PERFORMANCE AND ACCOUNTABILITY REPORT

Appalachian Regional Commission

Fiscal Year 2018
September 30, 2018

 Federal Co-Chair States’ Co-Chair

 Tim Thomas Governor Phil Bryant

GOVERNORS AND STATE ALTERNATES

Alabama New York South Carolina

Governor Kay Ivey Governor Andrew M. Cuomo Governor Henry McMaster

Kenneth Boswell Mark Pattison Michael McInerney

Georgia North Carolina Tennessee

Governor Nathan Deal Governor Roy Cooper Governor Bill Haslam

Christopher Nunn Jim McCleskey Brooxie Carlton

Kentucky Ohio Virginia

Governor Matt Bevin Governor John Kasich Governor Ralph Northam

Sandy Dunahoo Jason Wilson Erik Johnston

Maryland Pennsylvania West Virginia

Governor Larry Hogan Governor Tom Wolf Governor Jim Justice

Wendi W. Peters Sheri Collins Jennifer Ferrell

Mississippi

Governor Phil Bryant

Robert G. “Bobby” Morgan States’ Washington Representative

James Hyland

Executive Director

Scott T. Hamilton

G EORGIA

A LABAMA

T ENNESSEE

D E L A WARE

K ENTUCKY

O HIO

W ISCONSIN

NEW

JERSEY

V IRGINIA

N ORTH C AROLINA

S OUTH C AROLINA

I LLINOIS I NDIANA

M ICHIGAN

N E W Y ORK

M A R YLAND

MISSISSIPPI

WEST VIRGINIA

P ENNSYLVANIA

HART

G E O R G I A

A L A B A M A

S O U T H

MISSISSIPPI

HART

G EORGIA

A LABAMA

T ENNESSEE

D ELAW ARE

K ENTUCKY

O HIO

W ISCONSIN

NEW

JERSEY

V IRGINIA

N ORTH C AROLINA

S OUTH C AROLINA

I LLINOIS I NDIANA

M ICHIGAN

N EW Y ORK

M ARYLAND

P ENNSYLVANIA

MISSISSIPPI

WEST VIRGINIA

APPALACHIAN REGION

APPALACHIAN REGIONAL COMMISSION

The Appalachian Region includes all

of West Virginia and parts of Alabama, Georgia, Kentucky, Maryland,

Mississippi, New York, North Carolina,

Ohio, Pennsylvania, South Carolina,

Tennessee, and Virginia. The Region is

home to more than 25 million people

and covers 420 counties and almost

205,000 square miles.
CONTENTS

Message from the Co-Chairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

PART I: MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 Program Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Appalachian Regional Commission Structure and Programs . . . . . . . . . . . . . . . . . . 9

Summary of Achievements in Fiscal Year 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Management Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Summary of Financial Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

PART II: FISCAL YEAR 2018 PERFORMANCE REPORT

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Overview of ARC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Strategic Investment Goals and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Performance Measurement Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Strategic Investment Goal 1: Economic Opportunities . . . . . . . . . . . . . . . . . . . . . . . 32

Strategic Investment Goal 2: Ready Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Strategic Investment Goal 3: Critical Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . 38

Strategic Investment Goal 4: Natural and Cultural Assets . . . . . . . . . . . . . . . . . . . . 41

Strategic Investment Goal 5: Leadership and Community Capacity . . . . . . . . . . . 43

Summary of Achievements in Fiscal Year 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Progress Toward ARC Strategic Plan Performance Goals, 

Fiscal Years 2016–2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

PART III: FISCAL YEAR 2018 FINANCIAL REPORT

Message from the Executive Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Report of Independent Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Required Supplementary Stewardship Information . . . . . . . . . . . . . . . . . . . . . . . . . 80

PART IV: OTHER INFORMATION 

ARC Performance Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Improper Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Inspector General’s Summary of Management and Performance Challenges . . . 82

Summary of Financial Statement Audit and Management Assurances . . . . . . . . 85
2 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

Message from Federal Co-Chair Tim Thomas and

2018 States’ Co-Chair Governor Phil Bryant

We are pleased to present the Appalachian Regional Commission’s (ARC) Performance and Accountability Report for fiscal year

(FY) 2018. 

For FY 2018, the Commission approved $125.6 million in funding for 522 area development projects that advanced one or

more of the five goals of ARC’s 2016–2020 strategic plan: 1) investing in entrepreneurial and business development strategies that strengthen Appalachia’s economy; 2) increasing the education, knowledge, skills, and health of residents to work and

succeed in Appalachia; 3) investing in critical infrastructure—especially broadband; transportation, including the Appalachian

Development Highway System; and water/wastewater systems; 4) strengthening Appalachia’s community and economic

development potential by leveraging the Region’s natural and cultural heritage assets; and 5) building the capacity and skills

of current and next-generation leaders and organizations to innovate, collaborate, and advance community and economic

development. 

ARC’s FY 2018 grant funds attracted an additional $188.7 million in other project funding, an investment ratio of 2 to 1, and

$1.49 billion in non-project leveraged private investment, a ratio of 12 to 1. The projects funded during the year will create or

retain an estimated 26,662 jobs and train an estimated 34,135 students, workers, and leaders in new skills. 

In working toward its strategic goals in FY 2018, the Commission continued to foster entrepreneurship activities with a particular focus on emerging opportunities; diversify the Region’s economy, with a special emphasis on communities that have been

adversely affected by the decline in the coal industry; support advanced manufacturing and workforce development initiatives

to strengthen the Region’s competitiveness in the global economy; bolster infrastructure needed to spur development in economically distressed counties, including broadband and basic infrastructure such as water and wastewater systems; and expand

efforts and partnerships to tackle health disparities, including the Region’s opioid challenges.

This report includes information on the Commission’s program actions and financial management during FY 2018. We are

pleased to report that ARC’s independent auditor, Key & Associates, P.C., has pronounced an unmodified opinion that the

financial statements in this document fairly present the Commission’s fiscal status. 

ARC has made every effort to provide a complete and accurate report of its performance and stewardship of the public funds

entrusted to it. This report is based on data that is as reliable and comprehensive as possible. Congress and the American people can also be assured that the financial controls in place at the Commission reasonably meet the purposes of the Federal Managers’ Financial Integrity Act of 1982. 

The achievements reported here contribute significantly toward ARC’s mission of helping the Appalachian Region attain

socioeconomic parity with the nation. 

Sincerely,

Tim Thomas Phil Bryant

ARC Federal Co-Chair 2018 States’ Co-Chair

Governor of Mississippi

November 6, 2018 

MESSAGE FROM THE CO-CHAIRS
FISCAL YEAR 2018 PROGRAM

HIGHLIGHTS

I

n FY 2018, all of ARC’s activities advanced at least one

of the five goals of its 2016–2020 strategic plan: creating economic opportunities, developing a ready workforce, investing in critical infrastructure, leveraging natural

and cultural assets, and bolstering leadership and community capacity. These goals were pursued through the

agency’s regular program of economic and community

development; a special emphasis on strengthening and

diversifying the economy of coal-impacted communities,

including through the POWER (Partnerships for Opportunity and Workforce and Economic Revitalization) Initiative; and congressionally directed programs focusing on

broadband and basic infrastructure, as well as workforce

development in the automotive and aviation sectors.

Goal 1: Creating Economic Opportunities

Invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy.

POWER Initiative

ARC’s FY 2018 appropriation included $50 million in funding through the POWER Initiative, which helps diversify

economies in communities and regions that have been

affected by job losses in coal mining, coal power plant

operations, and coal-related supply chain industries due

to the changing economics of America’s energy production. Over the past three years, ARC has awarded $120

million in 149 total investments to help coal-impacted

communities in 309 Appalachian counties diversify and

grow their economies. These investments will create or

retain almost 14,000 jobs, leverage an additional $403 million in investment, and prepare thousands of workers and

students with globally competitive skills and opportunities

in the Region's manufacturing, technology, entrepreneurship, agriculture, and other emerging sectors. The awards

funded a wide range of activities in the Region targeted

at building a competitive workforce, enhancing access

to and use of broadband services, fostering entrepreneurial activities, and developing industry clusters in communities.

Advanced Manufacturing

Appalachia’s historically strong manufacturing sector

offers significant potential for economic growth. Supporting innovative manufacturing processes is critical to

development of this vital sector. In FY 2018, ARC invested

in additive manufacturing equipment for the Youngstown

Business Incubator. The new equipment will allow firms

from Appalachian Ohio access to shared equipment that

is often prohibitively expensive for startups and small

companies. The high costs of prototyping and post-processing prevent many startups from exploring the benefits

of additive manufacturing. Housing equipment in a

shared-use facility and providing technical assistance to

the firms will improve competitiveness by allowing them

to experiment with ways to integrate 3-D printing and

other additive processes into their existing and new lines

of business while assuming lower risk. The equipment purchase will benefit eight businesses and create approximately seven new jobs. The project will also help to train

approximately 255 students and 47 existing faculty and

staff from Youngstown State University and Eastgate

Community College who will have access to the equipment. 

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART I: 

MANAGEMENT’S DISCUSSION AND ANALYSIS
Entrepreneurship and Access to Capital

Locally owned businesses are important drivers of the

Region’s economy. To succeed, these ventures need a

strong community environment that encourages and

supports entrepreneurship and local business development. The cost and availability of capital in low-income

areas is an impediment to growing local businesses. In FY

2018, ARC invested in the Northeastern PA Alliance for

the New Market Tax Credit (NMTC) Launch project. An

NMTC investment fund will be developed for the target

region to help local businesses obtain the investment dollars they need to start or expand; invest in the construction and renovation of community facilities; and invest in

the revitalization of industrial and commercial facilities.

These investments will create jobs and economic opportunities and consequently, improve the quality of life.

Forty communities will benefit from these activities and

$25 million of private capital will be leveraged. 

In 2013, a report commissioned by ARC on access to

capital and credit in the Appalachian Region identified

significant gaps in financing for the Region’s small and

growing businesses. To address these gaps, the Commission, at the recommendation of ARC’s Capital Policy Initiative Advisory Committee, contracted with RAIN Source

Capital, a national angel investment organization, to

help in the formation of angel funds in the Region. Communities in the Region were invited to participate in the

effort. As of September 2018, seven new angel funds had

raised $8.6 million capital and made 26 investments,

which have resulted in the creation of more than 80 jobs.

These funds are located in Starkville, MS; Florence, AL;

Knoxville, TN; Boone, NC; Somerset, KY; Ashland, KY; and

Charleston, WV. An ARC POWER-funded initiative with

RAIN Source Capital, the Appalachian Angel Investor

Network project is also working with existing and new

angel investment funds to enhance their capability. Currently ARC and RAIN Source Capital are working with

local partners in four new areas to begin the process of

angel fund formation, which include Altoona, PA; Salamanca, NY; Birmingham, AL; and Southwest Virginia.

Goal 2: Developing a Ready Workforce

Increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia.

High-Tech Workforce

ARC is committed to investing in community and technical colleges throughout the Region, which are working to

prepare highly skilled workers for new high-tech jobs. Two

projects funded in FY 2018 illustrate this commitment. The

Tri-cities Airport in Tennessee is planning to open Aerospace Park, a 160-acre, runway-accessible industrial site,

that is expected to create up to 2,000 high-skilled aviation jobs in the region. The associated ARC project is

helping nearby Northeast State Community College to

revise and update its Aviation Technology curriculum to

receive FAA certification and train workers with the skillsets and competencies necessary to succeed in this

workforce. Forty-two students are expected to complete

their training and gain employment within the first three

years. A different type of aviation training will take place

at Alfred University (AU) in New York. Three new drone

technology programs are being created: one for pilots,

one for maintenance, and one for innovation enterprise

entrepreneurship. The innovation program will encourage

student and faculty outreach to the agriculture community by offering data upon request to help farmers project

crop yields and crop health. As the program matures, AU

envisions working in several different commercial applications, some of which include insurance, inspection services, security, construction site management, and first aid

delivery. The program represents an opportunity to diversify the economy in the Appalachian Region by providing

students and workers with skills in an emerging field that

are becoming more valuable as the commercial industry

learns to apply drone technology to new applications.

These programs should train approximately 33 students

and six workers in the first cohort, while also working to

develop demand for these skills.

Healthy Workforce 

A healthy workforce is key to the economic success of

the Region, but that workforce is threatened on a large

scale by the substance abuse and overdose epidemic

disproportionately facing Appalachia. Appalachians, on

4 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
the whole, are 65 percent more likely to die from a drug

overdose than the rest of the country. Disparities are

especially high among people in their prime working

years, ages 25–44; the overdose mortality rate is 70 percent higher for men and 90 percent higher for women in

the Region than in the non-Appalachian United States.

Some of the Region’s rural counties are experiencing

overdose-related mortality rates two, three, and sometimes even four times higher than the rest of the nation.

To better understand how these statistics are intersecting

with the other economic measures across the Region,

NORC at the University of Chicago and ARC developed

the Appalachian Overdose Mapping Tool. Through this

resource, overdose mortality rates can be mapped

against demographic data as well as important economic indicators, giving planners and other community

leaders insight as to where comprehensive interventions

may have the most impact. Among those in Appalachia

adopting a multi-pronged approach is FAHE, which is

using ARC funds to partner with a variety of other local

service providers to expand housing and job training

opportunities for those in recovery and living in some of

Eastern Kentucky’s most economically distressed areas.

Two projects funded by ARC in FY 2018 illustrate how ARC

can invest in improving the health of its workforce. In the

southern tier of New York State, ARC is supporting a project to expand the availability of medication-assisted

treatment, an evidence-based practice for treating opioid use disorders. This important clinical service can be

difficult to access in many rural areas, especially for

lower-income patients, and the grantee, the Council on

Addiction Recovery Services, Inc. (CAReS), is one of the

few providers in the area that treats Medicaid patients.

CAReS expects to treat 175 unique patients within a year

of the project’s completion. Using POWER funds, ARC was

also able to invest in an effort with several federal partners, including the National Institute on Drug Abuse at the

National Institutes of Health, to continue collaborative

research on effective interventions for opioid use disorders and related diseases in rural Appalachian coal communities. In addition to impacts from substance use

disorders, there is an increased risk for the spread of associated diseases such as HIV and hepatitis C. As part of a

multi-year federal effort that aims to implement and

assess evidence-based interventions in rural areas, ARC

funds will allow teams from the University of Kentucky and

West Virginia University to continue research focused on

coal-impacted communities in the Region. Successful

completion of this effort will help establish and deploy

best practices in the prevention and treatment of opioid

use, HIV, and hepatitis, especially within the context of

rural Appalachia.

Bright Spots in Health

Three new resources were released in FY 2018 by ARC,

the Robert Wood Johnson Foundation, and the Foundation for a Healthy Kentucky: Exploring Bright Spots in

Appalachian Health: Case Studies; Identifying Bright

Spots in Appalachian Health: Statistical Analysis; and a

new website, HealthinAppalachia.org. Together they

offer a fresh approach to understanding health in

Appalachia by focusing on community strengths and

identifying local factors supporting a culture of health.

The 10 case studies describe “Bright Spot” counties, each

defying predictions for health with better-than-expected

outcomes. They look at the people and communityfocused strategies, programs, and activities that are

working to improve health in the Bright Spot counties. The

accompanying statistical analysis explores how each of

the Region’s 420 counties performed on 19 health outcome measures and provides the performance-focused

research methodology that helped identify the Bright

Spot counties. The goal of this analysis was to identify and

examine counties with a wide range of characteristics

and resource levels that had all managed to find a way

to be healthier than expected, given their health drivers

and resources. The website, HealthinAppalachia.org,

explores extensive county-level health data for the entire

Appalachian Region. It complements the Bright Spots

research, offering regional data on mortality, morbidity,

behavioral health, and social determinants, among other

health domains. Local leaders, community members,

public health officials, and policy makers can use it to

explore health disparities and guide decisions on how to

improve community health.

