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Evaluation on the Hub 34

GAO_GAO-20-72

Background TSA’s Secure Flight Program TSA began implementing its Secure Flight program in 2009 to identify passengers who may pose security risks before boarding an aircraft. The program requires U.S. and foreign commercial aircraft operators traveling to, from, within or overflying the United States, as well as U.S. commercial aircraft operators with international point-to-point flights, to collect information from passengers and transmit it electronically to TSA. This information includes personally identifiable information, such as full name, gender, date of birth, passport information (if available), and certain non-personally identifiable information, such as itinerary information and the unique number associated with a travel record (record number locator). The Secure Flight program matches the passenger-provided personally identifiable information against federal government watchlists and other information to determine if passengers may pose a security risk and to assign them a risk category. Since January 2009, Secure Flight has matched passengers to two subsets of the Terrorist Screening Database—the No Fly List, composed of individuals who should be precluded from boarding an aircraft or entering the sterile area of a U.S. airport, and the Selectee List, composed of individuals who should receive enhanced screening prior to boarding an aircraft or entering an airport sterile area. The risk categories are not specifically communicated to the air carriers, but for each passenger Secure Flight provides responses to air carriers commensurate with the risk levels identified (e.g., an air carrier will receive a response of “inhibited” if the passenger was identified as being in the highest-risk category, or the boarding pass printed for a high-risk passenger will identify that passenger as a selectee for enhanced screening at the security checkpoint). In April 2011, in response to the December 25, 2009 attempted attack, TSA also began matching passengers to a third subset of the Terrorist Screening Database—the Expanded Selectee List—to designate known or suspected terrorists not otherwise included on the No Fly or Selectee Lists as selectees for enhanced screening. The Expanded Selectee List, in general, includes all records in the Terrorist Screening Database with a full name (first name and surname) and full date of birth not otherwise included on the No Fly or Selectee Lists. The Secure Flight system, which also screens passengers against the Silent Partner and Quiet Skies Lists, among others, results in passengers receiving one of four prescreening outcomes: Low risk (expedited screening). Passengers who are eligible for expedited screening, such as those with TSA Pre®, Unknown Risk (standard screening). Passengers who warrant standard screening, High Risk (enhanced screening). Passengers who receive enhanced screening such as a pat down and explosives trace detection, because they have been identified as matches to government watchlists, including the Selectee, Expanded Selectee, Silent Partner and Quiet Skies Lists, or Highest Risk (denied boarding). Passengers who are not permitted to board a commercial aircraft, such as passengers who are on the No Fly List or the Centers for Disease Control and Prevention Do Not Board List (see fig. 1). Secure Flight also randomly identifies passengers for enhanced screening. Although subject to the same screening measures as high risk passengers, they have not been determined to be high risk. Similarly, individuals included on the Silent Partner and Quiet Skies Lists have not been determined to be of high risk, but rather have been identified using rules based on current intelligence and other factors that may indicate an elevated risk. The Silent Partner List TSA leverages CBP information and targeting capabilities to create the Silent Partner List. Specifically, TSA leverages (1) data CBP collects regarding passengers traveling internationally (such as citizenship, passport country of issuance, and address information), and (2) CBP’s Automated Targeting System. CBP uses the Automated Targeting System to identify potentially high risk passengers arriving or departing the United States by comparing passenger information with law enforcement, intelligence, and other enforcement data using risk-based targeting scenarios and assessments. Analysts within TSA I&A’s Threat Analysis Division review intelligence to identify factors that may indicate elevated passenger risk. TSA works with CBP to create Silent Partner and Quiet Skies rules in the Automated Targeting System based on these factors. The system returns information on passengers who match with the rules and are scheduled to fly on U.S.- bound flights. TSA then omits any individuals on the Silent Partner cleared list (i.e. travelers exempted from further enhanced screening based on a specific rule) before placing the remaining passengers on the Silent Partner List. The Secure Flight program designates passengers who are on the Silent Partner List as selectees for enhanced screening for a particular international flight. The Quiet Skies List In April 2012, TSA’s Quiet Skies List became fully operational. The Quiet Skies List is a subset of passengers on the Silent Partner List. Specifically, TSA identifies certain Silent Partner rules that warrant continued enhanced screening for passengers’ subsequent domestic or outbound travel after arriving in the United States. Passengers identified via these rules—the Quiet Skies rules—comprise the Quiet Skies List. Passengers matched to the Quiet Skies List are designated as selectees and receive enhanced screening on any subsequent domestic flights for a designated period of time, or for a designated number of flights, whichever comes first. After the designated time period has elapsed (or number of flights is flown), passengers’ names and identifying information are moved to a cleared list. TSA Modernization Act Requirements Pursuant to the TSA Modernization Act, TSA I&A is to identify and review its Silent Partner and Quiet Skies screening rules, in coordination with DHS and TSA stakeholders, every 120 days and provide notification to these stakeholders no later than two days after making a change to a rule. Table 1 lists the DHS and TSA stakeholders TSA I&A must coordinate with under the Act. TSA Coordinates with Stakeholders as Required, but TSA Guidance Is Not Clear About Criteria for Review of Rule Changes TSA I&A Coordinates Quarterly Rule Reviews and Notifies Oversight Offices of Rule Changes According to DHS and TSA officials, TSA has coordinated quarterly rule review meetings with DHS and TSA stakeholders since the inception of the Silent Partner and Quiet Skies programs. We reviewed documentation of the reviews that occurred from December 2018 through March 2019. The quarterly review meetings are called for in DHS’s Automated Rule Review SOP and its Quiet Skies Implementation Plan. Pursuant to the TSA Modernization Act, TSA I&A is to identify and review its screening rules in coordination with DHS and TSA stakeholders every 120 days—or at least three times a year. TSA I&A officials stated that they plan to continue convening four times a year because, given the difficulty of scheduling these large meetings, it will help them ensure they meet the 120 day requirement. Since October 2018, TSA I&A has also included representatives of DHS’s Traveler Redress Inquiry Program and the Federal Air Marshal Service in these quarterly review meetings, as required by the Act. Officials from these offices told us in August 2019 that they are still determining their role in the rule review process, but expect the coordination to be beneficial. DHS and TSA SOPs set forth the process for the quarterly review meetings. TSA I&A and stakeholder officials stated that the process generally happens as described in the SOP. Two weeks prior to the meeting, TSA I&A sends out materials including a list of new rules, rule changes, archived (discontinued) rules, and the rationale and links to the underlying intelligence supporting each rule change. According to TSA officials, TSA and DHS stakeholders review the rules from their particular areas of expertise. For example, TSA Chief Counsel officials reported that they review rules and the supporting intelligence to ensure that the rules meet legal sufficiency standards. A TSA Privacy official stated that they review rules and the supporting intelligence to ensure rules do not violate passengers’ rights. All stakeholders review the rules to ensure they are based on current intelligence that identify specific threats. If a stakeholder finds that there is insufficient current intelligence to support the rule, TSA I&A officials stated that they would modify it to ensure it is tailored to current intelligence or archive a rule when the intelligence- based threat is no longer relevant. For example, during the March 2019 quarterly review meeting TSA I&A officials discussed archiving a Silent Partner rule due to insufficient current intelligence to support it. According to TSA I&A officials, the rule was archived in April 2019. TSA I&A officials and stakeholders generally agreed that the quarterly reviews provide a good mechanism for oversight of both programs. Stakeholders told us these meetings provide a forum to discuss the scope of the rules and whether or not they were supported by current intelligence or if they are sufficiently specific. For example, a TSA stakeholder questioned the basis for a rule that identified a particular travel pattern as a high risk factor. As a result, TSA I&A officials reviewed the intelligence and revised the rule. TSA I&A officials stated that since enactment of the TSA Modernization Act in October 2018, they have also notified DHS and TSA stakeholders within two days of making changes to a rule. We reviewed the eight notifications that TSA I&A sent to stakeholders regarding rule changes during the period from October 2018 through May 2019. These notifications detailed changes to rules, new rules, and rules that were archived. DHS and TSA stakeholders we spoke with said that the two day notifications are helpful in keeping them informed in between quarterly meetings. In addition, stakeholders said it allowed them to