PERFORMANCE AND ACCOUNTABILITY REPORT

Appalachian Regional Commission

Fiscal Year 2017
September 30, 2017

 Federal Co-Chair States’ Co-Chair

 Earl F. Gohl Governor Tom Wolf

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 Ted Townsend

Kentucky Ohio Virginia

Governor Matt Bevin Governor John Kasich Governor Terry McAuliffe

Sandy Dunahoo Jason Wilson William C. Shelton

Maryland Pennsylvania West Virginia

Governor Larry Hogan Governor Tom Wolf Governor Jim Justice

Wendi W. Peters Sheri Collins Mary Jo Thompson

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 2017 Program Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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

Summary of Achievements in Fiscal Year 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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

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

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

PART II: FISCAL YEAR 2017 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 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Progress toward ARC Strategic Plan Performance Goals, 

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

PART III: FISCAL YEAR 2017 FINANCIAL REPORT

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

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

Required Supplementary Stewardship Information . . . . . . . . . . . . . . . . . . . . . . . . . 79

PART IV: OTHER INFORMATION 

ARC Performance Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Improper Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Inspector General’s Summary of Management and Performance Challenges . . . 81

Summary of Financial Statement Audit and Management Assurances . . . . . . . . 84
2 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

Message from Federal Co-Chair Earl F. Gohl and

2017 States’ Co-Chair Governor Tom Wolf

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

(FY) 2017. 

For FY 2017, the Commission approved $152.3 million in funding for 591 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 2017 grant funds attracted an additional $206.1 million in other project funding, an investment ratio of more than

1 to 1, and $735.3 million in non-project leveraged private investment, a ratio of 5 to 1. The projects funded during the year

will create or retain an estimated 21,341 jobs and train an estimated 30,263 students, workers, and leaders in new skills. 

In working toward its strategic goals in FY 2017, 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 the Region’s health disparities.

This report includes information on the Commission’s program actions and financial management during FY 2017. We are

pleased to report that ARC’s independent auditor, Key & Associates, P.C., has pronounced an unqualified 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 as 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,

Earl F. Gohl Tom Wolf

ARC Federal Co-Chair 2017 States’ Co-Chair

Governor of Pennsylvania

November 2, 2017

MESSAGE FROM THE CO-CHAIRS
FISCAL YEAR 2017 PROGRAM

HIGHLIGHTS

I

n FY 2017, bolstered by its largest federal appropriation

in more than three decades, ARC pursued the goals of

its 2016–2020 strategic plan 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.

ARC adopted a five-year strategic investment plan in

November 2015 to address emerging economic opportunities in the Appalachian Region in the years ahead. All

of the Commission’s activities in FY 2017 advanced at

least one of the plan’s five strategic investment goals:

creating economic opportunities, developing a ready

workforce, investing in critical infrastructure, leveraging

natural and cultural assets, and bolstering leadership and

community capacity.

Goal 1: Creating Economic Opportunities

Invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy.

POWER Initiative

ARC’s FY 2017 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 two years, ARC has awarded $94 million in 114 total investments to help coal-impacted

communities in 250 Appalachian counties diversify and

grow their economies. These investments will create or

retain almost 8,800 jobs, leverage an additional $210 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 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.

Angel Fund Formation in Appalachia

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 2017, six new angel funds had

raised $8 million capital and made 26 investments, which

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

ARC POWER-funded initiative with RAIN Source Capital,

the Appalachian Angel Investor Network project, is also

FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART I: 

MANAGEMENT’S DISCUSSION AND ANALYSIS
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: Charleston,

West Virginia; Southwest Virginia; southwestern Pennsylvania; and New York’s Southern Tier West.

Reclaimed Mine Lands

During the fiscal year, ARC committed to turning

reclaimed mine lands and brownfields from liabilities to

economic assets. One example is the work of the West

Virginia Regional Technology Park Corporation in South

Charleston, in the Green Mining Model Business Program.

The project brings 17 public and private partners together

to operate a system of linked activities designed to use

reclaimed soils on inactive surface mining land to grow

value-added crops; extract high-value products from

these crops and market/sell them; and leverage land

reclamation, crop cultivation, and chemical extraction

and processing activities to provide displaced coal and

energy industry workers across 13 West Virginia counties

with training, employment, and entrepreneurial opportunities. The West Virginia Regional Technology Park will provide access to its multi-million-dollar chemical

manufacturing facilities, resident chemical separation

experts, and other partners who will provide knowledge

and assistance on product development, manufacturing,

and marketing. In addition to creating 250 new jobs, the

project is expected to improve seven businesses and spur

the creation of six new businesses. West Virginia has over

300,000 acres of reclaimed surface mine sites. The soil

engineering, land reclamation, and proof of concept

that high-value crops can be cultivated on these sites will

generate a highly replicable opportunity to turn other

reclaimed surface mine lands into valuable assets for

economic development and business creation.

Entrepreneurship Skills and Business Incubation

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. Recently, the town of Unicoi in east Tennessee celebrated the opening of the Mountain Harvest Kitchen, a

shared-use processing kitchen and food business incubator. With support from an ARC POWER grant, Mountain

Harvest Kitchen offers multiple workstations with commercial grade equipment, food safety certification courses,

workshops, and networking opportunities designed to

educate and empower food entrepreneurs. Mountain

Harvest Kitchen is located in a distressed area of Unicoi

County, which is designated economically at-risk by ARC,

and its operations will have a substantial impact by providing assistance to nearly 90 food and farm-based businesses in the area. In North Carolina, through an

investment from ARC, Haywood Community College is

cultivating a makerspace environment through a new

advanced manufacturing business incubator. Local residents, students, and entrepreneurs can receive highquality training and access to light and advanced

manufacturing equipment used by small and mediumsized employers. This access will help users to improve

employability through skill development and allow for the

testing of entrepreneurial designs using the available

equipment. 