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS
Goal 3: Investing in Critical Infrastructure

Invest in critical infrastructure—especially broadband;

transportation, including the Appalachian Development

Highway System; and water/wastewater systems. 

Critical Infrastructure

ARC invested $68.7 million during FY 2018 in 156 projects

aimed at bolstering the Region’s physical infrastructure.

These investments—creating and expanding local water

and sewer systems, providing access to broadband, and

building and maintaining access roads for industrial

parks—act as fundamental building blocks for further

economic development in Appalachian communities.

ARC’s FY 2018 infrastructure grant investments were

matched by $126.8 million in other public investments,

leveraged $1.26 billion in non-project private investment,

and served 28,086 households and 3,292 businesses. Physical infrastructure programs have been among the primary generators of new jobs in the Region. As a result of

ARC’s FY 2018 infrastructure investments, an estimated

15,301 jobs will be created or retained. 

Two projects supported during the fiscal year illustrate the

broad impact of ARC infrastructure investments. In

Pikeville, Kentucky, ARC funded a new sewer extension

that will provide sewer service for 85 households and 13

businesses. The area served by the project currently relies

on a combination of package treatment plants, which

are unable to meet current discharge regulations, and

septic systems, many of which have exceeded their useful life. As a result, wastewater is able to leach out of the

ground to create a public health hazard and contaminate nearby surface water. In Lowndes County, Mississippi, ARC is funding rail access to the Golden Triangle

Industrial Park, which will facilitate an industrial expansion

by an existing business. This project will result in $140 million in leveraged private investment from the capital

improvements and the creation of 33 new jobs. In addition, it will provide an important benefit to attract new

businesses to the park.

Access to Broadband 

In order to compete in the global economy, Appalachia

must continue to develop and improve the infrastructure

necessary for economic development. Telecommunications infrastructure is particularly critical to reducing

Appalachia’s isolation and connecting its businesses and

communities with information and markets around the

world. Research has shown that 80 new jobs are created

for every additional 1,000 broadband users served, and

that gaining 4 Mbps of broadband speed can increase

household income by $2,100 a year. ARC invested $16.2

million in 44 telecommunications and technology projects in FY 2018, including several that continue its commitment to help rural Appalachian communities expand

broadband service. One such example is the Haleyville,

Alabama Fiber Infrastructure Project, which is using ARC

funds to install 99 miles of new fiber construction. The

entire Haleyville area is severely underserved. Businesses

are unable to get adequate bandwidth, the schools

have connectivity problems, and the police department

is often unable to do background checks on stopped

vehicles because the internet crashes when students get

home from school. This project will expand broadband

service and include redundant routing to increase the

reliability of the network to 99.999% uptime. This is critically important to large businesses. The project will provide internet access to approximately 252 businesses and

over 1,500 households in two at-risk counties: Marion and

Winston.

Goal 4: Leveraging Natural and Cultural

Assets

Strengthen Appalachia’s community and economic

development potential by leveraging the Region’s natural and cultural heritage assets.

Recreational Tourism Industry

Appalachia’s numerous natural assets are the backbone

of the recreational tourism industry, which is creating

opportunities for entrepreneurship in the Region. Building

local businesses that support outdoor recreation and

tourism is an increasingly important way to diversify rural

6 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
economies. To capitalize on this expanding industry in the

Region, ARC invested in several projects designed to

leverage natural assets. Multiple projects focused on creating and extending hiking, biking, and motorsports trails.

In Southwest Virginia, ARC funded the “Outdoor Recreation Investments for the Coalfields of Virginia” project to

develop 50 miles of multi-use trails, six river access points,

and two parks to connect recreational assets to local

communities. This investment is part of an ongoing assetbased development effort in Virginia to restructure the

economy and fill gaps left by declining coal, manufacturing, and agriculture industries. It is expected to create 10

new businesses and 54 new jobs in the tourism sector and

increase visitation to the region by 15 percent each year

for the next five years. 

Downtown Revitalization and Gateway Communities

Strategic investments in downtown redevelopment, gateway communities, historic districts, and other unique

community features can help revitalize and enrich local

economies. ARC invested in a range of downtown revitalization projects across the Region in FY 2018 to help communities strengthen their local economies and improve

quality of life. One such project, in Forest County, Pennsylvania, will complete a planning process to produce a

Tionesta/Marienville Downtown Revitalization Master Plan.

The plan will focus on “placemaking” and small business

support and include an existing conditions analysis, goals

and recommendations for priority improvements, and an

implementation blueprint to guide further actions and

investments in the communities. 

ARC also continued its partnership with the National

Endowment for the Arts and the Conservation Fund to

support the Appalachian Gateway Communities Initiative, a program that provides technical assistance with

natural and cultural heritage tourism development to

communities that are geographically positioned as

“gateways” to the Region’s public lands and heritage

areas. 

Goal 5: Bolstering Leadership and Community Capacity

Build the capacity and skills of current and next-generation leaders and organizations to innovate, collaborate,

and advance community and economic development.

Appalachian Leadership Institute 

In FY 2018, ARC began developing the Appalachian

Leadership Institute to equip a diverse network of leaders

with the skills, expertise, and vision to address

Appalachia’s most pressing issues. The Institute will

increase the Region’s economic competitiveness and

help build regional leadership capacity across

Appalachia by engaging key public, non-profit, and private sector leaders and focusing on economic development and other challenges facing rural and Appalachian

communities. Upon the completion of the program, participants will possess the knowledge and skills necessary

to make a direct and sustainable impact in their community and state and across the Region. The first class is

scheduled to be announced by the end of FY 2019, with

subsequent classes to be announced annually. Each

class will be integrated into an active alumni program to

continue networking and collective action.

ARC-Sponsored Student Programs

To help build student leadership capacity, ARC funded

the Appalachian Teaching Project (ATP) in FY 2018, led

by the Consortium of Appalachian Centers and Institutes,

a coalition of 16 Appalachian studies organizations in 11

Appalachian states. Schools participating in ATP offer a

directed seminar guiding students in developing and

executing field-based research projects specific to the

needs of their surrounding, often distressed, communities

and in alignment with one or more of the ARC strategic

goals. As a capstone to this work, students and their faculty sponsors travel to Washington, DC to present their

work to other ATP participating institutions, ARC leadership, and community leaders in a formal peer-to-peer

symposium. 

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS
In FY 2018, ARC also supported the Oak Ridge National

Laboratory (ORNL) summer STEM program, a two-week,

residential, hands-on learning program delivered through

Oak Ridge Associated Universities. This year, 37 high

school students and 15 high school teachers, representing 12 Appalachian states, participated in the main STEM

program, and an additional 26 middle school students

participated in a one-week science academy. Program

activities included lab time at the renowned Oak Ridge

National Laboratory and visits to nearby industries, universities, and museums to experience real-world applications

of science, math, and technology. These annual summer

STEM programs provide a unique opportunity for students

to work in collaborative teams with world-class scientists

at ORNL to investigate science and technology, ranging

from robotics to alternative energy to building a supercomputer. Teacher participants have the opportunity to

enhance their teaching skills by learning how to translate

their program research for classroom learning. 

Emerging Leaders

In FY 2018, ARC funded a project to support the Real

Action Leadership Learning Southwest Virginia (Rally

SWVA) program to develop an emerging leaders program. Rally SWVA is an action learning mini-grant program that provides small grants to communities to

advance the community vision and support business

development by building community leadership capacity and reinforcing collaborative, entrepreneurial communities. It provides leadership development, coaching, and

facilitation, helping communities to develop shared

visions, set goals, build consensus, and move to actions

that will make their communities better places for small

businesses. This ARC project will focus on developing a

regional leadership program that will reach additional

communities with enhanced community leadership

capacity, enabling communities to complete successful

community projects. 

Taken together, these FY 2018 activities furthered progress

toward ARC’s strategic investment goals and helped

strengthen the Appalachian Region’s economy.

8 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
APPALACHIAN REGIONAL

COMMISSION STRUCTURE AND

PROGRAMS

Congress established the Appalachian Regional Commission (ARC) to address the profound economic and social

problems in the Appalachian Region that made it a

“region apart” from the rest of the nation. The Commission was charged to:

• Provide a forum for consideration of problems of the

Region and proposed solutions, and establish and use

citizens’ and special advisory councils and public conferences;

• Provide grants that leverage federal, state, and private resources to build infrastructure for economic and

human resource development;

• Generate a diversified regional economy, develop the

Region’s industry, and build entrepreneurial communities;

• Serve as a focal point and coordinating unit for

Appalachian programs;

• Make the Region’s industrial and commercial resources

more competitive in national and world markets;

• Improve the skills of the Region’s workforce;

• Adapt and apply new technologies for the Region’s

businesses, including eco-industrial development technologies; 

• Improve the access of the Region’s businesses to the

technical and financial resources necessary to the

development of business; and

• Coordinate the economic development activities of,

and the use of economic development resources by,

federal agencies in the Region.

The challenges confronting Appalachia today are complex. In some areas of the Region, basic needs in infrastructure, the environment, workforce training, and health

care still exist. But because the nation and the Region

now compete in the global economy, the threshold for

success is higher than it once was: high-technology jobs

rather than manual labor, college education rather than

basic literacy, and telecommunications arteries in addition to highways. 

Federal agencies are typically national in focus and narrow in scope, but ARC was created to be regional in

focus and broad in scope. No other government agency

is charged with the unique role of addressing

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

Number

of Grants

ARC

Funds

Other

Federal 

Funds

State

and Local

Funds

Total

Funds

Asset-Based Development 34 $9,194.1 $114.0 $12,013.6 $21,321.7

Business Development 75 34,379.5 7,864.9 46,775.5 89,020.0

Civic Entrepreneurship 13 1,023.8 0.0 649.4 1,673.2

Community Development 117 44,416.5 23,788.4 65,723.7 133,928.6

Education and Workforce Development 85 19,697.2 908.4 14,112.9 34,718.5

Health 24 5,970.8 4,705.5 3,963.8 14,640.1

Research and Evaluation 10 845.1 0.0 313.7 1,158.8

State and Local Development 

District Planning and Administration 164 10,085.1 0.0 7,724.6 17,809.6

Totals 522 $125,612.0 $37,381.2 $151,277.2 $314,270.5

Notes: Totals may not add because of rounding. Table includes access road projects funded through the Highway Trust Fund

Appalachian Regional Commission Projects Approved in Fiscal Year 2018 

(in thousands of dollars)
Appalachian problems and opportunities. No other

agency is charged with being simultaneously an advocate for the Region, a knowledge builder, an investor, a

catalyst for economic development, and a partner at

the federal, state, and local levels. These roles represent

elements that are essential to making federal investments

work to alleviate severe regional disparities in the country:

responsiveness to regional needs with a view to global

competitiveness, emphasis on the most distressed areas,

breadth of scope to address both human and physical

capital needs, and flexibility in funding.

The Commission by law directs at least half of its grant

funds to projects that benefit economically distressed

counties and areas in the Region. In part, ARC gauges its

long-term progress toward helping the Region achieve

economic parity with the nation in terms of the gradual

reduction in the number of such counties and areas over

time. The maps on page 15 show the Region’s highpoverty counties in 1960 and current high-poverty counties. The change is dramatic. (Also see page 50 for a

chart showing the number of Appalachian counties by

economic quartile in FY 2018.)

ARC is a federal-state partnership, with a governing

board composed of a federal co-chair and the governors

of the 13 Appalachian states. Because of its partnership

approach, ARC is able to identify and help fund innovative grassroots initiatives that might otherwise languish. In

many cases, the Commission functions as a predevelopment agency, providing modest initial funding that is

unavailable from other sources. ARC funds attract capital

from the private sector and from other public entities. 

Through the years, ARC support has helped address the

problem of historically low public and private investment

in Appalachia. ARC has effectively used its funds to help

communities qualify for, and make better use of, limited

resources from other federal agencies. These federal

funds, combined with state, local, and private money,

provide a broad program of assistance to the Region. In

addition, substantial private investment in business facilities and operations has accompanied ARC development

projects.

Three independent studies have found that ARC’s coordinated investment strategy has paid off for the Region in

ways that have not been evident in parts of the country

without a regional development approach. A 1995 study

funded by the National Science Foundation compared

changes in Appalachian counties with their socioeconomic “twin” counties outside the Region over 26 years,

from 1965 to 1991. This analysis, controlled for factors such

as urbanization and industrial diversification, found that

the economies of the Appalachian counties grew significantly faster than those of their non-Appalachian counterparts. A later report by Economic Development

Research Group extended this analysis to 2000 and confirmed the earlier findings on the impact of ARC’s investment. The study found that, on average, the gap

between Appalachian counties and their nonAppalachian twin counties grew significantly in the 1990s.

Most recently, ARC commissioned a report (in 2005) that

analyzed 50 years of socioeconomic trends in Appalachia

and summarized the economic impacts accruing to the

Region through ARC’s non-highway investments. The

report also includes results from a rigorous quasi-experimental research method indicating that counties that

received ARC investments increased per capita income

and added employment at a faster rate than similar

counties that did not receive ARC investments.

ARC’s appropriation for FY 2018 area development activities was $155 million. 

The Commission is a performance-driven organization,

evaluating progress and results on an ongoing basis and

relying on clearly defined priorities and strategies for

achieving them.

Organization: The ARC Partnership Model

The Appalachian Regional Commission has 14 members:

the governors of the 13 Appalachian states and a federal

co-chair, who is appointed by the president and confirmed by the Senate. Each year one governor is elected

by his or her peers to serve as the states’ co-chair. The

partnership nature of ARC is evident in its policy making:

the governors and the federal co-chair share responsibility for determining all policies and for the control of funds.

10 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
On all Commission decisions, the federal co-chair has

one vote, and the 13 governors share one vote. Accordingly, all program strategies, allocations, and other policy

must be approved by both a majority of the governors

and the federal co-chair. All projects are approved by a

governor and by the federal co-chair. This consensus

model ensures close collaboration between the federal

and state partners in carrying out the mission of the

agency. It also gives the Commission a nonfederal character that distinguishes it from typical federal executive

agencies and departments. 

State alternates appointed by the governors oversee

state ARC business and serve as state-level points of contact for those seeking ARC assistance. An alternate federal co-chair appointed by the president has authority to

act as the federal co-chair in his or her absence. By law,

there is an inspector general for the Commission. The

inspector general is under the general supervision of the

Commission and has a dual and independent reporting

relationship to both the Commission and Congress.

In FY 2018, there were 11 federal positions at the Commission.

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

Appalachian Regional Commission 

Organization Chart

Federal Membership State Membership

Non-Federal Staff

FEDERAL CO-CHAIR 13 GOVERNORS/STATES’ CO-CHAIR

OFFICE OF THE STATES’ 

WASHINGTON REPRESENTATIVE

COMMUNICATIONS HUMAN RESOURCES

DIVISION OF COMMUNITY 

INVESTMENT

LOCAL DEVELOPMENT 

DISTRICT PROGRAM

GOVERNORS’

ALTERNATES

OFFICE OF INSPECTOR

GENERAL

FINANCE & ADMINISTRATION RESEARCH & PLANNING

GENERAL COUNSEL

EXECUTIVE DIRECTOR

OFFICE OF THE FEDERAL

CO-CHAIR

ALTERNATE FEDERAL

CO-CHAIR
The Commission members appoint an executive director

to serve as the chief executive, administrative, and fiscal

officer. The executive director and staff are not federal

employees. The Commission has 54 nonfederal positions.