proactively reach out to TSA I&A to ask questions and share more timely feedback about rule changes. TSA I&A has implemented the two day notifications and other steps required in the TSA Modernization Act, but TSA I&A’s Standard Operating Procedures have not yet been updated to reflect these changes. TSA I&A officials stated that they have plans to do so in fall 2019. TSA Has a Standard and Expedited Rule Review Process, but TSA Guidance Is Unclear about Criteria for Each Process TSA I&A’s standard operating procedures establish two situation- dependent processes for reviewing and approving rule changes, as shown in figure 2. First, under standard circumstances, TSA I&A’s standard operating procedures detail a four-part vetting process by which TSA I&A drafts support for the rule change and it is subsequently approved by TSA Chief Counsel, the TSA I&A Assistant Administrator, and ultimately TSA senior leadership. TSA procedures specify that in standard circumstances, all rule changes are to be supported and approved in writing prior to implementation. Specifically, TSA I&A is to draft a memo with the nature of the threat and how all components of the rule address the concerns from intelligence reporting. The memo, along with all pertinent intelligence sources, is then required to be routed through TSA Chief Counsel and TSA leadership for intelligence, legal, and policy review. TSA’s April 2012 Quiet Skies Implementation Plan specified that the Chief Counsel’s review is to ensure that the proposed rule targets the threat presented in the assessment, the assessment properly documents the reasons for the recommendation, and the recommendation is in compliance with relevant legal authorities, regulations, and DHS policies. Upon approval, the memo is referred to TSA senior leadership—the TSA Administrator or TSA Deputy Administrator—for final written approval. Following this, the rule change can be implemented. A second process, called exigent, is also briefly described in the SOPs. In exigent circumstances—circumstances requiring immediate action—the TSA I&A Assistant Administrator or his or her designee may direct that the rule be implemented immediately without a signed decision memo. The signed memo is still required, but can be drafted, reviewed, and approved after the change is implemented. TSA I&A officials stated that the exigent process entails verbal direction to implement a rule. It is unclear if TSA I&A has followed the exigent rule review process in standard circumstances because the SOP is unclear on the criteria for each process. TSA’s SOP states that the exigent review process may be used “if TSA determines that exigent circumstances require immediate implementation of a Silent Partner rule.” However, the SOP does not clarify who or which office within TSA makes this determination or what types of circumstances would be appropriately characterized as exigent. TSA I&A officials told us that exigent circumstances were very rare. They estimated that in the last 3 years exigent circumstances had occurred once. Yet, the same officials also estimated that they implemented approximately 90 percent of the rule changes following verbal approval from either TSA or I&A leadership and drafted the required memos after the fact. This indicates that TSA I&A officials have not followed the standard review process when implementing rule changes in circumstances they regard as standard, and the process followed appears to be closer to what would occur in exigent circumstances. These TSA I&A officials explained that drafting and processing the approval memo after they implement a rule change allows them to more quickly respond to changing intelligence. TSA’s SOP provides flexibility for this in exigent circumstances. However, given the absence of clarity in the SOP about when the exigent process is to be used and who is to make that decision, it is unclear whether or not TSA I&A used the exigent review process—a process which is not, initially, contingent upon TSA’s legal review or I&A’s written support—in circumstances that DHS and TSA leadership who oversee the program would regard as standard. According to Standards for Internal Control in the Federal Government, management should implement control activities through policies by, for example, documenting responsibilities in policies and periodically reviewing policies and procedures for continued relevance and effectiveness. As TSA I&A updates its Silent Partner and Quiet Skies SOPs in fall 2019, clarifying the criteria for standard and exigent rule review procedures would provide greater assurance that screening rule changes are reviewed as intended. TSA I&A officials further told us that they do not document or otherwise have a way of determining what proportion of rule changes have been reviewed in accordance with the standard process versus the exigent process because they had not identified a need to do so. According to the 2012 TSA memo establishing Quiet Skies as a permanent program, at the program’s outset a working group of DHS and TSA stakeholders identified the need for transparency as the first of seven key areas of consensus. Further, DHS’s Integrated Risk Management Framework establishes transparency and documentation as important characteristics of homeland security risk management. Documenting which review process TSA I&A uses for each rule change could improve transparency. TSA Tracks Some Data on Rule Implementation, but Has Not Comprehensively Assessed Effectiveness TSA Has Monitored List Size and Number of Rule Matches, but Has Not Identified a Means to Comprehensively Measure Rule Effectiveness TSA I&A monitors some operational data on its passenger screening rules. For example, TSA I&A officials track the number of individuals on the Silent Partner and Quiet Skies Lists, and the number of Silent Partner and Quiet Skies rules triggered by the passengers’ travel. TSA I&A officials stated that rule matches and list size are helpful for oversight purposes because they allow TSA I&A to monitor for Secure Flight system errors. Officials identified one example in which a Secure Flight software update created a system error that prevented 808 passengers from being moved to the Quiet Skies cleared list after a designated number of flights. According to the officials, monitoring list size and the number of rules triggered by passengers’ travel allowed them to identify and correct this error within 10 days of identifying the system error. TSA I&A has not identified a means to comprehensively measure rule effectiveness. TSA I&A officials explained that they would find it helpful to demonstrate the effectiveness of the program, but had not yet done so because it was difficult to measure. TSA I&A officials reported that the approach they have used was to count the number of Quiet Skies passengers who were later identified as a known or suspected terrorist and added to the Terrorist Screening Database. TSA I&A officials reported that in January 2019 they reviewed all Quiet Skies passengers from January 2014 through July 2018 to determine how many were subsequently added to the Terrorist Screening Database. However, because it included Quiet Skies only, this analysis excluded about 93 percent of the rules. TSA officials reported that it is not feasible to do a similar analysis for Silent Partner rules because of the higher numbers of rules and matches and the difficulty matching Silent Partner rules to data in the Terrorist Screening Database. Further, TSA officials noted that without comparable information on the rate that non-Quiet Skies passengers were added to the Terrorist Screening Database during that time period, it is difficult to interpret what the results indicate about rule effectiveness. TSA’s April 2012 Quiet Skies Implementation Plan established that TSA would continually evaluate the performance of the rules in the Silent Partner and Quiet Skies programs. Further, GAO and the Office of Management and Budget have previously identified useful practices to enhance performance management and measurement processes. GAO has previously reported that measuring performance allows organizations to track the progress they are making toward their goals and gives managers critical information on which to base decisions for improving their progress. Office of Management and Budget guidance has also focused specifically on common challenges associated with measuring effectiveness, including data availability and identifying measurable outcomes for a program. This guidance suggests using a variety of approaches such as outlining short-term milestones, identifying target outcomes, and using proxy measures to assess these programs. Assessing the effectiveness of Silent Partner and Quiet Skies rules may be difficult, but I&A could explore using other data sources to assess program effectiveness in addition to further developing their consideration of Terrorist Screening Database additions. For example, TSA I&A could consider analyzing TSA data on the outcomes of the enhanced screening of Silent Partner and Quiet Skies passengers at passenger security checkpoints. CBP officials said that they review secondary inspection results to help them assess CBP’s rules-based program. TSA I&A officials noted that they were considering this measure and would need to determine what comparison group would make sense, and if they want to focus on specific screening outcomes versus all outcomes. TSA I&A could also consider using the results of air marshals’ monitoring of Quiet Skies passengers. According to senior Federal Air Marshal Service officials, the service—with a budget of approximately $780 million for fiscal year 2019—began deploying air marshals on as many flights as possible with Quiet Skies passengers in March 2018. According to TSA’s Privacy Impact Assessment for Silent Partner and Quiet Skies and a Federal Air Marshal Service official, after air marshals complete a flight with a Quiet Skies List match, they file a report saying either “nothing to report” or, if they observe that the individual was involved in a security incident or suspicious activity, they will describe this in an after-action report. TSA I&A officials told us that while they have seen individual after-action reports, they do not review them regularly. These after-action reports are another source of