenditures. 

MBTA and PVTA Have 

Developed New 

Accounting Procedures to 

Track Recovery Act Funds 

but Will Use Existing 

Procedures to Manage 

Contracts 

Officials from MBTA and PVTA have stated they are using existing 

procedures to manage Recovery Act contracts and have engaged external 

consultants to provide additional oversight and project management. 

While both transit agencies are currently following existing contract 

management procedures specified by FTA, MBTA has hired a consultant 

to develop an oversight plan for Recovery Act-funded projects, and PVTA 

officials reported that they will be using an external consultant to provide 

off-site inspections of manufactured goods that are being procured with 

Recovery Act funding. In addition, MBTA will hire external management 

firms to provide oversight support for several rail, bus, and transit station 

projects. 

MBTA and PVTA Are 

Developing Plans for 

Reporting on Expenditures 

and Jobs Created 

MBTA and PVTA reported they have received guidance from FTA on the 

Recovery Act reporting requirements and a separate request for 

information from the U.S. House of Representatives Transportation and 

Infrastructure Committee (the Oberstar Report). They are currently 

determining how to meet both sets of requirements. For example, PVTA 

has questions concerning how to calculate indirect jobs created from 

equipment purchases made with Recovery Act funding versus how to 

count jobs created from Recovery Act-funded construction projects. 

Hoping to get answers to these questions, officials from both MBTA and 

PVTA said they planned to attend one of FTA’s upcoming webinars. 

Neither transit agency had job data for the U.S. House of Representatives 

Transportation and Infrastructure Committee July report because they did 

not have projects under way at that time, but both agencies expect to be 

able to report job data for the next reporting cycle. 

 

33The Transportation Electronic Award Management System is FTA’s online grant 

application and project management system, which allows grant recipients to manage the 

grants awards, monitor project budgets and milestones, and make budget and scope 

revisions. 

Page MA-22 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

In addition to reporting job and spending data, transit agencies are 

required to submit quarterly reports to FTA on scheduled milestones for 

all projects funded under the Recovery Act. They are also required by FTA 

to include both the purpose and the rationale for federal investment in 

each grant application funded under the Recovery Act. Grant applicants 

are asked to explain how the infrastructure investment will contribute to 

one or more of the Recovery Act purposes, such as the preservation or 

creation of jobs, the long-term economic benefits, and whether the project 

addresses an immediate maintenance need. According to the Deputy 

Director of Financial Planning, in the future, MBTA may use these purpose 

and rationale indicators as performance measures to assess how well 

transit projects funded under the act are meeting their intended purpose, 

but the agency is not currently aware of any requirements that it report on 

these additional measures. According to this official, MBTA’s ability to 

maintain schedule and stay within the budget are the primary performance 

measures tracked and reported to FTA for all grant-funded projects, 

including Recovery Act grant programs. MBTA also provides information 

to the state through EOT that includes information on Recovery Act 

project status and copies of reports submitted to the U.S. House of 

Representatives Transportation and Infrastructure Committee and FTA for 

Section 1201(c) reporting requirements. According to this official, this 

information will then be posted to the EOT Recovery Act Web site for 

public review. 

The Recovery Act provides an additional $1.2 billion in funds for 

Workforce Investment Act (WIA) Youth Program, including summer 

employment. Administered by the Department of Labor (Labor), the WIA 

Youth Program is designed to provide low-income in-school and out-ofschool 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

Massachusetts Faced 

Challenges in 

Reaching Its Target 

Number of Summer 

Youth Participants 

While the Recovery Act does not require all funds to be used for summer 

employment, in the conference report accompanying the bill that became 

Page MA-23 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

the Recovery Act,34 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth Program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.35 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job (2) learn 

work readiness skills on the job, and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.36 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

 

34H.R. Rep. No. 111-16, at 448 (2009). 

35Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

36Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page MA-24 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Massachusetts was allotted $24,838,038 in Recovery Act WIA youth funds. 

Labor stipulated that these funds be expended by June 30, 2011. The 

Massachusetts Executive Office of Labor and Workforce Development 

(EOLWD), the agency responsible for overseeing the commonwealth’s 

WIA Youth Program, allocated $21,112,332 of the WIA youth Recovery Act 

funds to 16 workforce investment areas within the state. EOLWD 

developed its own spending guidelines and instructed local workforce 

investment boards (boards) to spend at least 60 percent of their Recovery 

Act funds by September 30, 2009, and the remainder by September 30, 

2010. Although these are the formal deadlines, state officials verbally 

encouraged the boards to spend all of their funding as soon as possible to 

stimulate the economy. As of September 5, 2009, local boards had drawn 

down about $11 million or 53 percent of WIA youth Recovery Act funds. 

Fewer Youth Than Planned 

Have Been Served with 

WIA Youth Funds by Some 

Local Workforce 

Investment Boards 

State officials planned to provide 6,500 youth37 with summer employment 

activities through the WIA Youth Program, but some local boards had 

problems identifying eligible youth.38 While EOLWD anticipated that the 

youth would participate throughout the summer, fewer than expected 

youth were served in the beginning. As of July 31, 2009, a few weeks into 

summer activities, Massachusetts reported to Labor that it had served 

5,640 youth, but as of August 24, 2009, it had met its goal and served over 

6,750 youth. 

When we met with local board officials in July 2009, they said they were 

having difficulty recruiting eligible youth in some areas. The Central 

Massachusetts Regional Employment Board, as of July 23, 2009, had only 

about 65 of its goal of 100 participants in one of its areas. The Merrimack 

 

37As stated in our July 2009 report, the Governor’s office estimated that each of the 6,500 

youth would work 30 hours per week for 8 weeks at the rate of $8 per hour. 

38In total, the Governor’s office planned to create about 10,000 summer jobs for youth 

across the state by leveraging and coordinating Recovery Act WIA youth funds, Recovery 

Act Edward Byrne Memorial Justice Assistance Grant funds provided to the state 

Executive Office of Public Safety and Security, and state-funded Youthworks funds. As of 

August 6, 2009, the state had surpassed its goal of serving 3,565 youth through the 

Youthworks program. The Recovery Act Edward Byrne Memorial Justice Assistance Grant 

program served 4 youth as of early September 2009. 

Page MA-25 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Valley Workforce Investment Board reported 304 participants as of the 

week ending July 31, 2009, and was not sure it would be able to reach its 

goal of 700 participants. 

Local officials said they found it difficult to recruit eligible youth in the 

short time they had to ramp up their programs. Local officials said it was 

challenging for youth to provide all of the documents that were required to 

demonstrate WIA Youth Program eligibility, especially in such short time 

frames. Officials from the Central Massachusetts board said that on 

average, youth had to come back to the program office about two or three 

times to supply the proper documentation. According to local board 

officials, it was especially onerous for students to be required not only to 

demonstrate they were from families at or below the poverty level, but 

also to prove they were eligible for the program because of another 

barrier, such as being pregnant, a parent, or an offender. According to 

local officials, parents and community members were troubled to learn 

that low-income youth without employment barriers were not eligible to 

participate in the program.39

The state has received a waiver from Labor that allows them the flexibility 

to provide work experiences to out-of-school youth 18 to 24 years old 

through March 31, 2010. This waiver allowed local boards to continue 

using only the work readiness indicator instead of all of the WIA 

indicators. Thus, the streamlined program operated in the summer will 

have additional time to serve other youth. Merrimack Valley officials told 

us they will attempt to recruit and begin serving more out–of-school youth 

and hope to meet their goal of serving 700 participants. 

Challenges Still Exist with 

Implementing the 

Recovery Act WIA Youth 

Program 

Local boards we met with faced additional challenges ramping up their 

summer programs and supporting and monitoring youth. As mentioned in 

our July 2009 report, both state and local officials commented that setting 

up WIA youth summer employment activities was time consuming and 

needed to be done within short time frames. State guidance required that 

local boards spend at least 60 percent of their Recovery Act WIA youth 

funds by September 30, 2009. Although these are formal deadlines, state 

officials verbally encouraged the boards to spend all of their funding as 

 

39One or more of the following barriers to employment must be demonstrated for eligibility: 

(1) school dropout; (2) basic literacy skills deficiency; (3) homeless, runaway, or foster 

child; (4) pregnant or a parent; (5) an offender; or (6) needs help completing an educational 

program or securing and holding a job. 

Page MA-26 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

soon as possible. To achieve their goal of serving a large number of youth 

in a short time frame, officials from one board said that some staff were 

required to work extra hours and staff that normally performed other 

duties were also assigned WIA Youth Program-related work. 

Local board officials made use of existing relationships with communitybased organizations, schools, and businesses to identify employers and 

youth quickly. The Merrimack Valley board hosted information sessions 

with local business organizations, like the Chamber of Commerce, and 

with school and municipal officials. According to local board officials, 

their relations with community-based organizations were strained as a 

result of the restrictive eligibility and documentation requirements of the 

WIA Youth Program. They noted that youth who were recruited through 

these organizations were subsequently not allowed to participate in the 

program because they either did not have any barriers to employment or 

did not provide full documentation to meet the requirements for additional 

barriers to employment. 

Local Workforce Boards 

Had Flexibility to Design 

and Administer Their WIA 

Youth Programs 

While the state provided guidance on a number of issues, generally as long 

as the programs complied with the Recovery Act, Labor requirements, and 

state provisions, the local boards were provided with the flexibility to 

design and administer their WIA youth programs as they liked. The two 

boards we visited varied slightly in the opportunities they provided to 

program participants. Both the Central Massachusetts and the Merrimack 

Valley programs offered work experiences; the Merrimack Valley program 

also offered some work experience positions combined with academic 

instruction to their participants. For example, we visited a work learning 

site where youth were taught academic subjects such as reading and 

writing for part of their day and then worked in a warehouse setting for 

the rest of the day. 

WIA youth summer participants were employed in a range of jobs. (See 

table 4.) One of the local boards we spoke with placed some youth with 

what they characterized as either green employers or green jobs. 

According to local officials, some green jobs included work at an urban 

farm and a light bulb efficiency start-up and manufacturing company. Both 

state and local officials told us there is little guidance on what technically 

constitutes a green job. 

Page MA-27 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Table 4: Program Characteristics for Two Local WIA Youth Programs 

Program characteristics 

Central Massachusetts 

Regional Employment Board 

Merrimack Valley 

Workforce Investment Board 

Areas served Greater Worcester, South County, 

Blackstone Valley 

Area cities and towns, including Haverhill, 

Lawrence, and Newburyport 

Program design One 25-hour paid week of pre-employment 

training 

Six or ten 25-hour weeks of paid 

employment 

2-hour orientation 

Up to 30-hour weeks of work and learning 

(work readiness employment and academic 

learning ), or 

Up to 30-hour weeks of paid employment 

Compensation Youth are paid $8 to $12 per hour Youth are paid $8 per hour for employment 

and stipends of $8 per hour for academic 

learning activities 

Length of program July 6 to September 18, 2009aJuly 6 to September 31, 2009 

Outreach Community organizations, youth council, 

state youth-serving agencies, media, and 

others 

Chambers of Commerce, municipal and 

school officials, media, and others 

Target number of participants 500 youth 700 youth 

Number of participants as of 

September 5, 2009 

537 youth 535 youth 

Amount allocated to the board $1,942,576 $1,477,861 

Amount expended by the board as of 

September 5, 2009 

$1,389,036 $706,587 

Examples of job types Camp counselors, Web design, landscaping, 

weatherization crew work 

Cabinetmaker apprentice, museum docent, 

groundskeeper, laborers, clerical positions 

Work readiness measure Completion of pre-employment training (1 

week) and exit interview 

Completion of a section of the 

Massachusetts Work-based Learning Plan 

Source: GAO analysis of WIA Youth Program information. 

a

The majority of youth completed the program on August 21, 2009; however, others were to complete 

the program on August 28 and September 18, 2009. 

Multiple Monitoring and 

Tracking Activities Are 

Performed on Recovery 

Act WIA Youth Funds 

State officials, as well as officials from the boards we met with, are 

monitoring and tracking activities of Recovery Act WIA youth funds in 

myriad ways. The two boards chose different administrative structures for 

their programs—either administering funds internally and contracting with 

providers directly (as in the case of the Merrimack Valley board) or 

contracting with an external organization to administer various program 

functions (as in the case of the Central Massachusetts board). Our 

selection of two contracts to discuss in greater depth with relevant agency 

contracting officials reflects this distinction. According to officials, each 

contract we examined was awarded competitively on a costreimbursement basis with a not-to-exceed ceiling price. 

Page MA-28 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

In the case of the Central Massachusetts board, we examined a contract 

awarded by the board to a community action agency for administration of 

the WIA Youth Program. This contract was awarded on May 18, 2009, at a 

total value of $873,362 with a project start date of April 24, 2009, and a 

projected completion date of September 30, 2009. It is intended to provide 

work readiness skills training for 300 WIA youth participants in the greater 

Worcester area. We noted, and officials confirmed, contract provisions 

requiring the submission of programmatic and fiscal reports; the contract 

also made clear that if this requirement and others are not met, program 

termination and withholding of funds can result. 

The Merrimack Valley board via its fiscal agent (the city of Lawrence’s 

Division of Grants Administration) awarded a contract to provide WIA 

youth services. This contract was awarded on July 6, 2009, at a total value 

of $6,839 with a project start date of July 6, 2009, and a projected 

completion date of September 30, 2009. It is intended to provide 10 eligible 

youth 18 to 24 years old who are disabled with a combination of work and 

learning activities—e.g., manufacturing, leadership, employability, and 

other skills. We noted, and officials confirmed, provisions in the contract 

that require monthly contractor expense reports and specify consequences 

(such as revocation of funds and program termination) for failure to 

submit accurate and complete reports within designated time periods. 

In addition to overseeing contracts, state and local officials discussed 

procedures in place to report on Recovery Act funds. Both state and local 

officials we spoke with stated they are using separate accounting codes to 

track Recovery Act funds, which will enable them to report on these funds 

separately. Also, short-term staff were hired to monitor the programs and 

funds. For example, on the state level, EOLWD created the Economic 

Recovery Project Coordinator position, with responsibilities for all 

Recovery Act monitoring and reporting requirements. At the local level, 

the boards we met with created staff positions to monitor work sites and 

keep abreast of each youth’s work performance. 

Both the state and one of the boards we visited are conducting compliance 

assessments for each work site. According to state officials, staff from the 

Commonwealth Corporation, a quasi-public agency created by the State 

Legislature, planned to visit each board at least twice to monitor the 

boards’ WIA youth summer programs. At the time of our interview, the 

first visits had already occurred. Commonwealth Corporation staff told us 

that during these monitoring visits, they perform file reviews and assess 

work sites. Both local boards we visited developed their own monitoring 

activities. For example, the Merrimack Valley board generated weekly 

Page MA-29 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

reports that included enrollment, youth served, work-site data, and total 

expenditures. 

State and Local Officials 

Are Attempting to Measure 

Program Outcomes 

In accordance with Labor’s guidance, the state requires each local board 

to track and report the number of youth employed and program 

completion rates. In addition, for WIA Youth Program performance 

measures, only the work readiness measure (which focuses on skills like 

work ethics, professionalism, communication skills, and interpersonal 

skills) is required to assess the effectiveness of summer employment for 

youth served with Recovery Act funds. Local boards may determine the 

methodology they use to measure work readiness gains. EOLWD’s 

guidance instructed local boards to choose from a variety of assessment 

tools, including work-site supervisor evaluations, work readiness skill 

checklists administered by program staff, portfolio assessments, and any 

other relevant forms of assessing work readiness skills. 

We found that the local areas we visited use different assessment 

instruments to determine work readiness skills upon beginning and 

completing the summer experience. The Merrimack Valley board is using a 

section of the Massachusetts Work-based Learning Plan, a goal-setting and 

assessment tool designed to drive learning and productivity on the job, to 

satisfy the work-readiness measure.40 Youth receiving a work experience 

are evaluated weekly on their time sheets by their supervisors according 

to such dimensions as work maturity skills—e.g., punctuality and dressing 

professionally; personal skills, such as teamwork and exercising 

leadership; and work-related skills, such as use of computers and the 

Internet and customer service. These evaluations will be used to evaluate 

the youth over time, identify trends, and assess their work readiness. The 

Central Massachusetts Regional Employment Board will use completion of 

the pre-employment training as its measure of work readiness. An 

evaluation of youth satisfaction will also be conducted. 

Results of assessments were not yet available at the time of our visits to 

local boards, although officials commented anecdotally that some 

immediate results are apparent from the WIA youth summer program. 

Officials from both boards we met with state that the youth they are 

 

40Youth will be assessed on attaining competencies in completing applications, resume 

development, interviewing skills, job search strategies, attendance and punctuality, 

workplace appearance, interaction with co-workers and supervisors, initiative, 

communication skills, money management, transportation, and workplace safety. 

Page MA-30 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

serving have been positively impacted by the programs. For example, local 

officials stated that some youth expressed a sense of pride and completion 

when they completed their orientation or training or when they received 

their first paycheck. Some youth were also provided with skills for 

activities of daily living, such as how to write a check. 

At the time of our visit, the commonwealth had not yet decided how it will 

address the OMB reporting requirements on jobs created and retained, not 

only for the WIA Youth Program but also for other Recovery Act-funded 

activities. However, subsequent to our visit, on August 14, 2009, Labor 

issued guidance clarifying that participants in employment and training 

programs, such as the WIA Youth Program, are not to be reported in the 

jobs created and retained numbers. At the local level, boards are compiling 

data on the number of non-youth positions fully and partially funded with 

WIA youth funds. 

As of September 4, 2009, Massachusetts was awarded funds for the 

following Recovery Act education programs: about $726 million through 

the State Fiscal Stabilization Fund (SFSF), $164 million in ESEA Title I, 

Part A, funds, and $291 million in funds through IDEA, Part B. Local 

educational agencies (LEA) have received $412 million in SFSF funds, 

$322 million in education stabilization funds, and $90 million, or about 

half, of its government services funds. According to state officials, 

Massachusetts, by the end of October, plans to restore public higher 

education funding for fiscal years 2009 and 2010 using a total of $54 

million and $168 million, respectively of SFSF funds. Upon receipt of the 

$268 million remaining of the state’s SFSF Recovery Act funds, the state 

plans to distribute an additional $168 million to LEAs in SFSF funds in 

fiscal year 2010. Similar to fiscal year 2009, LEAs and institutions of higher 

education will receive SFSF funds to offset cuts in state education funding 

for fiscal year 2010. Also, the Governor will use approximately $20 million 

of the $181 million available from the SFSF government services fund for 

public safety in fiscal year 2010 for grants to fire departments. Plans for 

use of the remaining SFSF education stabilization and government 

services funds have not been announced. 

Recovery Act 

Education Funds 

Continue to Be 

Distributed and Help 

Address State 

Funding Shortfalls 

As of September 4, 2009, 99 of the state’s 258 LEAs that were allocated 

ESEA Title I funds have submitted and had approved by state officials 

their state-required program applications. These LEAs have received about 

$2 million in ESEA Title I Recovery Act funds. In addition, at least 227 of 

the state’s LEAs that were allocated IDEA, Part B, Recovery Act funds 

have submitted their required application to the state to begin accessing 

Page MA-31 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

funds. These LEAs have received almost $10 million in IDEA, Part B, 

Recovery Act funds. (See figure 2 for funding information.) According to 

state officials, LEAs are spending non-Recovery Act ESEA Title I and 

IDEA, Part B, funds before spending Recovery Act funds. 

Figure 2: Financial Information on Three Recovery Act Education Programs as of 

September 4, 2009 

0

200

400

600

800

1,000

1,200

SFSF ESEA Title I IDEA Part B

Dollars (in millions)

Source: GAO analysis of state reported data.

Program

Allocated By Education

Awarded to State

Received by LEAs

994

291

164

726

164

291

412

2 10

We provided the Governor of Massachusetts with a draft of this appendix 

on September 3, 2009, and representatives from the Governor’s Office and 

the Office of the State Auditor responded on September 9 and 10, 2009. 

Officials agreed with our draft and in some cases provided clarifying or 

technical suggestions that were incorporated, as appropriate. 

State Comments on 

This Summary 

Page MA-32 GAO-09-1017SP Recovery Act
Appendix IX: Massachusetts 

Stanley J. Czerwinski, (202) 512-6806 or czerwinskis@gao.gov 

Laurie E. Ekstrand, (202) 512-6806 or ekstrandl@gao.gov 

In addition to the contacts named above, Carol L. Patey, Assistant 

Director; Ramona L. Burton, analyst-in-charge; Nancy J. Donovan; 

Kathleen M. Drennan; Keith C. O’Brien; Salvatore F. Sorbello Jr.; and 

Robert D. Yetvin made major contributions to this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page MA-33 GAO-09-1017SP Recovery Act
Appendix X: Michigan 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Michigan. The full report on our work, which covers 16 states 

and the District of Columbia, is available at http://www.gao.gov/recovery/. 

Overview 

This appendix focuses on how Michigan used Recovery Act funds; how it 

had implemented safeguards, such as controls over the procurement of 

goods and services; and how recipients were assessing results of the 

Recovery Act funding, such as the number of jobs created. In Michigan, we 

reviewed six Recovery Act programs. We selected these programs because 

they had a number of risk factors, including the receipt of significant 

amounts of Recovery Act funds or a substantial increase in funding from 

previous years’ levels. Consistent with the purposes of the Recovery Act, 

funds from the programs we reviewed are being directed to help Michigan 

and local governments stabilize their budgets and to stimulate 

infrastructure development and expand existing programs—thereby 

providing needed services and jobs. Specifically, work on contracts for 

highway projects using Highway Infrastructure Investment funds had been 

under way in Michigan for several months, and provided an opportunity 

for us to review the use of the funds and the financial controls, including 

oversight of the contracts. Similarly, the three U.S. Department of 

Education (Education) programs we reviewed had also been under way in 

Michigan for several months and provided an opportunity to review the 

use of the additional Recovery Act funds and consider internal controls at 

the state and locality level, including controls and financial management 

reforms under way at the Detroit Public Schools (DPS). We also reviewed 

Michigan’s weatherization program because it experienced significant 

growth due to Recovery Act funds. Finally, the WIA Youth Program in 

Michigan also experienced significant growth due to Recovery Act funds 

and was largely directed toward a summer employment program which 

was in full operation at the time of our review. Highlights of these 

programs are: 

Highway Infrastructure 

Investment Funds 

• The U.S. Department of Transportation’s Federal Highway 

Administration (FHWA) apportioned $847 million in Recovery Act 

funds to Michigan. As of September 1, 2009, the federal government 

Page MI-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
had obligated $575 million to Michigan and $41 million had been 

reimbursed by the federal government. 

• As of September 1, 2009, Michigan had awarded 153 contracts for 

highway projects. Of these 153 contracts, work had begun on 94 

contracts and 1 had been completed. The majority of funds obligated 

in Michigan are for highway pavement projects. 

• According to transportation officials, because the contracts generally 

have been awarded for less than the original estimates, the state will 

be able to fund additional projects. The additional projects will 

primarily be pavement and bridge improvements in economically 

distressed areas. 

• We reviewed two transportation contracts and spoke with officials 

who stated that the Michigan Department of Transportation (MDOT) 

has contracting procedures and internal controls in place for awarding 

and overseeing highway infrastructure investment Recovery Act 

contracts. 

Weatherization Assistance 

Program 

• The U.S. Department of Energy (DOE) allocated about $243 million in 

Recovery Act Weatherization funding to Michigan for a 3-year period 

ending in March 2012. Based on information available on August 31, 

2009, DOE provided about $121.7 million to Michigan representing 50 

percent of the amount allocated by DOE, and the state had obligated 

about $198.7 million to subrecipients, subject to limitation based on 

the availability of federal funds. 

• According to state officials, as of August 31, 2009, Michigan had 

awarded 32 weatherization contracts and had expended about 

$2 million. 

• The state’s goal is to weatherize at least 33,000 units, a large increase 

over the 14,346 units weatherized during program years 2005 through 

2007. 

• To help monitor whether these funds are used appropriately, 

Michigan’s Department of Human Services (DHS) hired additional staff 

to monitor the program and plans to hire several more. 

State Fiscal Stabilization 

Fund 

• The U.S. Department of Education (Education) allocated $1.592 billion 

in State Fiscal Stabilization Fund (SFSF) moneys to Michigan, with 

Page MI-2 GAO-09-1017SP Recovery Act
$1.302 billion for education stabilization and $290 million to fund 

government services. 

• As of September 1, 2009, Education had made two-thirds of the total 

education stabilization funds available to the Michigan Department of 

Education (MDE)—$873 million. MDE officials told us that they 

allocated $600 million of these funds to local educational agencies 

(LEA). 

• As of September 1, 2009, MDE had approved LEAs’ applications for 

$599 million of the education stabilization funds and LEAs had drawn 

down $584 million. MDE officials told us that LEAs plan to use most of 

the funding for teacher salaries. 

• State officials told us they planned to use the government services 

portion of the SFSF to replace state general fund revenues and pay for 

other state services; none of the funds will be provided to MDE. 

Title I, Part A, of the 

Elementary and Secondary 

Education Act of 1965, as 

Amended 

• As of August 18, 2009, Education made 50 percent of Michigan’s total 

Title I, Elementary and Secondary Education Act of 1965 (ESEA) 

Recovery Act funds available to MDE—$195 million of the state’s total 

allocation of $390 million. 

• According to MDE officials, they made a preliminary allocation of all 

of these funds to the LEAs and planned to make final allocations to the 

LEAs later in the fall of 2009 after reviewing their applications. 

• MDE officials said they have encouraged LEAs to use their ESEA Title 

I Recovery Act funds for programs such as professional development 

for teachers and professional staff and for supplemental reading 

programs. 

Individuals with 

Disabilities Education Act, 

Parts B and C 

• On April 1, 2009, Education made the first half of Michigan’s total 

$213 million in Individuals with Disabilities Education Act (IDEA) 

Recovery Act funds available to the state—$207 million for the Part B 

grants and about $6 million for Part C grants. 

• As of August 14, 2009, MDE had allocated all of the IDEA Part B funds 

for grants for school-aged children and youth, but it had not provided 

any of the funds because it had not yet approved the grant 

applications. 

Page MI-3 GAO-09-1017SP Recovery Act
• According to MDE officials, LEAs intend to use the Part B grants to, 

among other things, retain special education teachers; acquire new 

technologies, including automated data systems and electronic smart 

boards for use in classrooms; enhance professional development for 

teachers; and provide additional bus transportation services to 

students with disabilities. 

• The MDE officials also said the Part C grant funds will be used for 

early intervention services and, as of August 14, 2009, they had 

approved 42 applications for almost $5 million of these funds. 

Workforce Investment Act 

Youth Program 

• The U.S. Department of Labor (Labor) allotted about $74 million in 

Workforce Investment Act (WIA) Youth Recovery Act funds to 

Michigan and, as of August 31, 2009, Michigan had drawn down about 

$20.2 million. The state allocated $63 million to 25 Michigan Works! 

Agencies (MWA). 

• As of July 31, 2009, Michigan had enrolled 12,166 youth in summer jobs 

through its Recovery Act-funded WIA summer employment programs. 

The state Department of Energy, Labor and Economic Growth 

(DELEG) provides overall program guidance to the MWAs, but the 

design, implementation, monitoring, and reporting on the use of and 

accounting for WIA Recovery Act funds is the responsibility of the 

MWAs. 

• Although DELEG and MWA officials in Detroit initially said they did 

not foresee any difficulties, they later cited several challenges in 

running the program. Our work identified significant internal control 

issues with payroll preparation and distribution; the process for 

making eligibility determinations; and a lack of documentation 

supporting such decisions in the Detroit summer youth program. 

Progress is under way by state and local officials to address each of 

these issues, although more work remains. 

Michigan officials continue to work towards developing a state-level 

centralized system that the state will use to report to the Office of 

Management and Budget (OMB) and satisfy Recovery Act reporting 

requirements. The Director of Michigan’s Economic Recovery Office 

(Recovery Office) believes the state will be able to report centrally, but 

said that state agencies could report directly to the federal government if 

needed. 

Page MI-4 GAO-09-1017SP Recovery Act
Michigan continues to face considerable economic difficulties and 

significant fiscal challenges in meeting its balanced budget obligations for 

fiscal years ending September 30, 2009, and beyond. The state’s overall 

unemployment rate was 15 percent in July 2009, up from 8.3 percent in 

July 2008. Michigan’s manufacturing sector was particularly hard hit, 

losing about 108,900 jobs between July 2008 and July 2009, representing 

over 19 percent of all the manufacturing jobs in the state.2

 Local 

communities that have historically relied on manufacturing jobs must deal 

with even higher unemployment rates. For example, in July 2009 the city 

of Detroit had an unemployment rate of 28.9 percent and the city of Flint’s 

unemployment rate was 28.6 percent. 

As Michigan’s Overall 

Economic Condition 

Creates Pressure on 

the State’s Fiscal 

Position, Recovery 

Act Funds Will 

Continue to Provide 

Partial Relief 

This increase in unemployment has been accompanied by a continuing 

decline in state revenues. As noted in our July 2009 report, the state’s May 

2009 revenue estimate projected lower state revenues for fiscal year 2009 

compared not only to fiscal year 2008 revenues, but also to revenue 

estimates published four months earlier.3

 Despite lowered expectations, 

actual revenue collections have continued to fall short of projections. For 

example, according to the Senate Fiscal Agency’s monthly revenue 

reports, revenues for June and July 2009 totaled $110 million, which was 

3.1 percent below what the May revenue estimate had projected for this 2-

month period. This decline illustrates the rapid deterioration in the state’s 

fiscal condition and the difficulty in projecting Michigan state revenues. 

State budget officials also reported that revenues that can only be used for 

specified purposes, such as fees from game and wildlife licenses and state 

parks, have also declined in recent months. 

Michigan is using a combination of Recovery Act funds and cost-cutting 

measures to balance the state’s budget and is relying on Recovery Act 

funds to substantially, although not entirely, fill growing budget gaps. Over 

the 3 years ending September 30, 2011, Michigan expects $3.6 billion to be 

available, as a result of the Recovery Act funds, for budget stabilization.4

 

2

Within manufacturing, the automotive industry—including automotive parts producers—

declined by more than 42,000 jobs (28 percent) from July 2008 to July 2009. 

3

The Michigan Department of the Treasury, House Fiscal Agency, and Senate Fiscal Agency 

prepare the Consensus Revenue Estimate in January and May of each year to help 

legislators prepare the state’s budget. 

4

The state is expecting just over $2 billion in state funds to be made available as a result of 

the enhanced Federal Medical Assistance Percentage (FMAP) (discussed in detail in 

GAO-09-1016); $1.3 billion through SFSF education stabilization funds and $290 million 

through SFSF government services funds. 

Page MI-5 GAO-09-1017SP Recovery Act
For example, state officials expect Recovery Act funds, in addition to 

almost $400 million in spending cuts described below, to free up sufficient 

state revenue to address a $1.4 billion revenue shortfall and allow the state 

to end fiscal year 2009 with a balanced budget. As noted in our July 2009 

report, for the fiscal year ending September 30, 2009, Michigan’s costcutting actions included reducing revenue sharing to cities, villages, and 

townships by 10 percent; mandating 6 unpaid furlough days for 38,000 of 

the state’s 52,000 state employees; laying off 400 employees (including 100 

state troopers); closing three correctional facilities; and enacting a 4 

percent across-the-board cut for most state agencies. State Budget Office 

officials told us that, despite initial hopes to use Recovery Act funding for 

new projects, Michigan has used a large portion of these funds to free up 

state revenues for the maintenance of existing programs due to the state’s 

ongoing fiscal challenges. 

Michigan’s “rainy day fund”—the Counter-Cyclical Budget and Economic 

Stabilization Fund—does not offer assistance to meet the state’s existing 

fiscal challenges. Since fiscal year 2005, the fund has had a balance of 

about $2 million, and the Senate Fiscal Agency did not anticipate that any 

transfers out of this fund would occur during fiscal years 2009 or 2010 

because it would not adequately address Michigan’s budget situation. 

State officials continued to express concerns about Michigan’s fiscal 

outlook when the Recovery Act funds run out. Rather than spending all of 

its Recovery Act funds up front and creating the need for massive 

spending cuts in fiscal year 2011, Michigan is considering a range of 

options, including spending cuts and possibly tax increases, to balance the 

state’s annual budgets. State officials also said they are working with state 

agencies to prioritize Recovery Act spending in ways that could be 

sustained in 2011 and going forward after the majority of Recovery Act 

funds expire. Officials from the House Fiscal Agency, Senate Fiscal 

Agency, and State Budget Office told us their strategy is to minimize the 

effects of the budget shortfall by using Recovery Act funds in fiscal years 

2010 and 2011, primarily by using state funds that will be made available as 

the result of SFSF and the increased Federal Medical Assistance 

Percentage (FMAP). However, the exact allocation of Recovery Act funds 

remains uncertain as fiscal year 2010 budget negotiations continue and the 

state, as of September 17, 2009, did not yet have an approved budget for 

fiscal year 2010. 

According to state budget officials, Michigan will seek reimbursement 

from the U.S. Department of Health and Human Services (HHS) for the 

cost of the state’s Economic Recovery Office (Recovery Office), which is 

Page MI-6 GAO-09-1017SP Recovery Act
expected to be about $2 million for fiscal year 2009. On June 26, 2009, the 

state formally identified Recovery Office-related costs in an amendment to 

its statewide cost allocation plan submitted to HHS. In this amendment, 

Michigan opted to use the “billed cost” option available for calculating 

administrative costs associated with the Recovery Office. Officials told us 

that the state chose this option to avoid any potential lag that might arise 

from trying to reconcile estimated costs with actual costs.5

 Further, they 

informed us that HHS responded to Michigan’s submission in August and 

the state is planning to submit a revised addendum by the end of 

September. 

Michigan Continues to 

Develop a Statewide 

Central Reporting System 

The Michigan Economic Recovery Office Director told us that, as of 

September 1, 2009, the state plans to meet the October 10, 2009, due date 

for reporting to the federal government on Recovery Act spending through 

a centralized reporting process. The Recovery Office Director believes the 

state will be able to report centrally, but said that state agencies could 

report directly to the federal government if needed. If reporting under a 

centralized approach is not practical for the initial report due to the 

federal government in October 2009, then state agencies will report 

directly to their cognizant federal departments and to OMB. The Recovery 

Office Director said that the state agencies have been instructed to register 

with the OMB, a necessary procedure for direct reporting. 

Michigan officials continue to work toward developing a state-level 

centralized system that the state plans to use for reporting to OMB and 

complying with the reporting requirements under Section 1512 of the 

Recovery Act.6

 These officials said they believe that a centralized reporting 

system will provide the best mechanism for reporting accurate and 

consistent data to the federal government and enhance the state’s 

oversight and monitoring. Specifically, Recovery Office officials said they 

 

5

The State Budget Office said it reviewed Office of Management and Budget (OMB) 

Memorandum M-09-18, Payments to Grantees for Administrative Costs of Recovery Act 

Activities (May 11, 2009) that provides guidance to the states regarding the use of either 

“estimated cost” or “billed cost” options for determining the amount of administrative costs 

to be recovered. Because of the narrow scope of administrative costs the state is pursuing, 

M-09-18 did not affect the decision to use the “billed cost” option for Recovery Office costs. 

6

Recovery Act reporting requirements include identifying the entities receiving Recovery 

Act dollars, the amounts, which projects or activities are being funded, projects’ 

completion status, and an estimate of the number of jobs created and the number of jobs 

retained by projects and activities. 

Page MI-7 GAO-09-1017SP Recovery Act
will be able to analyze the data they receive from all state agencies for 

consistency and reasonableness in relation to other state agency spending 

data. The officials also said they believe that this level of review will not be 

as effective if each state agency reports directly to the federal government 

under a decentralized model. The Michigan Recovery Office has 

recommended that state agencies not delegate reporting requirements to 

subrecipients of Recovery Act funds so the state can maintain better 

control over the reporting process. However, state agencies have the 

authority to delegate reporting requirements to subrecipients. 

Officials from the Michigan Department of Information Technology 

(MDIT) said they had been working to develop the state-level centralized 

reporting system and intended to begin testing the system in July 2009. 

However, after receiving the OMB guidance in June, they recognized that 

the system under development did not have provisions for all of the data 

elements specified in the OMB guidance.7

 Officials told us they are 

working to include all required information in their system. 

As we reported in July 2009, FHWA apportioned $847 million to Michigan 

in March 2009 for highway infrastructure and other eligible projects. As of 

September 1, 2009, the state had obligated $575 million, or 68 percent, of 

these funds.8

 In addition, as of September 1, 2009, FHWA had reimbursed 

$41 million to the state.9

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the FederalAid 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 

Michigan Has Begun 

Several Highway 

Projects Using 

Recovery Act Funds 

 

7

OMB Memorandum M-09-21, Implementing Guidance for the Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009). 

8

For the Highway Infrastructure Investment Program, DOT has interpreted the term 

obligation of funds to mean the federal government’s contractual commitment to pay for 

the federal share of the project. This commitment occurs at the time the federal 

government signs a project agreement. 

9

States request reimbursement from FHWA on an ongoing basis as the state makes 

payments to contractors working on approved projects. 

Page MI-8 GAO-09-1017SP Recovery Act
follow existing program requirements, which include ensuring the project 

meets all environmental requirements associated with the National 

Environmental Policy Act, paying prevailing wages in accordance with 

federal Davis-Bacon Act requirements, complying with goals to ensure 

disadvantaged businesses are not discriminated against in the awarding of 

construction contracts, and using American-made iron and steel in 

accordance with Buy America 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. 

The Majority of Funds 

Obligated in Michigan Are 

for Highway Pavement 

Projects 

About 77 percent of Recovery Act highway obligations for Michigan are for 

pavement projects. Specifically, $334 million of the $575 million obligated 

in Michigan as of September 1, 2009, is being used for projects such as 

pavement improvement, including $120 million for road resurfacing. 

MDOT officials told us that they selected mostly pavement projects 

because the primary focus of Michigan’s capital improvement plan for 

highways has been maintaining existing roads and bridges and improving 

pavement conditions. In addition, pavement projects met one of the 

Recovery Act requirements that funds for highway infrastructure 

investments be obligated within 120 days of apportionment. Figure 1 

shows obligations by the types of road and bridge improvements being 

made. 

Page MI-9 GAO-09-1017SP Recovery Act
Figure 1: Highway Obligations for Michigan by Project Type as of September 1, 

2009 

Bridge improvement ($40.8 million)

Other ($82.1 million)

Pavement widening ($108 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($334.3 million)

Pavement projects total (77 percent, $442.3 million)

Bridge projects total (9 percent, $51 million)

Other (14 percent, $82.1 million)

58%

19%

7%

14%

2%

Bridge replacement ($10.2 million)

Notes: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. 

MDOT officials further told us that, as of September 1, 2009, Michigan had 

awarded 153 contracts for highway projects. Of these 153 contracts, work 

had begun on 94 contracts and 1 had been completed. According to MDOT 

officials, the completed project, which started in April 2009 and was 

completed in June 2009, involved preventive maintenance, including 

concrete pavement repairs to about 11 miles of Interstate 75 on the 

Ogemaw and Arenac County lines. The officials also said that the contract 

had a total value of about $854,000. As of September 1, 2009, 38 contracts 

were pending award, 16 were out for bid, and MDOT planned to advertise 

another 53 contracts. Since our July 2009 report, MDOT officials stated 

that Michigan has continued to find that contracts for Recovery Act 

projects are being awarded for less than the amounts it had estimated 

when the funds were obligated for the projects, which will allow them to 

allocate funds to additional projects. Because MDOT initially identified 

more projects than it estimated could be funded with the $847 million 

apportioned to Michigan for highway infrastructure projects, officials plan 

to use the funds freed up by the lower bids for these additional projects, 

Page MI-10 GAO-09-1017SP Recovery Act
which are primarily for pavement and bridge improvements in 

economically distressed areas. 

Michigan Is Using Existing 

Contracting Procedures 

and Internal Controls for 

Awarding and Overseeing 

Recovery Act Contracts 

MDOT has processes in place for the award and oversight of contracts 

using Recovery Act funds. We selected two contracts for pavement 

improvement projects to review—one for more and one for less than $20 

million. The first contract we reviewed was a state-administered contract 

in a rural, economically distressed area with a value of $21.7 million—

making it a large highway project for the state. MDOT awarded this 

contract to resurface about 7 miles of Interstate 196 (I-196) in Allegan 

County and building a new rest area. The project was scheduled to begin 

in May 2009 and be completed by November 2009. The second contract we 

reviewed was a locally-administered contract in an urban, economically 

distressed area. MDOT awarded this contract, which totals about $1.6 

million, for concrete pavement and repair of about 1.2 miles of Pasadena 

Avenue in Flint. It was scheduled to start in August 2009 and be completed 

by June 2010. 

According to MDOT officials, they awarded these two contracts 

competitively and followed the department’s procurement procedures. 

Officials provided the following facts about the procurement procedures. 

Contactors seeking to bid on MDOT projects must be pre-qualified to 

perform tasks such as road and bridge construction and repair and 

concrete or hot mix asphalt paving. Only bidders who have been 

prequalified by MDOT are allowed to submit bids on projects. As a part of 

its review process, MDOT ensures that contractors that have either had 

their prequalification suspended or have been debarred10 are not allowed 

to bid. Contracts are then awarded to the lowest prequalified bidder for 

each project. MDOT received bids from four and six bidders for the I-196 

and Pasadena Avenue projects, respectively, and all bidders were 

prequalified and had not been suspended or debarred, and the contracts 

were awarded to the lowest bidders. 

 

10According to officials, MDOT can debar a contractor if (1) the contractor has been 

debarred by the federal government and is on the debarment list posted on a federal 

website maintained by the General Services Administration (https://www.epls.gov) that 

lists contractors that are excluded from receiving federal contracts and certain 

subcontracts or (2) the contractor has serious performance issues, such as felony 

convictions, work performance and safety issues, or contract violations. 

Page MI-11 GAO-09-1017SP Recovery Act
According to MDOT officials, these two contracts are fixed unit price 

contracts with estimated quantities. Specifically, the unit price for all 

construction material is fixed but the final price of the contract depends 

on the quantity of materials used. For example, according to state officials, 

the contractor for the Pasadena Avenue project is required to repair the 

concrete base after removing the old asphalt, but the quantity of concrete 

required for these repairs cannot be determined until the asphalt is 

removed, which will affect the final price of the contract. 

According to officials, to help the state meet its Recovery Act reporting 

requirements regarding job creation, the contracts require the contractors 

to report to MDOT every month on the total (1) number of employees who 

performed work on the contracts, (2) number of hours worked by those 

employees, and (2) wages of the employees working on the projects. In 

August 2009, MDOT began using a new Web-based system to allow 

contractors to input employment and wage data directly into a database 

rather than filling out a form to report these data. MDOT officials told us 

that this system should increase efficiency and reduce data entry errors. 

Since construction on the I-196 project began on June 1, 2009, contractors 

have submitted reports for June and July to MDOT. The July 2009 report 

showed that 108 employees worked on the project. To check the accuracy 

and completeness of the data, MDOT field staff for this project compared 

the information provided in the contractor’s reports with weekly payroll 

information and on-site inspection reports that the MDOT Project Manager 

prepared. 

MDOT officials intend to use the department’s standard procedures to 

monitor whether Recovery Act construction contractors deliver quality 

goods and services in accordance with the contract terms. For example, 

for the two contracts we reviewed, we discussed procedures with agency 

officials who stated that all of the following monitoring activities have 

taken place. After contract award, MDOT assigned a project manager to 

oversee day-to-day construction activities and make sure the contractor 

met all contract requirements. The project manager and his oversight staff 

conducted routine inspections, reviewed testing and certifications of 

materials used in the project, and drafted daily inspection reports. The 

project manager also held regular on-site meetings with the contractor, 

which provide a vehicle for identifying issues that may arise so officials 

can take necessary actions to resolve them. 

MDOT uses a program/project management system that tracks the project 

schedule and resource needs based on information received from the 

Page MI-12 GAO-09-1017SP Recovery Act
project manager. A Project Steering Committee reviews the information in 

this system and information from the contractors’ monthly reports to 

identify areas needing attention. MDOT uses separate accounting codes to 

track Recovery Act projects and generate reports for FHWA and 

Michigan’s Economic Recovery Office.11

Officials told us that, at the end of each project, the project manager is 

required to reconcile and account for the work completed and the 

materials used before issuing the final payment. Officials explained that, 

before issuing final payment to a contractor, the project manager is also 

required to evaluate a contractor’s performance. Officials stated that 

MDOT’s Contractor Performance Evaluation Review team reviews the 

performance evaluations for all prime contractors and subcontractors. 

According to MDOT officials, this team’s review is intended to determine 

whether the contractor’s performance on the project has been satisfactory 

in meeting MDOT’s performance standards and whether staff have 

followed MDOT’s procedures and guidelines in rating contractors’ 

performance. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the DOE administers through 

each of the states, the District of Columbia, and seven territories and 

Indian tribes. The program 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 or 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. 

Michigan’s Use of 

Recovery Act Funds 

for Weatherization 

Assistance Is Under 

Way 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories, 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE has provided to the states $2.3 billion of the $5 billion in 

 

11MDOT also provides project status updates to FHWA area engineers and conducts site 

reviews on an as-needed basis. 

Page MI-13 GAO-09-1017SP Recovery Act
weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis-Bacon Act.12 Because the 

Davis-Bacon Act had not previously applied to weatherization, Labor had 

not established a prevailing wage rate for weatherization work. In 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. Labor then surveyed five types of “interested parties”13 about 

labor rates for weatherization work. The department completed 

establishing prevailing wage rates in all of the 50 states and the District of 

Columbia by September 3, 2009. 

Michigan’s Weatherization 

Plan Provides Goals for 

Reducing Energy Usage 

DOE allocated a total of $243 million in Recovery Act funds for a 3-year 

period to Michigan and approved Michigan’s weatherization plan on July 6, 

2009. As of August 31, 2009, DOE provided about $121.7 million of the 

funds representing about 50 percent of the amount allocated by DOE. 

Officials from Michigan’s Department of Human Services (DHS), which 

administers the Weatherization Assistance Program and is the prime 

recipient of funds, stated that as of August 31, 2009, DHS had obligated 

$198.7 million and expended about $2 million. According to the officials, 

as of August 24, 2009, DHS had awarded contracts with 30 community 

action agencies (CAA) and 2 limited purpose agencies for the total amount 

obligated. 14 According to state officials, the amount obligated by the state 

is subject to limitation based on the availability of federal funds. DHS 

officials told us that each CAA that uses subcontractors has prepared a 

 

12The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

13The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

14CAAs are agencies that support low-income residents’ efforts to achieve self-sufficiency 

primarily in the areas of housing, employment, education, energy, nutrition, healthcare and 

transportation. Limited purpose agencies are non-CAAs that perform weatherization for the 

state of Michigan. 

Page MI-14 GAO-09-1017SP Recovery Act
request for quotation (RFQ) to obtain vendors for weatherization materials 

and services and that they plan to review all the RFQs. As of August 31, 

2009, DHS officials had reviewed almost 20 RFQs to ensure they met 

Recovery Act and state requirements. The state’s goal is to weatherize at 

least 33,000 units with Recovery Act funds, a large increase over the 14,346 

units weatherized in program years 2005 through 2007.15 DHS is also using 

Recovery Act funds to train weatherization workers, pre-inspect homes to 

determine eligibility for weatherization, and hire and train new DHS 

program staff. In addition, DHS has provided technical assistance to CAAs 

through a workshop. Further, some agencies have purchased specialized 

equipment that inspectors use to test for leaks and heat loss in houses as 

part of the pre-inspection process. DHS has established a statewide goal 

that 20 percent of those served will be elderly and 15 percent will be 

persons with disabilities. Although a CAA establishes individual goals, 

DHS must approve any goals that are below the statewide goals. 

Use of Recovery Act 

Weatherization Funds Was 

Slowed by the Need to 

Determine Prevailing 

Wages under the DavisBacon Act 

According to agency officials, approval of expenditures for weatherization 

contracts using Recovery Act funds was slowed by the need for DHS to 

include prevailing wage rates for use in setting contract terms with CAAs. 

Although CAAs could have used Recovery Act funds to begin weatherizing 

homes (providing they paid construction at least Labor’s wage rates for 

residential construction or an appropriate alternative category and 

compensate workers for any differences if appropriate), DHS officials told 

us that most CAAs preferred to wait for Labor to determine the prevailing 

wage rates. CAAs did not want to face the administrative difficulties of 

correcting wages already paid. In order to determine prevailing wages, 

Labor created a survey that DHS forwarded to the CAAs along with 

instructions for completing it. On August 12, 2009, Labor posted the 

prevailing wage rates for Michigan to be paid under the requirements of 

the Davis-Bacon Act. According to officials, DHS subsequently awarded 

contracts with all CAAs and two limited purpose agencies.16

Initial concerns that Michigan officials had before determining the 

prevailing wage rates for weatherization activities have diminished. In July 

2009, DHS officials expressed concerns about determining the wage rates 

for weatherization activities. According to DHS officials, job classifications 

 

15This number includes units that may have been weatherized previously. 

16The only DOE weatherization projects to which Davis-Bacon applies are those receiving 

Recovery Act funding. 

Page MI-15 GAO-09-1017SP Recovery Act
specific to weatherization had not been identified. Additionally, they said 

that the wage rates for employment related to weatherization work were 

inconsistent from one county to another. For example, one CAA in the 

Lansing area, which provides weatherization services in four counties, 

paid $18 an hour to workers in three of the four counties and $42 an hour 

to workers in the remaining county. However, Labor subsequently 

determined that the prevailing wage in this remaining county is $28 an 

hour, a rate in better alignment with the wage rates across the four 

counties. Additionally, in July 2009, DHS officials expressed concerns that 

certain areas of the state had prevailing wage rates that would be 

prohibitively high, which would negatively affect their ability to work 

within the state’s funding limit of $6,500 per unit average for 

weatherization. However after Labor released the prevailing wage rates for 

Michigan, officials found the wage rates to be acceptable. 

DHS Has Increased Staff to 

Monitor the Use of 

Recovery Act 

Weatherization Funds 

Since June 2009, DHS officials have used Recovery Act funds to hire five 

additional staff to monitor the use of Recovery Act funds related to the 

Weatherization Assistance Program. Specifically, they said they hired a 

manager to oversee the program, two staff to review weatherization 

projects, a technical supervisor, and a fiscal analyst. They also plan to hire 

15 additional staff, including technical specialists and administrative 

support staff, and are considering hiring someone with expertise in the 

compliance and reporting requirements of the Davis-Bacon Act. 

DHS officials created a plan to monitor the Weatherization Assistance 

Program and said that they plan to monitor the use of weatherization 

funds by conducting annual visits to each CAA. These visits would 

alternate between comprehensive and shorter monitoring visits. The 

comprehensive visits would include a fiscal review, staff interviews, job 

site visits, and reviews of client files. DHS officials also plan to have their 

technical supervisors review at least 5 percent of all weatherized units. 

Michigan’s State Auditor General told us that the Single Audit review of 

DHS for 2007 through 2008 is in process and includes consideration of the 

Weatherization Assistance Program. The most recent Single Audit report 

on DHS for the fiscal years 2005 through 2006 did not include a review of 

the state’s Weatherization Assistance Program. 

DHS Officials Remain 

Concerned about Recovery 

Act Reporting 

On August 31, 2009, DHS officials told us that for the first Recovery Act 

reporting period, ending September 30, 2009, they were planning to report 

information directly to the federal government. DHS conducted a 

workshop for CAAs on the reporting requirements of the Recovery Act so 

Page MI-16 GAO-09-1017SP Recovery Act
that the CAAs could assist local subrecipients in understanding the 

requirements. DHS officials plan to use the data elements supplied by DOE 

and Labor to estimate job impact of the funds and noted they can use 

much of the information they already collect for these reports. However, 

DHS officials expressed concerns about the precision of the data that will 

be reported. They said that, although the Recovery Act requires them to 

report their use of the funds by October 10, 2009, agency data for 

Michigan’s fiscal year 2009, which ends on September 30, 2009, will not be 

finalized until October 24 or 25. 

The Recovery Act created a state fiscal stabilization fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHE). The initial award of SFSF funding required each state to submit an 

application to Education that provided several assurances, including that 

the state will meet maintenance-of-effort requirements (or will be able to 

comply with waiver provisions) and that it will implement strategies to 

meet certain educational requirements, such as increasing teacher 

effectiveness, addressing inequities in the distribution of highly qualified 

teachers, and improving the quality of state academic standards and 

assessments. In addition, states were required to make assurances 

concerning accountability, transparency, reporting, and compliance with 

certain federal laws and regulations. States must allocate 81.8 percent of 

their SFSF 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). 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 school 

districts or public IHEs. When distributing these funds to school districts, 

states must use their primary education funding formula, but they can 

determine how to allocate funds to public IHEs. In general, school districts 

maintain broad discretion in how they can use education stabilization 

funds, but states have some ability to direct IHEs in how to use these 

funds. 

SFSF Will Be Used to 

Maintain Education 

Programs and 

Replace General Fund 

Gaps Caused by 

Reductions in State 

Revenues 

Education allocated $1.592 billion in SFSF moneys to Michigan on April 1, 

2009: $1.302 billion for education stabilization and $290 million in 

Page MI-17 GAO-09-1017SP Recovery Act
government services funds. As of September 1, 2009, Education had made 

$873 million (two-thirds of the total education stabilization funds) 

available to MDE . MDE officials told us that LEAs had to submit 

applications for the education stabilization funds to MDE. MDE officials 

told us that they allocated $600 million of these funds to LEAs and, as of 

September 1, 2009, had approved LEAs’ applications for $599 million of the 

education stabilization funds. These officials told us that the states’ LEAs 

had drawn down $584 million of the education stabilization funds after 

MDE approved their applications. Two of the state’s LEAs—a charter 

school and a small district—did not apply for education stabilization funds 

because, according to MDE, those LEAs had decided not to accept 

Recovery Act funds. MDE officials also told us that although they did not 

allocate any of these funds to IHEs—the state’s colleges and universities—

for the 2008–2009 school year, they plan to allocate $68 million to IHEs for 

the 2009-2010 school year. According to the MDE officials, most LEAs plan 

to use the education stabilization funds to restore items deleted from their 

budgets as a result of cuts in state education funding made during the 

2008-2009 school year. Therefore, they anticipated that most of the funds 

would be applied to teacher salaries, which represents the bulk of the 

LEAs’ budgets. 

Officials with Michigan’s Office of the State Budget told us the state will 

use the state’s total SFSF government services allocation of $290 million to 

address areas where the state’s general funds were cut as a result of 

reductions in state revenues. As of September 16, 2009, the state 

legislature had not yet specified the programs to be supported with the 

state’s government services portion of SFSF funds. 

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 (ESEA) of 1965. 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 current statutory and regulatory 

requirements and must obligate 85 percent of the funds by September 30, 

Michigan Has Made 

Preliminary 

Allocations of ESEA, 

Title I Recovery Act 

Funds 

Page MI-18 GAO-09-1017SP Recovery Act
2010.17 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. Education made 

the first half of states’ Recovery Act ESEA Title I, Part A funding available 

on April 1, 2009, and announced on September 4, 2009, that it had made 

the second half available. 

As of August 18, 2009, Michigan had made preliminary allocations of the 

$195 million in ESEA, Title I Recovery Act funds, which was about 50 

percent of the $390 million Education made available to the state on April 

1, 2009. MDE officials told us they planned to make the final allocations of 

these funds to LEAs in the fall of 2009 after approving LEAs’ applications. 

Applications from LEAs that had summer programs were due to MDE by 

the end of July 2009, but applications from LEAs without summer 

programs were not due until September 1, 2009. MDE officials expressed 

concern that the Recovery Act funds they are allowed to use for 

administrative support were not sufficient to cover the resources required 

to review the large number of additional applications for ESEA, Title I and 

other education-related Recovery Act funds and to monitor LEAs’ uses of 

the funds. They also said that Education’s proposal to adjust the statutory 

caps on administrative costs did not fully address their concerns because 

these costs would be capped at $1 million, which represents about .26 

percent of their total Title I, ESEA Recovery Act funds. In addition, based 

on their reviews of the applications received to date, MDE officials said 

they expected many LEAs would be required to revise their applications to 

provide additional information on their planned use of the funds. 

According to MDE officials, the carryover waiver they received from 

Education for their ESEA Title I funds will be critical in allowing LEAs to 

use the funds after the September 30, 2010, cutoff date for obligating 85 

percent of ESEA Title I funds. However, they also said that some LEAs 

have expressed concern about challenges in meeting the “supplement not 

supplant” provisions of ESEA Title I.18 Specifically, LEAs rely on education 

funding provided by the state through sales tax revenues, which have 

 

17LEAs 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 requirement is referred to as a carryover limitation.

18In general, ESEA Title I requires states and LEAs to use federal funds to supplement and 

not supplant the funds that would, in the absence of federal funds, be made available from 

nonfederal sources. 

Page MI-19 GAO-09-1017SP Recovery Act
declined significantly in recent years. As a result, LEAs may find it difficult 

to only use Recovery Act funds to supplement their ESEA Title I programs 

rather than supplanting them because of the recent declines in state 

funding for these programs. 

MDE has encouraged LEAs to use their ESEA Title I Recovery Act funds 

for programs such as professional development for teachers and staff and 

for supplemental reading programs. MDE officials said that the 

applications they reviewed indicate that many LEAs also plan to purchase 

equipment such as “smart boards”— electronic boards linked to the 

Internet that can be used to display interactive educational materials in the 

classroom. According to MDE officials, the LEAs’ applications for ESEA 

Title I Recovery Act funds describe a range of activities because Michigan 

has LEAs that vary greatly in size, including a few large urban districts and 

many that are small and rural. For example, one LEA has fewer than 100 

students, at least five LEAs are made up entirely of one-room schools, and 

two LEAs are located on islands only accessible by boat or plane during 

much of the school year. In addition, 250 of the state’s LEAs are public 

school academies (charter schools) with no defined geographic 

boundaries that overlap with those of the other LEAs. As a result, MDE 

must recalculate funds provided via formula grants in order to determine 

the funds to be allocated to the public school academies that are based on 

the income eligibility of their students using the number of students who 

receive free and reduced lunches rather than U.S. Census poverty data, 

which are based on geographic boundaries. 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of Individuals with Disabilities Act (IDEA), the major 

federal statute that supports the provisions of early intervention and 

special education and related services for infants, toddlers, children, and 

youth with disabilities. Part B funds programs that ensure preschool and 

school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). 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. Education made the first half 

of states’ Recovery Act IDEA funding available to state agencies on April 1, 

2009, and announced on September 4, 2009, that it had made the second 

half available. 

Michigan Department 

of Education Has Not 

Approved All LEAs’ 

Applications for IDEA 

Recovery Act Funds 

Page MI-20 GAO-09-1017SP Recovery Act
On April 1, 2009, Education made the first half of Michigan’s IDEA 

Recovery Act funds available to the state—a total of $207 million for both 

types of Part B grants and $6.2 million for Part C grants. As of August 14, 

2009, MDE had allocated all of the Part B funds for grants for school-aged 

children and youth—$200.3 million—to LEAs through the state’s 

intermediate school districts (ISD) but none of the funds had been 

provided because their applications had not been approved.19 As of 

September 1, 2009, MDE officials said that they were in the process of 

reviewing the applications but had not yet approved any of them. As of 

August 14, 2009, MDE had allocated all of the $6.7 million in Part B IDEA 

preschool grant funds to ISDs and LEAs had drawn down $2.3 million of 

these funds. According to MDE officials, as of August 14, 2009, they 

allocated all of the $6.2 million in Part C IDEA grant funds to the ISDs and 

had approved 42 applications for $4.9 million of these funds.20

MDE officials said that according to the applications they had reviewed, 

LEAs intend to use the $200.3 million in IDEA Part B grants for schoolaged children and youth to, among other things, retain special education 

teachers; acquire new technologies, including automated data systems and 

electronic smart boards for use in classrooms; enhance professional 

development for teachers; and provide additional bus transportation 

services to students with disabilities. According to MDE officials, 

$2.3 million in the applications for Part B grants for preschool students 

approved by MDE will be used for salaries and to purchase services. 

According to MDE officials, most of the Part C grant funds will be 

provided to ISDs to purchase home-based early intervention services, but 

some LEAs plan to use the Part C funds for training programs in which the 

objective is to increase families’ understanding of how to meet the needs 

of their children with disabilities. They also told us that about 10 LEAs 

plan to use their IDEA Part C funds for new construction. 

 

19Unlike most other states, Michigan’s IDEA funds are provided to and managed by the 

state’s 57 ISDs. IDEA funds provided to schools go through the ISDs to the LEAs and then 

to individual schools. Some IDEA funds, however, are provided directly by the ISDs to 

service providers rather than LEAs and schools. Except for ISDs in the upper portion of the 

state (the Upper Peninsula), an ISD generally corresponds to a county. For example, the 

ISD in which Detroit’s LEA is located covers all 34 LEAs in Wayne County, Michigan and 82 

public school academies. 

20MDE provides the Part C IDEA funds to Michigan’s ISDs, which contract with public and 

private service providers such as public health departments, mental health agencies, and 

private organizations to provide home-based early intervention services to children with 

disabilities. Some Part C funds are provided via the ISDs to LEAs, but most funds are used 

by the ISDs to purchase services directly from service providers. 

Page MI-21 GAO-09-1017SP Recovery Act
MDE Will Use Existing 

Systems for Tracking and 

Reporting on Recovery Act 

Education Funds, but 

Challenges Remain 

MDE officials said that they will use their existing cash management and 

grants management systems to track Recovery Act funds and meet the 

reporting requirements. LEAs will input data on the use of Recovery Act 

funds and on jobs created and retained into these systems. MDE officials 

said they will test these data to help ensure that they are timely, complete, 

and accurate. MDE has provided some guidance on the reporting 

requirements to LEAs and plans to train them on how to comply with the 

requirements. However, MDE officials said that LEAs vary significantly in 

their capacity to accurately track the use of the Recovery Act funds and 

the requirements present some challenges to LEAs. For example, generally 

LEAs have not reported data on the use of grant funds on a quarterly basis 

as required by the Recovery Act—they have only reported on the use of 

the funds at the end of each grant. In addition, some of the adjustments 

needed in the state’s grants management system to distinguish Recovery 

Act grant funds from regular federal education grants and produce reports 

on the use of these funds had not been completed, according to MDE 

officials. This may hinder MDE’s ability to track and report on the uses of 

Recovery Act funds. 

MDE staff are responsible for reviewing and approving LEAs’ applications 

for Recovery Act funds and their use of the funds. As part of the oversight 

and monitoring process, MDE officials said that they plan to conduct onsite visits of schools to review their use of Recovery Act funds. These 

visits, which will each take about 3 days, will consist of MDE’s internal 

auditors reviewing selected districts’ financial statements, improvement in 

the district’s student achievement on standardized tests, progress in 

implementing corrective action plans, and compliance with federal 

regulations. To increase accountability for Recovery Act funds, MDE also 

chairs a weekly meeting, called the ARRA Education Core Team meeting, 

to facilitate working with external partners, school boards, and public 

school academies (also known as charter schools) to identify issues 

regarding the use of Recovery Act funds. According to MDE officials, these 

meetings have provided valuable feedback on the use of Recovery Act 

funds. 

The State Auditor General reported in a previous audit that MDE needs to 

improve the completeness and accuracy of the education data reported in 

the state’s cash management and grants management systems.21 In 

 

21Michigan State Auditor General, Performance Audit of Selected Payment and Related 

Systems, Michigan Department of Education and Michigan Department of Information 

Technology, November 2008. 

Page MI-22 GAO-09-1017SP Recovery Act
addition, in its Single Audits reports on MDE, the State Auditor General 

reported significant deficiencies in MDE’s internal controls. For example, 

in its 2005 through 2007 Single Audit report, the State Auditor General 

found that the agency’s internal controls over special education programs 

did not ensure compliance with federal laws and regulations regarding 

reporting and subrecipient monitoring.22 In April 2009, MDE issued its plan 

for corrective action to the State Auditor General. MDE officials told us 

that they were implementing their corrective action plan to improve the 

completeness and accuracy of data reported through the department’s 

cash management and grants management systems. 

MDE’s Oversight of Detroit 

Public Schools Has 

Focused on Correcting 

Weaknesses in Financial 

Management and 

Eliminating the District’s 

Budget Deficit 

The Detroit Public Schools (DPS) has faced many challenges in recent 

years, including serious financial weaknesses, sizeable budget deficits, and 

large reductions in its student population. Single Audit reports on DPS 

identified several material weaknesses, including lax, system-wide 

oversight and controls in DPS contracting.23 The 2008 Single Audit report 

contained 84 findings that identified deficiencies in five areas: (1) internal 

controls, (2) financial reporting, (3) policies and procedures, (4) training, 

and (5) information technology. DPS developed a corrective action plan 

for 70 of the findings and has contracted with a consulting firm to review 

the adequacy of its plan. The DPS Office of the Auditor General, an 

internal audit operation, is responsible for audits and reviews of district 

operations, including internal controls. The DPS Office of the Auditor 

General recently completed reviews of all the district’s 194 schools and 

found that 189 schools (97 percent) had inadequate bookkeeping. The DPS 

Single Audit report dated December 10, 2008, reported that material audit 

adjustments were necessary for the financial statements to be fairly stated. 

Financial statements were not available in a timely manner to meet 

statutory and other deadlines. 

In addition, as a result of the July 2008 Education Office of Inspector 

General audit of DPS’s use of ESEA Title I funds, Education designated 

 

22Michigan State Auditor General, Financial Audit Including the Provisions of the Single 

Audit Act of the Michigan Department of Education, October 1, 2005 though September 

30, 2007, June 2008. 

23Independent Public Accountants: Detroit Public Schools, Single Audit, For the Year 

Ended June 30, 2008 (December 10, 2008); Detroit Public Schools, Single Audit Report, 

Fiscal Year Ended June 30, 2007 (February 13, 2008); The School District of the City of 

Detroit Public Schools, Single Audit Report, Fiscal Year Ended June 30, 2006 

(November 30, 2006). 

Page MI-23 GAO-09-1017SP Recovery Act
DPS a high-risk district, requiring that all federal funds provided to DPS 

receive additional Education and MDE oversight. To comply, DPS must 

follow a checklist of required actions and develop strong internal controls. 

Education and MDE are working with DPS to address the district’s 

financial management challenges. DPS officials said that they meet weekly 

with MDE officials and monthly with officials from Education’s Office of 

Risk Management to discuss financial management issues. 

As a result of financial management weaknesses and DPS’s budget 

deficits, Michigan’s Governor appointed an Emergency Financial Manager 

for the district in March 2009. The Emergency Financial Manager also 

appointed two oversight officials for the district to help improve its 

financial oversight. Since the Emergency Financial Manager has been in 

place, DPS has begun developing and implementing new policies and 

procedures to address the district’s financial management challenges. 

For fiscal year 2008, DPS reported in its audited financial statements an 

excess of expenditures over revenues of $154 million.24 Further, in 

April 2009, DPS officials projected an excess of expenditures over 

revenues of $166 million for fiscal year 2009. Officials explained that in 

light of DPS’s ongoing operating deficits it was required by law to submit a 

deficit elimination plan to MDE. MDE returned the district’s first plan 

because it did not contain a long-range plan for eliminating the entire 

cumulative deficit—it only addressed the current year’s deficit. DPS 

recently submitted a revised deficit elimination plan to MDE for its review. 

DPS’s Deficit Elimination Plan 

Outlines Many Actions to Be 

Taken 

DPS has significantly reduced the number of teachers by eliminating 2,400 

positions and reduced its central office staff by 72 percent. However, 

according to DPS officials, further reductions will be required because 80 

to 85 percent of its budget consists of teacher salaries and benefits. Over 

the past several years, DPS’s budget problems have been compounded by 

declines in student enrollment as many former DPS students have moved 

or chosen to attend charter or private schools. Six years ago, DPS had 

about 167,000 students; by the 2008-2009 school year, its enrollment had 

declined to 93,000; and the estimate for the 2009-2010 school year is 

88,000. This is a significant problem because the district’s funding is based, 

in large part, on its enrollment. This decrease in enrollment has resulted in 

 

24Detroit Public Schools, Comprehensive Annual Financial Report for the Fiscal Year 

Ended June 30, 2008, Detroit Public Schools Division of Financial Services, December 10, 

2008. 

Page MI-24 GAO-09-1017SP Recovery Act
the district having many buildings with unused capacity; it recently closed 

61 buildings. One of DPS’s primary goals is to improve its academic 

standards and performance to bring students back to the district and 

increase its enrollment. DPS officials noted that establishing and 

sustaining Recovery Act-funded initiatives will be difficult given the 

challenges the district faces. In addition to reducing its cumulative budget 

deficit under the direction of its Emergency Financial Manager and with 

the approval of MDE, DPS must continue its operations in order to meet 

the educational needs of students. 

MDE allocated $80 million in SFSF funding to DPS through fiscal year 

2010. DPS plans to use most of its SFSF Recovery Act funds to backfill 

state aid cuts and support teacher salaries. Specifically, DPS officials said 

that they plan to pay the salaries of about 187 teachers with a portion of 

the district’s $80 million in SFSF Recovery Act funds. DPS’s SFSF 

application stated that it also intends to use the funds to purchase a new 

information system that will track data such as students’ demographic 

characteristics, schedules, registration dates, daily attendance, grades, and 

test scores. 

MDE Has Allocated Significant 

Recovery Act Funds to DPS 

MDE allocated $148 million in ESEA Title I Recovery Act funds to DPS 

through fiscal year 2010. However, DPS had not received any of these 

funds because MDE had not approved its Title I application. As of 

September 10, 2009, DPS had been informed by MDE that its application 

has been substantially approved and that final approval of the application 

is pending. DPS officials plan to use the funds to develop a system for 

assessing the academic performance of children in kindergarten through 

third grade and a “Learning Village”—an electronic compilation of model 

curricula that can be used as a resource for enhancing student education 

and DPS’s management of its education programs. 

MDE allocated $11.3 million in Recovery Act funds to DPS for IDEA Part B 

grants and $700,000 for IDEA Part C grants. MDE provided the IDEA funds 

to the Wayne Regional Educational Service Agency (Wayne RESA), an 

intermediate school district. The Wayne RESA covers all LEAs in Wayne 

County, Michigan, including DPS and 33 other school districts, and 82 

public school academies in the Detroit area. None of the IDEA funds, 

however, had been provided to DPS because MDE had not approved the 

ISD’s application for IDEA funds. DPS officials said that they did not have 

an estimated date as to when the district will receive its IDEA Recovery 

Act funds. DPS officials said that they planned to use these funds to 

develop electronic individual development plans for students with 

Page MI-25 GAO-09-1017SP Recovery Act
disabilities and to support an initiative to enhance teachers’ professional 

development. 

DPS officials said that they will report information on the use of SFSF, 

ESEA Title I, and IDEA Recovery Act funds using the state’s cash 

management and grants management systems. They also said that they are 

not sure whether MDE will add any requirements for tracking and 

reporting of Recovery Act funds. 

Based on prior audit reports, questions remain about MDE’s ability to 

report accurately and timely on the use of Recovery Act funds consistent 

with the accountability and transparency requirements of the act. A strong 

system of internal controls provides checks and balances against waste, 

fraud, abuse, and mismanagement and is an important component of an 

organization’s ability to operate efficiently and effectively. GAO’s guidance 

on internal controls may be useful in assisting MDE officials in 

implementing effective internal control over Recovery Act funds and 

determining what, where, and how improvement can be implemented.25

Questions Remain 

about MDE’s Ability 

to Accurately and 

Timely Report on 

Recovery Act Funds 

MDE and the state’s largest LEA—DPS— do not have strong systems of 

internal controls and will need to compensate for existing systems and 

processes in order to meet the timing and other accountability 

requirements of the Recovery Act. Given that the first comprehensive 

report on the use of Recovery Act funds used through September 30, 2009, 

is due to the federal government by October 10, 2009, the risks and 

challenges that MDE faces include timely accounting for the significant 

amount of Recovery Act funds provided for education as well as the use of 

Recovery Act funds by LEAs. In June 2008, the State Auditor General 

reported significant deficiencies in MDE’s internal controls. Also, LEAs 

vary significantly in their capacity to accurately track and report on the 

use of Recovery Act education funds. The poor internal controls of MDE 

and LEAs and the large amount of Recovery Act education funds allocated 

to the state result in increased risk that Recovery Act funds will not be 

used and accounted for in accordance with provisions of the act. 

According to MDE and DPS officials, the LEAs plan to use existing 

systems and processes to track funds. DPS will receive significant 

Recovery Act funds and plans to use its existing systems and processes to 

 

25GAO, Internal Control and Management Tool, GAO-01-1008G (Washington, D.C.: Aug. 1, 

2001). 

Page MI-26 GAO-09-1017SP Recovery Act
account for and report on the use of Recovery Act funds. The independent 

auditor for DPS reported as recently as December 2008 that material 

weaknesses existed, including weaknesses in systemwide oversight and 

controls. Further, the auditor reported that material adjustments were 

necessary for DPS’s financial statements to be fairly stated and that 

financial information was not available in a timely manner to meet 

statutory and other deadlines. 

According to state and DPS officials, the district has a number of 

initiatives under way to address its accountability challenges. For 

example, in March 2009, Michigan’s Governor appointed DPS’s Emergency 

Financial Manager who has initiated a number of important actions, such 

as developing a strategic approach to address long-standing and often 

repeated audit findings. However, as of September 2009, improvements in 

the controls and processes for DPS remain a work in process. Many 

identified control deficiencies are still in need of attention despite 

numerous special efforts to transform accountability at DPS. Questions 

remain about the reliability of DPS financial information and the capacity 

of DPS to produce timely and accurate financial information. Further, 

change actions implemented and those under way at DPS are designed to 

address long-standing deficiencies through deliberate processes; however, 

they are not aimed at short-term actions that may be necessary to provide 

reasonable assurance that Recovery Act funds used through September 30, 

2009, are properly accounted for and reported in October 2009, and that 

quarterly reports thereafter are accurate and timely. Further, the results of 

change actions have not yet been validated through external audit 

processes. 

To provide accurate and timely Recovery Act reporting, MDE, in 

coordination with DPS, will need to consider implementing policies and 

procedures in the near term to provide reasonable assurance that 

education-related Recovery Act funds, including those provided to DPS, 

are reported accurately and timely, that jobs retained and created are 

accurately and timely reported, and that funds are used only for allowable 

purposes. It will also be important to implement targeted accountability 

practices—internal and external—with timely validation processes for 

reports on the use of education-related Recovery Act funds, including 

those submitted by DPS in accordance with the act’s requirements. 

Page MI-27 GAO-09-1017SP Recovery Act
The Recovery Act provides an additional $1.2 billion in funds for WIA 

Youth program activities, including summer employment. Administered by 

Labor, the WIA Youth program is designed to provide low-income inschool and out-of-school youth 14 to 21 years of age, who have additional 

barriers to success, with services that lead to educational achievement and 

successful employment, among other goals. Funds for the program are 

distributed to states based on a statutory formula; states, in turn, distribute 

at least 85 percent of the funds to local areas, reserving as much as 15 

percent for statewide activities. The local areas, through their local 

workforce investment boards, have the flexibility to decide how they will 

use the funds to provide required services. 

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,26 the conferees stated that they were particularly 

interested in states using these funds to create summer employment 

opportunities for youth. While the WIA Youth program requires a summer 

employment component to be included in its year-round program, Labor 

issued guidance indicating that local areas have the flexibility to 

implement stand-alone summer youth employment activities with 

Recovery Act funds.27 Local areas may design summer employment 

opportunities including any set of allowable WIA Youth activities—such as 

tutoring and study skills training, occupational skills training, and 

supportive services—as long as they also include a work experience 

component. A key goal of a summer employment program, according to 

Labor’s guidance, is to provide participants with the opportunity to 

(1) experience the rigors, demands, rewards, and sanctions associated 

with holding a job; (2) learn work readiness skills on the job; and (3) 

acquire measurable communication, interpersonal, decision-making, and 

learning skills. Labor has also encouraged states and local areas to 

develop work experiences that introduce youth to opportunities in “green” 

educational and career pathways. Work experience may be provided at 

public sector, private sector, or nonprofit work sites. The work sites must 

meet safety guidelines, as well as federal and state wage laws.28 Labor’s 

guidance requires that each state and local area conduct regular oversight 

WIA Recovery Act 

Funds Provided 

Summer Employment 

to Many of Michigan’s 

Low-Income Youth, 

but Significant 

Internal Control and 

Program Challenges 

Exist 

 

26H.R. Rep. No. 111-16, at 448 (2009). 

27Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

28Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page MI-28 GAO-09-1017SP Recovery Act
and monitoring of the program to determine compliance with 

programmatic, accountability, and transparency provisions of the 

Recovery Act and Labor’s guidance. Each state’s plan must discuss 

specific provisions for conducting its monitoring and oversight 

requirements. 

The Recovery Act made several changes to the WIA Youth program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Michigan received $74 million in Recovery funds for the WIA Youth 

program and, as of August 31, 2009, had drawn down $20.2 million. After 

reserving 15 percent for statewide activities, the state allocated 

$62.9 million to the 25 local Michigan Works! Agencies (MWA) to provide 

services to youth. The Michigan’s Department of Energy, Labor and 

Economic Growth (DELEG)—the state agency that administers the 

program—set a goal to spend the majority of its allocation during the 

summer of 2009. DELEG officials expected to serve 21,000 youth with 

Recovery Act funds compared to about 4,000 youth served in the summer 

of 2008 in the WIA year-round program.29 The 25 MWAs have local 

flexibility in planning Recovery Act funded summer youth employment 

activities. For example, local areas have discretion to determine whether it 

is appropriate to link academic learning to summer employment 

opportunities. 