Commission staff are charged with serving both the federal and the state members impartially in carrying out

ARC programs and activities, and they provide the legal

support, technical program management, planning and

research, and financial/administrative management necessary for ARC’s programs.

Public and Private Partnerships

ARC promotes economic and community development

through a framework of joint federal and state initiatives.

ARC’s limited resources are necessary, but obviously not

sufficient, for Appalachia to reach parity with the rest of

the nation. Therefore, ARC uses a combination of its grassroots delivery system and Region-wide partnerships to

extend the reach of other federal programs. ARC works to

attract private-sector partners and to secure additional

resources for Appalachia. Recent partnerships include:

• Partnership for Opportunity and Workforce Training

(POWER), a multi-agency initiative to diversify the

economies of communities adversely impacted by

changes in the coal industry and power sector. Since

the inception of the POWER initiative in 2015, ARC has

awarded over $120 million to help coal-impacted communities in 309 Appalachian counties diversify and

grow their economies. The awards funded a wide

range of activities in the Region targeted at strengthening the entrepreneurial ecosystem, increasing

access to capital, developing regional industry clusters,

capitalizing on existing regional assets, and supporting

worker retraining programs focused on placing dislocated coal workers in high-demand industries.

• Shaping Our Appalachian Region (SOAR), a Kentucky

state initiative established to help eastern Kentucky

create local development strategies to address persistent challenges and to realize new opportunities.

With support from ARC, SOAR will continue its mission

to expand job creation; enhance regional opportunity, innovation, and identity; improve the quality of

life; and support all those working to achieve these

goals in Appalachian Kentucky. 

• Appalachian Community Capital (ACC), a new investment fund serving Appalachia. To address the gap in

available business funding, particularly in economically

distressed communities, ARC made the lead investment of $3.45 million in equity and operating support

for the fund. Its regional lending partners raised an

additional $12 million in debt and equity from Bank of

America, Deutsche Bank, Calvert Foundation, and the

Ford Foundation. Additional supporters include the

Mary Reynolds Babcock Foundation, the Claude Worthington Benedum Foundation, the Annie E. Casey

Foundation, and BB&T Bank. ACC has deployed over

$14 million in financing to member community development financial institutions, which have financed 55

businesses creating 1,000 news job in rural Appalachia.

• Appalachia Funders Network (AFN), a group of public

and private grant makers that works to promote an

entrepreneurial-based Appalachian economy, will

continue to invest in the Region with support from ARC.

One of the network’s programs, the Just Transition

Fund, created by AFN and the Rockefeller Family

Fund, provides catalytic funding to support coalfield

and power plant communities undergoing transition. In

addition, active working groups of funders and local

development partners are targeting job-creation

efforts in promising areas of opportunity such as valueadded agriculture, health, energy, community capacity, and arts and tourism. The Network is currently

developing an Appalachian Impact Investing Fund to

bring substantial investment—both philanthropic and

market rate—to underserved communities in the

Region. Over 100 national, regional, and local foundations participate in activities, along with federal and

state public funding partners.

• Diabetes Partnership. Through a long-term partnership

with the Centers for Disease Control and Prevention

(CDC) and West Virginia’s Marshall University, ARC

continues to support grassroots coalitions working to

12 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
address disproportionately high rates of type 2 diabetes in the Region. Recent activities have focused on

deployment of the National Diabetes Prevention Program in rural distressed counties.

• Creating a Culture of Health in Appalachia: Disparities

and Bright Spots, a partnership with the Robert Wood

Johnson Foundation to conduct a multi-year, $1 million

research project to study factors that support a culture

of health in Appalachian communities and to determine whether that knowledge can be translated into

actions that address health disparities between

Appalachia and the nation as a whole.

• Researching Opioid Abuse and Related Health Challenges in Appalachia, a partnership with the National

Institutes of Health, the Centers for Disease Control and

Prevention, and the Substance Abuse and Mental

Health Services Administration in two research efforts

focused on interventions and strategies addressing

opioid drug abuse, hepatitis C, and HIV in Appalachia.

The research will help deepen knowledge about

Appalachia’s current and future public health challenges, especially in the Region’s coal-impacted communities. ARC has committed $1.75 million to these

multi-agency research initiatives.

• Gateway Communities Cultural Heritage Initiative, a

partnership with the National Endowment for the Arts

that works with the Conservation Fund to provide training and technical assistance to communities that are

geographically positioned as “gateways” to the

Appalachian Region’s public lands and heritage

areas. 

In FY 2018, across all investment areas, each dollar of

ARC funding was matched by $1.50 in non-ARC project

funding (public and private) and leveraged $11.87 in private non-project investment attracted as a result of the

project.

ARC is often a predevelopment resource, especially in

economically distressed areas, providing modest

amounts of initial funding that are unavailable from other

sources because the community cannot qualify for the

support or raise adequate matching funds. The Commission can also allow other federal agencies to use ARC

funds under their statutory authorities when their own

funds are insufficient for projects; in effect, ARC can provide sufficient match for federal grants on behalf of the

poorest Appalachian communities. 

About half of past ARC grants have been administered

under agreements with federal agencies, mainly USDA

Rural Development, the Tennessee Valley Authority, the

U.S. Department of Housing and Urban Development, the

Federal Highway Administration, and the U.S. Economic

Development Administration. Other agreements have

involved such agencies as the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, and the

U.S. Departments of Energy, Labor, and Health and

Human Services, and the U. S. Forest Service. 

ARC has also developed agreements with 14 state agencies in the Appalachian Region to administer construction-related projects. ARC has also developed

agreements with 14 state agencies in the Appalachian

Region to administer construction-related projects. These

partners include the Alabama Department of Economic

and Community Affairs, the Georgia Environmental

Finance Authority, the Kentucky Department of Local

Government, the New York State Department of Economic Development, the Ohio Environmental Protection

Agency, and the Pennsylvania Department of Community and Economic Development. 

Commission Activities: Getting the Job

Done

Congress gave the Commission very broad program discretion to address problems and opportunities in the

Region. Accordingly, ARC has emphasized a wide-ranging set of priorities in its grant activities. Projects in recent

years have focused on business development, educational attainment, access to health care, telecommunications and technology infrastructure and use, and

tourism development. ARC has consistently maintained a

focus on the construction of development highways and

basic water and waste management facilities. 

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 13

MANAGEMENT’S DISCUSSION AND ANALYSIS
ARC Strategic Plan

FY 2018 was ARC’s third year of operating under its 2016-

2020 strategic plan, Investing in Appalachia’s Future,

which outlined ARC’s mission to innovate, partner, and

invest to build community capacity and strengthen economic growth in Appalachia, and identified five strategic

goals to help Appalachia reach socioeconomic parity

with the rest of the nation:

1 Invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy. 

2 Increase the education, knowledge, skills, and health

of residents to work and succeed in Appalachia.

3 Invest in critical infrastructure—especially broadband;

transportation, including the Appalachian Development Highway System; and water/wastewater systems.

4 Strengthen Appalachia’s community and economic

development potential by leveraging the Region’s

natural and cultural heritage assets.

5 Build the capacity and skills of current and next-generation leaders and organizations to innovate, collaborate, and advance community and economic

development.

As reported in Part II, the Commission demonstrated

progress in FY 2018 toward achieving the performance

goals set out in that plan.

Area Development Program

Area development funds are largely allocated to the

Appalachian states by formula to provide flexible assistance for individual community projects. In FY 2018, ARC

received an appropriation of $155.0 million for area development activities and allocated by formula $95.17 million,

61.4 percent of the appropriation, to the states. Within the

framework of the strategic plan, the states have wide discretion in the use of these funds, within the framework of

the strategic plan. Priorities for area development funding

are set forth in the Commission’s strategic plan, and state

and community leaders work together to package funding from public and private organizations to implement

those priorities. All ARC non-highway grants are approved

by a governor and by the federal co-chair.

ARC’s FY 2018 appropriation included $50 million for the

Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative, $16 million for a

program to support the automotive and aviation sectors

in Southern and South Central Appalachia, $10 million to

continue a program of high-speed broadband deployment in economically distressed counties in central

Appalachia, and $6 million for a program of basic infrastructure improvements in distressed counties in

Appalachia.

Special Focus on Distressed Counties

The Commission targets special resources to the most

economically distressed counties and areas in the

Region, using a very conservative measure of economic

distress based on three economic indicators: three-year

average unemployment rates, per capita market

income, and poverty rates. ARC uses an index-based

classification system to compare each county in the

nation with national averages on the three economic

indicators. Based on that comparison, each Appalachian

county is classified within one of five economic status

designations—distressed, at-risk, transitional, competitive,

or attainment. 

• Distressed counties are those that rank in the worst 10

percent of the nation’s counties.

• At-risk counties rank between the worst 10 percent

and the worst 25 percent of the nation’s counties.

• Transitional counties rank between the worst 25 percent and the best 25 percent of the nation’s counties.

• Competitive counties rank between the best 10 percent and the best 25 percent of the nation’s counties. 

• Attainment counties are those that rank in the best 10

percent of the nation’s counties.

In FY 2018, 84 counties were designated distressed, 115

were designated at-risk, 208 were designated transitional,

11 were designated competitive, and 2 were designated

attainment. ARC policy stipulates that competitive counties may receive limited assistance, while attainment

counties are generally not eligible for funding. See page

17 for a map of Appalachian counties classified by economic status.

14 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS
Besides allocating funding to benefit distressed counties

and areas, ARC has established other policies to reduce

economic distress. ARC normally limits its maximum project funding contribution to 50 percent of costs, but it can

increase its funding share to as much as 80 percent in distressed counties.

Business Development Revolving Loan Fund Grants 

Business development revolving loan funds (RLFs), pools

of money used by grantees for the purpose of making

loans to local businesses to create and retain jobs, have

been used by ARC since 1977 as an effective tool for

economic development. Limited access to credit is one

of the major problems in local business development in

Appalachia, and is a significant contributing factor to

local economic distress. Since the first RLF grants were

awarded, ARC-supported revolving loan funds have disbursed $214.8 million in 2,722 loans, resulting in 95,411 jobs

created or retained and leveraging $1.54 billion in private

investment for the Appalachian Region.

Highway Program: The Appalachian Development

Highway System

Congress created the Appalachian Development Highway System (ADHS) expressly to provide growth opportunities for the residents of Appalachia—the same benefits

afforded the rest of the nation through the construction

of the interstate highway system, which largely bypassed

Appalachia because of the high cost of building roads

through the Region’s mountainous terrain. The ADHS, a

3,090-mile system of modern highway corridors that

replaces a network of worn, winding two-lane roads, was

designed to generate economic development in previously isolated areas, supplement the interstate system,

and provide access to areas within the Region as well as

to markets in the rest of the nation and overseas.

In FY 2018, funding for the ADHS was included in the overall federal-aid highway funds apportioned to the states.

These funds are apportioned to the states annually, with

each state using the funding at its own discretion. The

federal share of funding for ADHS corridors and access

roads can normally range from 80 to 100 percent, as

determined by the state highway agencies. Although

funds used for the ADHS are derived from the highway

trust fund, ARC exercises policy and corridor alignment

control over the system. 

At the end of FY 2018, a total of 2,614.4 miles, or 84.6 percent, of the 3,090 miles authorized for the ADHS were

complete; 182.7 miles were under construction, 62.0 miles

were in the final design or right-of-way acquisition phase;

and 231.0 miles were in the location study phase. 

Local Development Districts 

ARC’s statute underlines the importance of supporting

local development districts (LDDs) in the Region. These

multi-county planning and development organizations

serve as local partners for ARC across the Region. Every

county in the Region is served by an LDD. Each LDD is

governed by a board of directors composed of both

elected officials and non-elected community leaders.

While LDDs have a wide array of responsibilities as determined by their individual boards of directors, they typically are involved in four key areas that support the

development of the Region: providing area-wide planning and program development, and coordination of

federal and state funding sources; assisting local governments in providing services, especially in poorer, more isolated communities; promoting public-private partnerships

and assisting in business development; and helping communities assess, plan, and conduct a wide range of activities such as job training, business development,

telecommunications planning and implementation, and

municipal government support. The Commission has also

supported the training and technical assistance activities

of the Development District Association of Appalachia,

an organization of the Region’s 73 LDDs.

Research and Technical Assistance Activities

ARC funds research and evaluation studies that produce

information on socioeconomic and demographic conditions in the Region, including baseline data and trend

analysis, economic impact analysis, program evaluation,

and regional economic and transportation modeling.

ARC-funded research focuses on strategic analyses of

key economic, demographic, and quality-of life factors

that affect Appalachia’s current and future development prospects. The aim of this research is to help policy

makers, administrators, and staff target resources effi16 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS
ciently, and to provide high-quality research for the general public and research specialists. ARC also funds project evaluations by outside researchers or consultants to

assess whether Commission-funded projects have made

a measurable difference in social or economic outcomes. The purpose of these evaluations is to determine

the extent to which the projects have contributed to the

attainment of economic development objectives identified in ARC’s strategic plan. In addition, evaluations are

used to verify project results and to assess the validity of

specific performance measurements for monitoring and

evaluating specific types of projects.

Reports and data products are distributed in print and

posted on ARC’s website at www.arc.gov.

Research completed or under way in FY 2018 includes:

• A study examining disparities and “bright spots” in

health outcomes in the Region

• A study examining trends and strategies in the tourism

sector in Appalachia

• An economic analysis of the coal industry ecosystems

• A study of economic resilience in Appalachian communities

• A program evaluation of ARC’s leadership and community capacity projects

• A study on documenting and strengthening the

entrepreneurial ecosystem in Appalachia

• A data overview study examining state- and countylevel data for the 13 Appalachian states on topics

including population, age, race, ethnicity, housing,

education, labor force, employment, income,

poverty, health insurance, disability status, and migration

• A website measuring population health and documenting disparities in health outcomes in the

Appalachian Region 

• A website documenting overdose deaths as well as

socioeconomic and economic indicators in

Appalachia

• A report monitoring and evaluating the impact of

ARC’s POWER-funded investments

• A program evaluation of ARC’s water and wastewater investments

• An ongoing analysis of coal production trends and

the resulting impacts on transportation in Appalachia

• An update and expansion of previous research

regarding the impact of Interstate 81 on the

Appalachian Region

• A case study assessing the anticipated economic

benefits of completing the Appalachian Development Highway System (ADHS) Corridor V in Northeast

Mississippi 

• A study examining traffic safety trends in Appalachia,

including the impact of the Appalachian Development Highway System (ADHS) and the effect of the

substance abuse epidemic on traffic safety in

Appalachia

• A study to identify variables impacting accessibility in

Appalachia and create a research framework to

quantify accessibility in a future study

Impediments to Progress

The Region’s isolation and its difficulty in adapting to economic changes over past decades are major factors

contributing to the gap in living standards and economic

achievement between the Region and the rest of the

nation. Mining and manufacturing, which have long

dominated the Appalachian economy, are currently in

decline. Many communities still rely on a single economic

sector. Despite progress in some areas, Appalachia still

does not enjoy the same economic vitality and living

conditions as the rest of the nation, and continues to

face many challenges when it comes to poverty, educational attainment, employment, population health, and

broadband. 

Poverty

• According to the U.S. Census Bureau’s American

Community Survey, over the 2012–2016 period (which

includes years of economic downturn and recovery),

16.7 percent of Appalachian residents lived below

the poverty level, well above the U.S. average of 15.1

percent. The mean income of Appalachian households was $62,299, just 80 percent of the U.S. average

of $77,866.

18 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Educational Attainment

• During the same time period, the share of adults with

a bachelor’s degree or more was seven percentage

points lower in Appalachia than in the nation as a

whole; and in 311 Appalachian counties, fewer than

one in five residents age 25 and over were graduates

of a four-year college or university. 