information TSA I&A could consider using to gauge program effectiveness. Given the TSA resources being devoted to the enhanced screening and in-flight monitoring of many passengers matching the Silent Partner and Quiet Skies Lists, and the burden on the traveling public, it is important that TSA understand the value of its screening rules programs. Exploring additional data sources—such as checkpoint screening results and Federal Air Marshal Service after-action reports—could help TSA refine and supplement their existing efforts to measure program effectiveness. Conclusions The attempted attack of December 25, 2009, highlighted the unknown threats to U.S. civil aviation. TSA has created the Silent Partner and Quiet Skies Lists to help address these unknown threats by ensuring that certain potentially higher risk passengers receive enhanced screening when traveling to, from, or within the United States. TSA created an oversight process that was further bolstered by the TSA Modernization Act, and DHS and TSA officials we met with generally regard the process as effective. However, TSA SOPs are not clear about when it is appropriate for TSA to use an expedited review process and they do not document which review process they used. The lack of clear SOPs inhibits program oversight. By establishing clear criteria for and documentation of each review process, TSA could increase transparency and ensure rule changes are reviewed as intended. Moreover, TSA has not identified a means to comprehensively measure the effectiveness of its Silent Partner and Quiet Skies rules. Exploring additional data sources—such as checkpoint screening results and Federal Air Marshal Service after-action reports—could help TSA refine and supplement their existing efforts to measure program effectiveness. Recommendations for Executive Action We are making the following three recommendations to TSA: The Administrator of TSA should clarify the criteria for exigent circumstances and standard rule review procedures; (Recommendation 1) The Administrator of TSA should document which rule review process TSA I&A uses (exigent or standard) for each new rule or rule change; (Recommendation 2) The Administrator of TSA should explore additional data sources measuring the effectiveness of Silent Partner and Quiet Skies rules. (Recommendation 3) Agency Comments We provided a draft of our report to DHS for comment. In written comments, which are included in appendix I, DHS concurred with our three recommendations and described steps they plan to take to address them. DHS also provided technical comments, which we have incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees and to the Acting Secretary of Homeland Security. In addition, this report is available at no charge on the GAO website at http://gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8777 or russellw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix II. Appendix I: Comments from the Department of Homeland Security Appendix II: GAO Contacts and Staff Acknowledgments Appendix II: GAO Contacts and Staff Acknowledgments Error! No text of specified style in document. GAO Contact William Russell, (202) 512-8777 or russellw@gao.gov. Staff Acknowledgments In addition to the contact named above Claudia Becker, Assistant Director; Imoni Hampton, Analyst-in-Charge; Melissa Greenaway, John De Ferrari, Michele Fejfar, Eric Hauswirth, Tom Lombardi, and Kevin Reeves made key contributions to this work.

On December 25, 2009, while on a flight from Amsterdam to Detroit, a person attempted to detonate explosives hidden in their underwear. This person was not included in the government's consolidated database of known or suspected terrorists at the time. In response, in 2010, TSA began identifying passengers who are not known or suspected terrorists, but who TSA determined should receive enhanced screening. Specifically, TSA identifies passengers for enhanced screening through the application of screening rules, which TSA develops by considering current intelligence and other factors. TSA refers to these rules and lists as Silent Partner and Quiet Skies. The TSA Modernization Act includes a provision for GAO to review the current oversight mechanisms and effectiveness of Silent Partner and Quiet Skies. This report examines the extent to which TSA has (1) coordinated with relevant DHS and TSA stakeholders to review passenger screening rules; and (2) assessed the effectiveness of these rules. GAO analyzed TSA documents, including standard operating procedures, and interviewed senior DHS and TSA officials involved in managing and overseeing the programs. The Transportation Security Administration (TSA) coordinates reviews of its intelligence-based screening rules known as Silent Partner and Quiet Skies. Specifically, TSA's Intelligence and Analysis office (I&A) coordinates quarterly rule reviews and notifies Department of Homeland Security (DHS) and TSA stakeholders of rule changes. According to stakeholders, these review processes provide a good mechanism for program oversight. TSA has established guidance for rule changes that involve TSA stakeholders reviewing rules in advance of their implementation. In some instances, TSA uses an alternate process, allowed by guidance in exigent circumstances, where rule changes go into effect before some stakeholders review them. However, agency guidance does not define the conditions for using the standard or exigent processes. Further, TSA officials do not document which review process—standard or exigent—they use for each rule change. Clarifying guidance and documenting which review process is used could improve transparency and better ensure screening rule changes are adequately reviewed. TSA tracks some data on rule implementation, but has not identified a means to comprehensively measure rule effectiveness. TSA officials explained that they had not yet fully assessed the rules' effectiveness because it was difficult to measure. Silent Partner rules identify passengers for enhanced screening on inbound flights to the United States. Quiet Skies rules—a subset of the Silent Partner rules—identify passengers for enhanced screening on subsequent domestic and outbound flights. TSA officials said that the one method they had used to assess effectiveness was to count Quiet Skies passengers who were later added to the government's watchlist of known or suspected terrorists. However, because this analysis was limited to Quiet Skies, it excluded 93 percent of the screening rules, making it difficult to interpret what the results indicate about effectiveness. TSA has access to data, such as the outcomes of enhanced screening of Silent Partner and Quiet Skies passengers, that could be explored to better assess rule effectiveness. Exploring additional data sources could help TSA refine and supplement their existing efforts to measure program effectiveness.

GAO_GAO-20-130

Background Roles and Responsibilities for Managing Federal Real Property Within the executive branch, both OMB and GSA provide leadership in managing federal real property. OMB, among other things, issues policies and memorandums, including the RTF policy discussed below. GSA has dual roles with regard to the management of federal real property. First, GSA’s Office of Government-wide Policy supports the implementation of OMB’s real property policies, including RTF, by collecting and analyzing federal real property data and providing agencies with guidance on leading practices. According to GSA officials, GSA and OMB coordinated to develop data analysis methods to monitor agencies’ performance in meeting OMB’s real property policies, and OMB approved the methods that are used. Second, as the federal government’s principal landlord, GSA’s PBS acquires, manages, and disposes of federally-owned real property for which it has custody and control on behalf of agencies that occupy it, and leases commercial space on behalf of agencies. In these cases, GSA manages the lease agreements. We refer to both of these types of properties as GSA-managed space. All of the agencies obtain at least some of their office space through GSA’s PBS; in fact, two-thirds of the 23 agencies’ office space is GSA-managed space. When agencies obtain space through GSA, they enter into occupancy agreements with PBS and pay rent, operations, and maintenance costs to PBS. When GSA obtains space for its own employees, it also enters into occupancy agreements with PBS. PBS maintains a record of agencies’ GSA-managed space, including information on square footage and costs, in its Occupancy Agreement database. We discuss PBS’s role in agencies’ office space decisions later in this report. Some agencies also have independent statutory authority to lease, or acquire and manage their own property, which GSA refers to as directly- leased or directly federally-owned (“directly-owned”) space. Additionally, some agencies may be authorized to directly lease or acquire property when GSA delegates authority to them because doing so is in the government’s best interest. Fourteen of the 23 agencies directly lease or own some of their office space, and about one-third of these agencies’ total office space is made up of directly-leased or owned property. Agencies pay rent to private landlords when directly leasing space and are responsible for operating and maintaining directly-owned property. Agencies must report, among other things, the square footage and costs to rent, operate, or maintain such properties to the FRPP database, which GSA maintains. Reduce the Footprint Policy and Performance As previously mentioned, in March 2015, OMB issued the RTF policy to promote the more efficient use of real property assets through improved space utilization and reduction. According to OMB, the policy is intended to provide value to the taxpayer. The RTF policy requires agencies to submit annual Real Property Efficiency Plans (Efficiency Plans) to OMB that: (1) identify annual reduction targets for domestic office and warehouse space for a 5-year period; (2) include a policy that specifies the maximum usable square feet per person, also known as a utilization rate, and (3) refrain from increasing the square footage of domestic office and warehouse space over fiscal year 2015 levels. As part of the Efficiency Plans, agencies must also identify specific projects they