Characteristics of WIA 

Summer Youth 

Employment Activities 

We visited the MWAs in Detroit and Lansing. According to officials, both 

locations contracted out all their summer youth employment activities to 

other organizations. In Lansing, the MWA had contracts for youth services 

 

29Revised from preliminary estimate of 25,500 as of July 2009 to 21,000 as of September 

2009 based on updated operational and wage data. 

Page MI-29 GAO-09-1017SP Recovery Act
with nine entities, including two faith-based organizations. Jobs for 

summer youth in Lansing included positions with Michigan State 

University and Lansing’s Board of Water and Light. Detroit Workforce 

Development Department (Detroit MWA) contracted with an organization 

to recruit youth for employment in its 2009 summer youth program. As of 

August 31, 2009, the contractor had filled 6,774 summer jobs at 221 

worksites, including a retail pharmacy chain, Henry Ford Hospital, the 

Detroit City Council, Detroit’s police and fire departments and Wayne 

County Community College District. Table 1 contains selected program 

features of the Detroit and Lansing local workforce development agencies 

as well as for all programs in the state. 

Table 1: Program Characteristics of Two Local WIA Youth Programs and for the State 

Program features Detroit MWA Lansing MWA Total for Michigan 

Michigan Works! Agency 

(MWA) 

Detroit Workforce Development 

Department 

Capital Area Michigan Works! 25 local workforce agencies of 

DELEG 

Areas served City of Detroit Ingham, Eaton, and Clinton 

Counties 

Statewide 

Program design Six 20-hour weeks, maximum 120 

hours, of paid employment 

Under 18: Up to 40 hours per week, 

including remediation 

Over 18: Up to 40 hours per week, 

plus remediation if needed 

Determined by each MWA 

Length of program May 18 to September 30, 2009a June 22 to September 30, 2009b Determined by each MWA 

Outreach Local schools, nonprofit 

organizations, neighborhood 

initiatives, and word of mouth 

Public service announcements and 

schools 

Determined by each MWA 

Target number of 

participants 7,000 600 21,000

Actual number of 

participants 6,774c

725c12,166d

Amount allocated $14.5 millione$3.3 million $73.9 million

Amount expended $7.8 millionf$2.6 milliong$3.3 millionh

Range of jobs Office assistant, senior citizens 

assistant, childcare assistant, 

teacher assistant, forestry 

apprentice, and “green” education 

coordinator 

Animal care, office assistant, 

environmental services, and 

legislative aide 

Determined by each MWA 

Page MI-30 GAO-09-1017SP Recovery Act
Program features Detroit MWA Lansing MWA Total for Michigan 

Work readiness measure Employability skills, job search and 

workplace readiness 

Measured at the completion of the 

program by an assessment 

instrument 

Interpersonal and professional 

measures including punctuality, 

attendance, quality of work, 

grooming, operation of tools and 

equipment, and personal behavior 

Measured at the beginning, middle 

and end of the program by an 

assessment instrument 

Determined by each MWA 

Source: GAO analysis of local and state information for the WIA Youth program. 

a

According to a Detroit MWA official, out-of-school youth over 18 years old may continue participating 

in the program until March 31, 2010, or until program funds are exhausted, whichever occurs first. 

b

All participants were to receive a week of leadership training before beginning work on June 22, 

2009. 

c

As of August 31, 2009. 

d

As July 31, 2009. 

e

Of the $14.5 million awarded, of which $11.4 million is from Recovery Act funds, Detroit MWA 

contracted with a contractor for $6.2 million and retained $8.3 million for participant payroll and 

administration. 

f

As of September 3, 2009. Of the $7.8 million expended, Detroit MWA paid approximately $2.1 million 

to the prime contractor and spent approximately $5.7 million for youth payroll and administrative 

expenses. 

g

As of August 14, 2009. 

h

Amount expended through June 30, 2009, the latest data available, by Michigan’s 25 MWAs 

according to DELEG was $3.3 million. DELEG obtains expenditure information from the 25 MWAs 

through quarterly expenditure reports. According to a DELEG official information through the quarter 

ended September 30, 2009, is expected to be available on October 20, 2009. 

Detroit and Lansing experienced challenges in implementing their WIA 

youth summer employment program—including managing a significant 

funding increase, the fact that the contractor for Detroit was new to the 

program, few program monitors for both Detroit and Lansing, the 

organizational complexity of the program delivery arrangement for 

Detroit, and no written policies and procedures for Detroit’s payroll and 

its process for determining eligibility and a lack of documentation 

supporting such decisions. Further, Detroit had significant internal control 

problems with paying youth and weaknesses in its process for making 

program eligibility determinations. Effective internal control is a major 

part of managing any organization to achieve desired outcomes and 

manage risk.30 

Detroit and Lansing 

Experienced Program 

Challenges for WIA 

Youth Summer 

Employment and 

Detroit Has 

Significant Internal 

Control Issues 

 

30GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999). 

Page MI-31 GAO-09-1017SP Recovery Act
GAO guidance on internal controls describes challenges to the efficient 

and effective achievement of organizational goals and objectives as risk.31

GAO’s Standards for Internal Control in the Federal Government 

includes risk assessment as part of an overall framework for establishing 

and maintaining internal control and for identifying and addressing major 

performance challenges and areas at greatest risk for fraud, waste, abuse, 

and mismanagement.32 

Further, the Recovery Act requires recipients of funds to comply with 

federal internal control standards. The Office of Management and Budget 

has stated that it will use its Circular No. A-133 Compliance Supplement to 

notify auditors of program requirements that should be tested for 

Recovery Act programs, and will issue interim updates as necessary.33

In May 2009, DELEG and MWA officials in Lansing and Detroit told us that 

they did not foresee any difficulties in implementing their Recovery Act 

funded WIA summer youth employment activities. State officials initially 

said they expected a smooth transition in using Recovery Act funds 

because of their experience running programs for displaced workers 

combined with the experiences of local MWA directors. However, in 

discussions throughout July and August 2009, officials cited several 

challenges as the much larger program got under way. 

In accordance with Labor’s requirements, DELEG’s overall guidance states 

that MWA directors must conduct regular oversight and monitoring of 

Recovery Act funds in order to monitor whether expenditures are made 

against the appropriate cost categories and within cost limitations.34 The 

guidance further states that oversight and monitoring should determine 

compliance with programmatic, accountability, and transparency 

 

31GAO-01-1008G. 

32 GAO/AIMD-00-21.3.1. See also GAO-01-1008G. 

33The Office of Management and Budget’s 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. 

34Michigan State Workforce Investment Plan Modification, Implementation of the American 

Recovery and Reinvestment Act of 2009, July 1, 2009 through June 30, 2010 

http://www.michigan.gov/mdcd/0,1607,7-122--217944--,00.html (accessed September 15, 

2009). 

Page MI-32 GAO-09-1017SP Recovery Act
requirements of the Recovery Act. To this end, DELEG set up separate 

accounting codes to track Recovery Act funds. The agency also holds 

monthly meetings with all 25 MWA directors to encourage reporting of 

consistent information. State program officials said they planned to 

conduct on-site monitoring visits of WIA worksites as well as three site 

visits each year at each of their MWAs. As of September 9, 2009, DELEG 

officials said that they had not begun their review of any of the MWAs. 

Officials in both Detroit and Lansing told us that it was challenging to 

implement a larger program than they had in the prior year in a short time 

frame. Both Detroit and Lansing had more applicants than available jobs, 

necessitating much more screening of applications than in previous years. 

Detroit’s summer youth program in 2009 had over two times the number of 

youth participants than in the prior year. Detroit MWA officials told us that 

they received 25,000 applications for 7,000 jobs. In August 2009, Detroit 

MWA officials told us that with 6,774 participants on August 31, 2009, they 

expect to reach their goal of 7,000 jobs before the end of the program. 

Lansing served over 100 more youth than expected and exceeded its goal 

of employing 600 youth during the summer of 2009. On September 16, 

2009, DELEG officials told us that the state has not met its target but 

expects to meet its target to employ 21,000 youth. 

In addition, Detroit MWA officials stated that they encountered several 

challenges working with the prime contactor. The contractor and its 

subcontractor were both new to the WIA program and one challenge was 

obtaining approval to use them from the City Council, a process which 

took several months. Detroit awarded the contract on May 4, 2009. 

Officials told us that the new contractor, however, did not have written 

policies or procedures or other related controls for payroll processing and 

distribution of the payroll. According to Detroit MWA officials, the 

previous contractor—that was not eligible to compete for the summer 

2009 contract—had been in place for several years and had established 

policies and procedures for processing and distribution of the payroll. 

Detroit fell short of its initial staffing goals for monitoring the program. 

Detroit MWA officials told us that the contractor’s initial plans were to hire 

up to 150 additional staff, including 50 worksite monitors, by June 30, 

2009. As of September 9, 2009, the contractor had 21 worksite monitors on 

staff. Detroit MWA and contractor officials told us final contract 

negotiations resulted in reducing total staffing to 140, including 21 

worksite monitors. Lansing MWA officials told us that finding staff to 

monitor program activities was a challenge because of the limited amount 

of time available to recruit and employ youths for the summer. Lansing 

Page MI-33 GAO-09-1017SP Recovery Act
MWA officials told us that they met their goal and hired 3 staff to monitor 

over 200 worksites. Also, Lansing officials indicated that they relied on 

their nine contractors to provide monitoring assistance through periodic 

reports on monitoring activities and results. 

The design and delivery of WIA Youth summer employment activities was 

complex and involved many parties. According to state and local program 

officials this has proven to be challenging. For example, Detroit’s summer 

youth program involved roles and responsibilities spread among multiple 

parties including the Michigan Works! Agency—the Detroit MWA, the 

contractor and its subcontractor, an external payroll service provider, as 

well as approximately 221 worksites, and nearly 7,000 youth. 

Detroit Had Significant 

Internal Control Problems 

with Paying Youth 

Participants on Time and 

in the Correct Amounts 

Some of the youth in Detroit’s WIA summer youth program were not paid 

for their employment in a timely manner and checks had incorrect 

amounts, payee names, and addresses. The lack of written policies or 

procedures for the preparation and distribution of payroll affected 

Detroit’s ability to ensure accountability for Recovery Act funds. Progress 

is under way by Detroit MWA officials and the contractor to document the 

process flow for the preparation and distribution of payroll, identify 

problem areas, and develop written policies and procedures, and they 

expect to complete the initial phase (documenting the payroll process 

flow) by September 30, 2009. 

As shown in table 2, 4 percent to 20 percent of youth in Detroit’s summer 

youth program were owed a paycheck but were not paid on time. 

Table 2: Summary of Payroll Preparation Results for the First Three Pay Periods 

July 25, 2009 August 8, 2009 August 22, 2009

Number of youths due a paycheck 2,614 4,686 5,617

Number of checks printed 2,080 4,259 5,371

Amount of checks printed $449,122 $1,335,227 $1,707,907

Number of youth owed paychecks but not paid when 

due 534 427 246

Percentage of youth not paid when due 20.4 9.1 4.4

Unclaimed checks Information not available 459 977

Source: Detroit summer youth program contractor data, unaudited. 

Page MI-34 GAO-09-1017SP Recovery Act
In August 2009, contractor officials told us that they were exercising due 

diligence in following up on providing all youth with checks in the correct 

amounts and that they were seeking to resolve all issues with paychecks 

as quickly as possible. At one of the worksites we visited where 25 youth 

were employed, the site manager told us that 10 of the youth were not paid 

the funds they were owed when they were due on August 8, 2009. We 

followed up with the manager at this worksite who said that, by the 

following week, all of the youth had been paid. There has been 

improvement in performance, such as the percentage of youths not paid 

when due, from the date of the first payroll on July 25, 2009, to the payroll 

that we observed on August 22, 2009. However, issues with payroll, such 

as youth owed paychecks but not paid when due, remain and additional 

work is necessary to correct the internal control problems with payroll 

processing and distribution. 

There was also confusion as to where youth were to pick up their 

paychecks at the first payroll distribution on July 25, 2009. The logistics at 

the distribution site were not transparent and youth reported to the 

contractors that they did not know which line to use or whom to talk to in 

order to discuss problems with or questions about their paychecks. 

Youths were also working at worksites that had not completed the 

registration process, and officials told us that as a result no checks were 

prepared for these youths. There were also issues in resolving problems, 

according to Detroit MWA officials, because youth initially did not have a 

place to go to ask questions regarding errors in their paychecks, including 

incorrect amounts, payee names and addresses, or when they did not 

receive their paychecks. 

Although payroll distributions had improved over the summer, some 

problems remain. We observed the payroll distributions on August 8, 2009, 

and August 22, 2009, and found that the contractor had made some 

improvements. For example, the contractor had established a customer 

care unit to address the youth’s concerns. The contractor also modified 

the payroll distribution process and distributed checks alphabetically, 

which decreased some of the confusion over the former worksite-based 

distribution process that it had used. However, there were problems 

during these two payroll distributions with the checks having the incorrect 

amount, payee name or address, and with youths not receiving their 

checks when due. In addition, we found that there were still problems 

with long lines. At the August 22, 2009, distribution, we observed that 

youth had to wait in lines as long as 4 hours while standing in the rain to 

receive their paychecks. Detroit MWA officials confirmed that the amount 

Page MI-35 GAO-09-1017SP Recovery Act
of time youths had to stand in line to receive their paychecks was, on 

average, 3 to 4 hours. Further, we observed on several occasions on 

August 22, 2009, local police were called to assist with crowd control. 

Contractor officials told us that the use of a larger venue for the 

September 4, 2009, payroll distribution reduced the waiting time. 

It will be important that DELEG work with the Detroit MWA and 

contractors for the City of Detroit WIA Summer Youth Program to 

continue to address the internal control issues with youth not being paid 

on time and checks being prepared with incorrect amounts, payee names, 

and addresses, as well as to resolve past payroll issues and distribution 

challenges. 

Detroit’s Process for 

Determining Participation 

in Its WIA Summer Youth 

Program Needs 

Improvement 

We found weaknesses in Detroit’s process for making WIA Youth summer 

program eligibility determinations and a lack of documentation supporting 

such decisions. The federal requirements for WIA eligibility are meeting 

(1) the income test (limit on family income), (2) the age test (from 14 to 

21),35 and (3) having any one of six barriers to success.36 Labor authorized 

the states to delegate the definition of the sixth barrier to local agencies.37

Detroit MWA officials provided us with the City of Detroit’s 

Comprehensive 5-year Local Plan (Plan) which included the definition for 

the sixth barrier. State officials told us that they had approved the 2008 

program year plan that contained the same definition for the sixth barrier 

 

35The Recovery Act extended eligibility to age 24. 

36The six barriers to success are: (1) limited English language proficiency, (2) school 

dropout, (3) foster child, homeless, or runaway youth, (4) single parent, pregnant, or 

parenting youth, (5) offender, or (6) is an individual (including a youth with a disability) 

who requires additional assistance to complete an education program or to secure and hold 

employment. 

3729 C.F.R. § 664.210. 

Page MI-36 GAO-09-1017SP Recovery Act
as in the plan currently under review as of September 9, 2009. The 

applicable section of the Plan provides the following definition:38

“The Detroit WDB39 has defined “youth residing in high poverty neighborhoods”40

as its locally developed sixth criterion for eligibility. A high poverty neighborhood 

is one in which 30 percent41 or more of all households are beneath the poverty 

line as defined by the U.S. Department of Health and Human Services, Office

Management and Budget.” 

 of 

 

Although this definition was used in the Plan, neither Detroit MWA 

officials nor contractor officials could explain how they used the sixth 

criterion when making eligibility determinations. Further, these officials 

provided no explanation about how staff made eligibility determinations 

using this category absent guidance on how to interpret this category in 

reviewing applications. Moreover, the local contractor and subcontractor, 

told us they did not receive any instructions from the Detroit MWA on 

required documentation for this eligibility category. Therefore, the basis 

used for determining whether an applicant was eligible for the program or 

not is unclear. 

During our fieldwork, we selected a nonprobability sample of 11 

participant files.42 Our review of these participant files revealed inadequate 

or nonexistent support of WIA eligibility determinations. One participant 

file’s registration form did not claim any barrier to success. While the 

other 10 participant’s eligibility determinations were based on the sixth 

criteria, we found that none of these files had documentation to support 

eligibility for this program. We discussed these issues with Detroit MWA 

38City of Detroit, “Revised Comprehensive Five-Year Local Plan July 1, 2000 – June 30, 2005 

with an Extension From July 1, 2005 – June 30, 2010, Detroit Workforce Development 

Department 

http://www.ci.detroit.mi.us/Departments/DetroitWorkforceDevelopmentDepartment/Curre

ntRFPs/tabid/1665/Default.aspx (accessed September 15, 2009).

39Workforce Development Board (WDB) is a policy unit in the Detroit Michigan Works! 

Agency. 

40Detroit MWA officials told us that they define the entire city of Detroit as a high poverty 

neighborhood. 

41The U.S. Census Bureau reported that the percentage of all households in Detroit that 

were beneath the poverty level in 2007 was estimated to exceed 30 percent. 

42Because our selection was not statistical, our results may not be projected to the 

population. 

Page MI-37 GAO-09-1017SP Recovery Act
officials and they told us that based on their review of the 11 files we 

reviewed, it would not be possible to determine eligibility based on the 

documentation in the files. Progress is under way by Detroit MWA to 

assess the process for determining eligibility and the documentation of 

eligibility determinations. Officials told us that they are reviewing 100 case 

files but as of September 8, 2009, this analysis had not been completed. We 

did not review the Detroit MWAs methodology for selection of the case 

files or for its review of the files. 

On September 2, 2009, DELEG officials told us they are considering the 

information that we brought to their attention over the course of our work 

regarding the Detroit WIA program’s eligibility process and the absence of 

documentation to support decisions on eligibility. It will be important for 

DELEG and Detroit officials to identify program risks and implement the 

appropriate internal controls to address issues involving eligibility 

determinations, and the lack of documentation supporting eligibility 

decisions. 

State and Local Officials 

Are Attempting to Measure 

the Outcomes of the WIA 

Summer Youth 

Employment Activities 

In accordance with Labor requirements, the state requires each MWA to 

track and report items such as the number of youth employed and 

program completion rates. Although the Recovery Act requires states to 

report the number of jobs created and retained through any activity 

supported by Recovery Act funds, Labor has issued guidance stating that 

states should not include WIA program participants in that number. In 

addition, the Recovery Act provided that only the measurement of work 

readiness gains is required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. States and local 

areas may decide the particular assessment tool to use to gauge work 

readiness gains. 

The local areas we visited used different assessment instruments to 

determine work readiness skills. Youth participating in Lansing’s program 

are evaluated by their supervisors on dimensions such as punctuality, 

grooming, quality of work, operation of tools and equipment, and personal 

behavior. Youth in Detroit’s program were evaluated on employability 

skills and workplace readiness. Lansing evaluated participants at the 

beginning, middle, and upon completion of the program. Detroit evaluates 

participants using an external party upon their completion of the program. 

Officials from Lansing and Detroit said that the youth they are serving 

have been positively affected by the program (see fig. 2). For example, 

local officials stated that some youth expressed a sense of pride when they 

completed their orientation training or when they received their first 

Page MI-38 GAO-09-1017SP Recovery Act
paycheck. Other youth were provided with skills for independent activities 

of daily living, such as how to write a check. 

Figure 2: WIA Summer Youth Participant 

Source: GAO.

WIA summer youth employment program participant assisting in food service at a Lansing,

Michigan hospital.

Officials at both MWAs that we visited were aware of the Recovery Act’s 

emphasis on “green” jobs. Detroit defined green jobs as those that build 

awareness and understanding of the natural environment and encourage 

careers in environmental sciences and industry. According to Detroit 

MWA officials, their contractor’s definition of a green job is one that 

“builds awareness and understanding of the natural environment and 

encourages careers in environmental sciences and industry.” For example, 

green sector jobs in Detroit are those where youth are engaged in 

education as well as hands-on experience in activities such as recycling, 

reducing waste or carbon emissions and reusing products in a new and 

creative way. MWA officials in Detroit told us that they had developed a 

task force to address this issue and planned to place 600 youths in green 

jobs. As of August 31, 2009, 446 of Detroit’s 6,774 WIA summer jobs (7 

Page MI-39 GAO-09-1017SP Recovery Act
percent) were defined by city officials as “green” jobs. Detroit MWA 

officials told us they expect to meet their goal by the end of the program. 

Lansing officials told us that they had difficulty identifying significant 

numbers of green jobs suitable for youths, although they created 42 green 

jobs for youths at worksites such as the Lansing Board of Water and Light 

and the School of Agriculture at Michigan State University. 

Michigan Used Existing 

Contracting Procedures 

for Recovery Act WIA 

Funds 

According to DELEG officials, existing state policies and procedures are 

intended to help safeguard the use of Recovery Act funds for the 25 MWA 

WIA Youth summer programs. We selected the Detroit MWA summer 

youth contract for review because this contract was for the largest WIA 

program in the state. According to the Detroit’s MWA officials, they follow 

city procurement practices and guidelines in awarding contracts, including 

those for the WIA program. In addition, officials told us that the Detroit 

MWA contract for the WIA program was competed. Officials explained 

that after selection of the winning bidder, a contract is drafted and 

reviewed by the city’s purchasing, budget, finance, and law departments 

before obtaining City Council approval. DELEG allocated $14.5 million to 

the Detroit MWA for the WIA Youth program of which $11.4 million is from 

Recovery Act funds.43 According to officials, Detroit MWA awarded a cost 

reimbursement contract not to exceed $6.2 million to a contractor for its 

WIA summer youth program for the period May 1, 2009, to June 30, 2010, 

and retained $8.3 million for payroll and administrative costs.44 This 

contract is funded by the Recovery Act and regular WIA funding. 

According to officials, the contractor issued a cost reimbursement 

subcontract not to exceed $3.7 million for program delivery including 

payroll processing and worksite development and monitoring from May 

15, 2009, to June 30, 2010. We discussed the contract with Detroit MWA 

procurement officials who told us that the award process was generally 

consistent with that described to us. 

 

43Of the $11.4 million of Recovery Act funding allocated to Detroit MWA, Detroit MWA 

contracted with a contractor for $3.1 million and retained $8.3 million for participant 

payroll and administration. 

44According to the Detroit officials, the prime contractor was awarded the WIA summer 

youth program contract under the City’s procurement process on May 4, 2009. The contract 

with the prime contractor was executed on July 8, 2009, following approval by city council. 

Page MI-40 GAO-09-1017SP Recovery Act
We provided the Governor of Michigan with a draft of this appendix, and 

staff in the Michigan Governor’s office and the Michigan Economic 

Recovery Office reviewed the draft appendix and responded on 

September 15, 2009. In general, they agreed with its overview of the state’s 

activities in the six programs selected for analysis. Further they stated that 

they believe that the report identifies several critical challenges that all 

states, including Michigan, must address to ensure timely, accurate and 

effective implementation of the Recovery Act. They also stated that they 

remain committed to our efforts to work with state agencies and local 

recipients to ensure that all implementation challenges are identified and 

addressed. The officials also provided technical suggestions that we 

incorporated, as appropriate. 

Susan Ragland, (202) 512-8486 or raglands@gao.gov 

Revae Moran, (202) 512-3863 or moranr@gao.gov 

In addition to the contacts named above, Robert Owens, Assistant 

Director; Jeffrey Isaacs, analyst-in-charge; Manuel Buentello; Leland 

Cogliani; Ranya Elias; Kevin Finnerty; Henry Malone; Melanie Swift; and 

Mark Ward made major contributions to this report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page MI-41 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of the American Recovery and Reinvestment Act (Recovery Act)1

spending in Mississippi. The full report on all of our work, which covers 16 

states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

Our work in Mississippi focused on specific programs funded under the 

Recovery Act and included reviewing three Recovery Act programs in 

detail, collecting summary data on two education programs, and updating 

the state’s fiscal condition since our July report. The programs we 

reviewed in detail were the state’s highway program, the Weatherization 

Assistance Program, and Recovery Act funds being provided under Title I, 

Part A of the Elementary and Secondary Education Act (ESEA) of 1965. 

We selected the highway program because the state’s full allocation of 

Recovery Act funds was available for use and the state had work 

underway, the weatherization program because the Recovery Act 

significantly increased the program’s funding, and the ESEA Title I 

program because the state was expected to make the first release of 

Recovery Act funds to schools during the time frame of our review. In 

addition to these programs, we also updated funding information on the 

U.S. Department of Education’s (Education) State Fiscal Stabilization 

Fund (SFSF) and the Individuals with Disabilities Education Act (IDEA). 

Consistent with the purposes of the Recovery Act, funds from the 

programs we reviewed are being directed to help Mississippi and local 

governments stabilize their budgets and expand existing programs—

thereby providing needed services. We focused on how funds were being 

used; how safeguards were being implemented, including those related to 

procurement of goods and services; and how results were being assessed. 

The funds include the following: 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s Federal Highway 

Administration (FHWA) apportioned $355 million in Recovery Act 

funds to Mississippi. 

Page MS-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115.287 (Feb. 17, 2009). 

 Recovery Act 
Appendix XI: Mississippi 

• As of September 1, 2009, the federal government has obligated 

$289 million to Mississippi and $21 million has been reimbursed by the 

federal government.2

• Almost 76 percent of Recovery Act highway obligations for Mississippi 

have been for pavement projects, including roadway repaving, 

widening, and new construction projects. Specifically, $154 million of 

the $289 million obligated for Mississippi’s use as of September 1, 2009, 

is being used for roadway repaving projects, including $4 million for 

approximately 18 miles of repaving at a site we visited in the south 

central region of the state. 

Weatherization Assistance 

Program 

• The Department of Energy (DOE) allocated $49.4 million in Recovery 

Act funding to Mississippi for the Weatherization Assistance Program. 

As of September 1, 2009, DOE had provided the Mississippi 

Department of Human Services (MDHS), the prime recipient of the 

funds, with $24.7 million. 

• MDHS is contracting with Mississippi’s 10 community action agencies 

to perform weatherization work. These agencies are responsible for 

purchasing materials and awarding labor contracts to make homes 

more energy efficient. As of July 31, 2009, three community action 

agencies that we visited had completed the weatherization of 134 

homes. 

• As of September 1, MDHS had disbursed $3.37 million to community 

action agencies for home weatherization. MDHS plans to provide 

community action agencies with a total of about $35.5 million from the 

state’s allocation of $49.4 million. With this the agencies are expected 

to weatherize a total of at least 5,468 homes. 

• MDHS expects to use the remaining $13.9 million, or 28 percent, for 

administrative costs, technical and training assistance, and audit fees 

for community action agencies’ year-end audits by private accounting 

firms. 

 

2

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 contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. States 

request reimbursement from FHWA as the state makes payments to contractors working 

on approved projects. 

Page MS-2 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

• Education has awarded Mississippi $132.9 million in Recovery Act 

funds under ESEA Title I, Part A. 

ESEA Title I, Part A Funds 

• As of September 8, Mississippi had released no Recovery Act ESEA 

Title I, Part A funds to local education agencies (LEA). Each agency is 

required to submit an application to the state, outlining its planned 

uses of these funds. According to MDE, it will review applications 

through the end of September. 

• Once funds are released, the agencies plan to use them for technology 

upgrades and supplemental reading and math programs. 

Updated Funding 

Information on Other 

Education Programs 

• As of September 4, 2009, the Governor of Mississippi had not released 

any of the $262.7 million that Education allocated under the SFSF for 

education stabilization. The Governor plans to release the education 

stabilization funds after the state has resubmitted its application for 

the funds to Education and after reviewing applications submitted by 

LEAs that detail each agency’s planned use of the funds. 

• Education has also awarded Mississippi about $127 million in 

Recovery Act funds under IDEA, Parts B and C, as of September 4, 

2009. None of these funds have been released to LEAs. 

In the face of declining tax revenues, Mississippi continues to experience 

significant fiscal challenges. Revenue collections for July and August 2009, 

the first 2 months of fiscal year 2010, were $26.2 million and $5.5 million 

below expectations, respectively. As shown in figure 1, total tax 

collections through fiscal year 2010 are down $31.7 million, which is nearly 

6 percent below projections. The State Fiscal Officer estimates that the 

budget shortfall for the fiscal year could be more than $800 million, but is 

more likely to range from $175 million to $350 million. The major causes 

for decreasing tax revenue are declines in sales taxes, individual income 

taxes, and other tax commissions. 

Mississippi Continues 

to Face Fiscal 

Challenges 

On September 3, the Governor ordered reductions in state agencies’ 

budgets totaling $171.9 million. The Governor took this action after 

reviewing August tax revenues and determining that tax revenue 

collections did not meet estimates for the first 2 months of fiscal year 

2010. The budget cuts reduce nearly all agencies’ budgets to at least 5 

percent below fiscal year 2009 appropriation levels. According to the 

Governor, he is statutorily prohibited from cutting an agency by more than 

5 percent until he has cut spending for all agencies by 5 percent. The 

Page MS-3 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Governor exempted only a few agencies and programs, such as the 

Department of Corrections and Medicaid, from the budget reductions. 

The budget cuts reduce fiscal year 2010 funding for education agencies by 

approximately $158.3 million while reducing funding for noneducation 

agencies by about $13.7 million. According to the Governor, because 

education spending makes up more than 60 percent of the state budget, 

Mississippi cannot control spending without addressing the largest line 

item in the state budget. 

Figure 1: Mississippi July/August 2009 Tax Revenue 

Figures in millions of dollars above or below the estimate

Source: Mississippi Legislative Budget Office.

-40 -30 -20 -10 0 10 20 30 40

Total collections

All other transfers

Other than tax

commission

Other tax commission

Gaming

Tobacco, ABC, and beer

Insurance premium

Use tax

Coporate income

Individual income

Sales tax -13.2

-8.5

1.3

0.9

-2.9

-2.0

0.9

0.0

-8.9

0.7

-31.7

Page MS-4 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

The use of Recovery Act funds must comply with specific program 

requirements but also, in some cases, enables states to free-up state funds 

to address their projected budget shortfalls. Mississippi was able to use 

Recovery Act funds in this manner. On June 30, 2009, the legislature 

approved the fiscal year 2010 Mississippi state budget using more than 

$519 million of Recovery Act funds to bring it into balance. The legislature 

appropriated $111.5 million and $19.6 million of education stabilization 

funds to K-12 education and institutions of higher education (IHE), 

respectively. This amount, plus $74.6 million of Recovery Act funds 

appropriated in fiscal year 2009 that will carry forward into fiscal year 

2010, freed up $205.7 million in General Funds that had been planned for 

K-12 education, IHEs, and community colleges. In addition, a provision of 

the Recovery Act that increased the Federal Medical Assistance 

Percentage3

 requirement made another $313 million available by lowering 

the portion of Medicaid costs that Mississippi must pay, thereby freeing up 

a like amount of state funds. According to a state budget official, these 

state funds were redirected to other programs. 

The Legislature Took 

Various Actions to 

Stabilize the Fiscal 

Year 2010 Budget 

To further balance the budget, the legislature transferred $65.2 million of 

“Rainy Day Funds”4

 to the Budget Contingency Fund5 to help cover 

projected shortfalls that appear likely to occur in the General Fund. 

Officials explained that the legislature also authorized an assessment on 

hospitals, amounting to $60 million, to offset the costs of Medicaid. In 

addition, the legislature increased General Fund revenues by raising the 

tax on each pack of cigarettes, which is expected to raise $106.1 million in 

additional tax revenue. 

 

3

Recovery Act funds used to stabilize the state’s operating budget includes, SFSF moneys, 

Temporary Assistance for Needy Families contingency funds, and funds made available as 

a result of the increased Federal Medical Assistance Percentage funds (see GAO-09-1016). 

4

The Mississippi Rainy Day Fund, formally called the Working Cash-Stabilization Reserve 

Fund, is intended, among other uses, to be used to cover any projected deficits that may 

occur in the General Fund at the end of a fiscal year as a result of revenue shortfalls. Miss. 

Code § 27-103-203. 

5

The Budget Contingency Fund was created in 2001 by the legislature to identify 

nonrecurring funding that the legislature could use in the budget process. The sources of 

funds deposited in the Budget Contingency Fund can differ from Special Fund transfers to 

the General Fund that are identified as nonrecurring. 

Page MS-5 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the FederalAid 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 

the states through federal-aid highway program mechanisms, and states 

must follow existing program requirements, which include ensuring the 

project meets all environmental requirements associated with the National 

Environmental Policy Act, paying a prevailing wage in accordance with 

federal Davis-Bacon requirements, complying with goals to ensure 

disadvantaged businesses are not discriminated against in the awarding of 

construction contracts, and using American-made iron and steel in 

accordance with Buy America 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. 

Mississippi Continues 

to Develop Recovery 

Act Highway Projects, 

but Is Challenged by 

Evolving Reporting 

Requirements and 

Tight Time Frames 

As we previously reported, $355 million was apportioned to Mississippi in 

March 2009 for highway infrastructure and other eligible projects. As of 

September 1, 2009, FHWA had obligated $289 million for Mississippi 

highway projects and had reimbursed the state $21 million. 

A little more than 75 percent of all Recovery Act highway obligations for 

Mississippi have been for pavement projects, including roadway repaving, 

widening, and new construction projects. Specifically, $154 million of the 

$289 million obligated for Mississippi’s use as of September 1, 2009, is 

being used for roadway repaving projects, including $4 million for 

approximately 18 miles of repaving at a site we visited in the south central 

region of the state. Figure 2 shows the types of road and bridge 

improvements for which funds have been obligated. 

Page MS-6 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Figure 2: Highway Obligations for Mississippi by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($25.3 million)

Other ($21.9 million)

New road construction ($22.5 million)

Pavement widening ($41.7 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($154.2 million)

Pavement projects total (75 percent, $218.4 million)

Bridge projects total (17 percent, $49.1 million)

Other (8 percent, $21.9 million)

53%

14%

9%

8% Bridge replacement ($23.8 million)

8%

8%

Note: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. 

Two Agencies Administer 

Mississippi Transportation 

Projects 

As we reported in July, Mississippi has two agencies administering 

Recovery Act funding for transportation projects. These two agencies are 

MDOT and the Office of State Aid Road Construction (OSARC). MDOT is 

responsible for operating and maintaining 14,300 miles of roadway 

statewide, including interstate highways, U.S. highways, and state routes. 

Furthermore, MDOT oversees all road construction projects that fall under 

the jurisdiction of any of the state’s four metropolitan planning 

organizations (MPO), which select and approve transportation projects for 

cities and counties known as local public agencies (LPA).6

 MDOT also 

 

6

MPOs 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. 

Page MS-7 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

oversees projects carried out by LPAs that are not part of MPOs. OSARC 

assists Mississippi’s 82 counties in the construction and maintenance of 

19,019 miles of secondary, nonstate roads, and bridges. The Governor 

appoints the State Aid Engineer; in contrast, an elected commission, 

independent of the Governor, controls MDOT. Since FHWA only 

recognizes one transportation agency in each state, all federal funding 

must flow from FHWA through MDOT. Although OSARC determines how 

Recovery Act funds will be allocated to Mississippi counties for the 

improvement of eligible county roads and then administers the funding, 

the agency must seek MDOT’s approval for each of the projects. After 

awarding contracts for federal projects, OSARC pays all contractor bills 

and then submits a request for reimbursement to MDOT. 

The Majority of MDOT and 

OSARC Recovery Act 

Projects Are Under Way 

Of the approximately $355 million in Recovery Act funds that FHWA 

allocated to Mississippi, MDOT is responsible for administering 

$343 million and OSARC has responsibility for $11.7 million. As of 

September 1, FHWA had obligated approximately $279 million of MDOT’s 

$343 million, and MDOT had awarded contracts for 45 projects.7

 By that 

same date, FHWA had obligated approximately $10.1 million of OSARC’s 

$11.7 million and OSARC had awarded contracts for 10 projects. 

Both MDOT and OSARC have awarded contracts for less than estimated. 

MDOT awarded Recovery Act contracts for nearly 12 percent less than the 

state’s estimate. Officials mentioned one project in Jackson County where 

increased competition resulted in the winning bid coming in 25 percent 

under the state estimate, something the officials had not witnessed in 

years. Of the 45 projects, for which MDOT has awarded contracts, 

contractors have begun construction on 39 and have completed 6. 

Similarly, OSARC awarded projects for nearly 15 percent less than 

originally estimated. Of the 10 projects for which OSARC has awarded 

contracts, 9 are under construction and 1 has been completed. 

We examined three Recovery Act contracts awarded prior to 

September 1.8

 We reviewed the contracts and discussed them with MDOT 

 

7

As we reported in July, MDOT met the requirement that 50 percent of these funds be 

obligated by June 30 of this year. The 30 percent of funds required to be suballocated, 

primarily based on population, for metropolitan, regional, and local use were not subject to 

this requirement. 

8

Our sample included two MDOT contracts and one OSARC contract. 

Page MS-8 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

and OSARC officials, who told us that the contracts were awarded to the 

lowest responsive bidder.9

 Furthermore, according to MDOT and OSARC 

officials, each MDOT and OSARC Recovery Act request for proposal and 

contract includes the act’s reporting requirements as well as the U.S. 

Department of Labor’s (Labor) Davis-Bacon requirements. 

MDOT Implements an 

Internal Obligation 

Deadline to Prevent the 

State from Losing Funds 

Included in the $343 million of Recovery Act funds that MDOT administers 

is $94.7 million that is set aside for LPA projects. Although the Recovery 

Act requires that these funds be obligated within 1 year of apportionment, 

MDOT chose to implement an internal deadline of September 3, 2009. 

MDOT established this deadline to encourage the LPAs to take action in 

advance of the final deadline, which reduces the risk that the state will 

lose any of its Recovery Act funding. 

As of September 1, FHWA had obligated $1.6 million of the $94.7 million 

set aside for LPA projects. In late August, the MDOT engineer responsible 

for LPAs told us that MDOT intended to ask LPAs to develop alternate 

projects if, by the September 3 deadline, funds for their projects were not 

close to being obligated or if the projects were facing substantial 

challenges, such as acquiring right-of-way. However, despite the fact that 

only 1 LPA project had funds obligated as of September 9, 6 days after the 

deadline, the engineer said that MDOT had reviewed the status of the LPA 

Recovery Act projects and determined that the projects were progressing 

well. 

LPAs Experience 

Challenges in Developing 

Projects 

In response to a 2006 national FHWA review that examined state oversight 

of locally administered projects, FHWA-Mississippi Division directed 

MDOT to enhance its oversight of LPA projects and update its Project 

Development Manual for LPAs to document the new oversight 

procedures. The updates include additional steps that LPAs must follow to 

activate a project. For example, MDOT previously allowed LPAs to certify 

that a project followed MDOT’s project activation protocol. LPAs now 

submit a written request to MDOT for project activation, along with 

documentation detailing the purpose and need of the proposed 

improvements, and LPA board meeting minutes. MDOT made the changes 

 

9

According to state officials, a responsive bidder is one that is not on the federal 

suspension and debarment list and that has submitted a balanced bid. A balanced bid is 

free from mathematical or material deficiencies. 

Page MS-9 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

in the project activation process because the department is ultimately 

responsible for ensuring that the state’s LPAs are in compliance with 

applicable state and federal requirements. However, as a result of these 

changes, LPAs undergo a much longer and more demanding protocol to 

activate their projects. This caused some MPO officials, who select and 

approve projects for the LPAs under their jurisdiction, to question whether 

the September 3, 2009, obligation deadline was achievable. 

Furthermore, officials at one MPO explained that MDOT’s new project 

activation process and the September 3 obligation deadline have affected 

the types of projects that are being approved in Mississippi. Officials from 

the Central Mississippi Planning and Development District (CMPDD) 

stated that most of its LPAs would have preferred to develop other 

projects with Recovery Act funds, such as new construction projects. But 

the officials told us that CMPDD ended up selecting more modest repaving 

and signal projects because of tight deadlines. According to those officials, 

over 90 percent of the Recovery Act projects that their MPO approved 

were repaving projects. 

In contrast, officials from the Gulf Regional Planning Commission (GRPC) 

told us that they chose to focus on safety improvement projects such as 

pedestrian walkways, intersection improvements, and bridge replacements 

rather than street-repaving projects because they felt these projects better 

reflected the goals of the Recovery Act. But, according to the officials, 

because projects were planned quickly to meet tight time frames, some 

projects have run into unanticipated issues that in some cases have caused 

costs to exceed the LPA engineers’ estimates. For instance, one locality 

had to deal with unanticipated drainage problems before it could begin 

constructing a planned sidewalk. According to GRPC officials, some LPAs 

had to come back to GRPC to ask for additional funding. GRPC officials 

initially told LPAs that if their engineers’ estimates were low, the LPA 

would have to pay the excess costs. However, GRPC officials stated that 

because some localities did not have funds to cover the additional costs, 

GRPC officials amended the transportation improvement program10 and 

added funds from other sources to fully fund the projects. 

Finally, MDOT and MPO officials informed us that some LPAs’ limited 

project administration experience might affect their ability to handle 

 

10The Transportation Improvement Program is the four year project list for federally funded 

transportation projects located within the jurisdiction of a MPO. 

Page MS-10 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Recovery Act projects. According to CMPDD officials, two member LPAs 

that were behind in the planning process have never managed a 

transportation project. Furthermore, MDOT’s State LPA Engineer also 

stated that some LPAs were dealing with mayoral changes, and that some 

new mayors simply did not know how to move projects forward. Officials 

from the GRPC also told us that one of its member localities did not 

receive funding because the town was in the midst of a mayoral change 

and did not have any staff to develop a suitable project. 

Reporting Requirements 

Present Challenges for 

FHWA, MDOT, and OSARC 

Officials from FHWA-Mississippi Division said that their counterparts at 

FHWA headquarters proactively developed a two-part system to collect 

and analyze Recovery Act project data on a monthly basis. This two-part 

system was made-up of prime recipient and subrecipient hard copy 

reporting forms as well as a computerized data base system, known as the 

Recovery Act Data System (RADS). Officials from FHWA-Mississippi 

Division told us that MDOT is experiencing challenges in meeting the 

reporting requirements set out in Section 1512 of the Recovery Act11

because FHWA developed RADS and the associated hard copy reporting 

forms before June 22, 2009, when the Office of Management and Budget 

(OMB) released Section 1512 reporting guidance. For example, FHWAMississippi Division officials cited one challenge as being that the original 

versions of RADS and prime recipient and subrecipient reporting forms 

were not formatted to collect all of the Section 1512 reporting elements. 

Therefore, FHWA-Mississippi Division officials explained that their 

counterparts at headquarters have been reworking RADS and the hard 

copy reporting forms so that each is formatted to collect all required 

information. FHWA wanted to complete the task by August 31, 2009, so 

that it could conduct a test run during the September monthly reporting 

cycle. The test run would help ensure that RADS is ready before the states 

must submit their reporting information for OMB’s first quarterly report, 

which is set for release in October. However, as of September 9, an FHWAMississippi Division official told us that FHWA had not completed its 

work. 

 

11Section 1512 of the Recovery Act requires that each recipient who receives funds from a 

federal agency submit a report to that agency that includes the amount of funds received, 

the projects and activities for which the funds were expended or obligated, the completion 

status of each project or activity and estimates of the number of jobs created and the 

number of jobs retained by the project or activity. See, Pub. L. No. 111-5, § 1512, 123 Stat. 

115, 287 (Feb. 17, 2009).

Page MS-11 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Officials from FHWA-Mississippi Division also explained that the changes 

being made to RADS and the hard copy reporting forms may result in 

prime recipients and subrecipients having to collect additional 

information. The officials told us that prime recipients and subrecipients 

may not have collected all information needed to comply with Section 

1512 reporting requirements because the original reporting forms did not 

require the information. According to the officials, both groups may find 

that they must retroactively collect data elements that were not collected 

prior to the changes in FHWA’s data collection system. 

For MDOT and OSARC officials tasked with compiling prime recipient and 

subrecipient Section 1512 reporting elements, the implementation of an 

evolving FHWA reporting system has constrained limited resources while 

causing confusion. MDOT and OSARC officials are most concerned about 

an ever-increasing workload as they are now required to carry out their 

normal work duties as well as complete the monthly FHWA reporting 

requirements. For example, MDOT officials explained that the MDOT 

Contract Administration Department employs about 13 to 14 staff 

members who typically oversee construction contracts with a total value 

of $300 to $400 million annually. MDOT officials stated that with the 

enactment of the Recovery Act, the department now has an additional 

$355 million worth of construction contracts to monitor, and the added 

reporting requirements that come with the state’s acceptance of this 

money. In addition, MDOT cited another challenge in that it only has 10 

calendar days, from the 11th through the 20th of each month, to verify the 

accuracy of the reporting elements provided to it from its own 

subrecipients as well as the data provided by OSARC. MDOT officials 

responsible for verifying these data said that 10 calendar days often only 

gives them enough time to identify very noticeable irregularities in the 

data, such as data fields that have been left completely blank or reported 

numbers that do not make sense for the element being reported. 

Our Spot Checks of Three 

Construction Sites Found 

That Internal Controls 

Were Being Implemented 

Given that Recovery Act funds are to be distributed quickly, effective 

internal controls over the use of funds are critical to help ensure effective 

and efficient use of resources, compliance with laws and regulations, and 

accountability over Recovery Act programs. Internal controls include 

management and program policies, procedures, and guidance that help 

ensure effective and efficient use of resources; compliance with laws and 

regulations; prevention and detection of fraud, waste, and abuse; and the 

Page MS-12 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

reliability of financial reporting. During visits to three projects being 

funded under the Recovery Act, we examined some of the internal 

controls that MDOT and OSARC have adopted.12

On Tuesday, August 11 and Wednesday, August 12, 2009, we conducted 

three site visits at one MDOT and two OSARC Recovery Act construction 

projects. Each of these site visits was conducted in association with the 

FHWA-Mississippi Division; MDOT and OSARC management were not 

aware that we planned to visit.13 The two OSARC site visits were bridge 

reconstruction projects located in the northwest region of the state, 

whereas the MDOT site visit was a repaving project located in the south 

central region of the state.14 In table 1, the findings of these site visits are 

summarized. 

Table 1: Site Visit Findings with Regard to Certain MDOT and OSARC Internal 

Controls 

Site visited 

Was work being 

conducted 

which involved 

a pay item? 

Was 

a technician 

on-site? 

Was 

the daily diary/ 

inspection 

report 

completed? 

Were the 

Davis-Bacon 

questionnaires 

completed? 

OSARC #1 Yes Yes Yes Yes 

OSARC #2 No Yes Yes Yes 

MDOT Yes Yes Yes Yes 

Source: GAO analysis. 

During each of the three site visits we conducted, MDOT and OSARC 

officials were following procedures at the required level or above. 

According to MDOT and OSARC officials, both MDOT and OSARC require 

 

12Additional information on internal controls may be found in the Mississippi appendix of 

GAO’s second bimonthly review, which may be accessed at 

http://www.gao.gov/recovery/bimonthly/ms/ms-july-09.php. 

13However, only the first of the two OSARC site visits can be classified as unannounced 

because the OSARC official at the second site told us that he had been informed of the 

possible visit. Furthermore, we cannot say that the conditions at the MDOT site, during the 

time of the visit, would have been exactly the same as those that may have existed because 

on the day of our visit to the site, FHWA had planned its own inspection of the site and had 

informed MDOT officials of these plans. 

14The site visit locations were selected on the day of the visit as the accessibility of projects 

under construction changes on a day-to-day basis based on weather and contractor 

workload. 

Page MS-13 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

that a technician be on-site whenever work is being conducted that 

involves a contract pay item.15 Furthermore, MDOT and OSARC officials 

stated that they require that the technician be certified in the line of work 

involving that particular pay item. The contractor at the first OSARC site 

explained to us that he was scheduled to pour concrete, and the technician 

at that site was a certified concrete technician. At the MDOT site, the 

division assistant construction engineer told us he was there to fill the 

technician requirement by checking the density of the asphalt being 

poured. However, at the second OSARC site, a technician was on-site even 

though he specifically told us that no pay item work was being completed. 

Further, we verified that the MDOT and OSARC on-site technicians were 

either in the process of completing or had completed the daily diary, 

which is an MDOT and OSARC internal control requirement. The daily 

diary includes information such as type(s) of work performed, location of 

work, daily quantities of pay items, major pieces of equipment located onsite, contractor’s labor force, specific instructions given to the contractor’s 

foreman, and visitors to the project site. Each technician at the two 

OSARC projects was able to verify that they were required to complete a 

daily diary and each technician submitted a completed daily diary to us for 

the day that the site visit was conducted. At the MDOT site, we spoke with 

an engineer, who also confirmed the required completion of a daily diary, 

and we reviewed the form for the day that we visited. 

We also asked the on-site technicians or, in the case of the MDOT project, 

an engineer, for documentation showing that required Davis-Bacon Labor 

questionnaires were being completed. These questionnaires ask contractor 

employees to provide such information as their job classification, their 

hourly pay rate, whether they received overtime pay for time worked in 

excess of 40 hours during a work week, as well as other information 

pertaining to whether they had filed a complaint for being underpaid. 

MDOT officials stated that they require their inspectors to complete at 

least one questionnaire every 2 weeks until all contractor and 

subcontractor employees have been interviewed or construction at the site 

is finished, while OSARC requires that its inspectors complete at least one 

questionnaire every month until all contractor and subcontractor 

employees have been interviewed or construction at the site is finished. 

Both OSARC technicians and the MDOT engineer were able to provide us 

 

15A pay item is a specifically described unit of work for which a price is provided in the 

contract. 

Page MS-14 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

with copies of questionnaires they had recently completed. From the 

provided questionnaires, we were able to verify that MDOT officials 

conducted interviews, at the site we visited, every two weeks during June, 

as required. Also, for the OSARC sites we visited, documentation showed 

that during the months of July and August, officials conducted the 

interviews once per month as required. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or 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. 

Weatherization 

Assistance Program 

Providing Assistance 

to Low-Income 

Families 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories, 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE has provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis Bacon Act.16 Because the 

Davis-Bacon Act had not previously applied to weatherization, Labor had 

not established a prevailing wage rate for weatherization work. In 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 

 

16The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

Page MS-15 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

alternative category, and compensate workers for any differences if Labor 

establishes a higher local prevailing wage rate for weatherization 

activities. Labor then surveyed five types of “interested parties” about 

labor rates for weatherization work. 17 The department completed 

establishing prevailing wage rates in all of the 50 states and the District of 

Columbia by September 3, 2009. 

Mississippi Receives Large 

Increase in Weatherization 

Funding 

DOE allocated $49.4 million in Recovery Act funding to Mississippi for the 

Weatherization Assistance Program. This represents a large increase over 

prior years when DOE’s allocation to Mississippi typically ranged from 

$1.5 million to $2 million. MDHS, the state agency responsible for 

administering the Weatherization Assistance Program, contracts with 10 

community action agencies across the state to provide weatherization 

services to households at or below 200 percent of the poverty level.18

MDHS is giving priority to income-eligible households with elderly 

members, disabled individuals, or young children by allocating 90 percent 

of its Recovery Act weatherization funds to these groups. The department 

intends to use the remaining 10 percent of the Recovery Act 

weatherization funds for income-eligible customers with high levels of 

energy usage. 

To receive weatherization funds from the Recovery Act, DOE required 

each state to submit a preliminary plan laying out how weatherization 

funds would be spent. MDHS submitted this plan on March 18, 2009, and 

on April 3, 2009, DOE released a 10 percent allocation ($4.9 million) to 

cover administrative costs, such as hiring and training new staff. On 

May 11, 2009, MDHS submitted a comprehensive plan and certification to 

DOE. This was followed by DOE’s release of an additional 40 percent of 

allocated funds, or $19.7 million. With this release, MDHS has received 50 

percent of its total allocation, or $24.7 million. DOE expects to make the 

remaining 50 percent of the Recovery Act weatherization funds available 

when the current award has been successfully expended. As of 

September 1, 2009, MDHS had disbursed $3.37 million to the community 

action agencies. 

 

17 The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

18The Recovery Act raised the income eligibility for the program from 150 percent of 

poverty to 200 percent of the poverty level. Pub. L. No. 111-5 § 407, 123 Stat. 115, 145 

(Feb. 17, 2009). 

Page MS-16 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Of the total $49.4 million in Recovery Act weatherization funds that MDHS 

is to receive, $35.5 million will be allocated to community action agencies 

that purchase materials and contract for weatherization services. MDHS 

expects to use the remaining $13.9 million, or 28 percent, for 

administrative costs, technical and training assistance, and audit fees for 

community action agencies’ year-end audits by private accounting firms. 

According to information provided by MDHS, of the $13.9 million, the 

department will expend approximately $8.6 million for training and 

technical assistance; $4.9 million, shared equally by MDHS and the 

community action agencies, for administrative costs; and $255,000 for the 

audits performed by the accounting firms. 

The Recovery Act has allowed states to increase the amount of funds that 

may be used to weatherize a home. Formerly, DOE allowed $2,500 to 

weatherize a home, but the Recovery Act increased this to a maximum of 

$6,500. MDHS has directed community action agencies to spend no more 

than $4,500 of that amount to purchase labor and materials for each home. 

The remaining $2,000 per home may be spent on overhead costs, such as 

program staff salaries, travel, supplies, rent, and utilities.19

MDHS determined that it can weatherize a total of 5,468 homes with 

Recovery Act funds ($35.5 million allocated to community action agencies 

divided by $6,500). An agency official stated that the 5,468 homes are a 

minimum goal and are based on projected costs per home. Should 

weatherization cost per home be less than $6,500, the agency official told 

us that additional homes will be weatherized. 

MDHS employed two formulas to determine the amount of funds that 

should be allocated to each agency and the number of homes each 

community action agency could need to weatherize. First, to determine 

how much funding should be allocated to each community action agency, 

MDHS multiplied the total programmatic funds ($35.5 million) by the 

percentage of the state’s impoverished population living within the area. 

MDHS then determined the number of homes within each community 

action agency’s coverage area that could be weatherized by dividing each 

agency’s allocation of funds by the Recovery Act allowance per home 

($6,500). Table 2 shows the allocation of weatherization funds by 

community action agency. 

 

19The overhead costs charged to each home are in addition to administrative costs that 

DOE allows the community action agencies to recover. 

Page MS-17 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Table 2: Allocation of Weatherization Funds and Estimated Number of Homes to Be 

Weatherized, by Community Action Agency 

Community action agency Allocationa

Estimated number of 

homes

to be weatherized

Bolivar County $1,524,867 235

Central Mississippi, Inc. 2,417,038 372

Lift, Inc. 2,601,871 401

Multi-County 3,255,893 501

Northeast 1,613,729 248

Pearl River Valley Opportunity 7,663,433 1,179

Prairie Opportunity 2,996,417 462

South Central 4,837,631 744

Southwest Mississippi 3,298,546 507

Warren Washington Issaquena Sharkey 5,324,593 819

Total $35,534,018 5,468

Source: Mississippi Department of Human Services/Division of Community Services. 

Note: These figures are through March 12, 2012. 

a

This column refers to the programmatic allocation for each community action agency, as opposed to 

the total allocation, which includes funds for equipment, audit, and technical and training assistance. 

According to MDHS, a community action agency may weatherize a home if 

it is occupied by a family unit that is qualified to participate in the 

Weatherization Assistance Program.20 The local community action agency 

must ensure eligibility of the family unit by verifying, among other things, 

household income level, Social Security information, and household 

energy expenses. Community action agency personnel then perform a preweatherization audit to determine the amount of weatherization that the 

home should receive. MDHS has directed that improvements be made in 

the following order, with the first three typically installed as a package. 

The remaining improvements are then made (also in order) if needed and 

if funding is available. 

• Air sealing 

• Attic insulation 

• Dense-pack sidewalls 

 

20A renter or a homeowner may apply for the Weatherization Assistance Program. If MDHS 

approves a renter’s application, the owner of the property must agree that the home may be 

weatherized and to certain conditions laid out in a written agreement. 

Page MS-18 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

• Floor insulation 

• Sealing and insulation of ducts 

• Smart thermostat 

• Compact fluorescent lamps 

• Replacing of refrigerator 

In addition, the following low-cost improvements may be made where 

applicable: 

• Weather stripping, caulking, glass patching 

• Water heater tank wrap 

• Pipe insulation 

• Installation of faucet aerators 

• Installation of low-flow showerheads 

• Installation of furnace filter 

• Reglazing of windows (as needed) 

• Installation of carbon monoxide detectors, smoke alarms, and fire 

extinguishers 

GAO Visited Three 

Community Action 

Agencies 

We visited three community action agencies in August 2009 to collect 

information on weatherization contracts, including data on contractor 

certifications, the costs incurred to weatherize a home, and how 

community action agencies plan to measure program performance. We 

also gathered information from the three agencies regarding compliance 

with the Davis-Bacon Act, job creation, reporting requirements, and 

oversight procedures. 

We chose to visit the Multi-County Community Service Agency (MultiCounty), the South Central Community Action Agency (South Central), 

and the Warren Washington Issaquena Sharkey Community Action Agency 

(WWISCAA). We visited Multi-County because it had extensive experience 

weatherizing homes, South Central because it had no previous experience 

weatherizing homes, and WWISCAA because it received the second largest 

allocation of funding, $5.78 million. 

Agencies Have Awarded 

Contracts and Homes Have 

Been Weatherized 

An official at one of the community action agencies told us that 

weatherization work on homes began in June 2009. Further, the official 

explained that the agency had to hire and train staff and purchase 

equipment before the work could begin. As of July 31, 2009, Multi-County 

had completed 31 homes; South Central had completed 47; and WWISCAA 

had completed 56 using Recovery Act funds. 

Page MS-19 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

To identify contractors to perform weatherization work, all of the 

community action agencies we visited told us that they advertised 

opportunities to bid for contracts through local media sources, the 

Mississippi Department of Employment Security, and Mississippi job 

centers. According to agency officials at the sites we visited, the agencies 

selected contractors through a competitive bid process and awarded 

contracts for labor only. The community action agencies purchase 

materials that meet DOE standards for weatherization and provide them to 

the contractors as needed.21 Agency officials also told us that they procure 

materials competitively by obtaining prices on a list of materials from 

vendors and then selecting the lowest-cost materials. 

DOE and the State of Mississippi both impose requirements on contractors 

selected to weatherize homes. DOE requires the contractors to purchase 

liability insurance and it strongly recommends that the contractors also 

obtain special pollution insurance. (All three community action agencies 

told us that they require both general liability and the special pollution 

insurance.) In addition, MDHS requires that contractors carry workers’ 

compensation insurance and obtain adequate bonding. The state also 

requires that all contractors and laborers complete a minimum of 80 hours 

of annual training. Training includes but is not limited to classes in gas 

leak detection, DOE lead safe work practices, DOE energy-related mold 

and moisture practices, and whole-house weatherization practices for both 

site-built homes and mobile homes. 

The average cost to weatherize a home using Recovery Act funds varied 

among the three agencies, with costs ranging from $3,000 to $4,500 per 

home.22 The differences in weatherization costs result from differences in 

calculating contractor labor costs, the amount of weatherization work 

performed, and, thus, the amount of materials used. One agency estimates 

labor using a fixed labor cost of $2,100 per house, a figure it arrived at 

when the labor rate for all bidders was at or near $87.50 per hour and the 

agency estimated that each home would require 24 hours of 

weatherization work.23 After establishing the labor rate competitively, this 

community action agency awards contracts to qualified contractors based 

 

21MDHS does not develop an approved list of suppliers; instead, agencies develop their own 

respective lists. 

22Total cost per home consists of labor and materials. 

23The figure of $87.50 per hour is a cumulative hourly labor rate for all workers on a 

particular job. 

Page MS-20 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

on their availability. The other two agencies base labor rates on material 

costs, with one agency pricing labor at 125 percent of materials and 

another agency pricing labor at 100 or 110 percent of materials, depending 

on the distance the contractor has to travel to the work site. Officials at 

each of the latter two agencies told us that the contractor for each house is 

selected competitively based on the number of hours bid to complete the 

work, but that the labor rates are a set percentage of material costs. 

The effect of weatherization on individual homes, and therefore regions 

and the state as a whole, will take time to realize. MDHS requires the 

community action agencies to measure program outcomes by collecting 

residents’ utility bills for the 12 months before a home is weatherized and 

for 12 months afterwards. By comparing pre- and postweatherization 

utility bills, the agencies will determine the savings resulting from 

weatherization. MDHS has a goal of reducing energy usage by 17,000 

MBtu24 across the 5,468 homes it plans to weatherize. 

Davis-Bacon Not a 

Concern for Community 

Action Agencies 

The Davis-Bacon Act requires that contractors and subcontractors pay 

prevailing wage rates to laborers who are employed on construction 

projects that receive federal assistance. The Weatherization Assistance 

Program has not been previously subject to Davis Bacon wage 

requirements. However, the Recovery Act requires all laborers and 

mechanics employed by contractors and subcontractors on projects 

funded directly by or assisted in whole or in part by and through the 

federal government with Recovery Act funds be paid wages at rates that 

are not less than those paid on local projects of a similar character as 

determined by the Secretary of Labor.25 To that end, Labor recently 

conducted a nationwide survey to determine wages for weatherization 

contractors and laborers. MDHS required all agencies receiving the survey 

to complete and return the survey to MDHS by July 31, 2009. MDHS 

submitted the surveys to Labor before August 14, 2009 and Labor posted 

prevailing wage rates for Mississippi on August 24, 2009. 

 

24The British thermal unit (Btu) is a precise measure of the heat content of fuels. It is the 

quantity of heat required to raise the temperature of 1 pound of water by 1 degree 

Fahrenheit at the temperature that water has its greatest density (approximately 39 degrees 

Fahrenheit). An MBtu is equal to 1,000 Btu. 

25Pub. L. No. 111-5, §1606, 123 Stat. 115, 303 (Feb. 17, 2009). 

Page MS-21 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

When we visited the three community action agencies in August, none 

were concerned with the outcome of the survey. Each of the three 

agencies stated that the labor rates being paid by the agencies and their 

contractors were at or above similar prevailing labor rates for their 

respective areas. MDHS officials told us that they did not expect Labor to 

release prevailing wage data that indicated a higher prevailing wage rate 

than the agencies were paying weatherization contractors and laborers. 

However, should this occur, a community action agency official told us 

that contractors would receive back pay from the community action 

agency, using Recovery Act funds. 

Community Action 

Agencies Hired Additional 

Staff to Support 

Weatherization Program 

The three community action agencies have each hired new staff as a result 

of the increase in weatherization work because of Recovery Act funding. 

Officials at each of the agencies visited could clearly identify the number 

of internal jobs created as a result of the funding. According to respective 

agency officials, Multi-County hired seven weatherization coordinators 

and two administrative staff; South Central hired four weatherization 

coordinators and two case managers; and WWISCAA hired a bookkeeper, 

three weatherization coordinators, and three case managers. In addition, 

officials at two of the three agencies wanted to hire additional staff with 

Recovery Act funding and would like to retain the new staff even after 

Recovery Act funds are no longer available. 

MDHS Working to Mitigate 

Potential Reporting 

Problems on the Use of 

Funds 

The Recovery Act imposes upon states an extended level of accountability 

and transparency in the use of federal funds. All prime recipients of 

Recovery Act funding must submit their first report to 

www.FederalReporting.gov by October 10, 2009. 

MDHS officials told us that to prepare for Section 1512 reporting 

requirements, MDHS plans to conduct two “trial runs” of data gathering 

and report preparation before the October 10, 2009 reporting deadline. In 

addition, MDHS requires the community action agencies to provide 

monthly submissions of all data required under Section 1512, including job 

creation/sustainment data. According to the officials, this will help them 

understand what information is needed to comply with the reporting 

requirements and give MDHS an opportunity to verify the accuracy of data 

the agencies report. One of the community action agencies we visited had 

limited data regarding jobs created by contractors and had no data 

regarding jobs created by vendors. MDHS officials stated that the 

community action agencies will collect both sets of data and report the 

information to MDHS by the deadline. An MDHS official stated that the 

Page MS-22 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

department has registered as required in preparation for Section 1512 

reporting. 

Oversight Is Carried Out at 

Multiple Levels 

State and local agencies are monitoring the Recovery Act Weatherization 

Assistance Program in Mississippi. At the state level, MDHS provides three 

levels of oversight. The first level is conducted by an independent division 

of MDHS, the Division of Program Integrity, who told us that they monitor 

10 percent of the total number of homes weatherized. The division 

monitors fiscal and programmatic records to determine, for example, 

whether community action agencies are meeting Davis-Bacon 

requirements and whether activities performed by contractors relate to the 

appropriate funding source. The second level of review is conducted by 

MDHS regional weatherization coordinators, and includes monitoring an 

additional 20 percent of the total number of homes. The Division of 

Community Services weatherization staff is responsible for the third level 

review, which includes monitoring 10 percent of the homes that were 

monitored by the regional coordinators, as well as an additional 10 percent 

of homes not reviewed by the regional coordinators. The second and third 

level reviews will include examining subgrantee files and monitoring 

contractor performance. 

At the local level, MDHS requires all community action agencies to 

conduct both pre- and postwork energy audits on homes. According to a 

community action agency official, the purpose of a pre-audit is to 

determine the most cost-effective measures for reducing energy costs 

associated with inefficiencies in the home, whereas the purpose of a 

postaudit is to determine whether appropriate improvements have been 

made and whether further work is needed. The official also stated that 

work on a particular home is not considered complete, nor is the 

contractor paid for the job, until the postweatherization audit is performed 

and the house passes the necessary criteria set out in the 

preweatherization audit. 

The Recovery Act provides education funds to the State of Mississippi 

through ESEA Title I, Part A; SFSF; and IDEA. Recovery Act funds 

provided through ESEA Title I, Part A help local school districts educate 

disadvantaged youth and are in addition to those funds regularly allocated 

through the ESEA Title I program. The SFSF provides funds to states to 

help avoid reductions in education and other essential public services. 

Finally, the Recovery Act provides supplemental funding for programs 

authorized by IDEA, the major federal statute that supports special 

Mississippi Has Not 

Yet Distributed 

Recovery Act 

Education Funds to 

LEAs 

Page MS-23 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

education and related services for infants, toddlers, children, and youth 

with disabilities. We conducted a detailed review of the Title I program 

and collected summary data for the SFSF and IDEA, Part B programs. 

MDE Providing Guidance 

and Reviewing LEAs’ 

Applications for ESEA 

Title I, Part A Recovery Act 

Allocations 

The Recovery Act provides $10 billion to help LEAs educate disadvantaged 

youth by making additional funds available beyond those regularly 

allocated through ESEA Title I, Part A. The Recovery Act requires these 

additional funds 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 current statutory and regulatory 

requirements and must obligate 85 percent of these funds by September 

30, 2010.26 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. Education 

made the first half of states’ Recovery Act ESEA Title I, Part A funding 

available on April 1, 2009, and announced on September 4, 2009, that it had 

made the second half available. 

As of September 4, Mississippi has received $132.9 million in ESEA Title I, 

Part A Recovery Act funds. The state had released none of these funds to 

LEAs as of September 8. MDE officials told us that each LEA is required to 

submit an application to the state, outlining its planned uses of these 

funds. These applications were due to the MDE at the end of July. As of 

September 8, 2009, several LEAs had not yet submitted their applications. 

According to MDE, it will review applications through the end of 

September. 

Along with ESEA Title I Recovery Act application packets, MDE released a 

guidance package to LEAs outlining the application process and 

suggesting uses of ESEA Title I Recovery Act funds. In addition to 

considering the guiding principles of the Recovery Act, MDE encouraged 

the LEAs to use the funds in ways that would allow for increased capacity, 

extended school days, professional development, instructional supplies 

and materials, transparency and accountability, school reform, and 

parental involvement. Included in the ESEA Title I, Part A Recovery Act 

 

26LEAs 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 MS-24 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

application package is an additional requirement that MDE normally does 

not place on ESEA Title I, Part A funds. MDE is requiring that each LEA 

address at least two of five ESEA performance goals and indicators. One 

goal is to help all students attain high standards in reading/language arts 

and mathematics, as indicated by the percentage of students who perform 

at an acceptable level on state assessments. Another goal is to enable all 

students with limited English skills to achieve high academic standards, as 

indicated by state assessments. Goals also include having “highly 

qualified” teachers teach all students in safe, drug free environments that 

are conducive to learning. Finally, ESEA performance goals include all 

students graduating from high school. In the application, an LEA must 

provide narrative on how they will achieve these goals, as well as a budget 

narrative detailing how the ESEA Title I, Part A Recovery Act funds will be 

used. 

MDE Could Pursue ESEA 

Title I Waivers 

MDE officials told us that they are concerned about the LEAs’ ability to 

obligate Recovery Act ESEA Title I funds in addition to regular ESEA Title 

I, Part A funds within the ESEA spending timeframes. That is, MDE is 

concerned that the LEAs cannot obligate 85 percent of the funds by 

September 30, 2010, and the full amount by September 30, 2011. MDE is 

considering applying to Education for a waiver that would allow MDE to 

waive the carryover limitation for individual LEAs. If granted, a LEA could 

carry over more than 15 percent of its Recovery Act allocation into the 

next fiscal year. Under ESEA, state education agencies currently have 

authority to waive carryover limitations only once every three years if the 

requests are reasonable and necessary. The waiver MDE wishes to apply 

for would allow it to grant waivers to LEAs more frequently if the LEAs 

needed additional time to expend their Recovery Act allocations. MDE 

officials said that they are currently assessing the guidance from 

Education on this issue, as well as surveying the LEAs in the state to 

determine if there is concern and interest among the LEAs in applying for 

such a waiver. In addition, MDE officials told us that they are interested in 

applying for permission to use the SFSF funds to satisfy maintenance-ofeffort requirements for ESEA Title I.27 According to MDE officials, they 

 

27A state meets the maintenance-of-effort requirement if either the combined fiscal effort 

for per student or the aggregate expenditures within the state with respect to the provision 

of free public education for the preceding fiscal year was not less than 90 percent of such 

combined fiscal effort or aggregate expenditures for the second preceding fiscal year (20 

U.S.C. § 6337(e)(1)). 

Page MS-25 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

have asked for, but not yet received, clarification on this issue from 

Education. 

Visited LEAs Intend to Use 

ESEA Title I, Part A 

Recovery Act Funds for 

Upgraded Technology in 

Classrooms and 

Supplemental Reading and 

Math Programs 

We visited three LEAs in Mississippi to discuss their planned uses of ESEA 

Title I, Part A Recovery Act funds: Jackson Public School District, Rankin 

County School District, and Greenville Public Schools. We chose to visit 

Jackson Public School District because it has a number of schools that are 

categorized under ESEA Title I as needing improvement, is an urban 

school district, and is receiving the largest ESEA Title I Recovery Act 

allocation in the state. Jackson Public School District is the largest LEA in 

the state in terms of student enrollment. We visited Greenville Public 

Schools because it is located in a rural town and is receiving the second 

largest ESEA Title I Recovery Act allocation in the state. Greenville Public 

Schools is the 12th largest school district in student enrollment. Finally, 

we visited Rankin County School District at the recommendation of 

Mississippi’s Office of State Auditor (OSA) and Office of the Governor, 

which cited this LEA as one of several in the state that follows “best 

practices” related to internal controls, compliance, and management. 

Rankin County School District is the third largest district in the state in 

terms of student population and is receiving the 15th largest ESEA Title I, 

Part A allocation in the state. 

Jackson Public School District is expected to receive a total allocation of 

$15,683,083. In determining how to apply the district’s ESEA Title I, Part A 

Recovery Act funds, Jackson Public School District officials solicited 

recommendations from district and school administrators, private school 

administrators, and parents. In addition, the district’s test scores indicated 

a critical need to address language arts and mathematics. In its application 

to the state, Jackson Public School District indicated that it wishes to use 

the additional ESEA Title I, Part A funds for supplemental instruction, 

particularly in those subjects with low student test scores. For example, 

officials told us that they plan to purchase math software programs, as 

well as the associated technologies that will be needed to use the 

software, such as computers and graphing calculators. Jackson Public 

School District will also use some of the funds for professional 

development for teachers. 

Rankin County School District is expected to receive an ESEA Title I, Part 

A Recovery Act allocation of $1,680,397. Rankin County School District 

officials told us that they plan to use these funds for technology upgrades 

in the classroom in order to create “21st century learning centers” for 

students and teachers. District officials plan to bring new technologies 

Page MS-26 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

into classrooms, such as laptop computers, interactive whiteboards, 

projectors, document cameras, digital video cameras, and printers. The 

district made the decision to use the ESEA Title I, Part A Recovery Act 

allocation in this way following a comprehensive needs assessment and 

conversations and focus groups with principals and teachers. District 

officials told us that efforts to modernize and upgrade classroom 

technology were already under way, but the additional Recovery Act funds 

will help the school district achieve these goals. Additionally, the district 

wants to use the funds for professional development of teachers, including 

instructing them on the use of the new equipment purchased, as well as 

improving the teachers’ instructional practices. 

Greenville Public Schools expect to receive an ESEA Title I, Part A 

Recovery Act allocation of $4,329,295. School officials told us that they 

plan to use the additional funds to purchase technology upgrades for the 

classroom in order to create “model classrooms” at each grade level. 

According to district officials, a model classroom is built around a set of 

best practice methodologies for instruction and motivation. Creating such 

a classroom involves purchasing upgraded technologies, such as modern 

computers that are compatible with current software, and providing 

corresponding instruction for teachers. With upgraded technologies, 

Greenville Public Schools can invest in supplemental instructional 

software in mathematics and language arts. Based on statewide testing 

programs, the school district identified these subjects as in need of 

intensive support and effective interventions. Additionally, Greenville 

Public School officials want to hire 15 additional teachers to offset teacher 

reductions caused by previous budget cuts. This will change student-toteacher ratio from 27: 1 to 22: 1. In determining how the additional 

allocation will be used, Greenville Public Schools officials told us that they 

took into account the opinions of stakeholders, such as parents, local 

businesses, advocacy groups, teachers and administrators. Greenville 

Public Schools held a public community meeting and then a central office 

meeting to determine the best uses of the additional Recovery Act funding 

before submitting its application to MDE for approval. 

ESEA requires each LEA to use ESEA Title I, Part A funds for the 

participation of children in private schools, as well as for homeless and 

neglected children. The act also allows ESEA Title I, Part A funds to be 

used for children living in local institutions for delinquent children, as 

appropriate. For example, Jackson Public School District officials told us 

that there are 11 private schools and 3 institutions for delinquent children 

in their district that will receive Recovery Act ESEA Title I, Part A 

Recovery Act funds. 

Page MS-27 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

In addition to the set-asides required for ESEA Title I, a 1996 policy passed 

by the Mississippi State Board of Education permits LEAs in Mississippi to 

reserve up to 20 percent of their regular Title I, Part A allocation for 

administrative purposes.28 MDE has instructed LEAs that the same policy 

applies to the Title I, Part A Recovery Act allocation. MDE did not require 

LEAs to discuss in detail their plans for the administrative set-asides. 

However, according to state school board policy, such costs can include 

salaries, benefits, travel, and office costs of ESEA Title I bookkeepers; 

cost of audits; and indirect costs. As part of its review process, MDE will 

ensure that set-asides do not exceed 20 percent of the total allocation. 

Rankin County School District and Jackson Public School District officials 

stated that they would consider using administrative funds to hire 

additional bookkeeping staff to handle the additional workload of tracking 

and monitoring the funds. 

MDE Developing Internal 

Control Plans 

Mississippi’s Department of Finance and Administration (DFA) has 

required each state agency to develop and submit a written internal 

control plan that covers safeguarding of agency assets, segregation of 

duties by function, and execution of transactions in accordance with laws 

of the State of Mississippi. The internal control plan will apply to all state 

and federal funding received by the agencies. The plan for MDE was still in 

draft as of September 4, 2009. 

To monitor the LEAs’ use of Recovery Act funds, MDE officials said that 

they have an Educational Accountability Office with an Internal 

Accountability division. MDE officials told us that this office is responsible 

for reviewing each LEA’s financial audit, following up on findings with the 

LEAs, and assisting them in taking corrective action. The audits are 

conducted annually by a private firm in conjunction with OSA. The 

Internal Accountability Office has three staff to cover 152 LEAs. 

MDE’s Office of Federal Financial Management also monitors LEAs’ use of 

federal funds for proper use and compliance with appropriate laws. MDE 

officials stated that LEAs are monitored on a 3-year cycle. At this time, 

there are no definite plans for additional monitoring of Recovery Act 

funds. 

 

28Mississippi State Board of Education Policy 7802, “Expenditures of Funds on Instruction,” 

1996. 

Page MS-28 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

LEAs Plan to Use Existing 

Policies and Procedures to 

Control Recovery Act 

Funds 

The three LEAs we visited said that they are not planning to make 

significant changes to their current policies and procedures for tracking 

federal funds in order to track the Recovery Act funds. The LEAs will use 

their current systems but will use unique identifying codes for the 

Recovery Act funds, as required by DFA. The LEAs we visited have not 

completed written internal control plans or risk assessments of internal 

control weaknesses. 

Officials with Jackson Public School District told us that they will set up a 

budget for each of the district’s schools that is based on the information 

the school provided to the district regarding how it plans to use its 

Recovery Act funds. These budgets are subject to school board approval 

to ensure that the uses fit within the district’s goals for improving 

instruction and comply with state guidelines. Requisitions for Recovery 

Act funds first must be approved by each school’s principal. Requests for 

expenditures will then be checked against these written budgets by 

Jackson Public School District’s federal programs and purchasing offices. 

At monthly grant review meetings, the Executive Director of Finance and 

others will review Recovery Act expenditures that were initiated centrally 

or at the school level. Jackson Public School District officials stated that 

they intend to be transparent with their uses of the Recovery Act funds. 