Goal 2: Developing a Ready Workforce

Increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia.

Building a High-Tech Workforce

Displaced coal miners are transitioning into the tech

economy through training programs that teach computer coding and programming. One such POWER project, the ARCODE Initiative, is combining the efforts of two

programs offering training in software engineering and

development. In Pennsylvania and West Virginia, Washington Greene County Job Training Agency, Inc., is working with several technology firms to prepare a workforce

skilled in information technology and provide job opportunities when the training is complete. With a supply of

certified tech talent, program partners will be able to hire

locally and have a ready workforce for short-term, laborintensive projects. CentralApp and its partners, the

EdVenture Group and the West Virginia Simulated Workplace, are creating a network of Salesforce-certified

experts who can support customers worldwide. Upon

completion, students who obtain certifications will have

4 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
access to the CentralApp Talent Exchange and will

obtain work from its customer base of thousands of

active customers, systems integrators, and consultancies.

In the short term, local employers will be able to provide

work opportunities to program graduates. Long-term, a

skilled, trained technical workforce will be created and

will be a resource in recruiting additional partners and

businesses to the region. In the first phase of the ARCODE

Initiative, the program anticipates enrolling 95 students

and will work with ten companies.

Building on Promising Sectors

Projects across the Region are tapping into the job

opportunities in emerging and growing economic industries, like drone technology. The Kentucky–West Virginia

Regional Drone Technology Workforce Project, an FY

2017 POWER project, is a joint effort between Maysville

Community and Technical College, in Maysville, Kentucky, and Southern West Virginia Community and Technical College, in Williamson, West Virginia. Both colleges

are connecting to ongoing work in the drone sector by

Mountain Empire Community College in Southwest Virginia, which was awarded a separate FY 2016 POWER

grant to develop an emerging drone industry cluster by

training a skilled drone-ready workforce. The three colleges form a geographical and regional triangle, the

Drone Tech Triangle, which can serve coal mining and

utility industries common to the region. The Kentucky–

West Virginia Regional Drone Technology Workforce Project extends the initiative begun in Southwest Virginia to

serve Kentucky and West Virginia, connecting the

regional colleges, leveraging expanding economic

opportunities, and providing a trained and skilled workforce for the growing drone economy in the region. These

economic development opportunities require specific

workforce training related to operating drones and drone

sensors for close-up inspections of fixed structures like

power lines, utility poles, and cell phone towers. In Virginia, the City of Covington and Alleghany County are

working to complete a design, marketing, and business

plan for a new Alleghany Highlands Drone Zone, a business accelerator program and facility to support new

enterprises in this promising industry sector.

Healthy Workforce

A healthy workforce is key to the economic success of

the Region. In fiscal year 2017, ARC completed research

with key partners and consultants looking at the Region’s

health challenges. The study Health Disparities in

Appalachia shows that while Appalachia has improved

on many health measures over the past few decades,

there are stark health disparities in the Region in comparison with the rest of the country. A second study, Diseases

of Despair, found that people of or near working age in

Appalachia experience higher and faster-rising mortality

rates from alcohol and drug overdose, suicide, and alcoholic liver disease/cirrhosis of the liver, compared with the

rest of the nation. To help combat the devastating

impacts of addiction, in FY 2017 ARC supported FAHE in

financing three community facilities projects through its

Community Lending Fund. These facilities will support

local residents' recovery from addiction, provide needed

health services, and create job opportunities in coalimpacted communities. 

Advanced Manufacturing

In FY 2017, ARC invested in building on its southern automotive workforce development effort to support,

strengthen, and grow the automotive and aviation sectors in Southern and South Central Appalachia. West Alabama Works (WAW)/ Region 3 Workforce Development

Council was awarded $1.5 million in POWER funding for

the WAW 2020 Initiative to deliver job training services to

fill critical regional workforce needs in the rapidly growing

automotive and advanced manufacturing industries.

WAW has partnered with Mercedes Benz to develop a

specific recruitment and training plan for positions in

mechatronics and industrial maintenance at its facilities

in the area. In addition, the project will create a “popup” Community Resource Center in Brookwood, Alabama, to serve as a hub for community engagement;

renovate the Brookwood Technical High School and

Training Center to offer credentialing services to students

at four regional high schools for employment in hospitality

and culinary arts, healthcare, and advanced manufacturing; and, through a partnership with Energy Alabama

and the Alabama Automotive Manufacturers Association, develop business-specific plans that will speed the

FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS
adoption of sustainable energy in the state’s automotive

industry. The project will train 1,000 displaced workers and

credential 500 students over the life of the award. 

Goal 3: Investing in Critical Infrastructure

Invest in critical infrastructure—especially broadband;

transportation, including the Appalachian Development

Highway System; and water/wastewater systems. 

Expanding Access to Broadband

ARC invested $28.9 million in 48 telecommunications and

technology projects in FY 2017. 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. During the fiscal year, ARC continued its commitment to help rural Appalachian communities expand

broadband service. One such example is the Somerset

County, Pennsylvania, Fiber Extension Project, which is

using ARC funds to install 22 miles of fiber optic cable on

existing pole lines that will allow a variety of business, residential, medical, and educational customers in underserved Somerset County access to broadband services.

The project will serve 1,094 businesses and 3,962 households, and will act as an economic and tourism driver in

the county.

Strengthening the Region’s Physical Infrastructure

ARC invested $60.1 million during FY 2017 in 150 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 2017 infrastructure grant investments were

matched by $103.2 million in other public investments,

leveraged $551.4 million in non-project private investment, and served 42,320 households and 4,145 businesses. Physical infrastructure programs have been

among the primary generators of new jobs in the Region.