will implement to reduce or improve efficient use of their space. Agencies may undertake different types of projects such as renovation, relocation, or consolidation projects to achieve their space reduction or efficiency goals. While OMB oversees the implementation of the RTF policy, GSA tracks and reports key cost performance measures on agencies’ square footage and cost changes, in accordance with analysis methods it developed in coordination with OMB. GSA reports these performance measures on performance.gov and to Congress in annual reports, and provides measures for agencies to use in their Efficiency Plans. According to these data, the 23 civilian agencies reduced more than 6 million square feet of office space from fiscal year 2015 through fiscal year 2018. As shown in figure 1, space changes varied across agencies; 16 of the 23 agencies reduced office space, while 7 increased space. According to publicly available RTF data, some agencies’ space reductions have slowed as the RTF policy approaches its end date in fiscal year 2020 and as according to OMB officials, many of the lower- cost, high financial return projects have been executed. GSA has reported varied results with regard to changes in agencies’ costs since the start of RTF. GSA reported that the federal government has avoided spending millions of dollars as a result of reduced office and warehouse space but also has reported that the average cost per square foot for office space has increased. We discuss the RTF cost performance measures in detail later in this report. The RTF policy is effective through the end of fiscal year 2020. OMB and GSA officials told us that discussions about a real property policy to succeed RTF were underway as of early 2019. However, no policy to succeed RTF has been issued as of September 2019, according to a senior GSA official. Reduce the Footprint Cost Performance Measures Give Insight into Agencies’ Efforts, but Using Actual Cost Data Would Provide More Accurate Information GSA tracks and reports two RTF cost performance measures—estimated cost avoidance and average cost per square foot. These measures provide useful information on agencies’ results, but the average cost per square foot performance measure does not use the most accurate information. Regarding estimated cost avoidance, GSA reported that the 24 CFO Act agencies—including DOD—avoided an estimated $166 million in office and warehouse costs as a result of their space reductions since fiscal year 2015. We used GSA’s data and the cost avoidance approach GSA developed with OMB to identify that $114 million of the estimated cost avoidance can be attributed to civilian agencies’ office space reductions since fiscal year 2015. The estimated cost avoidance measure reflects overall federal cost avoidance because it accounts for space that agencies have returned to GSA but that remains unoccupied. Under certain conditions, agencies may vacate GSA-managed space prior to the end of their occupancy agreement and report that as a reduction in their space. However, until this space is reoccupied or GSA disposes of it, the federal government continues to incur costs to operate and maintain the space. Because of these continued costs, GSA accounts for vacant space when it estimates cost avoidance. For example, from fiscal year 2016 to fiscal year 2017 the amount of vacant GSA-managed office space increased more than the amount of space agencies reduced. Since this increase meant that the federal government had not reduced office space overall when the calculation was made, GSA estimated that rather than avoiding costs, costs for civilian office space increased by roughly three-quarters of a million dollars during this period. GSA officials noted that this estimate represents estimated cost avoidance at a single point in time and does not capture fluctuations in agencies’ space or vacant federal space throughout the year. Average fiscal year 2015 cost per square foot for (1) space agencies lease directly, (2) space agencies acquire and manage directly, (3) space GSA leases on behalf of agencies, and (4) federally-owned space GSA manages. In 2018, GAO reported that GSA’s and OMB’s method for estimating the cost avoidance associated with agencies’ real property changes is a reasonable approach given current limitations. OMB officials explained that the estimated cost avoidance is not intended to depict actual cost savings or the net effect of space changes on costs (i.e., investment cost minus savings) because the estimate does not include agencies’ investment costs to renovate, relocate, or dispose of space. Rather, GSA’s and OMB’s method estimates the costs for rent, operations, and maintenance that the federal government did not incur because it no longer occupies space. Further, OMB officials pointed out that because agencies use a variety of methods and systems to track and categorize their renovation, relocation, and disposal costs, agencies’ data on actual investment costs are not consistent across agencies and using these data would limit the accuracy of any estimate purporting to be an actual cost savings measure. Another annual cost measure GSA uses to track agencies’ RTF performance is the average cost per square foot, which is intended to reflect actual changes in agencies’ real property costs. GSA calculates the annual average cost per square foot for different categories based on how the space is managed—directly-owned, directly-leased, and GSA- managed office space. GSA uses the same approach to calculate the measure for all agencies, and for each agency to use in their annual Efficiency Plans. GSA’s performance measure shows an increase in all types of office space costs since fiscal year 2015, and our analysis of FRPP and Occupancy Agreement data similarly found that overall office space costs have increased for the majority of agencies, some by as much as 10 to 15 percent. We found the approach GSA developed with OMB to calculate average cost per square foot for directly-owned and directly-leased office space to be reasonable because GSA used the best available data. However, we found that GSA’s and OMB’s approach for GSA-managed space understated the average cost per square foot. Specifically, we found that GSA understated the overall average cost per square foot for all agencies’ GSA-managed office space by $1.31 (4.7 percent) on average from fiscal years 2015 through 2018. Furthermore, we found that GSA’s and OMB’s method understated the average cost per square foot for 18 of the 23 agencies between 3 percent and 41 percent on average from fiscal years 2015 through 2018. Figure 2 illustrates the range of differences we found between GSA’s and OMB’s method and actual costs. GSA understated the average cost per square foot for GSA-managed space because it did not use readily available data on the actual costs agencies paid to GSA for office space each year. Instead, GSA used the “rental rate”, which reflects the cost per square foot that agencies paid in the month GSA accessed the data—usually September. This rate does not include all agency costs, such as costs for GSA’s fee. Using the monthly rental rate to calculate average cost per square foot can significantly affect the resulting measure because the rental rate can differ from month to month. According to GSA officials, this variation can occur for many reasons including rental incentives, credits, or one-time costs that are reflected in that particular month but do not apply in all months. To identify how GSA’s use of the rental rate affected the cost information GSA used to calculate the measure, we calculated costs using the rental rate (GSA’s method) and compared them to the actual annual costs in GSA’s data. We found that costs calculated using the rental rate were almost always lower than actual annual costs for agencies, sometimes by millions of dollars for a single space. This approach led GSA to exclude an average of $271 million in office space costs per year from its calculations during this time period. Moreover, by using this approach GSA did not include the costs for spaces that did not have a rental rate, even when agencies paid for those spaces during the fiscal year. In fiscal year 2018, GSA’s and OMB’s method excluded 405 GSA-managed office spaces that did not have a rental rate but that had a combined annual rental cost of $24.2 million. Example of the Effect of General Services Administration’s (GSA) and Office of Management and Budget’s (OMB) Method on Cost per Square Foot: National Aeronautics and Space Administration (NASA) GSA used the rental rate even though it tracks and can easily access actual annual costs in its Occupancy Agreement database because, in GSA’s view, the rental rate better reflects the real average cost of an office space. Officials said that the actual annual cost can represent partial year costs and that GSA did not want to skew the averages toward zero- or low-cost spaces. However, as demonstrated by our analysis, GSA’s use of the rental rate, rather than preventing GSA from skewing the average costs toward lower cost office spaces, actually resulted in an understatement of these costs. GSA and OMB’s method excluded about $31 million from the cost per square foot calculation. This difference was largely attributable to one office space, which had a rental rate of $44.67, much lower than the actual annual cost per square foot for that space, which was $97.98. Standards for Internal Control in the Federal Government state that agencies should use and externally communicate quality information— information that is accurate and complete—to achieve their goals. Understating the average cost per square foot for GSA-managed office space, which comprises two-thirds of agencies’ office space, has implications for federal efforts to efficiently manage space. First, using an inaccurate cost performance measure affects stakeholders’ and policymakers’ ability to accurately judge and oversee agencies’ progress toward reducing space costs. Second, because agencies use these data to judge their own performance and make decisions about how to efficiently manage their space, agencies are at risk of taking ineffective steps to manage their costs and achieve their goals. While Costs Are a Central Consideration When Making Office Space Decisions, Selected Agencies Balance