They will update parents and the community via newsletters and public 

access television programming. 

Officials with Rankin County School District told us that each employee is 

trained on accounting and purchasing rules. They plan to follow the same 

set of procedures for tracking Recovery Act funds as they do for all federal 

funds. An official in Rankin County Public Schools’ Federal Programs 

Department will be primarily responsible for tracking Recovery Act funds. 

This person will develop a budget, enter and track purchase orders, file 

invoices, and compile monthly reports to ensure that funds are being 

properly utilized. Requisitions for Recovery Act funding will be subject to 

approval by the Assistant Superintendent before being turned into 

purchase orders. A purchase order will be subject to approval by the 

accounting department at Rankin County School District, and may be 

additionally reviewed by the Business Manager or Purchasing Director. 

The accounting department will not approve a payment until services or 

materials are received, an invoice is filed, and the school board has 

approved the expenditure. School board meetings are open to the public, 

and uses of Recovery Act funds will also be made public via parent 

newsletters and email communications. 

Page MS-29 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Greenville Public Schools officials said that they would not make any 

significant changes to their plans for tracking federal funds, other than 

that the Recovery Act funding would be coded and tracked separately in 

the system. The Business Manager said that all staff are trained in 

accounting, and he would update their training to deal with the Recovery 

Act funds. Regarding the flow of funds to the individual schools, the 

business manager said that a requisition will be approved by the principal 

before being submitted to the district. The Greenville Public Schools 

Federal Programs Director will review the requisition to ensure that it 

addressed the district’s instructional goals, and the Business Office will 

ensure that the requisition complies with applicable purchasing laws and 

that there is an adequate budget for it. All funds will also be checked 

against the school’s monthly budget. The requisition will then become a 

purchase order. Purchase orders over a $5,000 threshold will require 

additional approval from the Superintendent. Also, computer purchases 

will require approval from the Information Technology Department. Once 

a purchase is made and items are delivered, the items are to be matched 

with the invoice and the purchase order and tagged for delivery. Physical 

inventories are conducted twice annually. The business manager said that 

the office is probably adequately staffed to handle the additional 

workload, but once the funds begin flowing, he will reevaluate the staffing 

needs. 

MDE Concerned about 

Timing of Reporting 

Requirements, and LEAs 

Request More Guidance 

MDE told us that it plans to use a centralized reporting approach, 

collecting information for the required quarterly reports from the LEAs 

and posting the data collectively rather than having each LEA do this 

individually. However, MDE is concerned that the 10-day data quality 

review period will not be sufficient to thoroughly review and validate 152 

LEA submissions and correct any deficiencies before the reports are 

released to federal agencies on www.FederalReporting.gov. MDE is also 

unsure about how the information is to be presented. Officials noted that 

they are working to develop a template that will detail the information 

required so that it can share this with the LEAs. MDE officials said that 

they requested additional guidance on this issue from Education and were 

told that it would be available in mid-September. Once additional guidance 

is received, the Governor’s office will advise state agencies on how to 

fulfill the reporting requirements. Without the guidance they have 

requested, MDE is concerned about meeting the reporting deadline of 

October 10. The three LEAs we visited stated that they are unsure of the 

specifics of reporting requirements and the format in which they will be 

required to report the data. School officials said that they would like for 

MDE to provide some clarity on this issue. 

Page MS-30 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

In addition to collecting detailed information on the ESEA Title I, Part A 

program, we collected summary funding information on SFSF and IDEA 

funds provided to Mississippi through the Recovery Act. We found that 

none of these funds have been released. 

Mississippi Has Not 

Yet Released SFSF or 

IDEA Funds 

The Recovery Act created 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 

be used to alleviate shortfalls in state support for education to school 

districts and IHEs. The initial award of SFSF funding required each state 

to submit an application to Education that provides several assurances, 

including that the state will meet maintenance-of-effort requirements (or it 

will be able to comply with waiver provisions) and that it will implement 

strategies to meet certain educational requirements, such as increasing 

teacher effectiveness, addressing inequities in the distribution of highly 

qualified teachers, and improving the quality of state academic standards 

and assessments. In addition, states were required to make assurances 

concerning accountability, transparency, reporting, and compliance with 

certain federal laws and regulations. States must allocate 81.8 percent of 

their SFSF 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). 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 school 

districts or public IHEs. When distributing these funds to school districts, 

states must use their primary education funding formula, but they can 

determine how to allocate funds to public IHEs. In general, school districts 

maintain broad discretion in how they can use stabilization funds, but 

states have some ability to direct IHEs in how to use these funds. 

As of September 4, LEAs in Mississippi had drawn down none of the 

$262.7 million of education stabilization funds allocated to the state by 

Education. According to MDE officials, the Governor is requiring all LEAs 

to submit applications for these funds. The SFSF application is in draft and 

currently being reviewed by the Governor’s office, but it has not yet been 

sent to LEAs for completion. Additionally, the Governor is in the process 

of resubmitting his application to Education. When the initial application 

was submitted, Mississippi had not yet passed its fiscal year 2010 budget. 

According to state officials, the state funding information upon which the 

Governor based the original application varied from the fiscal year 2010 

Page MS-31 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

budget that was later passed by the legislature. The resubmitted 

application will include the enacted budget information. No SFSF funds 

will be released to LEAs until both the Governor’s application and the 

individual LEA applications are approved. However, according to MDE 

officials, LEAs have been informed of their allocation amounts, so that 

they can begin to make definite plans regarding the use of the funds. 

The Recovery Act also provided supplemental funding for programs 

authorized by Parts B and C of the Individuals with Disabilities Education 

Act (IDEA), the major federal statute that supports the provisions of early 

intervention and special education and related services for infants, 

toddlers, children, and youth with disabilities. Part B funds programs that 

ensure preschool and school-aged children with disabilities have access to 

a free and appropriate public education and is divided into two separate 

grants—Part B grants to states (for school-age children) and Part B 

preschool grants (section 619). Education made the first half of states’ 

Recovery Act IDEA funding available to state agencies on April 1, 2009 and 

announced on September 4, 2009 that it had made the second half 

available. 

Education awarded Mississippi about $127 million in Recovery Act funds 

under IDEA, Parts B and C, but as of September 9, 2009, none of these 

funds have been released to LEAs. MDE is requiring each LEA to submit 

an application to the state for their allocation of IDEA, Part B funds and 

the department is currently reviewing the completed applications. 

Mississippi state officials continue to express concern regarding Recovery 

Act reporting requirements and costs associated with the act. These 

include the following: 

Clarifying recipient reporting responsibilities: The Recovery Act 

imposes upon states an extended level of accountability and transparency 

in the use of Recovery Act funds. While the Governor of Mississippi has 

determined that he is primarily accountable for the use of Recovery Act 

funds, this responsibility is shared by each executive officer of any entity 

that is a prime recipient or subrecipient of Recovery Act funds. As 

required by the Section 1512 recipient report requirement of the Recovery 

Act,29 all prime recipients within the State of Mississippi are to submit 

State Officials 

Continue to Express 

Concern over 

Reporting 

Requirements and 

Administrative Costs 

 

29Pub. L. No. 111-5, § 1512, 123 Stat. 115,287 (Feb. 17, 2009). 

Page MS-32 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

their first report to www.FederalReporting.gov by October 10, 2009. The 

reports required under Section 1512 of the act will contain, among

requirements, detailed information on the projects and activities funded by 

the Recovery Act, including (1) the name and description of each project 

or activity, (2) the total amount of Recovery Act funds expended or 

obligated to each project or activity, and (3) an evaluation of the 

completion status of projects or activities and an estimate of the number 

of jobs created and the number of jobs retained by each project or activity. 

 other 

DFA officials continue to express concern as to whether the state is 

responsible for all Recovery Act funds flowing into the state, including 

those that do not flow through the state treasury or are not reported 

through the state’s central accounting system. DFA officials told us that 

they do not have direct oversight of entities such as community colleges, 

local governments, and institutions of higher learning that may be 

receiving Recovery Act funding directly from federal agencies. According 

to the officials, a query of USAspending.gov completed in early August 

identified approximately 400 entities receiving Recovery Act funds directly 

from federal agencies. 

To help ensure that the State of Mississippi is in compliance with Recovery 

Act reporting requirements, the Governor issued a memo outlining the 

state’s reporting requirement in regard to these funds. The memo 

explained that unless an entity receiving these funds has been notified in 

writing by its federal granting/lending agency that the entity is only 

accountable to the federal granting agency, it must follow the state’s 

reporting guidance. 

On August 28, 2009, OMB issued guidance requiring that federal agencies 

report all Recovery Act grants to the states. The report is intended to 

inform states of Recovery Act funding obligated to nonfederal entities 

such as states and state agencies, grantees, tribes, and local governments. 

A DFA official stated that going forward the OMB guidance should help 

the state identify all Recovery Act funds that do not flow through the 

state’s treasury or central accounting system. However, the guidance does 

not help the state identify those funds if they were obligated before August 

2009, because the guidance does not require retroactive reporting. 

According to the DFA Deputy Executive Director, staff have used 

USAspending.gov to identify those Recovery Act funds that flow into the 

state without the state’s knowledge. However, DFA is finding erroneous 

data are being posted to the Web site. For example, the officials told us 

that USAspending.gov is reporting as Recovery Act awards some loan 

guarantees that have not been identified as such to the recipients. 

Page MS-33 GAO-09-1017SP Recovery Act
Appendix XI: Mississippi 

Recovering oversight and auditing costs: Officials in Mississippi’s OSA 

told us that there is a need for clarity regarding reimbursement of 

administrative costs associated with oversight of Recovery Act funding. In 

commenting on recent OMB guidance, officials observed that even though 

the Recovery Act provided no funding for state oversight activities, OSA 

believes there are expectations that states will carry out the act’s 

transparency and accountability mandate. OSA requested that OMB 

provide guidance as to what funds will be used to reimburse states for 

oversight, auditing, and administrative activities and to explain how 

reimbursement will take place. Although OMB’s recent guidance indicates 

that states can recoup Recovery Act administrative costs through the 

State-wide Cost Allocation Plan (SWCAP) in amounts that do not exceed 

0.5 percent of their Recovery Act allocations, officials believe that the 0.5 

percent limit is inadequate.30

We provided the Governor of Mississippi with a draft of this appendix on 

September 4, 2009. The Director of Federal Policy, who serves as the 

stimulus coordinator, responded for the Governor on September 10, 2009. 

The official provided technical suggestions that were incorporated, as 

appropriate. 

John K. Needham, (202) 512-5274 or needhamjk1@gao.gov 

Norman J. Rabkin, (202) 512-9723 or rabkinn@gao.gov 

In addition to the contacts named above, Barbara Haynes, Assistant 

Director; James Elgas, analyst-in-charge; Ellen Phelps Ranen; Carrie 

Rogers; Erin Stockdale; and Ryan Stott made major contributions to this 

report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

 

30OMB’s memorandum-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Act Activities, May 11, 2009, provides that a state can recoup central 

administrative costs through SWCAP. The guidance permits a state, after approval by the 

U.S. Department of Health and Human Services, to bill these costs to Recovery Act 

programs, but the costs so billed cannot exceed 0.5 percent of total Recovery Act funds 

received by the state. 

Page MS-34 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in New Jersey. The full report on all of our work, which covers 

16 states and the District of Columbia, is available at 

http://www.gao.gov/recovery. 

Overview 

We reviewed five programs in New Jersey funded under the Recovery 

Act—Title I, Part A, of the Elementary and Secondary Education Act of 

1965 (ESEA), as amended; the Individuals with Disabilities Education Act 

(IDEA), Part B; Highway Infrastructure Investment funds; Transit Capital 

Assistance funds; and the Weatherization Assistance Program. We selected 

these programs for different reasons. To expedite spending of ESEA Title I 

and IDEA, Part B Recovery Act funds, New Jersey’s Department of 

Education opened a request for applications for local educational agencies 

(LEA) to use up to 50 percent of each LEA’s allocation during the summer 

recess. Contracts for highway projects using Highway Infrastructure 

Investment funds have been under way in New Jersey for several months, 

which provided an opportunity to review and discuss with officials New 

Jersey’s progress in suballocating funds to local areas, as required by the 

Recovery Act, and the oversight of contracts. The Transit Capital 

Assistance funds had a September 1, 2009, deadline for obligating a 

portion of the funds. The Weatherization Assistance Program in New 

Jersey had begun to spend Recovery Act funds on start-up activities 

related to the weatherization of homes and, as in other states, the large 

influx of Recovery Act funds posed a risk to program implementation. 

With these programs, we focused on how funds were being used; how 

safeguards were being implemented, including those related to 

procurement of goods and services for highway and weatherization 

contracting; and how results were being assessed. We reviewed and 

discussed with officials contracting procedures and three specific 

contracts under the Recovery Act Highway Infrastructure Investment 

funds program. In addition to these five programs, we also updated 

funding information on the U.S. Department of Education State Fiscal 

Stabilization Fund (SFSF) and the U.S. Housing and Urban Development 

(HUD) Public Housing Capital Fund. Consistent with the purposes of the 

Recovery Act, funds from the programs we reviewed are being directed to 

help New Jersey and local governments stabilize their budgets and to 

stimulate infrastructure development and expand existing programs—

Page NJ-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix XII: New Jersey 

thereby providing needed services and potential jobs. The following 

provides highlights of our review of these programs: 

ESEA Title I, Part A and 

IDEA, Part B 

• New Jersey has allocated $91.5 million—50 percent of its total 

allocation of $183 million—in Recovery Act funds to LEAs under ESEA 

Title I, Part A. Similarly, New Jersey has allocated $186 million in 

Recovery Act funds under IDEA, Part B to LEAs. 

• As of September 1, 2009, New Jersey LEAs have not drawn down funds 

for ESEA Title I or IDEA, Part B. However, state officials reported that 

LEAs are spending on Recovery Act-funded activities such as summer 

programs for at-risk students or purchases of equipment and materials 

for students with disabilities. 

• In an effort to expedite spending, New Jersey approved applications in 

199 of the state’s 616 LEAs to implement summer activities and 

procure materials and equipment for which they will receive 

reimbursement with ESEA Title I and IDEA, Part B Recovery Act 

funds. 

• Some pre-existing weaknesses with monitoring at the state department 

of education and with managing funds at the local level, as well as 

competing priorities for state department of education staff and 

responsibility for monitoring 616 LEAs, will make monitoring the use 

of education Recovery Act funds a challenge for New Jersey. 

Highway Infrastructure 

Investment 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration apportioned $652 million in Recovery Act funds to New 

Jersey, of which $196 million—30 percent—was suballocated to 

metropolitan and other areas. 

• As of September 1, 2009, the New Jersey Department of Transportation 

(NJDOT) had awarded contracts, or advertised for bids on, 60 projects, 

obligating a total of $473 million in highway infrastructure funds. Most 

of these projects involve road paving, but many also involve bridge 

replacement and improvements, along with streetscape improvements. 

Transit Capital Assistance 

Funds 

• DOT’s Federal Transit Administration (FTA) apportioned more than $1 

billion in Recovery Act Transit Capital Assistance funds to New Jersey 

and urbanized areas that include New Jersey for transit projects. As of 

September 1, 2009, FTA concluded that the 50 percent obligation 

Page NJ-2 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

requirement had been met for New Jersey and the urbanized areas 

located in the state. 

• New Jersey Transit (NJT) is the primary public operator of bus and 

commuter rail transit lines in New Jersey. As of August 20, 2009, NJT 

had received nearly $357 million for Transit Capital Assistance 

projects. 

• The largest funded project is design and early construction of a new 

rail tunnel under the Hudson River, which will receive $130 million in 

Recovery Act funds. 

Weatherization Assistance 

Program 

• As of August 31, 2009, the state had obligated $24.1 million of its initial 

allocation of weatherization funds and disbursed $3.4 million of these 

funds.2

• New Jersey has begun to spend weatherization funds, particularly for 

start-up activities such as hiring and training. The state plans to use 

Recovery Act funds to weatherize 13,400 homes. 

• The Department of Labor (Labor) has issued prevailing wage rate 

information for weatherizaton work, which will facilitate 

weatherization program implementation. 

• The state agency administering the program will rely on the automated 

systems it has used for non-Recovery Act weatherization work to track 

accountability. 

• New Jersey officials stated that they will be able to meet Recovery Act 

reporting requirements. 

Updated funding 

information on SFSF and 

the Public Housing Capital 

Fund 

• The U.S. Department of Education has awarded New Jersey about 

$891 million, or about 67 percent of its total SFSF allocation. As of 

September 1, 2009, New Jersey has allocated these funds to LEAs, but 

LEAs have not drawn down funds. SFSF funds have helped New Jersey 

restore and increase the state’s portion of education aid to LEAs for 

the 2009-2010 school year. 

 

2

New Jersey’s Department of Community Affairs, the agency administering the 

weatherization program, defines the term “obligate” as monies available for Community 

Action Agencies (CAA) to draw down and the term “disburse” as monies CAAs have drawn 

down. 

Page NJ-3 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

• New Jersey has 80 public housing agencies to which HUD allocated 

Recovery Act formula grants. In total, these public housing agencies 

received $104 million in Public Housing Capital Fund formula grants. 

As of September 5, 2009, 64 of these public housing agencies have 

obligated $31 million, and 46 of these public housing agencies have 

drawn down $6.1 million. 

According to New Jersey state budget officials, the fiscal impact of 

Recovery Act funds has not changed since they provided budget estimates 

for GAO’s July 2009 Recovery Act report.3

 New Jersey budget officials 

continue to estimate that the state will take in approximately $4.0 billion 

less than originally projected for fiscal year 2009 and have closed a budget 

gap of $8.25 billion for fiscal year 2010.4

 New Jersey budget officials 

previously estimated that, overall, about $5.6 billion of their estimated 

$17.5 billion Recovery Act funding and tax benefits will actually pass 

through the state budget. The use of Recovery Act funds must comply with 

specific program requirements but also, in some cases, enables states to 

free up state funds to address their projected budget shortfalls. In 

response to our question about how New Jersey planned to phase out 

Recovery Act funds, the Governor’s Chief of Staff said that the state had 

not yet finalized plans to phase out Recovery Act funds. In addition, as a 

result of New Jersey’s budget cycle, New Jersey does not begin budget 

planning until October or November of this year. By late February, 

according to state officials, the Governor is required to propose a balanced 

budget and by then the Governor’s Office would have to propose measures 

that reflect a phasing out of the funds. 

Recovery Act Funds 

Continue to Assist in 

Stabilizing New 

Jersey’s Budget 

As previously reported, New Jersey budget officials said they used their 

entire rainy-day reserve fund of $735 million in fiscal year 2009 to offset 

their revenue shortfall. Although the rainy-day fund currently does not 

contain any funds, the state plans to maintain $500 million for fiscal year 

2010. New Jersey budget officials referred to this fund as a “free balance” 

account, which, they explained, means that it contains unrestricted funds 

which can be used for any purpose. 

 

3

GAO, Recovery Act States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses, GAO-09-830SP (Washington, D.C.: July 8, 2009). 

4

Recovery Act funds used to stabilize the state’s operating budget includes funds made 

available as a result of the increased Federal Medical Assistance Percentage (discussed in 

detail in the main report—see GAO-09-1016), SFSF funds, and Temporary Assistance for 

Needy Families contingency funds. 

Page NJ-4 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Recovery Act 

Education Funds 

Allocated to New 

Jersey 

The Recovery Act created a State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHE). The initial award of SFSF funding required each state to submit an 

application to the U.S. Department of Education that provides several 

assurances, including that the state will meet maintenance-of-effort 

requirements (or it will be able to comply with waiver provisions) and that 

it will implement strategies to meet certain educational requirements, such 

as increasing teacher effectiveness, addressing inequities in the 

distribution of highly qualified teachers, and improving the quality of state 

academic standards and assessments. In addition, states were required to 

make assurances concerning accountability, transparency, reporting, and 

compliance with certain federal laws and regulations. States must allocate 

81.8 percent of their SFSF 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). 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 

school districts or public IHEs. When distributing these funds to school 

districts, states must use their primary education funding formula, but they 

can determine how to allocate funds to public IHEs. In general, school 

districts maintain broad discretion in how they can use stabilization funds, 

but states have some ability to direct IHEs in how to use these funds. 

SFSF Funds 

The Recovery Act provides $10 billion to help local educational agencies 

(LEA) educate disadvantaged youth by making additional funds available 

beyond those regularly allocated through Title I, Part A of the Elementary 

and Secondary Education Act (ESEA) of 1965. 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. 

ESEA Title I, Part A 

Page NJ-5 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

In using the funds, LEAs are required to comply with current statutory and 

regulatory requirements and must obligate 85 percent of these funds by 

September 30, 2010.5

 The U.S. Department of 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. The U.S. Department of Education made the first 

half of states’ Recovery Act ESEA Title I, Part A funding available on April 

1, 2009, and announced on September 4, 2009, that it had made the second 

half available. 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of the Individuals with Disabilities Education Act (IDEA), 

the major federal statute that supports the provisions of early intervention 

and special education and related services for infants, toddlers, children, 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). The U.S. Department of Education made the first half of 

states’ Recovery Act IDEA funding available to state agencies on April 1, 

2009, and announced on September 4, 2009, that it had made the second 

half available. 

IDEA, Part B 

As of September 1, 2009, New Jersey had not drawn down its initial 

allocation of $729 million, $91.5 million, and $186 million in Recovery Act 

funds for the SFSF, ESEA Title I, and IDEA, Part B programs, 

respectively.6

 According to state officials, the state will draw down funds 

from the U.S. Department of Education in mid-September for SFSF 

payments to LEAs and will begin to draw down funds for ESEA Title I and 

IDEA, Part B after it makes final approvals of LEAs’ applications for the 

funds and receives requests for reimbursement from the LEAs. 

New Jersey Continues 

to Allocate Recovery 

Act Education Funds, 

but Monitoring 

Challenges Exist 

 

5

LEAs 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. 

6

See GAO-09-1016 for a detailed description of these programs. 

Page NJ-6 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

On July 7, 2009, the New Jersey Department of Education (NJED) 

allocated $1 billion7

 of SFSF education stabilization funds and $39.4 

million8

 of SFSF government services funds to help cover the state’s 

portion of education funding for the 2009-2010 school year. NJED issued 

guidance that strongly advised LEAs to spend SFSF funds on salaries in 

order to minimize earning interest on the funds and to more easily track 

the funds separately.9,10 NJED will disburse SFSF funds to LEAs through 

18 semimonthly payments that will begin in September 2009 and end in 

May 2010. New Jersey is requiring LEAs to provide quarterly reports on 

their spending of SFSF funds in order to monitor LEAs’ compliance with

the requirements for expenditures of Recovery Act funds.11

 

As reported in our July 2009 report, NJED has allocated ESEA Title I and 

IDEA, Part B Recovery Act funds to all 616 LEAs. LEAs can begin to 

submit claims for reimbursement and receive Recovery Act funds for 

ESEA Title I and IDEA, Part B once NJED approves the formal electronic 

7

NJED officials allocated the total amount of SFSF education equalization funds they 

expected to receive and that were included in New Jersey’s fiscal year 2010 budget. 

8

New Jersey received about $240 million in SFSF government services funds and plans to 

use the funds for a range of budget stabilization purposes, including education. 

9

According to the U.S. Department of Education’s guidance on SFSF, states must have an 

effective system to ensure that entities are able to draw down funds as needed to pay 

program costs but that also minimizes the time that elapses between the transfer of the 

funds and their disbursement by the grantee or subgrantee, in accordance with U.S. 

Department of the Treasury regulations at 31 C.F.R. Part 205. Education requires grantees 

and subgrantees to remit interest earned on advances to the department at least quarterly. 

34 C.F.R. §80.21(i). 

10Because New Jersey is using SFSF Recovery Act funds, LEAs will have to separately track 

expenditures. According to guidance provided by NJED regarding SFSF, LEAs will have to 

track three separate funding sources—state funds, government services funds, and 

education stabilization funds—that will equal the total amount of funding the state would 

have provided. This requirement to track funds separately will require LEAs to make the 

equivalent adjustment to expenditure accounts. As such, NJED strongly recommended that 

LEAs make the expenditure side adjustments in salary accounts to minimize accounting 

errors. The guidance on SFSF also noted that while NJED recommends using SFSF for 

salaries, LEAs can make the adjustments to expenditure accounts in any general fund 

category consistent with the programs authorized under ESEA, except for the prohibited 

categories. 

11Officials from New Jersey’s Office of the Governor noted that NJED plans to use the 

quarterly reports to monitor compliance with federal cash management requirements. 

Page NJ-7 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

applications submitted on or before September 14, 2009.12 For ESEA Title I 

and IDEA, Part B funds, NJED disburses funding through a reimbursement 

system in which LEAs spend their own funds and submit claims to the 

department for reimbursement. NJED officials noted that some LEAs are 

currently spending on approved activities under ESEA Title I and IDEA, 

Part B for which they will later request reimbursement with Recovery Act 

funds. For example, Newark Public Schools officials reported spending 

$2.25 million for a summer program for underperforming students in July 

and August 2009 and stated they will request reimbursement with 

Recovery Act ESEA Title I funds. 

New Jersey Targeted ESEA 

Title I and IDEA, Part B 

Funds Toward Summer 

Education Activities to 

Expedite Spending 

As we previously reported in July 2009, New Jersey allocated ESEA Title I 

and IDEA Part B Recovery Act funds to all 616 LEAs and, in an effort to 

expedite spending, opened an application process for LEAs to use up to 50 

percent of their allocations on summer activities.13 LEAs with approved 

plans for summer activities could implement these activities with the 

assurance that they would receive reimbursement.14 NJED officials noted 

that this expedited process was essentially a preapproval process to 

ensure that LEAs planned allowable activities under each program. These 

officials also said the department did not track the implementation of 

summer plans because, given the limited time, the state did not require 

LEAs to implement all approved activities. NJED will not know which of 

the approved activities LEAs were able to implement until their claims for 

reimbursement go through the department’s electronic accounting and 

grants management system, known as the Electronic Web-Enabled Grant 

System. 

According to data provided by NJED, the department approved 

applications for summer Recovery Act-funded activities in 199 of the 616 

LEAs (32 percent). The number of LEAs with approved plans and the 

corresponding spending projections are presented in table 1 below. As 

noted in our July 2009 report, the majority of these approvals were for 

IDEA Part B.15 NJED officials provided two possible reasons for this. First, 

 

12The electronic applications contained LEAs’ planned uses of Recovery Act funds, as well 

as actual activities implemented. LEAs can obligate funds after NJED designates 

applications as “substantially approvable.” 

13GAO-09-830SP. 

14NJED required LEAs to submit a plan for each Recovery Act-funded activity. 

15GAO-09-830SP. 

Page NJ-8 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

more LEAs in New Jersey receive IDEA Part B funding than ESEA Title I 

funding. Second, finding activities on which to spend money quickly is not 

as challenging with IDEA Part B, whereas it takes more time for staff to 

develop ESEA Title I programs. One reason why spending IDEA Part B 

funds may be less challenging is that, traditionally, LEAs use the summer 

months to purchase equipment or materials for students with disabilities 

for the upcoming school year. Recovery Act funds provide a way for LEAs 

in the state to expand or create in-district opportunities for students with 

disabilities, as well as reinstate programs that LEAs may have cut due to a 

lack of funds. For example, an official with the Newark Public Schools 

reported that the district’s 30-day extended year program16 for students 

with disabilities in July and August 2009 was in jeopardy due to a lack of 

funds, but the district was able to provide the program using Recovery Act 

IDEA Part B funds. 

Table 1: Summary of New Jersey’s Approved Summer Education Recovery Act 

Activities 

Dollars in millions 

Program 

Number of LEAs

with approved plans

Number of 

approved plansa

Total estimated 

funding approved

ESEA Title I 78 141 $12.4

IDEA Part B 155 455 20.1

Source: GAO analysis. 

a

LEAs could submit multiple plans to NJED. 

For ESEA Title I, NJED approved 141 plans in 78 LEAs on a range of 

activities. The most frequently reported activities were summer programs 

for at-risk students and professional development for teachers, as well as 

for purchasing equipment such as interactive computers for classrooms. 

For example, Newark Public Schools officials reported that the district 

received approval for and provided a professional development program 

for science teachers. District officials said that without Recovery Act 

funds, the program would have served only one or two teachers. ESEA 

Title I Recovery Act funds allowed the district to increase participation by 

 

16Extended school year services are special education and related services that are 

provided to a child with a disability beyond the normal school year, in accordance with the 

child’s Individualized Education Plan, and at no cost to the parents of the child. 

Page NJ-9 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

approximately 20 teachers.17 Figure 1 shows the approved activities or 

procurements for ESEA Title I, by type, as reported by NJED. 

ities or 

Figure 1: Number of Activities or Procurements included in Approved Recovery Act 

ESEA Title I, Part A Summer Plans, by Type 

Number of activities or purchases

Source: GAO analysis.

Type

0

10

20

30

40

50

60

70

80

Profe

development ssional 

for parents

Summer program

Other

for staff

 technology, Equipment,

or materials

program for Summer

students

on/or data Assessment

systems

Notes: Plans could include more than one activity or could include an activity and a procurement. The 

“other” category mostly includes activities for which the descriptions did not provide enough 

information to categorize. 

For IDEA Part B, the department approved 455 plans in 155 LEAs on 

activities such as extended school year programs, as well as for equipment 

and materials, including smart boards and purchases of reading programs 

designed for students with disabilities. For example, one LEA planned to 

purchase 20 computers for students with disabilities and another LEA 

planned to purchase seven wheelchair-accessible vans to transport 

students with disabilities. NJED officials observed that the speed with 

which the LEAs had to implement the summer programs was the primary 

 

17Newark Public Schools budgeted and was approved for 22 teachers; however, 14 teachers 

actually participated. 

Page NJ-10 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

challenge. Thus, most of the planned activities for IDEA Part B involved 

purchases of equipment, technology, and materials. Figure 2 shows the 

approved activities or procurements for IDEA Part B, by type, as reported 

by NJED. 

Figure 2: Number of Activities or Procurements included in Approved Recovery Act 

IDEA Part B Summer Plans, by Type 

Number of activities or purchases

 technology, Equipment,

school year

Extended

program

Summer school

positions

Staff

Other

or materials

Profe

development ssional 

for teachers

program or 

New or expanded 

classroom

Source: GAO analysis.

Type

0

50

100

150

200

250

Notes: Plans could include more than one activity or could include an activity and a procurement. The 

“other” category includes a range of activities such as data management and planning efforts, as well 

as activities for which the descriptions did not provide enough information to categorize. 

NJED Faces Challenges in 

Monitoring Education 

Recovery Act Funds 

Pre-existing weaknesses with monitoring at the state level and with 

managing funds at the local level, as well as competing priorities for NJED 

staff and responsibility for monitoring 616 LEAs, will make monitoring the 

use of education Recovery Act funds a challenge for New Jersey. New 

Page NJ-11 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Jersey’s Single Audit18 for fiscal year 2008 cited a material weakness in the 

special education programs which include IDEA, Part B; the audit found 

no evidence of NJED’s monitoring of LEAs’ use of federal funds to provide 

assurance of compliance with laws, regulations, or grant agreements. 

According to NJED officials, the state primarily relies upon independent 

audits of LEAs to monitor compliance at the local level. The department is 

responsible for conducting desk reviews of these independent audit 

reports of LEAs. However, the 2008 New Jersey Single Audit also found 

that NJED did not update its tracking system to include 214 of the 333 

independent audit reports LEAs submitted to the department. The New 

Jersey Office of the State Auditor (OSA) has also noted that LEAs in the 

state have had weaknesses in accounting for and managing funds. For 

example, a 2009 OSA review of one district found numerous control 

deficiencies in key accounting areas such as payroll, an area to which 

NJED is suggesting LEAs apply their SFSF funds. Competing priorities for 

staff also pose a challenge to the department’s ability to fully monitor 

funds. NJED’s self- assessments for 2007, 2008, and 2009 document that 

inadequate levels of staffing have been and continue to be a risk to internal 

controls. In response to this, the department produced a corrective action 

plan that includes hiring new staff. NJED officials reported that the 

additional responsibilities that come with administering Recovery Act 

funds have put a strain on the department’s already lean staff. While some 

staff have been reassigned to monitor Recovery Act funds and activities, 

other staff have responsibilities that compete with the Recovery Act 

among the department’s priorities. For example, in response to the Single 

Audit finding, the U.S. Department of Education now requires New Jersey 

to conduct desk audits of 100 percent of LEA audit reports. This will 

require an increased effort, as the 2008 New Jersey Single Audit also found 

that in 2008, staff conducted 22 desk reviews (7 percent) of the 333 audit 

reports LEAs submitted to the department.19 These NJED staff are also 

responsible for conducting background checks for a range of state and 

 

18The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507), requires that each 

state, local government, or nonprofit organization that expends $500,000 or more a year in 

federal awards must have a Single Audit conducted for that year subject to applicable 

requirements, which are generally set out in Office of Management and Budget 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, the entity may 

elect to have an audit of that program. 

19According to the 2008 Single Audit, NJED’s records indicated that staff conducted 22 desk 

reviews, but the department’s tracking system indicated that staff conducted 6 desk 

reviews. NJED’s response to these findings attributed the low number of desk reviews to a 

lack of staff. 

Page NJ-12 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

local education employees. Responsibility for monitoring 616 LEAs will 

compound New Jersey’s pre-existing and current issues related to 

monitoring education Recovery Act funds. 

NJED officials have reported a range of strategies for mitigating potential 

issues with compliance, some of which were mentioned in our July 2009 

report.20 Since our July report, much of the department’s efforts involved 

training LEA- and state-level staff on the requirements of the Recovery Act 

as a “first line of defense.” NJED held several sessions across the state on 

the permissible uses of Recovery Act funds, how to properly account for 

the funds, and compliance with reporting requirements. The department 

also participated in a series of information sessions with the New Jersey 

Association of School Business Officials specifically for staff working in 

LEA accounting offices. In partnership with the New Jersey Office of the 

Inspector General, NJED conducted and videotaped training on internal 

controls, which LEA staff can access through the department’s Web site. 

The New Jersey Recovery Accountability Task Force,21 the New Jersey 

Office of the Inspector General, and the Association of Government 

Accountants provided an audio conference for state staff on internal 

controls, a session NJED officials said that their staff attended. Officials 

from the New Jersey Governor’s Office noted that the New Jersey 

Recovery Accountability Task Force also sent written guidance on 

complying with the Recovery Act guidance to all of the state’s LEAs. NJED 

officials told us they were evaluating staffing needs for the department, 

including considering additional reassignments of staff, submitting a 

request to the Governor’s Office for a waiver of the hiring freeze, and 

options for hiring short-term staff. According to these officials, in the short 

term, they have decided to reassign staff previously responsible for other 

duties to monitor the accounting for Recovery Act funds in the state’s 

high-risk LEAs. On August 17, 2009, the U.S. Department of Education 

announced a proposal that would allow states to use more of their 

 

20GAO-09-830SP. 

21New Jersey’s Governor created the New Jersey Recovery Accountability Task Force to 

monitor the distribution of Recovery Act funds in New Jersey and promote the efficient use 

of those funds. One role of this entity is to provide guidance to agencies receiving Recovery 

Act funds on merit-based project selection, internal controls, accounting practices, and 

best practices in contract management and grant administration. 

Page NJ-13 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Recovery Act ESEA Title I and IDEA, Part B funds for administration.22

NJED officials said that this flexibility provides moderate relief as the 

department has already allocated ESEA Title I and IDEA, Part B funds to 

LEAs and encouraged summer spending of up to 50 percent of those 

funds. These officials also said that any funds not already allocated would 

be used for monitoring activities such as hiring staff. An official from the 

New Jersey Governor’s Office noted that NJED received approval on 

September 15, 2009 to hire 32 additional staff in order to help address 

deficiencies identified in the 2008 Single Audit and to assist with 

monitoring LEAs’ use of Recovery Act funds. 

We previously reported that the department planned to review the 

corrective action plans for the fiscal year ending June 30, 2008, for followup on all findings in LEAs’ independent audit reports related to the 

Recovery Act. NJED officials initially told us this effort would begin on 

July 1, 2009, but now state that staff are in the final stages of planning a 

wider effort that will bring together auditors and other types of monitoring 

staff (budget managers, grant administrators, county administrators, for 

example) for a more comprehensive approach. NJED officials reported 

plans to send teams of these staff to a select number of LEAs to monitor 

the fiscal and programmatic aspects of LEAs’ use of Recovery Act 

education funds (including SFSF). Currently, officials noted, they have a 

list of approximately 100 LEAs that may require additional monitoring and 

comprise about 60 to 70 percent of the Recovery Act education funds in 

New Jersey. According to NJED officials, they created this list of LEAs 

using criteria such as independent audit findings related to Recovery Act 

programs, presence of a state fiscal monitor, and low scores in the state’s 

accountability system.23 However, officials noted that the current staffing 

level is insufficient for intensive fiscal and programmatic monitoring of 

Recovery Act funds in 100 LEAs, while also monitoring state-funded and 

other federally-funded programs. NJED officials reported that they are 

finalizing the monitoring plan for Recovery Act funds, determining criteria 

for assigning a risk level to the LEAs in order to visit those that pose the 

 

2274 Fed. Reg. 41402. These two programs have limits, in place before the Recovery Act was 

passed, on the amount of funds states may reserve for administration. The Recovery Act 

allows the Secretary of Education to make reasonable adjustments to those limits to help 

states meet the additional data collection burden related to administering, monitoring, and 

reporting on the use of the funds. 

23New Jersey’s Quality Single Accountability Continuum (NJQSAC) is used to monitor and 

evaluate LEA adherence to state goals by evaluating LEAs’ performance in five areas: 

instruction and program; personnel; fiscal management; operations; and governance. 

Page NJ-14 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

highest risk, and determining the staffing levels needed to implement the 

effort. These officials said they plan to send monitoring teams out to LEAs 

in October 2009. 

NJED Is Implementing 

Plans to Meet Office of 

Management and Budget 

Reporting Requirements 

NJED officials reported that the department is on track to meet Office of 

Management and Budget (OMB) reporting requirements. NJED is not 

delegating reporting responsibilities to subrecipients (LEAs). NJED 

officials said the department already collects most of the data required by 

OMB and plans to prepopulate a form with the data it already collects and 

send the form to LEAs. LEAs will then be expected to provide information 

about the number of jobs created and retained with Recovery Act funds 

and vendors. Because the state will report for LEAs, NJED officials said on 

July 31, 2009, that they were uncertain about the extent of follow-up 

required for vendors, particularly when LEAs cannot provide the number 

of jobs created. Finally, NJED is in the early stages of its plan to collect 

statewide data on the impact of the Recovery Act on a range of educationrelated performance measures, including student and teacher outcomes. 

The department does not plan to roll out this effort until data collection 

begins for the second quarterly report to OMB. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through federal-aid highway program mechanisms and states 

must follow the existing program requirements, which include ensuring 

the project meets all environmental requirements associated with the 

National Environmental Policy Act (NEPA), paying a prevailing wage in 

accordance with federal Davis-Bacon Act requirements, complying with 

goals to ensure disadvantaged businesses are not discriminated against in 

the awarding of construction contracts, and using American-made iron 

and steel in accordance with Buy America 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. 

New Jersey Has an 

Overall High State 

Obligation Rate for 

the Federal Highways 

Program but the 

Obligation Rate of 

Funds to Suballocated 

Areas within the State 

Has Been Slow 

Page NJ-15 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

FHWA has obligated New Jersey’s Recovery Act funding to statewide 

projects at a high rate. As of September 1, 2009, FHWA had obligated 73 

percent for state highway projects. As we previously reported, $652 

million was apportioned to New Jersey in March 2009 for highway 

infrastructure and other eligible projects. As of September 1, 2009, $473 

million had been obligated.24 As of September 1, 2009, $4 million had been 

reimbursed by FHWA.25

New Jersey Has an Overall 

High Obligation Rate 

This obligated total is for 60 projects—45 state and 15 local projects. This 

compares with 53 projects obligated on July 31, 2009. Almost 60 percent of 

Recovery Act highway obligations for New Jersey have been for pavement 

improvement. Specifically, $285 million of the $473 million obligated in 

New Jersey as of September 1, 2009, is being used for pavement 

improvement. Many state officials told us they selected pavement 

improvement projects because these projects were already in their 

pipeline, were identified infrastructure needs, could advance sooner than 

planned because funding was available, and had met federal planning 

requirements. Figure 3 shows obligations by the types of road and bridge 

improvements being made. 

 

24For the Highway Infrastructure Investment Program, U.S. DOT has interpreted the term 

obligation of funds to mean the federal government’s contractual commitment to pay for 

the federal share of the project. This commitment occurs at the time the federal 

government signs a project agreement. 

25States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

Page NJ-16 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Figure 3: Highway Obligations for New Jersey by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($23.1 million)

Other ($100.3 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($284.7 million)

Pavement projects total (60 percent, $284.7 million)

Bridge projects total (19 percent, $88 million)

Other (21 percent, $100.3 million)

60%

14% Bridge replacement ($64.9 million)

21%

5%

Note: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. 

The Obligation Rate of 

Funds to Suballocated 

Areas within the State Has 

Been Slow 

NJDOT works with the three Metropolitan Planning Organizations (MPO)26

in the state to obligate the local highway infrastructure funds. As required 

by the Recovery Act, 30 percent of Recovery Act highway funds must be 

suballocated to local areas, and the entire suballocation must be obligated 

 

26MPOs 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. 

Page NJ-17 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

by March 2010. New Jersey’s three MPOs work with their local officials to 

select projects within their region that qualify for Recovery Act funding. 

Officials from two MPOs told us they began the planning process before 

Recovery Act funding became available because they wanted to have 

projects in place within their region, including distribution mechanisms, 

once funding was approved. 

Local highway infrastructure projects were selected based on their ability 

to benefit all areas within the MPO region and to be obligated within 1 

year. MPO officials told us they endeavored to distribute the funding 

equitably. For example, one MPO told us it distributed funding in the 

region based on population, in addition to ensuring that every county 

would receive at least 3 percent of Recovery Act funding—an amount they 

considered sufficient in order to make substantial infrastructure 

improvements in a particular county. Also, NJDOT and MPO officials told 

us they looked for projects they could implement within the timeframes of 

the Act, advance projects sooner than current funding would have been 

available to do so, and were identified infrastructure needs. For example, 

of 63 projects one MPO selected for Recovery Act funding, 41 were for 

resurfacing, which can be accomplished in a relatively short amount of 

time. Other commonly selected projects include bridge repair, 

signalization, and streetscape improvements. Officials from the MPO told 

us that resurfacing projects are worthwhile, but given more time, they 

would have selected a wider variety of projects, including more bridge 

work in their region. Overall, officials from both MPOs told us that they 

looked for projects that they could accelerate quickly, and in some cases 

moved new projects on the region’s transportation improvement plan 

(TIP) in order to receive Recovery Act funding. 

Despite early planning, local highway infrastructure funds are being 

obligated locally at a low rate. As of September 1, 2009, FHWA has 

obligated funding for only 15 local projects. An NJDOT official told us he 

estimated that the three MPOs have identified approximately 100 local 

projects. Currently, New Jersey’s obligation rate for the amount 

suballocated to local areas is 19 percent, whereas the average rate among 

the 16 states GAO is monitoring, plus the District of Columbia, is 52 

percent. NJDOT and MPO officials told us that despite selecting fastermoving projects, funding was being obligated slowly, as many of these 

local projects were new and needed more start-up time. Also, officials told 

us that local staff working on many of the projects needed time to navigate 

federal requirements such as the National Environmental Policy Act 

(NEPA), which involves the environmental review process. This is an 

issue, in part because the state had previously planned to fund some of 

Page NJ-18 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

these projects entirely with state funds, meaning the NEPA requirements 

may not have applied to the projects. Nonetheless, New Jersey is not in 

immediate danger of failing to meet the 100 percent obligation requirement 

within 1 year. However, NJDOT and MPO officials have told us they are 

watching these obligation rates closely and have safeguards in place to 

ensure the obligation requirement is met. For example, if a project does 

not meet established milestones or is in danger of not obligating within a 

year, officials may replace a local project with a state project in the region. 

In an effort to foster timely delivery, quality products and most 

importantly, proper project oversight, New Jersey DOT held two training 

sessions for counties and municipalities. These sessions included modules 

conducted by both state and federal officials. 

NJDOT Will Use Existing 

Procedures Intended to 

Help Ensure Appropriate 

Use of Funds 

Our review of management procedures for state highway construction 

contracts, as well as our discussions regarding three awarded contracts, 

indicates that NJDOT is using existing procedures intended to help ensure 

the appropriate use of Recovery Act funds. The three contracts we 

reviewed and discussed with state officials included two construction 

contracts and a design contract that NJDOT awarded.27 An NJDOT official 

told us the state awards contracts competitively, by soliciting bids for 

projects and then selecting qualified contractors that provide the lowest 

responsible bid and are not on the state’s excluded-contractors list. GAO 

did not verify NJDOT’s process for awarding contracts; however, out of 

the three NJDOT highway contracts we reviewed and discussed with 

officials, there was an average of six bids per project. Additionally, NJDOT 

officials told us that bids for all projects are coming in, on average, 20 

percent lower than expected, which could lead to more funding being 

available for other highway projects not currently funded through the 

Recovery Act. 

According to officials, NJDOT is mandated by the state to use low-bid 

fixed price contracts for construction projects. Officials stated that for 

professional services, NJDOT’s policy is to use a fixed price contract for 

professional services with the exception of construction inspection, 

construction engineering, litigation support, and instances where it is 

difficult to estimate the work effort required to satisfy a complex scope of 

 

27The three contracts we reviewed and discussed with New Jersey DOT officials were for 

repaving, road rehabilitation, and for project design. The three contracts were for a total 

value of $113 million and are expected to be completed in the next 1 to 3 years. 

Page NJ-19 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

work. In such cases, officials told us, NJDOT may utilize a cost plus fixed 

fee contract, also known as a cost reimbursable contract. For example, for 

the three contracts we reviewed and discussed with NJDOT officials, New 

Jersey used fixed-price contracts for the two construction contracts and a 

cost plus fixed fee contract for the design project. NJDOT officials told us 

that fixed fee contracts are mandated by the state, and in order to use a 

cost plus fixed fee contract that an exemption has to be granted by NJDOT 

Assistant Commissioner and documented to New Jersey’s procurement 

division. A NJDOT official told us that the rationale for a cost plus fixed 

fee contract is that if a project is in its early phases, it could have 

numerous potential changes that will affect price, such as right of way, 

utility, and permit issues. According to an agency official, regardless of 

contract type, NJDOT has standard procedures for construction inspection 

and materials testing that are approved by FHWA and are currently in 

place. NJDOT officials told us that they plan to use these standard 

procedures for Recovery Act projects. 

NJDOT is also beginning to use Single Audit results to monitor localities 

where any state or Recovery Act funding is used. Previously, FHWA 

officials told us that failure to track Single Audit findings against 

subrecipients was a weakness in NJDOT’s oversight structure. In order to 

address this weakness, NJDOT officials told us that they have begun 

developing a program for monitoring Single Act findings in localities 

where any state or federal highway funds are being used. As part of its 

process to ensure appropriate use of Recovery Act funds, NJDOT reviews 

these Single Audit findings to determine if there are any significant 

findings related to FHWA funds, including Recovery Act funds. This 

provides NJDOT another mechanism to track Recovery Act funding. 

NJDOT Expects to Meet 

Reporting Requirements 

New Jersey has incorporated the Recovery Act’s reporting requirements 

into its existing FHWA reporting processes, and NJDOT officials said that 

they are confident the state will be able to meet all requirements. NJDOT 

officials told us that because of their familiarity with existing FHWA 

reporting requirements, the additional reporting requirements in the 

Recovery Act will not be difficult to fulfill. Officials also said they expect 

to meet all of the Recovery Act reporting requirements by October 10, 

2009, per OMB’s guidance. For example, to meet the requirement to track 

the number of jobs created and retained by Recovery Act-funded projects, 

NJDOT officials have set up a statewide system using vendor reports from 

contractors and consultants and have centralized this reporting system in 

order to have statewide and local projects reported in the same database. 

NJDOT intends to conduct spot checks of the data to review accuracy and 

Page NJ-20 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

also will work with FHWA to achieve proper reporting of employment 

numbers. 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.28 The majority of the public transit funds—$6.9 billion 

(82 percent)—was apportioned for the Transit Capital Assistance 

Program, with $6.0 billion designated for the urbanized area formula grant 

program and $766 million designated for the nonurbanized area formula 

grant program.29 Under the urbanized area formula grant program, 

Recovery Act funds were apportioned to 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 under the nonurbanized area formula 

grant program 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. Up to 10 percent of apportioned 

Recovery Act funds may also be used for operating expenses.30 Under the 

Recovery Act, the maximum federal fund share for projects under the 

Transit Capital Assistance Program is 100 percent.31

FTA Found Key 

Recovery Act 

Obligation Deadline 

for Transit Funding 

Was Met, and Efforts 

to Assure Compliance 

with Reporting 

Requirements Are 

Under Way 

 

28The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

29Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

30The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, §1202, 123 Stat. 1859, 1908 (June 

24, 2009). In contrast, under the existing program, operating assistance is generally not an 

eligible expense for transit agencies within urbanized areas with populations of 200,000 or 

more. 

31The federal share under the existing formula grant program is generally 80 percent. 

Page NJ-21 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

As they work through the state and regional transportation planning 

process, designated recipients of the apportioned funds—typically public 

transit agencies and MPOs—develop a list of transit projects that project 

sponsors (typically transit agencies) submit to FTA for Recovery Act 

funding.32 FTA reviews the project sponsors’ grant applications to ensure 

that projects meet eligibility requirements and then obligates Recovery Act 

funds by approving the grant application. Project sponsors must follow the 

requirements of the existing programs, which include ensuring the 

projects funded meet all regulations and guidance pertaining to the 

Americans with Disabilities Act (ADA), pay a prevailing wage in 

accordance with federal Davis-Bacon Act requirements, and comply with 

goals to ensure disadvantaged business are not discriminated against in 

the awarding of contracts. 

The Recovery Act requires that 50 percent of the funds apportioned to 

urbanized areas or states for the Transit Capital Assistance Program be 

obligated before September 1, 2009 and the remaining funds are to be 

obligated within 1 year of apportionment. The Secretary of Transportation 

is to withdraw and redistribute to other urbanized areas or states any 

amount that is not obligated within these time frames.33 As of September 1, 

2009, FTA concluded that the 50 percent obligation requirement had been 

met for New Jersey and urbanized areas located in the state. FTA data 

showed that 84.6 percent of the funds had been obligated in the urbanized 

area that includes New Jersey and portions of New York and Connecticut, 

while 83.6 percent of the funds had been obligated in the Philadelphia 

urbanized area, which also includes portions of New Jersey. Similarly, 83.9 

percent of the funds had been obligated in the Allentown-Bethlehem, 

Pennsylvania, urbanized area, which includes parts of New Jersey, and 

 

32Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and metropolitan planning organizations designated for the area. 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 TIP and the approved State Transportation Improvement 

Program (STIP). 

33Pub. L. No. 111-5, 123 Stat. 115,209 (Feb. 17, 2009). 

Page NJ-22 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

exactly 50 percent of the funds had been obligated in the Atlantic City, 

New Jersey urbanized area. 

State governors must certify that the state will maintain the level of state 

spending for the types of transportation projects, including transit 

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 30, 

2010.34 This requirement applies only to state funding for transportation 

projects. New Jersey Transit (NJT) also stated that New Jersey is meeting 

the Recovery Act requirement that the state maintain its level of funding 

support for transit and not reduce its transit funding due to receiving 

Recovery Act funds. NJT annually receives $675 million from the state’s 

highway trust fund, and this is the level of funding that applies to this 

requirement. In addition, project sponsors must submit periodic reports, 

as required under the maintenance of effort for transportation projects 

section on the amount of federal funds appropriated, allocation, obligated, 

and outlayed; the number of projects put out to bid, awarded, or for which 

work has begun or is completed; project status; and the number of jobs 

created or sustained. In addition, grantees must report detailed 

information on any subcontractors or subgrants awarded by the grantee. 

NJT Used Transit Capital 

Assistance Funds to 

Improve Its Existing 

Transit System 

NJT, the nation’s third-largest provider of bus, rail, and light rail transit, is 

the primary public provider of transit service in New Jersey. As of 

September 1, 2009, NJT anticipated receiving grants totaling about $423.4 

million, of which $356.8 million is through the Transit Capital Assistance 

Program, both urban and nonurban, and $66.6 million is through the Fixed 

Guideway Modernization Program. The funds were allocated to the state’s 

three MPOs based on existing formulas that consider overall population, 

population density, and existing transit service levels. 

NJT, in consultation with the MPOs in the state, selected 16 projects—all 

of which are in its capital plan—to receive Recovery Act funds. The largest 

funded project is the new rail tunnel under the Hudson River, known as 

the ARC, or Access to the Region’s Core, which will receive $130 million of 

Recovery Act funds (the project’s total cost is about $8.7 billion). Overall, 

 

34Pub. L. No. 111-5 §1201(a). 

Page NJ-23 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

NJT expects to receive more than $1 billion in federal grants for capital 

projects for fiscal year 2009, including Recovery Act funding. 

Of the 16 Recovery Act projects, 15 received Transit Capital Assistance 

funds. NJT officials stated that all of their Recovery Act projects are 

capital projects, and all but four projects (Hackensack Bridge 

improvements, enhanced track program, commuter rail rehabilitation, and 

bus rehabilitation) are “capacity expansion” projects designed to increase 

the number of riders that existing transit can serve. All projects were 

selected because they could start quickly (were “shovel ready”). Officials 

selected projects that had completed the environmental review process, 

were projects that did not require environmental analysis, or were far 

enough along in the environmental review process to start work by the fall 

of 2009. As of September 1, 2009, all but one project had completed 

environmental review. 

All projects selected to receive Recovery Act funds were in the Statewide 

Transportation Improvement Plan (STIP) and approved by FTA, the 

relevant MPOs, and NJDOT. Officials told us they tried to distribute 

projects statewide in order to satisfy all of the MPOs and to provide 

transportation improvements throughout New Jersey, rather than 

concentrate them in one area of the state. FTA had also given NJT 

preaward authority for selected projects to enter into contracts before the 

grants were approved and funds obligated. As of July 31, 2009, FTA had 

reimbursed NJT about $54.5 million. 

According to NJT, work has begun on many of the capital projects, and all 

are on schedule. Many of the projects (Edison Rail, Plauderville Station, 

Danville, and Lower Hackensack Bridge Rehabilitation) were projects that 

received federal funding in the past for a study or to conduct an 

environmental clearance. Therefore, these projects were more advanced 

but would not have been completed, according to NJT officials, without 

Recovery Act funds. 

Page NJ-24 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Table 2: New Jersey Transit Capital Assistance Projects Funded with Recovery Act Grants as of August 20, 2009 

Dollars in thousands 

Project 

Transit

Capital Assistance

Out to bid 

(Yes/No) 

Work begun 

(Yes/No) 

ARC Final Design $110,000 Yes Yes 

ARC Tonnelle Avenue Construction 20,000 Yes Yes 

Edison Rail Park & Ride 11,000 Yes Yes 

Plauderville Station Improvements 15,000 Yes No 

Lower Hackensack Bridge Improvements 30,000 Yes No 

Morristown Line Signal Improvements 25,000 Yes Yes 

Newark Penn Station Plaza Improvements 17,300 Yes No 

River Line Cab Signals 24,000 No No 

Pennsauken Transfer Station Construction 40,000 Yes No 

Bus Shelter Installation 2,500 Yes Yes 

Commuter Rail Rehabilitation 1,500 N/A Yes 

Atlantic City Minibuses 16,000 Yes Yes 

Bus Rolling Stock Rehabilitation 35,000 N/A Yes 

Enhanced Track Rehabilitation Program 4,703 Yes Yes 

Rural Minibus Purchase 4,838 Yes No 

Total $356,841

Source: NJT. 

Note: N/A refers to projects done by in-house staff. No contract bids were required. 

No Recovery Act funds are currently being used for operating costs; 

however, this could change if more funds become available. After NJT and 

the MPOs decided which projects to fund, the 2009 Supplemental 

Appropriations Act was enacted, which authorizes the use of up to 10 

percent of each apportionment for operating expenses.35 When the law 

was passed, NJT projects were already approved by the MPOs. However, 

NJT officials told us that due to the slowness of the economy, most project 

bids are coming in, on average, 20 percent below the projected costs. As 

such, officials believe that, once all of the bids are finalized and the MPO

are assured that all of the projects will be completed, NJT may opt to u

some of the remaining Recovery Act funding for operating expenses. 

s 

se 

 

35Pub. L. No. 111-32, §1202. 

Page NJ-25 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

NJT officials stated that it has been proactive in building the management 

infrastructure needed to achieve accountability, compliance, and reliable 

reporting mandated by the Recovery Act. NJT’s independent auditor 

provided an unqualified or “clean” opinion on its consolidated financial 

statements for the years ended June 30, 2007 and 2008.36 The auditor stated 

that NJT complied, in all material respects, with the types of compliance 

requirements described in the OMB Circular A-133 Compliance 

Supplement and the New Jersey State Grant Compliance Supplement that 

are applicable to each of its major federal and state programs. Although 

the independent auditor did not express an opinion on NJT’s internal 

controls,37 it considered NJT’s internal controls over financial reporting 

and compliance with the federal and state requirements as a basis for 

designing its own auditing procedures. 

NJT Efforts to Assure 

Compliance with Recovery 

Act Requirements 

NJT has a long-standing process in place for handling federal funds. 

Essentially, NJT uses the same funding control procedures for Recovery 

Act funds as for its regular FTA funds. In most cases, the Recovery Act 

reporting is an addition to existing reports submitted to FTA and U.S. 

DOT. NJT sends financial data to FTA 10 days after the close of each 

quarter and enters quarterly milestone and progress reviews into FTA’s 

reporting system. 

NJT has taken additional steps to manage and account for Recovery Act 

funds. For example, NJT holds biweekly meetings to monitor the progress 

of Recovery Act projects. These meetings serve to review environmental, 

design, and other key milestones, as well as ensure that progress and 

workforce data collected are consistent and reported in a timely manner. 

 

36The independent auditor identified one significant deficiency related to NJT’s leveraged 

leases, whose outstanding amount as of June 30, 2008, is approximately $1.6 billion. 

Specifically, there is only one NJT employee who has in-depth knowledge of how these 

transactions are developed and monitored throughout the life of the lease. This employee 

maintains the closing documents for each of the transactions. As a result, a summary of 

outstanding leveraged lease obligations was not prepared and monitored, thus preventing 

NJT management from identifying and reporting that it was in technical default. 

37Internal control is an integral component of an organization’s management that provides 

reasonable assurance that the objectives of effectiveness and efficiency of operations, 

reliability of financial reporting, and compliance with applicable laws and regulations are 

being achieved. Internal controls also serve as the first line of defense in safeguarding 

assets and preventing and detecting errors and fraud. Organizations that award and receive 

grants need good internal control systems to ensure that funds are properly used and 

achieve intended results. 

Page NJ-26 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Additionally, NJT officials include Recovery Act projects in project status 

meetings with the Executive Director of NJT every 6 weeks. 

To assure compliance at the project level and minimize risk, NJT has 

assigned project managers to each Recovery Act project. They prepare 

detailed budget data and approve all purchase requisitions. NJT staff also 

attended fraud awareness training sponsored by the U.S. DOT. In addition, 

FTA participates in quarterly progress reviews with NJT to review whether 

selected projects have an appropriate scope and budget and have met all 

federal requirements, such as Davis-Bacon prevailing wage rules and 

environmental review procedures. On June 1, 2009, FTA issued its 

Combined State Management Triennial Review of NJT. Although not an 

audit, the review provided an assessment of NJT’s compliance with 

Federal requirements determined by examining grant management 

practices and program implementation activities. FTA’s Triennial Review 

of NJT reported no deficiencies in 20 of 26 areas reviewed, including 

program and financial management and grants administration. Lack of 

staffing and related resources associated with particular civil rights 

programs generally contributed to NJT’s deficiencies.38 FTA regional 

officials told us it plans to hire more regional staff (for example, engineers 

and transportation specialists) to regularly review Recovery Act projects 

and provide more on-site monitoring. 

NJT Is Preparing to 

Implement the Latest 

Recovery Act Reporting 

Requirements 

NJT is preparing to implement the Recovery Act reporting requirements. 

However, NJT officials are concerned that reporting job creation may 

prove difficult when it comes to reporting job creation to various 

authorities. In the past, based on a request from the U.S. House of 

Representatives, Committee on Transportation and Infrastructure, NJT 

submitted information on direct and indirect jobs created. U.S. DOT 

reports that it will continue to collect estimates of both direct and indirect 

jobs, but NJT plans to submit to OMB information only related to jobs 

 

38FTA reviewed 26 areas, ranging from program management to safety and security, and 

found 11 deficiencies in 6 areas, in particular civil rights programs. In addition, 4 of the 11 

deficiencies were related to inadequate monitoring over compliance with the 

Disadvantaged Business Enterprise (DBE) program. Specifically, NJT did not examine DBE 

payrolls, payments, and equipment used to verify that work committed to DBEs is actually 

performed by DBEs. 

Page NJ-27 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

created directly due to Recovery Act funding.39 Therefore, under the 

Recovery Act reporting requirement, the state would not report on 

someone delivering materials to a job site, even though that is creating 

employment, albeit indirectly. NJT officials said that some jobs may be 

missed due to this calculation. Overall, officials believe that estimates of 

job creation will be much easier to track when in-house staff are used, 

rather than outside contractors. Matching the old and new job creation 

reports may prove to be another challenge if all previous reporting has to 

be redone to match the new OMB guidance. No other performance 

measures are being used to evaluate performance of Recovery Act funds 

for transit. 

Finally, NJT reported no particular challenges related to managing and 

reporting on Recovery Act projects. However, officials stated that multiple 

federal and state oversight agencies asking for the same program and 

financial information is burdensome. Officials told us that they have not 

hired any additional staff to manage the reporting requirements but that 

existing staff are working longer hours to accommodate the workload. 

 

39OMB Memorandum M-09-21, Implementing Guidance for the Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (June 22, 2009), states 

that recipients should not report on the employment impact on materials suppliers and 

central service providers (so-called “indirect” jobs) or on the local community (“induced” 

jobs). Employees who are not directly charged to Recovery Act supported projects or 

activities, who provide critical indirect support (e.g., clerical/administrative staff preparing 

reports, institutional review board staff members, departmental administrators) are also 

not counted as jobs created or retained. 

Page NJ-28 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or 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. 

New Jersey Is 

Administering, 

Monitoring, and 

Implementing 

Reporting 

Requirements for 

Weatherization 

Assistance Program 

Funds, but Some 

Challenges Remain 

As of September 14, 2009, DOE had approved the weatherization plans for 

all but two of the states, the District of Columbia, the territories, and 

Indian tribes—including all 16 states and the District of Columbia in our 

review. DOE has provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

fringe benefits, as determined under the Davis-Bacon Act.40 Because the 

Davis-Bacon Act had not previously applied to weatherization, the 

Department of Labor (Labor) had not established a prevailing wage rate 

for weatherization work. In 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. Labor then surveyed five types of 

“interested parties”41 about labor rates for weatherization work. The 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009. 

 

40The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

41The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page NJ-29 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

DOE approved New Jersey’s state plan on July 10, 2009, and provided 50 

percent of the weatherization funds allocated to the state to New Jersey’s 

Department of Community Affairs (NJDCA), which administers the 

weatherization program. 42 According to the NJDCA officials, they had 

anticipated issuing to each of the subgrantees—22 Community Action 

Agencies (CAAs), which conduct weatherization work, approximately 35 

percent of the 50 percent of funds that DOE released to New Jersey by 

August 31, 2009.43 However, the officials commented that as of September 

9, 2009, NJDCA had issued the full 35 percent of the weatherization funds 

to only six of its 22 CAAs. They explained that NJDCA and the remaining 

16 CAAs were still in various stages of the grant agreement process, 

primarily due to technical amendments NJDCA had to make to the grant 

agreements.44 Also, according to officials from NJDCA and the New Jersey 

Governor’s Office, the process was further impacted because the New 

Jersey Attorney General’s office is reviewing some of the grant agreements 

as an additional oversight measure.45 NJDCA officials also noted that four 

CAAs had not received any funding as of September 9, 2009.46 Of these 

four CAAs, three are receiving additional oversight by NJDCA and on

pending finalization of a memorandum of understanding (MOU). NJDCA 

officials further commented that the status of the grant agreement process 

progresses daily. They said they were hopeful that the grant agreements 

between NJDCA and the CAAs would be completed by September 30, 

2009. See table 3 for the funds obligated and disbursed as of September 9, 

2009. 

New Jersey Is Using 

Weatherization Funds for 

Start-up Activities 

e is 

 

42DCA is a state agency that provides administrative guidance, financial support and 

technical assistance to local governments, community development organizations, 

businesses, and individuals to improve the quality of life in New Jersey. 

43The 22 entities include 21 CAAs and a local government organization. 

44According to the NJDCA officials, when DOE released an additional 40 percent of 

weatherization funding in July 2009, they had to change the CAAs’ grant agreements to 

address these funds. 

45According to a NJDCA official, the New Jersey Attorney General’s office is reviewing the 

grant agreements with a higher level of review than typical grant agreements as a proactive 

measure. 

46NJDCA defines these four entities as high risk due to performance issues or being a new 

NJDCA weatherization entity. 

Page NJ-30 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Table 3: Weatherization Funds Obligated and Disbursed in New Jersey as of 

September 9, 2009 

Total amount of Recovery Act weatherization funds for 

New Jersey $118,821,296

Total funds obligateda 24,142,983

Total funds disbursedb3,441,955

Source: New Jersey Department of Community Affairs. 

a

Funds are deemed to be obligated once all approvals have been satisfied in NJDCA’s grants 

administration system, at which point an award letter can be generated and only minor tasks need to 

be accomplished in order for funds to be available for disbursement. 

b

Funds are deemed to be disbursed when there is a transfer of funds from NJDCA to the grantee. 

Subsequently, NJDCA will release additional funds, on a reimbursable 

basis, after assessing a CAA’s progress in successfully completing 

weatherization work. Such assessments will include reviewing reports 

such as those indicating the number of weatherization projects completed. 

NJDCA also plans to reward those CAAs that complete all the work in 

their grant agreement on a timely basis and meet quality standards, by 

providing them more funds to do additional weatherization work. NJDCA 

has allocated $9 million for such incentives. 

As stated in New Jersey’s approved weatherization plan, NJ DCA will 

retain 28 percent of the Recovery Act funds that are allocated for training 

and technical assistance purposes. Also, NJDCA will use some of their 

Weatherization funds to hire four additional monitors to improve program 

oversight. According to a senior NJDCA official, NJDCA monitors inspect 

anywhere from 5 to 100 percent of weatherization projects completed by 

each CAA, depending on the performance record of a CAA. These staff 

inspect an average of 25 percent of the units. According to program 

officials, the department will not release payment to a CAA until a monitor 

signs off that the work inspected is complete and meets quality standards. 

Program officials said that although New Jersey has a hiring freeze, the 

state granted a waiver to NJDCA to hire these workers for the 

weatherization program. This will bring NJDCA’s total number of monitors 

to nine, which officials said is necessary due to the increased workload. 

According to NJDCA officials, as early as April 2009, many CAAs started 

using their initial allocation of weatherization funds for start-up training 

Page NJ-31 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

and hiring activities.47 For example, one CAA official reported that his 

organization used its initial Recovery Act funds to establish a separate 

office for the weatherization program, to physically separate it from the 

other approximately 40 community programs that it operates.48

New Jersey Established 

Weatherization Wage Rates 

Prior to Labor’s 

Determination 

Recovery Act weatherization projects must comply with the prevailing 

wage as determined under the Davis-Bacon Act.49 On August 17, 2009, 

Labor issued Davis-Bacon prevailing wage rates for New Jersey’s 21 

counties. Weatherization funds that states receive through their regular 

appropriations are not subject to Davis-Bacon requirements. As a result, 

Labor had not previously needed to establish wage rates for 

weatherization work. Due to the Recovery Act guidance and prior to Labor 

establishing these wage rates, New Jersey’s State Plan and Grant 

Application to the US Department of Energy established a weatherization 

wage rate of $17.40 per hour (plus benefits) that CAAs could use until the 

Labor wage rates became available. As noted in our July 2009 report,50

NJDCA officials said they established the rate to avoid unnecessary delays 

in starting weatherization work. 

According to a NJDCA official, although New Jersey had established a 

wage rate, some of the CAAs were concerned about encountering 

unforeseen repercussions for using a Davis-Bacon rate that Labor had not 

established. An official at one CAA we visited reiterated this concern, 

adding that his CAA had not received information on the New Jersey rate 

in writing. As a result, the official was reluctant to commence 

weatherization work using Recovery Act funds. Accordingly, the CAA used 

its initial Recovery Act weatherization funds for start-up activities such as 

hiring, training, and procuring vehicles. 

NJDCA officials said the department was not aware of any CAAs that had 

begun actual weatherization work with the initial allocation of Recovery 

Act funds, mitigating the need for likely wage adjustments. In some 

instances, Labor’s wage determinations (by county) were lower than New 

 

47Approximately $6.1 million for training and technical assistance purposes was available to 

CAAs and local government entities. 

48This CAA is allocated a total of $3 million of Recovery Act weatherization funds. 

49Pub. L. No. 111-5, §1606, 123 Stat. 115, 303 (Feb. 17, 2009). 

50GAO-09-830SP. 

Page NJ-32 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Jersey’s established rate of $17.40 per hour (plus benefits) for all trades. 

For example, in Ocean County, the rate for weatherization workers 

installing windows and doors was set at $14.09 per hour (plus $4.08 per 

hour in benefits). Conversely, some of Labor’s rates were higher than what 

New Jersey established. For example, in Somerset County, the HVAC’s 

mechanic wage was $24.45 per hour (plus 0.77 per hour in benefits). 

NJDCA officials commented that by establishing a rate of $17.40 per hour 

(plus benefits) before Labor established its rates, New Jersey was 

essentially able to ensure that wages and benefits would not go below this 

floor rate, even if Labor set lower rates for counties. 

NJDCA weatherization program officials told us they had not received a 

survey from Labor seeking input on wage rate determinations. However, 

they were aware that Labor had sought guidance from other sources in 

New Jersey, including CAAs, before making its wage determinations. As 

we reported in July 2009, NJDCA officials anticipated Labor setting a 

lower wage rate than what New Jersey established, primarily because New 

Jersey has generally high wages and is a strong union state.51

State Officials Are Relying 

on Existing Procedures to 

Monitor the Use of 

Recovery Act 

Weatherization Funds, but 

Acknowledge Increased 

Risk 

NJDCA officials said they will rely on its existing systems and procedures 

to determine risk and monitor procurement and disbursement of funds. 

To monitor risk associated with Recovery Act funds, DCA expects CAAs to 

maintain detailed records in the Hancock Energy Software Weatherization 

Assistance Program (HESWAP), an online reporting system that is 

NJDCA’s primary accountability tool for tracking and managing the use of 

Recovery Act funds. While the agency has not performed a formal risk 

assessment of the CAAs, NJDCA officials said that this assessment is built 

into their approval and monitoring process. For example, they said 

monitors review 100 percent of household applications for weatherization, 

and NJDCA strictly enforces procurement procedures. Further, NJDCA 

assigns a risk level of high, medium, or low to CAAs based on their past 

performance and determines the level of funding each should receive 

based in part, on their risk level. For example, as of September 9, 2009, 

NJDCA officials designated three CAAs as “high risk,” and thus, these 

CAAs would receive the lowest amount of weatherization Recovery Act 

funding—$500,000 each. In addition, NJDCA officials said they analyze 

 

51GAO-09-830SP. 

Page NJ-33 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

relevant audit results, such as those obtained from Single Audit reviews, to 

assess CAAs’ performance and determine appropriate funding levels. 

According to NJDCA program officials, the weatherization program relies 

on a decentralized procurement system for the entire procurement 

process.52 NJDCA has delegated purchasing responsibilities to CAAs, 

although NJDCA officials said they were considering developing a 

centralized list of approved weatherization materials suppliers. Also, 

according to a NJDCA program official, contractors who attended a 

NJDCA weatherization conference expressed a high level of interest in 

joining a national buyers’ group for weatherization activities in order to 

obtain materials at a more cost-effective rate. In order to monitor 

procurement activities, program officials said that NJDCA uses HESWAP 

as an internal control to monitor the work activities of CAAs. HESWAP 

tracks authorizations and project costs and creates payment invoices. 

According to a NJDCA official, the system is designed to disallow 

reimbursement for materials not on NJDCA’s approved list. 

Finally, NJDCA officials said they will monitor the disbursement of 

Recovery Act funds to CAAs through its System for Administering Grants 

Electronically (SAGE). SAGE assists their efforts to ensure that funds are 

disbursed properly because it enables them to manage executed grants. In 

addition, NJDCA officials said they would rely on HESWAP. NJDCA 

officials cited SAGE and HESWAP as important internal controls in 

monitoring grant expenditures. 

New Jersey’s Office of the State Auditor (OSA) has raised general 

concerns about risks associated with the expenditure of Recovery Act 

funds at the local level, though it has not yet specifically reviewed DCA’s 

weatherization program.53 As a result of these concerns, OSA sent a letter 

to the Governor and the Legislature recommending that oversight groups 

ensure transparency, accountability, and compliance with specific 

programmatic goals before disbursing substantial Recovery Act funds. 

OSA staff stated that deficiencies they identified in some programs that 

 

52However, according to NJDCA officials, CAA procurements must adhere to a centralized 

list of approved materials. 

53At the time of our review, state auditors were in the process of completing one segment of 

a two-part audit on a sample of programs that are receiving Recovery Act funds. The first 

part focused on monies going directly municipalities from the federal entity. The second 

part of the audit would involve Recovery Act funds that were passing through the state to 

program agencies. They began this portion of the work in August 2009. 

Page NJ-34 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

were receiving Recovery Act funds have serious implications for other 

Recovery Act programs, such as weatherization assistance. They based 

their conclusions on their review of independent financial and Single 

Audits of a sample of New Jersey local entities for four Recovery Act 

programs that have been allocated a total of $220.7 million in direct 

funding.54 OSA found that these external audits revealed historical 

transparency and/or accountability risks and grant compliance issues at a 

number of these entities. For example, they discovered that one 

municipality that was allocated a combined total of $2.7 million from three 

Recovery Act programs had ineffective financial controls. At the time of 

our review, OSA officials said they were preparing to undertake a similar 

audit of a sample of programs, including weatherization, receiving 

Recovery Act funding through the state’s accounting system. 

Another potential risk is that NJDCA is allocating the largest amount of 

Recovery Act funds—$30 million for weatherization projects—to the New 

Jersey Housing Mortgage & Finance Agency (NJHMFA), primarily to 

weatherize multifamily units. NJHMFA is established under, but is not a 

part of, the New Jersey Department of Community Affairs. It is constituted 

as an instrument of the state, exercising public and essential governmental 

functions, and for the purposes of weatherization, considered a local 

government affiliate. According to its 2008 financial statement, NJHMFA 

has extensive experience in construction and property management, 

financing, and energy-efficient design for multifamily dwellings.55

However, NJHMFA does not have prior experience in weatherizing homes. 

According to NJHMFA officials, NJDCA solicited the NJHMFA to 

participate in the Recovery Act weatherization program, although the 

agency has not performed weatherization work in the past. NJDCA 

officials explained that most of the regular weatherization appropriations 

go toward weatherizing single-family dwellings. With the availability of the 

Recovery Act funds, NJDCA wanted to ensure that tenants who live in 

multifamily units also benefit from these funds. To mitigate the fact that 

NJHMFA has not conducted weatherization work in the past, NJDCA said 

 

54The four programs are: the Community Development Block Grant, Homelessness 

Prevention/Rapid Re-housing Grant, Energy Efficiency and Conservation Block Grant, and 

Public Housing Capital Fund Grant. 

55NJHMFA’s 2008 Annual Report states that the entity is dedicated to increasing the 

availability of and accessibility to safe, decent, and affordable housing for families. 

According to NJHMFA officials, the entity operates similar to a bank; has been in existence 

for 42 years; has completed 350 ongoing projects in New Jersey; and has modernized over 

45,000 units, including 10,000 single family units. 

Page NJ-35 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

that monitors will inspect 100 percent of the approximately 3,900 units 

that NJHMFA is expected to complete over a 3-year time frame. However, 

since this is a substantial number of units, the inspections may not be 

timely. Such inspection delays could result in payment delays and limit the 

ability to complete other work. As of September 9, 2009, NJDCA had not 

provided any weatherization funds to NJHMFA. NJDCA was still in the 

process of drafting a memorandum of understanding with NJHMFA to 

focus on weatherizing multifamily units in NJHMFA’s portfolio. 

Weatherization Program 

Not Included in 2007 and 

2008 Single Audit Reports 

The weatherization program was not included in the 2007 and 2008 Single 

Audit reports in because New Jersey’s independent auditor did not identify 

this program as a major program based on risk criteria, including 

minimum dollar thresholds, set out in the Single Audit Act and OMB 

Circular No. A-133. According to NJDCA’s internal auditor, weatherization 

is being included in the 2009 Single Audit, given the large influx of funds as 

a result of the Recovery Act. 

The 2005 Single Audit report identified two findings in the weatherization 

program, and one was a material weakness related to reporting. 

