PERFORMANCE AND ACCOUNTABILITY REPORT

Appalachian Regional Commission

Fiscal Year 2019
September 30, 2019

 Federal Co-Chair States’ Co-Chair

 Tim Thomas Governor Roy Cooper

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 Brian Kemp Governor Roy Cooper Governor Bill Lee

Christopher Nunn Jim McCleskey Brooxie Carlton

Kentucky Ohio Virginia

Governor Matt Bevin Governor Mike DeWine Governor Ralph Northam

Sandy Dunahoo John Carey Erik Johnston

Maryland Pennsylvania West Virginia

Governor Larry Hogan Governor Tom Wolf Governor Jim Justice

Wendi W. Peters Sheri Collins Jennifer Ferrell

Mississippi

Governor Phil Bryant

Trip Polles 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 EORGIA

A L A B A M A

S O U T H

MISSISSIPPI

HART

GEORGIA

ALABAMA

TENNESSEE

DELAWARE

KENTUCKY

OHIO

WISCONSIN

NEW JERSEY

VIRGINIA

NORTH CAROLINA

SOUTH CAROLINA

ILLINOIS INDIANA

MICHIGAN

NEW YORK

MARYLAND PENNSYLVANIA

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 2019 Program Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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

Summary of Achievements in Fiscal Year 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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

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

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

PART II: FISCAL YEAR 2019 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 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Progress Toward ARC Strategic Plan Performance Goals, 

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

PART III: FISCAL YEAR 2019 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

Message from Federal Co-Chair Tim Thomas and

2019 States’ Co-Chair Governor Roy Cooper

We are pleased to present the Appalachian Regional Commission’s (ARC or the Commission) Performance and Accountability

Report for fiscal year (FY) 2019. 

For FY 2019, the Commission approved $176.8 million in funding for 482 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 Appalachian Region’s (the Region) 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 2019 grant funds attracted an additional $246.8 million in other project funding, an investment ratio of 1 to 1, and

$542.7 million in non-project leveraged private investment, a ratio of 3 to 1. The projects funded during this fiscal year will

create or retain an estimated 17,282 jobs and train an estimated 51,204 students, workers, and leaders in new skills. 

In working toward its strategic goals in FY 2019, 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, including re-entry into the workforce of individuals with

substance abuse disorders; and bolster infrastructure needed to spur development in economically distressed counties,

including broadband and basic infrastructure such as water and wastewater systems.

This report includes information on the Commission’s program actions and financial management during FY 2019. We are

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

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

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

entrusted to it. This report is based on data that is as reliable and comprehensive as possible. Congress and the American

people can also be assured that the financial controls in place at the Commission reasonably meet the purposes of the Federal

Managers’ Financial Integrity Act of 1982. 

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

socioeconomic parity with the nation. 

Sincerely,

Tim Thomas Roy Cooper

ARC Federal Co-Chairman 2019 States’ Co-Chairman

Governor of North Carolina

January 14, 2020

MESSAGE FROM THE CO-CHAIRS
FISCAL YEAR 2019 PROGRAM

HIGHLIGHTS

I

n FY 2019, all of ARC’s activities advanced at least one

of the five goals of its 2016–2020 strategic plan:

creating economic opportunities, developing a ready

workforce, investing in critical infrastructure, leveraging

natural and cultural assets, and bolstering leadership and

community capacity. These goals were pursued through

the Commission’s regular program of economic and

community development; a special emphasis on

strengthening and diversifying the economy of coalimpacted communities, including through the POWER

(Partnerships for Opportunity and Workforce and

Economic Revitalization) Initiative; and congressionally

directed programs focusing on broadband and basic

infrastructure, as well as workforce development in the

automotive and aviation sectors.

Goal 1: Creating Economic Opportunities

Invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy.

POWER Initiative

ARC’s FY 2019 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 four years, ARC has awarded

over $190 million in 239 total investments to help coalimpacted communities in 326 Appalachian counties

diversify and grow their economies. These investments will

create or retain more than 23,000 jobs, leverage an

additional $811 million in investment, and prepare

thousands of workers and students with globally competitive skills and opportunities in the Region's manufacturing,

technology, entrepreneurship, agriculture, and other

emerging sectors. The awards funded a wide range of

activities in the Region, targeted at building a competitive workforce, enhancing access to and use of

broadband services, fostering entrepreneurial activities,

and developing industry clusters in communities.

Opportunity Zones in Appalachia

Qualified Opportunity Zones are economically-distressed

communities where new investments, under certain

conditions, may be eligible for preferential tax treatment.

This can help bring new investments into previously undercapitalized areas. As Appalachia is home to 737

Opportunity Zones, or 8.5 percent of the country’s total,

ARC is actively working with communities to leverage

Opportunity Zone designations, and ARC's Federal CoChair serves on President Trump’s White House

Opportunity and Revitalization Council to better coordinate federal resources to these areas. Two of

Appalachia’s designated Opportunity Zones are along

the Oostanaula River in Rome, Georgia. The City of

Rome, using ARC support, is performing needed water

infrastructure upgrades in these zones. This will help the

Rome Downtown Development Authority, the RomeFloyd Chamber of Commerce, and surrounding property

and business owners make the area shovel-ready for

major development, attract capital, and create jobs. In

Kentucky, there are Opportunity Zone tracts in every one

of the state’s 54 Appalachian counties. The Kentucky

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

PART I: 

MANAGEMENT’S DISCUSSION AND ANALYSIS
Cabinet for Economic Development (KCED) has created

an online dashboard for potential Opportunity Zone

investors. With ARC assistance, KCED will expand this

resource to engage marketing, site and project development, project financing, and other professionals to work

closely with local leaders to identify and cultivate

additional Opportunity Zone investment prospects to help

communities better leverage Opportunity Zone investment incentives.

Entrepreneurship and Access to Capital

Locally owned businesses are important drivers of the

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

strong ecosystem that encourages and supports entrepreneurship and local business development. In FY 2019,

ARC funds supported the Groundswell Center Farm

Business Incubator Project, a nonprofit organization

sponsored by Cornell University, that operates an

incubator farm in Tompkins County, New York.

Groundswell provides technical assistance and training in

business and farm development through access to land,

infrastructure, equipment, supplies, mentoring,

networking, and one-to-one guidance. The ARC grant will

help the center purchase equipment to better assist

beginning farmers in becoming viable business operators. 

The access to capital in low-income areas is an impediment to growing local businesses. One ARC grant

addressing this gap is the Northwest Georgia Small

Business Development Initiative. Through this investment,

Access to Capital for Entrepreneurs (ACE) will provide

capital and business advisory services to small business

owners seeking to start and expand successful enterprises. ACE will offer loans to small business owners and

provide business development services to ensure that

borrowers have the financial knowledge necessary to

start and grow successful businesses and repay their

loans. It is anticipated that approximately 24 businesses

will successfully complete the pre-loan development

process and receive capital. In addition, the project is

expected to leverage more than $1.6 million of private

investment.

Goal 2: Developing a Ready Workforce

Increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia.

Workforce Development and Education

ARC is committed to investing in community and

technical colleges throughout the Region, which are

working to prepare highly skilled workers for new hightech jobs. Two projects funded in FY 2019 illustrate this

commitment. The Cybersecurity Education Hub at

Mississippi State University (MSU) will use ARC funding to

purchase equipment and cloud-based platforms to

expand distance learning for students (grades 8–12),

teachers, and the emerging workforce throughout the

Appalachian counties in Mississippi. The cyber education

currently provided by MSU for teachers and students and

for the Mississippi Coding Academy Golden Triangle

(MCA-GT) campus will be scaled to provide access to

public school districts, individuals seeking training, and

companies within the ARC Mississippi counties to train

their current workforce. 

In Maryland, ARC funds will help Allegany County equip a

newly acquired building in Cumberland to function as a

state-of-the-art training facility for advanced manufacturing and other sectors. It will also include a business

startup center and a makerspace, a space dedicated to

creative design of new physical or digital products. The

Allegany College of Maryland Continuing Education

Industrial Manufacturing program will be the primary

tenant of the facility, providing workforce training in

machining, welding, and industrial maintenance. The

college’s annual training capacity will increase from 39

trainees to 68. In addition, the facility will have four offices

to house new businesses. Classes for the community will

be offered in the makerspace, and incubator services

such as business plan development and coaching by the

Small Business Development Center staff will be available

to support the startup businesses.