As a result of ARC’s FY 2017 infrastructure investments, an

estimated 5,746 jobs will be created or retained. 

Two projects supported during the fiscal year illustrate the

broad impact of infrastructure investments. In Claiborne

County, Tennessee, work was completed on phase one

of a project to build a water line providing safe, reliable

drinking water to low-income households in the economically distressed Little Sycamore community, which had

previously relied on private wells and springs that were

unreliable and testing showed it was often contaminated

with bacteria and chemicals. With additional FY 2017

funding from ARC, a second phase will extend the water

line approximately 2.3 miles through the community to

serve additional low-income households in the area. In

Iuka, Mississippi, ARC is supporting the renovation of an

existing manufacturing facility to allow an aerospace

manufacturing company to expand its current operations, creating 30 new full-time jobs within two years. The

company has committed to investing at least $6.9 million

in Tishomingo County, which is currently classified as an

economically at-risk county.

Building and Renovating Affordable Housing

To address the lack of good-quality, affordable housing

for low-income families in eastern Kentucky, ARC continues to invest in improving housing conditions to stabilize

communities and build a thriving workforce through support for the Kentucky Housing Corporation, one of the

nation's most successful state-supported housing agencies. FY 2017 funding for the long-running Kentucky

Appalachian Housing Program will go toward the construction or renovation of approximately 70 quality housing units for low-income families in distressed counties of

Appalachian Kentucky. 

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.

Supporting the Appalachian Food Economy

Supporting the Appalachian Food Economy

With a POWER grant to the Natural Capital Investment

Fund, ARC continued its support for the work of the Cen6 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
tral Appalachian Network (CAN) and its partners for their

work building a strong local food economy across multiple states. Building on their local food systems development work, these groups are targeting production

capacity in the local food system by providing small and

medium-sized farms, farm workers, value-added processors, and food businesses with technical assistance, training, capacity building, equipment and facilities capital

improvements, market development, supply chain intermediation, and peer learning. Members of CAN include

the Appalachian Center for Economic Networks,

Appalachian Sustainable Development, the Coalfield

Development Corporation, the Community Farm

Alliance, and Rural Action. The project is expected to

serve and improve 37 existing businesses, create 26 new

businesses, create 100 jobs, and leverage $4 million in

additional private investment across 58 counties in Kentucky, Ohio, Tennessee, Virginia, and West Virginia.

Appalachia’s apiculture industry, including production of

honey and other bee products, is a growing part of the

Region’s increasingly robust food economy. Honey in particular offers a significant market opportunity for producers. According to the U.S. Department of Agriculture,

Americans consume about 540 million pounds of honey a

year, about 1 pound annually per person. However,

because of a shortage of beekeepers, the U.S. currently

imports more than 80 percent of its honey. One FY 2017

POWER project, the Sustainable Jobs Initiative—a partnership between Appalachian Headwaters, the Canaan

Valley Institute, Green Forests Work, and the West Virginia

Queen Producers—is working to change those statistics

through an effort to build bee yards, train beekeepers,

and develop a honey processing line. 

Investing in Downtowns, Trails, and Gateways

ARC invested in a range of downtown revitalization projects across the Region in FY 2017 to help communities

strengthen their local economies and improve quality of

life. In addition, to capitalize on the expanding recreational tourism industry in the Region, the Commission

invested in projects creating and extending hiking, biking,

and motorsports trails. In Pickens, South Carolina, ARC

funded the Doodle Park Trailhead Park project to redevelop a city-owned rail depot into a community recreation and exercise area featuring an ADA-compliant

accessible playground and accessible restrooms, outdoor exercise equipment, and an open-air farmers market with outdoor seating, with access to the 7.5-mile

Doodle Trail. The trail is heavily used by residents and visitors for walking, running, skating, and cycling. Once completed, the new park could attract and accommodate

over 100,000 visitors annually to visit the trail and other

parts of historic downtown Pickens. 

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.

Cultivating Future Leaders of Appalachia

The West Virginia Community Development Hub is spearheading the cultivation and development of the next

generation of leaders in Appalachia. This ARC-funded

project will support two intensive leadership development

training efforts and “new economy roadtrips” for emerging West Virginia leaders to study replicable economic

development initiatives across the country, as well as a

four-day visioning retreat in West Virginia for up to 20 participants. With ARC support, the Hub has launched the

32-member Future Leaders of West Virginia Cohort to

build relationships and a support network among a

diverse group of leaders.

Hubs for Workforce and Leadership Development

Appalachia’s community colleges can offer valuable

leadership in local economic development efforts. The

FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS
Community Colleges of Appalachia (CCA) is a voluntary

association of public community colleges serving the

common interests of member colleges and their communities through programs and services responsive to the

unique cultural, geographic, and economic development challenges facing the Region. With ARC support,

CCA provides venues for the colleges to meet and share

their learning. In FY 2017, CCA, in partnership with the

American Association of Community Colleges, also

administered additional funds to assist member colleges,

especially those in ARC-designated economically distressed and/or at-risk counties, in attending the association's annual Workforce Development Institute.

Additionally, this fiscal year, CCA offered scholarships for

up to 10 faculty or staff members from 10 CCA member

colleges to enroll in one of three graduate programs at

East Tennessee State University, including the Community

College Leadership Graduate Certificate, the Doctorate

in Education program, and the Master's in Education in

Student Personnel.

Appalachian Teaching Project

To help build student leadership capacity, in FY 2017ARC

again funded the Appalachian Teaching Project (ATP),

led by the Consortium of Appalachian Centers and Institutes, a coalition of 16 Appalachian-studies organizations.