Employment

• The Appalachian Region lost over 600,000 jobs

between 2007 and 2010, with losses taking place both

during and after the Great Recession. It took the

Region until 2015 to achieve its pre-recession level of

employment: there were 13.1 million jobs in

Appalachia in 2007, 12.5 million in 2010, and 13.2 million in 2015. Meanwhile, the United States as a whole

was able to match its 2007 employment level of 179.9

million jobs by 2013, when total employment was

reported at 182.4 million.

• Employment growth in the Appalachian Region

lagged behind that experienced in the United States

overall between 2000 and 2016. While the country

overall saw an increase of 17 percent in total

employment, the Region experienced growth of just

7 percent. Central Appalachia fared the worst

among the subregions, losing 5 percent of its total

employment over the time period. 

• Between 2011 and 2017, coal mining employment in

Central Appalachia decreased 61 percent—20,000

jobs were lost—and is not expected to return to its historic high.

• Between 2000 and 2016, manufacturing employment

declined at a faster rate than the national trend in

every Appalachian subregion except for Central

Appalachia. In both North Central and South Central

Appalachia, employment in the industry fell 36 percent over the time period, compared to a decline of

26 percent at the national level. 

• Employment in the health and social services sector

has grown much slower in the Appalachian Region

than in the nation as a whole. While the U.S. overall

experienced growth of 46 percent between 2000 and

2016, employment in the industry grew by just 33 percent in Appalachia. Growth has been especially slow

in Central Appalachia (20 percent over the time

period), a subregion with particularly poor performance in health measures.

Population Health

• Over the 2012–2016 period, the opioid-related overdose mortality rate for people ages 15–64 was 60 percent higher in Appalachia than in the United States

overall. 

• A report released in 2017 documenting population

health in Appalachia included 7 of the 10 leading

causes of death in the United States: heart disease,

cancer, chronic obstructive pulmonary disease

(COPD), injury, stroke, diabetes, and suicide—and the

Appalachian Region had higher mortality rates than

the nation for each. 

• Obesity, smoking, and physical inactivity—risk factors

for a number of health outcomes—are all higher in

Appalachia than in the nation overall. 

• The Region also has lower supplies of healthcare professionals when compared to the United States as a

whole, including primary care physicians, mental

health providers, specialty physicians, and dentists. 

Broadband

• The Region lags behind the rest of the nation in

access to affordable broadband telecommunications service. The role of the Commission is to help

Appalachia reach parity with the nation. In an era of

global competition, this requires a special emphasis

on helping the people of Appalachia become a

globally competitive workforce.

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS
20 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND RESULTS FOR FISCAL YEAR 2018 PROJECTS

ANNUAL PERFORMANCE TARGETS RESULTS: INITIAL ESTIMATES RESULTS ACHIEVED

Outcome Targets

20,000 jobs created or retained 26,662 jobs created or retained Exceeded Target by 33%

22,000 students, workers, and leaders with improvements 34,135 students, workers, and leaders

with improvements Exceeded Target by 55%

22,000 businesses and households with access to improved infrastructure31,378 businesses and households with

access to improved infrastructure Exceeded Target by 43%

2,500 businesses created or strengthened 2,500 businesses created or strengthened Met Target

250 communities with enhanced capacity 562 communities with enhanced capacity Exceeded Target by 125%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds Achieved a 12:1 ratio Exceeded Target by 98%

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds Achieved a 2:1 ratio* Met 75% of Target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas Directed 64% of funds** Exceeded Target by 14 

percentage points

*Ratios are rounded to the nearest whole number.

**Project funds are included if the project primarily or substantially benefits distressed counties or areas.

Performance results are assessed in detail in Part II (page 25).
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

Progress Toward ARC Strategic Plan Performance Goals, Fiscal Years 2016–2020

20,000

40,000

60,000

80,000

100,000

Jobs Created or Retained

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 1: Jobs Created or Retained 

(Cumulative)

Baseline:

October 1, 2015

Actual

Five-Year Performance Target:

100,000 jobs created or retained.

Students/Trainees with Improvements

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 2: Students, Workers, and Leaders

with Improvements (Cumulative) Baseline: October 1, 2015

Five-Year Performance Target:

110,000 students, workers, and

leaders with improvements.

Businesses and Households Served

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 3: Businesses and Households 

Served (Cumulative)

Baseline:

October 1, 2015

Five-Year Performance Target:

110,000 businesses and households

with improved access to infrastructure.

2,000

4,000

6,000

8,000

10,000

Businesses Created or Strengthened

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 4: Businesses Created

or Strengthened (Cumulative) Baseline: October 1, 2015

Five-Year Performance Target:

12,500 businesses created or

strengthened.

Communities with Enhanced Capacity

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 5: Communities with Enhanced

Capacity (Cumulative)

Baseline:

October 1, 2015

Five-Year Performance Target:

1,250 communities with enhanced

capacity.

12,000

14,000 5-year goal

11,731

120,000

5-year goal

66,705

Actual

20,000

40,000

60,000

80,000

100,000 Actual

120,000 5-year goal

110,911

20,000

40,000

60,000

80,000

100,000 Actual

120,000 5-year goal

100,260

200

400

600

800

1,000

1,200

1,400 5-year goal

1,429 Actual

1,600
FINANCIAL MANAGEMENT 

Financial Management System

In FY 2018 the Appalachian Regional Commission

renewed its contract with USDA Pegasys Financial Services to perform the Commission’s accounting and financial reporting. ARC supplements these financial services

with ARC.net, a management information system that

provides real-time funding, grant-status, and performance-measurement information, as well as grant-related

financial data, in an intranet environment available to

staff and key state officials. ARC.net applications are built

using an industry standard programming language.

Management’s Responsibility for Internal

Control

ARC implemented a process for providing audited financial statements in FY 2002, following the guidance of the

Accountability of Tax Dollars Act of 2002. ARC, strictly

speaking, is not a federal agency as defined in Titles 5

and 31 of the U.S. Code; it is a 501(c)(3) organization with

a quasi-federal character. While the Accountability of

Tax Dollars Act applies only to executive branch agencies, the Commission has elected to comply with Office

of Management and Budget (OMB) guidance because

full disclosure of financial information is consistent with the

governmental nature of ARC’s mission and operations

and its stewardship of public funds. ARC also follows OMB

and U.S. Department of the Treasury financial reporting

requirements, as appropriate.

ARC maintains a plan of internal control development

and testing, as required by the Federal Managers’ Financial Integrity Act of 1982. The agency’s approach is to

make management controls an integral part of the entire

cycle of planning, budgeting, management, accounting,

and auditing. ARC strives to maintain an environment of

accountability in which all employees help ensure that

government resources are used efficiently and effectively

to achieve intended program results with minimal potential for waste, fraud, and mismanagement.

The Office of Inspector General (OIG) conducts independent program reviews and audits. Weekly management team meetings provide an opportunity to address

control issues. Finance staff conduct pre-payment examinations of approved payments, as well as oversight

reviews of program account obligation and payment

details. Finally, the annual financial audit of the agency

provides independent assessments of the adequacy of

internal controls. The internal control plan assigns responsibility within the organization for follow-up action on any

deficiencies.

ARC is pleased to report that it received an unmodified

opinion from its independent auditor, Key & Associates,

P.C., on the fiscal year 2018 financial statements provided in this Performance and Accountability Report.

MANAGEMENT ASSURANCES

Overall Internal Control

The Appalachian Regional Commission’s management is

responsible for establishing and maintaining effective

internal control and management systems that meet the

objectives of the Federal Managers’ Financial Integrity

Act of 1982. The Commission conducted its assessment of

the effectiveness of internal control over the effectiveness

and efficiency of operations and compliance with applicable laws and regulations in accordance with OMB Circular A-123, Management’s Responsibility for Internal

Control. Based on this evaluation, the Commission can

provide reasonable assurance that its internal control

over the effectiveness and efficiency of operations and

compliance with applicable laws and regulations as of

September 30, 2018, was operating effectively and no

material weaknesses were found in the design or operation of the internal controls.

Internal Control over Financial Reporting

ARC conducted its assessment of the effectiveness of

internal control over financial reporting, which includes

safeguarding of assets and compliance with applicable

laws and regulations, in accordance with OMB Circulars

22 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
A-123, Management’s Responsibility for Internal Control,

and A-136, Financial Reporting Requirements. Based on

the results of this evaluation, ARC can provide reasonable assurance that internal control over financial reporting as of September 30, 2018, was operating effectively,

and no material weaknesses were found in the design or

operation of the internal controls over financial reporting.

Management Follow-Up to Inspector

General Recommendations

At the start of the fiscal year, implementation actions

were continuing on recommendations made in prior

audit reports and evaluations. During FY 2018, the OIG

issued 40 reports, including 29 grant audits, a Financial

Statement audit, and 10 program-related evaluations.

Evaluations included the status of older grants, performance period end-dates, performance measures, applications and approvals, and the J-1 Visa program. The dollar

value of grants and payments reviewed during FY 2018

was approximately $17 million, and results included $1.9

million in deobligations that could be put to better use.

By the end of the fiscal year, management decisions had

been made regarding most issued reports, recommendations had been implemented, and several reports

remained open pending final actions.

Office of Inspector General reports to Congress are available to the public at www.arc.gov/oig.

SUMMARY OF FINANCIAL STATUS

Part III of this Performance and Accountability Report

includes information about the financial status of the

Appalachian Regional Commission. In the unmodified

opinion of ARC’s independent auditor, Key & Associates,

P.C., the financial statements included in that section

fairly represent, in all material respects, the financial position of the Commission as of September 30, 2018, and

ARC’s net costs, changes in net position, and budgetary

resources for the year ended in conformity with U.S. generally accepted accounting principles (GAAP) and OMB

Circular A-136. The financial statements taken together

include all aspects of ARC, including the Office of the

Federal Co-Chair, area development programs, and

administrative/operational activities performed by the

Commission. 

Assets on September 30, 2018, totaled $427.8 million, versus $372.3 million in FY 2017. The change was due to an

increase in the fund balance with the U.S. Department of

the Treasury. Liabilities equaled $27.0 million in FY 2018

versus $35.0 million in FY 2017. The decrease was due to

decreases in liabilities for advances and prepayments,

and accounts payable. The U.S. Treasury held 89.8 percent of ARC’s assets. In addition, 6.2 percent, or $26.6 million, represented Commission grant funds held by

intermediary organizations in Appalachia for the operation of revolving loan funds promoting business development. The federal government retains a residual interest

in the loan funds. ARC also advanced funds equaling

$1.2 million to three federal agencies for the purpose of

servicing grants. Remaining assets are cash and

advances to grantees.

The net position increased from $337.2 million in FY 2017 to

$400.8 million in FY 2018. FY 2018 liabilities included $23.4

million in payments due to grantees, $820,133 of accrued

salary and benefits, and $2.7 million in cash and

advances from federal and non-federal sources.

The net cost of operations for FY 2018 totaled $91.5 million, compared with $109.1 million in FY 2017. ARC

receives most of its resources from congressional appropriations, which totaled $155.0 million in FY 2018. In addition, ARC received $4.2 million from the 13 member states

to pay their 50% share of the Commission’s operating

costs. The Statement of Budgetary Resources reported

net outlays of $100.6 million. 

ARC incurred obligations of $143.4 million in FY 2018 and

has an unpaid obligated balance (net, end of year) of

$293.1 million. Of FY 2018 obligations, $125.6 million

funded ARC’s Area Development Program. 

The principal financial statements have been prepared

to report the financial position and results of operations of

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 23

MANAGEMENT’S DISCUSSION AND ANALYSIS
the entity, pursuant to the requirements of 31 U.S.C. 3515

(b). While the statements have been prepared from the

books and records of the entity in accordance with

GAAP for federal entities and the formats prescribed by

OMB, the statements, in addition to the financial reports,

are used to monitor and control budgetary resources,

which are prepared from the same books and records.

The statements should be read with the realization that

they are prepared for a component of the U.S. government, a sovereign entity. Notes are attached to the

financial statements to describe and explain important

disclosure information about line items in the statements

and related financial policies and programs.

24 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Statement of Assurance

On the basis of ARC’s comprehensive internal control

program during FY 2018, ARC can provide reasonable assurance that its internal control over the effectiveness and efficiency of operations and compliance

with applicable laws and regulations as of September

30, 2018, was operating effectively. Accordingly, I am

pleased to certify with reasonable assurance that our

agency’s systems of internal control, taken as a whole,

comply with Section 2 of the Federal Managers’

Financial Integrity Act of 1982. Our agency also is in

substantial compliance with applicable federal

accounting standards and the U.S. Standard General

Ledger at the transaction level, and with federal

financial system requirements. Accordingly, ARC fully

complies with Section 4 of the Federal Managers’

Financial Integrity Act of 1982, with no material nonconformances.

ARC conducted its assessment of the effectiveness of

internal controls over financial reporting, which

includes safeguarding of assets and compliance with

applicable laws and regulations, in accordance with

the requirements of OMB Circular A-123. ARC has

reasonable assurance that internal controls over financial reporting as of September 30, 2018, were operating effectively and no material weaknesses were

found in the design or operation of the controls.

Tim Thomas

ARC Federal Co-Chair

November 6, 2018 
INTRODUCTION

T

he Government Performance and Results Act of

1993 (GPRA) requires all federal agencies to submit

a report to Congress on actual program results at

the end of each fiscal year. This report documents the

Appalachian Regional Commission’s (ARC) progress

toward fulfilling its mission and goals. The report 

• Compares ARC performance targets to estimated

results reported by the projects of the 13 Appalachian

states; 

• Summarizes the findings of ARC-initiated evaluations

and project verification; and

• Describes unmet performance targets and explains

why those targets were not met, and, if targets are

impractical or infeasible, identifies steps to be taken

to address the problem. 

The five strategic investment goals from ARC’s 2016–2020

strategic plan, Investing in Appalachia’s Future, were

used to evaluate performance in FY 2018. 

This report presents an overview of the Appalachian

Regional Commission; the methodology used to monitor

project outcomes in compliance with the GPRA; ARC’s

strategic investment goals and action objectives; performance targets and results for FY 2018 and for each of

the five prior fiscal years, where applicable; the results of

project verification; the results of program evaluation;

progress toward the ARC vision; and cumulative

progress toward five-year performance targets.

OVERVIEW OF ARC

ARC’s Vision: Appalachia is a region of great

opportunity that will achieve socioeconomic

parity with the nation.

ARC’s Mission: Innovate, partner, and invest to

build community capacity and strengthen

economic growth in Appalachia.

Organizational Structure

The Appalachian Regional Commission is a regional economic development agency that represents a partnership of federal, state, and local governments. Established

by an act of Congress in 1965, ARC is composed of the

governors of the 13 Appalachian states and a federal

co-chair, who is appointed by the president. Local participation is provided through multi-county local development districts.

Each year Congress appropriates funds for the Commission’s programs, which ARC allocates among its member

states. At the beginning of their terms in office,

Appalachian governors submit development plans for

the Appalachian counties in their states. The Commission

votes to approve these plans. The governors also submit

annual strategy statements developed from the plans,

and must select projects for ARC approval and funding

based on these statements. 

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 25

PERFORMANCE REPORT

PART II: 

FISCAL YEAR 2018 PERFORMANCE REPORT
Project Funding

ARC funds approximately 500 projects annually throughout the 13-state Appalachian Region through its Area

Development Program. All of the projects must address

one of the five goals in ARC’s 2016–2020 strategic plan:

invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy;

increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia; invest in

critical infrastructure—especially broadband, transportation, and water/wastewater systems; strengthen

Appalachia’s community and economic development

potential by leveraging the Region’s natural and cultural

heritage assets; and build the capacity and skills of current and next-generation leaders and organizations to

innovate, collaborate, and advance community and

economic development. 