Recovery Ecosystems for a Healthy Workforce 

As the nation’s substance abuse crisis continues to disproportionately impact Appalachia’s workforce, ARC is

supporting efforts throughout the Region to save lives and

4 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
strengthen communities by investing in recovery ecosystems. A recovery ecosystem includes support services

along with workforce training and employment opportunities to help people with substance use disorders

achieve long-term recovery and enter the workforce. It is

a series of connected interventions that leads to employment for participants and ultimately serves to strengthen

communities throughout the Region. November to April

2019, ARC hosted a series of public Recovery-to-Work

listening sessions to better understand the impact that the

substance abuse crisis is having on economic and

workforce opportunities across the Region, and to

explore how communities currently engage in substance

abuse treatment and recovery programs, job placement

strategies, employment opportunities, and other

wraparound services. In May, ARC formed the ARC

Substance Abuse Advisory Council to offer additional

guidance and recommendations in regards to how ARC

can support the recovery ecosystem. The Council

presented their recommendations to ARC in August.

Two projects funded by ARC in FY 2019 illustrate how ARC

can invest in improving the health of its workforce.

Reintegrate Appalachia is a job creation and workforce

development project designed for those recovering from

substance use disorder. A collaboration between West

Virginia Sober Living, Coalfield Development Corporation,

and employer partners, Reintegrate Appalachia creates

jobs, provides job placement, and offers the comprehensive support needed for West Virginians recovering from

substance use disorder to sustain their recovery and

obtain job-related skills necessary for obtaining and

maintaining employment. The program expects that at

least 40 adults will obtain full-time employment and 24 will

still be enrolled in the program and working towards that

goal at the end of the project period. 

In Kentucky, the Eastern Kentucky Addiction Recovery

and Training (eKART) program will provide training,

supportive services, and employment opportunities for

individuals affected by substance use disorder. The

project will be implemented by the Eastern Kentucky

Concentrated Employment Program, Inc. (EKCEP). EKCEP

will teach regional businesses how to provide a

supportive environment for employees in recovery,

increasing the opportunities for work-based training and

apprenticeships while also partnering with treatment

providers to identify and recruit recovering individuals

appropriate for those opportunities. Coaches will help

ensure recovering employees’ success, providing support

and guidance to workers and assisting employers in

responding productively to problems that arise. 

Goal 3: Investing in Critical Infrastructure

Invest in critical infrastructure—especially broadband;

transportation, including the Appalachian Development

Highway System; and water/wastewater systems. 

Critical Infrastructure

ARC invested $92.0 million during FY 2019 in 166 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 2019 infrastructure grant investments were

matched by $164.3 million in other public investments,

leveraged $417.1 million in non-project private investment, and served 69,369 households and 12,115

businesses. 

In FY 2019, ARC funded more, and larger, infrastructure

grants, particularly related to broadband. This year,

about one in five of the businesses and households

served by infrastructure projects were served by new or

improved broadband. In addition, ARC funds are

supporting emerging opportunities such as the development of the southern automotive and aviation clusters.

Three projects supported during FY 2019 illustrate the

broad impact of ARC infrastructure investments. Bibb

County is an at-risk county in Alabama that has seen

some economic progress in recent years thanks to a

burgeoning automotive manufacturing cluster in the

region. An ARC grant will help fund sewer system

improvements in the towns of West Blocton and

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS
Woodstock to accommodate anticipated new growth in

the Scott G. Davis Industrial Park. A new automotive plant

in the park is in its final planning stages, and additional

future industrial development is anticipated. 

In Pocahontas County, West Virginia, ARC funded the

extension of a public wastewater collection system in

order to provide new sewer service to 110 households,

seven businesses, and two industrial customers. The area

served by the project currently relies on septic tanks or

untreated wastewater discharge into the local watershed. This project will eliminate the discharge of

untreated wastewater, and will bring sewer service to an

area with potential for attracting new manufacturing jobs

and investment. 

ARC is also funding the construction of a municipal

wastewater collection and treatment system to serve 42

businesses centered around the village square in the

downtown district of Hammondsport, New York. The

proposed system will serve a commercial district

comprised of buildings built in the early 1900s. Today,

these buildings operate as restaurants and retail space

supporting tourism generated from Keuka Lake. The

limitation of on-site septic systems has impeded business

operations by limiting seating capacity in restaurants,

and preventing building owners from fully developing the

multi-story historic buildings. Through this project, business

and restaurant owners will be able to take full advantage

of the multi-story buildings to create new businesses, jobs,

and opportunities for growth in the local economy.

Access to Broadband 

In order to compete in the global economy, Appalachia

must continue to develop and improve the infrastructure

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

Appalachia’s isolation and connecting its businesses and

communities with information and markets around the

world. Research has shown that 80 new jobs are created

for every additional 1,000 broadband users served, and

that gaining 4 megabits per second (mbps) of broadband speed can increase household income by $2,100 a

year. In FY 2019, ARC invested $26.1 million in 48 broadband-related projects to continue its commitment to help

rural Appalachian communities expand broadband

service. One such project is the Twin Lakes - Rural Jackson

County Fiber Broadband Construction Project in

Tennessee. This grant helps construct a 51-mile fiber run

that will be used to provide broadband access with

speeds up to 1 gigabyte to serve the Granville community in Jackson County, Tennessee. Jackson County is very

rural and highly dependent on the tourism industry. Much

of the area does not have cellular service available. Nine

businesses and 447 households will have broadband

service available because of this grant. 

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.

Natural and Recreational Assets

Appalachia’s numerous natural assets are the backbone

of the recreational tourism industry, which is creating

opportunities for entrepreneurship in the Region. Building

local businesses that support outdoor recreation and

tourism is an increasingly important way to diversify rural

economies. To capitalize on this expanding industry in the

Region, ARC invested in several projects designed to

leverage natural assets. Multiple projects focused on

creating and extending hiking, biking, and motorsports

trails. 

In FY 2019, ARC provided a grant to Garrett County,

Maryland to continue the expansion of the Eastern

Continental Divide Loop Trail, an effort the county has

been engaged in for many years. Over the last several

years, the county has seen steady increases in the

number of visitors and a corresponding increase in sales

tax and lodging sales tax revenues. Through this new

grant, the county will improve 11,053 linear feet of the

existing foot trail as part of a multi-phased project to

6 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
create a hard-pack trail that will connect the 150-mile

Loop trail with the 132-mile Great Allegheny Passage.

Improvements to the trail will serve and improve seven

existing businesses catering to daytime and overnight

visitors, serve as a lab for 40 students enrolled in the

Adventure Sports Management program at Garrett

College, and help retain 50 existing jobs. The improved

trail segment will help Garrett County strengthen their

tourism economy and support recreation in the region,

such as hiking, backpacking, trail running, cross-country

skiing, and educational study.

Cultural Assets

Strategic investments in cultural assets, such as

downtown redevelopment, gateway communities,

historic districts, tourism trails, and other unique community features, can help revitalize and enrich local

economies. ARC invested in a range of cultural projects

across the Region in FY 2019 to help communities

strengthen their local economies and improve the quality

of life. One such project is ARC’s support for the second

phase of the Blue Ridge Craft Trails project, an effort that

will benefit 100 entrepreneurs and businesses and attract

new visitors into 40 communities featured on the trails.

Western North Carolina is a leading center for craft

production and education in the United States, but previously lacked a coordinated strategy to promote or brand

the industry. The ARC grant will continue an effort to

develop regional marketing and build infrastructure to

support entrepreneurs in finding new pathways to

increased sales and economic stability. Funding will be

used to add 100 sites and events to the existing online

trail inventory, as well as create 30 curated itineraries to

attract visitors to shop, eat, and lodge in towns located

throughout the 25 counties of western North Carolina.

ARC also continued its partnership with the National

Endowment for the Arts and the Conservation Fund to

support the Appalachian Gateway Communities

Initiative, a program that provides technical assistance

with natural and cultural heritage tourism development

to communities that are geographically positioned as

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

areas.

Goal 5: Bolstering Leadership and

Community Capacity

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

and advance community and economic development.

Appalachian Leadership Institute 

In FY 2019, ARC launched the Appalachian Leadership

Institute to equip a diverse network of leaders with the

skills, expertise, and vision to address Appalachia’s most

pressing issues. The Institute will increase the Region’s

economic competitiveness and help build regional

leadership capacity across Appalachia by engaging key

public, nonprofit, and private sector leaders and focusing

on economic development and other challenges facing

rural and Appalachian communities. Upon the completion of the program, participants will possess the

knowledge and skills necessary to make a direct and

sustainable impact in their community and state and

across the Region. Applications were opened in April

2019 and ARC received 181 applications, of which 40

were selected to participate in the inaugural class. The

class will graduate in July 2020 and will be integrated into

an alumni program to continue networking and collective action. Applications for the class of 2020–2021 will

open in March 2020.