Specifically, NJDCA did not establish a procedure to reconcile the 

expenditures charged to the programs56 with the amounts reported on the 

Schedule of Expenditures of Federal Awards, which is generated by the 

New Jersey Department of Treasury. The independent auditor issued a 

qualified opinion57 on New Jersey’s compliance with the weatherization 

program for 2005 because of these findings. 

The 2006 Single Audit report identified three findings in the program. Two 

were related to reporting and were material weaknesses, one of which was 

the same material weakness identified in 2005. The second material 

weakness was that DCA did not have adequate policies and procedures in 

place to ensure that the federal financial report was properly completed, 

 

56Specifically, these programs were the Weatherization Assistance for Low-Income Persons 

Program and Community Services Block Grant Pprogram. 

57A qualified opinion report is issued when the auditor encountered one of two types of 

situations which do not comply with the types of compliance requirements described in 

OMB Circular No. A-133 Compliance Supplement and the New Jersey State Grant 

Compliance Supplement that are applicable to each of its major federal and state programs. 

This type of opinion is very similar to an unqualified or “clean opinion,” with a certain 

exception that the program did not comply with the requirements of laws, regulations, 

contracts, and grants applicable to each of its major federal and state programs. 

Page NJ-36 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

supported by accurate documentation, and reviewed by a supervisor prior 

to its submission. The independent auditor also issued a qualified opinion 

in 2006 on New Jersey’s compliance with the weatherization program for 

the year ending June 30, 2006, because of these findings. The state 

implemented several corrective action plans to address the Single Audit 

findings, including the timely reconciliation of accounts and meeting 

reporting requirements. 

Weatherization Program 

Officials Do Not Foresee 

Challenges in Meeting 

Federal Reporting 

Requirements 

NJDCA is the prime recipient of weatherization funds and is therefore 

responsible for meeting Recovery Act reporting requirements. NJDCA 

officials said they did not have concerns about their ability to meet the 

various reporting requirements, including the Section 151258 requirements 

for reporting on the use of funds and job creation and retention.59

According to NJDCA officials, they will be able to meet the reporting 

requirements primarily because HESWAP provides access to real-time 

information about each CAA’s weatherization projects, including costs, 

and SAGE provides information about grant management. Also, the CAAs 

are able to access this same information, which facilitates their reporting 

on a timely basis.60 At the time of our review, DOE required quarterly 

reporting for the weatherization program. However, according to one of 

the NJDCA officials, DOE indicated at a conference in July that it intended 

to change this requirement to monthly reporting. NJDCA officials said they 

did not anticipate such a change posing a challenge for them. NJDCA 

officials further stated that they have participated in Webinars to obtain 

clarification on guidance. They said they were beginning to prepare for the 

NJDCA Officials Say They Can 

Meet OMB Reporting 

Requirements 

 

58Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

59As of late August, the Director of the weatherization program stated that some additional 

guidance from OMB was still pending on minor issues involving counting jobs created. 

60However, program officials acknowledged that NJDCA must allow for the monitoring, 

review, and approval of an inspected unit. Once these activities are complete, the 

information becomes real-time in HESWAP and can then be submitted to DOE as a 

completed project. 

Page NJ-37 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

required October 10 report to OMB, noting that CAAs are encouraged to 

provide their reports to NJDCA by September 15. 

NJDCA officials said they had not delegated any reporting requirements 

responsibilities to the CAAs as OMB allows. However, officials from the 

New Jersey Governor’s Office stated that the New Jersey Recovery 

Accountability Task Force had sent written guidance to state and local 

entities concerning reporting requirements. 

A NJDCA official said they have not yet attempted to measure the impact 

of Recovery Act weatherization funds on energy savings, primarily 

because they have not yet received guidance from DOE on how to do so. 

This official stated that using DOE’s historical methodology to calculate 

energy savings is logical. It is a formula-based approach that is a part of 

the energy audit system that DOE uses to calculate a savings-to-investment 

ratio. He further commented that DOE’s traditional approach has provided 

a clear indication of savings and efficiencies for each measure used, and 

therefore would be appropriate to measure the impact of Recovery Act 

funds on energy savings. This NJDCA official said that for its regular 

weatherization appropriations funding, they have relied on a list of 

“Priority Measures” that DOE approved. These measures include assessing 

items such as health and safety testing, attic insulation, and window and 

door replacement. 

Program Officials Have Not 

Begun to Measure Impact of 

Recovery Act Funds on Energy 

Savings 

The Public Housing Capital Fund provides formula-based grant funds 

directly to public housing agencies to improve the physical condition of 

their properties; develop, finance, and modernize public housing 

developments; and improve management.61 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. Recovery Act requirements specify that public housing agencies 

must obligate funds within 1 year of the date on which they are made 

available to public housing agencies, expend at least 60 percent of funds 

within 2 years, and expend 100 percent of the funds within 3 years. Public 

housing agencies are expected to give priority to projects that can award 

contracts based on bids within 120 days from the date on which the funds 

Update on Amount of 

Public Housing 

Capital Funds 

Obligated by Public 

Housing Agencies in 

New Jersey 

 

61Public housing agencies receive money directly from the federal government (HUD). 

Funds awarded to the public housing agencies do not pass through the state budget. 

Page NJ-38 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

are made available, as well as projects that rehabilitate vacant units, or 

those already under way or included in their current required 5-year 

capital fund plans. 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million); 

• gap financing for projects that are stalled due to financing issues ($200 

million); 

• public housing transformation ($100 million); and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

will be threshold-based, meaning applications that meet all the threshold 

requirements will be funded in order of receipt. If funds are available after 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

New Jersey has 80 public housing agencies to which HUD allocated 

Recovery Act formula grants. In total, these public housing agencies 

received $104 million in Public Housing Capital Fund formula grants (see 

fig. 4). As of September 5, 2009, 64 of these public housing agencies have 

obligated $31 million and 46 of these public housing agencies have drawn 

down $6.1 million. GAO visited four public housing agencies in New Jersey 

for our July 2009 report. These are the Newark Housing Authority, the 

Plainfield Housing Authority, the Rahway Housing Authority, and the 

Trenton Housing Authority. We will provide updated information on these 

housing agencies in a future report. 

Page NJ-39 GAO-09-1017SP Recovery Act
Appendix XII: New Jersey 

Figure 4: Percentage of Public Housing Capital Funds Allocated by HUD That Have Been Obligated and Drawn Down in New 

Jersey as of September 5, 2009 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

100%

$104,165,767

Funds obligated 

by public housing agencies

29.6%

$30,855,617

Funds drawn down

by public housing agencies

5.9%

$6,112,385

64

46

Number of public housing agencies

Source: GAO analysis of HUD data.

80

We provided the Governor of New Jersey with a draft of this appendix on 

September 3, 2009. The Governor’s Chief of Staff, who serves as the cochair for the Governor’s Recovery Accountability Task Force, responded 

for the Governor on September 8, 2009. The official provided technical 

suggestions that were incorporated, as appropriate. 

David Wise, (202) 512-2834 or wised@gao.gov 

Gene Aloise, (202) 512-6870 or aloisee@gao.gov 

New Jersey’s 

Comments on This 

Summary 

GAO Contacts 

In addition to the contacts named above, Raymond Sendejas, Assistant 

Director; Tahra Nichols, analyst-in-charge; Diana Glod; Tarunkant Mithani; 

Vincent Morello; Nitin Rao; Gary Shepard; and Cheri Truett made major 

contributions to this report. 

Staff 

Acknowledgments 

Page NJ-40 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act) 1

spending in New York. The full report on all of our work, which covers 16 

states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

New York, the nation’s third most populous state and home of the nation’s 

largest city and most important financial center, continues to be hit hard 

by the current recession. It expects to receive about $26.7 billion in 

Recovery Act funds plus possible additional discretionary program funds 

through the end of 2011. About $11 billion will be for Medicaid; $5 billion 

will be for education; and another $2.4 billion for highway and transit 

projects. 

GAO’s work in New York for this third bimonthly review focused on the 

efforts of the state to stabilize its budget and meet the Recovery Act’s first 

reporting requirements for recipients of Recovery Act funds. We also 

focused on three Recovery Act programs—the Transit Capital Assistance 

Program, the Weatherization Assistance Program, and the Workforce 

Investment Act Youth Program (WIA)—and updated funding information 

on the highway construction and public housing programs. We selected 

these programs for different reasons: 

• The Transit Capital Assistance funds had a September 1, 2009 deadline 

for obligating a portion of the funds and, further, provided an 

opportunity to review transit agencies receiving Recovery Act funds, 

including the Metropolitan Transportation Authority (MTA), which 

manages the nation’s largest transit system. 

• The Weatherization Assistance Program in New York received an 

almost 400 percent increase in funding as a result of the Recovery Act. 

The program began on June 26, 2009, providing us the opportunity to 

look at how state and local agencies are planning to oversee and 

implement financial controls, track funding, and report results. 

• The WIA Youth program in New York also experienced significant 

growth due to Recovery Act funds and many summer employment 

activities funded by the Recovery Act were in full operation at the time 

of our review. 

Page NY-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix XIII: New York 

Within these programs, we focused on how funds were being used, how 

internal controls and safeguards were being implemented, and how results 

were being assessed. Consistent with the purposes of the Recovery Act, 

funds from the programs we reviewed are being directed to help New York 

and local governments stabilize their budgets and stimulate infrastructure 

development and expand existing programs—thereby providing needed 

services and potential jobs. The following provides highlights of our 

review of these programs: 

Budget Stabilization • New York State addressed a significant 2-year budget gap of $20.1 

billion when it enacted its fiscal year 2009-2010 Budget Financial Plan 

on April 28, 2009,2

 with the help of approximately $6.2 billion in 

Recovery Act funds and other measures. 

• Continued declining revenues and the current economic environment 

resulted in a forecasted $2.1 billion budget gap for the state at the end 

of its first quarter for fiscal year 2009-2010. 

• The state’s proposal to address this budget gap is expected to be 

deliberated in early fall 2009. 

Highway Infrastructure 

Investment Funds 

• The U.S. Department of Transportation’s Federal Highway 

Administration (FHWA) apportioned $1.12 billion in Recovery Act 

funds to the New York State Department of Transportation (NYSDOT) 

in March 2009. 

• As of September 1, 2009, the federal government had obligated about 

$783 million to New York, and about $23 million had been reimbursed 

by the federal government. 

• According to NYSDOT, it has used Recovery Act funds to award 

contracts for about 194 projects, 190 of which have begun 

construction. Since June, NYSDOT has made progress in the number 

of contracts awarded and the proportion of projects that are located in 

economically distressed areas. 

 

2

The 2-year budget gap of $20.1 billion was for fiscal years 2008-2009 and 2009-2010. 

Page NY-2 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

• The U.S. Department of Transportation’s Federal Transit 

Administration (FTA) apportioned over $1.3 billion in Recovery Act 

funds to the state of New York and urbanized areas (UZA) that include 

localities in New York. As of September 1, 2009, FTA had obligated 

$1.1 billion. 

Transit Capital Assistance 

Program 

• FTA was slow to obligate these funds, because of its lengthy grant 

review processes, but as of September 1, 2009, FTA concluded that the 

50 percent obligation requirement had been met for New York and 

urbanized areas located in the state. 

• The Metropolitan Transportation Authority (MTA)—the largest transit 

agency in the country and recipient of the most Recovery Act Transit 

Capital Assistance Program funds in New York —used preaward 

authority to begin Recovery Act projects in advance of FTA’s 

obligation of the funds.3

 MTA will receive its Transit Capital Assistance 

Program funding through two grants worth over $660.2 million.4

 MTA 

plans to use these funds to pay for a series of maintenance and capital 

projects throughout the MTA transit system. 

Weatherization Assistance 

Program 

• On June 26, 2009, the U.S. Department of Energy (DOE) approved New 

York State’s plan for the use of Recovery Act funds in the 

Weatherization Assistance Program authorizing expenditure of 50 

percent ($197.3 million) of its total allocation for this program ($394.7 

million). 

• According to officials, as of August 31, 2009, no funds have been 

disbursed. The state’s Division of Housing and Community Renewal 

which reviews the contract applications submitted by the 64 

subgrantees that implement the program for the state has approved 

nine contract applications obligating $27.5 million. The division 

anticipates that the remaining contract applications will be approved 

by October 15, 2009. However, officials told us that the need to address 

Davis-Bacon requirements, which were not imposed on the program 

before the Recovery Act, had complicated the contract-review process 

 

3

FTA operates on a reimbursement basis, which means the project sponsor must have 

incurred a cost before they can draw funds. 

4

MTA expects to receive over $1 billion in Recovery Act funds, including funds through 

FTA’s Capital Assistance Grants, the Fixed Guideway Infrastructure Investment Program, 

and the Capital Investment Grant Program. 

Page NY-3 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

and created uncertainty over labor costs until prevailing wage rates 

were determined by September 3, 2009. 

Workforce Investment Act 

Youth Program (WIA) 

• The U.S. Department of Labor (Labor) allotted about $71.5 million to 

New York in WIA Recovery Act funds. 

• The state has allocated $60.8 million to the state’s 33 local workforce 

areas and, as of August 31, 2009, local areas had expended an 

estimated $34.6 million. 

• New York summer youth employment programs exceeded their goal 

by enrolling over 24,000 youth in summer jobs. 

• We visited the government entity managing the WIA Youth program in 

Oneida County. It employed various strategies to help overcome 

eligibility challenges and to retain older youth at the end of the 

summer. For example, Oneida County hired four employees from May 

to December 2009 that assisted youth in the eligibility process. 

Public Housing Capital 

Fund 

• New York State has 84 public housing agencies that have received 

Recovery Act formula grant awards through the Public Housing Capital 

Fund, totaling $502.3 million. 

• As of September 5, 2009, 59 of the state’s 84 public housing agencies 

have obligated $154.4 million, while 43 have expended $2.9 million. 

Recovery Act Reporting • New York State has a major planning effort in place to meet the 

Recovery Act’s first recipient reporting deadline of October 10, 2009.5

However, some concerns remain about the ability of recipients in the 

state that received Recovery Act funds to submit complete reports by 

the October 10, 2009 reporting deadline, which is 10 days after the end 

of the quarter; ensure that all subrecipients’ data will be included; and 

report on specific performance measures. 

• New York State has contracted with a consultant to assist the state in 

meeting its first-round reporting requirements in October. 

 

5

Section 1512 of the Recovery Act requires that all recipients prepare quarterly reports, 

which includes information such as who is receiving Recovery Act dollars and the 

amounts, projects or activities that are being funded, the completion status of project 

activities, and an estimate of the number of jobs created and the number of jobs retained 

by projects and activities. 

Page NY-4 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

• State officials said that state agencies vary in their thoroughness of 

planning and capability to meet Recovery Act reporting requirements. 

As noted in our July 2009 report, New York closed budget gaps of $2.2 

billion for fiscal year 2008-2009 and $17.9 billion for fiscal year 2009-2010.6

To help close the combined budget gap of $20.1 billion over these two 

fiscal years, New York used about $5 billion in funds made available as a 

result of the increased Medicaid Federal Medical Assistance Percentage 

(FMAP).7

 In addition, the state plans to use approximately $1.2 billion of 

Recovery Act State Fiscal Stabilization Fund (SFSF) funds to further 

alleviate this gap. 

Although Recovery 

Act Funds Helped 

New York Close a 

Budget Gap for Fiscal 

Year 2009-2010, New 

York Now Estimates a 

Shortfall Due to 

Decreased Tax 

Receipts 

New York State issued its 2009-2010 Financial Plan First Quarterly Update 

on July 30, 2009. The state now estimates a General Fund budget gap of 

$2.1 billion in the current fiscal year and projects budget shortfalls 

growing to $18.2 billion by fiscal year 2012-2013. Based on New York’s first 

quarterly update, approximately 93 percent of the state’s current year gap 

is due to a forecast for a reduction in state tax receipts. The remaining 

shortfall is due to General Fund disbursement revisions for several areas, 

such as a decrease in projected lottery receipts and escrow payments from 

other funds that offset the General Fund costs. The state expects that outyear budget gaps will be the result of both decreased receipts and 

increased disbursements. Table 1 shows the state’s revised gaps between 

its 2009-2010 Enacted Budget Financial Plan and its 2009-2010 Financial 

Plan First Quarterly Update. 8

 

6

New York State operates on an April 1 through March 31 fiscal year. 

7

FMAP is discussed in detail in the main report; see GAO-09-1016. 

8

2009-2010 Enacted Budget Financial Plan issued on April 28, 2009. 

Page NY-5 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Table 1: Comparison of New York State’s 2009-2010 Enacted Budget Financial Plan and Its 2009-2010 Financial Plan First 

Quarterly Update 

Dollars in millions 

Fiscal year 

Enacted budget

surplus/(gap) estimate First quarter revisions 

First quarterly update 

surplus/(gap) estimate

2009-2010 $0 $(2,123) $(2,123)

2010-2011 (2,166) (2,457) (4,623)

2011-2012 (8,757) (4,519) (13,276)

2012-2013 (13,706) (4,457) (18,163)

Cumulative total $(24,629) $(13,556) $(38,185)

Source: New York State’s 2009-2010 Financial Plan First Quarterly Update, July 30, 2009. 

New York continues to plan for and use Recovery Act funds for its current 

fiscal year. Specifically, budget officials said that, to date, there have been 

no changes in the state’s planned use of $3.7 billion in funds made 

available as a result of the increased FMAP and $1.2 billion in SFSF funds 

for budget stabilization during the state’s current fiscal year. To address 

the current-year deficit, the Governor will work with the legislature to 

develop an Economic and Fiscal Recovery Plan in early fall 2009. 

According to these officials, the plan will explore all avenues of state 

spending and will, through the Governor’s Office of Taxpayer 

Accountability, identify areas for savings by examining opportunities to 

reduce waste, fraud, and abuse in state government. In anticipation of 

these actions and the allocation of Recovery Act funds, budget officials do 

not expect the state to use its rainy-day or reserve funds.9

State budget officials have taken two main preliminary steps to plan for 

the eventual phase out of Recovery Act funds. Specifically, the state has, 

wherever possible (1) applied the Recovery Act funds to nonrecurring 

items and program restorations and (2) clearly identified the restorations 

that are made possible with Recovery Act funds. State officials expect to 

consider additional actions for mitigating the phasing out of funds as they 

develop the 2010-2011 Budget Financial Plan. 

 

9

New York has two rainy-day funds—its Tax Stabilization Reserve and Rainy Day Reserve 

Funds, which according to state officials, must be balanced at approximately $1 billion and 

$175 million, respectively, at the end of each fiscal year. These reserve funds may be 

utilized for cash flow purposes throughout the year; however, all funds must be restored by 

the end of the fiscal year. 

Page NY-6 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

In response to the Office of Management and Budget’s (OMB) May 11, 

2009, memorandum,10 New York budget officials stated that OMB’s 

guidance has had little impact on the state’s effort to recoup Recovery Act 

centralized implementation and oversight costs. State officials based this 

viewpoint on further discussion with federal agencies and other state 

budget officials. The state understands the OMB guidance as only allowing 

up to 0.5 percent reimbursement of total Recovery Act funds for central 

administrative costs. Budget officials added that their understanding is 

that this 0.5 percent can only be applied against the subset of Recovery Act 

programs that specifically allow reimbursement for administrative costs. 

In addition, New York believes that any effort to secure reimbursement for 

centralized implementation and oversight costs would reduce funding 

available to state agencies for assisting in meeting their agency-specific 

administrative and implementation costs. Finally, budget officials believe 

that the Statewide Cost Allocation Plan (SWCAP)11 process being used for 

recouping Recovery Act administrative costs is cumbersome and lengthy. 

Due to these reasons, the state has not decided whether to move forward 

with recouping these centralized costs. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

Federal-Aid Highway Surface Transportation Program and for other 

eligible surface transportation projects. The 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 

the states through federal-aid highway program mechanisms, and states 

must follow the existing program requirements, which include ensuring 

the project meets all environmental requirements associated with the 

National Environmental Policy Act (NEPA), paying a prevailing wage in 

accordance with federal Davis-Bacon requirements, complying with goals 

to ensure disadvantaged businesses are not discriminated against in the 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America program requirements. While the 

maximum federal fund share of highway infrastructure investment 

New York Has Made 

Progress in Awarding 

Highway Contracts, 

with Over 40 Percent 

of Planned Recovery 

Act Projects Now 

under Construction 

 

10OMB Memorandum, M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Activities, dated May 11, 2009. 

11SWCAP is a process in which states can recoup administrative costs on an annual basis by 

submitting cost detail to the Department of Health and Human Services (HHS) for review 

and approval. 

Page NY-7 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

projects under the existing federal-aid highway program is generally 80 

percent, under the Recovery Act, it is 100 percent. 

Funds appropriated for highway infrastructure spending must be used as 

required by the Recovery Act. One of the act’s requirements is that states 

must certify that they will maintain the level of spending for the types of 

transportation projects funded by the Recovery Act that they 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, 2010.12

As we previously reported in July 2009, $1.12 billion was apportioned to 

New York in March 2009 for highway infrastructure and other eligible 

projects. As of September 1, 2009, about $783 million had been obligated13

and about $23 million, or 3 percent of obligations, had been reimbursed by 

FHWA.14 This does not include obligations associated with $175.5 million 

of apportioned funds that were transferred from the Federal Highway 

Administration (FHWA) to the Federal Transit Administration (FTA) for 

transit projects.15 Almost all of these funds ($175 million) are for a project 

to rehabilitate seven ramps carrying bus and passenger traffic in and out of 

the St. George Ferry facility on Staten Island. The transfer of funds to this 

project was initiated by Governor Paterson. The New York City 

Department of Transportation and FTA will be responsible for this project 

and the associated Recovery Act reporting. This project is the single 

largest use of Recovery Act highway funds for an individual project in New 

York State, and accounts for about 16 percent of New York’s total 

apportionment. New York has transferred more of its apportioned 

highway funds to transit projects than all other states plus the District of 

 

12Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009). 

13For the Highway Infrastructure Investment Program, the U.S. Department of 

Transportation has interpreted the term obligation of funds to mean the federal 

government’s contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. 

14States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

15Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made 

available for transit projects to FTA. The about $175.5 million includes $466,000 in 

apportioned funds that were transferred from FHWA to FTA for vehicle fleet replacements 

(e.g., not buses) in Rochester by the Rochester-Genesee Regional Transportation Authority. 

Page NY-8 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Columbia combined. The $175.5 million New York has transferred to 

transit projects accounts for about 61 percent of total funds transferred to 

FTA by all states nationwide. 

Approximately 46 percent of Recovery Act highway obligations for New 

York have been for pavement improvement projects with only a small 

percentage having been obligated for pavement widening and new road 

construction. Specifically, $364 million of the $783 billion obligated to New 

York as of September 1, 2009, is being used for pavement improvement 

projects such as highway resurfacing and reconstruction, including $143 

million for resurfacing roads. In addition, as of September 1, 2009, almost 

30 percent of the funds obligated in New York have been for bridge 

replacement and bridge improvement projects, which is much higher than 

the national obligation average of 10 percent. Figure 1 shows obligations 

by the types of road and bridge improvements being made. 

Page NY-9 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Figure 1: Highway Obligations for New York by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($134.6 million)

Other ($158.3 million)

2%

New road construction ($14 million)

2%

Pavement widening ($12.3 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($363.5 million)

Pavement projects total (50 percent, $389.9 million)

Bridge projects total (30 percent, $235 million)

Other (20 percent, $158.3 million)

46%

17%

13% Bridge replacement ($100.4 million)

20%

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

According to NYSDOT, as of September 1, 2009, FHWA had obligated 

funding for a total of about 358 projects. According to officials, contracts 

have been awarded for about 194 of the authorized projects, or 43 percent 

of the total 450 projects NYSDOT plans to complete using Recovery Act 

funds. These awarded contracts total $412 million, or 37 percent of New 

York’s total allocation. Of the projects with awarded contracts, 190 of 

them, or 42 percent of all planned projects, were under construction. In 

our July 2009 report, we reported that as of June 17, 2009, 34 contracts had 

been awarded. The awarding of 160 contracts in 2 months has taxed 

NYSDOT’s limited procurement staff as well as staff in planning, design, 

construction, and information technology. The Director of the NYSDOT 

Contracts Management Bureau noted that they have hired no new 

Page NY-10 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

procurement staff and that current staff are working overtime in order to 

award the large number of contracts. 

NYSDOT officials reported that Recovery Act projects have often received 

bids that are lower than the planned costs of the project, resulting in 

contract prices as much as 10 to 12 percent lower than the engineering 

cost estimates. This frees up funds for other projects on the long backlog 

of New York transportation projects. A NYSDOT official said the agency 

had anticipated that the construction market would be saturated by now 

and that bid prices would begin rising. That has not happened yet, 

however, and it reports that bids continue to come in lower than the 

planned costs of the projects. 

In July, we again visited the $14.9 million Delaware Avenue reconstruction 

project in Albany, which we first visited in June. This project is being 

managed by the City of Albany and was the first construction contract 

funded by the Recovery Act awarded in the state. This project started in 

April 2009, involves the complete reconstruction of a 1.6-mile stretch of 

urban roadway, and employs about 50 people. Project officials report that 

the project is currently on budget, about 29 percent completed, and 

expected to be completed by October 2010. Although the project is being 

funded entirely through the Recovery Act, the City of Albany is currently 

paying the contractor and billing NYSDOT for reimbursement. 

We also visited a bridge included under a NYSDOT bridge painting project 

that involves work in Herkimer and Oneida counties. This contract was 

awarded on April 15, 2009, for $2.15 million. As we reported previously, 

the original scope of this project was 8 bridges, but, according to officials, 

NYSDOT was able to add 3 bridges to this contract as a result of the 

Recovery Act funds. When we visited the project worksite at the State 

Road 49 Bridge over Wood Creek near Rome on July 29 (see fig. 2), 

NYSDOT inspectors reported that the contractor had 3 bridges remaining 

to be painted before the contract completion date of November 30, 2009. 

NYSDOT officials reported that the same crew of around 17 employees has 

worked on each bridge, and that the additional 3 bridges allowed the crew 

to be employed later into the season. The contractor for this project is 

based in western New York and completes bridge and industrial painting 

projects in Pennsylvania and Massachusetts. 

Page NY-11 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Figure 2: Profile of a Highway Bridge Painting Project 

Bridge painting enclosure on State Road 49 over Wood Creek, at the

border between town of Verona and city of Rome, New York

Bridge painting, which is funded by the Recovery Act, in progress

(brown paint is the new finish)

Sources: GAO (photographs); and Map Resources (map).

Buffalo

Rochester Syracuse

Albany

New York

New York

Penn s ylvania

CANADA

Lake Ontario

Vermont

New York

Project

Lead agency 

Description

Recovery Act Funds

Status

Location

Highway Bridge Painting 

NYSDOT

Painting of 11 bridges

Herkimer and Oneida counties

$2.15 million

As of July 29, 8 bridges had

been painted 

As we reported previously, the Recovery Act requires states to give 

priority to projects located in economically distressed areas, as defined by 

the Public Works and Economic Development Act of 1965, as amended.16

 

1642 U.S.C. § 3161. 

Page NY-12 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

As of September 1, 2009, 58 percent of New York’s certified projects were 

in distressed areas. These projects currently account for 33 percent of the 

total New York state Recovery Act funds, up from about 25 percent in 

June. 

NYSDOT Officials Believe 

That They Will Meet 

Recovery Act Reporting 

Requirements 

NYSDOT officials reported that they are working to address OMB’s June 

22 guidance and are confident they will be able to meet the first OMB 

reporting deadline of October 10. With the help of the consultant hired by 

the state to assist state agencies in complying with Recovery Act reporting 

requirements, NYSDOT has determined that approximately 80 to 90 

percent of the data elements required by OMB are in its existing database. 

NYSDOT is using OMB’s data dictionary to program its database with the 

remaining data elements. NYSDOT officials reported that to meet the 

October 10 reporting deadline, they will gather information from both the 

state- and local-let projects and will report directly to OMB, in accordance 

with the current guidance from the New York Governor’s Office. For 

federal employment reporting purposes, all Recovery Act-funded highway 

projects complete FHWA Form 1589 on a monthly basis and record the 

total number of actual employees, number of hours, and total payroll for 

the month. The information collected by FHWA includes only employment 

information for jobs funded directly by the Recovery Act. 

Both of the Recovery Act highway projects we visited currently report 

employment information monthly to NYSDOT but had not yet received 

specific instruction on how to submit reporting information in accordance 

with OMB’s latest reporting guidance. For example, the Delaware Avenue 

project’s main contractor and consultant both fill out the FHWA Form 

1589 on a monthly basis on behalf of themselves and their 10 

subcontractors. This form reports the number of employees on the project, 

hours of work, and total payroll for the month. To date, Delaware Avenue 

project officials have not received guidance from NYSDOT regarding how 

it should report results in accordance with the June 22 OMB Section 1512 

reporting guidance, but are confident they will be able to meet any new 

reporting requirements. 

The NYSDOT Recovery Act Web site also reports on its certified highway 

projects using other performance measures, such as miles of highway 

resurfaced and number of bridges to be repaired. According to NYSDOT 

officials, these performance measures were compiled using data from the 

agency’s management information system. See table 2 for a list of these 

performance measures as of September 1, 2009. 

Page NY-13 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Table 2: NYSDOT Planned Performance Measures by Project Type, for All Projects 

Certified as of September 1, 2009 

Project type 

NYSDOT planned performance results 

for all Recovery Act projects certified 

Safety • 1,000 traffic signals 

• 11,208 large sign panels 

• 34 miles of guiderail 

Bridge repair • 269 bridges repaired 

• 234 bridges painted 

• 437 bridges cleaned 

Bridge replacement and rehabilitation • 33 bridges replaced 

• 34 bridges rehabilitated 

Mobility, reliability, smart growth • 1,131 new or improved street crossings 

• 97 miles of new or replaced sidewalks 

• 34 miles of new or replaced bike lanes 

Highway reconstruction and rehabilitation • 372 lane-miles reconstructed 

• 220 lane-miles repaved 

• 22 large culverts replaced 

Highway repair • 1,575 lane-miles resurfaced 

• 299 lane-miles surface treated 

• 2,011 lane-miles of cracks and joints 

sealed 

• 188 large culverts repaired 

Source: NYSDOT data and GAO analysis. 

NYSDOT Has Developed a 

Recovery Act Oversight 

Web site to Improve 

Communication and 

Transparency but Has Not 

Addressed a Potential 

Conflict of Interest Issue 

We reported on NYSDOT’s internal controls over Recovery Act funds in 

July 2009. In this report, we highlight NYSDOT’s efforts to develop and 

maintain a Web site that provides current information on Recovery Act 

projects and report on a potential conflict of interest issue that was first 

identified in an Office of the State Comptroller (OSC) audit report. 

The NYSDOT Recovery Act Web site, www.nysdot.gov/recovery, contains 

a wealth of information on the state’s highway infrastructure Recovery Act 

activity, such as the total value, contractor, and status of projects that are 

searchable by location, congressional district, and a variety of other 

characteristics. NYSDOT officials reported that they view this Web site as 

setting a new standard in terms of making Recovery Act status information 

available to the public. NYSDOT plans to maintain the Web site after the 

Recovery Act expires in September 2010 for its traditional program and 

project activity for many programs, such as transit, aviation, and rail. 

Page NY-14 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

The potential conflict of interest issue was reported on by the OSC in 

January 2009. This issue involves the Director of NYSDOT’s Audit and Civil 

Rights Division who is also the department’s Internal Control Officer. As 

Director of the Audit and Civil Rights Division, this individual’s 

responsibilities include oversight of the Internal Audit Bureau, which is 

charged under state law with reviewing agency operations to assure 

compliance with management policies and the effectiveness of internal 

controls. The Director was also designated as the NYSDOT Internal 

Control Officer, who is charged under state law with implementation and 

review of NYSDOT’s internal control responsibilities (the Enterprise Risk 

Management Bureau).17 In addition, the Director was appointed to lead the 

Governor’s Economic Recovery and Reinvestment Cabinet Internal 

Controls and Fraud Prevention Working Group. The working group is 

responsible for working with state agencies to provide additional guidance 

on internal control and fraud prevention to ensure compliance with the 

Recovery Act. In the January 2009 report on the quality of NYSDOT’s 

internal control certifications, OSC recommended that, to effectively 

maintain independence by avoiding a conflict of interest, NYSDOT should 

separate the internal audit function and the internal control officer 

function. The NYSDOT Executive Deputy Commissioner disagreed with 

this recommendation.18 We agree with the OSC recommendation and urge 

NYSDOT to reconsider its position. 

The New York State Governmental Accountability, Audit, and Internal 

Control Act of 198719 (Internal Control Act) requires the head of each 

agency to designate an internal control officer who reports to the head of 

the agency and who is responsible for the “implementation and review of 

the internal control responsibilities” assigned to the agency head under the 

act. Agency heads are responsible for establishing systems of internal 

control and programs of internal control review, including periodic 

assessments of the adequacy of their agency’s ongoing internal controls. 

The act also states that the internal audit function, when established in an 

agency, is to be headed by an internal audit director, who is required to 

operate in accordance with generally accepted professional standards for 

 

17The Audit and Civil Rights Division comprises the Office of Civil Rights, Internal Audit 

Bureau, Investigations Bureau, Enterprise Risk Management Bureau (Internal Control 

Office), and the Contract Audit Bureau. 

18On May 8, 2009, the Governor appointed the Executive Deputy Commissioner as Acting 

Commissioner. The Commissioner is the head of the agency. 

19N.Y. Exec. § 950–953. 

Page NY-15 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

internal auditing. These professional standards have been identified as the 

standards set forth by the Institute of Internal Auditors (IIA) in the state’s 

budget guidance. IIA’s standards state that “internal auditors must have an 

impartial, unbiased attitude and avoid any conflict of interest.”20 The 

mandatory interpretation of this standard states that, “conflict of interest 

is a situation in which an internal auditor, who is in a position of trust, has 

a competing professional or personal interest. Such competing interests 

can make it difficult to fulfill his or her duties impartially. A conflict of 

interest can create an appearance of impropriety that can undermine 

confidence in the internal auditor, the internal audit activity, and the 

profession.21 A conflict of interest could impair an individual’s ability to 

perform his or her duties and responsibilities objectively.” 

A practice advisory to the IIA’s standards states that “internal auditors are 

not to accept responsibility for non-audit functions or duties that are 

subject to periodic internal audit assessments. If they have this 

responsibility, then they are not functioning as internal auditors.”22 In 

addition, the practice advisory states that “when the internal audit activity, 

chief audit executive (CAE), or individual internal auditor is responsible 

for, or management is considering assigning, an operational responsibility 

that the internal audit activity might audit, the internal auditor’s 

independence and objectivity may be impaired.” The practice advisory 

lists the following among the factors that the CAE needs to consider in 

assessing the impact on independence and objectivity: audit coverage of 

the activities or responsibilities undertaken by the internal auditor, 

significance of the operational function to the organization, and adequacy 

of separation of duties. 

OSC also based its recommendation on its Standards for Internal Control 

in New York State Government and on New York State’s Division of the 

Budget’s Governmental Internal Control and Internal Audit Requirements, 

known also as B-350. According to OSC’s standards, “the internal control 

officer helps establish specific procedures and requirements. The 

effectiveness of these procedures and requirements must be audited by 

 

20IIA, International Standards for the Professional Practice of Internal Auditing, 1120, 

Individual Objectivity. 

21IIA defines conflict of interest as “any relationship that is, or appears to be, not in the best 

interest of the organization.” 

22IIA Practice Advisory 1130.A2-1, Internal Audit’s Responsibility for Other (Non-audit) 

Functions. 

Page NY-16 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

someone who was not involved in the process of putting them into place. 

In contrast, the organization’s internal auditor is responsible for evaluating 

the effectiveness of the system of internal control. This individual must be 

independent of the activities that are audited.” Thus, this standard states 

that “for this reason, in most instances, the internal auditor cannot 

properly perform the role of internal control officer.” B-350 states that “the 

IA [internal audit] function should be independent of the internal control 

officer, but should work closely with the internal control officer. 

Limitations should be established on internal control activities where 

those duties overlap. Agencies should identify impairments to the 

independence of the director of internal audit that may be created where 

the director of internal audit is performing the internal control officer 

function. Furthermore, internal audit units should not assume operating 

responsibilities, perform management functions, make management 

decisions, or assume other monitoring roles (e.g., Information Security 

Officer).” 

In responding to OSC’s recommendation, the NYSDOT Executive Deputy 

Commissioner stated that the independence of the internal audit function 

has been preserved by keeping it (the Internal Audit Bureau) 

organizationally separate from the internal control responsibilities (the 

Enterprise Risk Management Bureau). In addition, the NYSDOT official 

who is both the director of audits and the internal control officer told us 

that the department evaluated this organization issue before and after she 

assumed these responsibilities and concluded both times that there is no 

prohibition preventing her from holding both positions in the state 

guidance and law. Further, she said that NYSDOT has made full disclosure 

of this situation and that, in the case of any actual or appearance of a 

conflict of interest, she would be recused from making a decision. OSC 

officials told us in July 2009, however, that there continues to be an 

inherent conflict of interest in being able to effectively maintain 

independence. 

As noted above, we support OSC’s recommendation. While the NYSDOT 

internal audit bureau and the internal control units are separate within the 

Audit and Civil Rights Division, they are both headed by the Director of 

the Division who can override any decisions made by staff in charge of 

those units. The importance of auditor objectivity related to internal 

control is highlighted in the IIA guidance, which indicates that the 

auditor’s objectivity is considered to be impaired if the auditor is involved 

with the implementation of internal control systems. Any work performed 

by an audit organization, regardless of whether safeguards were placed 

between units, still reflects the professional reputation of the entire 

Page NY-17 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

organization. Having responsibility for both managing and auditing an 

activity creates an inherent conflict of interest that potentially weakens 

the integrity of the organization’s oversight. 

NYSDOT officials provided comments on our draft appendix and 

disagreed with our concurrence with OSC’s recommendation. Their main 

arguments against our concurrence included the following: 

• The Director is responsible for implementing and reviewing the 

internal control responsibilities established by the Internal Control 

Act, not implementing the controls themselves. Further, in NYSDOT, 

the Internal Control Officer (the Enterprise Risk Management Bureau) 

does not establish specific procedures and requirements for the 

Department – issuing procedures is a responsibility of agency 

managers. The Director assists managers by facilitating the 

identification and evaluation of risks and coaching management in 

responding to risks which, according to the IIA, are totally appropriate 

roles for the CAE to perform. NYSDOT has established an integrated 

approach to risk management whereby the Internal Control Officer is a 

leader and facilitator, serving as a coordinator – not a manager – of 

risks. Throughout the NYSDOT each manager has responsibility for 

identifying, assessing, and appropriately responding to (e.g. 

controlling) risks within his or her own area. 

• Other than simply stating that the internal audit function and the 

internal control officer function should be separated, OSC did not 

evaluate whether any impairments actually existed at NYSDOT. 

Furthermore, this relationship was fully disclosed in NYSDOT’s annual 

internal control certification and summary report. 

We also discussed this matter further with NYSDOT officials, who told us 

that the Audit and Civil Rights Division interprets the Internal Control Act 

in a manner consistent with IIA standards. In particular, NYSDOT officials 

stated that they have interpreted the act to require that their Enterprise 

Risk Management Bureau provide only guidance and advice to program 

managers on internal controls and that the program managers are 

primarily responsible for implementing internal control programs, 

conducting reviews to assure adherence to controls, and analyzing and 

improving control systems, including providing assurance certifications 

that the Enterprise Risk Management Bureau does not review. In addition, 

the officials said that the Enterprise Risk Management Bureau’s role as an 

advisor on internal control issues is consistent with IIA standards. 

Page NY-18 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

We agree in theory that if the Director merely advises the program 

managers on internal controls there is not a conflict of interest with her 

internal audit role. However, the Director has the legal authority to do 

more than advise. We note that according to B-350, the internal control 

officer should be an individual with sufficient authority to act on behalf of 

the agency head to implement and review the agency’s internal control 

program. We believe that because the NYSDOT internal control officer has 

the legal authority to implement the internal control program on behalf of 

the Commissioner, even if that authority is not fully exercised under the 

Audit and Civil Rights Division’s interpretation of the underlying statute, 

there is the appearance of a conflict of interest. Further, the NYSDOT 

officials told us that the Internal Audit Bureau does not audit the internal 

control programs that program managers are responsible for 

implementing. However, we found that the Internal Audit Bureau reviews 

program internal controls as part of other audits. Also, if the Internal Audit 

Bureau avoids auditing matters on which the Enterprise Risk Management 

Bureau personnel provided guidance and advice, there is a clear 

impairment to the internal auditor’s objectivity. Finally, we note that OSC 

did not assert that impairments took place. OSC simply states that the 

organization has an inherent conflict of interest with this structure. GAO 

agrees that this structure creates an inherent conflict of interest that 

potentially weakens the integrity of the organization’s oversight. 

Therefore, we continue to support OSC’s recommendation. 

Page NY-19 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing Federal Transit 

Administration (FTA) grant programs, including the Transit Capital 

Assistance Program.23 The majority of the public transit funds—$6.9 billion 

(82 percent)—was apportioned for the Transit Capital Assistance 

Program, with $6.0 billion designated for the urbanized area formula grant 

program and $766 million designated for the nonurbanized area formula 

grant program.24 Under the urbanized area formula grant program, 

Recovery Act funds were apportioned to 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 under the nonurbanized area formula 

grant program 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. Up to 10 percent of apportioned 

Recovery Act funds may also be used for operating expenses.25 Under the 

Recovery Act, the maximum federal fund share for projects under the 

Transit Capital Assistance Program is 100 percent.26

FTA Concluded That 

the 50 Percent 

Obligation 

Requirement Was Met 

for New York and 

Urbanized Areas in 

the State, but 

Program Impact Has 

Been Limited by Slow 

Federal Grant 

Approval Process 

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

 

23The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

24Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer then 50,000 people. 

25The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, § 1202, 123 Stat. 1859, 1908 

(June 24, 2009). In contrast, under the existing program, operating assistance is generally 

not an eligible expense for transit agencies within urbanized areas with populations of 

200,000 or more. 

26The federal share under the existing formula grant program is generally 80 percent. 

Page NY-20 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

submit to FTA for Recovery Act funding.27 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant application. Project sponsors must follow the requirements of the 

existing programs, which include ensuring the projects funded meet all 

regulations and guidance pertaining to the Americans with Disabilities Act 

(ADA), pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure disadvantaged business are 

not discriminated against in the awarding of contracts. 

Funds appropriated through the Transit Capital Assistance Program must 

be used in accordance with Recovery Act requirements, including the 

following: 

• Fifty percent of Recovery Act funds apportioned to urbanized areas or 

states are to be obligated within 180 days of apportionment (before 

Sept. 1, 2009) and the remaining apportioned funds are to be obligated 

within 1 year. The Secretary of Transportation is to withdraw and 

redistribute to other urbanized areas or states any amount that is not 

obligated within these time frames.28

• State governors must certify that the state will maintain the level of 

state spending for the types of transportation projects, including 

transit 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 30, 2010.29 This requirement applies only to state 

 

27Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and metropolitan planning organizations designated for the area. 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 TIP and the approved State Transportation Improvement 

Program (STIP). 

28Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

29Pub. L. No. 111-5, § 1201(a), 123 Stat. 115, 212 (Feb. 17, 2009). 

Page NY-21 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

funding for transportation projects. The Department of Transportation 

will treat this maintenance-of-effort requirement through one 

consolidated certification from the governor, which must identify state 

funding for all transportation projects. 

• Project sponsors must submit periodic reports, as required under the 

maintenance-of-effort for transportation projects section (§1201(c) of 

the Recovery Act) on the amount of federal funds appropriated, 

allocated obligated and outlayed; the number of projects put out to 

bid, awarded, or work has begun or completed; project status; and the 

number of jobs created or sustained. In addition, grantees must report 

detailed information on any subcontractors or subgrants awarded by 

the grantee. 

Of the over $1.3 billion of Recovery Act Transit Capital Assistance funding 

that was apportioned to the state of New York or to urbanized areas (UZA) 

that include localities in New York, 98 percent was apportioned through 

the urbanized area formula program. Under the Recovery Act, New York’s 

only large UZA (called the New York—Newark, NY—New Jersey—

Connecticut UZA) was apportioned nearly $1.2 billion in Transit Capital 

Assistance funding. An additional $123.9 million was apportioned to 

medium-sized UZAs with populations ranging from 200,000 to 999,999, and 

nearly $13.7 million was apportioned to the state of New York for small 

UZAs with populations of 50,000 to 199,999. In addition, the state was 

apportioned $26.25 million for transit projects in nonurbanized areas. The 

majority of Transit Capital Assistance funds are administered by transit 

agencies who are designated recipients of this funding. In New York, some 

of the UZAs cross state borders into Connecticut, New Jersey, and 

Pennsylvania.30 These states have long-standing formulas that they use to 

divide the apportionments. For UZAs that contain multiple transit agencies 

within the state, the MPOs work with the transit agencies to develop a split 

agreement which spells out how the apportionment will be divided among 

the various transit agencies in the UZA. NYSDOT administers a small 

portion of the federal transit aid for projects in smaller communities and 

rural areas of the state. 

 

30The jurisdiction of some urbanized areas within a state may cross into at least one other 

state. Therefore, some urbanized areas are included in multiple state totals. 

Page NY-22 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

In March 2009, FTA apportioned over $1.3 billion in Transit Capital 

Assistance Recovery Act funds to the state of New York and urbanized 

areas in the state for transit projects. As of September 1, 2009, FTA 

concluded that the 50 percent obligation requirement had been met for 

New York and urbanized areas located in the state.31

FTA Concluded That the 

50 Percent Obligation 

Requirement Was Met 

New York Transit Agencies 

Are Using Transit Capital 

Assistance 

Apportionments for Fleet 

Improvements and Capital 

Construction 

New York transit agencies submitted grant applications to FTA to use 

Recovery Act Transit Capital Assistance funds to finance a variety of fleet 

enhancement and capital projects that would otherwise not have been 

funded this year. These include rehabilitating or reconstructing existing 

rail and bus buildings, improving rail yards, replacing aging bus fleets with 

clean natural gas buses, and purchasing hybrid buses. MTA sought 

Recovery Act Transit Capital Assistance funding for a number of station, 

infrastructure, and equipment capital rehabilitation projects bundled 

under one grant application worth $393.3 million and funding for a large 

station reconstruction project under another grant application worth 

$266.9 million—for a total of $660.2 million.32 MTA’s smaller Recovery Act 

Transit Capital Assistance projects include rehabilitating or reconstructing 

existing rail and bus buildings, creating new locker/rest facilities for 

transit agency personnel, and installing improved audio systems for the 

hearing impaired. The large capital project is for improvements at the 

Fulton Street Transit Center that will ultimately facilitate access and 

provide intermodal connectivity, among other things. Although MTA’s first 

grant was not awarded until August 13, 2009, according to officials, MTA 

used preaward authority to begin Recovery Act projects in advance of 

FTA’s obligation of the funds. According to officials, as of August 31, 2009, 

MTA has entered into contracts with a total value of $598.8 million for 

projects funded with Transit Capital Assistance Program funds and 

expects to have most projects completed by the end of August 2013. 

We also visited Greater Glens Falls Transit (GGFT), because it was both a 

smaller transit agency and among the first agencies in New York to have 

its Transit Capital Assistance Program grant approved by FTA. GGFT is 

 

31For the Transit Capital Assistance Program, DOT 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. 

32Combining several projects into one application can expedite the approval process and 

provide flexibility to grant recipients to move excess funds from one project to another 

with FTA approval. 

Page NY-23 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

part of a UZA with a population of 50,000 to 199,000 and serves 11 

municipalities in upstate New York. It received a grant for projects worth 

$1.2 million to purchase a hybrid expansion vehicle and for various capital 

projects, including repairing an in-ground lift, upgrading the computer and 

the public information systems, and relocating and rehabilitating the Ridge 

Street bus transfer station in downtown Glens Falls. For a photo of the 

existing transfer station and additional description of this project, see 

figure 3. 

Page NY-24 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Figure 3: GGFT Ridge Street Bus Transfer Station Project 

The Ridge Street Bus Transfer Station in downtown Glens Falls, New York

to be relocated and rehabilitated. The city is in the process of selling the

land it is currently on to a private owner.

Sources: GAO (photographs); and Map Resources (map).

Buffalo

Rochester Syracuse

Glens Falls

Albany

New York

New York

Penn s ylvania

CANADA

Lake Ontario

Vermont

New York

Project

Lead agency 

Description

Recovery Act Funds

Status

Location

Relocation and rehabilitation of

Ridge Street bus transfer station

Greater Glens Falls Transit (GGFT)

Glens Falls, NY

$120,000 out of $1.2 million

awarded to GGFT

Grant has been awarded by FTA

but contract has not been let

Relocation of bus transfer station 

that is currently located on public 

land that the city is in the process

of selling to a private entity. Station 

will be moved 100 to 200 feet down 

the street to a location in front of 

the high-rise pictured below.

As of August 31, 2009, a GGFT official reported that they had awarded 

contracts for projects with a total value of $623,767 that included contracts 

for a hybrid bus, a service truck, and preventive maintenance. GGFT 

expects the Recovery Act projects to be completed by the end of 2010. See 

table 3 for a summary of all GGFT Transit Capital Assistance Recovery Act 

projects. 

Page NY-25 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Table 3: GGFT Transit Capital Assistance Projects 

Project name Project description 

Estimated 

cost

Buy 30-foot bus for expansion Buy 30-foot hybrid bus to provide needed additional capacity and help 

demonstrate the benefits of hybrid propulsion technology in a small 

fleet/small urban environment. 

$575,000

Preventive maintenance Cover capital preventive maintenance expenses for calendar years 2009 

and 2010. 

200,000

Rehabilitate/renovate bus passenger 

shelters 

Redesign and relocate two passenger shelters and information kiosk 

located on Ridge St. in downtown Glens Falls. Also add 2 shelters in other 

areas. Replace electronic display, and install additional lighting and 

benches where needed at high use stops. 

170,000

Acquire shop equipment Rehabilitate/replace existing GGFT in-ground vehicle lift and purchase new 

shop equipment. 

150,000

Acquire miscellaneous support 

equipment 

GGFT’s current telephone, tele-information system, and computer systems 

are outdated and need to be replaced. Existing telephone information 

system is inadequate to customer and service demands. 

100,000

Acquire support vehicles Replace 2000 pick-up truck and acquire new plow and salt spreader for 

maintenance of transit facility in winter months. 

30,000

Project administration Funds used to administer the projects. 17,494

Total $1,242,494

Source: GAO analysis based on GGFT data. 

According to NYSDOT, almost 93 percent of the non-MTA Recovery Act 

Transit Capital Assistance program funding obligated by FTA for the 

urbanized and nonurbanized areas in New York have been for bus 

purchases. Specifically, $134 million of the $144 million FTA obligated for 

New York for non-MTA transit agencies as of September 1, 2009, is being 

used for projects such as buses, including $15.7 million for replacement 

buses for the Capital District Transportation Authority (CDTA). 

NYSDOT and transit agency officials we spoke with told us that they used 

several key criteria for selecting transit projects to be funded under the 

Recovery Act. At the state level, NYSDOT sought new projects that were 

“shovel-ready” or existing projects that were out of funding or could be 

accelerated with Recovery Act funding. Transit agencies used a variety of 

criteria, including evaluating projects to see whether they were needed to 

keep the system in a state of good repair; may save or reduce the amount 

of local tax dollars spent on public transit services, thereby reducing the 

need for local tax increases; or may add or sustain jobs. According to 

NYSDOT, many state and local transit officials told the agency that they 

selected a large percentage of projects for bus replacement to improve 

reliability and lower maintenance costs. Transit agencies, in conjunction 

Page NY-26 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

with the MPO in the region, complied with the public review and outreach 

requirements by posting projects for public comment and holding public 

hearings. 

Transit Agencies Will Use 

Existing Internal Control 

Mechanisms with Some 

Planned Improvements to 

Oversee Recovery Act 

Grants 

Because transit authorities throughout the state rely on FTA grants, they 

must comply with existing FTA oversight requirements pertaining to the 

use of these funds. FTA evaluates grantees’ adherence to grant 

administration requirements through a comprehensive oversight program. 

FTA’s two major oversight mechanisms are Triennial Reviews of grantees 

receiving Section 5307 urbanized area formula grants and State 

Management Reviews of grantees receiving Section 5311 nonurbanized 

area formula grants. The Triennial Review includes a review of the 

grantee’s compliance in 23 areas that include financial management, 

technical, and reporting requirements. Thus, NYSDOT, MTA, and GGFT 

are using existing systems that have been reviewed by FTA and enhanced, 

if necessary, per FTA requirements to track Recovery Act Transit Capital 

Assistance grants and oversee the related contracts. They have also made 

or plan to make some enhancements to these processes as a result of past 

reviews or audits or a desire to provide increased oversight over Recovery 

Act funds. 

Since MTA is responsible for overseeing the most Recovery Act Transit 

Capital Assistance funds of any transit agency in the state of New York, we 

focused on its processes. MTA is required to comply with the New York 

State Governmental Accountability, Audit, and Internal Control Act. In 

accordance with that act, MTA annually prepares an internal control 

certification and summary, which, among other things, describes MTA’s 

internal control program including the identification of high-risk activities 

and control weaknesses. The summary also describes the corrective 

actions MTA has undertaken to resolve those identified weaknesses. The 

risk-based approach takes into account recommendations from prior audit 

findings, MTA management reviews, and internal control testing. MTA 

facilitates monitoring by using a central database to track all audit 

recommendations and the status of corrective actions. 

MTA’s 2008 to 2009 internal control summary identified some significant 

deficiencies with regard to internal controls, including the lack of a robust 

Disadvantaged Minority/Women’s Business Enterprise Program (DMWBE) 

contract tracking methodology in the Office of Civil Rights and an 

estimated 40 percent staffing shortage of New York City subway 

inspectors. MTA took corrective actions to resolve these deficiencies. 

Page NY-27 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

MTA has plans to increase monitoring for Recovery Act funded projects. 

MTA’s internal audit department plans to audit all Recovery Act projects, 

when they would typically only audit a sample of the projects, and MTA 

officials believe they possess the necessary skills and resources to do so. 

In addition, MTA has an independent engineering consultant who will also 

monitor the projects. MTA officials said that it will perform more on-site 

visits to help ensure adequate monitoring of their Recovery Act projects. 

MTA is also coordinating with the MTA Office of the Inspector General 

(OIG), Department of Justice (DOJ), and DOT, to develop a special 

training program that will be targeted to key MTA staff. The training 

program is currently planned for September or October 2009 and will 

focus on complying with the Recovery Act and fraud awareness. 

MTA also is subject to federal oversight. FTA holds quarterly capital 

program oversight meetings on every project with MTA, and MTA submits 

quarterly project reports to FTA. The DOT OIG conducts periodic reviews 

of MTA. According to an MTA OIG official, the DOT OIG is planning to 

increase its risk assessment and control environment reviews for 

Recovery Act oversight. 

GGFT is also required to comply with the FTA review and reporting 

requirements and with the OMB Single Audit requirement. FTA’s fiscal 

year 2007 Triennial Review of GGFT found deficiencies in three areas—

Satisfactory Continuing Control,33 Disadvantaged Business Enterprise 

 

33Satisfactory Continuing Control compliance requires grantees to maintain control over 

real property, facilities, and equipment and ensure they are used in transit service. GGFT 

was found to be deficient, because its contingency fleet plan included vehicles that had 

been sold. 

Page NY-28 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

(DBE),34 and Drug and Alcohol.35 Advisory comments were made in the 

Safety and Security area. FTA determined that GGFT took sufficient 

corrective actions to close the deficiencies. The 2007 Single Audit report 

for GGFT provided an unqualified opinion on its financial statements and 

on each major program, including the FTA Operating Assistance and FTA 

Capital Assistance programs. No significant deficiencies were identified 

related to the audit of major federal awards or audit of financial 

statements. 

New York Transit Agencies 

Are Developing Plans to 

Implement Reporting 

Requirements and Will 

Rely on DOT to Calculate 

Indirect Jobs Creation 

While transit agencies are generally prepared to meet the various reporting 

requirements using existing grant reporting mechanisms, the timing of 

FTA’s Recovery Act reporting guidance and its slight difference from the 

federal Office of Management and Budget (OMB) requirements have 

created some problems. When we met with NYSDOT, GGFT, and the 

Adirondack/Glens Falls Transportation Council—which is the MPO for 

Glens Falls and is reporting for GGFT—the FTA guidance had not yet been 

posted, and both NYSDOT and Adirondack/Glens Falls Transportation 

Council were under the impression that FTA would follow the FHWA 

reporting guidance and had developed plans accordingly. This did not turn 

out to be the case. The main difference between their employment 

reporting requirements is that FTA requires recipients to report on a grant 

basis, while FHWA requires recipients to report on a project basis. In 

addition, FHWA requires reporting on more types of data. For example, 

FTA requires recipients to report the total number of hours associated 

with direct jobs attributed to the grant that will be paid by Recovery Act 

funds, whether worked by the recipient’s staff, contractors, or 

 

34DBE compliance requires a grantee to comply with the DOT’s policy that DBEs are 

ensured nondiscrimination in the award and administration of DOT-assisted contracts. 

Grantees also must create a level playing field on which DBEs can compete fairly for DOTassisted contracts; ensure that only firms that fully meet eligibility standards are permitted 

to participate as DBEs; help remove barriers to the participation of DBEs; and assist the 

development of firms that can compete successfully in the marketplace outside the DBE 

program. GGFT was found to be deficient because procurement files for trolley buses 

reviewed during the site visit did not include the required Transit Vehicle Manufacturer 

DBE certification. 

35Drug and Alcohol compliance requires grantees to have a drug and alcohol testing 

program in place for all safety-sensitive employees. GGFT was found to be deficient 

because GGFT had hired 15 local school bus operators to operate trolley service during the 

summer and believed that the school bus operators’ drug and alcohol testing program with 

the school district was sufficient. GGFT was not aware of the requirement to conduct a 

pre-employment test for these school bus drivers prior to allowing them to perform safetysensitive work in accordance with FTA Drug and Alcohol regulations. 

Page NY-29 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

subcontractors. FHWA, on the other hand, requires recipients to report for 

each contractor or consultant on a project the number of project 

employees, the total number of hours those employees worked, and the 

total amount of wages paid. 

For each Recovery Act project, MTA told us that its agencies will calculate 

employment data for their own staff and collect the required information 

from contractors. This is the first time MTA has asked contractors to 

count jobs. To do so, according to officials, MTA included language in 

Recovery Act contracts requiring contractors to report the number of fulltime equivalent employees (FTEs) that are on a Recovery Act job to 

comply with OMB’s requirements. However, MTA reported that the FTA 

guidance requires recipients to report work hours. On September 10, 2009, 

MTA reported that it was developing a reporting system to capture both in 

house and third party work hours for the purposes of federal reporting. 

NYSDOT and GGFT also had questions concerning how to calculate direct 

jobs created from equipment purchases made with Recovery Act funding 

versus how to count jobs created from Recovery Act funded construction 

projects. MTA also had concerns about calculating FTEs from work hours. 

An MTA official said MTA will need to determine the “normal” hours 

worked in a year for each job title and divide the “normal” number of 

hours by four to determine the quarterly hours worked. 

MTA expects to have some jobs data to report in October. However, 

NYSDOT reported that the impact of Recovery Act funds has been limited 

by the time it took to obligate the funds. As such, NYSDOT said that many 

transit agencies might not have contracts awarded by September 30, 2009, 

and, therefore, will not have associated jobs to report. Also, after the 

recipients get their money, it can take up to a year to get delivery of 

certain items, such as buses. 

Transit agencies have limited plans to track performance measures other 

than those required for federal reporting. GGFT officials told us that they 

also planned to track local tax dollars saved as a performance measure, 

but that other metrics to measure improvements to the quality of service 

and maintenance of a state of good repair are more difficult to identify. 

MTA did not have plans to track additional performance measures beyond 

what was being required of them to report. However, MTA was open to 

considering reporting additional performance measures, such as the 

number of stations rehabilitated and customer satisfaction before and 

after the rehabilitation. 

Page NY-30 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or 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. 

The Department of 

Energy Has Approved 

New York’s 

Weatherization Plan, 

but Implementation 

Has Been Delayed by 

Davis-Bacon Act 

Concerns 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE has provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

that all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing 

wage, including fringe benefits, as determined by the Davis-Bacon Act.36

Because the Davis-Bacon Act had not previously applied to 

weatherization, the Department of Labor (Labor) had not established a 

prevailing wage rate for weatherization work. In 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. Labor then 

surveyed five types of “interested parties” about labor rates for 

weatherization work in each of the 50 states. 37 The department completed 

 

36The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. See Pub. L. No. 111-5, § 1606, 123 Stat. 115, 303 (Feb. 17, 

2009). 

37The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page NY-31 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

establishing prevailing wage rates in all the 50 states and the District of 

Columbia by September 3, 2009. 

DOE officials approved New York’s weatherization plan on June 26, 2009, 

and provided an additional 40 percent of the state’s allocation for the 

Weatherization Assistance Program funded by the Recovery Act. This 

brought the total funds provided New York to $197.3 million. According to 

officials, in anticipation of DOE’s approval, the New York State Division of 

Housing and Community Renewal (DHCR) sent out contract application 

packages to the 64 subgrantees that implement the program, so they could 

apply for funding under the Recovery Act. According to officials, as of 

August 31, 2009, nine contract applications with the subgrantees have 

been approved by the state, obligating $27.5 million of Recovery Act funds, 

though none has been spent. Meanwhile, according to officials, several 

other contract applications have been received and are currently being 

reviewed. DHCR expects to have additional contract applications 

approved shortly and all of the contract applications approved by October 

15, 2009. 

A major issue, according to program officials, in the submission of 

contracts by the subgrantees to DHCR for approval has been the 

uncertainty regarding the impact of the Davis-Bacon Act on Recovery Act 

funding for the Weatherization Assistance Program. The Davis-Bacon Act 

requirements do not apply to the annual weatherization program funded 

by grant awards from DOE and the Low Income Home Energy Assistance 

Program. Until Labor posted prevailing wage rates on September 3rd, the 

subgrantees had to estimate what these rates would be in their preparation 

of their budgets for their proposed use of Recovery Act funds in the 

weatherization program. DHCR has allowed the subgrantees the option of 

submitting contracts now and amending them later when the wage rates 

were established or waiting until the rates were established before 

submitting their contracts for review and approval. 

In preparation for establishing wage rates for New York, Labor sent wage 

surveys to each of the 64 subgrantees conducting weatherization work in 

the state. These surveys were due back on July 31, 2009. DHCR provided 

guidance to the subgrantees for completing this survey. According to 

DHCR, almost all of the subgranteess submitted the survey. 

The impact of Davis-Bacon on the Weatherization Assistance Program in 

New York goes beyond the establishment of prevailing wage rates. 

Because the only weatherization activities subject to Davis Bacon are 

those funded by the Recovery Act, subgrantees have to determine a 

Page NY-32 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

strategy of how to incorporate it into their overall program. One strategy 

that subgrantees can use is to subcontract all weatherization work funded 

by the Recovery Act in order to limit the impact of Davis-Bacon to just 

those subcontractors. Other subgrantees that use their own employees to 

do most of their weatherization work are hoping that the wage rates 

established by Davis-Bacon will be similar to what they pay now. It would 

be difficult for them to pay different wages to their workers doing the 

same work based on whether or not the weatherization work was funded 

by the Recovery Act or some other source, according to program officials. 

If the prevailing wage rates established are significantly higher than the 

rates currently being paid, DHCR officials are concerned that the number 

of units weatherized and workers hired to do the work may be fewer than 

what would have occurred if the Davis-Bacon Act had not been applied to 

weatherization projects funded by the Recovery Act. DHCR officials were 

hopeful that the wage rates established for many counties will be similar 

to those already paid by the subgrantees who, in many areas, are the 

predominant supplier of weatherization services. Thus, the impact of 

Davis-Bacon on the program would be minimal. 

Further, the administrative tasks required under Davis-Bacon, such as 

wage verification, visits to job sites, and weekly payrolls, are new to the 

subgrantees and represent a cost not previously experienced by the 

program. DHCR coordinated training sessions on September 2nd in 

Syracuse and September 10th in New York City on the proper 

administration of Davis-Bacon requirements. All subgrantees were 

encouraged to attend one of these sessions that were presented by Labor. 

According to DHCR officials, another potential programmatic impact of 

Davis-Bacon is that it might reduce the weatherization activities that are 

eligible for funding. To be eligible for funding under the Weatherization 

Assistance Program, an activity must generally achieve a Savings to 

Investment Ratio (SIR) of at least one. That is, one dollar invested, one 

dollar saved. DHCR officials are concerned that, if wage rates rise 

significantly due to Davis-Bacon, some activities such as window or door 

replacement may no longer be able to achieve the required SIR figure. This 

would preclude them from being completed as part of the weatherization 

program. 

Though no Recovery Act funds have been spent to date, DHCR said that 

the subgrantees have been expanding their operational capabilities 

through such actions as hiring and training additional staff and purchasing 

vans and trucks. The subgrantees have been able to do this by using their 

Page NY-33 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

allocation of annual weatherization funding provided by DOE and the Low 

Income Home Energy Assistance Program in anticipation of Recovery Act 

funds being available shortly. Likewise, DHCR has been using two 

contractors to provide ongoing training sessions for subgrantees’ workers. 

DHCR is using funds from it normal weatherization program to fund all of 

its activities to date, including those related to the Recovery Act 

weatherization program. 

State Officials Plan to Use 

a Variety of Accountability 

Approaches to Monitor the 

Use of Recovery Act 

Weatherization Funds 

DHCR officials stressed that an extensive fiscal and program monitoring 

system was in place for the weatherization program prior to the passage of 

the Recovery Act. Though the Recovery Act greatly increased the funding 

available for the program, the state plans to use its current program 

infrastructure to absorb this funding increase. It expects that its existing 

network of subgrantees will be able to expand the program to 

accommodate the increase in funding provided by the Recovery Act 

through the expansion of their in-house capabilities, employing additional 

subcontractors, or a combination of these two approaches. DHCR 

anticipates that some of the subgrantees will demonstrate a greater ability 

to expand production more than others. For that reason, DHCR set aside 

$65 million from its allocation of Recovery Act funds to direct additional 

funding to those subgrantees most able to make use of it in weatherizing 

additional housing units. 

DHCR uses a few mechanisms to perform oversight. DHCR conducts an 

annual review of each subgrantee and program inspectors and fiscal staff 

conduct 9 to 12 field visits to each agency. DHCR also reviews the Single 

Audits conducted of each subgrantee in the weatherization program and 

requires corrective action plans for any findings detected by these audits. 

These corrective action plans are monitored by DHCR to ensure that any 

issues are addressed. At the state level, there are no open findings from 

the state’s Single Audit related to the Weatherization Assistance Program. 

DHCR officials provide technical assistance to address any problems 

discovered based on their review of a subgrantee’s performance. They do 

not characterize subgrantees as high risk or low risk. Based on their 

experience, DHCR officials said that the performance of subgrantees can 

change dramatically in a short period of time for various reasons, 

including the turnover of key personnel. Therefore, they maintain a high 

level of monitoring for all of the subgrantees in its weatherization 

program. 

Page NY-34 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

In addition to its normal monitoring process, DHCR has established a 

Weatherization Assistance Program database that allows DHCR to monitor 

monthly production goals against actual work completed. When a contract 

with a subgrantee funded by the Recovery Act is awarded, DHCR 

advances 25 percent of the contract award to the subgrantee. Further draw 

downs of Recovery Act funds will only be permitted based on the actual 

work completed. In addition, according to agency officials, the 

subgrantees are required by DHCR to ensure that Recovery Act funds be 

clearly separated from the regular weatherization funding that they 

receive. For example, subgrantees are required to have a separate bank 

account for Recovery Act funds. Further, all work done using Recovery 

Act funds must be clearly identified and separate from work funded from 

other sources. Recovery Act funds cannot be co-mingled with other 

funding. 

DHCR has indicated that it intends to use its share of Recovery Act funds 

earmarked for administration to increase the resources available for onsite technical assistance provided to subgrantees, as well as increase the 

number of staff available for on-site monitoring of the program. Particular 

emphasis will be placed on both assisting and monitoring the 

implementation of Davis-Bacon by the subgrantees. 

Finally, to facilitate procurement of bulk weatherization materials for the 

program, the New York State Weatherization Directors’ Association 

annually solicits suppliers to establish a statewide price schedule for 

various weatherization materials. According to officials, this solicitation is 

conducted in accordance with state procurement guidelines and allows 

subgrantees to purchase weatherization materials in bulk at statewide 

negotiated prices. According to DHCR, the Buy American provision of the 

Recovery Act should not have a major impact on this procurement effort. 

State Officials Are 

Preparing to Measure the 

Impact of Recovery Act 

Weatherization Funds and 

to Meet Its Reporting 

Requirements 

DHCR intends to use DOE performance measures to determine the impact 

of Recovery Act weatherization funds in their state. For example, DHCR 

will use DOE methodology to measure the energy savings achieved by the 

use of Recovery Act funds in the weatherization program. With regard to 

job creation and retention, DHCR is waiting for guidance from DOE on 

how to measure and report these figures. It intends to follow that guidance 

in reporting on job creation and retention. Similarly, DHCR will comply 

with any other DOE guidance for measuring the impact of Recovery Act 

funds, as well as provide training to the subgrantees regarding compliance 

with any DOE requirements. 

Page NY-35 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

New York is considered the prime recipient, as defined by OMB, for 

weatherization funds provided by the Recovery Act, and DHCR is 

responsible for administering the weatherization program for the state. 

The 64 subgrantees that operate the weatherization program for DHCR are 

considered subrecipients. DHCR intends to collect all data required by 

DOE for reporting purposes from the 64 subgrantees and report these data 

for them. DHCR officials said that they already collect all of the 

information that they expect DOE to require except figures for job 

creation and retention. In addition, DHCR officials intend to perform 

quality reviews of the data submitted by the subgrantees to detect and 

correct any omissions or errors in the data being reported by the 

subrecipients. Once DOE has issued final guidance to DHCR on the 

reporting requirements under the Recovery Act, addressing such 

outstanding issues as job creation and retention, DHCR will issue guidance 

to its subgrantees. 

The Recovery Act provides an additional $1.2 billion in funds for the 

Workforce Investment Act (WIA) Youth program, including summer 

employment. Administered by the Department of Labor (Labor), the WIA 

Youth program is designed to provide low-income in-school and out-ofschool 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

New York Exceeded 

Its Goal for the 

Number of Youth 

Served in the WIA 

Program This 

Summer, Despite 

Facing Challenges 

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,38 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

 

38H.R. Rep. No. 111-16, at 448 (2009). 

Page NY-36 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

funds.39 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job (2) learn 

work readiness skills on the job, and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.40 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

New York was awarded about $71.5 million in Recovery Act WIA Youth 

funds. The New York State Department of Labor (NYSDOL), the agency 

responsible for overseeing the state’s WIA Youth Program, allocated $60.8 

 

39Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

40Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page NY-37 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

million (85 percent of the total WIA Youth Recovery Act funds) to 33 local 

workforce investment areas (LWIA) within the state. NYSDOL used $3.35 

million of their 15 percent WIA Youth state set-aside funds to fund the 

State Parks’ Conservation Corps Initiative. According to a local official, 

the state encouraged LWIAs to try to spend all of their funding as soon as 

possible to stimulate the economy. State officials estimated that as of 

August 31, 2009, $34.6 million was spent by the LWIAs. NYSDOL 

established a goal of serving about 23,600 youths in WIA Youth summer 

employment programs; it reported that it exceeded that goal and placed an 

estimated 24,208 youths in summer employment, as of August 15, 2009. 

According to Labor data as of July 31, 2009, a majority of these were youth 

14 to 18 years old. Of all participants, 27 percent were out-of-school youth 

and less than one percent were veterans (see table 4). We visited Oneida 

County Workforce Development41—the government entity that implements 

the WIA Youth program in Oneida County—and two of their summer job 

sites and two employers.42 The county served approximately 230 youth as 

of August 31 and will place another 15 in jobs, almost reaching its target of 

250 youth participants. 

Table 4: Demographics of New York State WIA Summer Youth Employment 

Participants as of July 31, 2009 

Category Number of youth 

Percent of all youth in 

summer employment

Youth 14 to 18 years old 15,114 71

Youth 19 to 21 years old 4,730 22

Youth 22 to 24 years old 1,531 7

Total 21,375 100

Source: Labor data based on data reported by the states. 

 

41Oneida County Workforce Development is part of Working Solutions, the Workforce 

Investment Board that serves Herkimer, Madison, and Oneida Counties. 

42Scheduling conflicts with other federal and state auditors limited our ability to visit our 

second planned site visit, the New York City workforce development office. 

Page NY-38 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Oneida County Found 

Solutions to Challenges It 

Faced in Quickly 

Expanding Its WIA Youth 

Program and Now Aims to 

Retain Older Youth in the 

Workforce 

In our previous bimonthly report, local officials cited challenges regarding 

youth eligibility, adequate supervision, and transportation for youth. 

Oneida County staff found it more difficult this year to determine the 

eligibility of applicants for the WIA Youth program than in previous years 

because of the inclusion of older youth. Officials said that older youth that 

are not employed or in school often do not have documentation of their 

identity, such as a birth certificate or social security card, their household 

income, or their citizenship. Oneida County hired four employees from 

May to December 2009 to assist the applicants with documentation of their 

eligibility. Officials overcame such challenges as finding meaningful work 

opportunities with adequate supervision and transportation for youth to 

job sites by contacting local employers with existing relationships with 

Oneida County Workforce Development and placing youth in jobs within a 

mile of their homes. In addition, a local workforce official said that Oneida 

County has managed stand-alone summer youth employment programs 

funded by other sources in recent years and its familiarity with the process 

allowed it to expand the program quickly. 

During our visit, Oneida County workforce officials said that their current 

challenge is retaining older youth, ages 19 to 24, in the workforce or in 

pursuing some form of education after the summer program ends. An 

official said connections that older youth made with the workforce 

development community could be lost if youth do not have existing 

education or work plans when the program ends. Oneida County will 

engage the older youth from their summer youth employment program 

year-round by providing continued job counseling and giving them priority 

to enter a year-round workforce program that will begin this year. 

Individual work sites also encouraged year-round involvement by allowing 

summer participants access to a computer lab all year, providing tours to a 

local community college and Job Corps facility, and providing military 

enlistment information. Next year, Oneida County plans to offer summer 

youth employment opportunities for older youth with other funding 

sources if additional Recovery Act funds are not awarded. 

Oneida County Aimed to 

Place Youth in Jobs within 

High-Demand Trades 

Oneida County Workforce Development placed approximately 230 youth 

in 38 summer employment work sites using WIA Recovery Act funds, as of 

August 31, 2009. Approximately 75 percent of the youth were employed at 

public sector work sites, with the remaining 25 percent of youth at 

nonprofit work sites. (For more information on work sites, see fig. 4.) 

Officials placed an estimated 70 percent of the youth in jobs that included 

occupational skills training, much of it focused on the construction trade 

due to the demand for those skills. For example, youth rehabilitated 

Page NY-39 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

houses for the Utica Municipal Housing Authority. Officials said about 10 

percent of the jobs were defined as “green” jobs and included some 

environmental and green technology. For example, at a work site we 

visited where youth constructed an Internet café for veterans, they learned 

about recycled construction materials and energy-efficient light bulbs (see 

fig. 5). 

Figure 4: Percentage of Youth Working at Oneida County WIA Summer Youth 

Employment Work Sites as of August 31, 2009 

3%

7%

8%

13%

Healthcare

Maintenance

Construction

Percent of youth 

Work sites by industry

Source: GAO analysis of Oneida County Workforce Development data.

Child care/youth care

Clerical

Elderly/social services

15%

54%

Page NY-40 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Figure 5: Internet Café Constructed by WIA Summer Youth Participants 

Similar conditions of walls before construction The internet café space at 85% completion

Sources: GAO (photographs); and Map Resources (map).

Buffalo

Rochester Syracuse

Utica

Albany

New York

New York

Penn s ylvania

CANADA

Lake Ontario

Vermont

New York

Project

Lead agency 

Description

Recovery Act Funds

Status

Location

WIA summer youth employment

program

Oneida County Workforce

Development

Utica, NY

$43,000

Completed

Program for low-income youth to 

learn job skills during the summer 

by constructing an internet café 

for veterans

In addition, youth out of school could enroll in a General Education 

Diploma (GED) training course for 3 hours a day outside of their work 

hours and get paid for 2 of the 3 hours. Officials said that programs for 19 

to 24-year-olds included more occupational training, while programs for 14 

to 18-year-olds included more academic skills training due to, among other 

things, restrictions imposed by labor laws on working conditions for 

minors. Some youth were taught work-appropriate behavior and discussed 

their personal growth in the program with supervisors. The youth 

Page NY-41 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

constructing the Internet café were asked by their employer to sign a code 

of conduct that governed their behavior at the work site, requiring such 

things as respect to others, proper dress, and language. Another work site 

we visited employed mentally and physically handicapped youth between 

the ages of 17 and 19 at a community park. The youth were taught skills 

related to taking initiative, having ethics in the workplace, and using 

proper language. 

Oneida County Uses 

Various Monitoring 

Techniques to Safeguard 

Its Summer Youth 

Employment Program and 

Measure Outcomes 

Related to Participation 

and Work Readiness 

To increase monitoring of the Recovery Act-funded program, Oneida 

County hired four employees temporarily to manage the monitoring of this 

program from May to December 2009. They worked to ensure all eligibility 

documentation was obtained before youth were employed; regularly 

performed site visits to all work sites throughout the summer to visually 

inspect them for safety hazards and use of safety equipment; and checked 

that appropriate work activities and adequate supervision were provided. 