Additional Factors GSA Prioritizes Federal Cost Savings When Obtaining Office Space for Agencies As the government’s principal landlord, GSA’s PBS emphasizes cost savings from a government-wide perspective when working with agencies. To facilitate this approach, PBS has established policies and tools that focus on early planning and cost analysis. For example, according to PBS officials, PBS generally begins planning and cost analysis 5 years ahead of expiring occupancy agreements and leases. As part of this planning, PBS analyzes project costs and cost savings, and considers opportunities to fill vacant federal space and improve a space’s efficiency by, for example, improving the utilization rate. PBS recommends projects—including consolidation, relocation, and renovation projects—to agencies based on its analysis. Though PBS officials said that PBS has the final decision-making authority regarding agencies’ space, they said PBS works closely with agencies to make collaborative decisions about office space changes. Officials also told us that early planning helps ensure that PBS and agencies have time to identify and select the most cost-effective project option. According to PBS officials, PBS developed a tool in 2018 to compare potential space projects based on, among other factors, market and move costs. Officials told us that this tool is a way to ensure that PBS analyzes all projects consistently to identify the most cost-effective option for the federal government. They also told us that they use this tool iteratively throughout the planning process and that the cost analysis becomes more refined as PBS coordinates with agencies and identifies specific spaces as options. For high-cost projects, PBS also performs cost analysis of alternative options, including comparing each alternative’s net present value. However, PBS officials said that there are instances when they do not perform GSA’s standard cost analysis because it is not necessary. Specifically, PBS does not conduct this analysis when there is a space option that clearly aligns with its priorities. For example, PBS did not conduct its standard cost analysis for two of our 13 selected projects because both agencies moved into vacant federally-owned or leased space, moves that presented clear benefits to the federal government, according to PBS officials. However, GSA’s government-wide emphasis may not always result in cost savings for individual agencies, and in some cases, what is most cost-effective for the federal government does not always align with what is most cost-effective for individual agencies. For example, when Education relocated its San Francisco office to vacant federal space in fiscal year 2016, GSA’s analysis of the relocation showed that it cost Education slightly more than one other option, but was the lowest cost option for the federal government because it allowed GSA to fill space the federal government was already paying for. Selected Agencies Conduct Cost Analysis When Making Office Space Decisions PBS officials told us that they expect their analysis to heavily influence agencies’ office space decisions and do not expect agencies to perform their own cost analysis for these decisions, but said some agencies do conduct such analysis. We found that all five of our selected agencies— Education, GSA in the space that it occupies, IRS, Labor, and NIH— conducted some type of cost analysis to inform office space changes. We found that some agencies include such analysis as part of their routine policies and procedures, while others conducted analysis for specific projects as needed. Percentage Change in Selected Agencies’ Square Footage and Cost, Fiscal Year 2015 through 2018 Cost plays an important role in agencies’ office space decision-making processes, which can influence office space changes over time. From fiscal year 2015 through 2018, our selected agencies’ office space costs and square footage changes varied, and square footage and cost changes did not always have the same trend. Education: A senior Education official said that the Department carries out various cost analyses when making office space decisions. For example, the official told us that Education conducts various cost analyses to identify the most cost-effective options for the Department. To manage agency office space costs, the Education official told us that Education focuses its planning process on expiring leases, high-cost leases, and low-cost projects with a large and rapid return on investment. We found that Education conducted such analysis when carrying out its Washington, D.C., consolidation project in fiscal year 2016. The official told us that Education had to quickly reduce agency costs and decided to do so by reducing space as opposed to furloughing employees. After reviewing their space and conducting rent savings analysis, Education decided to consolidate its staff from three different office buildings in Washington, D.C., into excess space it had in two other buildings. According to Education’s analysis, this consolidation reduced the annual rent for its Washington, D.C., offices by about 19 percent. GSA: GSA considers cost when it identifies and evaluates potential projects for the space it occupies. Specifically, GSA requires its offices to use a project template to routinely collect rent savings and payback period information on almost all potential projects. In fiscal year 2015, GSA also conducted a portfolio-wide review of GSA-occupied space during which it identified potential projects based, in part, on rent savings and payback period analysis. Through this review, GSA identified and recommended 15 projects that would reduce 964,000 rentable square feet, use space more efficiently, and save up to more than $17 million in rent over 5 years. GSA officials told us GSA prioritized its implementation of the recommendations by starting with the projects that had the largest space reduction and rent savings. For example, in fiscal year 2015, GSA decided to consolidate two of its Atlanta offices into one smaller, more efficient space. GSA determined that this consolidation could reduce its rentable square feet by 150,000 square feet (52 percent) and save $4.1 million in annual rent. IRS: IRS has developed multiple tools to analyze the cost of project options based on market data and upfront costs, among other information. For example, IRS developed its Return on Investment Calculator to help determine whether it is most cost-effective to stay in place, downsize, or relocate when a lease or occupancy agreement expires. The tool compares the return on investment for moving versus staying by using cost information, such as market data, travel, furniture, and rent costs. The IRS also uses a project estimating and tracking tool called the Space, Time & Resources Tool to create general cost estimates for a variety of project types, evaluate alternatives, and according to IRS officials, contribute to the development of plans for expiring leases. This tool uses preliminary space and cost estimates for needs such as facilities, security, and information technology to determine each project’s return on investment and potential annual rent savings. IRS officials told us that they may use the analyses from some of the tools to make a case to GSA in support of IRS’s preferred alternative or lowest-cost option, if necessary. Labor: Labor considers cost in its space policies and procedures, and we found that Labor sometimes conducted its own cost analysis to identify opportunities to achieve savings. A senior Labor official told us that Labor conducts an informal, broad review of its space that allows the Department to identify opportunities for cost savings. The official told us Labor looks for opportunities to co-locate staff from multiple agencies, and according to its space management policy, co-location allows Labor agencies to share support spaces which can reduce overall square footage and administrative costs. The official said that through review and analysis, Labor identified an opportunity to consolidate staff from multiple offices in Washington, D.C., into a single space in fiscal year 2016. Labor’s analysis indicated that the consolidation could save the Department an estimated $789,000 in annual rent in fiscal year 2014, the year the project began. The Labor official told us that Labor is focused on early planning to identify opportunities for cost savings and space reductions, and is beginning a new initiative to review and plan for projects up to 6 years in advance of lease or occupancy agreement expirations. NIH: We found that NIH routinely considers costs when it evaluates potential projects. Specifically, when NIH considers potential projects, it collects information on costs, such as long-term budget effects. A senior NIH official also told us that NIH works closely with GSA to conduct cost analysis, including analysis for high-cost projects that NIH submits as part of its funding requests to Congress, such as analysis of rent costs over the full lease term. Through this analysis, NIH has been able to identify lower-cost space options to meet its needs. For example, NIH determined that it could save $3.6 million annually and $53 million over 15 years by locating to office space that was closer to its other offices because it would decrease the time employees spent traveling between spaces. Additionally, the NIH official said one of NIH’s goals includes co-locating agency offices and staff to improve efficiency and reduce costs, and NIH routinely identifies opportunities to co-locate as part of its project selection process. For example, when NIH consolidated staff in Maryland into two buildings on one campus, the official said that NIH chose consolidation because it offered NIH an opportunity to operate more efficiently. All Selected Agencies Consider Factors beyond Cost When Making Office Space Decisions We found that while all selected agencies consider cost when making office space decisions, they generally do not make decisions based on cost alone. We have previously reported that cost, mission, and external considerations influence agencies’ efforts to manage, reduce, or change their space. We found that all five of our selected agencies balance these factors, as well as workforce considerations, with cost, and with each other, when