ARC-Sponsored Student Programs

To help build student leadership capacity, ARC funded

the Appalachian Teaching Project (ATP) in FY 2019, led

by the Consortium of Appalachian Centers and Institutes,

a coalition of 16 Appalachian studies organizations in 11

Appalachian states. Schools participating in ATP offer a

directed seminar that guides students in developing and

executing field-based research projects specific to the

needs of their surrounding, often distressed, communities

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS
and in alignment with one or more of the ARC strategic

goals. As a capstone to this work, students and their

faculty sponsors travel to Washington, DC to present their

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

symposium. 

In FY 2019, ARC also supported the Oak Ridge National

Laboratory (ORNL) summer science, technology,

engineering, and mathematics (STEM) program, a twoweek, residential, hands-on learning program delivered

through Oak Ridge Associated Universities. This year, 36

high school students and 16 high school teachers, representing 10 Appalachian states, participated in the main

STEM program, and an additional 26 middle school

students participated in a one-week science academy.

Program activities included lab time at the renowned

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

applications of science, math, and technology. These

annual summer STEM programs provide a unique opportunity for students to work in collaborative teams with

world-class scientists at ORNL to investigate science and

technology, ranging from robotics to alternative energy

to building a supercomputer. Teacher participants have

the opportunity to enhance their teaching skills by

learning how to translate their program research into

classroom learning. 

Emerging Leaders

In FY 2019, ARC provided a grant to Auburn University for

the Alabama Community Capacity Network (ACCN), a

new educational initiative made up of 12 participating

colleges and universities from 12 counties across

Appalachian Alabama. The ACCN will develop leadership skills for 72 students each year, expand awareness of

community assets, and provide a platform for collaboration between students and community members with a

focus on identifying opportunities and addressing

challenges related to sustainable community and

economic development in the region. This network will

give next-generation leaders the opportunity to develop

their leadership and communication skills and build

awareness of community assets and challenges to

economic development, while fostering student and

local university ties to the community. The program will

provide a platform for participating students, faculty, and

community partners to enhance existing relationships and

create new collaborative partnerships that will build

community capacity and strengthen economic growth in

Appalachian Alabama.

Taken together, these FY 2019 activities furthered progress

toward ARC’s strategic investment goals and helped

strengthen the Appalachian Region’s economy.

8 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
APPALACHIAN REGIONAL

COMMISSION STRUCTURE AND

PROGRAMS

Congress established 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: hightechnology 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

Appalachian problems and opportunities. No other

FY 2019 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 35 $13,520.3 $948.5 $11,093.1 $25,561.9

Business Development 79 41,135.3 3,078.5 45,005.5 89,219.3

Civic Entrepreneurship 8 1,126.1 0.0 468.8 1,594.8

Community Development 136 62,190.6 26,830.9 97,370.9 186,392.5

Education and Workforce Development 94 38,778.7 4,133.1 31,946.0 74,857.7

Health 22 7,561.8 6,006.8 11,162.4 24,730.9

Research and Evaluation 13 1,299.7 55.0 483.0 1,837.7

State and Local Development 

District Planning and Administration 95 11,161.9 60.6 8,195.2 19,417.7

Totals 482 $176,774.3 $41,113.4 $205,724.8 $423,612.6

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 2019 

(in thousands of dollars)
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 2019.)

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.

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’ cochair. 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. On all Commission decisions, the federal

co-chair has one vote, and the 13 governors share one

10 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
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 2019, there were 11 federal positions at the

Commission.

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

APPALACHIAN REGIONAL COMMISSION 

ORGANIZATION

Commission Staff

COMMUNICATIONS

FINANCE & ADMINISTRATION

OFFICE OF INSPECTOR

GENERAL

GENERAL COUNSEL

HUMAN RESOURCES

EXECUTIVE DIRECTOR

INFORMATION TECHNOLOGY

The Commission

DIVISION OF BUSINESS & 

WORKFORCE INVESTMENT

DIVISION OF CRITICAL 

INFRASTRUCTURE

RESEARCH & EVALUATION

FEDERAL CO-CHAIR GOVERNORS/ALTERNATES
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 56 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 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. ARC works to attract a variety of partners

and to secure additional resources for Appalachia.

Recent partnerships include:

• Federal and State Basic Agencies. About half of past

ARC grants have been administered under agreements with federal agencies, mainly U.S. Department

of Agriculture 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, the U.S. Forest

Service, and the U.S. Departments of Energy, Labor,

and Health and Human Services. 

ARC has also developed agreements with 15 state

agencies in the Appalachian Region to administer

construction-related projects. These partners include

the Alabama Department of Economic and

Community Affairs, the Georgia Environmental Finance

Authority, the Kentucky Department of Local

Government, the New York State Department of

Economic Development, the Ohio Environmental

Protection Agency, and the Pennsylvania Department

of Community and Economic Development. 

• Shaping Our Appalachian Region (SOAR). A Kentucky

state initiative established to help eastern Kentucky

create local development strategies to address

persistent challenges and to realize new opportunities.

With support from ARC, SOAR will continue its mission

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

life; and support all those working to achieve these

goals in Appalachian Kentucky. 

• Appalachian Community Capital (ACC). 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. To date, ACC has deployed over $16 million in

financing to member community development financial institutions, which have financed 70 businesses

that have created or retained 1,800 new jobs in rural

Appalachia.

• 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

12 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Program in rural distressed counties.

• Creating a Culture of Health in Appalachia: Disparities

and Bright Spots. A partnership with the Robert Wood

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

research project to study factors that support a culture

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

actions that address health disparities between

Appalachia and the nation as a whole.

• Researching Opioid Abuse and Related Health

Challenges in Appalachia. A partnership with the

National Institutes of Health, the Centers for Disease

Control and Prevention, and the Substance Abuse

and Mental Health Services Administration in two

research efforts focused on interventions and strategies addressing opioid drug abuse, hepatitis C, and

HIV in Appalachia. The research will help deepen

knowledge about Appalachia’s current and future

public health challenges, especially in the Region’s

coal-impacted communities. ARC has committed

$1.75 million to these multi-agency research initiatives.

• Department of Labor: Workforce Opportunities for

Rural Communities (WORC). A partnership with the

Delta Regional Authority and the Employment and

Training Administration in the Department of Labor,

which awarded $29.2 million in demonstration grant

funds to expand the impact of workforce development initiatives in the Appalachian and Delta Regions.

The WORC Initiative enables impacted communities to

develop local and regional workforce development

solutions aligned with existing economic development

strategies and community partnerships to promote

new, sustainable job opportunities and long-term

economic vitality. These demonstration grant projects

will provide valuable career, training, and support

services to dislocated workers, new entrants to the

workforce, and incumbent workers in counties and

parishes and/or areas currently underserved by other

resources.

• West Virginia POWER Support Project. The West

Virginia Hub, the Benedum Foundation, and ARC have

partnered in an initiative to support the teams behind

the WV POWER projects. The initiative aims to help

grantees to carry out their projects successfully, to

align their work with other projects occurring in the

same counties, and to find technical assistance to

address challenges and needs emerging in project

implementation. This collaborative initiative brings

together current and past POWER grantees to

network, problem solve, build new collaborations, and

deepen relationships with project funders and

technical assistance providers.

• Regional Educational Laboratory for Appalachia (RELAP). ARC serves on the governing board of the U.S.

Department of Education-funded REL-AP, operated by

SRI, Inc. The board provides guidance that supports

the SRI team’s success in carrying out rigorous

research, technical support, and dissemination efforts

that focus on high-leverage problems in their four-state

region of Kentucky, Tennessee, Virginia, and West

Virginia. ARC helps REL-AP amplify its reach by helping

connect REL staff with other service providers working

on similar issues, and by sharing information from highquality research, technical support, and dissemination

efforts. These efforts help inform and build educator

and policymaker capacity to improve outcomes for all

students in the Region and help both organizations

achieve their mutual goals.

• National Energy Technology Laboratory (NETL)

Regional Workforce Initiative. A regional workforce

initiative that is a means of assisting businesses to incorporate the latest technologies. NETL is a U.S.