The ATP program teaches real-world leadership skills, taking students out of the classroom and into their communities. Thirteen institutions from 11 Appalachian states

participated in the 2017 program, which was administered by the Center for Appalachian Studies and Services

at East Tennessee State University. The primary focus of

the ATP is to support community-based research and collaboration among emerging scholars that leads to a

more competitive economic future for Appalachian

communities. Student research addresses one or more of

the ARC strategic goals, and focuses on ways to overcome endemic challenges facing local communities,

preferably in economically distressed counties. Each participating institution must offer a for-credit course in which

students address the question: "How do we build on community assets to shape a positive future for Appalachia?"

Students prepare a final written report containing their

research findings, and formally present their findings to

ARC staff and invited guests at a two-day conference in

the Washington, D.C., area. The Appalachian Teaching

Project has a strong track record of strengthening student

leadership and research skills by partnering with local

communities and addressing critical community issues. 

ORAU Summer STEM

In fiscal year 2017, 26 high school students and 26 high

school teachers, representing each of the 13

Appalachian states, participated in a two-week, residential, hands-on learning program delivered with ARC support through Oak Ridge Associated Universities.

Additionally, 26 middle school students participated in a

one-week science academy. Program activities included

lab time at the renowned Oak Ridge National Laboratory

(ORNL) 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.

Taken together, these FY 2017 activities furthered progress

toward ARC’s strategic investment goals and helped

strengthen the Appalachian Region’s economy. 

8 APPALACHIAN REGIONAL COMMISSION / FY 2017 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 2017 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 59 $16,016.0 $429.2 $11,927.7 $28,372.9

Business Development 84 30,880.2 5,324.2 37,767.7 73,972.1

Civic Entrepreneurship 14 2,645.0 0.0 1,063.7 3,708.7

Community Development 130 50,355.2 21,845.3 68,300.1 140,500.6

Education and Workforce Development 110 36,168.8 168.9 40,760.1 77,097.8

Health 28 5,468.7 7,878.6 2,759.0 16,106.3

Research and Evaluation 5 542.8 0.0 7.0 549.7

State and Local Development 

District Planning and Administration 161 10,262.2 0.0 7,906.0 18,168.2

Totals 591 $152,339.0 $35,646.1 $170,491.3 $358,476.4

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 2017 

(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 2017.)

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 2017 area development activities was $152 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 2017 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 2017, there were 11 federal positions at the Commission.

FY 2017 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 51 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 initiative in 2015, ARC has awarded

$94 million to help coal-impacted communities in 250

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.

• Sustainable Communities, a partnership with the Economic Development Administration, the U.S. Departments of Agriculture and Transportation, the U.S.

Environmental Protection Agency, the Centers for Disease Control and Prevention, and the Delta Regional

Authority in programs that help rural communities

develop strategies to grow their economies and revitalize downtown neighborhoods. Initiatives include Local

Foods, Local Places, a program to create more livable

places by promoting local food economies; Healthy

Places for Healthy People, a program that helps communities use centrally located health care facilities to

promote community development and active living;

and Cool & Connected, created to help communities

use broadband service to create walkable, connected, economically successful neighborhoods. 

• 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, 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.

• Appalachia Funders Network, 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

12 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
partners are targeting job-creation efforts in promising

areas of opportunity such as valued-added 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. 

• 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

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 three-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 Opiod 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 million to these

multi-agency research initiatives.

• Raising Awareness of Substance Abuse in Appalachia,

a partnership with the CDC in an effort to address substance abuse issues in the Region, including research

to improve the use of social media and other communications approaches to help increase public awareness of substance abuse in Appalachia.

• 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 2017, across all investment areas, each dollar of

ARC funding was matched by $1.35 in non-ARC project

funding (public and private) and leveraged $4.83 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 18 state agencies in the Appalachian region to administer construction-related projects. These partners include the Georgia

Environmental Finance Authority, the Kentucky Housing

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

Agency and the West Virginia Department of Transportation’s Division of Highways. 

FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 13

MANAGEMENT’S DISCUSSION AND ANALYSIS
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. 

ARC Strategic Plan

FY 2017 was ARC’s second 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 2017 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 2017, ARC

received an appropriation of $152.0 million for area

development activities and allocated by formula $91.9

million, 60.1 percent of the appropriation, to the states.

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

nonhighway grants are approved by a governor and by

the federal co-chair.

ARC’s FY 2017 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. 

14 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

NEW YORK

GEORGIA

SOUTH CAROLINA

NORTH CAROLINA

ALABAMA

MISSISSIPPI

TENNESSEE

INDIANA OHIO PENNSYLVANIA

MARYLAND

DE

WESTVIRGINIA

NJ

ILLINOIS

WISCONSIN

MICHIGAN

VIRGINIA

KENTUCKY

0 100 50

Miles

NEW YORK

GEORGIA

SOUTH CAROLINA

NORTH CAROLINA

ALABAMA

MISSISSIPPI

TENNESSEE

INDIANA OHIO PENNSYLVANIA

MARYLAND

DE

WESTVIRGINIA

NJ

ILLINOIS

WISCONSIN

MICHIGAN

VIRGINIA

KENTUCKY

0 100 50

Miles

Data Source: U.S. Census Bureau, American Community Survey, 5-Year Estimates, 2011–2015

87 High-Poverty Counties

2011–2015

Data Source: Office of Economic Opportunity data from U.S. Dept. of Agriculture, Economic Research Service, 1960

295 High-Poverty Counties

1960

(Counties with Poverty Rates At Least 1.5 Times the U.S. Average)

High-Poverty Counties in the Appalachian Region
• Attainment counties are those that rank in the best 10

percent of the nation’s counties.

In FY 2017, 84 counties were designated distressed, 114

were designated at-risk, 210 were designated transitional,

10 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.

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.