In FY 2018, in addition to funding for ARC’s base Area

Development Program, the Commission’s appropriation

included funding for the administration’s Partnerships for

Opportunity and Workforce and Economic Revitalization

(POWER) Initiative, a multi-agency initiative that targets

federal resources to help diversify economies in communities and regions affected by job losses in the coal mining industry; for support of the automotive and aviation

sectors in Southern and South Central Appalachia; and

for efforts to support a broadband deployment program

in Central Appalachia.

One of the key differences between ARC and typical

federal executive agencies and departments is the flexibility given to the states in determining how their allocated funds will be invested. This flexibility exists within a

framework: funds must be invested in counties designated as part of the Appalachian Region; projects must

address one or more of the Commission’s five strategic

investment goals; and a specified amount of the funds

allocated to each state can be used only on projects

that benefit counties and areas the Commission has designated as economically distressed.

ARC holds itself and its local, state, and regional partners

accountable for setting and achieving performance outcomes associated with ARC-supported investments. ARC

measures the effectiveness of investments by tracking

progress on several performance targets. ARC’s strategic

plan sets out annual and five-year outcome targets (see

page 81).

In FY 2018, ARC met or exceeded most of its performance

outcome targets. Results were particularly strong for

investments in workforce training, education, and infrastructure improvements. These investments address the

needs of many communities across Appalachia—especially those hit hard by recent declines in coal-related

industries—to diversify their employment base, enhance

workforce development, and build critical infrastructure

needed to strengthen the Region’s economy.

26 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

FISCAL YEAR 2018 INVESTMENT TARGETS AND RESULTS

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES

20,000 jobs created or retained 26,662 jobs created or retained

22,000 students, workers, and leaders with improvements 34,135 students, workers, and leaders with improvements

22,000 businesses and households with improved 

infrastructure

31,378 businesses and households with improved 

infrastructure

2,500 businesses created or strengthened 2,500 businesses created or strengthened

250 communities with enhanced capacity 562 communities with enhanced capacity
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 27

PERFORMANCE REPORT

Economic

Opportunities

Invest in entrepreneurial 

and business development

strategies that strengthen 

Appalachia’s economy.

Strategic Objectives

1.1 Strengthen entrepreneurialecosystems and support for existing businesses.1.2 Support the startup andgrowth of businesses, particularly intargeted sectors.1.3 Enhance the competitivenessof the Region’s manufacturers.1.4 Promote export strategies toconnect startup and establishedbusinesses with external and globalmarkets.Outcome measure: Number ofjobs created or retained.

Ready 

Workforce

Increase the education, 

knowledge, skills, and health 

of residents to work and 

succeed in Appalachia.

Strategic Objectives

2.1 Develop and support educational programs and institutions toprepare students for post-secondary education and the workforce. 2.2 Support programs that providebasic and soft-skills training to prepare workers for employment.2.3 Develop and support careerspecific education and skills training for students and workers,especially in sectors that are experiencing growth locally and regionally and that provide opportunitiesfor advancement.2.4 Increase local residents’access to STEAM and other skillstraining on state-of-the-art technology and processes across all educational levels.2.5 Improve access to affordable,high-quality health care for workers and their families. 2.6 Use proven public health practices and establish sustainable clinical services to address healthconditions that affect the Region’seconomic competitiveness.2.7 Develop and support sustainable programs that remove barriers to participating in theworkforce.Outcome measure: Number of students, workers, and leaders with

improvements.

Critical 

Infrastructure

Invest in critical infrastructure—especially broadband;

transportation, including the

Appalachian Development

Highway System; and

water/wastewater systems.

Strategic Objectives

3.1 Promote the productive andstrategic use of broadband andother telecommunications infrastructure to increase connectivityand strengthen economic competitiveness.3.2 Ensure that communities haveadequate basic infrastructure toimplement their community andeconomic development objectives.3.3 Support the construction andadaptive reuse of business-development sites and public facilities togenerate economic growth andrevitalize local economies.3.4 Complete the AppalachianDevelopment Highway System(ADHS) and construct local accessroads to strengthen links betweentransportation networks and economic development. 3.5 Invest in intermodal transportation planning and infrastructurethat builds on the ADHS and maximizes the Region’s access todomestic and international markets.Outcome measure: Number ofbusinesses and households withaccess to improved infrastructure.

Natural and 

Cultural Assets

Strengthen Appalachia’s 

community and economic 

development potential

by leveraging the Region’s 

natural and cultural 

heritage assets.

Strategic Objectives

4.1 Preserve and strengthen existing natural assets in support of

economic opportunities that generate local and regional benefits.

4.2 Preserve and strengthen existing cultural assets through strategic

investments that advance local

and regional economic opportunities.

4.3 Support strategic investments

in natural and cultural heritage

resources to advance local economic growth.

4.4 Support preservation and

stewardship of community character to advance local economic

growth.

Outcome measure: Number of

businesses created or strengthened.

Leadership and 

Community Capacity

Build the capacity and skills of

current and next-generation

leaders and organizations to

innovate, collaborate, and

advance community and 

economic development.

Strategic Objectives

4.1 Develop and support robust

inclusive leadership that can

champion and mobilize forwardthinking community improvement. 

4.2 Empower and support nextgeneration leaders and encourage authentic engagement in

local and regional economic and

community development.

4.3 Strengthen the capacity of

community organizations and institutions to articulate and implement a vision for sustainable,

transformative community

change.

4.4 Support visioning, strategic

planning and implementation, and

resident engagement approaches

to foster increased community

resilience and generate positive

economic impacts. 

4.5 Develop and support networks, partnerships, and other

models of collaboration that catalyze public, private, and nonprofit

action for community impact.

Outcome measure: Number of

communities with enhanced

capacity.

STRATEGIC INVESTMENT GOALS AND OBJECTIVES

Investment Goal 1 Investment Goal 

2 Investment Goal 

3 Investment Goal 

4 Investment Goal 

5
PERFORMANCE MEASUREMENT

METHODOLOGY

Overview of ARC’s Performance Measurement System

ARC’s performance measurement system was designed

to accomplish two primary objectives: compliance with

the GPRA in measuring the outcomes of ARC projects,

and creation of a process that allowed for both feedback from grantees and analysis of funded projects, in an

effort to improve programming.

ARC’s performance measurement system has three components: 

• Project data collection and analysis,

• Verification of outcomes, and 

• Independent evaluations.

These three components work together to allow GPRA

reporting and compliance and to help ARC glean lessons

learned from previously funded grants. By structuring the

measurement system in this manner, ARC has made the

GPRA a management tool and a valuable resource in

determining program effectiveness. 

Performance Estimates: Initial Results

Initial results presented in this report are outcome estimates gathered from project applications, as reported

by grantees. Critical data from projects submitted to ARC

for funding are entered into the Commission’s grants

management information system to facilitate monitoring

of projects. Throughout the fiscal year, ARC staff review

performance measurement data to better understand

emerging trends, improve data integrity, and shape policy to improve the ARC program. At the close of each fiscal year, ARC staff review results and prepare the data

for submission to OMB and Congress.

Project Performance Verification: Intermediate Results

The performance verification process, a critical part of

ARC’s GPRA compliance, is designed to confirm project

outcomes after the projects have been completed. In

FY 2018, ARC continued an effort to expand the performance verification process in order to achieve a more

comprehensive sample of projects. Under the process,

project performance is verified for projects that have

been closed for at least two years, in order to capture

more accurate data on performance measures, which

can continue to accrue after a project has been completed. As a general rule, in each fiscal year ARC verifies

the outcomes of 40 to 60 projects. 

The verification performed by ARC staff yields far more

than project outcomes. Grantees are asked a series of

questions aimed at providing insight into why their projects were or were not successful in reaching their stated

outcomes. This feedback allows ARC to better understand the consequences of its programming and make

policy or procedural changes as the need arises. 

In situations where a project failed to meet proposed

goals, ARC staff consider mitigating circumstances and

look for possible trends in an effort to assist other projects

faced with similar challenges. Likewise, when a project

has exceeded proposed goals, ARC staff attempt to

determine why. Analyses from the verification activities

are shared with ARC staff. 

Program Evaluations: Final Results

Independent, external evaluation of ARC initiatives and

sub-programs is a critical component of ARC’s GPRA

compliance. Evaluations confirm both the outcomes and

the overall effectiveness of projects. Evaluations focus on

28 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

PROJECT 

PERFORMANCE

VALIDATION: 

INTERMEDIATE RESULTS

Reported 2 to 3 years

after project close

PERFORMANCE

ESTIMATES: 

INITIAL RESULTS

Collected at project

start, reported 

annually

PROGRAM 

EVALUATIONS: 

FINAL RESULTS

Reported every 

5 to 10 years
the extent to which the projects have achieved, or contributed to the attainment of, their objectives. Particular

emphasis is placed on assessing the utility and validity of

the outcome measures. The findings of these project

evaluations are summarized and made available to state

and local organizations engaged in carrying out projects

under the five general goals in ARC’s strategic plan, and

are published on ARC’s website. Summaries of recent

evaluations are included in this report under each strategic investment goal area.

This report presents outcome targets and results for each

of ARC’s five strategic investment goals, as well as overall

targets for leveraged private investment, matching project funds, and funds directed to distressed counties or

areas.

Annual Performance Targets and Measures 

Each fiscal year, ARC submits to the Office of Management and Budget (OMB) annual performance targets for

projects to be funded in coming years, as required in the

budget submission process. In determining these targets,

ARC develops likely investment scenarios for the 13

Appalachian states, anticipating how each state will

direct ARC funds in addressing the five strategic investment goals. The scenarios are based on state development plans, strategy statements, historical trends, and

communication with the states. ARC uses these scenarios

to project results; however, the states have flexibility in

spending decisions, although all projects are reviewed

and approved by the federal co-chair and must pursue

one of ARC’s five strategic investment goals. The states’

spending flexibility is a critical element of the ARC federal-state partnership but poses challenges in setting performance targets. Each state’s priorities will shift from year

to year, occasionally producing unanticipated results. 

To address reporting requirements, ARC reports results

toward reaching performance targets as stated in the

strategic plan. Although the projects funded by ARC

each year generate many more measures than those

reported for GPRA compliance, the measures reported

relate uniquely to ARC’s five strategic investment goals

(see table on page 27).

It is important to note that some outcome measures cut

across goal areas. To simplify the reporting of these measures, results from each strategic investment goal area are

totaled and reported under the strategic investment goal

that most closely aligns with the outcome measure. For

example, one of ARC’s outcome measures is jobs created or retained. ARC measures results for jobs created or

retained by projects funded under all of the strategic

goals. For clarity, this outcome measure is discussed, and

results from all strategic investment goal areas are

reported, under Strategic Investment Goal 1 “Economic

Opportunities: Invest in entrepreneurial and business

development strategies that strengthen Appalachia’s

economy.”

Before FY 2005, ARC focused on assessing progress

toward reaching outcome performance targets as

described in the Commission’s strategic plan. As a result

of OMB’s 2004 review of the ARC program using the Program Assessment Rating Tool, ARC established measurements for assessing progress toward reaching three

additional performance targets: leveraging private nonproject investments resulting from the completion of ARCfunded projects, leveraging non-ARC project funding

(matching funds), and targeting ARC funds to benefit

distressed counties and areas. Both non-ARC funds used

as a match in projects and non-project leveraged private

investments have been recorded by ARC in the past;

however, in FY 2005 ratios of these funds to ARC funding

were established as annual targets.

Outcome Measures

Strategic Investment Goal One: Economic Opportunities.

The following outcome measures are presented in Goal 1:

The number of jobs created and the number of jobs

retained. 

• “Jobs created” refers to the number of direct hires

(excluding construction) that will result from an ARC

project. (Measured during the project period and up

to three years after the project end date.)

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 29

PERFORMANCE REPORT
• “Jobs retained” refers to the number of jobs that

would have been lost or relocated in the absence of

the ARC project.

These two measures are combined and reported

together as “jobs created or retained.”

Strategic Investment Goal Two: Ready Workforce. The

following outcome measures are presented in Goal 2: The

number of students with improvements, the number of

workers/trainees with improvements, and the number of

leaders with improvements.

• “Students with improvements” refers to the number of

students who, as a result of an ARC-funded project,

either obtain a job in the field for which they were

trained; receive a diploma, certificate, or other

career credential; or successfully complete a course

or unit of study and/or graduate to the next grade

level necessary to continue their education. (Measured during the project period and up to three years

beyond the project end date.)

• “Workers/trainees with improvements” refers to the

number of workers or trainees who, as a result of an

ARC-funded project, develop improved skills that

enable them to obtain employment or enhance their

current employment. Enhancements include higher

pay, a better position, or a certification. (Measured

during the project period and up to three years

beyond the project end date.)

• “Leaders with improvements” refers to the number of

participants in leadership programs who, as a result of

an ARC-funded project, develop improved leadership skills as defined by the project. (Measured during

the project period and up to three years beyond the

project end date.)

These three measures are combined and reported

together as “students, workers, and leaders improved.”

Strategic Investment Goal Three: Critical Infrastructure.

The following outcome measures are presented in Goal 3:

The number of residential (“household”) and non-residential (“business”) customers with new or improved infrastructure.

• “Businesses served” refers to the number of non-residential customers with connections to new infrastructure services—such as water, sewer, natural gas, or

telecommunications service—or non-residential customers with improvements in existing infrastructure

services.

• “Households served” refers to the number of residential customers with connections to new infrastructure

services—such as water, sewer, natural gas or

telecommunications service—or residential customers

with improvements in existing infrastructure services.

These two measures are combined and reported

together as “businesses and households with improved

infrastructure.”

Strategic Investment Goal Four: Natural and Cultural

Assets. The following outcome measures are presented

in Goal 4: The number of businesses created and the

number of businesses strengthened. 

• “Businesses created” refers to the number of new

businesses created as a result of an ARC project. This

measure is used for business development projects

such as entrepreneurship training, value-added agriculture, access to capital, and business incubation

programs (including seed accelerators).

• “Businesses strengthened” refers to the number of

businesses with a measureable improvement as a

result of an ARC project. This measure is used for business development and improvement projects, such

as business technical assistance, market expansion,

tourism development, and value-added agriculture. 

30 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT
These two measures are combined and recorded

together as “businesses created or strengthened.”

Strategic Investment Goal Five: Leadership and Community Capacity. The following outcome measure is

presented in Goal 5: The number of communities with

enhanced capacity. 

• “Communities with enhanced capacity” refers to the

number of communities that have improved ability to

address critical community issues as a result of an

ARC project. This measure is used for projects that

address planning, civic participation, and community

capacity.

This measure is reported as “communities with enhanced

capacity.”

Leverage, Matching, and Distressed Counties Measures 

Leverage Measure: The ratio of leveraged private investment (LPI) to ARC investment for all area development

grants. LPI refers to the dollar amount of private-sector

financial commitments (non-project funds) that result

from an ARC project. (Measured during the project

period and up to three years after the project end date.)

Matching Measure: The ratio of non-ARC to ARC project

investment for all area development grants. This measure

helps illustrate the impact ARC’s flexible grants can have

in the Appalachian Region.

Distressed Counties/Areas Measure: The percentage of

total ARC funds invested in projects that benefit distressed counties or areas. Project funds are included if the

project primarily or substantially benefits distressed counties or areas. 

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 31

PERFORMANCE REPORT
32 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Over the past 50 years, ARC investments, coupled with significant leveraged investments from public- and private-sector partners, have helped improve economic outcomes across the Region. However, work remains to bring the

Appalachian Region to economic parity with the rest of the country. Creating opportunities for local ventures by supporting entrepreneurial and business development in existing and emerging sectors can help communities transform

their economies. To achieve the greatest impact, ARC’s investments in entrepreneurial development will create and

strengthen the ecosystems that provide broad-based support for business development, especially in economically

distressed counties and areas. Investments will also support business development targeted to sectors that connect

and build on local and regional assets, have growth potential, and offer better-quality jobs for the Region’s workers.