Department of Energy research and development

agency with two facilities in the Appalachian Region:

Morgantown, West Virginia, and Pittsburgh,

Pennsylvania. This initiative aids businesses and governments in the Appalachian Region in learning about

and applying the latest scientific research in areas

such as energy production, advanced manufacturing,

extraction of rare earth metals, and natural gas

storage. ARC has been working to connect NETL with

colleges, Local Development Districts, state and local

governments, and others so they and their clients can

make use of NETL’s resources. Through ARC facilitation,

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 13

MANAGEMENT’S DISCUSSION AND ANALYSIS
NETL has also become active with the Tristate Energy

and Advanced Manufacturing (TEAM) program,

funded by the ARC POWER initiative. 

• 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. 

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 2019 was ARC’s fourth 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 2019 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 2019, ARC

received an appropriation of $165.0 million for area

development activities and allocated by formula $103.3

million, 62.6 percent of the appropriation, to the states.

Within the framework of the strategic plan, the states

have wide discretion in the use of these funds. Priorities for

area development funding are set forth in the

Commission’s strategic plan, and state and community

leaders work together to package funding from public

and private organizations to implement those priorities. All

ARC non-highway grants are approved by a governor

and by the federal co-chair.

ARC’s FY 2019 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 $16 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

14 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

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FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS
county is classified within one of five economic status

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

or attainment. 

• Distressed counties are those that rank in the worst 10

percent of the nation’s counties.

• At-risk counties rank between the worst 10 percent

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

• Transitional counties rank between the worst 25

percent and the best 25 percent of the nation’s

counties.

• Competitive counties rank between the best 10

percent and the best 25 percent of the nation’s

counties. 

• Attainment counties are those that rank in the best 10

percent of the nation’s counties.

In FY 2019, 81 counties were designated distressed, 119

were designated at-risk, 205 were designated transitional,

14 were designated competitive, and 1 was 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.

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 $222.3 million in 2,774 loans, resulting in 95,916

jobs created or retained and leveraging $1.57 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 2019, 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 2019, a total of 2,645.4 miles, or 85.6

percent, of the 3,090 miles authorized for the ADHS were

complete; 158.2 miles were under construction or partially

complete and open to traffic; 56.9 miles were in the final

design or right-of-way acquisition phase; and 229.6 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

16 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS
elected officials and non-elected community leaders.

While LDDs have a wide array of responsibilities as determined by their individual boards of directors, they

typically are involved in four key areas that support the

development of the Region: providing area-wide

planning and program development, and coordination

of federal and state funding sources; assisting local

governments in providing services, especially in poorer,

more isolated communities; promoting public-private

partnerships and assisting in business development; and

helping communities assess, plan, and conduct a wide

range of activities such as job training, business development, telecommunications planning and

implementation, and municipal government support. The

Commission has also supported the training and

technical assistance activities of the Development District

Association of Appalachia, an organization of the

Region’s 73 LDDs.

Research and Technical Assistance Activities

ARC funds research and evaluation studies that produce

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

analysis, economic impact analysis, program evaluation,

and regional economic and transportation modeling.

ARC-funded research focuses on strategic analyses of

key economic, demographic, and quality-of life factors

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

makers, administrators, and staff target resources

efficiently, and to provide high-quality research for the

general public and researchers. ARC also funds project

evaluations by outside researchers or consultants to

assess whether Commission-funded projects have made

a measurable difference in social or economic

outcomes. The purpose of these evaluations is to determine the extent to which the projects have contributed

to the attainment of economic development objectives

identified in ARC’s strategic plan. In addition, evaluations

are used to verify project results and to assess the validity

of specific performance measurements for monitoring

and evaluating specific types of projects.

Reports and data products are distributed in print and

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

Research completed or in progress in FY 2019 included:

• Three reports offering Appalachian communities’

recommendations to address the health issues of

obesity, opioid misuse, and smoking

• An update to the data component of a research

report examining entrepreneurship in Appalachia

• Extended work on the coal industry ecosystems

research that includes a shift-share refinement of the

ecosystem; an analysis of the power industry

ecosystem; an assessment of local funding support for

elementary and secondary education; a cluster

analysis; and a look at industries, occupations, and

entrepreneurship in Appalachia

• A study of economic resilience in Appalachian

communities 

• A research report examining the tourism industry in

Appalachia

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

including population, age, race, ethnicity, housing,

education, labor force, employment, income,

poverty, health insurance, disability status, and migration

• A website featuring all of the reports and data from

the “Creating a Culture of Health in Appalachia:

Disparities and Bright Spots” initiative

• Updates to a website documenting overdose deaths

as well as socioeconomic and economic indicators in

Appalachia 

• A report monitoring and evaluating the impact of

ARC’s POWER-funded investments

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

• A process review of external grant administration for

ARC construction grants

• An evaluation of the experiences of alumni of the

Appalachian Teaching Project

• An ongoing analysis of coal production trends and

the resulting impacts on transportation in Appalachia

• An update and expansion of previous research

regarding the impact of Interstate 81 on the

Appalachian Region 

18 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
• A case study assessing the anticipated economic

benefits of completing the Appalachian

Development Highway System (ADHS) Corridor V in

Northeast Mississippi 

• A study examining traffic safety trends in Appalachia,

including the impact of the ADHS and the effect of

the substance abuse epidemic on traffic safety in

Appalachia

• A study to identify variables impacting transportation

on accessibility in Appalachia and create a research

framework to quantify accessibility in a future study

• A study to inventory and assess public transportation

in Appalachia

• A case study assessing the anticipated economic

benefits of completing ADHS Corridor N in Maryland

and Pennsylvania

Impediments to Progress

The Region’s isolation and its difficulty in adapting to

economic changes over past decades are major factors

contributing to the gap in living standards and economic

achievement between the Region and the rest of the

nation. Mining and manufacturing, which have long

dominated the Appalachian economy, are currently in

decline. Many communities still rely on a single economic

sector. Despite progress in some areas, Appalachia still

does not enjoy the same economic vitality and living

conditions as the rest of the nation, and continues to

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

broadband access. 

Poverty

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

Community Survey, over the 2013–2017 period (which

includes years of economic downturn and recovery),

16.3 percent of Appalachian residents lived below

the poverty level, well above the U.S. average of 14.6

percent. The mean income of Appalachian households was $64,880, just 80 percent of the U.S. average

of $81,283.

Educational Attainment

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

a bachelor’s degree or more was seven percentage

points lower in Appalachia than in the nation as a

whole; and in 306 Appalachian counties, fewer than

one in five residents age 25 and over were graduates

of a four-year college or university. 

Employment

• The Appalachian Region lost over 600,000 jobs

between 2007 and 2010, with losses taking place both

during and after the Great Recession. It took the

Region until 2015 to achieve its pre-recession level of

employment: there were 13.1 million jobs in

Appalachia in 2007, 12.5 million in 2010, and 13.2

million in 2015. Meanwhile, the United States as a

whole was able to match its 2007 employment level

of 199.5 million jobs by 2013, when total employment

was reported at 182.3 million.

• Employment growth in the Appalachian Region

lagged behind that experienced in the United States

overall between 2000 and 2017. While the country

overall saw an increase of 19 percent in total

employment, the Region experienced growth of just

8 percent. Central Appalachia fared the worst

among the subregions, losing 5 percent of its total

employment over the time period. 

• Between 2011 and 2018, coal mining employment in

Central Appalachia decreased 59 percent—over

19,000 jobs were lost—and is not expected to return

to its historic high.

• Between 2000 and 2017, manufacturing employment

declined at a faster rate than the national trend in

every Appalachian subregion. In Northern, North

Central, and South Central Appalachia, employment

in the industry fell 35 percent over the time period,

compared to a decline of 25 percent at the national

level. 

• Employment in the health and social services sector

has grown more slowly in the Appalachian Region

than in the nation as a whole. While the United States

overall experienced growth of 47 percent between

2000 and 2017, employment in the industry grew by

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS
just 34 percent in Appalachia. Growth has been

especially slow in Central Appalachia (21 percent

over the time period), a subregion with particularly

poor performance in health measures.

Population Health

• Over the 2013–2017 period, the opioid-related

overdose mortality rate for people ages 15–64 was 79

percent higher in Appalachia than in the United

States overall. 

• A report released in 2017 documenting population

health in Appalachia included 7 of the 10 leading

causes of death in the United States: heart disease,

cancer, chronic obstructive pulmonary disease

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

Appalachian Region had higher mortality rates than

the nation for each. 