Regional Initiatives

The ARC partners identify a limited number of strategic

objectives as regional initiatives. These initiatives support

ARC’s strategic plan by coordinating a concerted effort

by the 13 Appalachian states and the federal government to address an area of critical importance. The initiatives can support and promote innovation in a particular

goal area or focus on a sector of unique opportunity or

underperformance. In addition to providing special support for distressed counties, ARC has identified regional

initiatives on emerging opportunities, telecommunications, and export promotion. 

ARC’s Emerging Opportunities initiative helps communities identify and strategically invest in promising economic opportunities in areas such as health care, energy,

advanced manufacturing, and asset-based development, including food systems and tourism. Areas of focus

under this initiative in FY 2017 included support for entrepreneurship education; business incubation and technical support programs; community leadership; and access

to capital. In FY 2017 the formation of new angel investment funds was underway in North Carolina and Mississippi; Appalachian Community Capital, a central bank

for development lenders, cumulatively disbursed more

than $13 million in investments in the region; and additional investment was raised for the Just Transition Fund,

which is designed to supplement the multi-agency Partnerships for Opportunity and Workforce and Economic

Revitalization Initiative—an effort to assist communities

and workers impacted by changes in the coal industry

and power sector. Additionally, work to build an

Appalachian Impact Investment Fund was initiated by

ARC and more than 20 philanthropic and community

partners.

ARC’s Telecommunications initiative is helping increase

the use of advanced telecommunications and broadband throughout the Appalachian Region’s unserved

and underserved areas. In 2017, ARC continued its effort

to expand the use of advanced telecommunications

throughout the Region. ARC supported fiber and wireless

broadband deployment projects in several states and

helped support downtown Wi-Fi projects in many of the

Region’s smaller communities. With the continuation of a

special broadband allocation, ARC was able to fund

projects designated to help distressed communities in

Central Appalachia that have been negatively

impacted by the downturn in the coal industry. ARC also

continued support of telemedicine and technologyrelated workforce development projects and assistance

to increase computer usage and Internet access in rural

school systems.

ARC’s Export initiative works to help small and mediumsized Appalachian enterprises, many of which are

located in rural settings around the Region, successfully

export their products, services, and expertise to markets

throughout the world. The initiative is coordinated

through ARC’s Export Trade Advisory Council, which

includes representatives from the international trade

offices of the 13 Appalachian states, the U. S. Commercial Service, and ARC’s local development districts. In 

FY 2017, “Appalachia USA” export delegations, featuring

54 of the Region’s businesses and organizations, traveled

to the China Global Wood Trade Conference in

Chengdu, China, and to the multi-sector Trade Winds

2017 in Bucharest, Romania. In addition, ARC worked

closely with the U. S. Commercial Service to highlight the

Appalachian Region at the 2017 Select USA Investment

16 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

County Economic Status in Appalachia, Fiscal Year 2017

(Effective October 1, 2016 through September 30, 2017)

The Appalachian Regional Commission uses an index-based county 

economic classification system to identify and monitor the economic 

status of Appalachian counties. See the reverse side for a description of 

each economic level.

Map Created: March 2016

Data Sources:

Unemployment data: U.S. Bureau of Labor Statistics, LAUS, 2012–2014

Income data: U.S. Bureau of Economic Analysis, REIS, 2014

Poverty data: U.S. Census Bureau, American Community Survey, 2010–2014

0 100 50

Miles

GEORGIA

ALABAMA

MISSISSIPPI

SOUTH

CAROLINA

NORTH CAROLINA

VIRGINIA

WEST

VIRGINIA

KENTUCKY

OHIO ILLINOIS INDIANA

WISCONSIN

MICHIGAN

DE

NJ PENNSYLVANIA

MARYLAND

NEW YORK

TENNESSEE

Distressed (84)

At-Risk (114)

Transitional (210)

Competitive (10)

County Economic Levels

Attainment (2)
Conference, which attracted 2,500 visitors from around

the world, to pursue opportunities to expand foreign

direct investment in the United States.

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 $208.5 million in 2,656 loans, resulting in 95,049 jobs

created or retained and leveraging $1.5 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 2017, 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 2017, a total of 2,597.6 miles, or 84.1 percent, of the 3,090 miles authorized for the ADHS were

complete; 199.5 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

specific 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 efficiently, and to provide high-quality research

for the general public and research specialists. ARC also

funds project evaluations by outside researchers or con18 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
sultants to assess whether Commission-funded projects

have made a measurable difference in specific 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 Web site at www.arc.gov.

Research completed or under way in FY 2017 includes:

• A study examining disparities and “bright spots” in

health outcomes in the Region

• A study examining the impact of completing the

Appalachian Development Highway System

• A study on documenting and strengthening the

entrepreneurial ecosystem in Appalachia

• An economic analysis of the coal industry ecosystem

• A study of economic resilience in Appalachian communities

• A report on Appalachian diseases of despair

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

• A study examining the capacity of rail systems in

Appalachia

• A study examining trends and strategies in the tourism

sector in Appalachia

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: 

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

Community Survey, over the 2011–2015 period (which

includes years of economic downturn and recovery),

17.1 percent of Appalachian residents lived below

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

15.5 percent. The mean income of Appalachian

households was $60,525, just 80 percent of the U.S.

average of $75,558. 

• 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 324 Appalachian counties, fewer than

one in five residents age 25 and over were graduates

of a four-year college or university.

• Between 2011 and 2016, coal mining employment in

Central Appalachia decreased 63 percent—21,000

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

• Manufacturing employment has declined at a faster

rate than the national trend in every Appalachian

subregion except Central Appalachia. In SouthCentral Appalachia, manufacturing employment

fell 43 percent between 2000 and 2010 and is projected to decline an additional 2 percent between

2010 and 2020. 