ARC’s investments can also encourage renewed innovation and competitiveness in manufacturing, a regional economic mainstay. ARC’s aim is to support businesses that provide products and services to meet growing national and

international demand. ARC will advance all of these efforts in close partnership with federal agencies, the private sector, and regional and national philanthropies.

Action Objectives

1.1 Strengthen entrepreneurial ecosystems and support for existing businesses. 

1.2 Support the startup and growth of businesses, particularly in targeted sectors. 

1.3 Enhance the competitiveness of the Region’s manufacturers. 

1.4 Promote export strategies to connect startup and established businesses with external and global markets. 

Performance Targets and Results

Strategic Investment Goal 1 is aligned with the performance measure “jobs created or retained.” 

Outcome Measures

ARC’s strategic plan describes the major outcome measures for Strategic Investment Goal 1 as the number of jobs created or retained, the number of businesses created or strengthened, and the amount of leveraged private investment.

Because Strategic Investment Goal 1 is most closely aligned with the performance measure “jobs created and

retained,” results for jobs created or retained under all strategic investment goals are reported under this goal. Results

for businesses created or strengthened are reported under Strategic Goal 4. The results for leveraged private investment under all Strategic Investment Goals are reported on page 45. 

STRATEGIC INVESTMENT GOAL 1

Economic Opportunities

Invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy.
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 33

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2018: Exceeded target by 33%. In recent years, greater funding levels have increased ARC’s capacity to

invest, leading to more grants and larger average investments. This has led to a corresponding rise in jobs numbers.

Project Verification Sampling 

In FY 2018, members of ARC’s verification team surveyed eight projects completed in FY 2014 through FY 2015 that had

targets for jobs created/retained to compare estimated and actual results. 

As shown above, the projects surveyed achieved 155% of projected results for jobs created/retained.

Project Evaluation: Final Results

POWER Monitoring and Evaluation

In September 2018, the Appalachian Regional Commission launched a new effort to monitor and evaluate the

impacts of the POWER Initiative to date. POWER (Partnerships for Opportunities and Workforce and Economic Revitalization) is a congressionally funded initiative that targets federal resources to help communities that have been

affected by job losses in coal mining, coal power plant operations, and coal-related supply chain industries due to the

changing economics of America’s energy production. This assessment will encompass approximately 125 POWER

grants funded by ARC and other federal, state, and local partners in fiscal years 2015–2017. POWER grants are organized into four broad development categories: workforce development, broadband and telecommunications, entrepreneurship, and business cluster development. The purpose is to determine the extent to which POWER grantees are

progressing toward their stated performance outputs and outcomes, highlight success stories, flag potential issues or

challenges, and recommend technical assistance and training needs for grantees.

JOBS CREATED OR RETAINED IN FISCAL YEAR 2018

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2018: 20,000 jobs created or retained FY 2018: 26,662 jobs created or retained

JOBS CREATED OR RETAINED IN FISCAL YEARS 2013–2017 

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES

FY 2013: 19,000 jobs created or retained* FY 2013: 19,008 jobs created or retained

FY 2014: 20,000 jobs created or retained FY 2014: 20,056 jobs created or retained

FY 2015: 20,000 jobs created or retained FY 2015: 23,032 jobs created or retained

FY 2016: 20,000 jobs created or retained FY 2016: 18,702 jobs created or retained

FY 2017: 20,000 jobs created or retained FY 2017: 21,341 jobs created or retained

*The decrease in the outcome target in FY 2013 was due to budget cuts mandated by the Budget Control Act of 2011.

Number of Projects 

Surveyed

Projected Number of 

Jobs Created/Retained

Actual Number of 

Jobs Created/Retained

Results

Achieved 

8 337 523 155%
34 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Job Creation and Retention 

In September 2015, the Appalachian Regional Commission issued the report Program Evaluation of the Appalachian

Regional Commission’s Job Creation and Retention Projects, prepared by HDR, Inc., with Jack Faucett Associates, Inc.

The report evaluated 286 job creation and retention projects funded between fiscal years 2004 and 2010, with a total

of $42.5 million in ARC investment. Using data from ARC’s grants management database, as well as 15 in-depth case

studies and an extensive survey of project grantees, the study evaluated the economic development impact of these

projects on Appalachian businesses, households, and participants. The study also outlined key findings and common

themes and provided recommendations for enhancing future programs focused on job creation. Survey responses

from 123 project grantees, whose projects received a total of $20 million in ARC funding, showed that the projects created or retained more than 237,000 jobs, and contributed to the creation of 776 businesses and the retention of 3,427

businesses in the Appalachian Region. In addition, the funding for these 123 projects leveraged $422.7 million in private

non-project investments. Survey respondents also reported that project outcomes often exceeded the initial performance targets.

Entrepreneurship 

In April 2008, the Appalachian Regional Commission issued the report Creating an Entrepreneurial Appalachian

Region: Findings and Lessons from an Evaluation of the ARC’s Entrepreneurship Initiative 1997–2005, prepared by the

Rural Policy Research Institute (RUPRI), the RUPRI Center for Rural Entrepreneurship, EntreWorks Consulting, and RTI International. The report evaluated ARC’s Entrepreneurship Initiative (EI), which invested $43 million during that time span in

projects to stimulate and support entrepreneurship across Appalachia. The evaluation included development of a

metrics framework; analysis of data from ARC’s grants management database, including project outcomes; four site

visits; and interviews with stakeholders, economic development experts, and project grantees. The study found that the

EI projects created 9,156 jobs, retained 3,022 jobs, created 1,787 new businesses, and provided services to 8,242 existing businesses, and were projected to leverage $109.9 million in private investment. Interviewees reported that EI projects raised the profile of entrepreneurship within the Appalachian Region, provided start-up funding for innovative

projects, leveraged additional resources that allowed projects to achieve scale and impact, and facilitated networking and collaboration among practitioners.

Project evaluation reports are available online at www.arc.gov/research. 
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 35

PERFORMANCE REPORT

A healthy, skilled, and ready workforce is a building block for a more prosperous Appalachian Region. Education, particularly postsecondary education, is a key component of the business and entrepreneurial ecosystem and often a primary economic driver. Investments by ARC and its partners aim to connect education, workforce, and business

interests in a seamless system that prepares the Region’s young people to succeed in existing and emerging sectors,

and creates new opportunities for workers transitioning to new employment. These efforts must begin with strong educational programming and institutions, and ensure that all students have the basic skills, as well as the soft skills, needed

for productive employment or entrepreneurship. Particular emphasis will be placed on providing education and training matched to the Region’s current sectors and jobs, while increasing access to advanced skills training for the jobs of

the future. The health status of Appalachia’s residents is also closely tied to the Region’s economic health. A healthy

community has increased prospects for business development, civic entrepreneurship, and quality of life. ARC will

leverage its resources and partner with other public, private, and nonprofit organizations to advocate for and

address—through evidence-based and innovative practices—the challenges posed by poor health conditions, inefficient health-care infrastructure, and other health barriers that keep residents from being active and productive workers.

Action Objectives

2.1 Develop and support educational programs and institutions to prepare students for postsecondary education and

the workforce. 

2.2 Support programs that provide basic and soft-skills training to prepare workers for employment. 

2.3 Develop and support career-specific education and skills training for students and workers, especially in sectors that

are experiencing growth locally and regionally and that provide opportunities for advancement. 

2.4 Increase local residents’ access to science, technology, engineering, arts, and math (STEAM) and other skills training on state-of-the-art technology and processes across all educational levels. 

2.5 Improve access to affordable, high-quality health care for workers and their families. 

2.6 Use proven public health practices and establish sustainable clinical services to address health conditions that

affect the Region’s economic competitiveness. 

2.7 Develop and support sustainable programs that remove barriers to participating in the workforce. 

Performance Targets and Results

Strategic Investment Goal 2 is aligned with the performance measure “students, workers, and leaders with improvements.” 

STRATEGIC INVESTMENT GOAL 2

Ready Workforce

Increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia.
36 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Measure

ARC’s strategic plan describes the major outcome measure for Strategic Investment Goal 2 as the number of students,

workers, and leaders with improvements. Because Strategic Investment Goal 2 is most closely aligned with the performance measure “students, workers, and leaders with improvements,” results for students, workers, and leaders with

improvements under all strategic investment goals are reported under this goal.

Outcome Target and Result

Result for FY 2018: Exceeded target by 55%. The outcome result is likely due to additional funding ARC received for the

POWER Initiative, which emphasized investments in workforce training. 

In addition to the result above, in FY 2018 ARC funded six projects that provided computers or computer equipment

that will benefit 10,535 students and workers, and four projects that will provide new or improved broadband access to

an additional 66,490 students.

Project Verification Sampling

In FY 2018, members of ARC’s verification team surveyed eight projects completed in FY 2014 through FY 2015 that had

targets for students/trainees with improvements to compare estimated and actual results.

As shown above, the projects surveyed achieved 149 percent of projected results for students/trainees with improvements. 

STUDENTS, WORKERS, AND LEADERS WITH IMPROVEMENTS IN FISCAL YEAR 2018

ANNUAL OUTCOME TARGET RESULTS: INITIAL ESTIMATE*

FY 2018: 22,000 students, workers, and leaders with

improvements

FY 2018: 34,135 students, workers, and leaders with

improvements

*Excludes projects that provided computers or computer equipment that will benefit large numbers of students.

STUDENTS, WORKERS, AND LEADERS WITH IMPROVEMENTS IN FISCAL YEARS 2013–2017*

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES**

FY 2013: 19,000 students/trainees with improvements*** FY 2013: 22,749 students/trainees with improvements

FY 2014: 20,000 students/trainees with improvements FY 2014: 24,108 students/trainees with improvements

FY 2015: 20,000 students/trainees with improvements FY 2015: 23,123 students/trainees with improvements 

FY 2016: 22,000 students, workers, and leaders with

improvements*

FY 2016: 46,513 students, workers, and leaders with

improvements*

FY 2017: 22,000 students, workers, and leaders with

improvements*

FY 2017: 30,263 students, workers, and leaders with

improvements*

*Prior to FY 2016, leaders were not included in this performance measure.

**Excludes projects that provided computers or computer equipment that will benefit large numbers of students. . 

***The decrease in the outcome target in FY 2013 was due to budget cuts mandated by the Budget Control Action of 2011.

Number of Projects 

Surveyed

Projected Number of 

Students/Trainees with

Improvements

Actual Number of 

Students/Trainees with

Improvements

Results

Achieved 

8 2,986 4,458 149%
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 37

PERFORMANCE REPORT

Project Evaluation: Final Results

Health

In August 2015, the Appalachian Regional Commission issued the report Program Evaluation of the Appalachian

Regional Commission’s Health Projects, 2004–2010, prepared by the Community and Economic Development Initiative

of Kentucky at the University of Kentucky. The report evaluated health projects funded by ARC between fiscal years

2004 and 2010. During this time period, ARC invested $30.9 million in 202 health projects. The evaluation analyzed data

from ARC’s grants management database, administered an online survey to project grantees, and conducted indepth case studies of 13 projects. The study found that the health projects had met their goals of serving 359,860

patients, 131,464 non-clinical participants, 7,118 students, and 5,056 workers/trainees; and that ARC funding had

helped attract additional government or philanthropic funding. In addition, more than 95 percent of survey respondents said that without ARC funding their project would have been cancelled, downsized, or delayed by more than a

year. The projects contributed to a number of outcomes, including workforce training, health-care provision, public

health promotion, and public policy development. Analysis of data from ARC’s grants management database

showed that on average, ARC’s health projects have made a substantial impact on participants and patients. 

Education and Workforce Development 

In December 2012, the Appalachian Regional Commission issued the report Evaluation of the Appalachian Regional

Commission’s Education and Workforce Development Projects: 2000–2008, prepared by the Westat Corporation, the

Nick J. Rahall II Appalachian Transportation Institute, and the Economic Development Research Group. The report

evaluated 386 education and workforce development projects funded by ARC between 2000 and 2008, with a total

of $65 million in ARC investment. The evaluation included analysis of data from ARC’s grants management database,

grantee interviews, 15 in-depth case studies, and an extensive survey of project grantees. Survey responses showed

that these projects had served more students and worker/trainees than projected (141,037, compared with 77,606)

and substantially more students and workers/trainees were improved than originally projected (41,481, compared with

27,502). Among the students served by ARC projects, benefits included increased vocational and technical skills,

enrollment in a college or postsecondary program, achievement of basic or academic skills in a specific subject, and

achievement of a postsecondary degree, credential, or certification. Among workers/trainees served by ARC projects,

benefits included improved skills in a new area—including vocational and technical skills, and basic or academic skills. 

Project evaluation reports are available online at www.arc.gov/research. 
STRATEGIC INVESTMENT GOAL 3

Critical Infrastructure

Invest in critical infrastructure—especially broadband;

transportation, including the Appalachian Development

Highway System; and water/wastewater systems.

38 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

ARC investments in infrastructure have helped reduce the Region’s isolation, spur economic activity, and improve public health and safety. In order to compete in the global economy, Appalachia must continue to develop and improve

the infrastructure necessary for economic development, including broadband and telecommunications; basic infrastructure, such as water and wastewater systems; diversified energy; housing; and transportation, including the

Appalachian Development Highway System (ADHS). ARC will also support investments in multi-modal transportation

systems that strengthen connections to regional, national, and global markets. ARC infrastructure investments will

address local community needs as well as strategic, innovative approaches to economic development. ARC will provide leadership in helping communities develop long-term plans for effective development and deployment of the

infrastructure needed to support economic competitiveness and quality of life. To create the greatest impact, ARC will

leverage resources and bring together government agencies and the private sector to build the critical infrastructure

needed to strengthen the Region’s economy.

Action Objectives

3.1 Promote the productive and strategic use of broadband and other telecommunications infrastructure to increase

connectivity and strengthen economic competitiveness. 

3.2 Ensure that communities have adequate basic infrastructure to implement their community and economic development objectives. 

3.3 Support the construction and adaptive reuse of business-development sites and public facilities to generate economic growth and revitalize local economies. 

3.4 Complete the Appalachian Development Highway System (ADHS) and construct local access roads to strengthen

links between transportation networks and economic development. 

3.5 Invest in intermodal transportation planning and infrastructure that builds on the ADHS and maximizes the Region’s

access to domestic and international markets. 

Performance Target and Result

Strategic Investment Goal 3 is aligned with the performance measure “businesses and households with access to

improved infrastructure.” 

Outcome Measure

ARC’s strategic plan describes the major outcome measure for Strategic Investment Goal 3 as the number of businesses and households with access to improved infrastructure. 
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 39

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2018: Exceeded target by 43%. In FY 2018, states chose to fund more infrastructure projects than in previous years. In addition to this result, ARC funded water-storage projects in FY 2018 that will serve a total of 7,818 businesses and households.

Project Verification Sampling

In FY 2018, members of ARC’s verification team surveyed four projects completed in FY 2014 through FY 2015 that had

targets for households served to compare estimated and actual results. Verification is for households served with

water/sewer projects (the measure used during the timeframe of these projects).

As shown above, the projects surveyed achieved 115 percent of projected results for households served.