• Obesity, smoking, and physical inactivity—risk factors

for a number of health outcomes—are all higher in

Appalachia than in the nation overall. 

• The Region also has a lower number of healthcare

professionals when compared to the United States as

a whole, including primary care physicians, mental

health providers, specialty physicians, and dentists. 

Broadband Access

• The Region lags behind the rest of the nation in

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

Appalachia reach parity with the nation. In an era of

global competition, this requires a special emphasis

on helping the people of Appalachia become a

globally competitive workforce.

20 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND INITIAL ESTIMATES FOR FISCAL YEAR 2019 PROJECTS

ANNUAL PERFORMANCE TARGETS INITIAL ESTIMATES EXPECTED RESULTS

Outcome Targets

20,000 jobs created or retained 17,282 jobs created or retained Meet 86% of target 

22,000 students, workers, and leaders with improvements 51,204 students, workers, and leaders

with improvements Exceed target by 133%

22,000 businesses and households with access to improved infrastructure81,484 businesses and households with

access to improved infrastructure Exceed target by 270%

2,500 businesses created or strengthened 4,678 businesses created or strengthened Exceed target by 87%

250 communities with enhanced capacity 647 communities with enhanced capacity Exceed target by 159%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds 3:1 ratio Meet 51% of target

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds 1:1 ratio* Meet 70% of target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas 70% of funds** Exceed target by 20 

percentage points

*Ratios are rounded to the nearest whole number.

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

Performance results are assessed in detail in Part II (page 25).
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

0

500

1,000

1,500

2,000

2,500

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Communities with Enhanced Capacity (Cumulative)

Current

2,076

5-year Target: 1,250

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Businesses Created or Strengthened (Cumulave)

Current

16,409

5-year Target: 12,500

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Current

181,620

5-year Target: 110,000

Businesses and Households Served (Cumulative)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Students, Workers, and Leaders with Improvements 

(Cumulative)

Current

162,115

5-year Target: 110,000

0

20,000

40,000

60,000

80,000

100,000

120,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Jobs Created or Retained (Cumulative)

5-year Target: 100,000

Current

83,987
FINANCIAL MANAGEMENT 

Financial Management System

In FY 2019 the Appalachian Regional Commission

renewed its contract with United States Department of

Agriculture (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 industrystandard 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 prepayment 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 2019 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, 2019, 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 2019 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, 2019, 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 reviews. During FY 2019, the OIG issued

44 reports, including 34 grant audits, a Financial

Statement audit, and nine program-related reviews. The

reviews included the timely use of advances, large

balances, status of older grants, performance period

end-dates, performance measures, and applications and

approvals. 

The dollar value of grants and payments reviewed during

FY 2019 was approximately $43 million, and results

included $3.8 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,

and recommendations had been implemented. Several

reports remained open pending final actions.

Office of Inspector General reports are available 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, 2019, 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, 2019, totaled $484.3 million,

versus $427.8 million in FY 2018. The change was due to

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

of the Treasury. Liabilities equaled $29.2 million in FY 2019

versus $27.0 million in FY 2018. The increase was due to an

increase in accounts payable. The U.S. Treasury held 91.2

percent of ARC’s assets. In addition, 5.4 percent, or $26.3

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. Remaining assets are cash and advances to

grantees.

The net position increased from $400.8 million in FY 2018 to

$455.1 million in FY 2019. FY 2019 liabilities included $25.8

million in payments due to grantees, $840,014 of accrued

salary and benefits, and $2.6 million in cash and

advances from federal and non-federal sources.

The net cost of operations for FY 2019 totaled $110.8

million, compared with $91.5 million in FY 2018. ARC

receives most of its resources from congressional appropriations, which totaled $165.0 million in FY 2019. In

addition, ARC received $2.83 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 $107.2 million. 

ARC incurred obligations of $181.6 million in FY 2019 and

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

$355.4 million. Of FY 2019 obligations, $176.8 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 23

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

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

books and records of the entity in accordance with

GAAP for federal entities and the formats prescribed by

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

are used to monitor and control budgetary resources,

which are prepared from the same books and records.

The statements should be read with the realization that

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

financial statements to describe and explain important

disclosure information about line items in the statements

and related financial policies and programs.

24 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

Statement of Assurance

On the basis of ARC’s comprehensive internal control

program during FY 2019, 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, 2019, 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 non-conformances.

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, 2019, were

operating effectively and no material weaknesses

were found in the design or operation of the

controls.

Tim Thomas

ARC Federal Co-Chair

January 14, 2020
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 initial

estimates 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 2019. 

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 initial estimates for FY 2019

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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 25

PERFORMANCE REPORT

PART II: 

FISCAL YEAR 2019 PERFORMANCE REPORT
Project Funding

ARC funds approximately 500 projects annually

throughout the 13-state Appalachian Region through its

Area Development Program. All of the projects must

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

plan: invest in entrepreneurial and business development

strategies that strengthen Appalachia’s economy;

increase the education, knowledge, skills, and health of

residents to work and succeed in Appalachia; invest in

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

Appalachia’s community and economic development

potential by leveraging the Region’s natural and cultural

heritage assets; and build the capacity and skills of

current and next-generation leaders and organizations to

innovate, collaborate, and advance community and

economic development. 

In FY 2019, in addition to funding for ARC’s base Area

Development Program, the Commission’s appropriation

included funding for the 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 2019, ARC met or exceeded most of its performance

outcome targets. Initial estimates were particularly strong

for investments in workforce training, education, and

infrastructure improvements. These investments address

the needs of many communities across Appalachia—

especially those hit hard by recent declines in

coal-related industries—to diversify their employment

base, enhance workforce development, and build

critical infrastructure needed to strengthen the Region’s

economy.

26 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

FISCAL YEAR 2019 INVESTMENT TARGETS AND INITIAL ESTIMATES

ANNUAL OUTCOME TARGETS INITIAL ESTIMATES

20,000 jobs created or retained 17,282 jobs created or retained

22,000 students, workers, and leaders with improvements 51,204 students, workers, and leaders with improvements

22,000 businesses and households with improved 

infrastructure

81,484 businesses and households with improved 

infrastructure

2,500 businesses created or strengthened 4,678 businesses created or strengthened

250 communities with enhanced capacity 647 communities with enhanced capacity
FY 2019 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 forexisting 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 postsecondary education and theworkforce. 2.2 Support programs that providebasic and soft-skills training toprepare workers for employment.2.3 Develop and support careerspecific education and skillstraining for students and workers,especially in sectors that areexperiencing growth locally andregionally and that provide opportunities for advancement.2.4 Increase local residents’access to STEAM and other skillstraining on state-of-the-arttechnology and processes acrossall educational levels.2.5 Improve access to affordable,high-quality health care forworkers and their families. 2.6 Use proven public healthpractices and establish sustainableclinical services to address healthconditions that affect the Region’seconomic competitiveness.2.7 Develop and support sustainable programs that removebarriers to participating in theworkforce.Outcome measure: Number ofstudents, 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 economiccompetitiveness.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 andeconomic development. 3.5 Invest in intermodal transportation planning and infrastructurethat builds on the ADHS andmaximizes the Region’s access todomestic and internationalmarkets.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 Estimates

Initial estimates 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 initial

estimates 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 2019, 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

28 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

PROJECT 

PERFORMANCE

VALIDATION: 

INTERMEDIATE RESULTS

Reported 2 to 3 years

after project close

PERFORMANCE

ESTIMATES: 

INITIAL ESTIMATES

Collected at project

start, reported 

annually

PROGRAM 

EVALUATIONS: 

FINAL RESULTS

Reported every 

5 to 10 years
the overall effectiveness of projects. Evaluations focus on

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 initial estimates

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. In addition, performance verification

results and program evaluation results are reported under

the appropriate goal area.

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 initial

estimates 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, initial estimates for each performance target

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 initial results for jobs

created or retained by projects funded under all of the

strategic goals. For clarity, this outcome measure is

discussed, and initial estimates 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

non-project investments resulting from the completion of

ARC-funded 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

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 29

PERFORMANCE REPORT
project. (Measured during the project period and up

to three years after the project end date.)

• “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 nonresidential 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT
These two measures are combined and recorded

together as “businesses created or strengthened.”

Strategic Investment Goal Five: Leadership and

Community Capacity. The following outcome measure

is presented in Goal 5: The number of communities with

enhanced capacity. 