• During the 2007–2009 recession, the Region lost more

than 800,000 jobs, and as of 2013 had gained back

only half of those (a little more than 400,000).

• Research indicates that rates of all-cause mortality,

cancer, heart disease, obesity, and diabetes in

Appalachia exceed the national average. 

• 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,

that requires a special emphasis on helping the people of

Appalachia become a globally competitive workforce.

FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS
20 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND RESULTS FOR FISCAL YEAR 2017 PROJECTS

ANNUAL PERFORMANCE TARGETS RESULTS: INITIAL ESTIMATES RESULTS ACHIEVED

Outcome Targets

20,000 jobs created or retained 21,341 jobs created or retained Exceeded Target by 7%

22,000 students, workers, and leaders with improvements 30,263 students, workers, and leaders

with improvements Exceeded Target by 38%

22,000 businesses and households with access to improved infrastructure46,465 businesses and households with

access to improved infrastructure Exceeded Target by 111%

2,500 businesses created or strengthened 4,474 businesses created or strengthened Exceeded Target by 79%

250 communities with enhanced capacity 510 communities with enhanced capacity Exceeded Target by 104%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds Achieved a 5:1 ratio Met 80% of Target 

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds Achieved a 1:1 ratio Met 68% of Target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas Directed 73% of funds* Exceeded Target by 23 

percentage points

*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 2017 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

9,231

120,000

5-year goal

40,043

Actual

20,000

40,000

60,000

80,000

100,000

Actual

120,000 5-year goal

76,776

20,000

40,000

60,000

80,000

100,000

Actual

120,000 5-year goal

68,882

200

400

600

800

1,000

1,200

1,400 5-year goal

867

Actual
FINANCIAL MANAGEMENT 

Financial Management System

In FY 2017 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 2017 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, 2017, 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 2017 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, 2017, 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 2017, the OIG

issued 26 reports, including 15 grant audits, a financial

statement audit, and 10 program-related evaluations.

Evaluations included the status of older grants, performance measures, grant end-dates, and approvals. The

dollar value of grants and payments reviewed during

FY 2017 was approximately $10 million, and results

included $1 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 two

reports remained open pending implementation actions.

Office of Inspector General reports to Congress, including

semi-annual reports, and OIG contact information 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, 2017, 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, 2017, totaled $372.3 million, versus $305.9 million in FY 2016. The change was due to an

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

the Treasury. Liabilities equaled $35.0 million in FY 2017

versus $11.8 million in FY 2016. The increase was due to

increases in liabilities for advances and prepayments,

and accounts payable. The U.S. Treasury held 88.6 percent of ARC’s assets. In addition, 7.3 percent, or $27.3 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

$2.0 million to three federal agencies for the purpose of

servicing grants. Remaining assets are cash and

advances to grantees.

The net position increased from $294.1 million in FY 2016 to

$337.2 million in FY 2017. FY 2017 liabilities included $31.4

million in payments due to grantees, $853,662 of accrued

salary and benefits, and $2.8 million in cash and

advances from federal and non-federal sources.

The net cost of operations for FY 2017 totaled $109.1 million, compared with $71.6 million in FY 2016. ARC receives

most of its resources from congressional appropriations,

which totaled $152.0 million in FY 2017. In addition, ARC

received $4.1 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 $84.2 million. 

ARC incurred obligations of $162.7 million in FY 2017 and

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

$264.5 million. Of FY 2017 obligations, $152.3 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 23

PERFORMANCE REPORT
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 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Statement of Assurance

On the basis of ARC’s comprehensive internal control

program during FY 2017, 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, 2017, 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, 2017, were operating effectively and no material weaknesses were

found in the design or operation of the controls.

Earl F. Gohl

ARC Federal Co-Chair

November 2, 2017
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 2017. 

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 2017 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 25

PERFORMANCE REPORT

PART II: 

FISCAL YEAR 2017 PERFORMANCE REPORT
Project Funding

ARC funds approximately 450 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 2017, 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 80).

In FY 2017, ARC met or exceeded most of its performance

outcome targets. Results were particularly strong for

investments in business creation and support, workforce

training, education, and infrastructure improvements.

These investments address the critical need 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 invest in entrepreneurial strategies for

long-term economic growth.

26 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

FISCAL YEAR 2016 INVESTMENT TARGETS AND RESULTS

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES

20,000 jobs created or retained 21,341 jobs created or retained

22,000 students, workers, and leaders with improvements 30,263 students, workers, and leaders with improvements

22,000 businesses and households with improved 

infrastructure

46,465 businesses and households with improved 

infrastructure

2,500 businesses created or strengthened 4,474 businesses created or strengthened

250 communities with enhanced capacity 510 communities with enhanced capacity
FY 2017 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 2017, 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 2017 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 2017 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 31

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32 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 33

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Outcome Target and Result

Result for FY 2017: Exceeded target by 7%. 

Project Verification Sampling 

In FY 2017, members of ARC’s verification team surveyed 19 projects completed in FY 2012 through FY 2015 that had

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

As shown above, the projects surveyed achieved 111% of projected results for jobs created/retained.

Project Evaluation: Final Results

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

JOBS CREATED OR RETAINED IN FISCAL YEAR 2017

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

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

JOBS CREATED OR RETAINED IN FISCAL YEARS 2012–2016 

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES

FY 2012: 20,000 jobs created or retained FY 2012: 20,112 jobs created or retained 

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

*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 

19 4,968 5,500 111%
34 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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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 http://www.arc.gov/research/. 
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 35

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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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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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 2017: Exceeded target by 38%. 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 2017 ARC funded eight projects that provided computers or computer equipment

that will benefit 8,126 students; one project providing approximately 20,000 students with access to Microsoft software;

and one project that will train teachers in a STEM program that will benefit an additional 20,000 students over 3 years.