making office space decisions. These factors may not always align with each other and the extent to which these factors influence space decisions and their cost implications can vary for each specific office project need. Mission and Goals: We found that all selected agencies considered and balanced their mission or goals with other factors, such as cost, when making office space decisions. Mission: Agencies’ missions are an important factor and can work in tandem, or be in tension, with agencies’ efforts to achieve cost savings. For example, we found that when GSA decided in fiscal year 2014 to renovate and reduce space in its Chicago, IL, office, it considered, among other factors, how this project supported GSA’s government-wide mission to make federal space available to agencies. By reducing space in the existing location by fiscal year 2017, GSA determined it could reduce its annual rent in Chicago by 40 percent and provide more than 50,000 square feet of federal space to other agencies. On the other hand, a senior IRS official told us that because enforcement needs—a central part of IRS’s mission—are constantly shifting to different parts of the country, IRS may not always be able to enter into long-term lease agreements, which are generally more cost-effective. Goals: We found that agencies’ goals could be complementary to or in conflict with their efforts to reduce cost. A senior NIH official told us that NIH’s offices are currently widely dispersed and that NIH has a goal of “making the crumbs into a loaf” by co-locating different offices as leases expire. The NIH official told us that co-locating can facilitate cost savings because it allows NIH to operate more efficiently by, for instance, reducing shuttle services and sharing common areas and services. For example, one NIH project in Bethesda, Maryland will consolidate 11 expiring leases in five locations into three leases in a two-building campus that, according to GSA analysis, will reduce rent by 42.5 percent per year for 15 years. Conversely, some of our selected agencies noted that agency goals do not always align with cost savings. For example, both Labor and IRS officials told us that they may not pursue their space utilization goals if it costs too much to renovate space to meet their desired space per person. Additionally, the senior NIH official told us that NIH has previously moved to office space that did not meet its utilization rate goals because it was able to achieve larger cost savings by moving to a space in an area with lower rent than the area it previously considered. Workforce Impact: We found that all five of the selected agencies considered how office space decisions could impact their workforce, and a couple of agencies told us that they balance this consideration with costs, along with agency mission and goals. Commuting time: Officials from three selected agencies noted that changes in employees’ commuting time can influence what office space to select. For example, Education is scheduled to relocate its Dallas regional office in fiscal year 2020. A senior Education official told us that Education chose a space that has close proximity to the current space, in part, because the relocation will have minimal impact on employees’ commute. The official also said that even if federally- owned office space further away became available, Education may not move there if it would be difficult for staff to get to. Similarly, IRS’s business case to consolidate several offices in the Cincinnati, OH, area into one office starting in fiscal year 2015, analyzed how the project would affect IRS employees, including the impact on employees’ commute, ability to park, and the effect on employees’ income taxes. Employee Morale and Productivity: Several selected agencies noted that reducing the amount of space per person can affect employee morale and productivity. According to GSA’s strategic goals, improving space utilization by, for example, reducing the amount of space per person can help the federal government achieve cost savings. A senior Education official told us that when redesigning Education’s Washington, D.C., offices, which reduced the amount of space per person, leadership engaged in a substantial employee outreach effort to understand how these changes affected employees and to build employee support for the changes. The official also said Education took into account upfront costs for tools to improve employees’ experience. For example, the official said that the Department invested in noise cancelling headphones to improve the employee experience, which was a small cost compared to the cost for office space. To ensure that reductions are not having a negative impact on its employees, GSA developed a survey that it sometimes distributes both before and after making space changes. External Factors: Officials from four of the five selected agencies said external factors, such as federal priorities, statutes, regulations, and policies can influence their office space decisions. In some cases, these factors did not complement efforts to reduce costs. Federal Priorities: Federal goals and priorities can influence agencies’ space decisions, and these requirements may not align with efforts to reduce costs. For example, in fiscal year 2016, GSA relocated its regional office in New York City from federally-owned to federally- leased space in the World Trade Center. Though GSA considered cost, the federal government’s commitment to move into the World Trade Center after the terrorist attacks on September 11, 2001, influenced this decision, which resulted in increased costs for GSA. Statutes, Executive Orders, and Regulations: Some agencies told us that statutory requirements, directives, and regulations can influence their space decisions, and may or may not align with efforts to reduce costs. For example, a senior IRS official told us that a 1978 Executive Order, which requires that agencies with a mission need to locate in an urban area first consider moving to a central business district, might result in IRS moving to higher-cost neighborhoods. A senior official from the Department of Health and Human Services also told us that locating office space in the central business district of urban areas can be more expensive, but that the Department often does so because of the Executive Order. GSA policies: GSA policies on space management can also affect agencies’ office space decisions. A senior Labor official told us that the Department is currently reducing space in its Chicago, IL, regional office but the ability to do so is dependent on whether Labor can return the space to GSA. GSA policy states that agencies occupying space acquired from PBS can return space within a certain time frame if, among other requirements, the space is categorized as cancelable and is in marketable blocks based on the location, usage, and size of the space. If the space does not meet these criteria, an agency can return the space to PBS but is still responsible for paying rent and other costs associated with the space until the occupancy agreement or lease expires. Conclusions Even as agencies have intensified their focus on better space management in an effort to save taxpayer dollars, overall, the cost for office space continues to rise. Using the best data available to assess space options and trade-offs is critical. GSA’s and OMB’s cost per square foot performance measure could provide agencies a good way to assess their costs and track cost trends, particularly as agencies’ efforts continue to evolve beyond reducing their footprints toward optimizing their space. However, the measure is only as good as the approach and data used in the calculation. Because GSA’s and OMB’s cost per square foot performance measure is not using actual cost information for GSA- managed space, GSA and OMB are understating the average cost per square foot for a significant portion of square footage. This inaccurate information could adversely affect agencies’ and stakeholders’ understanding of RTF results. As the RTF policy ends in fiscal year 2020 and agencies look toward the next initiative, having the most transparent and accurate information on the results of agencies’ efforts to date can inform new strategies and tools to help agencies continue and expand upon their efforts to manage their property more efficiently and ultimately save money. Moreover, having accurate information on agencies’ real property costs will continue to be important in future initiatives to efficiently manage federal real property. Recommendation The Administrator of the General Services Administration (GSA), in coordination with the Director of the Office of Management and Budget, should ensure that the average cost per square foot performance measure for GSA-managed space is calculated using actual cost information. (Recommendation 1) Agency Comments We provided a draft of this report to GSA, OMB, and the Secretaries of the Departments of Labor, Education, the Treasury, and Health and Human Services for review and comment. In GSA’s written comments, which are reproduced in appendix II, GSA agreed with our recommendation. OMB did not provide comments, but GSA stated in its comments that it is working with OMB to develop a plan to address our recommendation. The Departments of Labor, Education, the Treasury, and Health and Human Services told us that they had no comments on the draft report. We are sending copies of this report to the appropriate congressional committee; the Administrator of GSA; the Director of the OMB, and; the Secretaries of the Departments of Education, Health and Human Services, Labor, and the Treasury. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning the report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix III. Appendix I: Objectives, Scope, and Methodology This report discusses: (1) the extent to which Reduce the Footprint performance measures reflect changes in civilian Chief Financial Officers Act agencies’ (CFO Act agencies) office space costs, and (2) how selected agencies considered costs in office space decisions. To obtain background information on both of our objectives, we reviewed literature including the Office of Management and Budget’s (OMB) and General Services Administration’s (GSA) memos and guidance governing the Reduce the Footprint (RTF) policy, the Real Property Efficiency Plans (Efficiency Plans) agencies submit to OMB and GSA annually as part of RTF, and relevant regulations and statutes. We also examined information GSA uses to track RTF progress, including public data on agencies’ square footage changes. We assessed the reliability of these data by conducting electronic testing, reviewing prior GAO assessments of reliability, and interviewing agency officials. Based on this assessment, we determined these data to be reliable for the purposes of describing changes in agencies’ square footage. Additionally, we reviewed previous GAO and GSA Inspector General reports describing the federal government’s efforts to use its property more efficiently and reduce costs. To address our first objective, we analyzed federal data on office space square footage and costs, and reviewed the two RTF cost measures GSA developed with OMB to track and report agency performance: (1) estimated cost avoidance and (2) changes in average cost per square foot. To identify changes in agencies’ office space costs, we analyzed square footage, and rent, operations, and maintenance costs from Federal Real Property Profile (FRPP) data submitted by agencies and GSA’s Occupancy Agreement data. Office space costs in both datasets may contain costs for additional items beyond rent, operations and maintenance, such as tenant improvements, but we determined that the inclusion of these costs did not preclude us from using these data to describe agencies’ costs as the data reflect the total annual costs to agencies. Though agencies may report different types of square footage in FRPP, as specified by GSA’s FRPP reporting guidance, we analyzed rentable square footage where available because it represents the total space an agency pays for. We limited our analysis to the CFO Act agencies because these agencies are subject to RTF requirements, but we excluded the Department of Defense (DOD) from our analysis because of GSA concerns about the reliability of DOD’s data. We analyzed data from fiscal year 2015, the year RTF began, through fiscal year 2018, the most recent year for which data were available. To assess the reliability of these data, we conducted electronic testing, reviewed GSA documentation and prior GAO data reliability assessments, and interviewed GSA officials. Based on our assessment, we determined that both the FRPP and Occupancy Agreement data were reliable for the purposes of describing changes in agencies’ office space costs and square footage. To analyze the extent to which the cost performance measures reflected agencies’ cost changes, we reviewed the methodologies GSA developed with OMB for the cost performance measures and GSA’s calculations, interviewed OMB and GSA officials regarding the measures, and replicated one of the methods. We also reviewed previous GAO assessments of the estimated cost avoidance methodology. To determine how GSA’s and OMB’s approach to calculating the average cost per square foot affected the results for GSA-managed space, we used GSA Occupancy Agreement data to compare the average cost per square foot based on GSA’s and OMB’s method to the average cost per square foot using actual costs. We compared our analysis of the average cost per square foot method to Standards for Internal Control in the Federal Government, which state that agencies should use and communicate quality information—information that is complete and accurate—to inform decisions. To address our second objective, we selected five agencies—the Department of Education (Education), GSA, the Department of the Treasury, the Department of Labor (Labor), and the Department of Health and Human Services—to review in depth. Within the Departments of the Treasury and Health and Human Services, we further selected the Internal Revenue Service (IRS) and National Institutes of Health (NIH) respectively because we determined that real property within these Departments is managed at the agency level. Using FRPP and Occupancy Agreement data on agencies’ costs and square footage, we selected agencies based on factors such as office space portfolio size, whether the agencies obtain office space themselves or through GSA, and changes in portfolio cost and square footage. We selected agencies for variety but weighted our selection toward agencies with larger absolute changes in cost and square footage. Our selection is not representative, and these agencies’ experience is not generalizable to all agencies. To gain insights into how these agencies consider costs when making office space decisions, we reviewed selected agencies’ real property management policies, and interviewed agency officials. We then analyzed this information to identify common themes across selected agencies. To further understand how agencies implemented their policies and the factors agencies considered when making specific office space decisions, we also selected 13 office space projects these agencies undertook from fiscal year 2015 through fiscal year 2018. We identified potential projects based on selected agencies’ annual Efficiency Plans, agency project data, and interviews with agency officials. We selected specific projects based on factors such as cost, location, changes in square footage, and project type. We chose projects with a range of types and locations to better understand agencies’ decision-making process for different kinds of projects. However, we selected only projects with a cost of $1 million or more and with larger changes in square footage because these projects have more effect on overall federal and agency costs and portfolios. Because our intent was to understand the factors selected agencies considered when deciding on projects, our selection includes both completed projects and projects that were ongoing as of spring 2019, when we collected our data. The projects we selected are not representative of all projects or agencies, and are not generalizable. We analyzed project documentation and interviewed agency officials about each project. We also reviewed federal data for some projects to identify the changes in agencies’ square footage and costs before and after projects. To further address our second objective, we reviewed GSA Public Buildings Service (PBS) policies and guidance, and interviewed PBS headquarters officials to understand PBS’s role in agencies’ office space decisions, including how PBS considers costs when helping agencies obtain space. We also reviewed PBS cost analyses, such as net present value alternatives analysis and move-stay analysis, for most of our selected projects. We conducted this performance audit from November 2018 to December 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the General Services Administration Appendix III: GAO Contact and Staff Acknowledgments GAO Contact: Staff Acknowledgments In addition to the contact named above, Maria Edelstein (Assistant Director), Katherine Raymond (Analyst-In-Charge), Eli Albagli, Ricki Gaber, and Minette Richardson made significant contributions to the report. Also contributing to this report were Melissa Bodeau, Josh Ormond, Kelly Rubin, Terence Lam, and Crystal Wesco.

The government's RTF policy has intensified federal efforts to reduce office space and save money since 2015. GSA and OMB report key cost performance measures but questions exist about how well these measures reflect agencies' efforts. GAO was asked to review how federal real property costs have changed since 2015. This report examines (1) the extent to which performance measures reflect changes in civilian CFO Act agencies' office space costs and (2) how selected agencies considered cost in their office space decisions. To conduct this work, GAO analyzed federal data on office space square footage and cost changes for the 23 civilian CFO Act agencies from fiscal years 2015 through 2018, and reviewed GSA's and OMB's calculations for cost performance measures. GAO selected five agencies and 13 of their office space projects as non-generalizable case studies based on several factors, including those with larger space and cost changes. GAO reviewed the selected agencies' policies and project documentation, and interviewed agency officials. The Office of Management and Budget (OMB) issued the Reduce the Footprint (RTF) policy in 2015 to promote the more efficent use of federal space. The General Services Administration (GSA) and OMB track and report two RTF cost performance measures: estimated costs avoided and average cost per square foot. GAO found that the method for estimating costs avoided was reasonable. However, the average cost per square foot was not accurate for the federally-owned and leased office space GSA manages for agencies. Specifically, GAO found that from fiscal years 2015 through 2018 the actual average cost per square foot for this space was, on average, $1.31 per square foot higher than the costs GSA and OMB reported for the 23 civilian agencies subject to the Chief Financial Officers (CFO) Act. The actual cost per square foot was higher for 18 out of 23 of these agencies (see figure). Because GSA and OMB did not use readily available actual cost data, their method, which is based on 1 month's data, excluded an average of $271 million per year in costs over this period. Consequently, stakeholders and agencies do not have accurate information to assess agencies' performance or help manage their space decisions. Note: This information covers the 23 Civilian Chief Financial Officers Act agencies. While selected agencies considered costs when making office space decisions, they balanced other factors as well. As the federal government's principal landlord, GSA obtains space for many agencies. In so doing, it emphasizes federal cost savings, which may not lead to agency savings. For example, GSA prioritized filling unoccupied federally-managed space even if it was more costly to an agency than another option. The selected agencies also reported that factors such as mission, workforce needs, and external factors are important to consider and balance as well. For example, a senior official from the Department of Education said that effects on employees' commutes are an important factor in its space decisions, and that it weighs the impact of potential office locations on the Department's workforce against the cost of the space.