• “Communities with enhanced capacity” refers to the

number of communities that have improved ability to

address critical community issues as a result of an

ARC project. This measure is used for projects that

address planning, civic participation, and community

capacity.

This measure is reported as “communities with enhanced

capacity.”

Leverage, Matching, and Distressed Counties Measures 

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

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

financial commitments (non-project funds) that result

from an ARC project. (Measured during the project

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

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

investment for all area development grants. This measure

helps illustrate the impact ARC’s flexible grants can have

in the Appalachian Region.

Distressed Counties/Areas Measure: The percentage of

total ARC funds invested in projects that benefit

distressed counties or areas. Project funds are included if

the project primarily or substantially benefits distressed

counties or areas. 

FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 31

PERFORMANCE REPORT
32 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Over the past 50 years, ARC investments, coupled with significant leveraged investments from public- and privatesector 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 Initial Estimates

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,” initial estimates and verification results for jobs created or retained under all strategic investment goals are

reported under this goal. Initial estimates and verification results for businesses created or strengthened are reported

under Strategic Goal 4. The initial estimates 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 33

PERFORMANCE REPORT

Outcome Target and Initial Estimates

FY 2019: Expected to meet 86% of target. In FY 2019, states chose to fund more education, workforce, and broadband

infrastructure projects, which will not lead to as many jobs as in past years.

Project Verification Sampling 

In FY 2019, members of ARC’s verification team surveyed 18 projects completed in FY 2015 through FY 2018 that had

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

As shown above, the projects surveyed achieved 336% of projected results for jobs created or retained.

Project Evaluation: Final Results

POWER Monitoring and Evaluation

In October 2019, findings and recommendations from the first phase of an evaluation of the POWER Initiative

conducted by Chamberlin Dunn, were finalized. POWER (Partnerships for Opportunities and Workforce and Economic

Revitalization) is a congressionally funded initiative that targets federal resources to help communities affected by job

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

economics of America’s energy production. This evaluation encompassed approximately 125 POWER grants funded

by ARC and other federal, state, and local partners in fiscal years 2015–2017. POWER grants are organized into four

broad development categories: workforce development, broadband and telecommunications, entrepreneurship,

and business cluster development. The purpose of the evaluation was to determine the extent to which POWER

grantees are progressing toward their stated performance outputs and outcomes, highlight success stories, flag

potential issues or challenges, and recommend technical assistance and training needs for grantees.

JOBS CREATED OR RETAINED IN FISCAL YEAR 2019

ANNUAL OUTCOME TARGET INITIAL ESTIMATE

FY 2019: 20,000 jobs created or retained FY 2019: 17,282 jobs created or retained

JOBS CREATED OR RETAINED IN FISCAL YEARS 2014–2018 

ANNUAL OUTCOME TARGETS INITIAL ESTIMATES

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

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

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

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

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

Number of Projects 

Surveyed

Projected Number of 

Jobs Created or

Retained

Actual Number of 

Jobs Created or

Retained

Results

Achieved 

18 654 2,195 336%
34 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

In FY 2020, Chamberlin Dunn will continue to monitor implementation of POWER grants with a focus on the special

needs of POWER substance abuse recovery projects, technical assistance grants, and other high priority areas.

Job Creation and Retention 

In September 2015, ARC issued the report Program Evaluation of the Appalachian Regional Commission’s Job Creation

and Retention Projects, prepared by HDR, Inc., with Jack Faucett Associates, Inc. The report evaluated 286 job

creation and retention projects funded between fiscal years 2004 and 2010, with a total of $42.5 million in ARC investment. Using data from ARC’s grants management database, as well as 15 in-depth case studies and an extensive

survey of project grantees, the study evaluated the economic development impact of these projects on Appalachian

businesses, households, and participants. The study also outlined key findings and common themes and provided

recommendations for enhancing future programs focused on job creation. Survey responses from 123 project

grantees, whose projects received a total of $20 million in ARC funding, showed that the projects created or retained

more than 237,000 jobs, and contributed to the creation of 776 businesses and the retention of 3,427 businesses in the

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

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

Entrepreneurship 

In April 2008, ARC issued the report Creating an Entrepreneurial Appalachian Region: Findings and Lessons from an

Evaluation of the ARC’s Entrepreneurship Initiative 1997–2005, prepared by the Rural Policy Research Institute (RUPRI),

the RUPRI Center for Rural Entrepreneurship, EntreWorks Consulting, and RTI International. The report evaluated ARC’s

Entrepreneurship Initiative (EI), which invested $43 million during that time span in projects to stimulate and support

entrepreneurship across Appalachia. The evaluation included development of a metrics framework; analysis of data

from ARC’s grants management database, including project outcomes; four site visits; and interviews with stakeholders, economic development experts, and project grantees. The study found that the EI projects created 9,156 jobs,

retained 3,022 jobs, created 1,787 new businesses, and provided services to 8,242 existing businesses, and were

projected to leverage $109.9 million in private investment. Interviewees reported that EI projects raised the profile of

entrepreneurship within the Appalachian Region, provided start-up funding for innovative projects, leveraged

additional resources that allowed projects to achieve scale and impact, and facilitated networking and collaboration

among practitioners.

Project evaluation reports are available online at www.arc.gov/research. 
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 35

PERFORMANCE REPORT

A healthy, skilled, and ready workforce is a building block for a more prosperous Appalachian Region. Education,

particularly postsecondary education, is a key component of the business and entrepreneurial ecosystem and often a

primary economic driver. Investments by ARC and its partners aim to connect education, workforce, and business

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

and creates 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 Initial Estimates

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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

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Outcome Measures

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

workers, and leaders with improvements, so initial estimates and verification results for this measure under all strategic

investment goals are reported under Goal 2.

Outcome Target and Initial Estimates

FY 2019: Expected to exceed target by 133%. This is likely due to additional funding ARC received for the POWER

Initiative, which emphasized investments in workforce training. Also, in FY 2019 ARC funded two projects that provided

computers or computer equipment that are estimated to benefit 2,552 students and workers, and three projects that

will provide new or improved broadband access to an estimated 33,843 additional students.

Project Verification Sampling

In FY 2019, members of ARC’s verification team surveyed 17 projects completed in FY 2015 through FY 2018 that had

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

As shown above, the projects surveyed achieved 240 percent of projected results for students/trainees with improvements. 

STUDENTS, WORKERS, AND LEADERS WITH IMPROVEMENTS IN FISCAL YEAR 2019

ANNUAL OUTCOME TARGET INITIAL ESTIMATE*

FY 2019: 22,000 students, workers, and leaders with

improvements

FY 2019: 51,204 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 2014–2018*

ANNUAL OUTCOME TARGETS INITIAL ESTIMATES**

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

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

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

improvements

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

improvements

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

improvements

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

improvements

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

improvements

FY 2018: 34,135 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. 

Number of Projects 

Surveyed

Projected Number of 

Students/Trainees with

Improvements

Actual Number of 

Students/Trainees with

Improvements

Results

Achieved 

17 4,921 11,792 240%
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 37

PERFORMANCE REPORT

Project Evaluation: Final Results

Health

In August 2015, ARC 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 in-depth 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, ARC 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

ARC investments in infrastructure have helped reduce the Region’s isolation, spur economic activity, and improve

public health and safety. In order to compete in the global economy, Appalachia must continue to develop and

improve the infrastructure necessary for economic development, including broadband and telecommunications;

basic infrastructure, such as water and wastewater systems; diversified energy; housing; and transportation, including

the Appalachian Development Highway System (ADHS). ARC will also support investments in multi-modal transportation systems that strengthen connections to regional, national, and global markets. ARC infrastructure investments will

address local community needs as well as strategic, innovative approaches to economic development. ARC will

provide leadership in helping communities develop long-term plans for effective development and deployment of the

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

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

needed to strengthen the Region’s economy.

Action Objectives

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

connectivity and strengthen economic competitiveness. 

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

3.3 Support the construction and adaptive reuse of business-development sites and public facilities to generate

economic growth and revitalize local economies. 

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

links between transportation networks and economic development. 

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

access to domestic and international markets. 

Performance Target and Initial Estimate

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, so initial estimates and verification results for this

measure under all strategic investment goals are reported under Goal 3. 
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 39

PERFORMANCE REPORT

Outcome Target and Initial Estimates

FY 2019: Expected to exceed target by 270%. In FY 2019, states chose to fund more infrastructure projects than in

previous years. The number and size of broadband projects particularly have increased greatly, and this year account

for one in five of the anticipated businesses and households served. In addition, ARC funded water-storage projects in

FY 2019 that expect to serve a total of 8,442 additional businesses and households. 