Project Evaluation: Final Results

Economic Analysis Study of the Appalachian Development Highway System (ADHS)

In FY 2017, ARC published a report led by Economic Development Research Group that analyzed the effect of ADHS

development on economic growth in Appalachia, and quantified the future economic benefits and costs of completing the system. The study applies a mix of data and modeling efforts to measure passenger and freight traffic, the costs

of corridor completion, time savings, and other user benefits of the ADHS, and the broader economic development

and trade impacts of the ADHS. The main purpose of the study is to estimate the economic benefits and costs of system and corridor completion to inform stakeholders as they work on funding and constructing the final segments of the

ADHS. The study’s key findings include: 1) Increased economic activity associated with the ADHS system has helped

BUSINESSES AND HOUSEHOLDS SERVED IN FISCAL YEAR 2018

ANNUAL OUTCOME TARGET RESULTS: INITIAL ESTIMATE*

FY 2018: 22,000 businesses and households served FY 2018: 31,378 businesses and households served

*Initial estimates do not include households served by ARC-funded water storage tank construction and improvement projects with large service areas.

BUSINESSES AND HOUSEHOLDS SERVED IN FISCAL YEARS 2013–2017*

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES**

FY 2013: 19,000 households served*** FY 2013: 21,863 households served 

FY 2014: 20,000 households served FY 2014: 23,989 households served

FY 2015: 20,000 households served FY 2015: 25,593 households served

FY 2016: 22,000 businesses and households served* FY 2016: 22,293 businesses and households served*

FY 2017: 22,000 businesses and households served* FY 2017: 46,465 businesses and households served*

*Prior to FY 2016, businesses were not included in this performance measure.

**Initial estimates do not include households served by ARC-funded water storage tank construction and improvement projects with large service areas.

***The decrease in the outcome target in FY 2013 was due to budget cuts mandated by the Budget Control Act of 2011.

Number of Projects 

Surveyed

Projected Number of 

Households Served

Actual Number of 

Households Served

Results

Achieved 

4 1,506 1,732 115%
40 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

create or support more than 168,000 jobs across the 13 Appalachian states, with nearly $7.3 billion of added worker

income annually; 2) ADHS investments made between 1965 and 2015 generated more than $19.6 billion per year of

added business sales in Appalachia, representing over $9 billion of added gross regional product; 3) The ADHS saves

231 million hours of travel time annually. Twenty percent of car vehicle hours saved and 31 percent of freight truck

vehicle hours saved are associated with trips with at least one end located outside the Appalachian states; and 4) As

of 2015, the value of transportation cost savings and productivity gains associated with the ADHS amounts to $10.7 billion annually. Informant interviews were conducted to complete case studies of major corridors and multimodal facilities located on or near corridors to show the connection with intermodal transportation. 

Telecommunications and Technology

In November 2015, the Appalachian Regional Commission issued the report Program Evaluation of the Appalachian

Regional Commission’s Telecommunications and Technology Projects: FY 2004–FY 2010, prepared by RTI International

and independent consultants. The report evaluated 322 telecommunications and technology projects ARC had

funded between fiscal years 2004 and 2010, with $41 million in ARC investments. The evaluation employed a variety of

techniques to conduct the research, including a literature review, a survey of project grantees, and case studies of 18

projects that highlighted elements that helped foster project success. The study found that the ARC projects improved

41,000 households; served over 5,000 businesses; created 2,800 jobs; leveraged over $10 million in private investment;

and served 286,000 patients, 152,000 students, and 22,500 workers. The study found that ARC projects expanded the

capacities of technology-assisted teachers in the Appalachian Region, increased capacity of local institutions to

deliver better services, and bolstered economic vitality. 

Infrastructure and Public Works 

In September 2018, the Appalachian Regional Commission launched a new program evaluation of ARC-funded water

and wastewater infrastructure projects in the Appalachian Region. The evaluation will encompass approximately 385

projects funded from fiscal year 2009 through fiscal year 2016. ARC’s water and wastewater infrastructure projects

include new water and/or wastewater systems that serve residential, commercial, or industrial properties, or some

combination thereof; rehabilitation to existing water and/or wastewater systems; and the construction or rehabilitation

of water storage tanks. The main purpose of the evaluation is to determine the extent to which these projects have

succeeded in achieving ARC’s strategic goals; inform ARC of ways to better encourage innovation as well as develop,

assess, and manage water and wastewater infrastruction projects; and enhance ARC’s ability to document and report

program impacts.

In August 2013, the Appalachian Regional Commission issued the report Program Evaluation of the Appalachian

Regional Commission’s Infrastructure and Public Works Projects, prepared by HDR Decision Economics, Cambridge Systematics Economic Development Research Group, and Mt. Auburn Associates. The evaluation assessed the impact of

811 ARC infrastructure projects funded between fiscal years 2004 and 2010, with a total of $206.4 million in investments.

The study included an analysis of data from ARC’s grants management database, an extensive survey of project

grantees, and case studies of 13 infrastructure projects. Survey responses showed that nearly 27,500 households were

served through the surveyed projects, well above the estimated 13,000, and 5,051 jobs were created, above the estimated 4,181. The case studies documented a wide variety of economic and community benefits, including leveraged

private investment, job creation and retention, and improved infrastructure services to local households and businesses.

The case studies also documented other impacts that have contributed to the local economy and broader community, including increased residential property values, enhanced environmental quality, and improved public health.

Project evaluation reports are available online at www.arc.gov/research. 
Appalachia’s natural and cultural heritage assets are significant building blocks for a more prosperous future. They

contribute to a sense of identity for Appalachians and provide the basis for sustainable, place-based economic development in many current and emerging sectors. Investments in natural and cultural assets can catalyze other economic development activities in the Region, including the growth of entrepreneurial ventures and high-tech

companies, and create an environment that helps attract and retain workers. ARC has an opportunity to promote

community and regional planning that takes a long-term view of local assets and emphasizes the balanced use of

those assets to generate sustainable economic benefits for local communities. ARC will work with partners to leverage

the productive use of these assets in support of existing and emerging economic opportunities throughout the Region.

The restoration and development of natural and cultural assets has the potential to become a critical economic

driver, particularly in economically distressed counties and areas.

Action Objectives

4.1 Preserve and strengthen existing natural assets in support of economic opportunities that generate local and

regional benefits. 

4.2. Preserve and strengthen existing cultural assets through strategic investments that advance local and regional

economic opportunities. 

4.3 Support strategic investments in natural and cultural heritage resources to advance local economic growth. 

4.4. Support preservation and stewardship of community character to advance local economic growth. 

Performance Targets and Results

Strategic Investment Goal 4 is aligned with the performance measure “businesses created or strengthened.” 

Outcome Measures

ARC’s strategic plan describes the major outcome measures for Strategic Investment Goal 4 as the number of businesses created or strengthened, and the number of communities with enhanced capacity. Because Goal 4 is most

closely aligned with the performance target “businesses created or strengthened,” results for new or strengthened

business for projects under all strategic investment goals are reported under this goal. Results for communities with

enhanced capacity are reported under Goal 5.

FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 41

PERFORMANCE REPORT

STRATEGIC INVESTMENT GOAL 4

Natural and Cultural Assets

Strengthen Appalachia’s community and economic development potential by leveraging the Region’s natural and

cultural heritage assets.
42 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2018: Met Target. 

Fiscal Year 2016 was the first year with a performance target for businesses created or strengthened. 

Project Verification Sampling

Fiscal Year 2018 was the third year with a performance target for businesses created or strengthened. Projects with this

measure are not yet due for verification.

Project Evaluation: Final Results

Tourism, Cultural Heritage, and Natural-Asset-Related Projects

In September 2010 the Appalachian Regional Commission issued the report Program Evaluation of ARC’s Tourism, 

Cultural Heritage, and Natural-Asset-Related Projects, prepared by Regional Technology Strategies with Mt. Auburn

Associates and Appalachian State University. The report evaluated a portfolio of 132 ARC tourism, cultural heritage,

and natural-asset-related projects, with a total of $10.8 million in ARC funding. The study used surveys, interviews, and

statistical analysis. The study showed that ARC’s investment in the tourism projects generated 2,588 jobs, with a new job

created for every $4,161 of ARC funding, and that a new business was created for every $23,139 in ARC funding. In

addition, every $.40 invested by ARC in the projects reviewed generated $1.00 in leveraged private investment. Survey

responses indicated that the greatest economic impact came from three main outputs: business assets/revenues, 

public assets/revenues, and employment.

Project evaluation reports are available online at www.arc.gov/research. 

BUSINESSES CREATED OR STRENGTHENED IN FISCAL YEAR 2018

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2018: 2,500 businesses created or strengthened FY 2018: 2,500 businesses created or strengthened

BUSINESSES CREATED OR STRENGTHENED IN FISCAL YEARS 2016–2017

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2016: 2,500 businesses created or strengthened FY 2016: 4,757 businesses created or strengthened

FY 2017: 2,500 businesses created or strengthened FY 2017: 4,474 businesses created or strengthened
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 43

PERFORMANCE REPORT

Community economic development is, at its core, an exercise in effective leadership. The future of the Appalachian

Region depends on both the current and the next generation of leaders. Investing in leadership development programs and activities and providing access to the resources community leaders need to understand their economic

opportunities and the root causes of the challenges they face will help create stronger communities in Appalachia.

To achieve the greatest impact, ARC investments in leadership and community capacity building will aim to help communities create a common vision for local development, and develop and execute an action plan for achieving that

vision. The plans will be based on model practices in engaging residents in the visioning and implementation processes

and will promote effective collaboration and partnerships across geographic and other boundaries. The development

plans that emerge will provide a guide for future investments—from ARC and local, state, federal, and other partners—

to capture new economic opportunities and create positive community change.

Action Objectives

5.1 Develop and support robust inclusive leadership that can champion and mobilize forward-thinking community

improvement. 

5.2. Empower and support next-generation leaders and encourage authentic engagement in local and regional economic and community development. 

5.3 Strengthen the capacity of community organizations and institutions to articulate and implement a vision for sustainable, transformative community change. 

5.4 Support visioning, strategic planning and implementation, and resident engagement approaches to foster

increased community resilience and generate positive economic impacts. 

5.5 Develop and support networks, partnerships, and other models of collaboration that catalyze public, private, and

nonprofit action for community impact. 

Performance Targets and Results

Strategic Investment Goal 5 is aligned with the performance measure “communities with enhanced capacity.” 

Outcome Measures

ARC’s strategic plan describes the major outcome measures for Strategic Investment Goal 5 as the number of leaders

strengthened and the number of communities with enhanced capacity. Results for communities with enhanced

capacity are reported under this goal. Results for leaders strengthened are reported under Goal 2, with students and

workers. 

STRATEGIC INVESTMENT GOAL 5

Leadership and Community Capacity

Build the capacity and skills of current and next-generation

leaders and organizations to innovate, collaborate, and

advance community and economic development.
44 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2018: Exceeded target by 125 percent. The strong result in FY 2018 for this measure is due in part to priorities established for the POWER Initiative.

Fiscal Year 2016 was the first year with a performance target for communities with enhanced capacity. 

Project Verification Sampling

Fiscal Year 2018 was the third year with a performance target for communities with enhanced capacity. Projects with

this measure are not yet due for verification.

Project Evaluation: Final Results

Community Capacity Building

In September 2018, the Appalachian Regional Commission finalized the report Evaluation of the Appalachian Regional

Commission’s Leadership and Community Capacity Projects FY 2008–FY 2015, prepared by the Westat Corporation.

The evaluation encompassed 152 projects representing $14.4 million in investments, and included a wide range of project types, including leadership programs, community and organizational capacity-building projects, downtown revitalization efforts, network and partnership-building projects, strategic planning, and technical assistance. The purpose

was to determine the extent to which this set of projects have succeeded in attaining their economic development

objectives. Through a mix of surveys, site visits and phone interviews, evaluation results suggested that most projects

met or exceeded their own goals, underscoring the effectiveness of their efforts. Project teams met or exceeded

expected project outcomes for the following measures: number of communities improved (91 percent of project

teams using this measure reported meeting or exceeding expected outcomes); number of organizations improved (89

percent of project teams using this measure reported meeting or exceeding expected outcomes); number of programs implemented (82 percent of project teams using this measure reported meeting or exceeding expected outcomes); and number of participants improved (78 percent of project teams using this measure reported meeting or

exceeding expected outcomes). Additionally, the report highlights the sustainability of these set of projects, as survey

findings indicate that many of the projects surveyed have continued to operate beyond the Commission-supported

grant period, and for nearly half of projects for which a survey was completed, respondents reported expanding their

efforts. Finally, the projects highlight the benefit accruing to distressed counties and rural or underserved communities.

Project evaluation reports are available online at www.arc.gov/research. 

COMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2018

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2018: 250 communities with enhanced capacity FY 2018: 562 communities with enhanced capacity

COMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2016–2017

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2016: 250 communities with enhanced capacity FY 2016: 357 communities with enhanced capacity

FY 2017: 250 communities with enhanced capacity FY 2017: 562 communities with enhanced capacity
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 45

PERFORMANCE REPORT

LEVERAGE, MATCHING, AND DISTRESSED COUNTIES/AREAS

PERFORMANCE TARGETS

Leverage Target

The leverage performance target for ARC investments is a ratio of leveraged private investments (LPI) to ARC investments. LPI is the dollar amount of private-sector financial commitments (non-projects funds) that result from an ARC

project, measured during the project period and up to three years after the project end date.

Result for FY 2018: Exceeded target by 98%. Every dollar of ARC funding attracted $11.87 of leveraged private investment (non-project funds). Outcome results typically fluctuate over the years as the states’ investment priorities vary.

Recent, greater funding levels have increased ARC’s capacity to invest, leading to more grants and larger average

investments. The total funding (ARC and matching project funds) is on average higher than in the past and larger projects tend to leverage more private investments.

LEVERAGED PRIVATE INVESTMENT RATIO IN FISCAL YEAR 2018

ANNUAL TARGET RESULT

FY 2018: 6:1 ratio of leveraged private investment to

ARC investment FY 2018: Achieved 12:1 Ratio*

*One large-scale project that had limited ARC participation was not included in this table.

LEVERAGED PRIVATE INVESTMENT RATIO 

IN FISCAL YEARS 2013–2017*

ANNUAL TARGET RESULTS

FY 2013: N/A FY 2013: Achieved 9:1 Ratio

FY 2014: N/A FY 2014: Achieved 13:1 Ratio

FY 2015: N/A FY 2015: Achieved 8:1 Ratio

FY 2016: 6:1 ratio of leveraged private investment to ARC investment FY 2016: Achieved 3:1 Ratio

FY 2017: 6:1 ratio of leveraged private investment to ARC investment FY 2017: Achieved 5:1 Ratio

*Fiscal Year 2016 was the first year with performance targets for leveraged private investment

for all ARC strategic goal areas.
46 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Matching Target

The matching performance target for ARC investments is a ratio of non-ARC investments (non-ARC matching project

funds) to ARC investments. The ratio illustrates the impact ARC’s relatively small, flexible investments can have in the

Appalachian Region. Matching funds include only non-ARC sources of project funds including federal, state, local,

nonprofit, and private project funding.

Result for FY 2018: Met 75% of target. Every dollar of ARC funding attracted $1.50 in matching project funds. The target

was not met in part because of continued emphasis on funding directed to distress. The match rate closely corresponds with funding to distressed counties and areas, as projects in these areas require a lower percentage of matching funds. ARC continues to encourage directing investment to distressed counties and areas, which could lead to a

lower amount of matching funds. 

MATCHING PROJECT FUNDS RATIO IN FISCAL YEAR 2018

ANNUAL TARGET RESULT

FY 2018: 2:1 ratio of matching funds to ARC investment FY 2018: Achieved 2:1 Ratio*

*Ratios are rounded to the nearest whole number.