According to local officials, each employer entered into a contract with 

Oneida County Workforce Development, detailing the specific work 

experiences to be provided and including a statement that two staff 

members would always be on site. One vendor had a process to support 

correct attendance counts each day for youth employed in landscaping 

activities. In this case, youth signed in and signed out with a manager at 

one central location before and after going to their work site, which could 

change daily. 

The county measures completion and drop-out rates, daily attendance, and 

work readiness determinations of youth before and after the program. As 

of August 31, the completion rate for Oneida County was 87.5 percent and 

the drop-out rate was 12.5 percent. Of those that completed the 

employment, 100 percent attained work readiness. 

Page NY-42 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

Table 5: Outcomes of Participants at Two Oneida County WIA Work Sites 

 Site A: number 

(percent)

Site B: number 

(percent)

Completion 

Enrolled 30 20

Completed 26 (86.7) 18 (90)

Work readiness 

Achieved 26 (100) 18 (100)

Future plans 

Employed 5 (19) 5 (28)

Applied to community college 4 (15) 4 (22)

Have or plan to take GED test 4 (15) 8 (44)

Applying for job in trade 3 (12) 3 (17)

Applied for year-round youth employment program 0 (0) 14 (78)

Source: Utica Municipal Housing Authority and Mohawk Valley Community College. 

In addition, each youth jointly completed an individual service plan with a 

job counselor that documents the youths’ short-term and long-term goals, 

among other things. Some program managers revisited the individual 

service plan with the youth at the end of the program. Local officials said 

that the daily attendance of older youth, ages 19 to 24, was higher than 

they expected based on similar programs they had conducted in the past. 

One local work site official said some youth associate the program with 

President Obama and, as a result, feel an obligation to complete the 

program. 

NYSDOL Plans to Conduct 

Initial Reviews of Each of 

the 33 LWIAs by November 

2009 to Help Assure 

Compliance with Recovery 

Act Requirements 

As the agency responsible for administering WIA for New York, NYSDOL 

has a monitoring system in place to oversee the WIA Youth program and 

the activities of the LWIAs. For example, NYSDOL auditors plan to visit 

each of the 33 LWIAs by November 2009. The state anticipates visiting 23 

of the LWIAs by September 2009. These initial reviews will consist of 

verifying that each LWIA has a budget and spending plan in place for 

Recovery Act funds to help ensure that expenditures, accruals, and 

obligations are properly reported and documented. Each LWIA will be 

required to complete a questionnaire to assess their ability to comply with 

the requirements of the Recovery Act and to determine if additional 

technical assistance is required. 

Page NY-43 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

After these initial visits, NYSDOL intends to continue monitoring a sample 

of the LWIAs with an emphasis placed on those LWIAs determined to pose 

the highest risk. This monitoring, which will continue through the life of 

the Recovery Act, involves both a fiscal and programmatic review. Among 

the key programmatic elements reviewed are adherence to workforce 

safety guidelines, conformity with applicable federal and state laws in 

regards to both wage and work requirements, and the eligibility of 

participants. The review is also expected to determine whether local areas 

are using Recovery Act funds as a supplement to their regular funding and 

not supplanting those funds. 

NYSDOL Is Preparing to 

Measure the Outcomes of 

Recovery Act Funding for 

the WIA Summer Youth 

Employment Program to 

Meet Its Reporting 

Requirements, but Does 

Not Anticipate Meeting the 

10-Day Reporting Deadline 

NYSDOL officials said that each of the LWIAs regularly reports to it and 

will continue to report on the achievement of work readiness by the 

participants in their summer youth employment program. LWIAs did 

request a waiver from Labor for reporting work readiness for ages 14 to 17 

because they felt that the measure was less applicable to this age group, as 

their WIA experience tended to emphasize educational experiences. The 

waiver has not been approved yet, as of August 31. NYSDOL allows each 

LWIA to develop its own work readiness measure, but the state reviews it 

before it can be implemented. For long-range outcomes, NYSDOL will 

track outcomes for those youth that were enrolled in Recovery Act-funded 

WIA summer youth employment activities and later receive youth services 

supported by regular WIA funding. 

For reporting purposes, NYSDOL officials said the agency is the prime 

recipient and each of its 33 LWIAs are subrecipients. NYSDOL officials 

said that they will gather the data from the LWIAs, consolidate it, and 

report it for them in order to comply with the Section 1512 reporting 

requirements of the Recovery Act. They already gather extensive data 

from the LWIAs through their Management Information System and they 

anticipate modifying it to obtain whatever data are needed to comply with 

anticipated requirements. NYSDOL noted that a major issue in complying 

with these requirements was the delay in obtaining guidance from Labor 

on what it will require. This guidance was not issued until August 14, 2009. 

This delay has hampered their effort to provide guidance to the LWIAs on 

what is expected from them. More detailed information on NYSDOL’s 

planned monitoring of Recovery Act expenditures can be found in GAO’s 

previous bimonthly report. 

NYSDOL officials raised a concern about the 10-day reporting requirement 

deadline. They do not believe that any state with multiple work areas, such 

as New York with 33 LWIAs, will be able to comply with that requirement 

Page NY-44 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

unless estimates are used in place of actual numbers. If actual numbers 

are required, it will take 20 to 30 days after the end of the quarter to come 

up with reliable figures. 

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.43 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. Recovery Act requirements specify that public housing 

agencies must obligate funds within 1 year of the date on which they are 

made available to public housing agencies, expend at least 60 percent of 

funds within 2 years, and expend 100 percent of the funds within 3 years. 

Public housing agencies are expected to give priority to projects that can 

award contracts based on bids within 120 days from the date on which the 

funds are made available, as well as projects that rehabilitate vacant units, 

or those already underway or included in their current required 5-year 

capital fund plans. 

Public Housing 

Agencies Have Made 

Progress Utilizing 

Recovery Act Funds 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million); 

• gap financing for projects that are stalled due to financing issues ($200 

million); 

• public housing transformation ($100 million); and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

 

43Public housing agencies receive money directly from the federal government (HUD). 

Funds awarded to the public housing agencies do not pass through the state budget. 

Page NY-45 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

will be threshold-based, meaning applications that meet all the threshold 

requirements will be funded in order of receipt. If funds are available after 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

New York State has 84 public housing agencies that have received 

Recovery Act formula grant awards through the Public Housing Capital 

Fund, totaling $502.3 million. Though we visited three housing agencies for 

our previous report, we did not visit any housing agencies for this report 

cycle. However, we continued to monitor the use of Recovery Act funding 

by the 84 public housing agencies in New York State. As of September 5, 

2009, 59 of the state’s 84 public housing agencies have obligated $154.4 

million, while 43 have expended $2.9 million, as illustrated by figure 6. 

Figure 6: Percentage of Public Housing Capital Funds Allocated by HUD That Have Been Obligated and Drawn Down in New 

York as of September 5, 2009 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

100%

$502,345,293

Funds obligated 

by public housing agencies

30.7%

$154,407,656

Funds drawn down

by public housing agencies

0.6%

$2,926,859

59

Number of public housing agencies

Source: GAO analysis of HUD data.

84

43

Page NY-46 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

The New York Recovery Cabinet is taking several actions to help agencies 

comply with reporting requirements. For example, the Governor’s Office 

has designated an individual to oversee Section 1512 Recovery Act 

recipient reporting requirements. In June 2009, this individual met with 

key officials in each agency, including finance, internal control, and 

program staff, to determine whether agency staff understood 1512 

reporting requirements and were developing plans and procedures to help 

ensure that the requirements will be met in a timely manner. In addition, 

the New York State Division of the Budget contracted with a consultant to 

(1) assess the optimal approach (centralized, decentralized, or hybrid) to 

be used when reporting to the federal government; (2) assess state 

agencies’ ability to meet Section 1512 reporting requirements; (3) provide 

assistance to agencies identified as high risks in complying with the 

reporting requirements, and (4) assess the state’s ability to conduct 

centralized quality assurance procedures for accurate and complete 

reporting to the federal government. The Governor’s Office identified 26 

agencies or prime recipients, including MTA, that are responsible for 

complying with the reporting requirements.44 To help ensure that the state 

meets its reporting requirements over the course of the Recovery Act, the 

state also issued a request for proposal for a Recovery Act consultant to 

serve on a longer-term basis in assisting state agencies. 

New York Is Focusing 

Guidance and 

Training Efforts on 

Meeting Reporting 

Requirements, but 

Concerns Remain 

The consultant has taken several actions to help New York meet its 

reporting requirements. The consultant prepared a survey that was sent to 

the 26 agencies, which are subject to the 1512 reporting requirements. The 

consultant was to analyze the results of the survey, work with the state to 

develop risk criteria, and assign a risk rating to each agency and program. 

This work was to be completed during the first week of July 2009.45 Based 

on the state’s estimate, 16 to 18 of the 26 agencies that are subject to 

Recovery Act reporting are considered high risk. For those agencies and 

programs assessed as high risk, the consultant is conducting follow-up 

workshops to (1) assess ability to report required data or data element 

 

44According to the Governor’s Office, they have compiled an inventory of prime recipients 

that is maintained and updated as necessary by the Recovery Cabinet. Inventories of 

subrecipients are being maintained by the agency making the subaward or contract. 

45On August 18, 2009, we requested survey results, which include a list of agencies that are 

considered high risk. However, as of September 16, 2009, we still had not received the list. 

Page NY-47 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

capability,46 (2) assist agencies in meeting reporting requirements, and (3) 

identify any gaps with the Recovery Act requirements. In addition, the 

state has used a consultant to provide training on reporting requirements 

to agencies and other recipients. For example, the consultant conducted 

an in-person training session on section 1512 reporting requirements for 

state personnel in June and a Webinar for non-state prime recipients or 

subrecipients (such as local governments, nonprofits, and contractors) on 

section 1512 reporting requirements in July.47 Additional training via Web 

cast is scheduled for September 10th. The recovery czar said that 200 

people attended the in-person training and 1,500 people attended the 

Webinar. 

On August 6, 2009, the New York recovery czar issued guidance to state 

agencies about the collection of Recovery Act Section 1512 reporting data. 

New York has chosen the decentralized approach for reporting recipient 

information, so each state agency that is a prime recipient will report 

directly to www.federalreporting.gov. In addition, the guidance states that 

each agency will report both prime recipient and subrecipient data and 

that prime recipients will not delegate reporting responsibility to a 

subrecipient. For example, DHCR intends to collect all the data required 

by DOE for reporting purposes from the 64 subgrantees running the state’s 

weatherization program and report it for them. In addition, prime 

recipients who receive funds directly from a federal agency, such as MTA, 

will also report directly to www.federalreporting.gov. 

According to the Governor’s Office, many of the state agencies have 

reporting plans in place, but they vary in their thoroughness of planning 

and capabilities. Officials in the Governor’s Office said that they are less 

concerned about agencies such as NYSDOT and NYSDOL, which are very 

experienced with federal reporting requirements, than some of the 

programs or agencies, such as the weatherization program, that are relying 

on local community-based organizations to administer Recovery Act 

funds. Such local organizations may not have experience with federal 

reporting requirements. 

 

46The specific data elements to be reported by prime recipients or subrecipients includes 

award type, description, amount of Recovery Act funds expended to projects/activities, 

project status, number of jobs created and retained, and amount awarded to and received 

by subrecipients. 

47This Webcast is archived at www.recovery.ny.gov. 

Page NY-48 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

New York State is also taking measures to help ensure accurate and 

complete reporting of the state’s data elements. For example, the 

consultant is assessing the state’s 1512 data element capability and quality 

assurance capability. In addition, officials at the Governor’s Office said 

that they will begin working on a formal process regarding data quality 

reviews and that it plans to involve the state’s quality control office. 

According to the Governor’s Office, on August 4, affected agencies were 

informed that they are required to incorporate quality control measures 

related to Section 1512 reporting in their internal control and audit plans. 

The Governor’s Office said that those plans will be reviewed soon to 

determine whether agencies have complied with this requirement. It is 

also developing a standard checklist of items that should be reviewed in 

the 1512 data quality control process for distribution to the agencies and 

plans to designate an individual to provide central oversight of agency 

compliance with quality control standards. 

According to the Governor’s Office, subrecipients will provide information 

to state agencies, which will assess the quality of the data and identify any 

issues such as double counting. A state official said that some 

subrecipients may submit reports on paper, which will require agencies to 

perform data entry. The state official also said that agencies are prepared 

to make phone calls between September 30th and October 10th to get the 

reports from sub-recipients. According to Office of the State Comptroller 

(OSC) officials, New York State has good systems to capture financial 

data, but it does not have good systems to capture measurement or impact 

data, such as the number of jobs created. The financial information in the 

state’s central accounting system will be used along with agency-specific 

reporting on individual projects/activities to meet Recovery Act quarterly 

reporting requirements. The state officials also said that the contract 

information for state agencies can be obtained in real-time from Open 

Book, which is managed by OSC.48

The Governor’s Office said that it is not certain about the extent of the 

program results it will report on October 10, 2009. In addition, an official 

from the Governor’s Office said that some federal agencies are requiring 

recipients to track other performance measures. However, the official said 

that this can create confusion because OMB has separate requirements 

from the federal agency with whom a recipient normally interacts. For 

 

48Open Book does not include financial data for agencies, such as MTA, that receive funds 

directly from federal agencies. 

Page NY-49 GAO-09-1017SP Recovery Act
Appendix XIII: New York 

example, while OMB requires recipients, such as MTA, to report the 

number of FTEs on a Recovery Act job, FTA guidance requires the same 

recipients to report work hours. 

We provided the Governor of New York with a draft of this appendix on 

September 9, 2009. Representatives from the Governor’s Office and the 

oversight agencies responded on or about September 11, 2009. In general, 

except for NYSDOT’s disagreement with our concurrence with OSC’s 

recommendation on the potential conflict of interest issue, they agreed 

with our draft and provided some clarifying information, which we 

incorporated. We addressed NYSDOT’s comments in the respective 

section. The officials also provided technical suggestions that were 

incorporated, as appropriate. 

Susan Fleming, (202) 512-4431, or flemings@gao.gov 

Dave Maurer, (202) 512-9627, or maurerd@gao.gov 

In addition to the contacts named above, Ronald Stouffer, Assistant 

Director; Barbara Shields, Analyst-in-Charge; Jeremiah Donoghue, Holly 

Dye, Colin Fallon, Christopher Farrell, Emily Larson, Sarah McGrath, 

Tiffany Mostert, Joshua Ormond, Summer Pachman, Frank Putallaz, and 

Yee Wong made major contributions to this report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page NY-50 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

The following summarizes GAO’s work for the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in North Carolina. The full report covering all of our work in 16 

states and the District of Columbia is available at 

http://www.gao.gov/recovery/. 

Overview 

Our work in North Carolina focused on three programs funded under the 

Recovery Act—the State Fiscal Stabilization Fund (SFSF) administered by 

the U.S. Department of Education (Education), Highway Infrastructure 

Investment funds administered by the U.S. Department of Transportation’s 

Federal Highway Administration (FHWA), and the Weatherization 

Assistance Program administered by the U.S. Department of Energy 

(DOE). Because SFSF is a new program and the state has disbursed funds 

to localities, we reviewed the SFSF to determine how the state was 

managing the allocation and distribution of funds. We also reviewed 

selected localities’ planned expenditures and contracting procedures for 

education Recovery Act funds, including those that expanded existing 

funding under Title I, Part A of the Elementary and Secondary Education 

Act (ESEA) and Part B of the Individuals with Disabilities Education Act 

(IDEA). In addition, we reviewed contracts for highway projects using 

Highway Infrastructure Investment funds that have been underway in 

North Carolina for several months, including oversight of these contracts. 

As we have done in our previous reports, we reviewed the Weatherization 

Assistance Program because it is considered a high-risk area because it 

will receive significantly more funds than in prior years. For each program, 

we reviewed the planning and preparation efforts in place for the October 

2009 Recovery Act recipient reporting requirement. In addition to these 

programs, we also reviewed challenges that rural small localities have 

faced in accessing Recovery Act funds because several state officials have 

told us that this is an area of risk in the state. We also reviewed and 

analyzed preliminary data collected by the North Carolina League of 

Municipalities (NCLM) on municipalities’ efforts to pursue Recovery Act 

funds. We determined this information to be reliable for our purposes. 

Also, we updated information on North Carolina’s budget situation and 

how the Recovery Act funds will be used to stabilize the budget. 

Recovery Act funds are being directed to helping North Carolina stabilize 

its budget and support local governments, and to stimulate infrastructure 

Recovery Act

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

Page NC-1 GAO-09-1017SP 
Appendix XIV: North Carolina 

development and expand existing programs that will provide needed 

services and potential jobs. 

Budget • On August 7, 2009, the Governor of North Carolina signed the budget 

bill (SB 202) into law, after the state used continuing resolutions to 

keep the government operating from June 30—the end of the prior 

fiscal year—until the budget was signed. 

• To close the state’s $4.8 billion shortfall, the state is using $1.4 billion 

of Recovery Act funds, making $2 billion in cuts to the state budget, 

and closing the remaining gap with $1.4 billion in tax and fee increases. 

• Beginning in October 2008 and continuing through May 2009, the North 

Carolina Division of Medical Assistance (DMA) overbilled the federal 

Centers for Medicare & Medicaid Services (CMS) and received $291 

million for federal reimbursement for Qualified Public Hospital 

medical claims under Medicaid. The overbilling occurred because a 

DMA employee, who was new to this area of responsibility, 

erroneously requested federal reimbursement for this program rather 

than state funding. However, according to state officials, none of the 

$291 million in overbillings involved Recovery Act funds. Nevertheless, 

this will impact the state’s 2010 budget. To begin repaying the 

overbillings, the North Carolina Department of Health and Human 

Services (NCDHHS) requested $160 million less in federal 

reimbursement than actual Medicaid expenditures incurred by the 

state for the period covered by the July 31, 2009 reimbursement. The 

NCDHHS anticipates paying the balance in quarterly installments over 

the remainder of fiscal year 2010 by reducing the federal 

reimbursement for its actual expenditures. 

U.S. Department of 

Education State Fiscal 

Stabilization Fund; ESEA 

Title I, Part A; and IDEA, 

Part B Funds 

• Education had approved North Carolina’s application for the state’s 

SFSF award and released $1 billion to the state as of August 19, 2009. 

• The state approved 115 applications from local educational agencies 

(LEA) and 96 applications from charter schools,2

 which are also LEAs, 

for SFSF funds and released the funds in August 2009. 

 

2

A charter school LEA must receive SFSF funding on the same basis as other LEAs in the 

state. State law determines whether a charter school is an LEA or a school within an LEA. 

Page NC-2 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

• As of September 1, 2009, the state had allocated $129 million in ESEA 

Title I, Part A and $130 million in IDEA, Part B funds awarded under 

the Recovery Act to LEAs. The state reported that as of August 31, 

2009, LEAs had expended about $9.6 million and $27 million, 

respectively, for these two programs. 

• LEAs GAO visited reported using Recovery Act funds to save jobs of 

school personnel. 

• State officials report that after receiving guidance from Education they 

are developing a comprehensive plan for monitoring SFSF use at the 

local level. 

Highway Infrastructure 

Investment 

• FHWA apportioned $736 million in Recovery Act funds to North 

Carolina. As of September 1, 2009, the federal government had 

obligated $452.9 million for North Carolina and $38 million had been 

reimbursed by the federal government. 

• As of September 1, 2009, the North Carolina Department of 

Transportation (NCDOT) had advertised for bids for 101 proposed 

contracts representing a total value of $386 million in estimated 

Recovery Act funding. Of the 101 proposed contracts, 88 contracts had 

been awarded for $348 million, and work has begun on 77 of these 

contracts representing a total value of about $330 million. Many of 

these contracts involve road paving. 

• Based on the high-profile nature of the Recovery Act, the FHWA—NC 

Division has increased oversight for Recovery Act highway projects. 

• NCDOT is using its established process for awarding and overseeing 

contracts for Recovery Act highway projects. 

• NCDOT anticipates meeting the October 2009 recipient reporting 

requirements for Section 1512 (c) of the Recovery Act. 

Weatherization Assistance 

Program 

• Of the $132 million in Recovery Act weatherization funding North 

Carolina is expected to receive, DOE has provided $66 million. State 

weatherization officials are in the process of disbursing approximately 

$13 million of the Recovery Act weatherization funds to local 

weatherization agencies to fund start up activities such as buying 

equipment and vehicles and funding public awareness campaigns. 

Page NC-3 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

• State weatherization officials do not have any concerns associated 

with incorporating the Recovery Act weatherization requirements, 

such as compliance with the Davis-Bacon Act, or with monitoring the 

use of funds. 

• State weatherization officials plan to follow both the normal and 

Recovery Act reporting requirements, which include programmatic 

quarterly reports, monthly financial status reports, and Office of 

Management and Budget (OMB) Section 1512 reporting requirements. 

Officials do not anticipate having any challenges with respect to 

complying with these reporting requirements in a timely manner. 

Rural Issues • North Carolina includes approximately 550 municipalities and 100 

counties, many of which are small or rural. According to U.S. 

Department of Agriculture 2008 estimates, about one-third of the 

state’s residents lived in nonmetropolitan counties, and these counties 

had higher poverty rates and lower income than the statewide 

averages. 

• North Carolina municipalities rely on a variety of sources in obtaining 

information about the Recovery Act that include federal, state, and 

nonprofit sectors. Officials from North Carolina’s Office of Economic 

Recovery and Investment (OERI) told us that they have held a series of 

informational workshops across the state since April 2009 designed to 

provide a question and answer forum for local officials and the general 

public. Still, officials in three of the municipalities we visited reported 

a variety of challenges identifying information about Recovery Act 

funding opportunities, such as navigating a “maze” of funding 

opportunities and having staff-capacity issues. 

• Several North Carolina state officials told us that many of the state’s 

small towns and cities have been historically understaffed and may 

lack the expertise to apply for and administer federal grants. Local 

officials we interviewed expressed concerns about their capacity to 

apply for and administer Recovery Act funding. For example, officials 

in two localities told us that they lack funds to meet the federal 

matching requirements or other up-front costs needed for some 

Recovery Act programs. 

Recipient Reporting • OERI has undertaken initiatives to help ensure state agency Section 

1512 Recovery Act Recipient Reports are complete, accurate, and 

submitted on time. 

Page NC-4 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

• Based on the results of an assessment, the OERI official in charge of 

reporting issues told us that he has a high level of confidence that 

North Carolina state agencies will be ready to submit the required 

reports in October. 

• As of September 4, 2009, none of the respondents to a state survey on 

subrecipient delegation and data quality requirements reported they 

were planning to delegate reporting responsibility to subrecipients. 

• Some state officials indicated concerns with the methodology to be 

used for measuring jobs created or retained. 

On August 7, 2009, the Governor of North Carolina signed the biennial 

budget bill (SB 202) into law, after the state used continuing resolutions to 

keep the government operating from June 30—the end of the prior fiscal 

year. The biennial budget includes about $19 billion in appropriations for 

fiscal year 2010 and $19.5 billion in appropriations for fiscal year 2011. In 

developing the budget, the North Carolina Legislature faced a $4.8 billion 

budget shortfall in fiscal year 2010. To close this shortfall, the state is 

using $1.4 billion of Recovery Act funds, making $2 billion in cuts to the 

state budget, and closing the remaining gap with $1.4 billion in tax and fee 

increases, according to state officials. Although the legislature cut many 

state agency budgets, certain areas of the budget received proportionately 

smaller cuts. For example, state budget officials told us that the state 

Department of Public Instruction (DPI) took a relatively small funding cut 

relative to the size of the agency’s budget. Although agencies will be 

operating at 95 percent of their budgets for several months, officials from 

the Office of State Budget and Management (OSBM) said they plan to ease 

restrictions on agencies’ discretionary spending put in place for the 2009 

state fiscal year. According to state officials, regarding tax increases, the 

budget included increased income and sales tax rates. 

North Carolina Used 

Recovery Act Funds 

to Mitigate State’s 

Budget Shortfall 

In order to better track the flow of Recovery Act funds in North Carolina, 

OSBM continues to develop an electronic data collection system. The new 

system will serve as the state’s Recovery Act tracking tool and will pull 

data from several state accounting and procurement systems in order to 

present a more comprehensive accounting of Recovery Act funds. OSBM 

officials noted that it is their goal to have this system available by 

February 2010. 

Page NC-5 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

According to officials with the North Carolina Department of Health and 

Human Services (NCDHHS) and the North Carolina Office of the State 

Auditor, beginning in October 2008 and continuing through May 2009, the 

North Carolina Division of Medical Assistance (DMA) overbilled the 

federal Centers for Medicare & Medicaid Services (CMS) and received 

$291 million for federal reimbursement for Qualified Public Hospital 

medical claims under Medicaid. The overbilling occurred because a DMA 

employee, who was new to this area of responsibility, erroneously 

requested federal reimbursement for this program rather than state 

funding. According to the officials, none of the $291 million in overbillings 

involved Recovery Act funds. 

Although the overbillings did not involve Recovery Act funds, this will 

impact the state 2010 budget. After the Medicaid billing error was 

discovered, the Secretary of NCDHHS met with CMS officials on July 22, 

2009, to self-report the overbillings and to discuss how to repay the $291 

million. CMS and NCDHHS officials agreed that North Carolina would 

make its first repayment of the funds in the amount of $160 million on July 

31, 2009. This repayment was done by requesting $160 million less in 

federal reimbursement than actual expenditures incurred by the state for 

the period covered by the July 31, 2009 reimbursement. The NCDHHS 

anticipates paying the balance in quarterly installments over the remainder 

of state fiscal year 2010 by reducing the federal reimbursement for its 

actual expenditures. 

The Recovery Act created a State Fiscal Stabilization Fund (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 be used to alleviate shortfalls in state support for 

education to school districts and public institutions of higher education 

(IHEs). The initial award of SFSF funding required each state to submit an 

application to the U.S. Department of Education that provides several 

assurances, including that the state will meet maintenance-of-effort 

requirements (or it will be able to comply with waiver provisions) and that 

it will implement strategies to meet certain educational requirements, such 

as increasing teacher effectiveness, addressing inequities in the 

distribution of highly qualified teachers, and improving the quality of state 

academic standards and assessments. In addition, states were required to 

make assurances concerning accountability, transparency, reporting, and 

compliance with certain federal laws and regulations. States must allocate 

81.8 percent of their SFSF funds to support education (these funds are 

North Carolina Overbilled 

Medicaid, Which Will 

Reduce State Fiscal Year 

2010 Federal Medicaid 

Reimbursements 

Recovery Act Funds 

for Education 

Page NC-6 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

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). 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 

school districts or public IHEs. When distributing these funds to school 

districts, states must use their primary education funding formula, but they 

can determine how to allocate funds to public IHEs. In general, school 

districts maintain broad discretion in how they can use stabilization funds, 

but states have some ability to direct IHEs in how to use these funds. 

The Recovery Act provides $10 billion to help local educational agencies 

(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 (ESEA) of 1965.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 current statutory and 

regulatory requirements and must obligate 85 percent of these funds by 

September 30, 2010.3

 The U.S. Department of 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. The U.S. Department of Education made the 

first half of states’ Recovery Act ESEA Title I, Part A funding available on 

April 1, 2009 and announced on September 4, 2009 that it had made the 

second half available. 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of the Individuals with Disabilities Education Act (IDEA), 

the major federal statute that supports the provisions of early intervention 

and special education and related services for infants, toddlers, children, 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-aged children with disabilities have access to a free and 

appropriate public education and is divided into two separate grants—Part 

B grants to states (for school-age children) and Part B preschool grants 

(section 619). Part C funds programs that provide early intervention and 

 

3

 LEAs 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 NC-7 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

related services for infants and toddlers with disabilities—or at risk of 

developing a disability—and their families. The U.S. Department of 

Education made the first half of states’ Recovery Act IDEA funding 

available to state agencies on April 1, 2009 and announced on September 

4, 2009 that it had made the second half available. 

State Fiscal Stabilization 

Funds Help North Carolina 

Address Large Budget 

Shortages 

In its May 2009 SFSF application, North Carolina cited an “extreme and 

historic revenue shortfall” that resulted in the state ordering most of its 

agencies to return 11 percent of their state funding to the state. The state 

also reported it had adopted several budget restrictions, including freezing 

purchases of goods and services, limiting travel, and prohibiting the filling 

of most vacant positions. Also, the state cited an urgent need for funding 

to meet personnel costs, specifically requesting $127 million in SFSF funds 

to cover May and June payroll for state IHEs. The state made required 

assurances, including that it would meet Recovery Act maintenance-ofeffort requirements by maintaining state support for education at no less 

than fiscal year 2006 levels of $7.0 billion for elementary and secondary 

education and $2.6 billion for public IHEs. The state also indicated it 

would not use SFSF funds to restore state funding to elementary and 

secondary education in fiscal year 2009, but would use $127 million cited 

above for IHEs in fiscal year 2009. For 2010, the state projected using $721 

million for elementary and secondary education, but that it would not use 

SFSF funds for IHEs. Education approved North Carolina’s application 

and, as of August 19, 2009, had released to the state $1.0 billion of its $1.4 

billion total allocation. 

An official from the state budget office told us the state is in the process of 

amending its SFSF application and now plans to use approximately $3.9 

million of its governments services fund award to support North Carolina 

Virtual Public School (NCVPS) program courses. NCVPS provides online 

courses to high school students throughout the state. The government 

services fund monies would support a portion of the instructional costs of 

providing the courses in Spring semester 2010. 

North Carolina’s Department of Public Instruction (DPI) required LEAs to 

apply for education stabilization funds by June 30, 2009. A North Carolina 

education official told us they modeled the LEA application for SFSF 

funds after the applications from a number of states, including California. 

The application required LEAs to make several assurances concerning the 

use and reporting of SFSF funds. For example, LEAs must assure they will 

administer SFSF funds in accordance with federal laws, including specific 

provisions of the Recovery Act, federal regulations, and state requirements 

Page NC-8 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

for school facility construction. Although North Carolina was required to 

assure that it would make progress toward educational reforms as a 

condition of receiving SFSF funds, the state did not require LEAs to certify 

that they would make such progress. While the state cannot tell LEAs how 

they must use SFSF funds, Education’s guidance for the program 

specifically notes that a governor “may require an LEA to describe in its 

local application how the LEA will assist the state in advancing essential 

reforms in the four areas for which the state provides assurances in its 

application for Stabilization funds.”4

 According to a state Department of 

Public Instruction official, the department did not require the education 

reform assurances in the LEA applications, but they directed LEAs to 

Education’s guidance on the SFSF program. Further, the state official with 

responsibility for overseeing SFSF emphasized that they were committed 

to making progress toward education reforms, and said that they have 

accountability measures in place to monitor progress. 

DPI officials report that all 115 of North Carolina’s LEAs, and the state’s 96 

charter schools, which are also LEAs, applied for education stabilization 

funds. State officials said they reviewed and approved applications as they 

were received, and as of August 25, 2009, all applications had been 

approved. DPI notified North Carolina’s LEAs of their allocation amounts 

and made the funds available to LEAs on August 19, 2009. As of that date, 

the state had allocated $380 million of education stabilization funds to 

LEAs. In addition to education stabilization funds, North Carolina had 

allocated, as of September 1, 2009, $129 million in ESEA Title I, Part A 

funds and $130 million in IDEA Part B funds. As of August 31, 2009, the 

state reported that LEAs have expended $14.3 million in SFSF funding, 

$9.6 million in ESEA Title I, Part A funds, and $27 million in IDEA, Part B 

funds. 

 

4

The four areas of education reform from the Recovery Act as described by Education are: 

(1) making improvements in teacher effectiveness and addressing inequities in the 

distribution of highly qualified teachers, (2) making progress toward rigorous college and 

career-ready standards and assessments that are valid and reliable for all students, (3) 

providing targeted, intensive support and effective interventions to turn around schools 

identified for corrective action or restructuring, and (4) establishing a pre-K-throughcollege data system to track student progress and foster improvement. 

Page NC-9 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

North Carolina Developing 

Plans to Monitor Local Use 

of Education Stabilization 

Funds 

State officials told us they have not yet developed specific plans to 

monitor local use of SFSF funds, but are now doing so in response to 

guidance Education issued on August 27, 2009. Specifically, the 

guidance—issued as a letter to state officials via Education’s listserv for 

SFSF grantees—references statutory and regulatory requirements with 

which SFSF grant recipients must comply and advises recipients that they 

must have a comprehensive SFSF monitoring plan in place that includes a 

monitoring schedule, monitoring policies and procedures, data-collection 

instruments, monitoring reports and feedback to subrecipients, and 

processes for verification of implementation of corrective actions at the 

subrecipient level. 

DPI officials told us they planned to rely on existing procedures for 

monitoring LEAs’ uses of funds. The existing procedures, according to the 

DPI official responsible for overseeing SFSF, include reviews of LEAs 

budgets and expenditures to ensure that expenditures comply with stateapproved budgets. The official also said they trained certified public 

accounting firms in monitoring the spending of federal funds, and then 

review the firms’ annual financial statement audits of LEAs. 

Also, a DPI official told us they are modifying the state’s data collection 

system to capture additional data elements required to meet recipient 

reporting requirements of the Recovery Act. Specifically, the state official 

reported that they currently capture a majority of required data elements, 

but that they would need to put procedures in place to capture elements 

they do not collect, such as jobs created. The state official said that the 

information that DPI reported for the October quarterly report required 

under the Recovery Act would only capture expenditures by LEAs through 

the end of August. The official also said that they would not be able to 

report data through the end of September because that would not give 

them sufficient time to ensure the accuracy and completeness of the data. 

Rural LEAs Visited GAO visited two LEAs in North Carolina to better understand the issues 

facing rural LEAs and to review contracting practices when Recovery Act 

funds are used. We chose Lincoln County Schools and Perquimans County 

Schools because they are located in rural counties and information we 

obtained from the state DPI indicated both counties had used Recovery 

Act funds to contract for services. Lincoln County Schools had a total 

school year 2007-2008 budget of about $100 million. The LEA’s 24 schools 

served 12,193 students and employed 1,810 persons in school year 2007-

2008. Perquimans County serves 1,800 students through four schools and 

employs about 150 licensed personnel. The Perquimans school 

Page NC-10 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

superintendent told us that the LEA’s student population has been 

decreasing annually, which, in turn, has led to a decrease in funds from 

state and federal sources. Officials in both LEAs told us they were facing 

budget shortages. 

Rural LEAs Reported 

Recovery Act Funds Help 

Address State Budget Cuts 

and Will Be Used to Save 

Jobs 

Officials in both LEAs told us they are using Recovery Act funds to offset 

budget reductions. Lincoln County’s school superintendent told us the 

LEA had two overarching goals for its use of Recovery Act funds: first, to 

save jobs, and second, to preserve the integrity of classroom instruction by 

minimizing class-size increases. Lincoln officials also expressed concern 

that budget cuts will prevent the LEA from continuing some of the 

educational reforms it had already put in place. 

Lincoln County school officials reported they were able to use Recovery 

Act ESEA Title I funds to save teaching jobs, and SFSF funds to save 

support positions. A Lincoln official told us they plan to use the LEA’s 

$2.8 million in SFSF funds primarily to save 119 custodial and clerical 

positions, which were cut as a result of state budget cuts. He also told us 

they will use Title I funds to save the jobs of 24 teacher assistants and that 

IDEA funds will help save the jobs of 9 teachers and 11 teacher assistants. 

Under both IDEA and Title I, a Lincoln official said the district took steps 

when retaining positions to ensure they did not violate federal 

“supplement, not supplant” requirements. The supplement, not supplant 

requirements of ESEA and IDEA generally require that federal funds must 

only supplement the funds that would, in the absence of federal funds, be 

made available from non-federal sources (for Title I) or state, local or 

other federal funds (for IDEA). 

While federal funds have helped to save jobs, Lincoln officials still 

anticipate decreasing teaching positions, and, as a result, class sizes will 

increase. While committed to maintaining class size at current levels in 

kindergarten through grade 3, officials said they anticipate increasing class 

size by one student in grades 4 through 12, but may have to increase class 

size by two students in high schools. Also, officials said that they will 

reduce the number of hours some clerical staff work and leave some 

vacant positions unfilled. Officials said that Recovery Act IDEA funds 

would allow them to expand services for exceptional children. For 

example, Lincoln has hired two “interventionists” who will work with 

regular classroom teachers modeling effective instructional interventions 

in reading and mathematics. These two positions are funded for the two 

years the LEA will receive Recovery Act funds. Lincoln officials also said 

that additional IDEA funds will help address the needs resulting from an 

Page NC-11 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

increase in the population of exceptional children they serve, particularly 

children with hearing impairments and autism. 

The Perquimans County School district is facing a similar fiscal situation 

to that of Lincoln County and has also prioritized saving jobs. The school 

superintendent said the LEA relies heavily on state funding, but the state 

budget lowered funding for the LEA every year. He also said the LEA 

began planning for budget cuts last year and has been successful in 

bringing in additional funding from grants for which it applied. The school 

superintendent told us Recovery Act funding will get the LEA through this 

school year, but once Recovery Act funds are expended, the LEA is likely 

to face a “funding cliff” that will result in the LEA being in the same fiscal 

position it is now. Perquimans officials said they had ideas for innovative 

practices they would have liked to implement with education stabilization 

funds, but with the continued deterioration of the state funding to 

education, the LEA must use all funds available to it to save jobs. 

Perquimans officials said they will use the Title I funds to save jobs in 

extended day and preschool programs as well as IDEA funds to save jobs. 

One Perquimans official told us they are working with a state university to 

provide telespeech services for 23 students and plan to use Recovery Act 

IDEA funds to pay for these services. That official told us this effort has 

the potential of saving the LEA money. 

Both LEAs reported they have received guidance from the state on the use 

of education stabilization funds. Perquimans officials told us most of the 

information they have received on Recovery Act education programs came 

from the state, but they sometimes have sought information directly from 

Education or other federal sources. Likewise, a Lincoln County official 

said they had received preliminary guidance from state officials and that 

the state’s guidance to LEAs has improved as Education has released more 

guidance. Lincoln County officials also told us they shared all guidance 

they have received with teachers and other employees. 

LEAs Cite Challenges in 

Procurement 

Officials in both LEAs told us they face challenges in finding qualified 

contractors. Perquimans officials said their LEA relies heavily on 

contractors to provide needed services for exceptional students because it 

is difficult to find the specialized staff exceptional children need, and in 

some cases, they need to solicit contractors from as far away as Virginia. 

Perquimans officials told us they had received some guidance from DPI on 

contracting with Recovery Act funds, and reported using Recovery Act 

funds to pay for contracted services. Due to the shortage of qualified 

contractors locally, Perquimans officials reported they plan on issuing a 

Page NC-12 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

sole-source contract for these services. A Perquimans official reported to 

us that they often need to research and solicit contractors individually in 

order to find a qualified person to meet their needs. The same Perquimans 

official said that they often contact surrounding LEAs to identify qualified 

contractors with which those districts have worked. One official also 

reported that contracts usually set a maximum payment to contractors 

based on a set wage rate and estimated number of hours to be spent on 

contract activities. They told us that contracts are generally for one school 

year. Lincoln officials also said they often consult with other LEAs that 

have needs similar to their own in order to identify qualified contractors. A 

Lincoln official also reported that the typical period of contract 

performance is for the duration of the school year and generally contracts 

are fixed price, based on a per student cost. However, Lincoln officials 

told us they do not anticipate using Recovery Act funds for contracting.5

Nonetheless, according to a Lincoln official responsible for contracting, 

their procurement policies and procedures are based on those of DPI and 

require a formal process for all contract solicitations over $90,000. The 

official stated for contract solicitations with an estimated value between 

$30,000 and $90,000 the LEA would use a less-formal process that includes 

a letter of interest to potential bidders and the solicitation of at least three 

bids. The procurement official stated that all procurements over $100,000 

must be approved by the local Board of Education. 

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the FederalAid 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, which include ensuring the project 

meets all environmental requirements associated with the National 

Environmental Policy Act (NEPA), paying a prevailing wage in accordance 

with federal Davis-Bacon Act requirements, complying with goals to 

ensure disadvantaged businesses are not discriminated against in the 

Transportation: 

Highway 

Infrastructure 

Investments 

 

5

We selected Lincoln County for review based on information from DPI that indicated that 

Lincoln County had contracted for IDEA services with Recovery Act funds. However, 

during our site visit, Lincoln County officials informed us that what had been reported as 

contracted services was actually a reclassification of costs from the LEA’s state funding 

account to the federal Recovery Act account due to reversions in state aid. 

Page NC-13 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

awarding of construction contracts, and using American-made iron and 

steel in accordance with Buy America 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. 

The Federal Highway Administration—North Carolina (FHWA—NC) 

Division is one of the 52 operating federal-aid Division Offices of the 

federal Highway Administration (FHWA) and is located in Raleigh, North 

Carolina. The FHWA—NC Division is responsible for administrating the 

federal-aid highway program to help maintain the integrity and safety of 

North Carolina’s roads and bridges. The staff has technical expertise and 

other resources, and provides oversight and coordination of the federalaid program in North Carolina. The North Carolina Department of 

Transportation (NCDOT) is the primary recipient of all federal-aid 

highway funds in North Carolina. The NCDOT is responsible for building, 

repairing, and operating highways, bridges, and other modes of 

transportation, including ferries, in North Carolina. 

Overview The U.S. Department of Transportation’s FHWA apportioned $736 million 

to North Carolina in March 2009 for highway infrastructure and other 

eligible projects. As of September 1, 2009, $452.9 million6

 has been 

obligated for mainly pavement improvement projects. Also, funds have 

been obligated for 101 contracts either begun or advertised for bids. Based 

on the high-profile nature of the Recovery Act, the FHWA—NC Division 

has increased oversight for Recovery Act highway projects. According to 

agency officials, the NCDOT is using its established process for awarding 

and overseeing contracts for Recovery Act highway projects. Moreover, 

the NCDOT anticipates meeting the October 2009 recipient reporting 

requirements for Section 1512 (c) of the Recovery Act. 

 

6

This does not include obligations associated with $4.9 million of apportioned funds that 

were transferred from the FHWA to the Federal Transit Administration (FTA) for transit 

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

made available for transit projects to FTA. 

Page NC-14 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

As we reported in July 2009, $736 million was apportioned to North 

Carolina in March 2009 for highway infrastructure and other eligible 

projects. As of September 1, 2009, $452.9 million had been obligated.7

 As of 

September 1, 2009, $38 million had been reimbursed by FHWA.8

Almost 83 percent of Recovery Act highway obligations for North Carolina 

have been for pavement projects. Specifically, $376.6 million of the $ 452.9 

million obligated as of September 1, 2009, is being used for pavement 

projects. As reported in our April 2009 report, NCDOT officials told us that 

they identified these projects based on Recovery Act direction that priority 

is to be given to projects that are anticipated to be completed within a 3-

year time frame, and that are located in economically distressed areas. 

Figure 1 shows obligations by the types of road and bridge improvements 

being made. 

Recovery Act Funds Have 

Been Obligated for NCDOT 

and Expended Mainly for 

Pavement Improvements 

Projects 

 

7

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 contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project agreement. 

8

States request reimbursement from FHWA as the state makes payments to contractors 

working on approved projects. 

Page NC-15 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Figure 1: Highway Obligations for North Carolina by Project Improvement Type as 

of September 1, 2009 

Bridge improvement ($12.7 million)

Other ($52.2 million)

New road construction ($57.2 million)

Pavement widening ($137.5 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($182 million)

Pavement projects total (83 percent, $376.6 million)

Bridge projects total (5 percent, $24.2 million)

Other (12 percent, $52.2 million)

40%

30%

3%

Bridge replacement ($11.5 million)

12%

13%

3%

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

According to the NCDOT, as of September 1, 2009, the Department had 

publicized contract opportunities for 101 proposed contracts representing 

a total value of $386 million in estimated Recovery Act funding. According 

to officials, of the 101 proposed contracts, 88 contracts had been awarded 

for $348 million, and work has begun on 77 of these contracts representing 

a total value of about $330 million. According to an NCDOT official, 

approximately 40 of the 101 proposed contracts that had been solicited, 

representing $82 million, are anticipated to be complete by December 1, 

2009. 

FHWA—NC Division 

Oversight Increased for 

Recovery Act Projects 

According to the FHWA—NC Division officials, the division will provide 

oversight of all Recovery Act highway projects based on the high-profile 

nature of the Recovery Act and its Risk Management Plan for the Recovery 

Act. These officials stated that prior to the Recovery Act, the FHWA—NC 

Page NC-16 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Division typically provided full oversight of federal-aid projects only when 

the projects were on the National Highway System (NHS)9

 or if the project 

would be added to the Interstate Highway System. FHWA—NC Division’s 

full oversight of projects includes coordination, review, and approval of 

several steps in the planning and project-development phase and in the 

design and construction phase. Normally, for those federal-aid projects not 

subject to the FHWA—NC Division’s full oversight, the division, after 

approval of the environmental decision document, delegated authority to 

the NCDOT for the remaining design and construction steps without 

project review by the FHWA—NC Division. 

The FHWA—NC Division increased its oversight for Recovery Act projects 

based on a Risk Management Plan, completed on March 27, 2009, for such 

projects. The Risk Management Plan identified six major risk areas that 

needed to be managed for the successful implementation of Recovery Act 

projects: 

• quality of plans, specifications, and the engineering cost estimate; 

• conformance to federal-aid regulations by projects administered by 

local governmental agencies; 

• adherence to civil rights provisions; 

• construction monitoring and quality assurance in materials; 

• fiscal oversight and eligibility of costs; and 

• achievement of Recovery Act program goals. 

The FHWA—NC Division will provide oversight of all Recovery Act 

projects. For all Recovery Act projects that affect the NHS, the FHWA—

NC Division will continue its traditional full oversight of these projects. 

For all other Recovery Act projects, the FHWA—NC Division will provide 

more limited oversight. This oversight will include reviewing each project 

in regard to the first five risk areas cited above and monitoring NCDOT 

reporting of Recovery Act data for the program goal achievement risk 

area. Also, the FHWA—NC Division will check whether (1) the project is 

 

9

The NHS includes the Interstate Highway System as well as other roads important to the 

nation’s economy, defense, and mobility. The NHS was developed by the Department of 

Transportation (DOT) in cooperation with the states, local officials, and metropolitan 

planning organizations (MPO). According to an FHWA—NC Division official, the NHS for 

North Carolina includes about 1,000 miles of interstate and about 5,400 miles of other 

designated highways. 

Page NC-17 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

on the State Transportation Improvement Plan,10 (2) environmental and 

right-of-way documentation is included, and (3) plans, specifications, and 

the engineering cost estimate are included. Additionally, the FHWA—NC 

Division conducts project preconstruction scoping reviews during the 

design stage on several Recovery Act projects. During construction of the 

Recovery Act projects, the FHWA—NC Division plans to conduct at least 

one construction inspection on each Recovery Act project. 

Established NCDOT 

Process for Awarding and 

Overseeing Contracts for 

Highway Projects Will 

Remain the Same under 

the Recovery Act 

According to NCDOT, its process for awarding and overseeing contracts 

for highway projects funded under the Recovery Act has not changed 

except for processes to collect data for the new reporting requirements 

under the Recovery Act. According to NCDOT officials, the NCDOT uses 

the same overall process for awarding contracts involving Recovery Act 

projects as it does for other federal-aid highway projects. Contracts valued 

over $1.2 million are awarded by the NCDOT headquarters in Raleigh, 

North Carolina and contracts valued at or below $1.2 million may be 

awarded by NCDOT’s 14 divisions11 or the NCDOT headquarters. 

According to NCDOT officials, prior to July 1, 2009, contractors bidding on 

projects through the 14 highway divisions that were at or below $1.2 

million were not required to be prequalified. However, after July 1, 2009, 

all contractors, regardless of the contract amount, are required to be 

prequalified as responsible contractors by NCDOT to be eligible for 

contract award. According to NCDOT officials, this change did not occur 

as a result of the Recovery Act but was a process improvement to make 

the prequalification requirements the same for all contractors. NCDOT 

officials told us that their prequalification process includes a review of the 

company’s financial position, the number and skill sets of its labor force, 

its equipment, and its safety record. Specifically, officials told us that 

NCDOT examines the company’s prior year’s audited financial statements 

and documentation on (1) a surety company’s willingness to issue 

performance and payment bonds for its work, (2) the company’s safety 

citations including those for any safety-related injuries, (3) the company’s 

labor workforce including its skill certifications, (4) the condition and 

 

10 The State Transportation Improvement Plan is a 7-year outline of the state’s 

transportation priorities and needs identified through the development of the 

comprehensive transportation plan prioritized by each local planning organization and 

presented to the North Carolina Board of Transportation for programming. 

11 NCDOT has 14 highway divisions and each division represents a number of counties. 

Page NC-18 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

maintenance of its equipment, and (5) the capacity of the company to 

perform the type of work required. Also, included in the prequalification 

process is an examination of the contractor’s Non-Collusion Affidavit12 and 

Debarment Certification13 covering the prior 3 years (from the date of the 

contractor’s application for prequalification) which are submitted with the 

contractor’s application for prequalification. NCDOT’s prequalification of 

a contractor generally covers a three-year period, with annual updates for 

any changes in officers or safety record and annual affidavits regarding 

noncollusion. According to NCDOT officials, a contractor involved in 

nonperformance of a contract will be removed from NCDOT’s list of 

prequalified contractors and not allowed to bid on future contracts. 

According to officials, after authorization of the project by the FHWA—NC 

Division, NCDOT, using its normal process for federal-aid projects, solicits 

bids by mailings to established contractors, placing legal notices in 

newspapers with statewide circulation, and posting the invitation for bids 

on NCDOT’s official Website. Further, any bids received that are 10 

percent above or 15 percent below the NCDOT engineering project cost 

estimate are specifically reviewed by the bid review committee to examine 

whether the bid proposal includes omissions or errors in material 

quantities. Also, a FHWA—NC Division official said that a FHWA—NC 

Division representative attends the deliberations of the NCDOT bid review 

committees as a nonvoting member for federal-aid projects (including 

Recovery Act projects) over $1.2 million. FHWA—NC Division officials 

said that the nonvoting observer role of its representative in these 

deliberations is designed to avoid problems in awarding the contract. For 

NCDOT Highway Division-awarded contracts (valued at $1.2 million or 

less), the FHWA—NC Division conducts a postaward review of selected 

contracts to assess whether the NCDOT Highway Division has followed 

NCDOT policies and procedures. 

 

12 The Non-Collusion Affidavit states “The person executing the bid, on behalf of the 

Bidder, being duly sworn, solemnly swears (or affirms) that neither he, nor any official, 

agent, or employee of the bidder has entered into any agreement, participated in any 

collusion, or otherwise taken any action which is in restraint of free competitive bidding in 

connection with this bid, and that the Bidder intends to do the work with its own bonafide 

employees or subcontractors and is not bidding for the benefit of another contractor.” 

13 According to a March 16, 2009, invitation to bid on a contract, Debarment Certification 

essentially requires the bidder to certify that it and its principals are not presently 

debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded 

from covered transactions by any federal department or agency as well as other 

certifications regarding criminal convictions and judgments. 

Page NC-19 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

To protect North Carolina and the federal government against prime 

contractor nonperformance, NCDOT officials said that contract 

performance and payment bonds14 covering 100 percent of the project’s 

contract amount are required for all highway projects (including Recovery 

Act projects) valued over $300,000. An official with a bonding company 

told us that his company exercises much due diligence in examining 

companies before deciding to issue performance and payment bonds for a 

contractor. This official further explained that his bonding company 

investigates the financial position of the company, the integrity and 

honesty of the officers, and capacity of the contractor to perform the work 

before issuing performance and payment bonds. 

According to NCDOT officials, Recovery Act highway projects receive the 

same level of monitoring and inspection received by other federal-aid 

highway projects to ensure that quality goods and services are received. 

Each project is assigned a resident engineer as well as other on-site 

personnel who monitor and inspect the contractor’s performance under 

the contract. 

We selected two Recovery Act highway improvement project contracts to 

discuss in greater depth with NCDOT officials. One contract was centrally 

awarded by NCDOT but is administered by NCDOT Highway Division 4. 

The other contract was awarded and administrated by NCDOT Highway 

Division 1. 

NCDOT Centrally-Awarded 

Contract 

According to state officials, the NCDOT centrally awarded this contract to 

conduct work utilizing Recovery Act Highway Infrastructure Investment 

funds. This contract was awarded on April 29, 2009, for a total value of 

$14.3 million with a project start date of June 1, 2009, and a projected 

completion date of December 31, 2011. The contract was awarded to 

construct a 2.3 mile extension of Booker Dairy Road in Smithfield, North 

Carolina, from State Road 1003 to U.S. 70. This road, which is not located 

in an economically distressed area, is considered a major urban 

thoroughfare and will provide an alternate east-west route improving 

access to residential, commercial, industrial, and recreational areas. 

 

14 According to an NCDOT publication, a contract performance bond is a bond furnished by 

the contractor and its corporate surety guaranteeing the performance of the contract. A 

contract payment bond is a bond furnished by the contractor and its corporate surety 

securing the payment of those furnishing labor, materials, and supplies for the construction 

of the project. 

Page NC-20 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

According to NCDOT officials, the fixed unit price contract was awarded 

competitively, with nine contractors submitting bids. The successful 

contractor’s price was 20.6 percent lower than the NCDOT official 

engineering estimate. 

NCDOT Highway DivisionAwarded Contract 

The NCDOT Highway Division 1 awarded this contract to conduct work 

utilizing Recovery Act Highway Infrastructure Investment funds. This 

contract was awarded on April 23, 2009, at a total value of $494,000 with a 

project start date of May 11, 2009, and a projected completion date of 

October 30, 2009. The contract was awarded to resurface a 4.1 mile section 

of U.S. 13 from Modlin Hatchery Road (State Road 1130) to N.C. 461 in 

Hertford County, North Carolina. This project, which is located in an 

economically distressed area, is intended to improve the ride quality of 

this stretch of U.S. 13 and extend the life of the pavement. According to 

NCDOT officials, the fixed unit price contract was awarded competitively, 

with three contractors submitting bids. The successful contractor’s price 

was 24 percent lower than the NCDOT official engineering estimate. 

According to NCDOT officials, both selected contracts require the prime 

contractors to assist the state in complying with Recovery Act monthly 

reporting requirements under Section 1512 (c) of the Recovery Act for 

both the prime contractor’s Recovery Act work and for its subcontractors. 

According to NCDOT officials, contractors for both selected contracts will 

receive the same level of monitoring and inspection of the contractors’ 

work that the NCDOT provides to contractors for other federal-aid 

highway projects. This monitoring includes a resident engineer and on-site 

personnel to provide day-to-day monitoring of construction, as well as 

other engineers to oversee roadway and structures construction, to make 

sure that the work is done according to the contract specifications. 

As described above, several mechanisms used by the FHWA—NC Division 

and the NCDOT in contracting for Recovery Act projects could mitigate 

some of the risks associated with contracting, if they are implemented as 

intended. These quality-assurance mechanisms, based on our discussions 

with FHWA—NC Division and NCDOT officials, include 

• increased review and inspection of Recovery Act projects by the 

FHWA—NC Division, 

• the FHWA—NC Division’s nonvoting participation in the deliberations 

of the NCDOT bid review committees prior to contract awards, 

Page NC-21 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

• NCDOT’s current requirement that every NCDOT contractor be 

prequalified by NCDOT to help ensure that contracts are awarded only 

to responsible contractors, 

• a requirement that all contractors selected for award of contracts 

valued over $300,000 post contract performance and payment bonds 

covering the full cost of the contract in the event of contractor 

nonperformance, 

• a requirement that contractors provide noncollusion and debarment 

affidavits before they are awarded contracts, and 

• use of an established process of review and inspection of construction 

by skilled NCDOT personnel to ensure that work meets contract 

specifications and requirements. 

NCDOT Anticipates 

Meeting Recovery Act 

Recipient Reporting 

Requirements 

The NCDOT official serving as the focal point for collecting and submitting 

the recipient reports to the Office of Management and Budget (OMB), told 

us that NCDOT will be prepared to meet the requirements for recipient 

reporting to OMB in October 2009. As defined under OMB’s guidance in 

memorandum M-09-2115 for the Recovery Act, according to a NCDOT 

official, the NCDOT is classified as a prime recipient, and the prime 

contractor for a Recovery Act-funded highway project is classified as a 

vendor. According to a NCDOT official, the prime contractor is 

responsible for reporting information to NCDOT required by Section 

1512(c)16 of the Recovery Act for all of its subcontractors. As we 

previously reported in July 2009, the North Carolina Office of Economic 

Recovery and Investment requested prime recipients to address their 

readiness to meet the Recovery Act reporting requirements in October 

2009 by conducting a trial run. According to the NCDOT official serving as 

the focal point for this reporting, NCDOT’s trial run went well. 

To address the reporting requirement under the Recovery Act, NCDOT has 

designated the Director of its Programs Management Office as the focal 

point for receiving recipient reports from its 14 highway divisions, 

according to a NCDOT official. Also, each division is responsible for 

 

15 OMB Memorandum, M-09-21, Implementing Guidance for Reports on Use of Funds 

Pursuant to the American Recovery and Reinvestment Act of 2009 (June 2009). 

16 OMB Memorandum,M-09-21, at p.6, guidance implementing Section 1512 ( c ) of the 

Recovery Act requires recipient reports to include, among other things: (1) total amount of 

funds received and of that total, the amount spent on projects and activities; (2) a list of 

those projects and activities funded by name to include descriptions, completion status, 

and estimates on jobs created or retained, and (3) details on sub-awards and other 

payments. 

Page NC-22 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

obtaining required reports from the prime contractors within the division’s 

area of responsibility. According to the NCDOT Director of Programs 

Management, the NCDOT requires all first-time prime contractors for 

Recovery Act projects to attend a training session shortly after award of 

the contract at which NCDOT provides an introduction to the Recovery 

Act and the act’s reporting and record-keeping requirements under Section 

1512(c). This official also told us that some contractors are surprised upon 

learning of the extensive Recovery Act reporting requirements. In addition, 

NCDOT Highway Division officials said that division personnel discuss the 

contract reporting requirements for Recovery Act projects during the 

preconstruction meetings with prime contractors (even if the current 

contract is not their first involving a Recovery Act project). Division 

officials told us that they review the overall reasonableness of Section 

1512(c) recipient reports submitted by the prime contractors based on 

their on-site observations of how many contractor personnel are on the 

job. In August 2009, FHWA—NC Division officials told us they are not, at 

this time, planning to review the accuracy of NCDOT’s recipient reporting 

under Section 1512(c) of the Recovery Act. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or air 

conditioning equipment. Over the past 32 years, DOE’s 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 $5 billion provided to the Weatherization Assistance Program 

in the Recovery Act represents a significant increase for a program that 

has received about $225 million per year in recent years. 

U.S. Department of 

Energy Recovery Act 

Weatherization 

Assistance Program 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories, 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE had provided to the states $2.3 billion of the $5 billion in 

weatherization funding under the Recovery Act. Use of the Recovery Act 

weatherization funds is subject to Section 1606 of the act, which requires 

all laborers and mechanics employed by contractors and subcontractors 

on Recovery Act projects to be paid at least the prevailing wage, including 

Page NC-23 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

fringe benefits, as determined under the Davis-Bacon Act.17 Because the 

Davis-Bacon Act had not previously applied to weatherization, the 

Department of Labor (Labor) had not established prevailing wage rates for 

weatherization work. In 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. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.18 The 

department completed establishing prevailing wage rates in all of the 50 

states and the District of Columbia by September 3, 2009. 

Incorporating Recovery 

Act Requirements into 

North Carolina’s Existing 

Weatherization 

Procurement Process Is 

Not Expected to Cause 

Any Difficulties 

DOE approved North Carolina’s weatherization plan on June 18, 2009, and 

provided North Carolina 50 percent (approximately $66 million) of its 3-

year Recovery Act weatherization allocation. As of August 25, 2009, North 

Carolina had distributed approximately $13 million to local weatherization 

agencies. The Office of Economic Opportunity (OEO) within NCDHHS is 

responsible for administering the weatherization program, and the 

program is administered locally through subgrantees, generally 

community action agencies, which serve all 100 of the state’s counties. 

However, according to state weatherization officials, the state will be 

transferring the weatherization program from OEO to the State Energy 

Office within North Carolina’s Department of Commerce so that the 

program is located with all of the other state energy programs. According 

to state weatherization officials, the first 10 percent of the Recovery Act 

weatherization funding is being disbursed to local weatherization agencies 

to fund start-up activities such as buying equipment and vehicles and 

funding public awareness campaigns. State weatherization officials are 

planning to disburse an additional 40 percent of the Recovery Act 

weatherization funds to the local weatherization agencies in September 

2009. State weatherization officials plan to use Recovery Act funds to 

weatherize approximately 24,224 units. 

 

17Program funds made available through annual appropriations are not subject to the DavisBacon Act. 

18 The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page NC-24 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

While wages paid to weatherization laborers and mechanics were not 

previously subject to the Davis-Bacon Act, weatherization expenditures 

made using Recovery Act funds must comply with the prevailing wage 

requirements as determined under the act. To help determine the 

prevailing wage for the Davis-Bacon Act, a Labor survey was sent out to 

each state; however, North Carolina state weatherization officials said 

they never received this survey and several local weatherization agencies 

had reported not receiving it as well. State weatherization officials said 

they obtained the survey and survey instructions from Labor’s Web site 

and provided this information to the local weatherization agencies for 

them to directly submit their responses to Labor. Even though the survey 

was not received directly from Labor, state weatherization officials do not 

have any concerns about the effect of the Davis-Bacon Act on the use of 

Recovery Act weatherization funds. They said they obtained the 

information pertaining to Davis-Bacon Act requirements they needed by 

attending the National Weatherization Conference where Labor held 

several training sessions on the Davis-Bacon Act. State weatherization 

officials said that the prevailing wages established by Labor were similar 

to wages that were already being paid by local weatherization agencies. 

State weatherization officials plan to continue issuing contracts to spend 

Recovery Act funding that will include the wage-rate provision. 

In addition to receiving training on the Davis-Bacon Act, state 

weatherization officials also received training at the National 

Weatherization Conference on the contract award requirements applicable 

to weatherization projects funded by the Recovery Act. State 

weatherization officials plan to follow their existing procurement process, 

which includes following the Recovery Act requirements for awarding 

contracts, and issue guidance on the process to the local weatherization 

agencies. According to state documents, weatherization contracts will 

contain a list of Recovery Act requirements that must be followed, 

including registering on the Central Contractor Registration (CCR) system; 

obtaining a Data Universal Numbering System (DUNS) number; 

supporting section 1512 reporting requirements; and using iron, steel, and 

manufactured goods that are produced in the United States in certain 

circumstances. State weatherization officials said they review local 

weatherization agencies’ procurement processes to make sure they are 

following proper procedures. Based on their recent review of the local 

weatherization agencies’ procurement processes, state weatherization 

officials do not have any concerns about these processes. 

According to state weatherization officials, the weatherization program 

does not have centralized procurement or established prices and suppliers 

Page NC-25 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

of weatherizing materials; procurement is delegated to the local 

weatherization agencies that are required to develop a fair-market price 

list. Annually, the state weatherization office monitors each local 

weatherization agency’s fair-market price list and issues guidance on 

price-list requirements; however, the guidance does not spell out the 

process for developing the fair-market price and it is left up to the local 

agency to determine how best to do this. State weatherization officials also 

said they sometimes provide assistance to local weatherization agencies to 

help them develop the fair-market price list, but officials said most local 

agencies do Internet price comparisons in order to develop the list. 

North Carolina 

Weatherization Officials 

Have a Variety of 

Accountability Approaches 

to Monitor the Use of 

Recovery Act Funds 

State weatherization officials plan to use existing processes to monitor the 

disbursement of Recovery Act funds through monthly reviews of the local 

weatherization agencies’ financial status reports and through 

programmatic and financial monitoring visits. They said that, for the 

monthly financial status report reviews, they receive signed hard copies of 

the financial status reports the weatherization agencies generate from the 

Accountable Results for Community Action system. These reports show 

the funding status and a list of homes that have been completely 

weatherized. According to state weatherization officials, the on-site 

monitoring is done annually as required by DOE. They explained that the 

on-site monitoring of each weatherization agency contains three parts: (1) 

a preassessment questionnaire is sent to the agency to gather initial 

administrative and programmatic information and is reviewed by the state 

weatherization officials to determine if there are any issues; (2) an 

entrance meeting is held at the start of the on-site visit, and officials 

conduct a file review, equipment verification, and an invoice review; and 

(3) state weatherization officials use a monitoring tool to conduct on-site 

field inspections of weatherized homes. State weatherization officials said 

DOE requires that at least 5 percent of weatherized homes be inspected. 

They also said that this usually equates to inspecting 6 to 8 weatherized 

homes per local weatherization agency annually. State weatherization 

officials told us that during these inspections they compare the 

information reported in the preassessment questionnaire with their on-site 

observations. If an issue is identified, a meeting is held on site to describe 

the issues that were found, an assessment report of the visit is discussed, 

and corrective actions are prescribed. After the on-site visit, a formal 

report is issued to the local weatherization agency. Local weatherization 

agencies must provide a plan to meet the prescribed corrective actions 

along with proof that the actions were taken before the state 

weatherization office will close out a finding. However, state 

weatherization officials said most weatherization agencies will have taken 

Page NC-26 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

the necessary corrective action during the on-site visit or immediately 

thereafter. State weatherization officials said that if a weatherization 

agency is having problems they may make additional site visits during the 

year to get the agency back on track. 

State weatherization officials acknowledged that the Recovery Act funding 

for the weatherization program will significantly increase the local 

weatherization agencies’ workload. They said that in order to meet the onsite monitoring requirements, they plan to hire an external group to assist 

with these activities. With the increased workload due to the Recovery Act 

funds, state weatherization officials anticipate having to conduct 3 to 4 onsite visits a year to each local weatherization agency rather than 1 on-site 

visit a year in order to continue meeting DOE’s annual 5 percent 

inspection requirement and to meet North Carolina’s newly established 

policy that requires an average of 20 percent of weatherized homes be 

inspected. 

In addition to these accountability approaches, state weatherization 

officials have an existing risk-assessment process they use to review local 

weatherization agencies’ staff, goals, funding, and annual audits. Based on 

the annual assessment, each weatherization agency is assigned either a 

high or low level of risk. However, this year’s annual risk-assessment 

review will include a medium risk classification which will help identify 

local weatherization agencies that may need additional help so that they 

do not become high risk in the future. If a local weatherization agency is 

identified as a high risk, state weatherization officials may increase the 

amount of monitoring for that agency in order to address any issues the 

agency is having. Based on last year’s risk assessment, officials said of the 

30 local weatherization agencies, there were two agencies that were 

identified as a high risk. According to state weatherization officials, these 

local weatherization agencies will not receive any Recovery Act funding 

based on prior findings of noncompliance with laws and regulations. For 

example, instances were found in which internal control policies and 

procedures were not applied consistently, the agency charged unallowable 

expenditures, and the agency’s Board of Directors failed to provide 

consistent oversight of operations. In addition to the state weatherization 

office’s annual risk-assessment process, OERI has hired independent 

auditors to perform capacity audits; which include pre- and post 

performance audit inspections, on all local weatherization agencies that 

are participating in the weatherization program. Specifically, OERI plans 

to have these auditors assess the capabilities of local agencies before or 

shortly after Recovery Act funding is awarded and to monitor the 

Page NC-27 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

performance of agencies awarded grants during the course of the grant 

projects. 

North Carolina 

Weatherization Officials 

Plan to Follow Recovery 

Act Reporting 

Requirements; However, 

Additional Guidance Is 

Needed 

According to state weatherization officials, both the normal and Recovery 

Act reporting requirements, which include programmatic quarterly 

reports, monthly financial status reports, and section 1512 reporting 

requirements, will be followed. State weatherization officials do not 

anticipate having any challenges with respect to complying with these 

reporting requirements in a timely manner. In order to meet the section 

1512 reporting deadlines, the state weatherization office, which is the 

prime recipient,19 plans to create templates based on the reporting 

requirements to collect information from local weatherization agencies 

and then have them ready for OERI and OMB by the 10th day of the 

following month for quarterly reporting. The state weatherization agency 

has issued guidance in order to assist local subrecipients in understanding 

reporting requirements and to collect their financial information in a 

timely manner. 

OMB provided guidance on measuring jobs saved and jobs created, which 

state weatherization officials plan to use for calculating and reporting this 

information. State weatherization officials said that they understand the 

general framework of OMB’s guidance, but the information for calculating 

jobs saved and jobs created is unclear. For example, state officials 

consider OMB’s guidance to lack information on who should be included 

in the calculation as a vendor. Specifically, state weatherization officials 

are not sure if a subcontractor should be counted as a vendor. State 

weatherization officials have asked DOE for help, and DOE stated that 

technical briefs would be sent out to address these issues. 

 

19The prime recipients are nonfederal entities other than individuals that receive Recovery 

Act funding as federal awards in the form of grants, loans, or cooperative agreements 

directly from the federal government. 

Page NC-28 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

According to the North Carolina League of Municipalities (NCLM), North 

Carolina’s cities, towns, and villages are incorporated municipalities that 

have been granted a charter by the North Carolina General Assembly 

authorizing the establishment of a government and outlining its powers, 

authorities, and responsibilities. Municipalities provide a variety of 

services, including access to water and sewer systems and police and fire 

protection, according to NCLM. Under North Carolina law, all 

municipalities must balance their budgets.20 Within North Carolina’s 

Treasury Department, the Local Government Commission (LGC) has 

responsibility for monitoring fiscal, accounting, and debt-management 

practices of local governments, as well as for providing assistance and 

guidance on these matters. 

North Carolina’s 

Small Rural Localities 

Face Challenges 

Accessing Recovery 

Act Funds 

North Carolina includes approximately 550 municipalities and 100 

counties, many of which are small or rural. Specifically, according to 2008 

Census estimates, 430 municipalities had a population of under 5,000 

people. In addition, based on 2000 Census data, 60 of North Carolina’s 

counties were considered rural, and 21 of these counties were completely 

rural, or had an urban population of less than 2,500.21 According to 2008 

U.S. Department of Agriculture estimates, about one-third of the state’s 

residents lived in nonmetropolitan counties in 2008, and these counties 

had higher poverty rates and lower income than the statewide averages in 

2007. 

While there are several sources of information and assistance available, 

state officials, rural community leaders, and others have told us about 

challenges rural areas have in accessing and administering Recovery Act 

funding programs. According to state officials, rural areas face a number 

of challenges affecting their financial and administrative capacity, 

including diminishing budgets, staffing shortages, and a lack of expertise 

and skill sets in key areas. For example, the State Auditor identified small 

rural localities as risk areas with respect to Recovery Act funds, due to 

staffing shortages coupled with the additional reporting requirements of 

the Recovery Act. Local officials we interviewed also cited some of these 

 

20Each local government and public authority in North Carolina must operate under an 

annual balanced budget ordinance adopted and administered according to North Carolina 

law. A budget ordinance is balanced when the sum of estimated net revenues and 

appropriated fund balances is equal to appropriations. N.C. Gen. Stat. § 159-8(a). 

21Using Census data, OMB defines urban and rural counties based on population size and 

the extent to which outlying counties are economically tied to core counties as measured 

by work commuting. 

Page NC-29 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

challenges and expressed concerns about their capacity to apply for and 

administer Recovery Act funds. 

Based on our prior Recovery Act work in North Carolina and the state’s 

significant rural sector, we decided to focus part of this report on the 

experiences of selected rural towns in North Carolina in accessing and 

administering Recovery Act programs. Specifically, we selected the towns 

of Bethel, Williamston, Woodfin, and the City of Hendersonville based on 

their size and geographic dispersion. The populations in these towns 

ranged from 1,743 to 12,005 according to the Census 2008 population 

survey. We interviewed officials in these towns to obtain their 

perspectives on the Recovery Act. We also interviewed officials from the 

U.S. Department of Agriculture’s North Carolina Rural Development 

office, OERI, NCLM, and the North Carolina Rural Economic Development 

Center (Rural Center). During our interview with Rural Center officials, 

we also met officials from the municipalities of Elkin and Pinetops. 

Opportunities Exist for 

Municipalities to Benefit 

from Various Recovery Act 

Programs 

Under the Recovery Act, North Carolina localities can apply for funding 

for a variety of federal programs either from state agencies or directly 

from federal agencies. The Recovery Act contains many programs that 

provide funding opportunities to municipalities, including the Clean Water 

State Revolving Fund (CWSRF), the Drinking Water State Revolving Fund 

(DWSRF), the Community Oriented Policing Services (COPS) program, 

the Edward Byrne Memorial Justice Assistance Grant (JAG) program, the 

Federal-Aid Highway Surface Transportation program, the Broadband 

Initiatives Program, the Broadband Technology Opportunities Program 

(BTOP), and the Rural Community Facilities Loans and Grants program. 

(See table 1 for information on available funds and awards made under 

these programs.) Several of these programs are targeted specifically at 

small or rural communities. To increase the speed with which Recovery 

Act funds are spent, the act added requirements or priorities to several 

programs to focus on projects that could be completed quickly. 

Page NC-30 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Table 1: Selected Recovery Act Funding Opportunities for North Carolina Municipalities 

Dollars in millions 

Program 

Funds 

available to 

localities from 

North Carolina 

agenciesa

Funds

awarded by

North Carolina 

agencies to 

localities

Competitive

funds available

to localities

directly from

federal agencies,

(national totals)

Formula funds 

available to 

North Carolina 

localities directly 

from federal 

agencies

Funds

awarded by

federal agencies 

directly to

North Carolina 

localities

Clean Water State 

Revolving Fundb

$71 $67 n.a. n.a. n.a.

Drinking Water State 

Revolving Fundb

$66 $64 n.a. n.a. n.a.

COPS Hiring Recovery 

Program n.a. n.a. $1,000 n.a. $31

Edward Byrne Formula and 

Competitive Grants $34.5c

No awards made c $225 $21.9 $21.2

Federal-Aid Highway 

Surface Transportation $736d

n.a. n.a. n.a. n.a.

Broadband Initiatives 

Program n.a. n.a. $2.5 n.a. No awards madee

Broadband Technology 

Opportunities Program n.a. n.a. $4.7 n.a. No awards madee

Community Facilities Loans 

and Grants Program n.a. n.a. $1,161f n.a. $11.7 f

Total $907.5 $131 $2,393.2 $21.9 $63.9

Source: Federal and state agencies 

n.a.: Not applicable 

a

This column captures funds apportioned, allotted, allocated, awarded or otherwise made available by 

federal agencies to North Carolina state agencies to be awarded or allocated to North Carolina 

localities. 

b

Funding under these two programs is split evenly between principal forgiveness and interest-free 

loans. 

c

$34.5 million was awarded to the state, of which about $13.2 million must be passed on to localities. 

No awards had been made to localities as of August 11, 2009. 

d

While these funds will be administered by NCDOT, the projects will impact some rural areas. 

e

Applications for first of three rounds of grants were due by August 24, 2009. 

f

Nationally $1.1 billion is available in loans and $61 million is available in grants. In North Carolina, 

11.7 million has been awarded to localities, of which about $9.8 million was in loans and $1.8 million 

was in grants. Totals do not add up to $11.7 million due to rounding. 

The total funding available for water and drinking water grants and loans 

in North Carolina includes about $71 million for the CWSRF and about $66 

million for the DWSRF. The CWSRF assists in the funding of the 

construction of publicly owned wastewater treatment facilities, the 

Clean Water State Revolving 

Fund (CWSRF) and Drinking 

Water State Revolving Fund 

(DWSRF) Capitalization Grants 

Page NC-31 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

implementation and management of non-point source pollution22 control 

programs, and the development and implementation of estuary 

conservation and management plans. Under the Recovery Act, states are 

to give priority to projects that are ready to proceed with construction 

within 12 months of enactment of the act. The North Carolina Department 

of Environment and Natural Resources (DENR) will administer this 

program for North Carolina. DENR will award half of the funds in the form 

of principal forgiveness,23 and the other half in the form of interest-free 

loans, as required. There is a cap of $3 million for each project award, and 

awards will not be increased for bids that come in higher than the project 

award amount. As of July 20, 2009, the state had announced awards 

totaling about $67 million for projects in 48 localities. 

The DWSRF assists public water systems in complying with the national 

primary drinking water regulations. Assistance cannot go to a public water 

system24 that does not have the technical, managerial, and financial 

capability to ensure compliance with federal Safe Drinking Water Act 

(SDWA).25 Eligible uses include replacement of aging infrastructure, 

planning studies, consolidation of water systems, and source water 

rehabilitation. Ineligible uses include dams or rehabilitation of dams, 

operation and maintenance costs, projects mainly for fire protection, or 

projects primarily to accommodate future growth. As with CWSRF, the 

main criteria for Recovery Act awards for DWSRF will be how quickly a 

project can issue a contract and proceed with construction. The Public 

Water Supply Section (PWSS) of DENR will administer this program. 

PWSS will award half of grant funds in the form of principal forgiveness, 

and the other half in the form of an interest-free loan, with up to a 20-year 

payback period, as required. There is a cap of $3 million for each project 

 

22Non-point source pollution comes from diffuse sources. It is generally caused by rainfall 

or snowmelt moving over and through the ground. Non-point source pollutants could 

include excess fertilizers, herbicides, and insecticides from agricultural lands and 

residential areas; oil or grease from urban runoff; sediment from improperly 

managed construction sites and forests; and bacteria and nutrients from livestock. 