Project Verification Sampling

In FY 2019, members of ARC’s verification team surveyed eight projects completed in FY 2015 through FY 2018 that had

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

and households served with water/sewer projects.

As shown above, the projects surveyed achieved 86 percent of projected results for businesses and households served.

Results were skewed by one project that overestimated the households that would be served by a large amount.

Project Evaluation: Final Results

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

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

development on economic growth in Appalachia, and quantified the future economic benefits and costs of

completing the system. The study applies a mix of data and modeling efforts to measure passenger and freight traffic,

the costs of corridor completion, time savings, and other user benefits of the ADHS, and the broader economic development and trade impacts of the ADHS. The main purpose of the study is to estimate the economic benefits and costs

of system and corridor completion to inform stakeholders as they work on funding and constructing the final segments

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

BUSINESSES AND HOUSEHOLDS SERVED IN FISCAL YEAR 2019

ANNUAL OUTCOME TARGET INITIAL ESTIMATE*

FY 2019: 22,000 businesses and households served FY 2019: 81,484 businesses and households served

*Initial estimate does not include households served by ARC-funded water storage tank construction and one outlier project with a large service area.

BUSINESSES AND HOUSEHOLDS SERVED IN FISCAL YEARS 2014–2018*

ANNUAL OUTCOME TARGETS INITIAL ESTIMATES**

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

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

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

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

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

Number of Projects 

Surveyed

Projected Number of 

Businesses and 

Households Served

Actual Number of 

Businesses and 

Households Served

Results

Achieved 

8 4,967 4,272 86%
40 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

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, ARC issued the report Program Evaluation of the Appalachian Regional Commission’s

Telecommunications and Technology Projects: FY 2004–FY 2010, prepared by RTI International and independent consultants. The report evaluated 322 telecommunications and technology projects ARC had funded between fiscal years 2004

and 2010, with $41 million in ARC investments. The evaluation employed a variety of techniques to conduct the research,

including a literature review, a survey of project grantees, and case studies of 18 projects that highlighted elements that

helped foster project success. The study found that the ARC projects improved 41,000 households; served over 5,000

businesses; created 2,800 jobs; leveraged over $10 million in private investment; and served 286,000 patients, 152,000

students, and 22,500 workers. The study found that ARC projects expanded the capacities of technology-assisted

teachers in the Appalachian Region, increased capacity of local institutions to deliver better services, and bolstered

economic vitality. 

Infrastructure and Public Works 

In September 2018, ARC launched a new program evaluation of ARC-funded water and wastewater infrastructure

projects in the Appalachian Region. The evaluation will encompass approximately 385 projects funded from fiscal year

2009 through fiscal year 2016. ARC’s water and wastewater infrastructure projects include new water and/or wastewater

systems that serve residential, commercial, or industrial properties, or some combination thereof; rehabilitation to existing

water and/or wastewater systems; and the construction or rehabilitation of water storage tanks. The main purpose of the

evaluation is to determine the extent to which these projects have succeeded in achieving ARC’s strategic goals; inform

ARC of ways to better encourage innovation as well as develop, assess, and manage water and wastewater infrastructure projects; and enhance ARC’s ability to document and report program impacts.

In September 2013, ARC 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 Initial Estimates

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,” initial estimates and verfication

results for new or strengthened business for projects under all strategic investment goals are reported under this goal.

Initial estimates and verification results for communities with enhanced capacity are reported under Goal 5.

FY 2019 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Target and Initial Estimates

FY 2019: Expected to exceed target by 87%. The large numbers are due to the priorities of the POWER program as well

as the choice of states to fund more projects with these measures. 

Project Verification Sampling

In FY 2019, members of ARC’s verification team surveyed 13 projects completed in FY 2015 through FY 2018 that had

targets for businesses created or strengthened to compare estimated and actual results.

As shown above, the projects surveyed achieved 218% of projected results for communities with enhanced capacity.

Project Evaluation: Final Results

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

In September 2010, ARC issued the report Program Evaluation of ARC’s Tourism, Cultural Heritage, and Natural-AssetRelated 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 2019

ANNUAL OUTCOME TARGET INITIAL ESTIMATE

FY 2019: 2,500 businesses created or strengthened FY 2019: 4,678 businesses created or strengthened

BUSINESSES CREATED OR STRENGTHENED IN FISCAL YEARS 2016–2018*

ANNUAL OUTCOME TARGET INITIAL ESTIMATE

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

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

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

*FY 2016 was the first year with a performance target for businesses created or strengthened. 

Number of Projects 

Surveyed

Projected Number of 

Businesses Created

or Strengthened

Actual Number of 

Businesses Created 

or Strengthened

Results

Achieved 

13 288 627 218%
FY 2019 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 Initial Estimates

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. Initial estimates and verification results for

communities with enhanced capacity are reported under this goal. Initial estimates and verification 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 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

Outcome Target and Initial Estimates

FY 2019: Expected to exceed target by 159 percent. This is due in part to priorities established for the POWER Initiative.

Project Verification Sampling

In FY 2019, members of ARC’s verification team surveyed five projects completed in FY 2015 thorugh FY 2018 that had

targets for communities with enhanced capacity to compare estimated and actual results.

As shown above, the project surveyed achieved 92% of projected results for communities with enhanced capacity.

Project Evaluation: Final Results

Community Capacity Building

In March 2019, ARC issued the report Evaluation of the Appalachian Regional Commission’s Leadership and

Community Capacity Projects FY 2008–FY 2015, prepared by the Westat Corporation. The evaluation encompassed

152 projects representing $14.4 million in investments, and included a wide range of project types, including leadership

programs, community and organizational capacity-building projects, downtown revitalization efforts, network and

partnership-building projects, strategic planning, and technical assistance. The purpose was to determine the extent to

which this set of projects has succeeded in attaining its economic development objectives. Through a mix of surveys,

site visits, and phone interviews, evaluation results suggested that most projects met or exceeded their own goals,

underscoring the effectiveness of their efforts. Projects met or exceeded expected outcomes for the following

measures: number of communities improved (91 percent of grantees using this measure reported meeting or

exceeding expected outcomes); number of organizations improved (89 percent of grantees using this measure

reported meeting or exceeding expected outcomes); number of programs implemented (82 percent of grantees

COMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2019

ANNUAL OUTCOME TARGET INITIAL ESTIMATE

FY 2019: 250 communities with enhanced capacity FY 2019: 647 communities with enhanced capacity

COMMUNITIES WITH ENHANCED CAPACITY IN FISCAL YEAR 2016–2018*

ANNUAL OUTCOME TARGET INITIAL ESTIMATE

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

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

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

*FY 2016 was the first year with a performance target for communities with enhanced capacity. 

Number of Projects 

Surveyed

Projected Number of 

Businesses Created

or Strengthened

Actual Number of 

Businesses Created 

or Strengthened

Results

Achieved 

5 13 12 92%
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 45

PERFORMANCE REPORT

using this measure reported meeting or exceeding expected outcomes); and number of participants improved (78

percent of grantees using this measure reported meeting or exceeding expected outcomes). Additionally, the report

highlights the sustainability of this set of projects, as survey findings indicate that many of the projects surveyed have

continued to operate beyond the Commission-supported grant period, and for nearly half of projects for which a

survey was completed, respondents reported expanding their efforts. Finally, the projects highlight the benefit accruing

to distressed counties and rural or underserved communities.

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

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.

FY 2019: Expected to meet 51% of target. Every dollar of ARC funding is estimated to attract $3.07 of leveraged private

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

vary. FY 2019 saw a marked increase in education and workforce projects, which tend to have low, if any, leveraged

private investment.

LEVERAGED PRIVATE INVESTMENT RATIO IN FISCAL YEAR 2019

ANNUAL TARGET INITIAL ESTIMATES

FY 2019: 6:1 ratio of leveraged private investment to

ARC investment FY 2019: 3:1 Ratio

LEVERAGED PRIVATE INVESTMENT RATIO 

IN FISCAL YEARS 2014–2018*

ANNUAL TARGET INITIAL ESTIMATES

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

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

FY 2016: 6:1 ratio of leveraged private investment to

ARC investment FY 2016: 3:1 Ratio

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

ARC investment FY 2017: 5:1 Ratio

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

ARC investment FY 2018: 12:1 Ratio

*FY 2016 was the first year with performance targets for leveraged private investment for all ARC strategic goal areas.
46 APPALACHIAN REGIONAL COMMISSION / FY 2019 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.