MATCHING PROJECT FUNDS RATIO 

IN FISCAL YEARS 2013–2017*

ANNUAL TARGET RESULTS**

FY 2013: N/A FY 2013: Achieved 2:1 Ratio

FY 2014: N/A FY 2014: Achieved 2:1 Ratio

FY 2015: N/A FY 2015: Achieved 2:1 Ratio

FY 2016: 2:1 ratio of matching

funds to ARC investment FY 2016: Achieved 2:1 Ratio

FY 2017: 2:1 ratio of matching

funds to ARC investment FY 2017: Achieved 1:1 Ratio

*Fiscal Year 2016 is the first year with performance targets for matching project 

funds for all ARC strategic goal areas.

**Ratios are rounded to the nearest whole number.
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 47

PERFORMANCE REPORT

Distressed Counties/Areas Target

The Distressed Counties/Areas target for ARC investments is the percentage of total ARC funds directed to projects

that benefit distressed counties or areas. Project funds are included if the project primarily or substantially benefits 

distressed counties or areas.

Result for FY 2018: Exceeded target by 14 percentage points. ARC continues to encourage directing investment to 

distressed counties and areas.

PERCENTAGE OF FUNDS TO DISTRESSED COUNTIES/AREAS IN FISCAL YEARS 2013–2017*

ANNUAL TARGETS RESULTS

FY 2013: Direct 50% of ARC funds to distressed 

counties or areas FY 2013: Directed 61% of funds

FY 2014: Direct 50% of ARC funds to distressed 

counties or areas FY 2014: Directed 64% of funds 

FY 2015: Direct 50% of ARC funds to distressed 

counties or areas FY 2015: Directed 72% of funds

FY 2016: Direct 50% of ARC funds to distressed 

counties or areas FY 2016: Directed 79% of funds

FY 2017: Direct 50% of ARC funds to distressed 

counties or areas FY 2017: Directed 73% of funds

*Project funds are included if the project primarily or substantially benefits distressed counties or areas.

PERCENTAGE OF FUNDS TO DISTRESSED COUNTIES/AREAS IN FISCAL YEAR 2018*

ANNUAL TARGET RESULT

FY 2018: Direct 50% of ARC funds to distressed counties or areas FY 2018: Directed 64% of funds

*Project funds are included if the project primarily or substantially benefits distressed counties or areas.
48 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND RESULTS FOR FISCAL YEAR 2018 PROJECTS

ANNUAL PERFORMANCE TARGETS RESULTS: INITIAL ESTIMATES RESULTS ACHIEVED

Outcome Targets

20,000 jobs created or retained 26,662 jobs created or retained Exceeded Target by 33%

22,000 students, workers, and leaders with improvements 34,135 students, workers, and leaders

with improvements Exceeded Target by 55%

22,000 businesses and households with access to improved infrastructure31,378 businesses and households with

access to improved infrastructure Exceeded Target by 43%

2,500 businesses created or strengthened 2,500 businesses created or strengthened Met Target 

250 communities with enhanced capacity 562 communities with enhanced capacity Exceeded Target by 125%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds Achieved a 12:1 ratio Exceeded Target by 98%

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds Achieved a 2:1 ratio* Met 75% of Target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas Directed 64% of funds** Exceeded Target by 14

percentage points

*Ratios are rounded to the nearest whole number.

**Project funds are included if the project primarily or substantially benefits distressed counties or areas.
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 49

PERFORMANCE REPORT

Leveraged Private

Investment

800,000,000

600,000,000

400,000,000

200,000,000

$0

Non-ARC Project Funds 

(Public and Other)

ARC Project Funds

$125,612,000

$188,658,488

Funding and Leveraged Private Investment

for all ARC Projects in Fiscal Year 2018

$1,490,288,000

Non-Project Funds:

Leveraged Private

Investment

Project Funds

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

LEVERAGE, MATCHING, AND DISTRESSED COUNTIES/AREAS SUMMARY

Leveraged private investment $1,490,288,000* 12:1 ratio of leveraged private investment to ARC investment

Non-ARC matching project funds $188,658,488 2:1 ratio of non-ARC project investment to ARC project investment

ARC project funds targeted to distressed counties or areas $80,700,096**

64% of total ARC project funds

directed to projects that benefit distressed counties or areas

*One large-scale project that had limited ARC participation was not included in this table.

**Project funds are included if the project primarily or substantially benefits distressed counties or areas.

Investment Summary for FY 2018 Projects
50 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

MEASURING PROGRESS TOWARD THE ARC VISION 

ARC’s overall vision is that Appalachia is a region of great opportunity that will achieve socioeconomic parity with the

nation. One way to measure the Region’s progress toward this vision is to look at the economic status of Appalachian

counties in comparison with all counties nationwide. 

In order to provide a single unified measure of regional progress and economic change, ARC developed an index to

track improvement over time. Drawing on the three variables ARC uses annually to determine the economic status of

the Region’s counties, staff developed a national composite index of distress. The three variables (three-year annual

unemployment, per-capita market income, and decennial poverty rates) are applied to each county in the nation

and compared with national averages. The resulting values are summed, averaged, and ranked to create four quartiles with an approximately equal number of counties in each group. 

Using this index, ARC can compute annually the number of Appalachian counties in each quartile, as well as an overall regional index value. This can be directly compared with the national index value to measure progress. In addition,

progress can be clearly measured by reductions in the number of Appalachian counties in the worst quartile. As the

figure below shows, the Region continues to have a disproportionately high number of counties with underperforming

economies and a smaller share of counties with strong economies, compared with the nation. 

80

60

40

20

0

Number of Appalachian Counties

by Economic Quartile, Fiscal Year 2018

Quartile 1

(Economically

Strongest)

100

120

140

160

180

Quartile 4 Quartile 3 Quartile 2

(Economically

Weakest)

National

Economic

Parity

Number of Appalachian Counties

199

144

64

13

Economic Quartile

200

220
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 51

PERFORMANCE REPORT

Progress Toward ARC Strategic Plan Performance Goals, Fiscal Years 2016–2020

20,000

40,000

60,000

80,000

100,000

Jobs Created or Retained

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 1: Jobs Created or Retained 

(Cumulative)

Baseline:

October 1, 2015

Actual

Five-Year Performance Target:

100,000 jobs created or retained.

Students/Trainees with Improvements

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 2: Students, Workers, and Leaders

with Improvements (Cumulative) Baseline: October 1, 2015

Five-Year Performance Target:

110,000 students, workers, and

leaders with improvements.

Businesses and Households Served

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 3: Businesses and Households 

Served (Cumulative)

Baseline:

October 1, 2015

Five-Year Performance Target:

110,000 businesses and households

with improved access to infrastructure.

2,000

4,000

6,000

8,000

10,000

Businesses Created or Strengthened

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 4: Businesses Created

or Strengthened (Cumulative) Baseline: October 1, 2015

Five-Year Performance Target:

12,500 businesses created or

strengthened.

Communities with Enhanced Capacity

FY 2016FY 2017FY 2018FY 2019FY 2020

Goal 5: Communities with Enhanced

Capacity (Cumulative)

Baseline:

October 1, 2015

Five-Year Performance Target:

1,250 communities with enhanced

capacity.

12,000

14,000 5-year goal

11,731

120,000

5-year goal

66,705

Actual

20,000

40,000

60,000

80,000

100,000 Actual

120,000 5-year goal

110,911

20,000

40,000

60,000

80,000

100,000 Actual

120,000 5-year goal

100,260

200

400

600

800

1,000

1,200

1,400 5-year goal

1,429 Actual

1,600
52 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

FINANCIAL REPORT

PART III: 

FISCAL YEAR 2018 FINANCIAL REPORT

MESSAGE FROM THE EXECUTIVE DIRECTOR

The executive director of the Appalachian Regional Commission is appointed by the federal co-chair and the governors of

the 13 member states to be the chief executive officer of the organization, a responsibility that includes financial management. ARC recognizes its responsibility to demonstrate to the American public that it exercises proper stewardship of the

public resources entrusted to it. The financial statements in this Performance and Accountability Report fairly present the

financial position of ARC.

I am very pleased to report that Key & Associates, P.C., the independent auditor of ARC’s financial statements for 2018,

has rendered an unmodified opinion about the adequacy of the statements. There were no findings in this fiscal year. The

independent audit was performed in cooperation with the Office of Inspector General (OIG). 

The Commission maintains clearly written financial management guidelines governing accounts, payments, procurement,

administration, and travel policy. The guidelines are provided to all staff and are reviewed at least annually, and are

amended to reflect changes in policy or revised procedures resulting from tests of internal controls.

On behalf of the entire Commission, I pledge a continued commitment to promptly address all financial management

issues that need further attention and to maintain the strengths the Commission has achieved.

Scott T. Hamilton

Executive Director

November 6, 2018
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 53

FINANCIAL REPORT

REPORT OF INDEPENDENT AUDIT
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FINANCIAL REPORT

ments in human capital in FY 2018 included grants for

education and job training programs in areas including

workforce training, dropout prevention, math and science, early childhood education, and health. 

ARC Investment in Research and Development

Research and development investments are expenses

included in net cost of operations that support the search

for new or refined knowledge and ideas and for the

application or use of such knowledge and ideas with the

expectation of maintaining or increasing national economic productive capacity or yielding other future benefits. In FY 2018, ARC invested in applied research through

the following projects: a program evaluation of ARC’s

leadership and community capacity projects; an economic analysis of the coal industry ecosystem in

Appalachia; a study of economic resilience in

Appalachian communities; a study examining disparities

and “bright spots” in health outcomes in the Region; a

study examining trends and strategies in the tourism sector in Appalachia; a report on the entrepreneurial ecosystems in Appalachia; a report on Appalachian “diseases

of despair” ; and a website measuring population health

and documenting disparities in health outcomes in the

Appalachian Region.

REQUIRED SUPPLEMENTARY

STEWARDSHIP INFORMATION

Stewardship Investments

Stewardship investments are substantial investments that

are made by the federal government for the benefit of

the nation but are not physical assets owned by the federal government. Such investments are measured in

terms of expenses incurred for non-federal physical property, human capital, and research and development.

ARC invests in non-federal physical property, human capital, and research and development through its Area

Development Program, which funds projects that support

the goals and objectives set forth in the Commission’s

strategic plan. 

ARC Investment in Non-Federal Physical

Property

Non-federal physical property investments are expenses

included in net cost of operations for the purchase, construction, or major renovation of physical property owned

by state and local governments. In FY 2018, ARC’s investment in non-federal physical property included grants for

water and wastewater system construction and improvements; broadband expansion; utilities installation; and

access road construction. 

ARC Investment in Human Capital

Human capital investments are expenses included in net

cost of operations for education and training programs

that are intended to increase or maintain national economic productive capacity and that produce outputs

and outcomes that provide evidence of maintaining or

increasing national productive capacity. ARC’s investARC Investment in Non-Federal Physical Property

Fiscal Year 2014 $31,413,574

Fiscal Year 2015 $34,823,339

Fiscal Year 2016 $34,522,482

Fiscal Year 2017 $32,100,717

Fiscal Year 2018 $36,962,756

ARC Investment in Human Capital

Fiscal Year 2014 $8,060,378

Fiscal Year 2015 $6,813,073

Fiscal Year 2016 $11,504,662

Fiscal Year 2017 $21,077,501

Fiscal Year 2018 $29,925,465

ARC Investment in Research and Development

Fiscal Year 2014 $553,462

Fiscal Year 2015 $449,590

Fiscal Year 2016 $237,000

Fiscal Year 2017 $588,310

Fiscal Year 2018 $633,418
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 81

OTHER INFORMATION

IMPROPER PAYMENTS

Improper Payments Information Act of

2002, as Amended 

The IPIA, as amended, and OMB implementing guidance, OMB Circular A-123, Appendix C, “Requirements

for Effective Measurement and Remediation of Improper

Payments,” require agencies to review all programs and

activities they administer to identify those that are susceptible to significant improper payments. OMB defines

significant improper payments as gross annual improper

payments (i.e., the total amount of overpayments plus

underpayments) in a program exceeding (1) both 2.5

percent of program outlays and $10 million of all program

or activity payments made during the fiscal year

reported, or (2) $100 million, regardless of the improper

payment percentage of total program outlays. ARC’s

top-down approach for assessing the risk of significant

improper payments allows the reporting of results by its

one mission-aligned program—Area Development.

In accordance with the IPIA, as amended, and OMB

implementing guidance, ARC assessed its program and

activities for susceptibility to significant improper payments. Based on the results of the risk assessment for the

period ended September 30, 2018, the Commission concluded that the program was not susceptible to significant improper payments.

PART IV: 

OTHER INFORMATION

Annual 

Performance Target

5-Year 

Performance Target

Businesses created and/or strengthened 2,500 12,500

Jobs created and/or retained 20,000 100,000

Ratio of leveraged private investment 6 to 1 6 to 1

Students, workers, and leaders improved 22,000 110,000

Communities with enhanced capacity 250 1,250

Businesses and households with access to

improved infrastructure 22,000 110,000

Annual 

Performance Target

5-Year 

Performance Target

ARC PERFORMANCE TARGETS, 2016–2020

Targets are based on level annual appropriations of $70 million.
82 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

OTHER INFORMATION
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 83

OTHER INFORMATION
84 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

OTHER INFORMATION
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 85

OTHER INFORMATION

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT

ASSURANCES

The following tables provide a summarized report on ARC’s financial statement audit and its management assurances.

For more details, see the auditor’s report on pages 53–79 and ARC’s management assurances on pages 22–24.

Material Weaknesses Beginning 

Balance New Resolved Consolidated EndingBalance

Total Material Weaknesses 0 0 0 0 0

Statement of Assurance: Unmodified

Effectiveness of Internal Control over Operations—FMFIA 2

Non-Conformance Beginning 

Balance New Resolved Consolidated EndingBalance

Total Non-Conformance 0 0 0 0 0

Statement of Assurance: Systems conform with financial management system requirements

Conformance with Financial Management System Requirements–FMFIA 4

Agency Auditor

Overall Substantial Compliance

1. System Requirements No noncompliance noted

2. Federal Accounting Standards No noncompliance noted

3. United States Standard General Ledger at Transaction Level No noncompliance noted

Compliance with Federal Management Improvement Act

Material Weaknesses Beginning 

Balance New Resolved Consolidated EndingBalance

Total Material Weaknesses 0 0 0 0 0

Audit Opinion: Unmodified

Restatement: No

Summary of Financial Statement Audit

Material Weaknesses Beginning 

Balance New Resolved Consolidated EndingBalance

Total Material Weaknesses 0 0 0 0 0

Statement of Assurance: Unmodified

Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting—Federal Managers’ Financial Integrity Act of 1982 

(FMFIA, Section 2)

Category 2-3 Years >3-5 Years >5 Years

Number of Grants/Cooperative Agreements with Zero Dollar Balances 0 0 0

Number of Grants/Cooperative Agreements with Undisbursed Balances 0 0 0

Total Amount of Undisbursed Balances 0 0 0

Grants Oversight and New Efficiency Act Requirements

In FY 2018, ARC had no federal grant or cooperative agreement awards and balances for which closeout had

not occurred but for which the period of performance had elapsed by more than two years.
86 APPALACHIAN REGIONAL COMMISSION / FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT

OTHER INFORMATION
FY 2018 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 87

OTHER INFORMATION

Authorization to reproduce this report in whole or in part is granted.

While permission to reprint this publication is not necessary, the citation should 

be: Appalachian Regional Commission, Appalachian Regional Commission 

Performance and Accountability Report, Fiscal Year 2018. Washington, D.C., 

January 2019.

This report is available on ARC’s Web site at www.arc.gov/publications.

To order copies of the report, contact:

APPALACHIAN REGIONAL COMMISSION

1666 Connecticut Avenue, NW, Suite 700

Washington, DC 20009-1068

202.884.7700 | info@arc.gov

www.arc.gov