23Principal forgiveness means that half of each loan will not need to be repaid. The other 

half of the money will need to be repaid at a zero percent interest rate. If a project’s actual 

cost is lower than originally projected or the scope of the project is reduced, the same 50-

50 split will be maintained. 

24A public water system can be any local unit responsible for the collection, treatment, 

storage, and distribution of drinkable water from a source to a consumer. 

25Pub. L. No. 93-523, 88 Stat. 1660 (1974) (codified as amended at 42 U.S.C. §§ 300f through 

300j-25). 

Page NC-32 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

award, and awards will not be increased for bids that come in higher than 

the project award amount. As of July 20, 2009, the state has announced 

awards totaling about $64 million to 63 localities. 

The Recovery Act provides $1 billion for the CHRP program, administered 

by the Office of Community Oriented Policing Services within the U.S. 

Department of Justice (Justice), to provide funds directly to law 

enforcement agencies to be used to hire and/or rehire career law 

enforcement officers. CHRP grants provide 100 percent funding for 3 years 

for approved entry-level salaries and benefits for newly-hired, full-time 

sworn officer positions or for rehired officers who have been laid off, or 

are scheduled to be laid off. On July 28, 2009, Justice announced that it 

had awarded $1 billion in CHRP funds, including nearly $31 million to 50 

North Carolina local agencies to fund a total of 202 officers, including 183 

new officers. In total, 216 North Carolina local agencies applied to Justice 

for CHRP funds. 

COPS Hiring Recovery Program 

(CHRP) 

The Edward Byrne Memorial Justice Assistance Grant (JAG) program, 

administered by the Bureau of Justice Assistance within Justice, provides 

federal formula grants to state and local governments for law enforcement 

and other criminal-justice activities, such as crime prevention and 

domestic-violence programs, corrections, justice information-sharing 

initiatives, and victims’ services. Under the Recovery Act, an additional $2 

billion in grants are available to state and local governments under the 

JAG program. JAG funds are allocated to states on the basis of a formula 

that includes population size and violent-crime statistics, in combination 

with a minimum allocation to ensure that each state receives an 

appropriate share of funding. Using this formula, 60 percent of the 

allocation is awarded to state governments, which must in turn award a 

specified percentage to local governments, and the remaining 40 percent is 

awarded by Justice directly to local governments. The total JAG allocation 

for North Carolina state and local governments under the Recovery Act is 

about $56.3 million, of which, the localities will receive about $13.2 million 

from the state and about $21.9 million from Justice. Applications from 

localities for funding were due to the state by June 17, 2009, but funds had 

not been awarded as of August 11, 2009. Applications from localities for 

JAG funding to be awarded directly by Justice were due to Justice by June 

17, 2009, and as of September 8, 2009, Justice has awarded about $21.2 

million to North Carolina localities. In addition to the $56.3 million in JAG 

grant funds, $225 million in Recovery Act funds are also available 

nationally under the Edward Byrne Competitive Grant Program to state, 

local, and tribal governments, and to national, regional, and local nonprofit 

organizations awarded directly by Justice. These competitive grants are to 

Edward Byrne Formula and 

Competitive Grants 

Page NC-33 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

prevent crime, improve the administration of justice, provide services to 

victims of crime, support critical nurturing and mentoring of at-risk 

children and youth, and for other similar activities. Applications for the 

competitive Byrne grants were due by April 27, 2009, and Justice is in the 

process of awarding these grants and plans to finish awarding them by 

September 30, 2009. Based on information available as of September 4, 

2009, no Byrne competitive grant awards have been announced for North 

Carolina. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

Federal-Aid Highway Surface Transportation program administered by the 

Federal Highway Administration (FHWA) in the U.S. Department of 

Transportation. North Carolina is expected to receive $736 million under 

the Recovery Act for highway and bridge improvements. Under the 

Federal-Aid Highway Surface Transportation Program, funds are 

apportioned annually to each state department of transportation (or 

equivalent agency) to construct and maintain roadways and bridges on the 

federal-aid highway system. North Carolina Department of Transportation 

officials told us that they identified highway projects based on Recovery 

Act direction that priority is to be given to projects that are anticipated to 

be completed within a 3-year time frame and that are located in 

economically distressed areas. Also, the department collaborated with 

metropolitan and rural planning organizations26 to select projects that are 

located across the state. Projects were also evaluated based on several 

criteria, including alignment with long-range investment plans and 

considerations about geographical diversity and economic impact.27 As of 

September 1, 2009, the state had awarded $348 million in highway 

contracts. 

Federal-Aid Highway Surface 

Transportation Program 

The Recovery Act appropriated $7.2 billion to expand broadband access in 

the United States. Specifically, the U.S. Department of Agriculture 

(Agriculture) Rural Utility Service (RUS) was appropriated $2.5 billion to 

extend loans, grants, and loan/grant combinations to facilitate broadband 

development in rural areas.28 The U.S. Department of Commerce 

Broadband Access 

 

26Metropolitan and rural planning organizations work cooperatively with North Carolina 

Department of Transportation to plan transportation systems in urban and rural areas. 

27Projects selected were evaluated based on several other criteria, including a state equity 

formula (North Carolina G.S. 136-17.2A) that creates a target value for programming future 

expenditures in various regions of the state. 

28See, Recovery Act div. A, tit. I, 123 Stat. at 118. 

Page NC-34 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

(Commerce) National Telecommunications Information Administration 

(NTIA) was appropriated $4.7 billion to make available grants for 

deploying broadband infrastructure in unserved and underserved areas in 

the United States, enhancing broadband capabilities at public computing 

centers, and promoting sustainable broadband adoption projects. 29 NTIA 

and the RUS jointly issued a Notice of Funds Availability (NOFA) and 

solicitation of applications for the RUS’s Broadband Initiative Program 

and NTIA’s Broadband Technology Opportunities program. The agencies 

are planning three opportunities for eligible entities, including states, local 

governments, or any agency, subdivision, instrumentality, or political 

subdivision thereof to apply for these grants. The deadline for the first 

round was extended from August 14, 2009, until August 24, 2009.30 The 

current goal of the agencies is to issue a second NOFA before the end of 

2009 and a third in the spring of 2010. No awards have been made under 

either program. 

The Recovery Act also added more funding to the Community Facilities 

Loans and Grants program to build or improve essential public facilities in 

cities and towns with no more than 20,000 in population. Under the 

Recovery Act, $1.1 billion in loans and $61 million in grants is made 

available for this program. Some examples of eligible projects include 

health care facilities such as hospitals and clinics, nursing homes, daycare 

centers, public safety facilities and equipment such as fire trucks, 

community buildings, educational facilities such as libraries, and activity 

centers for disabled persons. Localities apply for the funds directly from 

the U.S. Department of Agriculture Rural Development Center. In total, 

$11.7 million in loans and grants have been awarded by the U.S. 

Department of Agriculture to North Carolina localities for a variety of 

projects, including police and fire equipment. 

Community Facilities Loans 

and Grants Program 

 

29See, Recovery Act div. A, tit. II, 123 Stat. at 128; § 6001(b), 123 Stat. at 512-513. 

30Applicants that had started the electronic application process prior to the original 

application deadline were given until August 20, 2009 to complete the electronic 

submission of its applications. 74 Fed. Reg. 41676 (2009). Applicants having difficulties 

uploading any of the attachments to its application were given the opportunity to submit 

the core application by August 20, 2009 and subsequently submit any attachments that 

were not successfully uploaded by August 24, 2009. 74 Fed. Reg. 42644, 42645 (2009). 

Page NC-35 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Municipalities Rely on a 

Variety of State and Other 

Resources for Recovery 

Act Information 

North Carolina municipalities rely on a variety of sources in obtaining 

information about the Recovery Act. According to a survey conducted by 

NCLM, municipalities sought guidance and technical support from various 

sources within the state, including OERI, the Rural Center, and NCLM. We 

also heard from localities we visited that they rely on the School of 

Government at the University of North Carolina—Chapel Hill and the 

North Carolina Regional Councils31 for technical support and guidance on 

Recovery Act issues. 

Along with providing the oversight and monitoring of Recovery Act funds, 

part of OERI’s mission is to develop a communications network to keep 

the public informed about the status and progress of the recovery effort 

and funding opportunities. OERI officials told us that they have held a 

series of informational workshops across the state since April 2009 

designed to provide a question and answer forum for local officials and the 

general public. According to OERI officials, these meetings have been 

strategically scheduled in geographically diverse sections of the state, 

including rural areas, in an effort to reach a large portion of the state’s 

population. To assist smaller towns and cities with identifying and 

applying for Recovery Act funds, OERI officials told us that they have 

hired a team of new staff to help local officials in 19 rural counties to apply 

for and manage grants. OERI officials selected the 19 counties based on 

rural areas with high unemployment rates. 

In addition to OERI, there are a number of other organizations in North 

Carolina that provide assistance to rural communities. One such 

organization, the Rural Center, provides a variety of services to the state’s 

rural areas. The Rural Center is a private, nonprofit organization, funded 

by both public and private sources, that serves the state’s rural 

communities, with a special focus on individuals with low to moderate 

incomes and communities with limited resources. According to Rural 

Center officials, their office provides a variety of services, including policy 

research and development, legislative advocacy, topical workshops, 

technical assistance, leadership and workforce training, and municipal and 

community capacity building strategies. For example, in September 2009, 

the Rural Center, as part of its efforts to reach out to minority populations, 

provided a forum for a group of African-American-led communitydevelopment organizations to discuss the Recovery Act. 

 

31North Carolina Regional Councils are multicounty planning and development agencies 

serving different areas of the state. 

Page NC-36 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

NCLM, another source of information for North Carolina’s rural areas, is a 

nonpartisan association of municipalities in North Carolina that provides 

member services that strengthen and support municipal governments, 

including those in rural communities. According to an NCLM official, the 

organization has compiled and posted to its Web site guidance, including a 

listing of Recovery Act programs with funds still available, aimed at 

helping municipalities in their pursuit of federal Recovery Act funding. The 

official said that the guidance will be updated regularly. Further, NCLM 

also prepared guidance regarding how municipalities can increase their 

chances of obtaining federal funding. In June 2009, NCLM initiated a 

statewide survey of the 551 municipalities in an effort to obtain 

information about their experiences with the Recovery Act, and received a 

91 percent response rate. According to NCLM officials, a main reason they 

conducted the survey was because the state did not have a centralized 

source of information on which local governments in the state were 

pursuing Recovery Act funding or what type of funding they were 

pursuing. 

Also, University of North Carolina-Chapel Hill’s School of Government, in 

an effort to help smaller cities, towns and counties to research, apply for, 

and acquire Recovery Act funds, created the Carolina Economic Recovery 

Corps (CERC). The CERC is made up of eight graduate students from UNC 

who spent 10 weeks over the summer working full time as interns with 

councils of governments (COG).32 Among other forms of support, the eight 

interns helped communities with Recovery Act compliance, grant writing, 

and reporting requirements. 

Further, 17 North Carolina Regional Councils serve regions that share 

similar economic, physical, and social characteristics. Their function is to 

aid, assist, and improve the capabilities of local governments in 

administration, planning, fiscal management, and development, and all of 

them are involved in providing technical assistance to their members. In 

particular, the councils provide information on state and federal programs 

of concern to local governments. 

 

32Councils of governments are regional bodies that exist throughout the United States. 

Generally, councils of governments serve an area of several counties, and address issues 

such as regional and municipal planning, economic and community development, 

transportation, and emergency planning. 

Page NC-37 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Two Municipalities That 

Received Recovery Act 

Funds Reported They Will 

Help Address Needs 

Two of the municipalities we visited reported their applications for JAG 

Recovery Act funds had been approved and that these awards would help 

them address needs. For example, Williamston officials told us they had 

been approved for a $35,157 JAG grant, which will be used to upgrade its 

communications system for its police department. According to 

Williamston officials, this system will enhance its communications ability 

to conform with state recommendations. Officials from the City of 

Hendersonville told us that their police department also received JAG 

funds. The Hendersonville Police Department received $72,956 and 

reported they had drawn down approximately $50,000 of the funds at the 

time of our interview. The city plans to use the funds on concealment 

devices for microphones and to support the work of its undercover 

investigations. Neither Bethel nor Woodfin officials had been awarded 

Recovery Act funds. 

State Officials and Others 

Expressed Concerns over 

the Capacity of Small 

Towns to Access and 

Administer Recovery Act 

Funds 

Several North Carolina state officials told us that many of the state’s small 

towns and cities have been historically understaffed and may lack the 

expertise to apply for and administer federal grants. For example, one 

state official indicated that these challenges can sometimes serve as 

barriers to some small towns and cities in seeking federal recovery 

assistance. Additionally, officials at the Rural Center told us that many 

municipalities have expressed concerns about applying for Recovery Act 

funds. Specifically, they said that municipalities are wary of spending their 

limited funds to develop initiatives for competitive grants when it is not 

certain that they would receive an award. Rural Center officials said that 

the Recovery Act’s “quick implementation” requirements for some 

programs can be a barrier for smaller municipalities because they lack 

resources to quickly develop proposals. Further, many other 

municipalities face capacity challenges as they lack a town manager or 

administrator. Specifically, according to Rural Center officials, more than 

200 North Carolina municipalities do not have a town manager or 

administrator. As a result, many management responsibilities are assumed 

by a clerk or unpaid mayors and council members. 

Many small municipalities do not plan to apply for Recovery Act funds, 

according to the results of the NCLM 2009 survey that obtained responses 

from North Carolina’s municipalities on their plans to pursue Recovery 

Act funds. Specifically, 207 municipalities with a population of less than 

5,000 people reported they were not planning to apply for Recovery Act 

funds. This represents 41 percent of the communities that responded to 

the survey, a figure that is significantly smaller than the 3 percent of larger 

municipalities that indicated they would not apply. According to our 

Page NC-38 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

analysis of the NCLM 2009 survey information, 13 municipalities with a 

population over 5,000 reported they were not planning to apply for these 

funds. Furthermore, of the 173 small municipalities with populations less 

than 5,000 that reported they plan to apply for Recovery Act funds, 94, or 

54 percent, indicated that they need technical assistance with the 

applications. 

Local officials we interviewed expressed concerns about their capacity to 

apply for and administer Recovery Act funding. For example, officials 

from the Town of Woodfin told us that their ability to identify and apply 

for Recovery Act funds was limited by their current level of staff. The town 

has three staff—the town administrator, a town clerk, and a code 

enforcement officer. The town administrator told us that he has multiple 

duties, such as planning director, finance officer, and head of town 

operations and that serving in these multiple roles constrains his ability to 

pursue available Recovery Act funds. Officials in two localities told us that 

they lack funds to meet the federal matching requirements or other upfront costs needed for some Recovery Act programs. Some local officials 

also told us that the shovel-ready requirements of some Recovery Act 

programs made it difficult for them to apply for funds because they would 

need to commit funds to develop projects that were shovel-ready.33 The 

officials said that smaller municipalities are disadvantaged by this 

provision because larger municipalities tend to be in a better position to 

meet the quick-spending objective of the Recovery Act. 

However, officials were mixed in their views about their ability to manage 

Recovery Act funds. Officials from both Bethel and Hendersonville felt 

that they would be able to comply with reporting and tracking 

requirements for Recovery Act funds. But, officials from Williamston 

expressed concerns over their ability to hire additional qualified staff, if 

necessary, to meet the reporting requirements under the Recovery Act. 

Municipalities Reported 

Challenges Identifying 

Information about 

Recovery Act Programs 

Officials in three of the municipalities we met with reported a variety of 

challenges identifying information about Recovery Act funding 

opportunities. In particular, officials in the two municipalities that had not 

received Recovery Act funding—Bethel and Woodfin—cited challenges in 

identifying information about funding possibilities. Bethel officials said 

 

33The term “shovel-ready” means the projects could be started and completed 

expeditiously, in accordance with applicable Recovery Act requirements. 

Page NC-39 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

that they attempted to identify funding opportunities by conducting 

research on the Internet and contacting state agencies and congressional 

offices. The City Manager characterized their efforts as attempting to 

“navigate a maze” of funding opportunities. As of August 11, 2009, Bethel 

has not identified any programs that it would be eligible for or for which it 

has the means to develop a proposal. For example, according to Bethel 

officials they were advised they were not eligible for JAG funding due to 

having a crime rate that is too low. Woodfin officials said that they had 

received a lot of information, but that this information was not well 

organized and that they were not aware of what funding opportunities still 

remain. One representative of a Regional Council told us that the Council 

has received a number of calls from localities that are under pressure to 

obtain Recovery Act funds but do not know how to access information 

about the programs. 

Hendersonville officials told us that they began planning for the Recovery 

Act early and were able to identify and apply for several programs, 

including the JAG program, for which they received an award. However, 

they said that the information and guidance they received from state 

agencies for water and sewer programs and highway funding was not 

always clear or timely. For example, they told us that the state issued 

guidance on water and sewer projects after they had already submitted 

their application. Hendersonville officials said that it would have been 

helpful to have had more information when they applied for funding. 

While local officials did mention difficulties obtaining information, they 

also noted some sources of information that were useful. For example, 

Hendersonville officials mentioned that they relied on several sources for 

information about the Recovery Act, including NCLM and OERI. Woodfin 

officials told us that they rely heavily on their contacts at the Land of Sky 

Regional Council for information pertaining to the Recovery Act. 

Page NC-40 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

Beginning October 10, 2009, each state is required to submit a quarterly 

report to OMB to meet the reporting requirements of Section 1512 of the 

Recovery Act. Under Section 1512, recipients (also known as prime 

recipients) and subrecipients of Recovery Act funds are required to report 

a number of data elements, including jobs created with Recovery Act 

funds. In North Carolina, each state agency that receives Recovery Act 

funds is responsible for the completion and submission of Section 1512 

Recovery Act quarterly recipient reports to OMB via a Web site—

FederalReporting.gov. OMB’s June 22, 2009, reporting guidance (M-09-21) 

gave prime recipients the option to delegate certain reporting elements to 

their subrecipients. 

OERI has undertaken several initiatives to help ensure state agency 

Section 1512 Recovery Act recipient reports are complete, accurate, and 

submitted on time. For example, OERI conducted a prime-recipient 

readiness assessment to evaluate how prepared state agencies are to 

provide recipient reports. Based on the results of the readiness 

assessment, an OERI official in charge of reporting issues told us that he 

has a high level of confidence that North Carolina state agencies will be 

ready to submit the required reports in October. 

OERI Is Taking Steps 

to Help Ensure the 

Complete, Accurate, 

and Timely 

Submission by State 

Agencies of Section 

1512 Recovery Act 

Quarterly Recipient 

Reports to OMB 

On August 11, 2009, OERI sent the 16 state agencies that will be submitting 

the Recovery Act recipient reports a survey to determine, among other 

things, whether they (1) had delegated reporting responsibility to 

subrecipients, (2) had put controls in place to ensure accurate, complete, 

and timely reporting, and (3) had coordinated responsibilities within the 

agency to avoid double reporting. As of September 4, 2009, none of the 8 

agencies that responded reported they were planning to delegate reporting 

responsibility to subrecipients. Most of the agencies reported they either 

had or planned to have internal control systems. However, based on state 

agencies’ responses, it remains uncertain whether some of the state 

agencies considered their controls adequate, at that time, to ensure the 

submission of accurate, complete, and timely Recovery Act Section 1512 

reports in October. 

OERI also began, on August 27, 2009, to hold regularly planned roundtable 

discussions with state agency officials responsible for Recovery Act 

reporting. OERI plans to continue these roundtable discussions until the 

October 10 reporting deadline. According to an OERI representative, the 

roundtable discussions are being held to share information among 

recipients by having agencies (1) share any plans for delegating reporting 

responsibilities to subrecipients, (2) identify a single point of contact for 

each agency to avoid double reporting, (3) discuss the data systems each 

Page NC-41 GAO-09-1017SP Recovery Act
Appendix XIV: North Carolina 

agency will use for quarterly reporting to FederalReporting.gov, and (4) 

develop expectations for quality assurance common to all North Carolina 

state agencies that will be reporting. 

At the August 27 session, some state officials reported concerns about the 

methodology to be used for measuring jobs created or retained. The OERI 

representative urged state agency officials to ask cognizant federal 

agencies for any specific guidance on measuring jobs created or retained 

that the federal agency may have issued in addition to OMB’s reporting 

guidance. Also, agency officials at this session expressed concerns over 

the availability of data by the September 30, 2009, cutoff date for recipient 

reporting. 

We provided the Governor of North Carolina with a draft of this appendix 

on September 14, 2009. The Director of OERI responded for the Governor 

on September 16, 2009. In general, the comments were either technical or 

were status updated. These were incorporated as appropriate. 

Cornelia Ashby, (202) 512-8403 or ashbyc@gao.gov 

Terrell Dorn, (202) 512-6923 or dornt@gao.gov 

In addition to the contacts named above, Bryon Gordon, Assistant 

Director; Sandra Baxter; Carleen Bennett; Bonnie Derby; Steve Fox; Fred 

Harrison; Leslie Locke; Stephanie Moriarty; Anthony Patterson, and Scott 

Spicer made major contributions to this report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page NC-42 GAO-09-1017SP Recovery Act
The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Ohio. The full report on all of our work, which covers 16 states 

and the District of Columbia, is available at http://www.gao.gov/recovery/. 

GAO’s work in Ohio focused on the implementation of two programs: 

(1) the Weatherization Assistance Program and (2) the Workforce 

Investment Act (WIA) Youth Program. We selected these programs for 

different reasons. The Weatherization Assistance Program in Ohio began 

on July 1, 2009, which provided an opportunity to compare local agencies’ 

implementation—including financial controls and oversight of contracts. 

The Recovery Act funded WIA Youth Program in Ohio is largely directed 

toward a summer employment program and was also in full operation. 

With these programs, we focused on how funds were being used; how 

safeguards were being implemented, including those related to 

procurement of goods and services; and how results were being assessed 

and reported. In addition, GAO is providing an update on the status of 

expenditures of funds from the U.S. Department of Transportation’s 

Highway Infrastructure Investment Program; three programs from the U.S. 

Department of Education: the Title I, Part A program, the IDEA Part B 

program, and the State Fiscal Stabilization Fund (SFSF); and the Public 

Housing Capital Fund. These programs, which were included in our July 

2009 Recovery Act report, were selected to continue our ongoing 

longitudinal analysis of the use of Recovery Act funds. 

On July 17, 2009, the Governor of Ohio signed the biennial budget for state 

fiscal years 2010 and 2011. According to a senior state budget official, the 

main operating budget and the transportation operating budget, signed 

April 1, 2009 and effective July 1, 2009, appropriate approximately 

$63.9 billion in state fiscal year 2010 and about $60.2 billion in fiscal year 

2011, including about $7.6 billion from Recovery Act funds over the 

biennium. Of the Recovery Act resources, approximately $2.4 billion is 

increased federal reimbursement for Medicaid. In addition, the state used 

its state rainy-day fund to close a $1 billion shortfall in the fiscal year 2009 

budget. 

Appendix XV: Ohio 

Overview 

Recovery Act Funds 

Helped Stabilize the 

State Budget, but 

Budgetary 

Uncertainty Remains 

Page OH-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix XV: Ohio 

According to a senior state budget official, the recession brought 

considerable uncertainty to the budget process in the state. In the last 

year, the state realized double-digit revenue losses compared with the 

previous year and, as a result, had to make adjustments to the budget 

when revenues did not come in as expected. In developing the enacted 

budget for this biennium, a senior state budget official said Ohio had to 

aggressively revise revenue estimates downward; revenue estimates are 

nearly 6.5 percent lower than the level originally proposed in February 

2009 when the budget was first submitted. The budget office produces a 

monthly report that tracks actual revenues and expenditures to ensure 

they meet the targets set in the budget. The state met its revenue targets in 

the first month of the biennium (July 2009). The state budget director 

monitors budget performance closely and has the authority to make 

adjustments to the spending targets throughout the biennium if revenues 

do not meet the targets in the budget. 

According to a senior budget official, the enacted budget relies on a new 

revenue source—proceeds from new video lottery terminals. The budget 

assumes these terminals will be in place by November 2009 and will bring 

in approximately $851 million in new revenues over the biennium. These 

revenue estimates were vetted through a variety of state economists and 

have been compared to the revenue generated in other states with similar 

terminals. If the lottery revenues do not meet these targets, then the 

budget director, within the scope of her authority, could consider 

recommendations for further reductions in other expenditures. 

As noted in our July 2009 Recovery Act report, Ohio plans to collect 

centralized administrative costs through a series of charge backs to the 

state agencies that are administering the Recovery Act programs. State 

budget officials said the amounts each agency would be asked to pay for 

centralized administrative costs would be in proportion to the Recovery 

Act funds each agency received. Senior state officials expect to collect 

about $3 million for centralized administrative costs—far less than the 

$40 million the state estimates it is eligible to collect based on Office of 

Management and Budget (OMB) guidance.2

 State officials said they limited 

the amount of administrative costs each agency could charge in order to 

maximize the impact of Recovery Act resources in the state. 

 

2

OMB Memorandum M-09-18, Payments to State Grantees for Administrative Costs of 

Recovery Activities (May 11, 2009). This guidance allows states to collect no more than 0.5 

percent of the total Recovery Act funds the state expects to receive. 

Page OH-2 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the U.S. Department of Energy 

(DOE) administers through each of the states, the District of Columbia, 

and seven territories and Indian tribes. The program 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, or 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. 

Ohio Began 

Weatherizing Homes 

Soon after DOE 

Approved Its State 

Plan 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, the territories, 

and Indian tribes—including all 16 states and the District of Columbia in 

our review. DOE had provided to the states almost $2.3 billion of the 

$5 billion in weatherization funding under the Recovery Act. Use of the 

Recovery Act weatherization funds is subject to Section 1606 of the act, 

which requires all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing 

wage, including fringe benefits, as determined under the Davis-Bacon Act.3

Because the Davis-Bacon Act had not previously applied to 

weatherization, the Department of Labor (Labor) had not established a 

prevailing wage rate for weatherization work. In 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 established a higher 

local prevailing wage rate for weatherization activities. Labor then 

surveyed five types of “interested parties”4

 about labor rates for 

weatherization work. The department completed establishing prevailing 

wage rates in all of the 50 states and the District of Columbia by 

September 3, 2009. 

 

3

The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

4

The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page OH-3 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Ohio Relies on Grantees to 

Implement the 

Weatherization Program 

The Ohio Department of Development (ODOD) has obligated all of the 

approximately $133.4 million that DOE provided to Ohio. Specifically, 

Ohio has obligated these funds to its provider network of 34 grantees.5

ODOD reserved 20 percent of these funds for contingencies but plans to 

use these funds to weatherize eligible homes. An ODOD official told us 

that as of September 15, 2009, 17 to 19 grantees reported that they had 

spent approximately $5.4 million weatherizing 1,260 homes. According to 

the state weatherization plan—approved by DOE on June 18, 2009—ODOD 

is using its existing network of grantees located throughout the state to 

run its Home Weatherization Assistance Program. Grantees began 

weatherizing homes on July 1, 2009, with Recovery Act funds. Specifically, 

grantees have used Recovery Act funds to hire and train program staff and 

weatherization workers, certify contractors, perform energy audits on 

eligible homes, and weatherize qualified homes. 

We visited two of Ohio’s 34 grantees, the Community Action Partnership of 

the Greater Dayton Area (CAP-Dayton) in Dayton, Ohio and the Mid-Ohio 

Regional Planning Commission (MORPC) in Columbus, Ohio to gain 

information on program implementation as of August 31, 2009. 

• CAP-Dayton had received about $1.8 million or 10 percent, of it’s 

approximately $18.1 million weatherization allocation from Ohio’s 

total $266.8 million allocation in Recovery Act funds for the 

Weatherization Assistance Program. CAP-Dayton expects to 

weatherize approximately 2,100 homes with its $18.1 million using inhouse crews and will contract out for more skilled work, such as 

plumbing and electrical work. To increase production from about 

45 homes per month to about 100 homes per month, CAP-Dayton has 

hired six more crew leaders and 11 more technicians to augment its 

planned weatherization workforce of 82 in-house staff. During the 

2-month period of July and August 2009, CAP-Dayton expended about 

$801,100 of its allocation and weatherized 120 homes. 

• MORPC has been allocated about $4.5 million of Ohio’s $266.8 million 

allocation in Recovery Act funds for the Weatherization Assistance 

Program and plans to weatherize 538 homes with its portion of these 

funds. MORPC expects to add 14 staff to augment its inspectors, case 

managers, and quality assurance positions and has hired one additional 

outside contractor. Until August 2009, MORPC used four contractors. 

 

5

Three of these grantees use 24 local agencies—called delegates—to provide 

weatherization services. 

Page OH-4 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

To meet its new production goals, MORPC solicited applications for 

additional contractors. MORPC officials stated that while eight 

weatherization contractors submitted proposals, only one met the 

selection criteria — the contractor had to be appropriately licensed, 

provide satisfactory references, and have experience or skills in 

weatherization work. MORPC awarded the contract on August 1, 2009. 

MORPC now uses five contractors to provide weatherization services 

in the mid-Ohio region. During the two month period of July and 

August 2009, MORPC expended about $251,240 of its allocation and 

weatherized 36 housing units. 

Davis-Bacon Act Is Not a 

Factor Limiting the Use of 

Recovery Act Funds 

Ohio began weatherizing homes before Labor had issued its guidance on 

Davis-Bacon wage rates for weatherization work. ODOD officials directed 

grantees to choose a wage rate of at least as much as an existing prevailing 

wage for a similar position and begin weatherizing homes. ODOD officials 

said that if these rates were lower than Labor’s new prevailing wage rate 

for weatherization work, the wages would be retroactively adjusted. 

ODOD officials said that most of the 34 grantees that perform 

weatherization services already paid wages above then existing prevailing 

wage categories. 

On September 3, 2009, Labor published a county-by-county weatherization 

wage determination for Ohio. The determination includes weatherization 

work performed by a weatherization worker, such as minor repairs, batt 

and blown insulation, window and door repair, and weather stripping, 

solar film installation, air sealing, caulking, and other minor or incidental 

structural repairs. The determination also identified specialty 

weatherization work including replacement of doors and windows, 

installation and repair of furnace and cooling systems, and work 

associated with furnace and cooling systems such as electrical, pipe, and 

duct work. A senior ODOD weatherization official told us, however, that 

this determination was incomplete. Specifically, wage determinations for 

six of Ohio’s counties were not included and some wage determinations 

for specific classifications of two counties seem very high. ODOD has 

scheduled for Labor to provide prevailing wage training in early October 

2009. 

Although the Davis-Bacon wage rates themselves were not a concern for 

ODOD, officials said they will have to overcome some administrative 

challenges concerning payroll processing required under the Davis-Bacon 

Act. The act requires that employees are paid weekly; however, grantees in 

Ohio have biweekly payrolls and will have to change their payroll systems 

to implement the program with Recovery Act funds. An ODOD official 

Page OH-5 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

stated he was concerned that contractors may not participate in the 

program due to these paperwork requirements. At the two grantees we 

visited CAP-Dayton had advertised to hire a Davis-Bacon compliance 

officer and MORPC officials told us they were considering hiring a DavisBacon compliance officer. 

Implementation of 

Weatherization Program 

Varies throughout Ohio 

Since ODOD relies on a network of grantees to implement the program, 

there are variations in the way the program is implemented across the 

state. While some grantees may need to hire more staff and inspectors to 

weatherize homes in their area, others may rely on local contractors to do 

the work. Another difference between grantees’ program implementation 

is how they acquire weatherization supplies. For example, CAP-Dayton 

contracts with material suppliers for bulk purchases of weatherization 

supplies. Whereas, MORPC does not purchase weatherization materials; 

instead, it requires its contractors to purchase the supplies they use. 

ODOD said it has developed a list of suppliers of weatherization materials 

that emphasizes the use of Ohio businesses, but it does not require its 

grantees to use suppliers from the list. The grantees can purchase their 

own materials in bulk or allow its contractors to purchase supplies, as 

long as the supplies meet state established standards.6

 In instances where 

a grantee contracts out its weatherization services, the responsibility of 

purchasing supplies and materials is often given to the contractor. 

We reviewed MORPC’s solicitation for a new contractor to gain a better 

understanding of how it provides weatherization services and discussed it 

with local officials, who told us that the contract was not competitively 

bid. They explained that MORPC uses a set price list for supplies and 

materials and establishes the wages for the contractor’s staff. The 

contractor has to agree to MORPC’s price and wage conditions. Further, 

an official stated that the contract does not set total value; rather, its 

effective dates run from August 1, 2009, through March 31, 2011, and 

MORPC will allocate production among all its contractors until its meets 

its production goals. 

 

6

Ohio requires weatherization materials installed conform to the State of Ohio 

Weatherization Program Standards and Appendix A of 10 CFR Part 440. 

Page OH-6 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Ohio Plans to Enhance 

Existing Monitoring to 

Accommodate Program 

Growth 

Given the large increase in funding from the Recovery Act, ODOD plans to 

enhance its monitoring activities. Currently, to ensure that grantees are 

meeting program requirements, ODOD visits each grantee at least once 

every 2 years to conduct administrative monitoring during which files of at 

least 10 percent of total production are reviewed. In addition, technical 

program monitoring occurs at least once a year during which 5 percent of 

completed, weatherized units are inspected. Going forward, ODOD intends 

to conduct both administrative and technical monitoring on an annual 

basis. To further enhance its monitoring under the Recovery Act, ODOD 

plans to assess each grantee provider’s performance and use of Recovery 

Act funds on a quarterly basis. If deficiencies are noted, ODOD indicated it 

will work with the grantee to meet program requirements. If ODOD finds 

that a particular grantee cannot resolve its deficiencies, ODOD will look 

for another grantee to provide services in that part of the state. 

ODOD conducts on-site monitoring of a selected number of completed 

units to help ensure that weatherization program standards are met. DOE 

requires on-site inspections of at least 5 percent of production. The 

enhanced funding level will require many more inspections; ODOD 

officials said they plan to increase their staff from six to eight staff in order 

to meet the requirements. ODOD officials said that if its inspectors identify 

deficiencies, the contractors are required to return to the home to 

complete the work. ODOD also plans to conduct telephone satisfaction 

surveys to recipient households to monitor whether local programs are 

effective and customer friendly. 

Grantees also monitor production. For example, CAP-Dayton officials told 

us that field supervisors oversee 100 percent of the housing units 

weatherized as work is being done. A final inspector reviews work crew’s 

work before the project is closed. This inspection is done on every project. 

CAP-Dayton weatherization directors randomly inspect work sites. Finally, 

CAP-Dayton contacts every customer to obtain their satisfaction with the 

work done and follow up on 25 percent of the weatherized units to 

measure energy consumption. CAP-Dayton officials noted they will 

continue with these monitoring procedures for the Recovery Act projects. 

Similarly, an official at MORPC told us the weatherization program 

manager reviews and signs off on every application for weatherization 

service, quality assurance inspectors verify that weatherization work was 

properly done on 100 percent of the projects, and the program manager 

also checks completed units on a random basis. MORPC staff conduct a 

telephone survey of at least 25 percent of weatherization customers. 

MORPC officials also said they plan to continue these monitoring 

procedures on projects funded by the Recovery Act. 

Page OH-7 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Because the weatherization program has been small in recent years, 

ODOD’s monitoring activities have not been tested by an independent 

audit in more than 10 years. However, monitoring procedures and 

activities are subject to periodic review by the DOE. The lack of an 

independent review through the Single Audit process heightens the risks 

associated with the program. When considering risk during the Single 

Audit process, auditors consider such items as the recipient’s current and 

prior audit experience with federal programs; the results of recent 

oversight visits by federal, state, or local agencies; and the inherent risk of 

the program. Ohio’s Office of Internal Audit (OIA) recently conducted a 

risk assessment of ODOD in order to help optimize use of its audit 

resources. OIA plans to perform an interim review of the adequacy of the 

internal controls at ODOD and will conduct assurance testing of key 

controls as funds are disbursed to ODOD. Additionally, the Auditor of 

State anticipates auditing Ohio’s Weatherization Assistance Program in 

2010. 

Ohio Will Use DOE 

Performance Measures to 

Assess Impact of Recovery 

Act Funds and Help Meet 

Section 1512 Reporting 

Requirements 

ODOD officials plan to use DOE performance measures to determine the 

impact of Recovery Act weatherization funds and are reporting several 

metrics to DOE on a quarterly basis, including: financial data, units 

weatherized, jobs created, monitoring activities, training provided, and 

equipment purchased. Grantees are required to report production and 

financial information monthly. ODOD, on a monthly basis, plans to 

monitor grantees’ productivity in relation to established production goals 

and the quality standards and to adjust program funding and identify 

grantee providers that may need additional guidance or oversight. 

To help meet Section 15127

 reporting requirements, ODOD said it plans to 

report actual jobs created. ODOD will collect the data through surveys of 

its grantees, aggregate the data, and report the information to DOE and 

OMB. To allow adequate time to review the subrecipient data before 

ODOD has to submit the data to Ohio’s Office of Budget and Management 

(OBM), ODOD plans to establish a reporting deadline for its grantees that 

is 10 days in advance of the reporting date. ODOD will check the data once 

 

7

Section 1512 of the Recovery Act requires direct recipients of Recovery Act funds to report 

not later than 10 days after the end of each calendar quarter beginning with the quarter 

ending September 30, 2009, including use of funds received from federal agencies, detailed 

project or activity information, and an estimate of the number of jobs created and the 

number of jobs retained for projects and activities. Pub. L. No. 111-5, 123 Star. 115, 287 

(Feb. 17, 2009) 

Page OH-8 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

they are received. If data appear questionable, officials will compare the 

electronically submitted information against hard-copy files. Although 

ODOD cannot verify the data before it submits it to OBM, ODOD plans to 

verify the data during its quarterly on-site visits. 

In Ohio, all state agencies that receive Recovery Act funds are responsible 

for reporting Recovery Act Section 1512 data—including the number of 

jobs created and retained—to OMB. Ohio’s OBM has issued guidance on 

estimating jobs created and retained. Additionally, guidance was provided 

to grantees at weatherization assistance program meetings hosted by 

ODOD on March 3 and 4, 2009. However, grantee officials told us that they 

had not received guidance on how to report on jobs created. CAP-Dayton, 

which primarily uses in-house crews to perform weatherization work, 

estimated that it will create 30 new jobs under Recovery Act funding. 

MORPC officials plan to measure full-time equivalent jobs and estimated 

that 14 jobs will be created within the agency. MORPC contracts out the 

majority of its weatherization services; MORPC surveyed its contractors 

and estimates that its contractors will create 8 new jobs. ODOD officials 

said they expect to issue additional Section 1512 reporting guidance in the 

near future. Because of the centralized reporting requirements issued by 

OBM, ODOD officials said they already possess most of the required 

identifying data. As a result, relatively few additional reporting 

requirements for subrecipients are anticipated. 

Another challenge of measuring job creation will be separating job 

creation by funding source. Ohio’s Recovery Act weatherization program 

receives funding from three different sources: DOE’s Weatherization 

Assistance Program, Health and Human Service’s (HHS) Low-Income Heat 

Assistance Program (LIHEAP), and Ohio’s Electric Partnership Program 

(EPP). Officials at both CAP-Dayton and MORPC told us they will use 

DOE Recovery Act funds for in-house labor costs and will only report job 

creation under DOE Recovery Act weatherization funds. However, 

MORPC officials explained that contractors are able to use some LIHEAP 

funds to pay salaries. ODOD officials stated they do not yet have a method 

to report job creation by separate funding stream, but will seek guidance 

from DOE. 

Page OH-9 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

The Recovery Act provides an additional $1.2 billion in funds for the 

Workforce Investment Act (WIA) Youth Program, including summer 

employment. Administered by 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. 

Funds for the program are distributed to states based on a statutory 

formula; states, in turn, distribute at least 85 percent of the funds to local 

areas, reserving as much as 15 percent for statewide activities. The local 

areas, through their local workforce investment boards, have the flexibility 

to decide how they will use the funds to provide required services. 

Ohio Expanded 

Summer Youth 

Employment 

Activities but Faced 

Challenges Reaching 

Intended Enrollments 

for Older Youth 

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,8

 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth Program requires a summer employme

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.

nt 

 

9

 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. A key 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job; (2) learn 

work readiness skills on the job; and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.10 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

8

H.R. Rep. No. 111-16, at 448 (2009). 

9

Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 2009). 

10Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page OH-10 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Page OH-11 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

The Ohio Department of Job and Family Services (JFS) administers the 

state’s workforce development system, including the WIA Youth Program, 

in addition to administering other federally funded social service 

programs. Ohio has 20 local Workforce Investment Boards (WIB), each 

including a varying number of counties. County commissioners are 

actively involved in decision making for the workforce system, and the 

design of summer youth employment activities differs from county to 

county, according to a senior JFS official. For our review of summer youth 

employment activities, we visited three counties: Franklin, Montgomery 

and Union, all of which we visited for our July 8, 2009, report.11 We 

selected these counties to give us (1) a mix of population sizes and (2) a 

mix of experience operating summer youth programs. The counties are in 

two of Ohio’s local area WIBs: Area 11, the Central Ohio Workforce 

Investment Corporation (COWIC),12 which covers Franklin County and the 

city of Columbus; and Area 7, which covers 43 counties, including Union 

and Montgomery. (See fig.1.) 

Ohio’s Counties, in 

Conjunction with Local 

Workforce Investment 

Boards, Design WIA 

Summer Youth 

Employment Activities 

 

11GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses, GAO-09-830SP (Washington, D.C.: July 8, 2009). In the July report, 

we also visited Licking County, which is not covered in this report. 

12COWIC is a nonprofit entity that is eligible to receive and administer funds granted under 

the Workforce Investment Act of 1998. Also known as the Local Workforce Board for Area 

11 within the state of Ohio, it represents the city of Columbus and Franklin County, Ohio. 

Page OH-12 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Figure 1: Map of Ohio’s Workforce Investment Boards 

Sources: GAO presentation of Ohio Department of Job and Family Services data; Map Resources (map).

# 20 Workforce Investment Areas

Indicates that Area 7 is split into two noncontiguous areas

Montgomery

Franklin

Union

7

1 7

13

12

20

14

15

8

10

11

16

9

4

2

3

6

17

18 19

5

Page OH-13 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Ohio received $56.2 million in Recovery Act funds for the WIA Youth 

Program and reserved 15 percent for statewide activities. As of August 15, 

2009, JFS estimated it had expended $13.5 million of its allotment. Though 

not required by the Recovery Act, JFS set an overall expenditure rate 

target for the Recovery Act youth funds, requiring local areas to expend at 

least 70 percent of the funds by October 31, 2009, and 90 percent by 

January 31, 2010. Local areas in Ohio that do not meet this target risk 

having those funds recaptured by the state, according to JFS. JFS reported 

that given current expenditures, it is unsure whether the local areas would 

meet its October expenditure target. 

Local Areas’ Ability to 

Meet Ohio’s Expenditure 

Rate Target Is Unclear 

As Localities Implemented 

WIA Summer Youth 

Employment Activities, 

Meeting Enrollment 

Projections Proved 

Challenging 

As we reported in July 2009, counties reported facing some challenges 

implementing their summer youth activities. For this report, we returned 

to three counties we visited in July. Local officials said they were able to 

overcome many of their initial concerns, but other concerns—such as 

recruiting and serving older youth, and increased workloads—remained. 

The localities we visited each initially set a projected number of youth 

they could serve and had varying success reaching those projections. For 

our July 2009 report, JFS officials told us they expected 14,205 youth 

participants this summer. As of July 31, 2009, there were 12,530 youth 

participants statewide, with participation expected to increase as some 

local areas continued enrolling.13 Similarly, at the three counties we 

visited, the number of participants in the program at the time of our visit 

was below the counties’ projected numbers. Table 1 summarizes the 

projected, eligible, and actual number of youth participants for the 

localities we visited. 

 

13Data provided by Labor based on information reported by Ohio. 

Page OH-14 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Table 1: Projected, Eligible, and Actual Numbers of Participants in Three WIA Summer Youth Employment Programs 

Projected number of youth 

participants from our last visit

Actual number of

youth determined eligible

who could begin activitiesa

Actual number of participants

at the time of our latest visit

COWIC 2,500b Total: 2,121

Olderc: 782

Total: 1,492

Older: 493

(as of Aug. 21, 2009)

Montgomery County 750 Total: 774

Older: 774

Total: 607

Older: 607

(as of Aug. 18, 2009)

Union County 30 Total: 24

Older: 6

Total: 18

Older: 5

(as of Aug. 14, 2009)

Sources: COWIC, Montgomery County JFS, and Union County JFS officials. 

a

Represents the final number of your found eligible after intake periods ended. 

b

COWIC later revised the number of participants they could fund to 2,338 due to an increase in hourly 

wage for out-of-school youth. 

c

Older youth are ages 18 to 24. 

Local officials said that older and out-of-school youth, including the newly 

eligible 22- to 24-year-olds, were especially challenging to recruit, enroll, 

and serve. Specifically, many 18- to 24-year-olds did not follow through 

with program requirements, such as providing eligibility documents. To 

help accommodate older youth, Montgomery County and COWIC had 

rolling admission. 14 For older youth in COWIC’s area, wages were an issue. 

Officials at COWIC originally planned to serve about 1,250 out-of-school 

youth but only served 782. COWIC told us that older youth said they could 

find jobs on their own for minimum wage, so COWIC increased its hourly 

wage from $7.30 to $9 per hour, which helped increase participation. Once 

activities began, older youth did not always show up for work readiness or 

orientation sessions or to their job at the work sites, according to the local 

officials we visited. For some youth, this was due to competing 

responsibilities, such as child care. In Union County, the number of 

eligible applicants was low for all ages of youth. This, combined with 

 

14Labor specifies the dates for WIA summer youth employment to be between May 1 and 

September 30, 2009. However, Ohio has a waiver from Labor that allows work experience 

to continue for youth 18 to 24 years old until March 30, 2010. 

Page OH-15 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

initial concerns about meeting the state expenditure rate target, allowed 

officials to offer 40 hours per week of work for most youth.15

In managing the program, local officials indicated it was a challenge to 

quickly screen the large number of applicants or to collect the 

documentation required for WIA eligibility. Compared with past summer 

programs, the counties we visited experienced increased workloads 

processing applications and documenting eligibility. To address the 

volume, COWIC had youth use an online portal to input application 

information with vendor staff. Montgomery County used an online form to 

prescreen potential applicants, and both counties hired additional staff to 

process applications and review eligibility documentation. COWIC used 

five staff members, including one hired for Recovery Act work, to review 

more than 2,300 applications processed by vendors. Montgomery County 

hired seven staff to review more than 1,000 applications. Union County 

processed only 43 applications; while its small staff did not have 

experience calculating WIA eligibility and the process was slow, the 

relatively small number of applications allowed them to process the 

applications themselves. 

In the three counties we visited, local officials we spoke with put varying 

levels of effort into identifying and defining green opportunities. Despite 

Labor’s encouragement for local areas to develop opportunities to 

introduce youth to green careers, Union County officials said finding green 

job placements was not a focus in their county. A Montgomery County 

official expressed frustration at the lack of definition for green jobs and 

said he was unsure how to define or identify green jobs. On the other 

hand, COWIC officials said they are working with industry leaders in the 

sector to identify green opportunities. In COWIC’s request for proposals, it 

describes green initiatives as those that will help the conservation, 

recycling, or preservation of our environment. Along those lines, four 

COWIC youth were assigned to an internship in urban gardening, where 

they were to participate in the development of soil, compost, and planning, 

as well as learn about food business and soil conservation. However, some 

youth working in jobs classified under a “green initiative” were not 

necessarily working toward “green” educational or career paths. For 

example, two youth were assigned to the Ohio State University Center for 

Automotive Research, whose projects include alternative fuel vehicles. 

 

15Hourly wages for youth in Union County ranged from $7.30 to $10 per hour and were 

based on wages that employers pay non-WIA-funded employees. 

Page OH-16 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

While they were exposed to green technology, their actual task was 

clearing brush and painting a fence at the center. 

In implementing WIA summer youth employment activities, the local areas 

we visited did not have a problem recruiting employers to the program. In 

our visits, we found that the “work experience” component varied in the 

counties we visited, with some work sites having more educational 

elements than others. For example, 205 youth 14 to 17 years old in 

COWIC’s Camp IT are expected to strengthen computer skills; explore 

careers; engage in soft skill development, team building, and personal 

development; and access college and financial aid information. However 

other in-school youth placed in jobs by COWIC assisted in children’s 

summer camps, did clerical work or customer service. In Montgomery and 

Union Counties, work readiness sessions—lasting 1 hour in Montgomery 

County and 1 week in Union County—were the only classroom time for 

youth. The majority of youth in those counties did clerical or custodial 

work at employers in a variety of fields. 

Work readiness measures were developed by individual counties in Ohio. 

In our July 2009 report, we noted that for officials in Montgomery County, 

developing work readiness measures was one of their greatest challenges. 

Montgomery County used work readiness measures developed by a 

vendor for their in-school youth program.16 Similarly, COWIC used 

different measures for in-school youth and out-of-school youth, as 

developed by vendors who have worked on previous COWIC programs.17

Union County used elements from a couple of sources, including a preemployment test given by a local business.18

 

16Montgomery County’s work readiness test is a true/false test covering topics such as: 

money management, workplace communication, conflict management, coping skills, and 

time management. 

17In addition to completing work readiness tests, all COWIC participants complete work 

readiness portfolios to document their learning during their internship. 

18Union County’s work readiness test has questions on employment requirements, math 

computation, past employment experiences, and how to respond to workplace scenarios. 

Page OH-17 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Ohio Is Enhancing Its 

Existing Monitoring 

Approach for the WIA 

Programs 

As the prime recipient of WIA funds, JFS is responsible for monitoring the 

local area WIBs. JFS told us it plans on using its existing monitoring 

approach for the WIA Youth Program, with some enhancements. In April 

2009, JFS issued guidance to local area WIB directors communicating its 

monitoring approach for WIA Recovery Act funding. According to this 

guidance, JFS will conduct multiple on-site visits, desk reviews, and 

teleconferences with the local area WIBs to assess the local area WIBs’ 

readiness to implement services and activities using Recovery Act funds, 

as well as the sufficiency of its oversight procedures. JFS plans to provide 

the local area WIB with a written summary of the results of each visit or 

teleconference and will share these summaries with JFS staff so that they 

can address technical assistance needs, as appropriate. To enhance its 

monitoring capability, JFS plans on hiring additional staff to provide 

technical assistance, perform reviews of the fiscal data, and coordinate 

reviews of program data, as needed. To monitor activities provided with 

Recovery Act funds, JFS has also created supplemental questions specific 

to Recovery Act requirements. 

In addition to reviewing the monitoring approach at the state level, we also 

assessed the monitoring approach of the counties and local WIBs we 

visited and noted both similarities and variations in their oversight 

practices. Similar practices local officials told us about were as follows: 

• verifying eligibility by reviewing and signing off on each individual 

application; 

• verifying the accuracy of a sample of manually entered application 

data (which was entered into the JFS reporting system, as electronic 

applications are not linked into the state reporting system); 

• having supervisors sign youth timesheets and by reviewing them for 

accuracy; 

• having employers file work-site agreements that detail the safety and 

supervision requirements for the programs; and 

• using staff to make frequent on-site visits to monitor whether youth 

work sites were complying with program rules. 

An example of a varying practice between the WIBs we visited is that 

COWIC officials told us it has an audit committee and had conducted 

recent risk assessments of its summer youth service providers. It used the 

results of these risk assessments to develop its fiscal monitoring schedule 

for conducting desk reviews. Area 7 told us it does not have an audit 

committee, and although it provided its monitoring schedule indicating 

site visits had begun, it had not conducted a recent risk assessment 

because it plans to visit every county. 

Page OH-18 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

In our July 2009 report, we noted that the Auditor of State had declared 

one of the local area WIBs to be “unauditable.” The Auditor of State 

declares an entity “unauditable” when the condition of the financial 

records is inadequate to complete the audit. The Area 7 WIB was the local 

area WIB declared “unauditable” by the Auditor of State. A senior JFS 

official responsible for overseeing the resolution of the audit issues told us 

that Area 7’s audit issues have been resolved, and on September 10, 2009, 

the Auditor of State released Area 7’s fiscal year 2008 single audit report. 

JFS is responsible for the accuracy and completeness of all subrecipient 

reported information and plans to use a spreadsheet to collect 

subrecipient information. As subrecipients, local areas are responsible for 

reporting financial information to the state system through reporting 

mechanisms and processes determined by the state. JFS has issued initial 

guidance to its local area WIBs regarding its subrecipient reporting 

responsibilities. According to a JFS official, one of the challenges in 

meeting the October 10, 2009, reporting deadline is the requirement to 

include Recovery Act funding information through September 30, 2009. 

This is challenging because although local WIBs provide information to 

JFS by the end of the month, JFS has to review the information submitted, 

and this process normally takes about 10 days. 

A WIA Summer Youth 

Contract Case Study 

We selected one contract to review and discuss in greater depth with 

COWIC contracting officials. COWIC awarded this contract to a local 

vendor to provide services in support of its WIA summer work program 

for out–of-school youth. The contract was awarded on May 1, 2009, at a 

total value of $160,068 with a project start date of May 1 and a projected 

completion date of September 30, 2009. The contract provides for the 

provision of services to 375 WIA eligible youth for their development as 

working professionals, which includes providing case management of 

individual participants, job readiness training, and internship job 

opportunities related to each participant’s career interests. 

According to a senior contracting COWIC official, the contract awarded 

was one of six made by COWIC to public and private organizations to 

serve a total of approximately 970 out-of-school youth 18 to 24 years old 

during the summer of 2009. The official stated the contract was awarded 

competitively using procedures that included a request for proposal (RFP) 

open to any public or private organization capable of performing the work 

described. According to the senior official, 11 vendors submitted letters of 

intent (LOI) to bid, and from a review of those 11, it was determined that 9 

vendors met the criteria established to submit a full proposal in response 

Page OH-19 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

to the RFP. The official stated these LOI reviews were used to ensure the 

capability of each contractor to perform the required services before 

actual contract award. 

Officials told us that under COWIC Procurement Policy and Procedure, the 

agency’s policy specifies that all procurement transactions shall be 

conducted in a manner to provide open and free competition in order to 

ensure objective contractor performance and eliminate unfair competitive 

advantage. This policy also states that contracts will be awarded to the 

offeror whose bid is responsive to the solicitation and is most 

advantageous to COWIC, price, quality, service, and other factors 

considered. 

According to the senior contracting official, the work was awarded using a 

cost-reimbursable contract with a not-to-exceed amount. Payments to the 

vendor are based on actual expenditures, with all vendor invoices 

supported with detailed receipts. The official stated that COWIC has used 

this type of contract with service providers in the past and has achieved 

excellent outcomes. According to the contracting official, the agency has 

standard procedures for monitoring contractor performance with ongoing 

monitoring provided by COWIC compliance staff to assure quality and 

performance is being met. These procedures include conducting desk 

reviews of service provider information on program performance and 

compliance, service provider site visits to review records and interview 

contractor staff, and surveys to participating employers and youth to 

determine program compliance and assess service quality. A sample of 

work-site visits are also conducted by COWIC staff, and program reports 

are completed to document key quality and performance information. 

Other oversight activities include clarifying the performance outcomes 

with the vendor during contract negotiations and providing training for all 

selected vendors and their partners after contract award. 

Page OH-20 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through federal-aid highway program mechanisms, and states 

must follow the requirements of the existing program, which include 

ensuring the project meets all environmental requirements associated with 

the National Environmental Policy Act (NEPA), paying a prevailing wage 

in accordance with federal Davis-Bacon requirements, complying with 

goals to ensure disadvantaged businesses are not discriminated against in 

the awarding of construction contracts, and using American-made iron 

and steel in accordance with Buy America 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. 

FHWA Is Obligating 

Highway Funds for 

Ohio for More 

Complex Projects and 

Has Increased 

Obligation Rates to 

Metropolitan Planning 

The U.S. Department of Transportation’s Federal Highway Administration 

(FHWA) apportioned about $936 million in Recovery Act funds to Ohio. As 

of September 1, 2009, the federal government had obligated about 

$429 million for 193 projects. This is about 46 percent of the $936 million 

apportioned to Ohio in March 2009.19 Almost $290 million or 70 percent of 

Recovery Act highway obligations for Ohio have been for highway 

pavement projects. More than $190 million of these obligated funds are 

going for larger and more complex projects, such as the $18 million 

Greater Cleveland and Greater Akron Regional Intelligent Transportation 

Systems for installing traffic cameras, dynamic message boards, vehicle 

detectors, and advisory radios along highways across seven Ohio counties. 

Figure 2 shows obligations by the types of road and bridge improvements 

being made. 

 

19 All states have met the Recovery Act requirement that 50 percent of apportioned funds be 

obligated within 120 days of apportionment (before June 30, 2009). However, this 

requirement applies only to funds apportioned to the state and not to the 30 percent of 

funds required by the Recovery Act to be suballocated, primarily based on population, for 

metropolitan, regional, and local use or to funds transferred to FTA. The number reported 

above reflects the percentage of all apportioned funds that have been obligated, including 

the suballocated amounts. 

Page OH-21 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Figure 2: Highway Obligations for Ohio by Project Type as of September 1, 2009 

Bridge improvement ($40.9 million)

Other ($55.9 million)

New road construction ($129.8 million)

Pavement widening ($4.8 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($153.3 million)

Pavement projects total (67 percent, $287.9 million)

Bridge projects total (20 percent, $85.3 million)

Other (13 percent, $55.9 million)

Bridge replacement ($15.1 million)

36%

30%

10%

7%

4%

13%

New bridge construction ($29.3 million)

Note: “Other” includes safety projects, such as improving safety at railroad grade 

crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

We selected two highway contracts20 awarded by the Ohio Department of 

Transportation (ODOT) contracting officials to gain a better understanding 

of how projects were to be implemented. We reviewed the contracts and 

discussed them with ODOT officials, who told us that both projects were 

competitively bid and were awarded for a fixed price. Officials also stated 

that one contract was for 7.7 percent less than the state’s estimated cost, 

and the other contract was for 15.1 percent more than the estimated cost. 

Also, in both cases, these officials indicated that ODOT had incorporated 

FHWA Recovery Act requirements into the contracts. As a result, the 

contractors are required to provide information necessary for ODOT to 

meet its Recovery Act reporting requirement. 

 

20The two contracts we reviewed included a project in Hancock County to pave 

deteriorated sections along Interstate 75 and a project in Cuyahoga County to repave the 

shoulders and widen the ramp between two major interstates. 

Page OH-22 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Ohio Department of 

Transportation Monitors 

the Obligations and 

Expending Rates of 

Recovery Act 

Transportation Funds for 

Metropolitan Planning 

Organizations 

As of September 1, 2009, the federal government obligated $49.6 million, or 

31 percent, of the $161.5 million of Recovery Act funds suballocated to 

Metropolitan Planning Organizations (MPO)21 throughout the state. These 

obligated funds went to 57 of the 153 approved MPO Recovery Act 

projects. ODOT officials said they were monitoring the MPOs’ obligation 

rates closely and have procedures in place designed to ensure that all of 

the funds allocated for MPOs are promptly expended. For example, 

according to ODOT officials, ODOT requires the MPOs to submit 

contingency plans in case the actual contract amount is lower than the 

amount obligated for a project. MPO and ODOT district office officials 

meet regularly to discuss whether follow-up action is needed with local 

political entities that are sponsoring individual projects. In addition, ODOT 

central office convenes monthly video conferences with MPO and local 

ODOT district office officials to ensure that project phases are completed 

on schedule. 

We visited the four largest of Ohio’s eight MPOs;22 officials at all four 

MPOs expect there will be projects where contracts will be awarded at 

less than the original Recovery Act estimate. As of September 1, 2009, 

officials at one MPO identified four contracts that will be awarded about 

$400,000 less than originally estimated. According to an MPO official, the 

contingency plan calls for removal of the unused funds from the original 

contract and obligating those funds for use on other road surfacing 

projects. 

ed 

 

ODOT officials told us they expect all Recovery Act funds to be obligat

on MPO approved projects by March 2, 2010. However, officials at the 

MPOs we visited were unsure of the process that should be followed to 

deobligate funds from projects and obligate those funds to other projects. 

In addition, they were unaware of the time frame available for completing 

the action. ODOT central office officials told us that all deobligated funds 

21Metropolitan 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 TIP and the 

approved State Transportation Improvement Program (STIP). 

22MPOs visited were the Ohio-Kentucky-Indiana Regional Council of Governments, 

Northeast Ohio Areawide Coordinating Agency, Mid-Ohio Regional Planning Commission, 

and the Miami Valley Regional Planning Commission. These four MPOs were allocated the 

largest amount of Recovery Act funds in the state. 

Page OH-23 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

from contracts that were awarded at less than the original estimate need

to be obligated on new projects by September 30, 2010. ODOT officials 

said they plan to revisit the procedures for obligating the unused Recovery 

Act funds with the MPOs to make sure they understand the process; ODOT 

officials also stated they may provide written guidance on the process. 

) in 

nment 

 each 

ts, such 

te 

06 

nds 

Ohio Has Obligated 

Its Recovery Act 

Funds for State Fisc

Stabilization Fund 

and Education, but 

Few Funds

al 

 Have Been 

Expended 

iscal Stabilization 

Fund 

The Recovery Act created the State Fiscal Stabilization Fund (SFSF

part to help state and local governments stabilize their budgets by 

minimizing budgetary cuts in education and other essential gover

services, such as public safety. Stabilization funds for education 

distributed under the Recovery Act must be used to alleviate shortfalls in

state support for education to school districts and public institutions of 

higher education (IHE). The initial award of SFSF funding required

state to submit an application to Education that provided several 

assurances, including that the state will meet maintenance-of-effort 

requirements (or will be able to comply with waiver provisions) and that it

will implement strategies to meet certain educational requiremen

as increasing teacher effectiveness, addressing inequities in the 

distribution of highly qualified teachers, and improving the quality of state 

academic standards and assessments. In addition, states were required to 

make assurances concerning accountability, transparency, reporting, and 

compliance with certain federal laws and regulations. States must alloca

81.8 percent of their SFSF 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). After maintaining state support for education at fiscal year 20

levels, states must use education stabilization funds to restore state 

funding to the greater of fiscal year 2008 or fiscal year 2009 levels for state

support to school districts or public IHEs. When distributing these fu

State F

Page OH-24 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

to school districts, states must use their primary education funding 

formula, but they can determine how to allocate funds to public IHEs. In

general, school districts maintain broad discretion in how they can use 

education stabilization funds, but states have some ability to direct IHEs in 

how to use these funds. 

ires 

 and 

ys 

youth, such as through providing professional development to teachers. 

rvices 

Recovery Act IDEA funding available to state agencies on April 1, 2009. 

Department of Education (ODE) administers all Recovery Act funds for 

 

The Recovery Act provides $10 billion to help local educational agencies 

(LEA) educate disadvantaged youth by making additional funds available 

beyond those regularly allocated through Title I, Part A of the Elementary 

and Secondary Education Act (ESEA) of 1965. The Recovery Act requ

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 current statutory

regulatory requirements and must obligate 85 percent of the funds by 

September 30, 2010.23 Education is advising LEAs to use the funds in wa

that will build the agencies’ long-term capacity to serve disadvantaged 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of the Individuals with Disabilities Education Act (IDEA), 

the major federal statute that supports the provisions of early intervention

and special education and related services for infants, toddlers, children, 

and youth with disabilities. Part B funds programs that ensure preschool 

and school-aged children with disabilities access to a free and appropriate 

public education and is divided into two separate grants—Part B grants to 

states (for school-age children) and Part B preschool grants (section 619). 

Part C funds programs that provide early intervention and related se

for infants and toddlers with disabilities—or at risk of developing a 

disability—and their families. Education made the first half of states’ 

Ohio has allocated almost all Recovery Act funds made available for ESEA

Title I, IDEA, and SFSF, but limited funds have been expended. The Ohio

ESEA Title I 

IDEA 

23LEAs 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 OH-25 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

education, including SFSF money, and will distribute those funds to 

recipients as those entities request drawdowns. (See fig. 3.) 

Figure 3: Expenditures of Recovery Act Funding for Selected Education-Related 

Programs as of September 15, 2009 

Source: GAO analysis of data from the U.S. Department of Education and the Ohio Department of Education.

Program

0

100

200

300

400

500

600

Expended by subrecipients

Allocated by state to subrecipients

Made available to state

State Fiscal

Stabilization Fund,

Government

Services Fund

State Fiscal

Stabilization Fund,

Higher Education

State Fiscal

Stabilization Fund,

K-12

ESEA Title I, IDEA, Part B

Part A

Dollars (in millions)

Made available to state

Allocated by state to subrecipients

Expended by subrecipients

Note: The U.S. Department of Education does not separately allocate SFSF funds to states for K-12 

and higher education, but this graph reflects the division of funds appropriated by the Ohio legislature. 

While the final third of education stabilization funds have not yet been 

made available to the state, the state’s biennial budget appropriates all the 

funds to be provided by the Recovery Act. In addition, the budget 

allocated all of the state’s government services funds—a portion of the 

SFSF—to the Department of Rehabilitation and Corrections (ODRC). 

Specifically, the budget allocated the following over fiscal years 2010 and 

2011: 

• about $845 million in SFSF to LEAs as a portion of the state’s 

foundation funding that the state sends in grants to LEAs each year by 

Page OH-26 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

formula. This year, the state changed the formula it will use to 

distribute this funding, known as foundation funding.24

• nearly $619 million in SFSF for higher education. These funds are 

being distributed to all 37 of Ohio’s public institutions of higher 

education as part of the state’s share of instruction (SSI). A state 

official said that, like the K-12 formula, the formulas used to determine 

SSI distributions also changed this year: They will include factors 

related to course completion and degree attainment, which are 

expected to be phased into the formulas over the next two biennia. 

Overall, the total SSI provided to IHEs increased by about 6 percent 

from fiscal year 2009 to fiscal year 2010. Based on preliminary 

calculations of SSI distributions, all main campuses of 4-year 

universities received more funding through the SSI than in the 

previous year except Youngstown State University and Central State 

University (CSU), whose total allocation for SSI was projected to be 

reduced compared with the previous year. Officials from CSU said the 

new formula factors presented challenges for the school. 

• nearly $326 million in SFSF over 2 years to the ODRC for operating 

costs such as salaries and other expenses. 

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.25 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. Recovery Act requirements specify that public housing 

agencies must obligate funds within 1 year of the date on which they are 

Ohio’s Use of Public 

Housing Capital Fund 

Grants Is Increasing 

 

24The budget adopted an “evidence-based model” for school funding in Ohio. The new 

model, which includes funding for universal all-day kindergarten, will be phased in over 10 

years. The total amount of funding calculated under the model is termed the adequacy 

amount. The adequacy amount includes eight major components: (1) instructional services, 

(2) additional support, (3) administrative services, (4) operations and maintenance, 

(5) gifted instruction and enrichment, (6) technology resources, (7) professional 

development, and (8) instructional materials. Certain components of the model are 

adjusted to account for differences in the school district’s educational attainment, wealth, 

and concentration of economically disadvantaged students. 

25Public housing agencies receive money directly from the federal government. Funds 

awarded to the public housing agencies do not pass through the state budget. 

Page OH-27 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

made available to public housing agencies, expend at least 60 percent of 

funds within 2 years, and expend 100 percent of the funds within 3 years. 

Public housing agencies are expected to give priority to projects that can 

award contracts based on bids within 120 days from the date on which the 

funds are made available, as well as projects that rehabilitate vacant units, 

or those already under way or included in their current required 5-year 

capital fund plans. 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million), 

• gap financing for projects that are stalled due to financing issues 

($200 million), 

• public housing transformation ($100 million), and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

will be threshold-based, meaning applications that meet all the threshold 

requirements will be funded in order of receipt. If funds are available after 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

Ohio has 52 public housing agencies that have received Recovery Act 

formula grant funds. In total, these agencies received about $128.3 million 

in Public Housing Capital Fund grant awards. We reported in July 2009 

that Ohio’s public housing agencies had obligated approximately 

$8.1 million or about 6.3 percent of the total grant award allocation and 

had expended $794,847 or about 0.6 percent. As of September 5, 2009, the 

Ohio public housing agencies have increased the pace at which they are 

obligating and expending Recovery Act funds. Figure 4 shows the funds 

allocated by HUD that have been obligated and drawn down by Ohio 

public housing agencies as of September 5, 2009. 

Page OH-28 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Figure 4: Percentage of Public Housing Capital Funds Allocated by HUD That Have Been Obligated and Drawn Down in Ohio, 

as of September 5, 2009 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

100%

 $128,325,949

Funds obligated 

by public housing agencies

21.7%

 $27,807,450

Funds drawn down

by public housing agencies

3.0%

 $3,838,762

36

Number of public housing agencies

Source: GAO analysis of HUD data.

52

28

As of September 5, 2009, 36 of 52 agencies in Ohio had obligated funds—

an increase of 9 since June 20, 2009—and 28 have drawn down funds—an 

increase of 18 agencies. During the same time period, obligations have 

increased to about $27.8 million, or 21.7 percent of the grant allocations, 

and draw downs have increased to over $3.8 million, or about 3.0 percent. 

In Ohio, OBM is responsible for completion and submission of the 

quarterly Section 1512 Recovery Act reports to the FederalReporting.gov 

Web site. As a direct or prime recipient, state agencies contract with 

subrecipients, monitor these subrecipients, and report Recovery Act 1512 

data from subrecipients to OBM for processing and reporting. OBM will 

monitor and report on Recovery Act funding that is managed by state 

agencies or passed through to local government entities on a subrecipient 

basis. OBM will neither monitor nor report funding and programmatic 

information on Recovery Act dollars that local entities may receive as 

prime recipients directly from federal grant programs. Prime recipients are 

Ohio to Use a 

Centralized System 

for Recipient 

Reporting 

Page OH-29 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

responsible for reporting information required by Section 1512 directly to 

FederalReporting.gov. 

To ensure the accuracy and completeness of Recovery Act reports to 

federal agencies, OBM has designed a new information system—called the 

Ohio American Recovery and Reinvestment Act Hub (Hub)—to centrally 

collect and report on both financial and program data. Revenue and 

expenditure data is directly input to the Hub through an interface with the 

Ohio Administrative Knowledge System (OAKS). Programmatic 

information, however, is being entered into the Hub by each of the state 

agencies. State agencies that administer Recovery Act-funded programs 

are also responsible for submitting subrecipient and vendor information to 

the Hub. Each state agency that is a Recovery Act funding recipient is 

working with the OBM’s Office of Internal Audit to complete detailed 

process maps and risk assessments. This process began in March 2009 and 

is expected to continue for the duration of the Recovery Act programs. 

OBM Has Identified Risks 

and Controls within the 

Hub 

OBM identified four risk areas and established controls designed to avoid 

two key data problems—material omissions and significant reporting 

errors. Material omissions are when required data are not reported or 

reported information is not responsive to the data requested. Significant 

reporting errors occur when data is not reported accurately. 

OBM reviewed the process activities for Ohio’s centralized reporting 

system—the Hub—for the program initiation and quarterly reporting 

process and identified four risk areas: 

• commingling of Recovery Act funds with non-Recovery Act funds; 

• insufficient or lack of internal controls in place to comply with 

Recovery Act program requirements and goals or to minimize the 

fraud, waste, and abuse; 

• incomplete and inaccurate data; and 

• untimely submission of Recovery Act data to federal agencies. 

OBM established six key controls designed to prevent or mitigate the risk 

areas. These controls include 

• assigning a unique OAKS number to each program for both revenue 

and expenditures, 

• providing independent review of the Recovery Act process diagrams 

for each agency, 

• delivering and monitoring data and validation reports to determine 

which programs are validating data to ensure compliance, 

Page OH-30 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

• reviewing OAKS data at month and quarter ends to ensure accuracy 

and completeness, 

• performing completeness checks on data pulled from the Hub and data 

uploaded into FederalReporting.gov, and 

• evaluating the Recovery Act internal controls of each agency. 

Because the Hub is a new application, implementation issues could result. 

Recognizing this, in early August 2009, OBM performed an initial test run 

of the Hub. This “dry run” had two purposes. First, it allowed state 

agencies to become accustomed to the reporting timelines and the internal 

work procedures needed to meet the timelines. Second, it provided OBM 

with an opportunity to test its information system and ensure it could pull 

together accurate central reports in a timely and effective manner. 

Initial Tests of the Hub Are 

Promising, but Challenges 

Exist 

In mid-August 2009, OBM completed initial Hub testing. According to 

OBM, the test was designed as a basic system test. Specifically, the test 

was designed to help ensure that state agencies report all data elements 

required by Section 1512, that data were added to the appropriate reports 

by program and in summary, and that financial data from OAKS were fed 

properly into the Hub and were associated with the appropriate program. 

Additionally, the test provided an impetus for agencies to provide their 

program data, establish proper security for their users, and use the 

validation function for an individual to attest to the accuracy of program 

data. 

OBM reported that the test was successful. Specifically, an OBM official 

noted that (1) reports available to all Hub users contained the required 

data, (2) financial data from OAKS were associated with the proper 

Catalog of Federal Domestic Assistance number and appeared correctly in 

reports, and (3) the validation and attest feature worked. Further, the test 

prompted the agencies to become more familiar with the Hub and spurred 

them to load their programmatic data. OBM plans another Hub test in 

early September 2009. This second test is to include available vendor and 

subrecipient data elements and will again test a reporting period 

conclusion. 

While initial tests of the Hub were successful, OBM faces additional 

challenges before the system is fully operational and fully tested. First, the 

“dry run” tested data of only 14 of the more than 20 Recovery Act 

programs. Second, all controls and validation procedures may not be 

complete by the first quarterly reporting date of October 10, 2009. Third, 

notwithstanding the controls put into place and OBM’s “dry run” test, the 

Page OH-31 GAO-09-1017SP Recovery Act
Appendix XV: Ohio 

Hub could still contain erroneous data because each state agency has its 

own validation policy and is responsible for validating the accuracy and 

completeness of subrecipient data, as well as its own data. OBM officials 

told us they plan to review state agencies’ controls and make sure that 

agencies’ data have been independently reviewed. 

We provided the Governor of Ohio with a draft of this appendix on 

September 4, 2009, and representatives of the Governor’s office responded 

on September 09, 2009. 

In general, they agreed with our draft and provided some clarifying 

information, which we incorporated. The officials also provided technical 

suggestions that were incorporated, as appropriate. 

Cynthia M. Fagnoni, (202) 512-7202 or fagnonic@gao.gov 

David C. Trimble, (202) 512-9338 or trimbled@gao.gov 

In addition to the contacts named above, Bill J. Keller, Assistant Director; 

Sanford Reigle, analyst-in-charge; William Bricking; Matthew Drerup; 

Laura Jezewski; Myra Watts-Butler; Lindsay Welter; Charles Willson; and 

Doris Yanger made major contributions to this report. 

State Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page OH-32 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act)1

spending in Pennsylvania. The full report on all of our work, which covers 

16 states and the District of Columbia, is available at 

http://www.gao.gov/recovery/. 

Overview 

We reviewed four programs in Pennsylvania funded under the Recovery 

Act—Highway Infrastructure Investment funds, Transit Capital Assistance 

Program funds, Weatherization Assistance Program, and the Workforce 

Investment Act (WIA) Youth Program summer employment activities. We 

selected these programs for different reasons. Contracts for highway 

projects using Highway Infrastructure Investment funds have been under 

way in Pennsylvania for several months, and provided an opportunity to 

review financial controls, including the oversight of contracts. The Transit 

Capital Assistance Program funds had a September 1, 2009, deadline for 

obligating a portion of the funds, and further, provided an opportunity to 

review nonstate entities that receive Recovery Act funds. The 

Weatherization Assistance Program received a significant funding increase 

and is considered a high-risk program by Pennsylvania’s Bureau of Audits. 

We selected the WIA Youth Program in Pennsylvania because many of the 

local workforce areas were setting up summer youth employment 

activities for 2009. With these programs, we focused on how funds were 

being used; how safeguards were being implemented, including those 

related to procurement of goods and services; and how results were being 

assessed. We reviewed contracting procedures and examined two specific 

contracts under both the Recovery Act Highway Infrastructure Investment 

funds and the WIA Youth Program. In addition to these four programs, we 

also updated funding information on three Recovery Act education 

programs—the U.S. Department of Education (Education) State Fiscal 

Stabilization Fund (SFSF); Title I, Part A, of the Elementary and 

Secondary Education Act of 1965 (ESEA), as amended; and the Individuals 

with Disabilities Education Act (IDEA), Parts B and C—which were 

awaiting spending authority under Pennsylvania’s state budget. We also 

updated the funding information for the Public Housing Capital fund to 

provide perspective on nonstate entities receiving Recovery Act funds. 

Consistent with the purposes of the Recovery Act, funds from the 

programs we reviewed are being directed to help Pennsylvania and local 

governments stabilize their budgets and to stimulate infrastructure 

Page PA-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix XVI: Pennsylvania 

development and expand existing programs—thereby providing needed 

services and potential jobs. We also reviewed the Pennsylvania 

Accountability Office’s plans for reporting and assessing the effects of 

spending. The following provides highlights of our review: 

Updated Funding 

Information on Three 

Education Programs 

• For its SFSF, Education directed Pennsylvania to resubmit its 

application before receiving the first portion of its $1.9 billion 

allocation. In addition, because the Governor and General Assembly 

disagree about how to use the SFSF funds, local school districts will 

remain uncertain about this funding until Pennsylvania adopts a final 

budget for the fiscal year that began July 1, 2009. 