FY 2019: Met 70% of target. Every dollar of ARC funding attracted $1.40 in matching project funds. The target was not

met in part because of continued emphasis on funding directed to distress. The match rate closely corresponds with

funding to distressed counties and areas, as projects in these areas require a lower percentage of matching funds.

ARC continues to encourage directing investment to distressed counties and areas, which could lead to a lower

amount of matching funds. 

MATCHING PROJECT FUNDS RATIO IN FISCAL YEAR 2019

ANNUAL TARGET RESULT

FY 2019: 2:1 ratio of matching funds to ARC investment FY 2019: 1:1 Ratio*

*Ratios are rounded to the nearest whole number.

MATCHING PROJECT FUNDS RATIO 

IN FISCAL YEARS 2014–2018*

ANNUAL TARGET RESULTS**

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

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

FY 2016: 2:1 ratio of matching funds to

ARC investment FY 2016: 2:1 Ratio

FY 2017: 2:1 ratio of matching funds to

ARC investment FY 2017: 1:1 Ratio

FY 2018: 2:1 ratio of matching funds to

ARC investment FY 2018: 2:1 Ratio

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

funds for all ARC strategic goal areas.

**Ratios are rounded to the nearest whole number.
FY 2019 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.

FY 2019: Exceeded target by 20 percentage points. ARC continues to encourage directing investment to 

distressed counties and areas.

PERCENTAGE OF FUNDS TO DISTRESSED COUNTIES/AREAS IN FISCAL YEARS 2014–2018*

ANNUAL TARGETS RESULTS

FY 2014: Direct 50% of ARC funds to distressed 

counties or areas FY 2014: 64% of funds 

FY 2015: Direct 50% of ARC funds to distressed 

counties or areas FY 2015: 72% of funds

FY 2016: Direct 50% of ARC funds to distressed 

counties or areas FY 2016: 79% of funds

FY 2017: Direct 50% of ARC funds to distressed 

counties or areas FY 2017: 73% of funds

FY 2018: Direct 50% of ARC funds to distressed 

counties or areas FY 2018: 64% 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 2019*

ANNUAL TARGET RESULT

FY 2019: Direct 50% of ARC funds to distressed 

counties or areas FY 2019: 70% of funds

*Project funds are included if the project primarily or substantially benefits distressed counties or areas.
48 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

PERFORMANCE REPORT

SUMMARY OF ACHIEVEMENTS

PERFORMANCE TARGETS AND INITIAL ESTIMATES FOR FISCAL YEAR 2019 PROJECTS

ANNUAL PERFORMANCE TARGETS INITIAL ESTIMATES EXPECTED RESULTS 

Outcome Targets

20,000 jobs created or retained 17,282 jobs created or retained Meet 86% of target

22,000 students, workers, and leaders with improvements 51,204 students, workers, and leaders

with improvements Exceed target by 133%

22,000 businesses and households with access to improved infrastructure81,484 businesses and households with

access to improved infrastructure Exceed target by 270%

2,500 businesses created or strengthened 4,678 businesses created or strengthened Exceed target by 87%

250 communities with enhanced capacity 647 communities with enhanced capacity Exceed target by 159%

Leverage Target

Achieve a 6:1 ratio of leveraged private investment to ARC funds 3:1 ratio Meet 51% of target

Matching Target

Achieve a 2:1 ratio of matching funds to ARC funds 1:1 ratio* Meet 70% of target 

Distressed Counties/Areas Target

Direct 50% of ARC funds to benefit distressed counties or areas 70% of funds** Exceed target by 20

percentage points

*Ratios are rounded to the nearest whole number.

**Project funds are included if the project primarily or substantially benefits distressed counties or areas.
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 49

PERFORMANCE REPORT

Leveraged Private

Investment

400,000,000

300,000,000

200,000,000

100,000,000

$0

Non-ARC Project Funds 

(Public and Other)

ARC Project Funds

$176,774,332

$246,838,229

Funding and Leveraged Private Investment

for all ARC Projects in Fiscal Year 2019

$542,662,996

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

Leveraged private investment $542,662,996 3:1 ratio of leveraged private investment to ARC investment

Non-ARC matching project funds $246,838,229 1:1 ratio of non-ARC project investment to ARC project investment

ARC project funds targeted to

distressed counties or areas $123,324,332*

70% of total ARC project 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.

Investment Summary for FY 2019 Projects
50 APPALACHIAN REGIONAL COMMISSION / FY 2019 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 2019

Quartile 1

(Economically

Strongest)

100

120

140

160

180

Quartile 4 Quartile 3 Quartile 2

(Economically

Weakest)

National

Economic

Parity

Number of Appalachian Counties

200

147

58

Economic Quartile

200

220

15
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 51

PERFORMANCE REPORT

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

0

500

1,000

1,500

2,000

2,500

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Communities with Enhanced Capacity (Cumulative)

Current

2,076

5-year Target: 1,250

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Businesses Created or Strengthened (Cumulave)

Current

16,409

5-year Target: 12,500

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Current

181,620

5-year Target: 110,000

Businesses and Households Served (Cumulative)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Students, Workers, and Leaders with Improvements 

(Cumulative)

Current

162,115

5-year Target: 110,000

0

20,000

40,000

60,000

80,000

100,000

120,000

1-Oct-15 FY16 FY17 FY18 FY19 FY20

Jobs Created or Retained (Cumulative)

5-year Target: 100,000

Current

83,987
52 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

FINANCIAL REPORT

PART III: 

FISCAL YEAR 2019 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 2019,

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.

Charles Howard

Interim Executive Director

Appalachian Regional Commission

January 14, 2020
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 53

FINANCIAL REPORT

REPORT OF INDEPENDENT AUDIT
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including workforce training, dropout prevention, math

and science, early childhood education, technology,

leadership, 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 2019, ARC invested in applied research

through the following projects: a program evaluation of

ARC’s leadership and community capacity projects; a

study of economic resilience in Appalachian communities;

a website featuring all the reports and data from the

“Creating a Culture of Health in Appalachia: Disparities

and Bright Spots” initiative; a research report examining

the tourism industry in Appalachia; a report on the entrepreneurial ecosystems in Appalachia; a website focusing

on Appalachian overdose mortality; a program evaluation

of ARC’s investments in water and wastewater infrastructure; a report monitoring and evaluating the impact of

ARC’s POWER-funded investments; a process review of

external grant administration for ARC construction grants

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

including population, age, race, ethnicity, housing, education, labor force, employment, income, poverty, health

insurance, disability status, and migration

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 2019, ARC’s

investment in non-federal physical property included

grants for water and wastewater system construction and

improvements; broadband expansion; utilities installation;

and access road construction. 

ARC Investment in Human Capital

Human capital investments are expenses included in net

cost of operations for education and training programs

that are intended to increase or maintain national

economic productive capacity and that produce

outputs and outcomes that provide evidence of

maintaining or increasing national productive capacity.

ARC’s investments in human capital in FY 2019 included

grants for education and job training programs in areas

ARC Investment in Non-Federal Physical Property

Fiscal Year 2015 $34,823,339

Fiscal Year 2016 $34,522,482

Fiscal Year 2017 $32,100,717

Fiscal Year 2018 $36,962,756

Fiscal Year 2019 $41,085,774

ARC Investment in Human Capital

Fiscal Year 2015 $6,813,073

Fiscal Year 2016 $11,504,662

Fiscal Year 2017 $21,077,501

Fiscal Year 2018 $29,925,465

Fiscal Year 2019 $31,671,742

ARC Investment in Research and Development

Fiscal Year 2015 $449,590

Fiscal Year 2016 $237,000

Fiscal Year 2017 $588,310

Fiscal Year 2018 $633,418

Fiscal Year 2019 $616,790
80 APPALACHIAN REGIONAL COMMISSION / FY 2019 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 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, 2019, 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 2019 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 2019, 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.
FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT / APPALACHIAN REGIONAL COMMISSION 85
86 APPALACHIAN REGIONAL COMMISSION / FY 2019 PERFORMANCE AND ACCOUNTABILITY REPORT

OTHER INFORMATION

Authorization to reproduce this report in whole or in part is granted.

While permission to reprint this publication is not necessary, the citation should 

be: Appalachian Regional Commission, Appalachian Regional Commission 

Performance and Accountability Report, Fiscal Year 2019. Washington, D.C., 

February 2020.

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