Project Verification Sampling

In FY 2017, members of ARC’s verification team surveyed 13 projects completed in FY 2012 through FY 2015 that had targets for students/trainees with improvements to compare estimated and actual results.

As shown above, the projects surveyed achieved 248 percent of projected results for students/trainees with improvements. 

STUDENTS, WORKERS, AND LEADERS WITH IMPROVEMENTS IN FISCAL YEAR 2017

ANNUAL OUTCOME TARGET RESULTS: INITIAL ESTIMATE*

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

improvements

FY 2017: 30,263 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 2012–2016*

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES**

FY 2012: 20,000 students/trainees with improvements FY 2012: 20,315 students/trainees with improvements

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*

*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 

13 3,695 9,163 248%
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 37

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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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 39

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2017: Exceeded target by 111%. In FY 2017, states chose to fund more infrastructure projects than in previous years. In addition to this result, ARC funded water-storage projects in FY 2017 that will serve a total of 25,350 businesses and households.

Project Verification Sampling

In FY 2017, members of ARC’s verification team surveyed 9 projects completed in FY 2012 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 112 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

BUSINESSES AND HOUSEHOLDS SERVED IN FISCAL YEAR 2017

ANNUAL OUTCOME TARGET RESULTS: INITIAL ESTIMATE*

FY 2017: 22,000 businesses and households served FY 2017: 46,465 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 2012–2016*

ANNUAL OUTCOME TARGETS RESULTS: INITIAL ESTIMATES**

FY 2012: 20,000 households served FY 2012: 19,708 households served

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*

*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 

9 19,695 21,969 112%
40 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

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

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 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 2017 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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Outcome Target and Result

Result for FY 2017: Exceeded Target by 79 percent. The strong result in FY 2017 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 businesses created or strengthened. 

Project Verification Sampling

Fiscal Year 2017 was the second 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 2017

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2017: 2,500 businesses created or strengthened FY 2017: 4,474 businesses created or strengthened

BUSINESSES CREATED OR STRENGTHENED IN FISCAL YEAR 2016

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2016: 2,500 businesses created or strengthened FY 2016: 4,757 businesses created or strengthened
FY 2017 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 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Target and Result

Result for FY 2017: Exceeded target by 104 percent. The strong result in FY 2017 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 2017 was the second 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 FY 2017, a team from Westat undertook a program evaluation of ARC’s leadership and community capacity projects. The evaluation will encompass approximately 135 projects funded from fiscal year 2008 through fiscal year 2015.

ARC’s leadership and community capacity projects include a wide range of project types, including adult and youth

leadership programs, community and organizational capacity-building projects, downtown revitalization efforts, network and partnership-building projects, strategic planning for local communities, and technical assistance. Investments

in these projects are targeted to meet the leadership or capacity-building needs of groups of individuals, organizations, and/or the community at large. The Commission’s purpose in conducting this evaluation was to determine the

extent to which leadership and community capacity projects have succeeded in attaining the projects’ objectives. A

final report will be available in FY 2018.

In July 2004, the Appalachian Regional Commission issued the report Evaluation of the Appalachian Regional Commission’s Community Capacity-Building Projects, prepared by the Westat Corporation. The purpose of the evaluation was

to assess factors associated with successful capacity-building projects and to recommend a range of performance

measures that could be used to document the impact of successful initiatives. One hundred projects were examined

in the study, all of which were funded by ARC between 1995 and 2003, with total ARC funding of approximately $7 million. The report’s evaluation includes both quantitative and qualitative findings on outcomes, based on documentary

evidence, interviews, and case studies; and incorporated lessons learned about community capacity building. Most

(70 percent) of the 179 outcomes proposed by interviewed project grantees were successfully achieved. Many projects benefited organizations by increasing collaboration and the sharing of ideas and strategies for community develCOMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2017

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2017: 250 communities with enhanced capacity FY 2017: 510 communities with enhanced capacity

COMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2016

ANNUAL OUTCOME TARGET RESULT: INITIAL ESTIMATE

FY 2016: 250 communities with enhanced capacity FY 2016: 357 communities with enhanced capacity
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 45

PERFORMANCE REPORT

opment, and by enhancing their efficiency and effectiveness, as well as their stability and growth. Projects also benefited communities more broadly by improving strategic planning, enhancing the sense of community self-reliance and

pride, increasing civic and political participation, and improving infrastructure and educational opportunities.

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

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 2017: Met 80 percent of target. Every $1 of ARC funding attraced $4.83 of leveraged private investment

(non-project funds). Outcome results typically fluctuate over the years as the states’ investment priorities vary. A lower

ratio of leveraged private investment in FY 2017 could reflect a continued emphasis by the states on critical needs in

entrepreneurship, workforce development, and broadband infrastructure improvements, all of which are critical foundations for economic development but do not typically leverage large amounts of private investment.

LEVERAGED PRIVATE INVESTMENT RATIO IN FISCAL YEAR 2017

ANNUAL TARGET RESULT

FY 2017: 6:1 ratio of leveraged private investment to

ARC investment FY 2017: Achieved 5:1 Ratio*

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

LEVERAGED PRIVATE INVESTMENT RATIO 

IN FISCAL YEARS 2012–2016*

ANNUAL TARGET RESULTS

FY 2012: N/A FY 2012: Achieved 4:1 Ratio

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

*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 2017 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 2017: Met 68% of target. Every dollar of ARC funding attracted $1.35 in matching project funds. The target

was not met in part because POWER priorities emphasized funding for distressed counties and areas, which requires a

lower percentage of matching funds.