• For Title I, Part A, of ESEA, Education has awarded Pennsylvania 

about $400.6 million in Recovery Act funds. Based on information 

available as of September 3, 2009, Pennsylvania has allocated 

$368 million to local education agencies (LEA), but the stopgap 

budget—adopted on August 5, 2009—provided authority to spend only 

$199.4 million. These funds are to be used to help educate 

disadvantaged youth. 

• For IDEA, Parts B and C, Education has awarded Pennsylvania about 

$456 million in Recovery Act funds. Pennsylvania had allocated 

$267 million to LEAs; however, the stopgap budget provided only 

$228.5 million in spending authority. These funds are to be used to 

support special education and related services for infants, toddlers, 

children, and youth with disabilities. 

Highway Infrastructure 

Investment Funds 

• The U.S. Department of Transportation’s (DOT) Federal Highway 

Administration (FHWA) apportioned $1.026 billion in Recovery Act 

funds to Pennsylvania, of which 30 percent was required to be 

suballocated primarily based on population for metropolitan, regional, 

and local use. As of September 1, 2009, the federal government had 

obligated $874.9 million, and $50.5 million has been reimbursed by 

FHWA. As of August 31, 2009, Pennsylvania had awarded contracts for 

219 projects, mainly for bridge improvements and roadway 

resurfacing. 

• In July 2009, as a result of favorable bids on its original Recovery Act 

projects, Pennsylvania used about $134.8 million of Recovery Act 

funds to add 52 projects for a total of 293 projects. Four existing 

projects using about $69 million in Recovery Act funds were also 

modified. According to Pennsylvania, the additional projects and 

modifications were covered by the original apportionment. 

Page PA-2 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

• Two Recovery Act projects we reviewed in depth have started and are 

making progress. First, the bridge rehabilitation project in Bedford 

County began in July 2009 and was 40 percent complete by early 

September. This project is expected to be finished by November 2009. 

Second, the transportation enhancement project in Chester County to 

construct and upgrade over 1,000 access ramps for persons with 

disabilities began in May 2009 and was estimated to have about 29 

percent of the design and 21 percent of the construction work 

complete by early September. This project is expected to be finished in 

May 2010. 

Transit Capital Assistance 

Program Grants 

• DOT’s Federal Transit Administration (FTA) apportioned 

$327.5 million in Recovery Act Transit Capital Assistance formula 

grant funds to urbanized and nonurbanized areas in Pennsylvania. As 

of September 1, 2009, $257.5 million had been obligated for urbanized 

areas, and $30.2 million had been obligated for nonurbanized areas. 

• Three transit agencies we visited plan to use their Recovery Act funds 

for rehabilitating rail lines and stations in Philadelphia, completing a 

tunnel to extend rail service from downtown Pittsburgh to its North 

Shore area, and constructing a transit center in Butler, Pennsylvania, 

that would serve local bus lines. In Pittsburgh and Butler, Recovery 

Act funds helped sustain projects that otherwise would have been 

suspended or scaled down significantly. In Philadelphia, favorable bids 

on its original Recovery Act projects allowed for six additional 

Recovery Act projects. 

• As of September 1, 2009, FTA concluded that the 50 percent obligation 

requirement had been met for Pennsylvania and its urbanized areas. 

Weatherization Assistance 

Program 

• The U.S. Department of Energy (DOE) allocated about $253 million in 

Recovery Act weatherization funding to Pennsylvania for a 3-year 

period. DOE provided Pennsylvania with its initial 10 percent 

allocation (about $25 million) on March 27, 2009, and another 40 

percent allocation (about $101 million) when DOE approved 

Pennsylvania’s weatherization plan on August 25, 2009. 

• As of September 1, 2009, Pennsylvania had not obligated any of its 

weatherization funds but was working to issue contracts to 43 local 

weatherization agencies. Pennsylvania expects to begin work in 

November 2009 to weatherize 29,700 homes and create an estimated 

940 jobs. 

Page PA-3 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

WIA Youth Program 

Summer Employment 

Activities 

• The U.S. Department of Labor (Labor) allotted about $40.6 million to 

Pennsylvania in WIA Youth Program Recovery Act funds. Pennsylvania 

has allocated $34.6 million to local workforce boards, and as of 

September 1, 2009, the local workforce boards had expended 

$11 million. 

• Pennsylvania enrolled more than 8,800 youth, exceeding its enrollment 

goal of 8,700. The two workforce investment boards we visited 

provided employment activities that combined work readiness 

activities with academic learning components. For example, one 

university-affiliated contractor in Philadelphia ran an urban nutrition 

employment activity at local high school sites with an educational 

component that required participants to submit at least three 

applications to institutions of higher education (IHE). 

• While Pennsylvania exceeded its enrollment plans, local workforce 

investment areas encountered challenges implementing the summer 

youth employment activities. For example, in Philadelphia, the 

contractor stated that the work start dates of approximately 25 percent 

of youth participants were delayed because of delays in the enrollment 

paperwork process. 

Updated Funding 

Information on Public 

Housing Capital Funding 

• The U.S. Department of Housing and Urban Development (HUD) has 

allocated about $212 million in Recovery Act funding to 82 public 

housing agencies in Pennsylvania. Based on information available as of 

September 5, 2009, about $65.0 million (31 percent) had been obligated 

by 68 of those agencies. 

Reporting and Assessing 

the Effects of Spending 

• Pennsylvania’s Accountability Office plans to centralize submission of 

quarterly recipient reporting for Recovery Act funds received by 

Pennsylvania state agencies. State program agencies receiving 

Recovery Act funds—the direct recipients—are responsible for 

collecting and entering any additional data for their subrecipients and 

vendors into the centralized Recovery Act data warehouse. The 

Accountability Office is developing internal controls and a quality 

review process to help ensure that the data are complete and accurate 

before submission. Pennsylvania’s Accountability Office expects to file 

at least 40 recipient reports for the October 10, 2009, deadline. 

• Looking beyond the recipient reporting on jobs and project status, 

Pennsylvania’s Accountability Office is developing a performance 

measure framework to track results of Pennsylvania’s Recovery Act 

spending and report meaningful outcomes to the public. After the first 

Page PA-4 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

round of recipient reporting is complete in October, Pennsylvania’s 

Accountability Office will continue work to finalize the performance 

measures and begin collecting data for publication on Pennsylvania’s 

recovery Web site, www.recovery.pa.gov. 

Pennsylvania ended its fiscal year 2008-09 with a projected budget gap of 

more than $1.9 billion, and lower-than-expected revenue collections 

complicated efforts to balance the budget. The Pennsylvania Department 

of Revenue reported that the shortfall in general fund revenue for fiscal 

year 2008-09 was $3.3 billion, or 11.3 percent less than estimated as of June 

30, 2009. As we reported in July, Pennsylvania’s Office of the Budget does 

not expect revenues to grow in fiscal year 2009-10, which may contribute 

to a budget gap—where anticipated expenditures are greater than 

anticipated revenues—in fiscal year 2009-10.2

 According to August 2009 

revenue collection data reported by the Pennsylvania Department of 

Revenue, general fund revenues for the first 2 months of fiscal year 

2009-10 were $3.3 billion, or 0.7 percent less than estimated. 

Pennsylvania Budget 

Impasse Continues to 

Delay Release of 

Some Recovery Act 

Funds 

While Recovery Act funds are expected to help Pennsylvania narrow its 

budget gap and to minimize reductions in essential services and the need 

for state tax increases, the General Assembly and the Governor have not 

agreed on a final budget for fiscal year 2009-10, which began July 1, 2009. 

In June 2009, the Governor revised his proposed budget for fiscal year 

2009-10, including $26.4 billion in general fund spending. As we reported in 

July, the Governor also proposed temporarily increasing the state’s 

personal income tax rate from 3.07 to 3.57. However, the state Senate 

passed an appropriations bill—Senate Bill 8503

—that differed substantially 

from the Governor’s proposed budget. The Governor’s proposed budget 

and the Senate bill differed on issues such as targeted tax increases, the 

use of Pennsylvania’s Rainy Day Fund,4

 and education funding (discussed 

below). Without a budget in place on July 1, Pennsylvania’s state 

government did not have spending authority. Although state offices 

 

2

Pennsylvania’s state fiscal year begins on July 1 and ends on June 30. 

3

S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009). 

4

As of February 2009, Pennsylvania’s Rainy Day Fund balance was $753 million. 

Page PA-5 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

remained open, state employees faced delays in receiving their paychecks 

during the budget impasse.5

On August 5, 2009, the Governor signed Senate Bill 850 to provide a 

“stopgap” budget measure to pay state employees and fund health and 

public safety programs. According to the Governor’s letter to the state 

Senate, the Senate bill was not a constitutionally balanced budget and 

would have led to a $1.7 billion shortfall.6

 The Governor used line item 

veto authority to veto all but $11 billion in appropriations mainly for state 

employees’ pay, as well as basic health and safety services. The 

$12.9 billion in appropriations vetoed included state basic and higher 

education funding, subsidized day care, mental health and other health 

services, and county court reimbursement.7

 The Governor said that he 

could not approve the Senate bill in its entirety because he viewed the 

funding for education and other programs as insufficient. As of September 

12, 2009, the General Assembly had not passed and the Governor had not 

signed a final budget for fiscal year 2009-10, which began on July 1. 

Pennsylvania has used some Recovery Act funds to help narrow its budget 

gap. The use of Recovery Act funds must comply with specific program 

requirements but also, in some cases, enables states to free up state funds 

to address their projected budget shortfalls. Pennsylvania plans to use 

Recovery Act funds to a greater extent in fiscal year 2009-10 than they 

were used during fiscal year 2008-09. In fiscal year 2008-09, Pennsylvania 

used $957 million in Recovery Act funds to help stabilize its budget.8

 

5

In 2008, the Commonwealth Court of Pennsylvania held that the federal Fair Labor 

Standards Act (FLSA) does not preempt the provision of the state constitution requiring an 

appropriation by the state legislature before any money can be paid out of the state 

treasury. Council v.Com., 954 A.2d 706 (Pa. Comm. Ct. 2008). The court found that FLSA 

“does not authorize an illegal raid on the State’s treasury to make payroll” and that the 

remedy for a violation of FLSA is the remedy created by Congress, liquidated damages. Id. 

at 718. However, Labor’s Employment Standards Administration, Wage and Hour Division, 

initiated an inquiry under the federal FLSA in response to state employee complaints. 

6

According to the Secretary of the Budget, Senate Bill 850 was based on an outdated 

estimate of the 2008-09 budget shortfall and assumed 1 percent growth in revenues. 

7

The stopgap budget included partial funding for mental health and Medical Assistance to 

meet requirements for Pennsylvania to be eligible for the increased Federal Medical 

Assistance Percentage funds under the Recovery Act. 

8

Recovery Act funds used to stabilize the state’s budget were the Federal Medical 

Assistance Percentage funds (discussed in detail in GAO-09-1016). Other funds available for 

states’ budget stabilization include SFSF moneys. 

Page PA-6 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

However, the extent to which Recovery Act funds will contribute to 

Pennsylvania’s fiscal stability is difficult to assess at this time because 

Pennsylvania has not appropriated all federal Recovery Act funds for state 

use. Under Pennsylvania law, federal funds must, in general, be 

appropriated by the General Assembly.9

 According to analysis by 

Pennsylvania’s Office of the Budget, the August stopgap budget measure 

appropriated $3.3 billion in Recovery Act funding. Table 1 shows the 

amounts appropriated for the Recovery Act programs we reviewed for this 

report. Highway infrastructure investment funds of $1.026 billion did not 

require separate appropriation, according to state budget officials, and 

Pennsylvania has been spending those funds since last spring. Some 

Recovery Act programs, such as the competitive grants that Pennsylvania 

has applied for, were not included in the August stopgap budget measure 

and thus do not have spending authority in place to move forward as 

Pennsylvania receives the federal funds. Likewise, some Recovery Act 

programs received only partial appropriations, and as discussed further 

below, the Governor vetoed the SFSF appropriations. 

Table 1: State Appropriations for Selected Recovery Act Programs in 

Pennsylvania’s August Stopgap Budget 

Dollars in millions 

Recovery Act program 

Amount 

available under 

the Recovery Act 

Amount 

appropriated

in the state

stopgap budget

Highway Infrastructure Investment funds $1,026.4 Not applicablea

Transit Capital Assistance grants for 

nonurbanized areas 30.2 $30.0

Weatherization Assistance Program 252.8 200.5

WIA Youth Programb40.6 37.0

Three education programsc2,756.6 427.9

Total for selected programs $4,106.6 $695.4

Source: GAO analysis of Pennsylvania Office of the Budget data. 

a

Federal Highway Infrastructure funding does not require separate appropriation, according to the 

Pennsylvania Office of the Budget. 

b

Pennsylvania also appropriated $15 million for statewide WIA activities and administration, 

$16 million for WIA adult employment and training, and $30 million for WIA dislocated worker 

activities. 

c

Includes SFSF and Recovery Act funds under ESEA Title I, Part A, and IDEA Parts B and C. 

 

9

72 Pa. Cons. Stat. § 4615. 

Page PA-7 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Even as the Pennsylvania General Assembly and Governor debate how to 

incorporate Recovery Act funds into the fiscal year 2009-10 budget, budget 

officials are looking ahead for ways to balance future budgets when this 

temporary funding ends. As we reported in July, budget officials indicated 

that they are taking several steps to prepare for when Recovery Act funds 

are phased out, including using a multiyear budget planning process, 

emphasizing onetime uses of Recovery Act funds where possible, and 

requiring agencies to use limited-term positions when hiring using 

Recovery Act funds.10 State budget officials acknowledged that 

Pennsylvania will need to make additional cuts or consider revenue 

enhancements depending on how quickly the economy improves. 

According to Pennsylvania’s Secretary of the Budget, if $1.7 billion in 

onetime nonrecurring revenues, such as the Rainy Day Fund, are used to 

bridge the funding gap in fiscal year 2009-10, there would still be about a 

$1.7 billion shortfall at the end of the fiscal year. Without the addition of 

any recurring revenues, the projected shortfall would grow to more than 

$4 billion at the end of fiscal year 2010-11. As of August 2009, the three 

nationally recognized bond rating agencies have observed fiscal pressures, 

such as increased pension contributions beginning in 2013 and the need to 

replace the temporary Recovery Act funding, that could put downward 

pressure on Pennsylvania’s bond rating. One rating agency said that 

Pennsylvania’s rating outlook is negative if the budget continues to rely on 

nonrecurring revenue sources, such as the Rainy Day Fund and Recovery 

Act funding, and does not return to structural budget balance. 

Pennsylvania Plans to Use 

Some Recovery Act Funds 

for Administrative Costs 

Following OMB’s guidance on central administrative costs, Pennsylvania 

plans to bill central oversight costs to each Recovery Act award based on 

the ratio of that award to total Recovery Act funds received by the state. 

Central administrative costs will consist of $500,000 for the Accountability 

Office, $1,750,000 for creating a reporting tool, and $468,000 for 

Pennsylvania’s Comptroller Office to perform risk assessments and audits 

of high-risk Recovery Act–funded programs. Under the proposed billing 

methodology, estimated costs will be billed to Recovery Act–funded 

programs at the beginning of the fiscal year, actual personnel and 

operating costs will be tracked during the fiscal year, and the estimated 

and actual costs will be reconciled at the end of the fiscal year. Any 

 

10As of August 14, 2009, Pennsylvania had filled 166 positions specifically for Recovery Act 

programs, including 155 staff for food stamp eligibility and processing. Another 154 

positions are approved, mostly to administer the workforce investment, unemployment 

compensation, and food stamp programs. 

Page PA-8 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

difference will be used to offset the costs charged to that award in the 

subsequent fiscal year. 

Pennsylvania may consider exempting certain Recovery Act programs and 

funding, such as the increased Federal Medical Assistance Percentage, 

which do not require quarterly recipient reporting under Section 1512 of 

the Recovery Act, from the allocation base. Also, where a Recovery Act–

funded program does not receive federal funding for administrative costs, 

Pennsylvania may charge that cost share to other available federal funding 

sources. Pennsylvania submitted its proposed billing methodology to the 

U.S. Department of Health and Human Service’s Division of Cost 

Allocation for approval on August 28, 2009. According to the Secretary of 

the Budget, Pennsylvania received preliminary verbal approval for its 

proposed cost allocation plan on September 4, 2009. 

As part of our review of Recovery Act education funding, we looked at 

three programs administered by Education: SFSF; Title I, Part A, of ESEA; 

and IDEA, Parts B and C. We obtained updated budget and spending data 

from Pennsylvania’s Office of the Budget. 

As we reported in July, Pennsylvania’s current budget debate centers on 

the state basic education funding level, and according to state officials, 

local school districts are unable to spend Recovery Act funds until they 

are appropriated in the Pennsylvania budget.11 For fiscal year 2009-10, the 

Governor’s application for SFSF funds proposed to maintain state funding 

for elementary and secondary education at the fiscal year 2008-09 level of 

about $5.2 billion and use $418 million in education stabilization funds for 

elementary and secondary education. In contrast, Senate Bill 850 proposed 

to reduce appropriations for state basic education funding for school 

districts to the fiscal year 2005-06 level of about $4.5 billion and use 

$729 million of Recovery Act funds for basic education.12 As we reported 

in July, school districts would have received the same funding for 2009-1

school year that they had during 2008-09 school year under Senate Bill 

850,

Funding for 

Education Will 

Remain Uncertain 

until Pennsylvania 

Adopts Its Final 

Budget 

0 

 

13 whereas school districts would have received an increase in funding 

11According to state education officials, local school districts may obligate ESEA Title I, 

Part A and IDEA Recovery Act funds as soon as their applications are received in an 

approvable form. 

12S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009). 

13S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009). 

Page PA-9 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

under the Governor’s budget. In the stopgap budget measure signed on 

August 5, 2009, the Governor vetoed funding for state basic education—

the largest state appropriation for local school districts. Without a final 

budget in place to provide spending authority, the Pennsylvania 

Department of Education did not make its monthly state basic education 

payments to school districts in July and August.14 School district officials 

we interviewed in the past reported that if the budget impasse continues 

into the fall, they would need to borrow funds to pay bills or shut down. 

The budget impasse has also affected funding for higher education. The 

Pennsylvania Higher Education Assistance Agency does not know the 

amount that will be available for state grant awards for college students 

and is unable to finalize and disburse college tuition grants for the 2009-10 

academic year. 

School Districts Remain 

Uncertain of State Fiscal 

Stabilization Funds 

Because of the State 

Budget Impasse 

The Recovery Act created 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 

be used to alleviate shortfalls in state support for education to school 

districts and public IHEs. The initial award of SFSF funding required each 

state to submit an application to Education that provides several 

assurances, including that the state will meet maintenance-of-effort 

requirements (or it will be able to comply with waiver provisions) and that 

it will implement strategies to meet certain educational requirements, such 

as increasing teacher effectiveness, addressing inequities in the 

distribution of highly qualified teachers, and improving the quality of state 

academic standards and assessments. In addition, states were required to 

make assurances concerning accountability, transparency, reporting, and 

compliance with certain federal laws and regulations. States must allocate 

81.8 percent of their SFSF 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). 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 

school districts or public IHEs. When distributing these funds to school 

 

14School districts receive monthly subsidy payments from the state on the last Thursday of 

every month. 

Page PA-10 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

districts, states must use their primary education funding formula, but they 

can determine how to allocate funds to public IHEs. In general, school 

districts maintain broad discretion in how they can use stabilization funds, 

but states have some ability to direct IHEs in how to use these funds. 

As of September 1, 2009, Pennsylvania had not yet received approval for 

the initial allocation of $1.3 billion of its total $1.9 billion allocation of 

SFSF funds. Pennsylvania submitted an SFSF application on June 26, 2009. 

This application excluded four IHEs that per the Governor, are not under 

state control and, therefore, would not be eligible to receive SFSF 

money.15 However, under Pennsylvania’s preliminary SFSF application

April 2009, these four institutions would have been awarded $41.9 million.

The SFSF guidance requires states to use SFSF money to restore st

spending for public IHEs to the greater of fiscal year 2008 or 2009 levels of 

support. The guidance further notes that a state may not choose to restore 

support only for elementary and secondary education or only for public 

IHEs. Education has directed Pennsylvania to resubmit its SFSF 

application and include these four institutions as IHEs. Pennsylvania will 

resubmit its application once a final fiscal year 2009-10 budget is in place. 

 in 

ate 

 

In the stopgap budget measure signed on August 5, 2009, the Governor 

vetoed the SFSF amounts included in Senate Bill 850, because the General 

Assembly and the Governor did not agree on how to distribute the funds. 

As we reported in July, Pennsylvania Department of Education officials 

were uncertain of the funding levels for SFSF Recovery Act funds given 

the budget uncertainty. 

School Districts Received 

Partial Spending Authority 

for ESEA Title I, Part A 

Funds 

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 ESEA. 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 current statutory and regulatory 

requirements and must obligate 85 percent of these funds by 

15These four IHEs are Pennsylvania State University, University of Pittsburgh, Temple 

University, and Lincoln University. 

Page PA-11 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

September 30, 2010.16 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. 

Education made the first half of states’ Recovery Act ESEA Title I, Part A 

funding available on April 1, 2009, and announced on September 4, 2009, 

that it had made the second half available. 

Education has awarded Pennsylvania its total allocation of about 

$400.6 million in Recovery Act funds. Based on information available as of 

September 3, 2009, Pennsylvania has allocated $368 million to LEAs. 

However, the stopgap budget measure signed on August 5, 2009, provided 

authority to spend only $199.4 million. Pennsylvania received its ESEA 

Title I, Part A allocation and expended $23 million as of September 3, 2009. 

Recovery Act IDEA, Parts 

B and C, Funding Received 

Partial Appropriations 

The Recovery Act provided supplemental funding for programs authorized 

by Parts B and C of IDEA, the major federal statute that supports the 

provisions of early intervention and special education and related services 

for infants, toddlers, children, and youth with disabilities. Part B funds 

programs that ensure that preschool and school-aged children with 

disabilities have access to a free and appropriate public education and is 

divided into two separate grants—Part B grants to states (for school-age 

children) and Part B preschool grants (Section 619). 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. Education made the first half of states’ Recovery Act IDEA 

funding available to state agencies on April 1, 2009, and announced on 

September 4, 2009, that it had made the second half available. 

For IDEA Parts B and C, Education has also awarded Pennsylvania its 

total allocation of $456 million in Recovery Act funds. Pennsylvania had 

allocated $267 million to LEAs, but the stopgap budget measure provided 

only $228.5 million in spending authority. Pennsylvania received its IDEA 

allocation but no funds have been expended as of September 3, 2009. 

 

16LEAs 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 PA-12 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

Federal-Aid Highway Surface Transportation Program, and for other 

eligible surface transportation projects. The 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 

the states through existing federal-aid highway program mechanisms, and 

states must follow the requirements of the existing program, including 

planning, environmental review, contracting, and other requirements. 

However, the federal fund share of highway infrastructure investment 

projects under the Recovery Act is up to 100 percent, while the federal 

share under the existing Federal-Aid Highway Program is usually 80 

percent. 

FHWA Has Obligated 

for Pennsylvania 85 

Percent of Recovery 

Act Funds Primarily 

for Roadway 

Resurfacing and 

Bridges 

As we previously reported, $1.026 billion was apportioned to Pennsylvania 

for highway infrastructure and other eligible projects. As of September 1, 

2009, $874.9 million (85.2 percent) had been obligated. DOT has 

interpreted the “obligation of funds” to mean the federal government’s 

contractual commitment to pay for the federal share of the project. This 

commitment occurs at the time the federal government signs a project 

agreement. As of September 1, 2009, $50.5 million had been reimbursed by 

FHWA. States request reimbursement from FHWA as the states make 

payments to contractors working on approved projects. Pennsylvania 

initially planned to fund 241 projects from its apportionment.17

Pennsylvania has awarded highway and bridge contracts and started work. 

As of August 31, 2009, Pennsylvania had received bids for 245 projects and 

awarded contracts for 219 projects representing about $604 million. Of 

these, 212 projects representing $503 million were under way—that is, a 

Notice to Proceed had been issued, which authorizes a contractor to begin 

work. According to a Pennsylvania Department of Transportation 

(PennDOT) official, the contracts would be “let”—that is, bids opened or 

received—for the remaining projects by December 17, 2009. As we 

previously reported, PennDOT officials expect all work to be completed 

on Recovery Act projects within 3 years of the date the Recovery Act was 

enacted. 

 

17According to a PennDOT official, one additional project was not certified. This project 

was included in a subsequent certification. 

Page PA-13 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

We reported in July 2009 that bids for Recovery Act highway and bridge 

projects were 14.6 percent less than original project cost estimates. 

According to data from PennDOT, as of August 31, 2009, the total amount 

across all bids received was 12 percent (or about $104 million) less than 

original state estimates of total project costs. As a result of the favorable 

bidding climate, on July 23, 2009, the Governor of Pennsylvania certified to 

the U.S. Secretary of Transportation an additional 52 Recovery Act 

projects and the modification of 4 existing Recovery Act projects.18 The 

additional projects totaled $134.8 million in Recovery Act funds and the 

modified projects about $69.2 million. The certification letter stated that 

the addition of these projects did not change Pennsylvania’s Recovery Act 

apportionment of $1.026 billion for highway infrastructure and other 

eligible projects but rather were covered by the apportionment. With the 

addition of these projects, Pennsylvania now plans to fund 293 projects 

with its Recovery Act apportionment. PennDOT officials told us that they 

track bid savings in each area of Pennsylvania represented by a 

metropolitan or rural planning organization and that additional projects 

funded by these savings would be selected by these organizations. The 

additional projects will be located in 35 of Pennsylvania’s 67 counties, 

including 19 economically distressed areas and 16 non–economically 

distressed areas. Recovery Act funds for the projects range from 

$32.8 million for a highway reconstruction project in Allegheny County to 

about $136,000 for a transportation enhancement project in Schuylkill 

County.19

Pennsylvania Has 

Primarily Used Recovery 

Act Funds for Pavement 

Improvements and Bridge 

Improvements 

Pennsylvania selected highway and bridge projects that could be started 

quickly and focused on roadway pavement needs and bridge deficiencies. 

FHWA data show that as of September 1, 2009, most Recovery Act funds 

for Pennsylvania have been obligated for pavement improvements and 

bridges; lesser amounts have been obligated for other projects, including 

safety and traffic management and transportation enhancements (see fig. 

1). Specifically, $353.8 million of the $874.9 million obligated was for 

pavement improvement projects and $251.0 million was obligated for 

 

18Federal regulations require states to maintain a process for reviewing project cost 

estimates. In addition, the state shall seek to revise the federal funds obligated for a project 

within 90 days after it has determined that the estimated federal share of project costs has 

decreased by $250,000 or more.(23 C.F.R. Part 630.106.) The funds deobligated from this 

process may be used for other projects, once funds have been obligated by FHWA. 

19This latter project, which is to construct access ramps for people with disabilities, has a 

total value of $1.1 million of which about $136,000 in Recovery Act funds will be used. 

Page PA-14 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

bridge improvements or replacements. The obligation of Pennsylvania’s 

Recovery Act funds for pavement improvement projects is similar to the 

share of spending nationwide for this type of project—40 percent for 

Pennsylvania compared with 48 percent nationwide. One exception was 

pavement widening, for which FHWA has only obligated 1 percent of 

Pennsylvania’s highway apportionment compared with 16 percent 

nationwide. In contrast, FHWA has obligated a larger share of 

Pennsylvania’s Recovery Act funds to bridge projects—about 29 percent 

for Pennsylvania compared with 10 percent nationwide.20 As we reported 

in July 2009, a significant percentage of the state’s bridges (we reported 

about 26 percent in 2008) are structurally deficient—a reflection of the 

state’s consistently poor bridge conditions.21 Pennsylvania’s initial 

Recovery Act program planned to address 400 bridges, about 100 of which 

are structurally deficient. 

 

20Pennsylvania’s spending for other types of projects (such as transportation 

enhancements) was similar to national averages. 

21See GAO, Highway Bridge Program: Clearer Program Goals and Performance Measures 

Needed for a More Focused and Sustainable Program, GAO-08-1043 (Washington, D.C.: 

Sept. 10, 2008), for more information. 

Page PA-15 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Figure 1: Highway Obligations for Pennsylvania by Project Improvement Type as of 

September 1, 2009 

Bridge improvement ($219.6 million)

Other ($253.2 million)

1%

Pavement widening ($9.7 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($353.8 million)

Pavement projects total (42 percent, $363.4 million)

Bridge projects total (30 percent, $258.2 million)

Other (29 percent, $253.2 million)

Bridge replacement ($31.4 million)

40%

25%

4%

29%

1%

New bridge construction ($7.2 million)

Note: Totals may not add due to rounding. “Other” includes safety projects, such as improving safety 

at railroad grade crossings, and transportation enhancement projects, such as pedestrian and bicycle 

facilities, engineering, and right-of-way purchases. 

Both Recovery Act projects we reviewed in our July 2009 report (a bridge 

project in Bedford County and a transportation enhancement project in 

Chester County) have begun. First, the bridge project in Bedford County—

an economically distressed area—consists of removing an existing overlay 

from bridge beams on two structures and replacing it with a concrete deck 

and paving. This $250,000 project began in May 2009 and is expected to be 

completed in November 2009. PennDOT officials estimated that as of early 

September, this project was 40 percent complete. Second, a $4.4 million 

transportation enhancement project to construct and upgrade over 1,000 

access ramps for people with disabilities in Chester County—a noneconomically distressed area—began in April 2009 and is expected to be 

completed in May 2010. PennDOT officials estimated that as of early 

September, about 29 percent of the design work and 21 percent of the 

construction work for this project was complete. In its August 2009 report 

to FHWA (with data as of July 2009), PennDOT showed that 14 jobs had 

Page PA-16 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

been created or sustained for the Bedford project and 41 jobs were 

created or sustained for the Chester project. 

Pennsylvania Uses 

Existing Procedures to 

Solicit Bids for Recovery 

Act Highway Contracts 

and Monitor Contractor 

Work 

PennDOT officials said that they are using existing procedures to solicit 

bids for contracts for Recovery Act highway and bridge projects and that 

their contracting must comply with federal acquisition requirements. 

PennDOT officials told us that state law requires that contracts be 

competitively bid and that the lowest responsible bidder be selected 

unless there are extenuating circumstances. According to PennDOT 

officials, all Recovery Act highway contracts have been competitively bid, 

and bidding contractors were subject to prequalification. This includes 

determining both financial and nonfinancial responsibility and checking 

suspension and debarment lists. Officials stated that bidders that do not 

meet this criterion are not allowed to win bids, even if they are the lowest 

price bidders. 

Of the two highway projects that we reviewed in depth, both the Bedford 

bridge project and the Chester transportation enhancement project were 

competitively bid, and PennDOT officials said that the bidders were 

prequalified. PennDOT officials told us that the contractors were selected 

based on the lowest responsible bids. These officials also said that most 

PennDOT contracts awarded—including those for the projects we 

reviewed—are contracts where a fixed price is assigned to individual 

items to be supplied by a contractor (unit price). According to PennDOT 

officials, the unit price is fixed but the quantities to be supplied can be 

adjusted up or down by 25 percent before negotiations are required. The 

25 percent allowance recognizes that field conditions may change after a 

contract is awarded, but significant changes to a contract may require the 

use of a change order. PennDOT officials said that in general, federal 

highway contracts require the use of Davis-Bacon Act wages. The general 

exception is for rural connectors to federal-aid highways where state 

prevailing wages are paid; however, PennDOT officials said this exception 

does not apply to Recovery Act projects. According to PennDOT, both the 

Bedford and Chester projects used Davis-Bacon Act wages. Contractors 

were also notified of Recovery Act reporting requirements when bids were 

solicited for contracts. 

PennDOT will also use its existing procedures to monitor Recovery Act 

contractor work and help ensure that quality goods and services are 

received. The procedures include the following: 

Page PA-17 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

• Management oversight and controls. PennDOT’s district offices are 

heavily involved with highway projects, including assigning a PennDOT 

assistant construction engineer to each project to provide oversight of 

construction work. PennDOT is organized into 11 engineering districts. 

Both the Bedford and Chester projects had assistant construction 

engineers assigned, each with 30 years experience and each with various 

certifications in concrete and other construction activities from national 

associations. PennDOT’s Bureau of Construction and Materials also plays 

a role in project management and oversight. PennDOT officials said that 

this bureau is responsible for the overall management and oversight of 

highway construction projects and ensures the quality of material used on 

construction projects through various materials tests and certifications. 

Finally, PennDOT officials said that the department uses an automated 

system to handle all aspects of contracting, including advertising and 

accepting bids and financial and nonfinancial contract management and 

reporting. A PennDOT official said that this system is a database that can 

be used to generate a number of reports on projects. 

• Inspectors to monitor contractor performance. PennDOT assigns an 

inspector-in-charge to each construction project who provides day-to-day 

inspection of contractor work; such inspectors were assigned to the two 

Recovery Act projects we reviewed. PennDOT officials said that 

inspectors-in-charge maintain daily diaries of such things as work 

performed, on-site workers, and wages paid. PennDOT officials said that 

these diaries are used to determine how much contractors get paid and to 

spot-check various contractor reports, including the reasonableness of 

Recovery Act reports on jobs, work hours, and payroll. In some instances, 

PennDOT will also contract for consultants to assist with inspections. 

PennDOT officials said that the Chester project was using one or two 

contracted consultant inspectors and that they work for the PennDOT 

inspector-in-charge.22

 

22In December 2007, Pennsylvania’s Department of the Auditor General reported on its 

investigation of PennDOT’s procedures for evaluating, selecting, and monitoring contracts 

with private firms that provide inspection services. Among the findings were that PennDOT 

had failed to verify individual inspector qualifications and, in some instances, substitutes 

were used to do inspections rather than inspection staff listed on bid documents. 

According to the Auditor General’s report, PennDOT took actions during 2007 to revise its 

procedures regarding contract consultant inspectors to address the issues in the report, 

including instituting procedures to ensure that inspector qualifications are verified by 

district offices. For more information see Commonwealth of Pennsylvania, Department of 

the Auditor General, Special Investigation of the Pennsylvania Department of 

Transportation, Construction Inspection Consultants, December 2007. 

Page PA-18 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

• Reports, meetings, and monitoring of project metrics. PennDOT 

officials said that there are weekly reports it prepares on project status 

and progress as well as weekly meetings with FHWA and contractors to 

discuss completed work and contractor problems. PennDOT district 

officials also said that there are various metrics being used to monitor the 

Bedford and Chester projects we reviewed; for example, PennDOT District 

9 officials told us that they monitor various cost metrics for the Bedford 

project as well as compliance with disadvantaged business enterprise 

(DBE) goals.23 PennDOT District 6 officials said that they monitor, among 

other things, the amount of work done compared with the dollars spent on 

the Chester project. 

Recovery Act Highway 

Reporting Has Begun, and 

PennDOT Will Submit 

Section 1512 Recipient 

Reports through 

Pennsylvania’s 

Accountability Office 

The Recovery Act requires various reports regarding the use of funds 

provided. Section 151224 in particular requires that any entity that receives 

funds appropriated by the Recovery Act directly from the federal 

government (whether through grant, loan, or contract) is to provide 

regular recipient reports. The first Section 1512 report is due October 10, 

2009. FHWA has also established reporting requirements, including 

monthly reports on project status and employment. A PennDOT official 

told us that Pennsylvania’s Accountability Office will submit the recipient 

reports for PennDOT and all other state agencies by the 10th day after 

each reporting quarter; this centralized reporting is discussed further 

below. In addition, PennDOT plans to report directly to FHWA as part of 

the federal reporting requirement for Recovery Act funding. PennDOT 

noted that FHWA has built a database to collect Section 1512 information 

and FHWA will collect this information from states. However, states are 

still responsible for submitting their own Section 1512 reports. 

As we reported in July 2009, PennDOT has begun reporting to FHWA on 

the number of people working on Recovery Act projects and hours 

worked. In March 2009, PennDOT established policies and procedures for 

prime contractors and consultants to report monthly, by project, the 

number of employees, number of work hours, and the amount of payroll.25

PennDOT uses a Monthly Employment Report to collect the required data 

from its contractors and consultants. PennDOT officials told us that 

 

23In accordance with federal regulations, PennDOT maintains a DBE program that among 

other things, ensures that there is no discrimination in contracting opportunities for 

disadvantaged businesses, for example, firms owned by women and minorities. 

24Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

25Reports are to include all subcontractors and subconsultants. 

Page PA-19 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

project inspectors in the district offices with daily contact with 

contractors review the reports for reasonableness, and PennDOT’s Bureau 

of Construction and Materials compiles the reports for submission to 

FHWA. 

The Recovery Act appropriated $8.4 billion to fund public transit 

throughout the country through three existing FTA grant programs, 

including the Transit Capital Assistance Program.26 The majority of the 

public transit funds—$6.9 billion (82 percent)—was apportioned for the 

Transit Capital Assistance Program, with $6.0 billion designated for the 

urbanized area formula grant program and $766 million designated for the 

nonurbanized area formula grant program.27 Under the urbanized area 

formula grant program, Recovery Act funds were apportioned to 

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 

under the nonurbanized area formula grant program 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. Up to 10 

percent of apportioned Recovery Act funds may also be used for operating 

expenses.28 Under the Recovery Act, the maximum federal fund share for 

projects under the Transit Capital Assistance Program is 100 percent.29

Pennsylvania’s Transit 

Capital Assistance 

Funds Are Being 

Obligated, and Transit 

Agencies Are Using 

Recovery Act Funds 

to Refurbish or 

Construct Facilities 

and Extend Service 

 

26The other two public transit programs receiving Recovery Act funds are the Fixed 

Guideway Infrastructure Investment program and the Capital Investment Grant program, 

each of which was apportioned $750 million. The Transit Capital Assistance Program and 

the Fixed Guideway Infrastructure Investment program are formula grant programs, which 

allocate funds to states or their subdivisions by law. Grant recipients may then be 

reimbursed for expenditures for specific projects based on program eligibility guidelines. 

The Capital Investment Grant program is a discretionary grant program, which provides 

funds to recipients for projects based on eligibility and selection criteria. 

27Urbanized areas are areas encompassing a population of not less than 50,000 people that 

have been defined and designated in the most recent decennial census as an “urbanized 

area” by the Secretary of Commerce. Nonurbanized areas are areas encompassing a 

population of fewer than 50,000 people. 

28The 2009 Supplemental Appropriations Act authorizes the use of up to 10 percent of each 

apportionment for operating expenses. Pub. L. No. 111-32, § 1202, 123 Stat. 1859, 1908 

(June 24, 2009). In contrast, under the existing program, operating assistance is generally 

not an eligible expense for transit agencies within urbanized areas with populations of 

200,000 or more. 

29The federal share under the existing formula grant program is generally 80 percent. 

Page PA-20 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

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 (MPO)—develop 

a list of transit projects that project sponsors (typically transit agencies) 

submit to FTA for Recovery Act funding.30 FTA reviews the project 

sponsors’ grant applications to ensure that projects meet eligibility 

requirements and then obligates Recovery Act funds by approving the 

grant applications. Project sponsors must follow the requirements of the 

existing programs, which include ensuring that the projects funded meet 

all regulations and guidance pertaining to the Americans with Disabilities 

Act, pay a prevailing wage in accordance with federal Davis-Bacon Act 

requirements, and comply with goals to ensure that disadvantaged 

businesses are not discriminated against in the awarding of contracts. 

 

30Designated recipients are entities designated by the chief executive officer of a state, 

responsible local officials, and publicly owned operators of public transportation to receive 

and apportion amounts that are attributable to transportation management areas. 

Transportation management areas are areas designated by the Secretary of Transportation 

as having an urbanized area population of more than 200,000, or upon request from the 

governor and MPOs designated for the area. MPOs 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 Program and the approved State Transportation Improvement Program. 

Page PA-21 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

In March 2009, $327.5 million in Transit Capital Assistance Recovery Act 

funds were apportioned for transit projects to urbanized and nonurbanized 

areas in Pennsylvania. As of September 1, 2009, $257.5 million had been 

obligated for urbanized areas, and $30.2 million had been obligated for 

nonurbanized areas.31 Of the $237.8 million in Recovery Act funds 

apportioned to the large urbanized areas of Philadelphia and Pittsburgh,32

$206.4 million had been obligated as of September 1, 2009. The 

Southeastern Pennsylvania Transportation Authority (SEPTA) in 

Philadelphia was apportioned $125.2 million33 and the Port Authority of 

Allegheny County (Port Authority) in Pittsburgh was apportioned 

$44.0 million.34 As of September 1, 2009, $112.8 million of SEPTA’s 

apportionment and all of Port Authority’s apportionment had been 

obligated by FTA. PennDOT was apportioned $30.2 million for intercity 

bus projects and transit projects in nonurbanized areas, which was 

obligated by FTA in July 2009.35

Transit Agencies in 

Pennsylvania Plan to Use 

Funds for New and 

Ongoing Projects to 

Refurbish or Construct 

Facilities and Extend 

Service 

We met with PennDOT officials and visited three transit agencies—SEPTA 

in Philadelphia, Port Authority in Pittsburgh, and Butler Transit Authority 

in Butler, Pennsylvania. We selected SEPTA and Port Authority because 

they are in the only two urbanized areas in Pennsylvania with populations 

 

31DOT 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 and a project agreement is 

executed. 

32Philadelphia and Pittsburg are Pennsylvania’s only urbanized areas with population of 1 

million or more. Transit Capital Assistance funds in the Philadelphia urbanized area were 

split between the Southeastern Pennsylvania Transportation Authority and five other state 

and regional transit entities in Pennsylvania, New Jersey, Maryland, and Delaware. Funds 

in the Pittsburgh urbanized area were split between the Port Authority of Allegheny County 

in Pittsburgh and five other regional transit agencies. 

33SEPTA’s $125.2 million in Transit Capital Assistance funding is from two allocations: 

$121.4 million from urbanized area formula (§ 5307) funds and $3.8 million in “Growing 

States” (§ 5340) funds. SEPTA was also awarded $65.7 million in Fixed Guideway 

Modernization (§ 5309) Recovery Act funding by FTA, which combined with the Transit 

Capital Assistance funding totals $190.9 million. 

34Port Authority’s $44.0 million in Transit Capital Assistance (§ 5307) funding is from two 

allocations: $43.5 million in urbanized area formula funds and $0.5 million in 

“Transportation Enhancement” funds. Port Authority was also awarded $18.5 million in 

Fixed Guideway Modernization (§ 5309) Recovery Act funding by FTA, which combined 

with the Transit Capital Assistance funding totals $62.5 million. 

35PennDOT’s $30.2 million grant was awarded by FTA as a Transit Capital Assistance § 5311 

nonurbanized formula grant. PennDOT also received $9.4 million in § 5307 Transit Capital 

Assistance funding and § 5309 Fixed Guideway Modernization funding for intercity rail. 

Page PA-22 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

of more than 1 million, and they received the largest Transit Capital 

Assistance Program apportionments in the state, with about 51.7 percent 

of Pennsylvania’s total transit apportionment. We chose the Butler Transit 

Authority because its $5.3 million allocation was one of the largest funding 

allocations among the transit agencies in nonurbanized areas receiving 

Recovery Act money through PennDOT. We also met with officials from 

the two MPOs related to the three transit agencies. 

Transit agency, MPO, and PennDOT officials we spoke with told us that 

they selected projects for Recovery Act funding based on key criteria, 

including readiness for construction and potential for job creation or 

retention. In addition, SEPTA selected projects to serve a variety of 

locations and transportation modes, and also projects that would reduce 

long-term maintenance and operating costs. 

SEPTA has a Transit Capital Assistance grant approved by FTA totaling 

$112.8 million, with which SEPTA plans to fund all or part of 21 projects.36

For the most part, SEPTA will use its Recovery Act funds for “state of 

good repair” projects,37 including right-of-way and track maintenance, 

communication and signal replacement, and station work.38 For example, 

Recovery Act funds are paying for the rehabilitation of the structure of the 

Tulpehocken Station building. (See fig. 2.) Another project is the 

rehabilitation of a rail bridge on SEPTA’s Lansdale Regional Line. (See fig. 

3.) Also included among SEPTA’s Recovery Act projects is the purchase of 

40 additional hybrid buses. 

 

36SEPTA officials reported that they have a total of 32 Recovery Act projects being funded 

by a combination of Transit Capital Assistance (§ 5307) funds and Fixed Guideway 

Modernization (§ 5309) funds. FTA has approved $112.8 million of SEPTA’s $125.2 million 

Transit Capital Assistance (§ 5307 and § 5340) allocation; to use the remainder of its 

allocation, SEPTA plans to amend its grant to add one more project when its environmental 

assessment is complete. 

37SEPTA declares an asset or system as in a “state of good repair” when no backlog of 

needs exists and no component is beyond its useful life. State of good repair projects 

correct past deferred maintenance or replace capital assets that have exceeded their useful 

life. 

38In its rail modernization report to Congress in April 2009, FTA named SEPTA as one of 

seven transit agencies containing the nation’s oldest transit infrastructure, some of which 

has exceeded its expected useful life. 

Page PA-23 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Figure 2: Holes in the Roof of SEPTA’s Tulpehocken Station That Will Be Repaired 

Using Recovery Act Transit Capital Assistance Funds 

Source: Southeastern Pennsylvania Transportation Authority.

Page PA-24 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Figure 3: Rail Bridge on SEPTA’s Lansdale Regional Rail Line That Will Be 

Rehabilitated Using Transit Capital Assistance Recovery Act Funding 

Source: Southeastern Pennsylvania Transportation Authority.

Port Authority will use all of its Transit Capital Assistance (Section 5307) 

Recovery Act allocation of $44.0 million to continue work on its North 

Shore Connector.39 The project will extend an existing light rail line from a 

downtown Pittsburgh station to two new stations on Pittsburgh’s North 

Shore area through new twin tunnels below the Allegheny River. (See fig. 

4.) According to Port Authority officials, Recovery Act money will pay for 

rail installation, station construction, elevators, and escalators. (See fig. 5.) 

The North Shore Connector project broke ground in October 2006 and as 

of August 20, 2009, the project had received $389.7 million of federal, state, 

and local funding, with a Full Funding Agreement with FTA for 

$435 million. However, according to Port Authority officials, due primarily 

 

39In addition to the $44.0 million Transit Capital Assistance (§ 5307) Recovery Act grant, 

Port Authority will also use its $18.5 million Fixed Guideway Modernization (§ 5309) 

Recovery Act grant to fund work on the North Shore Connector project. 

Page PA-25 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

to cost growth in construction materials and construction bid prices, the 

project’s total estimated cost was revised to $538.8 million in early 2

with a budget gap of $103.8 million. Without additional funds, Port 

Authority faced the decision either to defer construction until future 

funding could be identified or to cease construction altogether. With the 

Recovery Act grant money approved, Port Authority was able to continue 

the North Shore Connector project, and Port Authority officials stated that

the Recovery Act funding helped retain approximately 600 direct jobs. A

of September 2009, Port Authority officials expected the entire pro

including all Recovery Act work, to be completed by March 2012. 

According to its estimates, Port Authority will need $41.8 million to 

complete the project, which officials expect to recei

 A

009, 

s 

ject, 

ve through county, 

state, and federal funding streams in coming years. 

Figure 4: Completed Tunnel beneath Allegheny River Awaiting Rail for Port 

Authority’s North Shore Connector Project Which Will Funded by Recovery Act 

Money 

Source: GAO.

Page PA-26 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Figure 5: Steel Girders for the Port Authority’s North Shore Connector Project, Near 

New Allegheny Avenue Station, Which Will Be Funded by Recovery Act Money 

Source: GAO.

For its nonurbanized Transit Capital Assistance grant of $30.2 million, 

PennDOT selected projects in 15 transit agencies in nonurbanized areas 

for Recovery Act funding based on such criteria as projects’ readiness and 

potential for creating jobs. One of these projects is the construction of a 

new intermodal transit center in Butler, Pennsylvania, which will serve 

city and county bus routes. The Butler Transit Authority received 

$5.3 million of PennDOT’s nonurbanized FTA Section 5311 grant to fund 

construction of its new center, which will include new administrative and 

maintenance facilities and was designed for expandability to meet future 

demand. PennDOT officials told us that without Recovery Act funding, 

Butler’s project would not have been able to proceed without being scaled 

down significantly. As of September 2009, Butler Transit Authority was 

soliciting bids for the project, with work expected to start in November or 

December 2009 and to be completed late 2010. 

Page PA-27 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

The Recovery Act requires that 50 percent of Recovery Act transit funds 

apportioned to urbanized areas or states be obligated within 180 days of 

apportionment (or before September 1, 2009) and the remainder within 1 

year.40 As of September 1, 2009, FTA concluded that the 50 percent 

obligation requirement had been met for Pennsylvania and its urbanized 

areas. FTA awarded Recovery Act grants to SEPTA and Port Authority in 

May 2009, and to PennDOT for nonurbanized areas in July 2009. 

Agencies receiving Recovery Act Transit Capital Assistance 

apportionments submitted applications to FTA for the funding by 

consolidating multiple projects into one grant application for each type of 

funding.41 According to FTA, if the list of projects or the specific amount 

budgeted for projects within an approved grant changes, a transit agency 

can submit a no-cost application to amend an approved grant, as long as 

the total amount remains unchanged. For example, SEPTA officials told us 

that bids for the original 26 projects in their initially approved grants were 

awarded at around 15 percent lower than estimates, for a savings of 

approximately $20.2 million in Transit Capital Assistance funding. As a 

result, in late August 2009, FTA approved SEPTA’s applications to add 6 

additional projects to its grants to be funded by the $20.2 million.42 The 

additional projects included such things as station building rehabilitation 

and electrical substation overhaul. 

FTA Concluded That the 

Recovery Act Requirement 

That 50 Percent of Funds 

Be Obligated by September 

1, 2009, Has Been Met for 

Pennsylvania and its 

Urbanized Areas, and Bid 

Savings Have Allowed 

Additional Projects to Be 

Added to Some Grants 

PennDOT, SEPTA, Port 

Authority, and Butler 

Transit Authority Will Use 

a Mix of Existing and 

Modified Procedures to 

Track Recovery Act Funds 

and Manage Projects 

PennDOT, SEPTA, Port Authority, and Butler Transit Authority reported 

that they will track Recovery Act funds and manage Recovery Act projects 

by building upon existing internal procedures. Officials told us that their 

accounting systems have unique budget codes for each source of funding, 

and that these codes are being used to identify and track Recovery Act 

funds. For its nonurbanized grant from FTA, PennDOT is using its 

dotGrants system to track funds, and this system is tied into the state’s 

accounting system. The invoicing and payment processes in dotGrants and 

the state’s accounting system are used for PennDOT’s non–Recovery Act 

work as well. According to PennDOT officials, the dotGrants system was 

 

40Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

41These types of funding include Transit Capital Assistance formula grants in urbanized 

areas (§ 5307) and nonurbanized areas (§ 5311), as well as Fixed Guideway Infrastructure 

Investment grants (§ 5309). 

42SEPTA submitted applications to amend two grants: its § 5307 Transit Capital Assistance 

urbanized formula grant and its § 5309 Fixed Guideway Modernization grant. 

Page PA-28 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

established in 2008 and was modified in 2009 to include Recovery Act 

identifiers. 

Whereas the large transit agencies and PennDOT rely on their existing 

systems, smaller transit agencies may need to modify their control systems 

to track Recovery Act funds. For example, the Butler Transit Authority, 

which has a permanent staff of three, created a dedicated bank account to 

segregate its Recovery Act money, and started using dedicated subaccount 

numbers to identify the Recovery Act funds in its accounting system. 

Under its existing controls, the Butler Transit Authority board must 

approve payment of all invoices. The Butler Transit Authority will 

continue to rely on its contract accounting firm to advise the staff on best 

practices and review monthly statements. Butler Transit Authority officials 

told us that they were confident that these procedures will be sufficient to 

track funds accurately. 

For project management, SEPTA and Port Authority officials told us that 

they plan to use existing procedures for their projects. SEPTA will use a 

variety of in-house and contractor personnel to track project progress. 

Port Authority’s general construction management contractor will 

continue to provide on-site oversight for the North Shore Connector 

project, including the Recovery Act portions of the project. Additionally, 

FTA will continue to provide an external project management oversight 

consultant for the North Shore Connector project. 

PennDOT officials said that they hired consultants specifically to assist in 

Recovery Act project management. One firm was hired to help transit 

agencies in urbanized and nonurbanized areas achieve environmental 

compliance for their proposed Recovery Act projects. The other firm was 

hired to provide more general project and construction management 

services, including support and advice for agencies in urbanized and 

nonurbanized areas receiving Recovery Act funds. A Butler Transit 

Authority official told us that he had been in contact with this PennDOT 

consultant. The PennDOT Bureau of Public Transportation helped scope 

the Butler Transit Authority Recovery Act project. In addition, PennDOT 

has recently added two headquarters personnel to assist with Recovery 

Act project inspections and oversight, since the Bureau of Public 

Transportation does not have a field staff structure for these duties. Butler 

Transit Authority also hired its own engineering firm for construction 

management of its Recovery Act project. 

Page PA-29 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Recipients of Recovery Act funds for transit projects are submitting 

reports in varying time frames to FTA, the federal government through 

www.FederalReporting.gov, and the U.S. House of Representatives 

Committee on Transportation and Infrastructure (House Committee) on 

funds received, project status, and jobs created or sustained.43 PennDOT 

officials told us that they plan to collect reports from all transit agencies 

statewide, including the transit agencies in nonurbanized areas receiving 

funds through PennDOT and the transit agencies in urbanized areas 

receiving Recovery Act funds directly from FTA. SEPTA and Port 

Authority officials stated that they had reported monthly to the House 

Committee through August 2009 and met the first required Section 1201(c) 

deadline to FTA on August 16, 2009. 

Reporting for Recovery 

Act Transit Projects Has 

Begun, but SEPTA, Port 

Authority, and PennDOT 

Are Still Preparing for the 

Section 1512 October 

Reporting Deadline 

As of September 2009, SEPTA and Port Authority were planning their 

strategies for meeting the October 10, 2009, Section 1512 deadline for 

reporting to the federal government. SEPTA and Port Authority officials 

told us that they attended FTA conference calls and Webinars. For some of 

the information related to jobs created, SEPTA and Port Authority officials 

told us that they will rely on information from their contractors and 

subcontractors. To manage the workload of reporting on its numerous 

Recovery Act projects, SEPTA plans to use a consultant to collect data 

from contractors. As of September 2009, Port Authority officials said that 

they did not plan to add staff to oversee their Recovery Act contracts. 

Instead, they will collect the data with the help of their construction 

management firm. 

PennDOT officials told us that they plan to use their engineering 

consultant to assist with the collection of reporting data from the 15 

nonurbanized area transit agency subrecipients receiving funding through 

PennDOT’s FTA nonurbanized Recovery Act grant. PennDOT planned to 

distribute detailed reporting information and instructions to transit 

agencies in urbanized and nonurbanized areas in early September 2009. 

Additionally, PennDOT and its consultant planned to contact 

nonurbanized area subrecipient agencies, which will report directly to 

PennDOT for their Recovery Act funds, to assist them with data collection 

for the Section 1512 report. PennDOT will compile all Section 1512 report 

data elements for its nonurbanized area subrecipients and provide the 

 

43According to guidance from the House Committee on its Recovery Act reporting requests, 

transit agencies in the 256 large urban areas designated by FTA were the only transit 

agencies from which the committee has requested monthly reporting. 

Page PA-30 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

summary information to Pennsylvania’s Accountability Office, which will 

report on behalf of all state agencies in Pennsylvania receiving Recovery 

Act funding. 

SEPTA officials told us that Recovery Act reporting requirements were a 

source of confusion. Guidance issued by OMB in June 2009 about 

Recovery Act Section 1512 reporting prompted questions from SEPTA 

about who is required to report, through what mechanism, and to whom. 

In addition, language in the OMB guidance required that certain 

“subrecipients” submit the names and salaries of the five highest paid 

executives in their organizations, and it was unclear to SEPTA whether 

this referred to Recovery Act project subrecipients or subcontractors. As 

of September 1, 2009, SEPTA officials told us that they had resolved their 

questions using further guidance from the Recovery Act federal Web site. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which DOE administers through each 

of the states, the District of Columbia, and seven territories and Indian 

tribes. The program 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; or modernizing heating 

equipment, air circulation fans, or 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 lowincome 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. 

Pennsylvania’s 

Recovery Act 

Weatherization Plan 

Was Approved, and 

Work Will Begin after 

Local Agency 

Contracts Are in Place 

As of September 14, 2009, DOE had approved the weatherization plans of 

all but two of the states, the District of Columbia, the territories, and 

Indian tribes—including all 16 states and the District of Columbia in our 

review. DOE has provided to the states almost $2.3 billion of the $5 billion 

in weatherization funding under the Recovery Act. Use of the Recovery 

Act weatherization funds is subject to Section 1606 of the act, which 

requires all laborers and mechanics employed by contractors and 

subcontractors on Recovery Act projects to be paid at least the prevailing 

wage, including fringe benefits, as determined under the Davis-Bacon 

Page PA-31 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Act.44 Because the Davis-Bacon Act had not previously applied to 

weatherization, Labor had not established a prevailing wage rate for 

weatherization work. In 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. Labor then surveyed five types of 

“interested parties” about labor rates for weatherization work.45 Labor 

completed establishing prevailing wage rates in all of the 50 states and the 

District of Columbia by September 3, 2009. 

The Recovery Act provides $252.8 million for Pennsylvania’s 

Weatherization Assistance Program. This represents a substantial increase 

above fiscal year 2008-09 funding levels. The Pennsylvania Department of 

Community and Economic Development (DCED)—the prime recipient of 

these funds—is responsible for program management, contract oversight, 

public reporting, and other administrative activities. DCED will disburse 

most of these funds to 43 subrecipient agencies. These agencies are 

responsible for employing people to weatherize homes in the 

commonwealth. 

Pennsylvania Expects to 

Begin Recovery Act 

Spending on 

Weatherization in 

November 2009 

As we reported in July, DOE provided the initial 10 percent allocation 

(about $25.3 million) on March 27, 2009, but DCED was not authorized to 

obligate or spend these funds until the Pennsylvania General Assembly 

enacted the fiscal year 2009-10 budget. In the stopgap budget measure 

signed by the Governor of Pennsylvania on August 5, 2009, DCED received 

most of its appropriation authority for Recovery Act weatherization 

funding. On August 25, 2009, DOE approved Pennsylvania’s weatherization 

 

44The Weatherization Assistance Program funded through annual appropriations is not 

subject to the Davis-Bacon Act. 

45The five types of “interested parties” are state weatherization agencies, local community 

action agencies, unions, contractors, and congressional offices. 

Page PA-32 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

plan and provided a 40 percent allocation of about $101.1 million.46 As of 

September 1, 2009, DCED has not obligated or expended any Recovery Act 

weatherization funds. That is, Pennsylvania’s weatherization activities 

through August, 2009 (including development of the state weatherization 

plan and training plan), had been funded through its annual appropriation 

of Weatherization Assistance Program and Low Income Home Energy 

Assistance Program funds. The Weatherization Program Manager of 

DCED’s Office of Community Services estimates that weatherization work 

will begin in November 2009. 

Pennsylvania will use Recovery Act weatherization funds to help lowincome households decrease energy consumption and costs and also to 

provide jobs. Pennsylvania plans to weatherize at least 29,700 housing 

units over the next 2 to 3 years, and create an estimated 940 jobs. The 

energy savings goal is to reduce energy usage by the equivalent of what it 

might take to power about 7,000 homes per year. Of the total 

$252.8 million Pennsylvania will receive, $224.5 million will be allocated to 

subrecipient agencies to weatherize homes, $20 million will be 

administered by the Pennsylvania Department of Labor and Industry for 

training and technical assistance, and $8.3 million will be retained by 

DCED to cover its costs of program management, oversight, reporting, and 

administration. 

As of September 1, 2009, DCED was reviewing management plans 

submitted by the 43 weatherization agencies. These plans are to contain 

agency targets for the number of weatherized homes, energy reduction 

targets, and information on staffing and production timelines. Once 

approved by DCED, the plans will form the basis of contracts for the 

weatherization agencies. Labor established Pennsylvania’s weatherization 

prevailing wage rates on September 3, 2009. DCED has since advised 

weatherization agencies that the agencies may have to amend their plans if 

prevailing wages differ from wages in their submitted plans. 

 

46DOE did not approve Pennsylvania’s state weatherization plan when it was first submitted 

on May 12, 2009, in part because DCED did not follow the required public notice and a 

hearing process when adding the Pennsylvania Housing Finance Agency as the state’s 43rd 

subrecipient agency. DCED held a public hearing on August 5 for the Pennsylvania Housing 

Finance Agency to apply as a subrecipient agency and to discuss other changes to the state 

plan, DCED submitted Pennsylvania’s amended plan to DOE on August 10, and DOE 

approved the plan on August 25. 

Page PA-33 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Within Pennsylvania, the DCED weatherization program has been 

considered a high-risk program in need of stronger oversight and 

monitoring. In 2007, Pennsylvania’s Auditor General reported that the 

weatherization program had, among other things, weak internal controls, 

weaknesses in contracting, and inconsistent verification and inspection of 

subcontractor work.47 In June 2009, the Pennsylvania Bureau of Audits 

completed a risk assessment of more than 90 programs for which 

Pennsylvania expects to receive Recovery Act funds and categorized the 

programs as high, medium, or low risk. Risk levels were determined based 

on a variety of sources, including prior reports by the Bureau of Audits 

and Auditor General, interviews with agency staff, expected Recovery Act 

funding levels, and potential agency strengths or weaknesses in 

administering this funding. DCED’s weatherization program was one of the 

15 programs categorized as high risk by the Bureau of Audits. The 

Executive Director of DCED’s Office of Energy Conservation and 

Weatherization said that he is concerned that the weatherization agencies 

in Pennsylvania will be challenged by the large amount of weatherization 

work funded by the Recovery Act, but he is confident that they will get the 

job done. 

Pennsylvania Plans to 

Increase Controls over the 

Weatherization Program, 

Including Monitoring the 

Use of Funds 

DCED has worked to address program deficiencies and is aware that the 

large investment in weatherization provided by the Recovery Act will 

require greater capacity at all levels of the program’s operation. In 

program year 2008-09, DCED revised its guidelines and procedures to 

provide local weatherization agencies with a clearer understanding of the 

process of on-site monitoring. DCED also requested that each 

weatherization agency describe in its management plan its capacity to 

meet enhanced production targets with appropriate quality control and 

financial safeguards. Agency management plans must contain a 3-year 

budget and production timeline that demonstrates each agency’s capacity 

to expend at least half of its total Recovery Act funds by September 30, 

2010, at least 80 percent of the funds by June 30, 2011, and 100 percent by 

 

47Pennsylvania Department of the Auditor General, A Special Performance Audit of the 

Department of Community and Economic Development’s Weatherization Assistance 

Program, August 2007. Pennsylvania’s Single Audit report for 2008 also found 

noncompliance and internal control deficiencies in DCED’s program monitoring of Low 

Income Home Energy Assistance Program weatherization subrecipients. Although 

Recovery Act funds will be administered under DOE’s Weatherization Assistance Program, 

and not under the U.S. Department of Health and Human Services (HHS), this finding is 

relevant because it relates directly to DCED’s monitoring of weatherization subrecipients. 

The Chief Operating Officer for DCED said that HHS is reviewing DCED’s corrective action 

plan to address the Single Audit findings. 

Page PA-34 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

March 31, 2012. DCED will evaluate whether local agencies’ initial 

performance meets capacity targets by looking at the number of people 

hired and trained. DCED plans to use the Pennsylvania Housing Finance 

Agency to increase statewide capacity to weatherize multifamily rental 

housing units, and has reserved the right to add additional subrecipient 

agencies, if necessary, to meet the weatherization program’s production 

goals. The Pennsylvania Department of Labor and Industry will establish 

training and certification standards to provide weatherization workers 

with an industry-recognized credential, and beginning in fiscal year 2009-

10, training will be required for all weatherization auditors and installers. 

The Executive Director of the DCED Office of Energy Conservation and 

Weatherization expressed concern that the Davis-Bacon Act requirement 

to pay workers on a weekly basis may increase the burden on 

weatherization agencies, requiring additional recordkeeping and tracking. 

Agencies must address how they will comply with Davis-Bacon 

requirements and enhanced internal control requirements for Recovery 

Act weatherization work in their management plans. For example, each 

agency will need to appoint a unit or staff member at the agency 

responsible for contract compliance, agency officers and directors are 

required to file financial disclosure statements, and agency management 

staff and purchasing personnel must file conflict of interest statements. 

DCED plans to establish a monitoring, compliance, and reporting system 

and increase its full-time monitoring staff. According to Pennsylvania’s 

weatherization plan, DCED monitors will inspect 10 percent of 

weatherization units in progress to check compliance with the energy 

audit and work priority requirements, and 10 percent of completed units to 

check the installation work. A financial monitoring team will spot-check 

agencies’ financial records and will provide financial management and 

technical assistance to strengthen internal controls. DCED currently has 

three full-time monitors for the weatherization program and plans to hire 

eight more to help with the Recovery Act monitoring workload. Also, each 

weatherization agency must hire a designated quality control person not 

involved in the actual installation to inspect all completed units. 

DCED plans to increase its financial controls over weatherization funds 

and is developing a central procurement system for weatherization 

materials. Agencies will be required to use Hancock Energy System 

software, which contains an inventory function that will allow agencies to 

monitor inventory down to the individual house level, and will allow 

DCED to monitor purchasing within each agency and across agencies. 

DCED reviews agency invoices for funds and uses an electronic invoice 

Page PA-35 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

and payment system to monitor the disbursement of funds. Further, 

weatherization agencies will be required to purchase materials and 

equipment through the Pennsylvania Department of General Services’ 

(DGS) cooperative purchasing program—COSTARS. According to the 

state weatherization plan, if exceptional circumstances apply or if 

materials are not available through the COSTARS program, DCED will 

require agencies and their subcontractors to obtain at least three 

independent bids for the materials. The COSTARS purchasing program is 

intended to reduce the cost of materials so that more homes can be 

weatherized. In May 2009, DGS opened COSTARS-22 to procure 

weatherization materials only for work funded by the Recovery Act. As of 

August 2009, DGS said that it had awarded contracts to four suppliers and 

received a fifth bid from a prospective supplier; bids from prospective 

suppliers of weatherization materials will be accepted on a continual 

basis. 

Pennsylvania Plans to 

Assess Energy Savings but 

May Have Little to Report 

in October 2009 

DCED officials plan to commission an annual independent evaluation of 

the weatherization program to measure energy savings attributable to the 

weatherization work completed by each subcontractor. DCED plans to 

collect and maintain monthly energy use data directly from utility 

companies for at least 1 year after weatherization occurs and will report 

reductions in energy use as a measure of program success. Energy savings 

achieved by each agency will also be reported in relation to the cost of 

weatherization improvements per house. DCED also plans to evaluate 

agencies’ performance based on their ability to achieve energy reduction 

and other targets specified in their management plans, and will base 

subsequent funding allocations on performance. 

As a prime recipient of Recovery Act funds for weatherization, DCED must 

provide quarterly financial and progress reports to DOE pursuant to 

Section 1512 of the Recovery Act. The first of these recipient reports is due 

October 10, 2009. Subrecipient agencies will also be required to report to 

DCED on any other requirements mandated by federal or state 

government. DOE requires reporting on performance measures to 

determine the impact of Recovery Act weatherization funds in the state. 

For measures of job creation, agencies are required to report to DCED on 

jobs created and jobs retained at the state and local agency levels. DCED’s 

Weatherization Program Manager was unclear about some of the recipient 

reporting requirements under Section 1512 of the Recovery Act, and said 

that agency management plans do not specifically include recipient 

reporting requirements but may need to be adjusted to include them. 

Pennsylvania’s Accountability Office has since provided training to 

Page PA-36 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

DCED’s Weatherization Office on 1512 reporting and is working to ensure 

full compliance with recipient and subrecipient reporting requirements. 

DOE has also since provided guidance to DCED and other prime 

recipients of the Recovery Act funds for weatherization to help them meet 

the Section 1512 reporting requirements. 

The Recovery Act provides an additional $1.2 billion in funds for the WIA 

Youth Program, including summer employment. Administered by Labor, 

the WIA Youth Program is designed to provide low-income in-school and 

out-of-school youth 14 to 21 years of age, who have additional barriers to 

success, with services that lead to educational achievement and successful 

employment, among other goals. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

Pennsylvania Used 

Recovery Act Funds 

to Provide Summer 

Youth Employment 

Activities and 

Exceeded Its 

Enrollment Plans 

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,48 the conferees stated that they were particularly 

interested in states using these funds to create summer employment 

opportunities for youth. While the WIA Youth Program requires a summer 

employment component to be included in its year-round program, Labor 

has issued guidance indicating that local areas have the flexibility to 

implement stand-alone summer youth employment activities with 

Recovery Act funds.49 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 they also include a work experience 

component. A key goal of a summer employment program, according to 

Labor’s guidance, is to provide participants with the opportunity to 

(1) experience the rigors, demands, rewards, and sanctions associated 

with holding a job; (2) learn work readiness skills on the job; and (3) 

acquire measurable communication, interpersonal, decision-making, and 

learning skills. Labor has also encouraged states and local areas to 

 

48H.R. Rep. No. 111-16, at 448 (2009). 

49Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

Page PA-37 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

develop work experiences that introduce youth to opportunities in “green” 

educational and career pathways. Work experience may be provided at 

public sector, private sector, or nonprofit work sites. The work sites must 

meet safety guidelines, as well as federal and state wage laws.50 Labor’s 

guidance requires that each state and local area conduct regular oversight 

and monitoring of the program to determine compliance with 

programmatic, accountability, and transparency provisions of the 

Recovery Act and Labor’s guidance. Each state’s plan must discuss 

specific provisions for conducting its monitoring and oversight 

requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work readiness attainment rate and the 

summer employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

The Pennsylvania Department of Labor and Industry (L&I) administers 

Pennsylvania’s WIA Youth Program through local areas. Pennsylvania’s 67 

counties are divided into 23 local workforce investment areas, each led by 

a workforce investment board whose purpose is to support the labor and 

job training demands of industries and help students, job seekers, and 

incumbent workers acquire skills and attain rewarding, family-sustaining 

jobs. Local workforce investment areas vary widely in the geographic area 

served, ranging from one that serves only the City of Pittsburgh to a 

regional area that serves nine counties. Programs and services may also 

vary within and among workforce investment areas. In 2008, 7 of 

Pennsylvania’s 23 local workforce investment areas—Allegheny, Central 

Counties, Northwest Counties, Philadelphia, Pittsburgh, Pocono Counties, 

and Westmoreland/Fayette—had extensive stand-alone summer youth 

 

50Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page PA-38 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

employment programs, and 2,205 youth were served statewide.51 These 

stand-alone summer youth employment programs were funded from a 

variety of public (including workforce, Temporary Assistance for Needy 

Families (TANF), and community block grants), private, and nonprofit 

sources. 

Pennsylvania Spent 27 

Percent of Recovery Act 

Funds and Exceeded 2009 

Enrollment Plans for the 

Recovery Act–Funded WIA 

Summer Youth 

Employment Activities 

Pennsylvania was allotted about $40.6 million in Recovery Act funds to 

support WIA Youth Program activities and services. In turn, $34.6 million 

(85 percent) was allocated to the 23 local workforce investment areas, and 

L&I retained $6 million (15 percent) for possible statewide activities, such 

as incentive grants to encourage best practices. As we reported in July, 

only 40 percent of the allocations were available for the local boards to 

spend before July 1, 2009. Since the enactment of Pennsylvania’s stopgap 

budget in August 2009, the local workforce investment areas’ full 

allocations were available for spending. As of September 1, 2009, L&I had 

expended $11 million, or 27 percent, of Pennsylvania’s allotment. 

Pennsylvania uses a cost reimbursement structure to administer these 

funds and officials stated that they expect that additional funds will be 

drawn down over the coming months. Based on the local boards’ original 

Recovery Act plans, the 23 local workforce investment areas planned to 

spend 70 to 90 percent of their Recovery Act WIA Youth Program 

allocations by the end of September 2009. 

Pennsylvania exceeded the number of youth that the local boards had 

planned to serve. Pennsylvania did not set an overall target number of 

youth to be served, but based on the local boards’ plans, approximately 

8,700 youth were to be served. Data from Labor show that Pennsylvania 

served 5,102 participants, as of July 31, 2009. 

According to data obtained from L&I, as of August 31, 2009 Pennsylvania 

enrolled 8,817 participants in Recovery Act–funded WIA summer youth 

employment activities (see table 2). Of those youth, 28 percent were out of 

school and 6 percent were between the ages of 22 and 24 years. According 

to L&I, four participants were veterans, as of July 31, 2009. 

 

51The Central regional board includes Centre, Clinton, Columbia, Lycoming, Mifflin, 

Montour, Northumberland, Snyder, and Union counties. The Northwest regional board 

includes Clarion, Crawford, Erie, Forest, Venango, and Warren counties. The City of 

Philadelphia is a countywide city. 

Page PA-39 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Table 2: Number of Recovery Act–Funded WIA Summer Youth Employment Activity Participants, by Workforce Investment 

Board, as of August 31, 2009 

Participants Actual participants by age group 

Workforce 

Investment Board Planned Actual 14 to 18 19 to 21 22 to 24 

In-school

 youth

Out-ofschool 

youth

Allegheny 600 565 502 56 7 457 108

Berks 335 257 181 62 14 157 100

Bucks 121 123 76 33 14 64 59

Central 700 650 419 169 62 411 239

Chester 100 130 123 5 2 122 8

Delaware 100 44 9 26 9 0 44

Lackawanna 250 192 144 35 13 134 58

Lancaster 300 212 78 103 31 5 207

Lehigh Valley 200 417 302 82 33 304 113

Luzerne/ Schuylkill 300 350 268 58 24 281 69

Montgomery 150 153 127 22 4 89 64

North Central 314 268 174 71 23 146 122

Northern Tier 134 141 94 41 6 90 51

Northwest 350 405 328 70 7 315 90

Philadelphia 2,533 2,578 2,260 285 33 2,394 184

Pittsburgh 313 320 303 17 0 307 13

Pocono 320 340 277 50 13 277 63

South Central 500 487 315 133 39 266 221

Southern Alleghenies 430 428 308 85 35 244 184

Southwest Corner 76 173 75 73 25 105 68

Tri-County 96 139 49 59 31 35 104

West Central 200 127 31 50 46 15 112

Westmoreland/ Fayette 270 318 148 129 41 138 180

Total 8,692 8,817 6,591 1,714 512 6,356 2,461

Source: Pennsylvania Department of Labor and Industry, 2009. 

Page PA-40 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

We visited two local workforce investment areas—the Philadelphia 

Workforce Investment Board and the South Central Workforce Investment 

Board—to determine the status of their Recovery Act–funded WIA 

summer employment activities. We also met with some of their service 

providers and visited some work sites. We selected the Philadelphia local 

board because it received the largest allocation of Recovery Act WIA 

Youth Program funding in Pennsylvania and it had a summer youth 

employment program in 2008. The Philadelphia local workforce board was 

allocated $7.4 million, more than 20 percent of Pennsylvania’s allotment. 

We selected the South Central board—located in Harrisburg within 

Dauphin County and serving seven neighboring counties—because it did 

not have an extensive stand-alone summer youth employment program in 

2008.52 The South Central board was allocated $1.6 million. Using 

Recovery Act WIA Youth Program funds, the Philadelphia Workforce 

Investment Board planned to serve 2,533 youth participants and had 

enrolled 2,578 youth as of August 31, 2009; the South Central Workforc

Investment Board planned to serve 500 youth and had enrolled 487 youth.

Ten of the 23 workforce boards in Pennsylvania had not yet met thei

planned enrollment targets as of August 31, 2009. As of August 3

Philadelphia had enrolled 184 out-of-school youth and 33 youth ages 22 to 

24. South Central had enrolled 221 out-of-school youth and 39 youth ages 

22 to 24. 

Philadelphia and South 

Central Workforce 

Investment Boards 

Overcame Some 

Challenges, but Other 

Challenges Remain in 

Implementing Summer 

Youth Employment 

Activities in Pennsylvania 

e 

r 

1, 2009, 

 

As discussed in our July report, local workforce officials explained that 

recruiting eligible youth to participate in the Recovery Act–funded WIA 

summer youth employment activities and verifying eligibility 

documentation was a challenge. For example, some youth did not have 

access to documentation, such as birth certificates and Social Security 

cards for each family member. Gathering 6 months of income 

documentation was also challenging. To help address these challenges, 

state officials, through a memorandum of understanding, released a list of 

youth eligible for TANF and food stamps to the local workforce boards. 

This information helped identify eligible youth for Recovery Act–funded 

WIA summer youth employment activities. One contractor we met with 

stated that some families were fearful about revealing income information 

and access to these lists meant that families did not have to provide such 

information. In Philadelphia, the contractor stated that the work start 

52The South Central regional board serves Adams, Cumberland, Dauphin, Franklin, Juniata, 

Lebanon, Perry, and York counties. 

Page PA-41 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

dates of approximately 25 percent of youth participants were delayed 

because of delays in the enrollment paperwork process. 

The employment activity start-up period was also noted as a challenge in 

our July report. Philadelphia had a summer youth employment program in 

2008 but had to expand its program to serve 1,200 additional youth with 

Recovery Act funds. The South Central Workforce Investment Board did 

not have a separate stand-alone summer youth employment program in 

2008 and had to build one this year. In dealing with the short employment 

activity start-up periods, the contractors we interviewed used existing 

relationships with employers to find work sites for the youth. One 

contractor placed Recovery Act–funded youth with employers who 

participated in the year-round WIA Youth Program. 

Workforce investment boards and the contractors we met with stated that 

the definition of “green jobs” was not clear.53 Officials at one workforce 

board stated that they defined anything that improved the health of the 

planet as “green,” and officials acknowledged that this broad definition 

could apply to almost every job. According to work site data from the 

Philadelphia workforce investment area, 19 percent (490 of 2,571) of its 

participants were placed in a “green” job and in the South Central 

workforce investment area, 7 percent (42 of 564) of its participants were 

placed in a “green” job. One South Central official added that the board’s 

count of “green” jobs would not include work sites that provided “green” 

education or awareness. For example, one construction work site included 

tours of recycling facilities, discussed how to make homes more energy 

efficient, and exposed youth to “green” careers, such as electricity 

consumption auditors, but this would not have been included in the 

board’s count of “green” jobs. Other employment activities had a clearer 

“green” link. In one Philadelphia employment activity, participants tested 

the permeability of soil samples from the site of a major oil spill in Alaska. 

Other challenges listed in our July report may have persisted and 

challenged the implementation of Recovery Act–funded WIA summer 

youth employment activities. For example, weak economic conditions 

may have made it challenging to find youth placements as participants 

were not allowed to be placed in an area that had recently experienced 

 

53Officials made similar comments earlier, as reported in GAO, Recovery Act: States’ and 

Localities’ Current and Panned Uses of Funds While Facing Fiscal Stresses 

(Pennsylvania), GAO-09-830SP (Washington, D.C.: July 2009). 

Page PA-42 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

layoffs, and state officials acknowledged that this restriction had limited 

the number of placements in some areas. Also, officials reiterated that the 

lack of public transportation was an implementation challenge. Youth who 

participated in Recovery Act–funded WIA summer youth employment 

activities told us that getting to and from work sites was a significant 

challenge given the lack of public transportation in their region. For 

example, in the South Central workforce investment area, some job sites 

in York County were inaccessible by bus, and participants at those sites 

either had to walk or rely on friends or family for transportation. 

Local Workforce 

Investment Boards Were 

Given Flexibility to Design 

and Administer the 

Recovery Act–Funded 

Summer Employment 

Activities 

While the federal government provided guidance on a number of issues, 

local workforce boards had the flexibility to design and administer their 

Recovery Act–funded WIA summer youth employment activities. As 

shown in table 3, the two workforce boards we visited varied slightly in 

the opportunities they provided to participants. For example, Philadelphia 

offered three types of employment activities to participants: 

• service learning (work teams to develop projects that provide active 

service to communities or individuals), 

• internships (career exposure and connections to public and private 

sector employers), and 

• work and learning experiences (mixture of academic skill building, 

college exposure, career exploration, and work readiness training). 

Page PA-43 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Table 3: Overview of the Recovery Act–Funded WIA Summer Employment Activities for Two Pennsylvania Local Workforce 

Investment Boards, 2009 

Philadelphia Workforce 

Investment Board 

South Central Workforce 

Investment Board 

Areas served Philadelphia Adams, Cumberland, Dauphin, Franklin, Juniata, 

Lebanon, Perry, and York counties 

Employment activity design Participants worked approximately 20 to 25 

hours each week and were paid $7.25 per hour 

Participants worked approximately 25 to 30 hours 

each week and were paid between $7 and $7.25 per 

hour, depending on the current minimum wage 

Length of employment 

activity 

Most were for 6 weeks, but a few were 

compressed into 5 weeks 

6 to 8 weeks 

Types of employment 

activities 

Service learning, internships, and work and 

learning experiences 

Employment activities in the private, public, and 

nonprofit sectors 

Examples of the range of 

employment activities 

Administrative assistant, camp counselor, 

clerical aide, maintenance, teacher aide, sales 

associate, office assistant, and researcher 

Child care, electrical maintenance, computer 

technology, community service, construction, and 

manufacturing 

Work readiness measure Measured through a pre- and post-test and 

employer pre- and post-evaluations 

Contractors are required to measure at the beginning 

and end of an employment activity, but the decision 

on how to conduct this assessment was left up to the 

individual contractors; both contractors we 

interviewed are using a pre- and post-test 

Source: GAO analysis of information from local workforce investment boards, 2009. 

Both workforce investment boards we visited provided employment 

activities that combined work readiness activities with academic learning. 

For example, all participants in the Philadelphia Recovery Act–funded 

WIA summer youth employment activity were to complete an academic 

project that was aligned with state education goals. Certified teachers 

evaluated the projects and youth were eligible for academic credit. One 

university contractor stated that the employment activities focused not 

only on work readiness skills but also on promoting higher education. At 

one of the contractor’s work sites we visited, participants cleaned and 

painted a space to create an art gallery and created a blog detailing their 

employment activities learning about mixed media artwork. According to 

the contractor, by learning social media skills like blogging and online 

collaboration, the participants learned both social and business skills. 

Another university-affiliated contractor in Philadelphia ran an urban 

nutrition employment activity at local high school sites that included 

cooking, farming, and an educational component. This educational 

component, the College Access and Career Readiness program, worked 

with participants to develop résumés and essays and required participants 

to submit at least three applications to IHEs. One of the South Central 

workforce board’s contractors we visited provided training that included 

Page PA-44 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

occupational skills, workplace skills, and job readiness skills. The 

contractor also held a 2-week orientation before placing the youth at work 

sites. Participants we spoke with emphasized the value of the key lessons 

they learned from the orientation, such as punctuality and wearing 

appropriate attire. 

Local Workforce 

Investment Boards 

Monitor Contractors for 

the WIA Summer Youth 

Recovery Act Funds 

The Recovery Act–funded WIA summer youth employment activities are 

administered by the Philadelphia Youth Network (PYN), a local nonprofit 

organization. While the Philadelphia Workforce Investment Board 

monitors PYN programmatically, the Philadelphia Workforce Development 

Corporation holds the contract with PYN and conducts fiscal monitoring.54

According to Philadelphia workforce board officials, the Recovery Act 

contract was not awarded competitively. L&I applied and was approved 

for a waiver from Labor to expand the scope of existing competitively 

procured contracts. According to Philadelphia Workforce Development 

Corporation officials, the requirements were added to an existing cost 

reimbursement agreement. The officials added that they used a cost 

reimbursement structure, the same structure used for the year-round WIA 

Youth Program. 

To safeguard the WIA Youth Program Recovery Act funding, Philadelphia 

Workforce Development Corporation officials stated that they use key 

procedures to monitor PYN and its contractors. These procedures include 

ensuring that the age requirements are specified, reporting and 

deliverables are met, fiscal internal controls exist, payment processes are 

timely, fiscal and programmatic documentation exist, and if applicable, 

support payments exist. PYN contracted with service providers, and 

Philadelphia Workforce Development Corporation officials stated that 

they check whether PYN is monitoring these contractors and that all 

parties involved are adhering to Recovery Act policies. PYN monitors its 

contractors through site visits to ensure things such as the existence of 

eligibility documentation and compliance with work site safety 

requirements. In addition, PYN trains contractors and workplace 

supervisors on administrative responsibilities and employment activity 

expectations. 

 

54According to Philadelphia Workforce Development Corporation and Philadelphia 

workforce board officials, PYN was the sole bidder for the past two rounds for the 

competitive process to secure the administration of YouthWorks, Philadelphia’s 

comprehensive youth workforce development program, which includes year-round and 

summer WIA Youth Programs. 

Page PA-45 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

The South Central Workforce Investment Board had five contractors 

administer the Recovery Act–funded summer youth employment activities 

in its area. According to the South Central workforce board officials, the 

contracts were not awarded competitively as allowed under the L&I 

waiver from Labor. Officials stated that because they had recently 

competitively bid the contracts for the year-round WIA Youth Program, 

they did not compete the Recovery Act–funded WIA summer youth 

employment activity contracts.55 The officials asked the five contractors 

that had recently been awarded year-round WIA Youth Program contracts 

to submit proposals to cover the employment activities funded by the 

Recovery Act WIA summer youth activity dollars. The officials stated that 

the requirements were procured using cost reimbursement contracts. The 

officials stated that this type of format ensures that only actual costs are 

reimbursed in compliance with the approved budget. 

To safeguard Recovery Act WIA Youth Program funds, South Central 

workforce board officials stated that they used different mechanisms to 

monitor contractors. Informally, some workforce board officials 

periodically visited work sites to ensure compliance with safety 

requirements. Officials stated that some of these early site visits yielded 

disconcerting observations, such as park crew participants working 

without proper safety equipment or some not engaged in meaningful work. 

Officials added that these observations were relatively few and were 

quickly addressed by the contractors. In terms of formal monitoring, 

officials stated that two staff visited contractors and work sites. Before 

such visits, workforce board staff conducted premonitoring visits to 

remind contractors that they would be monitored and to review the 

standards with them. The monitoring tool the officials used covered topics 

such as employment activity supervision, time, and attendance. 

 

55South Central workforce board officials stated that potential contractors were made 

aware that there would be additional Recovery Act funding available for WIA summer 

youth employment activities for those contractors that were successfully awarded yearround WIA Youth Program contracts. 

Page PA-46 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Local Workforce 

Investment Areas Will 

Measure Work Readiness, 

and Pennsylvania Plans 

Additional Evaluations to 

Identify Best Practices for 

Serving Older Youth 

Work readiness is the only measure that is required to assess the 

effectiveness of Recovery Act–funded WIA summer youth employment 

activities. Within the parameters set forth in federal agency guidance, local 

workforce investment areas may determine the methodology for 

measuring work readiness gains. In the Philadelphia workforce investment 

area, the same pre- and post-test work readiness assessment is 

administered for all work sites. The Philadelphia work readiness 

assessment focuses on seven skills—professionalism/work ethic, 

oral/written communication, lifelong learning/self-direction, technology, 

leadership, ethics and social responsibility, and teamwork and 

collaboration. According to board officials, in the South Central workforce 

investment area, contractors are required to measure work readiness at 

the beginning and end of an employment activity, but the decision on how 

to conduct the pre- and post-assessment was left up to the individual 

contractors. Both contractors we interviewed stated that they are using a 

pre- and post-test work readiness assessment. Without a standard work 

readiness assessment tool statewide and in some cases throughout the 

workforce investment area, Pennsylvania does not have consistent 

measures of work readiness outcomes from different work experience 

types, across workforce investment areas, or even across contractors for 

some workforce investment areas. Currently, L&I provides local 

workforce boards and contractors with a list of acceptable assessment 

tools, and L&I officials said that they are considering possible incentive 

grants for workforce boards and contractors that use a tool recommended 

by the state. 

L&I plans to review completion rates, work readiness outcomes, 

expenditure rates, and characteristics of participants; analysis and listing 

of work site types; and best practices and innovative approaches to 

recruitment, retention, and work readiness. Recovery Act–funded WIA 

summer youth employment activities information is collected through 

Pennsylvania’s Commonwealth Workforce Development System (CWDS), 

a tracking and reporting data system used by the Pennsylvania workforce 

boards. As we reported in July, local workforce investment areas had to 

report data manually, but CWDS is now available online to track and 

report Recovery Act–funded WIA summer youth employment activity data. 

Should additional information be needed, the system can be modified to 

collect those data from the workforce boards. The state officials said that 

they will not delegate Recovery Act quarterly recipient reporting 

responsibilities to any workforce boards. They also stated that the 

reporting processes and systems have been designed to ensure accurate 

and complete information. For example, officials said that they have 

developed unique identifiers to monitor and track WIA Youth Program 

Page PA-47 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

activities separately from other funding streams. Through routine staff 

monitoring and quality assurance, officials stated that they will be able to 

ensure that reporting has all the required information fields as well as 

assign categories and subcategories of information. In terms of monitoring 

grantees, officials stated that they have processes in place, such as 

reviewing local monitoring documents, including those pertaining to 

service providers’ financial and progress reports. 

State officials said that they intend to conduct long-term evaluations of the 

Recovery Act–funded WIA summer youth employment activities. In 

particular, they plan to study the outcomes and employment activities for 

older youth from the ages of 22 to 24 years, as this was the first time older 

youth were served. Officials also want to look at the placements offered to 

all participants and whether certain placements (e.g., private sector or 

public sector work sites) provided better employment activities than 

others. State officials said that they plan to look at not only participant 

outcomes, but also at what efforts were successful and which activities 

and employment activities can be used for future job training activities 

throughout the state. 

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.56 The Recovery Act requires 

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. Recovery Act requirements specify that public 

housing agencies must obligate funds within 1 year of the date on which 

they are made available to public housing agencies, expend at least 60 

percent of funds within 2 years, and expend 100 percent of the funds 

within 3 years. Public housing agencies are expected to give priority to 

projects that can award contracts based on bids within 120 days from the 

date on which the funds are made available, as well as projects that 

rehabilitate vacant units, or those already under way or included in their 

current required 5-year capital fund plans. 

Local Housing 

Authorities Have 

Obligated 31 Percent 

of Public Housing 

Capital Fund Formula 

Grants 

 

56Public housing agencies receive money directly from the federal government (HUD). 

Funds awarded to the public housing agencies do not pass through the state budget. 

Page PA-48 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

HUD is 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 renovations and energy 

conservation retrofit investments. In a Notice of Funding Availability 

published May 7, 2009, and revised June 3, 2009, HUD outlined four 

categories of funding for which public housing agencies could apply: 

• creation of energy-efficient communities ($600 million), 

• gap financing for projects that are stalled because of financing issues 

($200 million), 

• public housing transformation ($100 million), and 

• improvements addressing the needs of the elderly or persons with 

disabilities ($95 million). 

For the creation of energy-efficient communities, applications (which 

were due July 21, 2009) were to be rated and ranked according to criteria 

outlined in the Notice of Funding Availability. The last three categories 

will be threshold based, meaning applications that meet all the threshold 

requirements will be funded in order of receipt. If funds are available after 

all applications meeting the thresholds have been funded, HUD may begin 

removing thresholds after August 1, 2009, in order to fund additional 

applications in the order of receipt until all funds have been awarded. 

Applications in these three categories were accepted until August 18, 2009. 

Pennsylvania has 82 public housing agencies that have received Recovery 

Act formula grants. In total these public housing agencies received 

$212.2 million in Public Housing Capital Fund formula grants. (See fig. 6.) 

As of September 5, 2009, 68 of these public housing agencies have 

obligated $65 million (31 percent), and 51 have drawn down $6.7 million. 

We visited two public housing agencies in Pennsylvania for our July 

report: the Philadelphia Housing Authority and the Harrisburg Housing 

Authority. We will provide updated information on these housing agencies 

in a future report. 

Page PA-49 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Figure 6: Percentage of Public Housing Capital Funds Allocated by HUD That Have Been Obligated and Drawn Down in 

Pennsylvania, as of September 5, 2009 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

100%

$212,155,156

Funds obligated 

by public housing agencies

30.6%

$64,986,026

Funds drawn down

by public housing agencies

3.2%

$6,687,227

68

51

Number of public housing agencies

Source: GAO analysis of HUD data.

82

Page PA-50 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Pennsylvania’s new Accountability Office, led by the Recovery Act Chief 

Accountability Officer, plans a centralized approach for the quarterly 

recipient reporting that state agencies must submit to comply with Section 

1512 of the Recovery Act. Under OMB guidance, these recipient reports 

are to be submitted through www.FederalReporting.gov. Pennsylvania’s 

Accountability Office coordinates a reporting working group, which also 

includes the Office of Information Technology, the Governor’s Budget 

Office, and the Office of the Chief Accounting Officer, to plan and 

implement the recipient reporting. Over the summer of 2009, the working 

group identified the gaps between the information required for the 

recipient reporting and data available from Pennsylvania’s current 

enterprise resource planning (ERP) system.57 As we previously reported, 

the Office of Comptroller Operations established unique accounting codes 

within the state’s integrated accounting system (ERP system) to track 

Recovery Act spending separately. Where practical, new data fields will be 

added to the accounting system to support the data extract for Recovery 

Act reporting. Whereas the financial data for Pennsylvania’s state recipient 

reports will be drawn from the ERP system, the Office of Information 

Technology designed a new centralized Recovery Act data warehouse—

the Central Access to Recovery Data System (CARDS)—to compile the 

other data elements gathered from program agencies and their 

subrecipients and vendors. Pennsylvania’s Accountability Office is 

developing internal controls and a quality review process to help ensure 

that the data are complete and accurate before submission. 

Pennsylvania’s 

Accountability Office 

Plans Centralized 

Reporting for 

Recovery Act Funds 

Received by the State 

and Is Developing 

Performance 

Measures 

According to Pennsylvania Recovery Act officials, many subrecipient and 

vendor details, such as names and addresses, required under Section 1512 

already existed within Pennsylvania’s ERP system, since most 

organizations receiving Recovery Act funds through state agencies were 

already registered to do business with Pennsylvania state government. 

State program agencies receiving Recovery Act funds—the direct 

recipients—are responsible for collecting and entering any additional data 

for their subrecipients and vendors into CARDS. For example, PennDOT is 

the direct recipient for the Highway Infrastructure Investment funds and 

will collect data from its vendors—the contractors working on the 

highway and bridge projects. For the WIA Youth Program, L&I as the 

direct recipient will compile data from the local workforce area 

 

57An ERP solution is an automated system using commercial off-the-shelf software and 

consisting of multiple, integrated functional modules that perform a variety of tasks, such 

as accounts payable, general ledger accounting, and grant management. 

Page PA-51 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

subrecipients, which in turn will gather data from their vendors on the 

summer youth activities. 

According to the Senior Advisor for Recovery Implementation, the process 

of classifying subrecipients and vendors using the five-point test in OMB’s 

guidance has been surprisingly difficult. Pennsylvania’s Accountability 

Office plans to use the state ERP system coding to preliminarily assign 

entities to one category or the other. Initially, entities receiving Recovery 

Act funds coded as grant, debt service/investment, and transfer payment 

categories will be treated as subrecipients, and entities receiving Recovery 

Act funds coded as operating expenses will be treated as vendors. 

Pennsylvania’s Accountability Office will override these preliminary 

classifications in cases where the federal awarding agency’s instructions 

are plainly contrary. 

On August, 26, 2009, Pennsylvania’s Accountability Office issued 

instructions for program agencies detailing their reporting responsibilities 

and the timeline for preparing for the first recipient reports due on 

October 10, 2009. On August 31, 2009, Pennsylvania’s Accountability Office 

issued companion instructions for use by the program agencies’ vendors, 

subrecipients, and subrecipient vendors. By the end of August, each 

program agency was to identify its key reporting personnel, verify its 

identification numbers, and complete a onetime survey on its Recovery 

Act funding award received to date. In early September 2009, agency staff 

will receive CARDS training and will load onetime survey data from their 

outreach to vendors and subrecipients. All onetime data entry is to be 

completed by September 25, and program agencies are to begin entering 

quarterly data—such as the numbers of jobs, narrative on quarterly 

activities, and project status—beginning on October 1. Subrecipients are 

to provide their data by October 5, and the program agencies are to upload 

all data to CARDS by October 6. Each program agency is responsible for 

using CARDS to review and approve its final recipient report. 

Pennsylvania’s Accountability Office has registered at 

FederalReporting.gov and plans to transmit the recipient reports for 

Pennsylvania state agencies. As of September 11, 2009, the office expects 

to file at least 40 recipient reports by the October 10, 2009, deadline. To 

help oversee the reporting process, the reporting working group will set 

up a centralized operation focused exclusively on the recipient reporting 

Page PA-52 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

effort from September 23 until October 30, 2009.58 Pennsylvania’s 

Accountability Office told the program agencies that the first 10 days of 

October will be difficult but manageable. Pennsylvania’s Accountability 

Office will also manage the process for program agencies to revise their 

reports and respond to any issues flagged by federal agencies. 

Looking beyond the recipient reporting on jobs and project status, 

Pennsylvania’s Accountability Office is developing a performance measure 

framework to track results of Pennsylvania’s Recovery Act spending and 

report meaningful outcomes to the public. Pennsylvania’s Accountability 

Office has reached out to state agencies receiving Recovery Act funds to 

identify performance measures for each Recovery Act program. In 

addition to job creation measures, Pennsylvania’s Accountability Office 

plans to compile both program-specific output measures as well as longerterm outcome measures. For example, output measures for highway and 

bridge projects might include the number of road miles resurfaced and the 

number of bridges rehabilitated, whereas longer-term outcomes would be 

reducing the percentage of road miles rated as in poor condition in terms 

of roughness and the share of Pennsylvania bridges rated as structurally 

deficient. Where possible, Pennsylvania’s Accountability Office is trying to 

identify measures of energy savings or environmental improvement. After 

the first round of recipient reporting is complete in October, 

Pennsylvania’s Accountability Office will continue work to finalize the 

performance measures and begin collecting data for publication on 

Pennsylvania’s recovery Web site, www.recovery.pa.gov. 

We provided the Governor of Pennsylvania with a draft of this appendix 

on September 9, 2009, and the Chief Implementation Officer and Chief 

Accountability Officer responded for the Governor on September 11, 2009. 

These officials agreed with our draft and provided clarifying and technical 

comments that we incorporated where appropriate. 

State Comments on 

This Summary 

 

58The centralized efforts will reopen in late December for the next quarterly recipient 

reporting round. 

Page PA-53 GAO-09-1017SP Recovery Act
Appendix XVI: Pennsylvania 

Phillip Herr, (202) 512-2834 or herrp@gao.gov 

Mark Gaffigan, (202) 512-3168 or gaffiganm@gao.gov 

In addition to the contacts named above, MaryLynn Sergent, Assistant 

Director; Richard Jorgenson, analyst-in-charge; Waylon Catrett; Brian 

Hartman; John Healey; Richard Mayfield; Andrea E. Richardson; and 

Laurie F. Thurber made major contributions to this report. 

GAO Contacts 

Staff 

Acknowledgments 

Page PA-54 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

The following summarizes GAO’s work on the third of its bimonthly 

reviews of American Recovery and Reinvestment Act (Recovery Act) 1

spending in Texas. The full report covering all of our work at 16 states and 

the District of Columbia is available at www.gao.gov/recovery. 

Overview 

Use of Funds: We reviewed three programs in Texas funded under the 

Recovery Act Highway Infrastructure Investment funds, Workforce 

Investment Act (WIA) Youth Program, and Weatherization Assistance 

Program. We selected these programs for different reasons. The Highway 

Infrastructure Investment fund was selected because highway projects 

have been underway in Texas for several months, and provided an 

opportunity to review contracts. The WIA Youth Program was selected 

because Texas received a large increase in funding, the program was in 

full operation, and it provided an opportunity to review contracts. We 

selected the Weatherization Assistance Program because the Recovery Act 

provided a 25-fold increase in Texas’s funding. With these programs we 

focused on how funds were being used; how safeguards were being 

implemented, including those related to procurement of goods and 

services; and how results were being assessed. We reviewed contracting 

procedures and examined two specific contracts under both the Recovery 

Act Highway Infrastructure Investment fund and the WIA Youth Program. 

In addition to these three programs, we also updated funding information 

on the use of Recovery Act funding in Texas’s budget, including the use of 

the U.S. Department of Education (Education) State Fiscal Stabilization 

Fund (SFSF). Consistent with the purposes of the Recovery Act, funds 

from the programs we reviewed are being directed to help Texas and local 

governments stabilize their budgets and to stimulate infrastructure 

development and expand existing programs—thereby providing needed 

services and potential jobs. The following provides highlights of our 

review of these funds: 

• U.S. Department of Education State Fiscal Stabilization Fund.

Education approved Texas’s application making more than $2 billion 

available for education programs, including public schools and higher 

education. As of September 8, 2009, the state has received 287 

applications from school districts for these funds. 

Page TX-1 GAO-09-1017SP 

 

1

Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

 Recovery Act 
Appendix XVII: Texas 

• Highway Infrastructure Investment Program. The U.S. 

Department of Transportation’s Federal Highway Administration 

(FHWA) apportioned $2.25 billion in Recovery Act funds to Texas. As 

of September 1, 2009, the federal government has obligated $1.19 

billion for 287 projects to Texas and $47 million has been reimbursed 

by the federal government. Seventy-eight percent of highway 

obligations have been for pavement improvements and roadway 

widening. 

• Workforce Investment Act (WIA) Youth Program. The Texas 

Workforce Commission has allocated approximately $70 million of the 

WIA Youth Recovery Act funds, received from the Department of 

Labor, to 28 workforce development boards within the state. The goal 

is to expend at least 70 percent of these funds by September 30, 2009. 

As of August 15, 2009, local workforce development boards had 

expended approximately $31.5 million and enrolled over 19,500 youth 

in summer employment activities throughout Texas. Texas is 

exceeding its target goal of summer employment for 14,420 youth. 

• Weatherization Assistance Program. On July 10, 2009, the U.S. 

Department of Energy provided the Texas Department of Housing and 

Community Affairs (TDHCA) access to $163.5 million of the state’s 

$327 million Recovery Act funding allocation. On September 11, 2009, 

TDHCA entered into contracts totaling $145.5 million with 

subrecipients. The remaining $17.8 million will be used for TDHCA 

administration and technical assistance and training for subrecipients 

and grantees. 

On September 1, 2009, Texas began a new 2-year budget cycle, formally 

called the 2010-2011 biennium, making available about $12 billion in 

Recovery Act funding for several programs, including Medicaid, public 

schools, higher education, and transportation.2

 However, Texas officials 

would like the federal government to clarify the process for recouping 

administrative costs and provide specific guidance on which Recovery Act 

programs are subject to the 0.5 percent administrative cap. In the longer 

term, the effect of the Recovery Act on the state’s fiscal position remains 

uncertain. 

Use of Recovery Act 

Funding in the Texas 

State Budget 

 

2

Texas budgets on a biennial basis. The 2010-2011 biennium will run through August 31, 

2011. 

Page TX-2 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

As Texas implements its budget for the 2010-2011 biennium, state officials 

provided updated information on the use of Recovery Act funds, including 

the State Fiscal Stabilization Fund (SFSF), to support state programs. As 

the state begins to receive more Recovery Act funds, officials with the 

Governor’s office indicated that they would like more federal guidance 

concerning administrative costs related to the Recovery Act. Texas 

officials have participated in conference calls with OMB officials, but did 

not receive requested guidance on what Recovery Act funded programs 

are subject to the 0.5 percent administrative cap. 

On July 24, 2009, the U.S. Department of Education (Education) approved 

Texas’s application for the Recovery Act State Fiscal Stabilization Fund 

(SFSF), making available more than $2 billion.3

 According to an 

assessment by the Texas Legislative Budget Board (LBB),4

 the 2010-2011 

biennial budget uses SFSF funds to provide funding for education 

programs, including public schools, higher education and to the Texas 

Education Agency (TEA) for textbooks. Officials in the Governor’s office 

told us that the TEA is accepting applications from school districts seeking 

SFSF funds. As of September 8, 2009, TEA reports that the agency has 

received 287 applications for SFSF funds.5

 The Governor’s staff 

anticipated that school districts would begin receiving SFSF funds in 

September 2009, and this would include retroactive funding for cost 

incurred for the period between the enactment date of the Recovery Act 

(February 17, 2009) and the effective date of th

Texas Is Using Recovery 

Act Funds, but Seeks to 

Clarify Administrative Cost 

Issues 

Texas Preparing to Use State 

Fiscal Stabilization Fund 

e application. 

 

3

Education also noted that Texas would be eligible to apply for additional SFSF funds this 

fall. 

4

In Texas, the LBB is a permanent joint committee of the Texas legislature that develops 

budget and policy recommendations for legislative appropriations for all agencies of state 

government, as well as completes fiscal analyses for proposed legislation. 

5

TEA reports an additional 606 local education agencies (LEA) of the approximately 1,200 

school districts and charters in the state have started a draft of the application in TEA’s 

eGrants system, but have not finalized and submitted the application. 

Page TX-3 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

The state legislature’s conference committee report for the 2010-2011 

budget identifies two sources of funding for administrative costs.6

 The 

legislature appropriated $10 million to the Governor’s office from the 

Recovery Act’s government services fund for administrative costs.7

 State 

officials told us that the Governor’s office may provide this funding to 

other state agencies with oversight responsibilities. The second source is 

money recovered from the State-wide Cost Allocation Plans (SWCAP) for 

administrative costs. On May 11, the Office of Management and Budget 

(OMB) issued a memo describing how states could recover central 

administrative costs related to carrying out Recovery Act programs and 

activities.8

 However, officials with the Governor’s office indicated that this 

guidance does not fully address their concerns. 

Texas Has Appropriated Funds 

to Pay Administrative Costs, 

but Seeks Clarification on 

Federal Guidance 

The OMB memo gives the states the option to recoup costs for central 

administrative costs through SWCAP, which states submit to the U.S. 

Department of Health and Human Services annually. The guidance states 

that any estimated cost amount should not exceed 0.5 percent of the total 

Recovery Act funds received by the state. However, the Governor’s staff 

said they were concerned about OMB’s decision to use the SWCAP as a 

mechanism for states to recover administrative costs. The officials believe 

that using the SWCAP to recoup Recovery Act administrative costs could 

require duplicate reporting by the Texas state government—once for the 

Recovery Act and once for already established federal programs. 

The Governor’s staff also stated they needed more guidance on what 

programs were to be included in the total dollar amount that the 0.5 

percent would be based on. For example, the Governor’s staff said that if 

Recovery Act funds Texas received for Medicaid were included; the 

amount Texas could recoup in administrative costs would increase. For 

the 2010-2011 biennium, the Texas LBB estimated that the Recovery Act 

would increase federal funds for Medicaid by $2.513 billion, of which 0.5 

percent is approximately $12.6 million. Texas officials told us they 

participated in conference calls with OMB officials where they requested 

 

6

Conference Committee Report for S.B. No. 1 General Appropriations Bill, 81st Leg. Sess., at 

XII-9. 

7

The conference report indicated that $10 million would be available for administrative 

costs, provided that Texas receives more than $700 million from the government services 

fund of the SFSF. 

8

Office of Management and Budget Memorandum M-09-18, Payments to State Grantees for 

Administrative Costs of Recovery Act Activities (May 11, 2009). 

Page TX-4 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

guidance on this matter. Officials added that OMB has issued clarifying 

questions and answers. However, Texas officials thought further guidance 

is needed from OMB, including a listing of programs that are subject to the 

0.5 percent administrative cap. 

State Is Assessing Future 

Budget Funding 

Our July and April reports noted that both the Governor and legislature 

have provided extensive guidance to state agencies indicating that much 

of the Recovery Act funding is temporary and should be used for 

nonrecurring expenditures, such as onetime costs. The conference 

committee report for the 2010-2011 appropriations bill directs state 

agencies to “give priority to expenditures that do not recur beyond the 

2010-2011 biennium.”9

 Similarly, the Governor in his proclamation 

concerning the state budget reiterated that “state agencies and 

organizations receiving these funds should not expect them to be renewed 

by the state in the next biennium.”10

The LBB is asking state agencies to report on their uses of Recovery Act 

funds, with the first report due in September 2009. LBB staff told us that 

these reports will allow them to monitor spending on an ongoing basis. A 

state legislative official noted that the LBB reports will be sent to key 

leaders in the legislature. Moreover, the Texas legislature’s House Select 

Committee on Federal Economic Stabilization Funding held a hearing in 

August to monitor how state agencies were using Recovery Act funding. 

LBB staff said that the Recovery Act had helped fill gaps in funding 

education and Medicaid programs in the 2010-2011 budget. For example, 

LBB staff anticipate SFSF funds being used to address what likely would 

have been a gap in education funding for 2010-2011. More specifically, the 

staff expected SFSF funds would be used to replace funding the state 

usually receives from the state’s Permanent School Fund,11 which has been 

adversely affected by financial market turmoil. However, LBB staff 

indicated that financial market turmoil may prevent the state from 

transferring Permanent School Fund money to support education in 2010-

 

9

Conference Committee Report for S.B. No. 1 General Appropriations Bill, 81st Leg. Sess., 

at XII-9. 

10Proclamation by the Governor of the State of Texas Concerning the General 

Appropriation Act. 

11The Permanent School Fund earns proceeds from the sale of state lands and mineralrelated revenue from these lands. 

Page TX-5 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

2011. The 2010-2011 biennial budget uses SFSF funds to support 

education. A senior official with the Governor’s office reiterated the state’s 

commitment to fund education regardless of the performance of the 

Permanent School Fund.12

In our recent discussions, LBB staff noted the importance of identifying 

revenue to support education spending as well as the state’s Medicaid 

program,13 when Recovery Act funding ends. In the case of education, LBB 

officials reported that there is uncertainty about whether the Permanent 

School Fund would provide a distribution that could fund education in the 

2012-2013 biennium. Moreover, officials from two legislative offices told us 

that it may be challenging for some state agencies to scale back, once the 

Recovery Act funding ends. However, officials in the Governor’s office 

reported that they continue to provide guidance indicating that Recovery 

Act funding is temporary. For example, a senior official said that the 

application for school districts to use in applying for SFSF funds makes 

clear that the SFSF funding is onetime. 

Growth in Texas’s Tax 

Revenue Has Declined 

The Texas Comptroller has certified that sufficient funding exists to 

support the 2010-2011 biennium budget. However, in January 2009, the 

Comptroller projected that Texas may have 10.5 percent less revenue 

available for general purpose spending for the 2010-2011 biennium than 

was available in 2008-2009. Specifically, the Comptroller’s Biennial 

Revenue Estimate anticipated that Texas would have $77.1 billion 

available for general purpose spending in the 2010-2011 biennium, 

compared to $86.2 billion in the previous 2008-2009 biennium. The 

Comptroller’s revenue estimate has important implications. According to a 

report by the Texas legislature’s House Research Organization, for an 

appropriations bill to be valid, the Comptroller must certify that there is 

enough revenue to cover the approved spending.14

 

12We were told by LBB staff that there is a constitutional requirement that fund returns over 

a 10-year period must exceed payouts over the same period in order for there to be a 

distribution. 

13Recovery Act funds used in the state’s fiscal year 2010-2011 budget include Federal 

Medical Assistance Percentage funds (discussed in GAO-09-1016). 

14Texas House of Representatives, House Research Organization, Writing the State Budget 

81st Legislature, Report No. 81-1 (Feb. 2, 2009). 

Page TX-6 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Of particular importance for Texas is the outlook for sales tax revenue. 

For the past two decades, state sales tax revenues have accounted for 

more than half of the state’s general revenue related tax collections.15 The 

Comptroller’s projections suggest that sales tax collections will slightly 

increase in 2009 and 2010. For example, in fiscal year 2010, the 

Comptroller projects sales tax revenue will increase by 0.5 percent. 

According to this report, this slight increase expected in fiscal year 2010 

would come after strong revenue growth in fiscal year 2008. In fiscal year 

2008, sales tax receipts increased 6.6 percent from the previous year. The 

Comptroller’s report notes that, “loss of jobs, tighter credit, and 

uncertainty about the economy are likely to keep consumers at home.” 

Moreover, figure 1 shows that the projected trend in sales tax collections 

for 2010-2011 would contrast with more rapid growth in sales tax 

collections in 2006 and 2007. Looking ahead, the Comptroller anticipates 

that sales tax revenue will grow at a faster pace in 2011.16

 

15Texas does not have a state income tax. 

16Between 2010 and 2011, sales tax collections in Texas are expected to increase 4.2 

percent. This rate of increase will likely exceed the rate of inflation, resulting in a real 

increase in sales tax revenue collected by the state. 

Page TX-7 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Figure 1: Texas Sales Tax Collections: 2006-2011 

0

16

17

18

19

20

21

22

23

24

2006 2007 2008 2009 2010 2011

Sales tax collections (in billions of dollars)

Source: GAO analysis of Texas Comptroller data from Biennial Revenue Estimate: 2010-2011 and Biennial Revenue Estimate,

2008-2009.

Year

Note: Figures for 2009-2011 as well as 2007 are estimates by the Comptroller. 

State officials had different perspectives concerning the potential need in 

the future to use money from the state’s rainy day fund, the Texas 

Economic Stabilization Fund.17 Officials from several legislative offices 

indicated it was likely that the state would need to use rainy day funds in 

the 2012-2013 biennium. For example, one of the officials noted that the 

state may face a “funding cliff,” as Recovery Act funding ends. 

Furthermore, the official pointed to 2003 when the state used money from 

the rainy day fund to address a budget deficit. According to a report by the 

Texas legislature’s House Research Organization,18 rainy day funds were 

used in fiscal 2003 to support several state programs, including $460.3 

million for Medicaid acute care as well as $295 million for the Texas 

State Officials’ Perspectives on 

the Rainy Day Fund 

 

17The state’s economic stabilization fund is commonly referred to as the “rainy day fund.” 

18Texas House of Representatives, House Research Organization, State Finance Report, 

Report No. 78-3 (Nov. 17, 2003). 

Page TX-8 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Enterprise Fund to support economic development.19 A senior official in 

the Governor’s office did not anticipate the need to use money from the 

rainy day fund in the 2010-2011 budget. Moreover, the Governor’s advisor 

noted that appropriating funds from the rainy day funds would require a 

supermajority vote in the legislature.20

There has been recent discussion in the Texas legislature regarding the 

projected future balance of the rainy day fund. In an August hearing, the 

chairman of the Texas legislature’s House Select Committee on Federal 

Economic Stabilization Funding requested updated information 

concerning the balance in the rainy day fund. An official from the 

Comptroller’s office reported that the rainy day fund currently had a 

balance of approximately $6.7 billion. In January 2009, the Comptroller 

had anticipated that money would be transferred into the rainy day fund in 

2010-2011 and consequently the rainy day balance would reach $9.1 billion. 

According to a report by the Comptroller’s office, the state is required to 

transfer half of any General Revenue Fund surplus in each biennium and 

75 percent of any oil and natural gas production taxes exceeding 1987 

levels into the rainy day fund. In the Comptroller office’s August 

statement, officials continued to expect that the state would transfer 

money into the rainy day fund in 2010-2011. Specifically, the official 

estimated that $852 million would be transferred in fiscal 2010 and $740 

million in fiscal 2011. Oil and gas production taxes continue to be an 

important source of revenue for the rainy day fund. According to the 

Comptroller’s office, $852 million from oil and gas production taxes is 

anticipated to be transferred into the rainy day fund in fiscal 2010. Figure 2 

shows recent trends in the rainy day fund’s ending balance. 

 

19According to a description on the Governor’s Web page, the Texas Enterprise Fund is 

used primarily to attract new business to the state or assist with the substantial expansion 

of an existing business as part of competitive recruitment. The fund can be used for a 

variety of economic development projects including infrastructure and community 

development, job training programs, and business incentives. 

20A report by the House Research Organization indicates that more than a majority of 

members of the legislature must approve the use of rainy day funds. The report explains 

that, “generally, money in the rainy day fund can be spent only as approved by at least 

three-fifths of the members present in each house. Spending from the fund generally may 

not exceed the amount of any unanticipated deficit or revenue shortfall, but any amount 

from the fund may be spent for any purpose if at least two-thirds of the members present in 

each house approve it.” 

Page TX-9 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Figure 2: Texas Economic Stabilization Fund, Ending Balances (1990-2009) 

Ending balance (in billions of dollars)

Source: GAO analysis of data from Texas Comptroller’s office.

Fiscal year

0

1

2

3

4

5

6

7

8

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Notes: Figures have been adjusted to report the ending balance in constant 2009 dollars using the 

GDP price index. 

Figure for 2009 is preliminary data, year to date. 

No data is available for 1991. 

The Recovery Act provides funding to the states for restoration, repair, 

and construction of highways and other activities allowed under the 

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 

the states through federal-aid highway program mechanisms, and states 

must follow the requirements of the existing program, which include 

ensuring the project meets all environmental requirements associated with 

the National Environmental Policy Act (NEPA), paying a prevailing wage 

in accordance with federal Davis-Bacon requirements, complying with 

goals to ensure disadvantaged businesses are not discriminated against in 

the awarding of construction contracts, and using American-made iron 

and steel in accordance with Buy America program requirements. While 

the maximum federal fund share of highway infrastructure investment 

Texas Is Proceeding 

with Highway 

Infrastructure 

Investment Projects 

Page TX-10 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

projects under the existing federal-aid highway program is generally 80 

percent, under the Recovery Act, it is 100 percent. 

As we reported in July 2009, $2.25 billion was apportioned to Texas in 

March 2009 for highway infrastructure and other eligible projects, as 

shown in figure 3. As of September 1, 2009, $1.19 billion had been 

obligated for 287 projects. As of September 1, 2009, $47 million had been 

reimbursed by FHWA. The U.S. Department of Transportation has 

interpreted the term “obligation of funds” to mean the federal 

government’s contractual commitment to pay for the federal share of the 

project. This commitment occurs at the time the federal government signs 

a project agreement. States request reimbursement from FHWA as 

payments are made to contractors working on approved projects. Actual 

payments to contractors by Texas totaled about $47 million. 

Figure 3: Flow of Texas Recovery Act Highway Funds as of September 1, 2009 

Dollars (in billions)

Source: GAO analysis of U.S. Department of Transportation and Texas Department of Transportation data.

Funds

0.0

0.5

1.0

1.5

2.0

2.5

State Reimbursed

payments

to contractors

Apportioned Obligated

$2.25

$1.19

$0.05 $0.05

Spending Continues on 

Planned Projects 

Seventy-eight percent of Recovery Act highway obligations for Texas have 

been for pavement improvements and widening. Specifically, $933.5 

million of the $1.19 billion obligated, as of September 1, 2009, is being used 

for projects such as resurfacing, repairing, and widening roadways, 

Page TX-11 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

including $513.5 million for pavement improvements and $420 million for 

roadway widening. Texas primarily selected highway preservation 

projects, such as resurfacing, repair and widening, which can be quickly 

started and completed. Figure 4 shows obligations by the types of road 

and bridge improvements being made as of September 1, 2009. 

Figure 4: Highway Obligations for Texas by Project Improvement Type as of 

September 1, 2009 

1%

Bridge improvement ($13.4 million)

Other ($82.2 million)

Pavement widening ($420 million)

Source: GAO analysis of FHWA data.

Pavement improvement ($513.5 million)

Pavement projects total (84 percent, $1,005.9 million)

Bridge projects total (9 percent, $106.7 million)

Other (7 percent, $82.2 million)

1%

Bridge replacement ($10.9 million)

35%

7%

7%

New bridge construction ($82.4 million)

6%

43%

New road construction ($72.4 million)

Note: “Other” includes safety projects, such as improving safety at railroad grade crossings, and 

transportation enhancement projects, such as pedestrian and bicycle facilities, engineering, and rightof-way purchases. 

Page TX-12 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

In August 2009, we returned to two Recovery Act–funded projects we 

visited for our July report.21 One project site was within the Texas 

Department of Transportation’s Fort Worth district office and the other 

site was within the Dallas district office. For this report, we revisited these 

two projects and observed work that was underway using Recovery Act 

funds. 

Construction at Two Sites 

Is Ongoing and, According 

to State Officials, Based on 

Competitively Awarded 

Fixed-Price Contracts 

Figure 5 shows the Fort Worth district office project before construction 

work started. This project is located in Tarrant County and involves 

resurfacing a 5-mile section of Interstate 820 to improve safety and 

maintain the roadway by performing pavement and bridge repairs. Figure 

6 shows the work in progress. 

pairs. Figure 

Figure 5: Fort Worth, Texas, Interstate 820 Roadway Deterioration Prior to 

Resurfacing Using Recovery Act Funds 

Source: Texas Department of Transportation.

 

21GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses (Appendixes), GAO-09-830SP (Washington, D.C.: July 2009). 

Page TX-13 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Figure 6: Fort Worth, Texas, Interstate 820 Resurfacing in Process to Repair 

Roadway Deterioration Using Recovery Act Funds 

Source: Texas Department of Transportation.

The Dallas district project is located in Cedar Hill, Texas, and involves the 

construction of intersection improvements including widening of the 

intersection, signal upgrades, and the addition of turn lanes at Farm-toMarket Road 1382 and Straus Road. Figure 7 shows the intersection prior 

to the start of construction and figure 8 shows the work site during our 

review. 

Page TX-14 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Figure 7: Cedar Hill, Texas, Intersection at Farm-to-Market Road 1382 and Straus 

Road before Recovery Act–Funded Improvements 

Source: GAO.

Page TX-15 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Figure 8: Cedar Hill, Texas, Intersection at Farm-to-Market Road 1382 and Straus 

Road, Temporary Turn Lane Constructed as Recovery Act–Funded Improvements 

Advance 

Source: GAO.

According to Texas Department of Transportation officials, the two 

projects were initiated through competitively awarded contracts. 

According to state officials, after soliciting proposals for the projects, 

Texas received and evaluated 6 proposals for the Fort Worth district 

project and 10 proposals for the Dallas district project. Texas officials 

stated they followed the practice of awarding contracts to the lowest 

responsive bidder, and awarded fixed-price contracts for both projects.22

The Fort Worth and Dallas district contracts were awarded to the low 

bidder for approximately $3.97 million and $1.38 million respectively. 

 

22According to Texas Department of Transportation officials, highway construction 

contracts are awarded to the lowest responsible and responsive bidder. 

Page TX-16 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Funds appropriated for highway infrastructure spending must be used as 

required by the Recovery Act. States are required to do the following: 

• Ensure that 50 percent of apportioned Recovery Act funds were 

obligated within 120 days of apportionment (before June 30, 2009). The 

50 percent rule applies only to funds apportioned to the state and not 

to the 30 percent of funds required by the Recovery Act to be 

suballocated, primarily based on population, for metropolitan, 

regional, and local use. In addition, states are required to ensure that 

all apportioned funds—including suballocated funds—are obligated 

within 1 year. The Secretary of Transportation is to withdraw and 

redistribute to other states any amount that is not obligated within 

these time frames.23 As of September 1, 2009, approximately $1.2 

billion for highway projects has been obligated using Recovery Act 

funds. Included is approximately $197 million obligated from the 30 

percent of funds suballocated. The rate of obligation for suballocated 

funds is about 29 percent compared to a 53 percent obligation rate for 

Texas Recovery Act highway funds in general. Although the obligation 

of suballocated funds has been slower, Texas officials anticipate that 

suballocated funds will be obligated within the 1-year time frame 

required. 

Texas Is Meeting Recovery 

Act Highway 

Infrastructure Spending 

Requirements, and 

Maintenance-of-Effort 

Certification Has Been 

Accepted 

• 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 30, 2010.24 Following an initial 

certification by Texas dated March 17, 2009, the U.S. Secretary of 

Transportation informed Texas on April 20, 2009, that conditional and 

explanatory certifications were not permitted, and provided guidance. 

Subsequent to the Secretary’s guidance, Texas resubmitted 

certifications on May 22, 2009, and July 9, 2009. The Office of the 

Secretary of Transportation accepted the Texas certification, as of 

August 13, 2009. 

 

23Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009). 

24Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009). 

Page TX-17 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

According to Texas Department of Transportation officials, highway 

construction project management includes daily oversight of both 

contractors and subcontractors by on-site inspectors. Resident engineers 

for each work site keep a daily log of the quantity of materials delivered 

and installed. The engineers take measurements to verify the quantity of 

materials used (e.g., loads of asphalt) and whether those quantities 

conform to established specifications. As an additional check, state 

officials told us that independent record keepers verify the inspectors’ 

calculations before payment to contractors or subcontractors is 

authorized. 

The Recovery Act provides an additional $1.2 billion in funds for the 

Workforce Investment Act (WIA) Youth program, including summer 

employment. Administered by the Department of Labor (Labor), the WIA 

Youth Program is designed to provide low-income in-school and out-ofschool 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. Funds for the program are distributed to 

states based on a statutory formula; states, in turn, distribute at least 85 

percent of the funds to local areas, reserving as much as 15 percent for 

statewide activities. The local areas, through their local workforce 

investment boards, have the flexibility to decide how they will use the 

funds to provide required services. 

Texas Transportation 

Agency Providing 

Monitoring and Oversight 

of Highway Contracts 

Workforce Investment 

Act (WIA) Youth 

Program 

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,25 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While the WIA Youth Program requires a summer employment 

component to be included in its year-round program, Labor has issued 

guidance indicating that local areas have the flexibility to implement 

stand-alone summer youth employment activities with Recovery Act 

funds.26 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. A key 

 

25H.R. Rep. No. 111-16, at 448 (2009). 

26Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

Page TX-18 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

goal of a summer employment program, according to Labor’s guidance, is 

to provide participants with the opportunity to (1) experience the rigors, 

demands, rewards, and sanctions associated with holding a job, (2) learn 

work-readiness skills on the job, and (3) acquire measurable 

communication, interpersonal, decision-making, and learning skills. Labor 

has also encouraged states and local areas to develop work experiences 

that introduce youth to opportunities in “green” educational and career 

pathways. Work experience may be provided at public sector, private 

sector, or nonprofit work sites. The work sites must meet safety 

guidelines, as well as federal and state wage laws.27 Labor’s guidance 

requires that each state and local area conduct regular oversight and 

monitoring of the program to determine compliance with programmatic, 

accountability, and transparency provisions of the Recovery Act and 

Labor’s guidance. Each state’s plan must discuss specific provisions for 

conducting its monitoring and oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 

youth are served using these funds. It extended eligibility through age 24 

for youth receiving services funded by the act, and it made changes to the 

performance measures, requiring that only the measurement of work 

readiness gains will be required to assess the effectiveness of summer-only 

employment for youth served with Recovery Act funds. Labor’s guidance 

allows states and local areas to determine the methodology for measuring 

work readiness gains within certain parameters. States are required to 

report to Labor monthly on the number of youth participating and on the 

services provided, including the work-readiness attainment rate and the 

summer-employment completion rate. States must also meet quarterly 

performance and financial reporting requirements. 

Texas Expects to Meet 

Expenditure and 

Participant Targets of WIA 

Youth Recovery Act Funds 

Texas expects that it will meet its WIA Youth program expenditure and 

participant targets for Recovery Act funds. Texas was awarded 

approximately $82 million in WIA Youth Recovery Act funds. Labor issued 

guidance stating that these funds are to be expended by June 30, 2011. The 

Texas Workforce Commission (TWC), the agency responsible for 

overseeing the state’s WIA Youth Program, has allocated about $70 million 

of the WIA Youth Recovery Act funds to 28 workforce development boards 

 

27Current federal wage law specifies a minimum wage of $7.25 per hour. Where federal and 

state laws have different minimum wage rates, the higher rate applies. 

Page TX-19 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

within the state.28 TWC’s target is to expend at least 70 percent of these 

funds by September 30, 2009, and the remainder by September 30, 2010. 

Each workforce board receiving Recovery Act funds is also expected to 

meet these targets. As of August 15, 2009, Texas had expended about $31.5 

million, or 38.5 percent, and state officials expect to fully meet their 

expenditure target. As of August 15, 2009, over 19,500 youth had been 

enrolled in summer employment activities throughout Texas, exceeding 

TWC’s state-wide participation target of 14,420 youth. Almost 25 percent of 

enrollees were out-of-school youth and 74 percent were youth between the 

ages of 14 and 18. Approximately 6.5 percent of youth enrolled by Texas as 

of August 15, 2009, were between the ages of 22 and 24. 

Local Boards We Visited 

Faced Challenges 

In July and August 2009, we revisited the two boards that we reported on 

in our July 2009 report. The Gulf Coast Development area, which covers 13 

counties29 and includes the cities of Houston and Galveston, was allocated 

$14.8 million for its WIA youth program and given a target of 3,054 

participants for summer employment activities by TWC. The local area 

exceeded its target and had placed 5,128 youth to work sites and expended 

approximately $11.3 million, or 76 percent of its allocation as of 

September 3, 2009. The North Central Texas development area consists of 

14 counties30 and received an allocation of $4.5 million in WIA Youth 

Recovery Act funds and a participant target of 927 youth. As of September 

9, 2009, the board had recruited 1,090 summer youth participants for 

summer employment activities. Officials told us that as of August 31, 2009, 

it had expended 41 percent of its allocation. 

The North Central Workforce Development Board covers a predominately 

rural area, and officials attributed their difficulty recruiting youth to the 

lack of public transportation in its region and the distances that must be 

traveled to work sites. Board officials have encouraged car pools to 

facilitate youth mobility. The board also sought to overcome recruiting 

 

28TWC used a portion of its 15 percent WIA youth state set-aside funds to fund employment 

opportunities for blind and deaf youth. 

29The Gulf Coast Workforce Development Board administers the WIA program throughout 

the following 13 counties: Austin, Brazoria, Chambers, Colorado, Galveston, Fort Bend, 

Harris, Liberty, Matagorda, Montgomery, Walker, Waller, and Wharton. 

30The North Central Workforce Development Board administers the WIA program 

throughout the following 14 counties: Collin, Denton, Ellis, Erath, Hood, Hunt, Johnson, 

Kaufman, Navarro, Palo Pinto, Parker, Rockwall, Somervell, and Wise. 

Page TX-20 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

challenges by targeting rural areas with various types of media 

advertisements and on-site recruiting efforts. 

Officials from both boards also cited challenges in dealing with program 

eligibility requirements and income limits that they believe are too low. 

Officials from one board said that they received 5-7 ineligible applications 

for every eligible youth recruited, creating a backlog of files and 

consuming staff resources. Further, youth participants and their parents 

do not always submit required eligibility documentation in a timely 

manner, which forces local officials to use their resources to obtain that 

documentation. Although officials we spoke with did not express 

difficulties recruiting work sites, they found it challenging to identify work 

sites that would hire participants who were between 14 and 16 years old. 

Local Boards Used 

Contractors to Place 

Youths at a Variety of Work 

Sites 

According to officials, to implement Recovery Act–funded summer 

employment activities, the Gulf Coast and North Central Workforce 

Development Boards awarded contracts to a variety of organizations to 

recruit youth, determine participant eligibility, identify potential 

employers, and process payroll. According to officials, these organizations 

were also responsible for conducting youth and supervisor orientation 

sessions, assessing work sites’ safety requirements, and verifying that 

youth were performing meaningful work. Local workforce officials from 

both boards relied on existing relationships with community-based 

organizations, schools, and businesses that existed through other 

workforce programs to quickly identify work sites and recruit youth 

participants. In situations where additional work sites were needed, North 

Central board contractors scheduled presentations with business 

organizations and conducted outreach phone calls. 

In order to recruit youth within the time frames for summer employment 

activities prescribed by Labor, both boards and their contractors 

purchased radio advertisements and distributed flyers and posters. 

Program presentations were also made to youth at schools and community 

colleges to notify them of the program. The North Central board officials 

informed us that because their area included several rural areas with 

declining populations they initiated media recruitment efforts by 

purchasing radio and billboard advertisements to meet this challenge. 

These efforts led, in part, to an influx of applicants, including many that 

were not eligible for the program. 

Page TX-21 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Boards Provided a Variety 

of Employment 

Opportunities 

TWC recommended to boards that they establish summer employment 

opportunities that were linked, to the extent possible, with education and 

training, and credential attainment. In addition to the work experience 

component of its summer youth program, the Gulf Coast board included 

computer technology occupational skills training and workshops designed 

to prepare youth for work. North Central board officials stated that their 

participants attended leadership and work training seminars before 

beginning work and were given the opportunity to attend a computer 

training class. Along with software training, the curriculum emphasizes 

presentation skills, professionalism, and personal responsibility. 

Summer youth program participants in the 27 Texas counties covered by 

the two workforce areas we visited have been engaged in work activities 

offered by a variety of employers, including city and county governments, 

community colleges, school districts, and private companies. For example, 

one of the Gulf Coast Workforce board’s contractors was a charter school 

that enrolled 50 youth between the ages of 14 and 16 for a 7-week 

entrepreneurship program. The program’s goal was to provide hands-on 

projects to youth in order to prepare them for school and for the 

workforce. Youth were to learn various skills by attending workshops and 

presentations by speakers who overcame economic disadvantages while 

growing up. The youth had several responsibilities that had to be 

completed before successfully completing the program. For example, 

participants were required to create and market business plans to a panel 

of judges. 

Employers and Youth at 

Sites We Visited Cited 

Program Benefits 

We conducted work-site visits in order to observe work being performed 

and to speak with youth and employers participating in the program. The 

five employers we visited generally believed that program participants 

were performing good work and recognized the importance of utilizing 

youth for meaningful work activities. We spoke with a 23- year-old 

program participant who had been placed at a glass distribution company 

and who was offered permanent employment after 1 month in the 

program. Representatives of the company were pleased with the youth’s 

work and stated their desire to hire additional program participants. Other 

employers we spoke with stated that they would permanently hire youth if 

their budgets allowed it. Seven program participants we spoke to felt that 

the program was beneficial for them and allowed them to gain necessary 

skills to enter the workforce. For example: 

• A high-school senior placed as a teacher’s assistant at Houston 

learning academy attributed her new-found interest in becoming a 

Page TX-22 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

teacher to her summer youth work experience. While at the academy, 

the high-school senior worked with students, prepared transcripts, and 

marketed the school’s services to various media outlets. The academy 

owner stated that her goal was to teach her youth employees how to 

behave at a work place and teach them interpersonal and computer 

skills. 

• Ten participants working for the City of Houston Human Resources 

Department performed a variety of clerical work. One program 

participant we spoke with added that he was responsible for helping 

City of Houston job applicants without computer skills apply for jobs 

online. 

• A youth working at a city animal shelter was happy that the program 

took her preferences into account when placing her at a work site. Her 

goal is to become a veterinarian and she was able to gain first-hand 

experience about what would be required of her. Her experience 

included working with veterinarians, taking care of animals, cleaning 

kennels, and completing intake paperwork. 

TWC and Local Boards 

Oversee Compliance with 

WIA Youth Program 

Requirements 

According to officials, procedures have been put in place to ensure (1) 

youth are performing meaningful work activities with adequate 

supervision; (2) work sites meet safety requirements; and (3) youth payroll 

is accurate. TWC officials monitor the performance and the financial 

expenditure of funding allocated to the local workforce boards and meet 

monthly to discuss them. Technical assistance is provided to boards that 

do not appear to be on track to meet their participant or expenditure 

targets. According to officials, TWC also used established monitoring 

procedures intended to ensure compliance with Recovery Act 

requirements and the requirements established through the contracts with 

boards. TWC’s Subrecipient Monitoring Department conducted nine board 

reviews during the summer and three Recovery Act–specific reviews at 

boards receiving the largest youth allocation amounts. 

According to officials, workforce board officials and their contractors 

employ monitors to ensure compliance with program requirements. 

Contract monitors for the Gulf Coast board make unannounced visits to 

select work sites at least twice a week to determine program compliance. 

The local boards also employ their own monitors to conduct additional 

reviews. For example, monitors from the Gulf Coast Workforce board also 

conduct work site visits. The monitors interview youth and their 

supervisors to determine whether youth are performing meaningful work, 

whether all safety requirements are being met, and whether supervisors 

Page TX-23 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

require additional training. The monitors issue reports for each work site 

with observations and recommendations. Although issues have been 

reported by monitors, such as lack of supervisor training and too many 

youth per supervisor, board employees have worked with their 

contractors to rectify these problems. Officials from one contractor we 

visited told us that work-site orientation sessions have been held to 

confirm that employers are aware of program requirements. 

Boards Are Using Different 

Work-Readiness Measures 

to Assess WIA Youth 

Summer Employment 

Success 

The Recovery Act provided that, of the WIA Youth Program measures, 

only the work-readiness measure is required to assess the effectiveness of 

the summer-only employment for youth served with Recovery Act funds. 

Within the parameters set forth in federal agency guidance, local boards 

may determine the methodology they use to measure work readiness 

gains. The Gulf Coast and North Central boards have developed different 

tools to measure work readiness. The Gulf Coast board will, for example, 

use a tool that assesses each youth on 12 factors with a four-point system 

based on the frequency with which each factor is demonstrated.31 Officials 

from the North Central board have developed a Work Readiness Policy to 

identify the methodology for determining a measurable gain of workreadiness skills. 

TWC officials informed us that boards will encourage older out-of-school 

youth to use workforce services for permanent employment options. 

Automation systems will allow TWC to track summer youth participants 

who continue to receive workforce services. This enables TWC to track 

and report on their employment and retention experience. 

Contracts Awarded to 

Administer Recovery WIA 

Summer Youth 

Employment Activities 

We selected one contract from each of the boards we visited. In April 2009, 

the Gulf Coast board issued a request for proposals from entities 

interested in providing the requested services. According to agency 

officials, the board received 37 proposals from this request and evaluated 

each one based on (1) experience performing the requested services, (2) 

management approach; and (3) financial stability of the bidding 

organization. According to officials, evaluation scores ranged from 93 to 

 

31The factors include attendance, appearance, productivity, interpersonal relationships, 

work habits and attitudes, motivation and initiative, accepting direction, communication, 

and four additional factors the work-site supervisors identify. 

Page TX-24 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

21, and the highest 13 scores with a range of 93 to 81 were awarded fixedprice contracts. 

The Gulf Coast Workforce Development Board contract we selected had a 

score of 89 and was ranked seventh. We reviewed contract documentation 

and spoke with agency officials, who explained the following; that the 

contract was awarded to a nonprofit organization on April 21, 2009, at a 

total value of $2.7 million with a project start date of May 1, 2009, and a 

projected completion date of September 30, 2009; and that this contract 

was awarded competitively. The contract requires the organization to 

recruit young people from low-income families for subsidized summer 

jobs, develop work sites or activities or both, prepare participants for 

work, match participants to work sites, counsel young people, and oversee 

work sites. 

According to officials, the North Central Workforce Development Board 

awarded only one new contract for its 2009 summer youth activities, and 

the remainder of the work was performed by extending an existing 

contract. We selected the board’s new contract for our review and 

reviewed contract documents. On March 17, 2009, the board issued a 

request for proposals from entities interested in providing the requested 

services. Officials told us the following: that the board received five 

proposals from this request and had a panel of evaluators review each one; 

that the contract was awarded to a nonprofit organization on May 4, 2009, 

at a total value of $740,000, and a completion date of November 30, 2009; 

and that this contract was awarded competitively. The contract requires 

the organization to recruit young people from low-income families for 

subsidized summer jobs, prepare participants for work, match participants 

to work sites, counsel young people, and oversee work sites. 

The Recovery Act appropriated $5 billion over a 3-year period for the 

Weatherization Assistance Program, which the Department of Energy 

(DOE) administers through each of the states, and the District of Columbia 

and seven territories and Indian tribes. The Weatherization Assistance 

Program 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 circulations fans, or air conditioning equipment. Over the 

past 32 years, DOE’s 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 $5 billion provided to the 

Texas Expands the 

Weatherization 

Assistance Program 

Page TX-25 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

Weatherization Assistance Program in the Recovery Act represents a 

significant increase for a program that has received about $225 million per 

year in recent years. 

As of September 14, 2009, DOE had approved all but two of the 

weatherization plans of the states, the District of Columbia, and the 

territories, and Indian tribes—including all 16 states and the District of 

Columbia in our review. DOE has provided to the states almost $2.3 billion 

of the $5 billion in weatherization funding under the Recovery Act. Use of 

the Recovery Act weatherization funds is subject to Section 1606 of the 

act, which requires all laborers and mechanics employed by contractors 

and subcontractors on Recovery Act projects to be paid at least the 

prevailing wage, including fringe benefits, as determined under the DavisBacon Act.32 Because the Davis-Bacon Act had not previously applied to 

weatherization, the Department of Labor (Labor) had not established a 

prevailing wage rate for weatherization work. In 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. Labor then 

surveyed five types of “interested parties” about labor rates for 

weatherization work. 33 The department completed establishing prevailing 

wage rates in all of the 50 states and the District of Columbia by 

September 3, 2009. 

State Fund Allocations to 

Texas Subrecipients Are 

Underway 

On June 26, 2009, DOE approved the weatherization plan developed by the 

Texas Department of Housing and Community Affairs (TDHCA) and 

allocated Recovery Act funding amounting to about $327 million for the 

weatherization program. Funds are available over a 3-year period from 

April 2009 through March 2012. On July 10, 2009, DOE provided 50 percent 

or $163.5 million of the funding allocation. As shown in figure 9, on July 

30, 2009, the TDHCA Governing Board34 authorized allocation of $145.7 

 

32Weatherization Assistance Program funded through annual appropriations are not subject 

to the Davis-Bacon Act. 

33The five types of “interested parties” are state weatherization agencies, local communityaction agencies, unions, contractors, and congressional offices. 

34The TDHCA Governing Board is the policy-making body of TDHCA. 

Page TX-26 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

million to subrecipients. TDHCA executed contracts to subrecipients35 on 

September 11, 2009. The remaining $17.8 million will be used for TDHCA 

administration and technical assistance and training for the grantee and 

subrecipients. As of August 31 2009, TDHCA spent approximately $36,000 

of the $17.8 million allocated for TDHCA administration and training. 

0 

Figure 9: Allocation of Recovery Act Weatherization Program Funds 

$7,200,000

Amount allocated for TDHCA

administration 

$10,600,000

Amount allocated for training 

$163,500,000 $145,700,000

Source: GAO analysis of Texas Department of Housing and Community Affairs data.

Amount allocated for subrecipient 

contracts

Not allocated by DOE 

 

35TDHCA subrecipients in three categories will receive Recovery Act funds to provide 

weatherization services: (1) the existing subrecipient network (Community Action 

Agencies, Regional Councils of Government, and other nonprofit entities), who receive 

funds allocated by county based proportionately on low-income, elderly poverty 

population, median household income and climate data; (2) cities with populations over 

75,000, where allocations were based on low-income households; and (3) competitively 

awarded grants to small cities and nonprofits for populations in rural areas that may not 

otherwise be served under the other two subrecipient categories. 

Page TX-27 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

TDHCA officials and some existing subrecipients believe that Davis-Bacon 

requirements that contractors must meet may create delays and increase 

costs. For example, a potential effect of the Davis-Bacon Act is increased 

payroll and administrative costs to subcontractors, according to TDHCA 

officials. Under Davis-Bacon, workers are paid weekly based on an hourly 

rate. TDHCA officials told us that subcontractors often pay employees a 

set amount for a construction job rather than an hourly wage. Additionally, 

wage rates frequently differ by county. One subcontractor may conduct 

weatherization work in several counties and be required to pay different 

hourly wage rates depending on the county in which the work is 

conducted. As a result, TDHCA officials told us that the subcontractor may 

need to pay for changes in the payroll structure due to these Davis-Bacon 

requirements. Texas officials added that they believe Davis-Bacon 

requirements work against finding the most economical and efficient way 

to attain the program goals. 

TDHCA Officials and Some 

Subrecipients Believe 

Davis-Bacon Requirements 

May Delay Spending and 

Increase Administrative 

Costs 

Risk-Assessment and 

Mitigation Approaches 

Exist or Are Under 

Development to Monitor 

the Use of Funds 

As of August 2009, TDHCA officials told us that their internal audit 

division is developing its annual risk assessment and is likely to include 

audits of Recovery Act programs in the fiscal year 2010 audit plan. To 

handle the increase of Recovery Act funds, TDHCA has hired one new 

auditor and will be hiring two additional auditors with Recovery Act funds 

this fall, increasing TDHCA’s internal audit staff from three to six. Internal 

audit staff will attend TDHCA Recovery Act meetings and training, and 

serve in an advisory capacity to review and comment on internal controls 

as Recovery Act funds are spent. 

TDHCA also performs an annual risk assessment which includes existing 

providers and takes into account funding levels, time elapsed since last 

monitoring visit, number of monitoring findings, and the status of any 

Single Audit issues.36 The risk-assessment process is being modified to 

consider the expanded network of providers and potential new risk 

factors. Additionally, TDHCA is taking the following actions to mitigate 

risks: 

• As part of the application process a review is conducted to ensure the 

entity requesting funds does not have unaddressed compliance issues 

under any TDHCA program. The previous participation review is 

 

36The Single Audit Act of 1984, as amended (31 U.S.C. ch.75). 

Page TX-28 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

required by the Texas Government Code,37 and helps ensure the ability 

of the applicant to administer TDHCA programs and to comply with 

program rules. As a result of these Recovery Act reviews for 

weatherization fund awards, five subrecipients were found to have 

noncompliance issues associated with their administration of other 

TDHCA housing programs. These five subrecipients were originally 

allocated $27.3 million in weatherization funds before noncompliance 

issues surfaced. TDHCA is in the process of reviewing alternatives to 

disburse these funds to the affected communities. 

• To mitigate risks associated with noncompliance and lack of 

weatherization construction expertise, TDHCA is developing a new 

training approach. A Request for Proposal was released asking 

potential vendors to bid on establishing a training and technical 

assistance academy. Submissions were due by August 7, 2009 and as of 

September 8, 2009, TDHCA was in process of selecting a vendor. The 

academy will offer a range of weatherization, energy efficiency, and 

administrative instruction through a combination of classroom 

teaching, online instruction, and field work. The administrative portion 

will include TDHCA regulations and reporting as well as financial 

accountability. The courses are intended for weatherization 

subrecipients, subcontractors, subcontractor employees, and TDHCA 

staff. 

The financial status of Recovery Act funds at the local program level will 

be monitored by TDHCA staff. According to TDHCA’s DOE-approved 

weatherization plan, the monitoring approach will be twofold, consisting 

of a fiscal review, as well as a review of the quality and scope of the work 

performed on dwellings. Monitoring will include procurement, financial 

procedures, compliance, personnel policies, site inspections, assessments, 

and staff procedures. 

TDHCA is in the process of hiring 14 additional staff in its Energy 

Assistance Section, including 7 staff to monitor subrecipient 

weatherization of dwellings. The other new positions consist of four 

weatherization trainers, one contract specialist, one administrative 

assistant, and one Davis-Bacon specialist. Other monitoring steps include 

the following: 

 

37Texas Government Code, § 2306.057. 

Page TX-29 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

• An Office of Accountability and Oversight Project Manager position 

was created by TDHCA. This project manager helps develop and 

manage performance, compliance, and expenditures systems, with a 

goal of producing timely and accurate Recovery Act data. 

• Work is underway on two major database systems to track and report 

on Recovery Act weatherization funds: (1) modification of the Central 

Database—the main information system for all TDHCA programs and 

activities—to conform to the Recovery Act data-collection and 

reporting requirements for subrecipients; and (2) development of the 

Consolidated Recovery Act Reporting System—a database to track 

information received from the Central Database and local programs 

such as contracts awarded, funds awarded and expended, and 

households and individuals served. 

Plans Are Underway to 

Measure the Effect of 

Funds 

As the prime recipient of Recovery Act weatherization funds, TDHCA told 

us it is in the process of modifying existing monitoring protocols to 

address job reporting and other monitoring needs. They expect that 

guidance from DOE will further define subrecipient reporting protocols 

and facilitate monitoring. When this guidance is issued, TDHCA will 

distribute it to the subrecipient network and incorporate reporting 

requirements into its training curriculum. TDHCA officials told us that 

training on the new and unfamiliar reporting requirements will be 

necessary for all subrecipients and subcontractors. Officials added that the 

new DOE reporting requirements are expected to include jobs created or 

retained at the TDHCA, subrecipient, local agency, and local contractor 

levels and on-site monitoring visits of dwellings where weatherization has 

been completed. 

TDHCA plans to calculate projected savings from the installation of 

materials designed to reduce home energy consumption by using the DOE 

methodology developed at the Oak Ridge National Laboratory. Measures 

to be tracked and reported include the number of units weatherized, the 

average cost per home served, and the percentage of eligible low-income 

households that receive weatherization assistance. 

Page TX-30 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

The Recovery Act established several reporting requirements, and OMB 

issued guidance for meeting those requirements. Each recipient of 

Recovery Act funds is required to periodically report on a number of 

things including: (1) the total amount of Recovery Act funds received, (2) 

the amount of Recovery Act funds that were expended or obligated to 

projects or activities, and (3) an estimated number of jobs created and 

retained by projects or activities.38 The first reporting deadline is October 

10, 2009, with quarterly reports due 10 days after the end of each calendar 

quarter thereafter. OMB issued guidance on meeting those reporting 

requirements in February 2009 and updated the guidance in April and June 

2009.39 The guidance established that the reporting requirements apply to 

the prime nonfederal recipients of the federal funding. The prime recipient 

is responsible for reporting on how it used the funds as well as any 

subawards it made. To train federal agencies and recipients of Recovery 

Act funding on complying with their reporting responsibilities, OMB 

conducted a series of “webinars” in July 2009 on topics such as developing 

job creation estimates, prime and subrecipient reporting, and data quality 

requirements. Texas officials commented that OMB guidance related to 

Section 1512 reporting requirements continues to change. As an example, 

they said that as recently as August 2009, programs covered and data 

elements had changed. Texas officials believe these ongoing revisions 

create additional administrative burdens for the state in designing and 

maintaining Recovery Act reporting processes and systems. 

Texas Efforts to Meet 

Recovery Act Section 

1512 Reporting 

Requirements 

Texas’s Plans for Reporting 

Have Been Finalized 

Texas officials in the Office of the Governor told us in August 2009 that 

each state agency and institution would report directly to the designated 

federal Web site,40 and the State Comptroller’s Office was establishing a 

process to receive copies of the report submissions to perform a quality 

assurance role for accuracy, completeness, and timeliness. Consistent 

with this quality assurance role, the State Comptroller’s Office also plans 

to perform field audits beginning in August 2009 to help ensure 

 

38Pub. L. No. 111-5, Sec. 1512(c), 123 Stat. 115, 287 (Feb. 17, 2009). 

39OMB Memorandums M-09-10, Initial Implementing Guidance for the American 

Recovery and Reinvestment Act of 2009 (Feb. 18, 2009); M-09-15, Updating Implementing 

Guidance for the American Recovery and Reinvestment Act of 2009 (Apr. 3, 2009); and M09-21 Implementing Guidance for the Reports on Use of Funds Pursuant to the American 

Recovery and Reinvestment Act of 2009 (June 22, 2009). 

40www.FederalReporting.gov. 

Page TX-31 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

appropriate policies and processes are established for Section 1512 

reporting. 

Texas Has Issued 

Guidance and Conducted a 

Pilot Project to Prepare for 

the Reporting Deadline 

In April 2009, the State Comptroller’s Office issued guidance to state 

agencies and institutions of higher learning related to the use and 

subsequent reporting on Recovery Act funds.41 In May 2009, the State 

Comptroller’s Office, in conjunction with the Office of the Governor and 

LBB, began requiring state agencies and 4-year institutions of higher 

education to report weekly on all Recovery Act funds allocated or 

requested. Additional guidance for the weekly reporting was issued by the 

State Comptroller’s Office in July 2009.42 As of August 7, 2009, 42 state 

agencies reported about $11.5 billion in Recovery Act awards and over 

$2.1 billion in expenditures in the state’s weekly activity reporting. The 

State Comptroller’s Office makes information, such as the amount of 

federal awards received, available to the public on a Web site it 

maintains.43

To allow Texas agencies and institutions the opportunity to better 

understand and fine-tune the recipient reporting requirements before the 

October 2009 deadline, the State Comptroller’s Office required all state 

agencies and 4-year institutions of higher education that received a 

Notification of Award for Recovery Act funds and had a federal program 

subject to Section 1512 recipient reporting to participate in a pilot project 

of reporting information to the State Comptroller’s Office by July 10, 2009. 

Guidance for this pilot process was issued by the State Comptroller’s 

Office in June 2009.44 Using this pilot process, the State Comptroller’s 

Office compiled all questions and concerns related to the federal reporting 

for resolution with the appropriate state or federal oversight entity, and 

convened a Recovery Act working group on July 31, 2009. The State 

Comptroller’s Office reported that 27 of the 33 state agencies filed Section 

1512 recipient reports for the pilot project. 

 

41Texas Comptroller of Public Accounts, “Fiscal Policies and Procedures, J.004” (Apr. 20, 

2009). This guidance was superseded by the State Comptroller’s Office in August 2009. 

42Texas Comptroller of Public Accounts, “Fiscal Policies and Procedures, B.008” (July 15, 

2009). 

43www.window.state.tx.us/recovery/follow/received.php. 

44Texas Comptroller of Public Accounts, “Fiscal Policies and Procedures, B.009” (June 30, 

2009). 

Page TX-32 GAO-09-1017SP Recovery Act
Appendix XVII: Texas 

We provided the Governor of Texas with a draft of this appendix on 

September 8, 2009. A Senior Advisor, designated as the state’s point of 

contact for the Recovery Act, responded for the Governor on September 

10, 2009. In general, the Senior Advisor agreed with the information in this 

appendix, but expressed concern that our discussion on the future of 

Texas’s budget was outside the scope of our work and that we did not 

acknowledge what the Office of the Governor has relayed to us in 

numerous discussions, that Texas has a track record of living within its 

means by cutting spending when necessary. We explained that the purpose 

of the discussion in this section was to provide a perspective on Texas’s 

budget, beyond the current biennium, with the expiration of Recovery Act 

funding. This particular section of the appendix reflects the views and data 

provided by staff from the Governor’s Office, Comptroller’s Office, the 

Legislative Budget Board, and the legislature’s House Select Committee on 

Federal Economic Stabilization Funding. In discussing this section of the 

appendix with the Senior Advisor, we made revisions to reflect the varied 

views of the State’s budget beyond the current biennium. In addition, 

more contextual perspective was added to the appendix on how the state 

views the guidance and directives received from the federal government 

on what is expected on reporting and monitoring of Recovery Act funds. 

The Senior Advisor also provided technical suggestions that we 

incorporated, where appropriate. 

Carol Anderson-Guthrie, (214) 777-5700 or andersonguthriec@gao.gov 

Lorelei St. James, (214) 777-5719 or stjamesl@gao.gov 

In addition to the contacts named above, Ron Berteotti, K. Eric Essig, Fred 

Berry, Victoria De Leon, Wendy Dye, Ken Howard, Michael O’Neill, and 

Daniel Silva made major contributions to this report. 

Texas’s Comments on 

This Summary 

GAO Contacts 

Staff 

Acknowledgments 

Page TX-33 GAO-09-1017SP Recovery Act
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