MATCHING PROJECT FUNDS RATIO IN FISCAL YEAR 2017

ANNUAL TARGET RESULT

FY 2017: 2:1 ratio of matching funds to ARC investment FY 2017: Achieved 1:1 Ratio

MATCHING PROJECT FUNDS RATIO 

IN FISCAL YEARS 2012–2016*

ANNUAL TARGET RESULTS

FY 2012: N/A FY 2012: Achieved 2:1 Ratio

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

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

funds for all ARC strategic goal areas.
FY 2017 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 2017: Exceeded target by 23 percentage points. The percentage of ARC funds directed to distressed

counties or areas has steadily increased over the last several years. In addition, ARC’s POWER Initiative funding targets

coal-impacted communities, which are often located in economically distressed counties.

PERCENTAGE OF FUNDS TO DISTRESSED COUNTIES/AREAS IN FISCAL YEARS 2012–2016*

ANNUAL TARGETS RESULTS

FY 2012: Direct 50% of ARC funds to distressed 

counties or areas FY 2012: Directed 57% of funds

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

*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 2017*

ANNUAL TARGET RESULT

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.
48 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND RESULTS FOR FISCAL YEAR 2017 PROJECTS

ANNUAL PERFORMANCE TARGETS RESULTS: INITIAL ESTIMATES RESULTS ACHIEVED

Outcome Targets

20,000 jobs created or retained 21,341 jobs created or retained Exceeded Target by 7%

22,000 students, workers, and leaders with improvements 30,263 students, workers, and leaders

with improvements Exceeded Target by 38%

22,000 businesses and households with access to improved infrastructure46,465 businesses and households with

access to improved infrastructure Exceeded Target by 111%

2,500 businesses created or strengthened 4,474 businesses created or strengthened Exceeded Target by 79%

250 communities with enhanced capacity 510 communities with enhanced capacity Exceeded Target by 104%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds Achieved a 5:1 ratio Met 80% of Target 

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds Achieved a 1:1 ratio Met 68% of Target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas Directed 73% of funds* Exceeded Target by 23 

percentage points

*Project funds are included if the project primarily or substantially benefits distressed counties or areas.
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 49

PERFORMANCE REPORT

Leveraged Private

Investment

400,000,000

300,000,000

200,000,000

100,00,000

$0

Non-ARC Project Funds 

(Public and Other)

ARC Project Funds

$152,338,975

$206,137,397

Funding and Leveraged Private Investment

for all ARC Projects in Fiscal Year 2017

$735,264,437

Non-Project Funds:

Leveraged Private

Investment

Project Funds

500,000,000

600,000,000

700,000,000

800,000,000

LEVERAGE, MATCHING, AND DISTRESSED COUNTIES/AREAS SUMMARY

for All ARC Nonhighway Projects

Fiscal Year 2017

Leveraged private investment $735,264,437* 5:1 ratio of leveraged private investment to ARC investment

Non-ARC matching project funds $206,137,397 1:1 ratio of non-ARC project investment to ARC project investment

ARC project funds targeted to distressed counties or areas $110,574,629**

73% of total ARC project funds

directed to projects that benefit distressed counties or areas

*Two large-scale projects that had limited ARC participation were not included in this table.

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

Investment Summary for FY 2017 Projects
50 APPALACHIAN REGIONAL COMMISSION / FY 2017 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 2017

Quartile 1

(Economically

Strongest)

100

120

140

160

180

Quartile 4 Quartile 3 Quartile 2

(Economically

Weakest)

National

Economic

Parity

Number of Appalachian Counties

198

151

59

12

Economic Quartile

200

220
FY 2017 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

9,231

120,000

5-year goal

40,043

Actual

20,000

40,000

60,000

80,000

100,000

Actual

120,000 5-year goal

76,776

20,000

40,000

60,000

80,000

100,000

Actual

120,000 5-year goal

68,882

200

400

600

800

1,000

1,200

1,400 5-year goal

867

Actual
52 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

FINANCIAL REPORT

PART III: 

FISCAL YEAR 2017 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 2017,

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 2, 2017
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FINANCIAL REPORT

REPORT OF INDEPENDENT AUDIT
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FINANCIAL REPORT

ments in human capital in FY 2017 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 2017, ARC invested in applied research through

the following projects: a program evaluation of ARC’s

leadership and community capacity projects; a study

examining the capacity of rail systems in Appalachia; an

economic analysis of the coal industry ecosystem in

Appalachia; a study of economic resilience in

Appalachian communities; a report on Appalachian Diseases of Despair; the development of best practices for

case study communities; a report on the entrepreneurial

ecosystems in Appalachia; and a study examining stateand county-level socioeconomic data for the 13

Appalachian states.

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 2017, ARC’s investment in non-federal physical property included grants for

water and sewer system construction and improvements;

storm sewer construction; 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 2013 $41,265,515

Fiscal Year 2014 $31,413,574

Fiscal Year 2015 $34,823,339

Fiscal Year 2016 $34,522,482

Fiscal Year 2017 $32,100,717

ARC Investment in Human Capital

Fiscal Year 2013 $8,634,520

Fiscal Year 2014 $8,060,378

Fiscal Year 2015 $6,813,073

Fiscal Year 2016 $11,504,662

Fiscal Year 2017 $21,077,501

ARC Investment in Research and Development

Fiscal Year 2013 $422,764

Fiscal Year 2014 $553,462

Fiscal Year 2015 $449,590

Fiscal Year 2016 $237,000

Fiscal Year 2017 $588,310
80 APPALACHIAN REGIONAL COMMISSION / FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT

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, 2017, 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.
FY 2017 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 81

OTHER INFORMATION
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OTHER INFORMATION
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OTHER INFORMATION
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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 53–78 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 2017, 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.

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 2017. Washington, D.C., 

January 2018.

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