CRS_R46143

Introduction The Office of Federal Student Aid (FSA) within the U.S. Department of Education (ED) is the primary entity responsible for the administration and oversight of the federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329, as amended). As such, FSA is the largest provider of postsecondary student financial aid in the nation, performing functions that are akin to those of large banks, to which it has sometimes been compared. In FY2019, FSA oversaw the provision of $130.4 billion in Title IV aid to 11.0 million students attending approximately 6,000 participating institutions of higher education (IHEs). In addition, in FY2019, FSA managed a student loan portfolio encompassing 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. FSA is a performance-based organization (PBO) pursuant to Section 141 of the HEA. Conceptually, PBOs are intended to be results-driven organizations that have clear objectives and measurable goals designed to improve an agency's performance and transparency. PBOs are led by chief executives who are personally accountable for meeting measurable goals within the organization. In exchange, PBOs are granted greater discretion than other government agencies to operate more like private-sector companies, with more control over the budget, personnel decisions, and procurement. FSA was established under the Higher Education Amendments of 1998 ( P.L. 105-244 ) as the federal government's first PBO. This was done in response to the belief that ED needed restructuring to improve federal student aid delivery. In recent years, FSA has come under scrutiny for its oversight of IHEs participating in the student aid programs and contracted student loan servicers, its perceived lack of transparency to stakeholders, and its accountability to and engagement with stakeholders. This report provides information about the structure and organization of FSA, the nature of the work it performs, and its characteristics as a PBO. Additionally, the report attempts to synthesize some challenges experienced by FSA that have received considerable attention in recent years. There has been considerable interest in this set of issues from the 116 th Congress. As Congress contemplates the reauthorization of the HEA, it might examine some of the issues raised by these critiques and the way FSA's organization as a PBO may affect congressional goals and policies. This report begins by discussing the HEA provisions that distinguish FSA from other types of federal agencies. This is followed by a discussion of the legislative history of the creation of FSA as a PBO and of HEA Title IV programmatic changes that may affect its operations. Next, the report describes the current operations and structure of FSA. Finally, it discusses several issues related to FSA's operations and how they may relate to its structure as a PBO. The issues presented have received recent congressional and stakeholder attention and have been identified in reviews of FSA's operations. There have been numerous recent reports that have examined aspects of FSA's operations. Appendix A provides a bibliography of recent Government Accountability Office (GAO) and ED Office of Inspector General (IG) reports relating to FSA's operations. Appendix B provides a list of selected acronyms used in this report. FSA as a PBO: Distinctions from Most Agencies Federal programs are usually carried out by or through agencies that are established in statute, with structural refinements established through directives issued by the agency head. Over time, Congress has created governmental and quasi-governmental entities with varying characteristics to address diverse needs in different contexts. Most federal agencies in the executive branch, however, are designed to be directly or indirectly accountable to the President. Furthermore, most federal agencies must comply with general management laws regarding financial management, procurement, information management, personnel, and other administrative practices. As a PBO, FSA has organizational features that are distinct from most other departmental subunits in the executive branch of the federal government. As the name suggests, PBOs are designed to have a greater focus on results—outcomes rather than outputs. To this end, they are required to have clear objectives and measurable goals. PBO leaders are to be held professionally accountable for meeting measurable goals within the organization, with continued tenure and a portion of compensation linked to these measures of success. In exchange, these organizations and leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies. Key statutorily established features of FSA include, among others, the appointment and compensation arrangements for its chief operating officer (COO) and other senior managers, exemptions from certain government-wide personnel and procurement requirements, and greater independence from political pressure in the exercise of its functions. FSA Leadership Most high-level subunits within departments are led by political appointees who are appointed by the President or the Secretary and serve at their pleasure for an indefinite term. Political appointments are not subject to the same requirements as career appointments to the Senior Executive Service (SES) or appointments to the competitive service. Depending on the authority used to make a political appointment, compensation will usually be determined by the Executive Schedule, the SES pay system, or the General Schedule. Consistent with the PBO framework, the HEA contains provisions aimed to enable FSA to attract leadership with demonstrated ability and expertise, incentivize leadership to meet performance goals, and shield FSA leadership from political pressures. FSA is led by a COO, whom the Secretary of Education appoints for a term of three to five years. The appointment is to be made based on "demonstrated management ability and expertise in information technology (IT), including experience with financial systems, and without regard to political affiliation or activity." The COO's work and priorities are governed by a performance agreement with the Secretary that includes measurable organizational and individual goals. The COO may be reappointed to additional terms of three to five years if her or his performance is satisfactory. The HEA also specifies the manner in which a COO may be removed: REMOVAL.—The Chief Operating Officer may be removed by— (A) the President; or (B) the Secretary, for misconduct or failure to meet performance goals set forth in the performance agreement in paragraph (4). The President or Secretary shall communicate the reasons for any such removal to the authorizing committees. The law appears to authorize the President to remove the COO at will. In addition, the Secretary may remove the COO "for misconduct or failure to meet performance goals set forth in the performance agreement." Either the President or the Secretary must provide their reasons for removal to the authorizing congressional committees. The COO's compensation includes basic pay, which is tied to the pay levels of the SES, and an annual bonus not to exceed 50% of the basic pay. The senior managers of FSA are appointed by the COO without regard for the competitive service appointment provisions of Title 5 of the U.S. Code . The work and priorities of these senior officials are governed by annual performance agreements with the COO that include measurable organizational and individual goals. Senior managers serve at the pleasure of the COO or, in the event that the COO position is vacant, the Secretary. As is the case for the COO, the compensation of senior managers includes basic pay, which is tied to the pay levels of the SES, and an annual bonus. The total annual compensation of a manager may not exceed 125% of the maximum basic pay for the SES pay system. FSA Personnel Flexibilities Unless otherwise specified in law, executive branch employment is governed by the civil service laws of Title 5 of the U.S. Code . Consistent with the PBO framework, HEA includes provisions that give FSA more flexibility in the staffing, classification, and pay of its employees. The statute stipulates that FSA shall not be subject to any cap on the number or grade of its employees. FSA and the Office of Personnel Management (OPM) are directed to jointly develop and implement personnel flexibilities that are consistent with Title 5 of the U.S. Code . In addition, the COO is authorized to establish technical and professional positions that are not subject to the provisions of Title 5 pertaining to competitive service appointments. The HEA provision places covered positions in the excepted service, under which FSA could use alternative hiring procedures that relax the traditional competitive hiring procedures in Title 5 (such as application of veterans' preference, public notice, and/or modified qualification standards). FSA is directed to develop a performance management system consistent with Title 5 that establishes goals or objectives for employees. FSA Procurement Flexibilities When executive branch agencies need to acquire goods or services to carry out their functions, they are required to comply with the Federal Acquisition Regulation (FAR) and applicable procurement statutes. The PBO procurement provisions of HEA are consistent with this overarching requirement while also permitting certain flexibilities. They state, "Except as provided in this section, the PBO shall abide by all applicable Federal procurement laws and regulations when procuring property and services." The procurement flexibilities provided to the PBO include, for example, those related to the use of experts and consultants. Whereas agencies are generally constrained in obtaining such services by limitations and conditions of Title 5 of the U.S. Code —such as requirements for a specific appropriation or other statutory authorization and for reporting to OPM on such actions—the PBO may obtain such services without regard to this provision. In another example of procurement flexibility, HEA provides the PBO with authority to "use a two-phase process for selecting a source for a procurement of property or services." In such a process, an agency first issues a general solicitation and then issues a second solicitation with more specific requirements to a limited group of vendors from among respondents to the first solicitation. In contrast, the FAR provides for the use of this authority under limited circumstances. In a final example, the circumstances and criteria under which the PBO may pursue a procurement with only one company differ from those followed by most agencies. Whereas in most instances the FAR allows "sole-source" procurement only where the needed services or supplies are available from only one responsible source and no other substitute will meet the agency's needs, FSA may use "single source" procurement to obtain certain systems where multiple vendors could supply the product but one vendor is "the most advantageous source for purposes of the award." FSA Independence As noted above, most high-level subunits within departments are led by political appointees who serve at the pleasure of, and under the direction of, the Secretary. In some cases, however, subunits are statutorily structured to have some independence from political leadership. A variety of structural mechanisms in different combinations have been used over time to establish such independence. Consequently, agencies vary in their level of structural independence from political leadership. In addition, notwithstanding these structural features, a specific leader of such a departmental subunit might elect to adhere to the Secretary's agenda for other political or policy reasons. Although HEA explicitly states that FSA is subject to the direction of the Secretary, the agency is afforded a greater level of independence from political leadership than most departmental subunits in the executive branch. This is due to HEA provisions that pertain to the appointment and removal of the FSA COO, as well as those that stipulate FSA's independence in carrying out certain functions. As noted above, the COO's appointment is to be made for a three- to five-year term on the basis of specified abilities, expertise, and experience "without regard to political affiliation or activity." Although the COO may be removed from office before the end of a term, the statute includes atypical specifications of the circumstances and manner in which this may occur. The statute also specifies that FSA "shall exercise independent control of its budget allocations and expenditures, personnel decisions and processes, procurements, and other administrative and management functions." Although this authority is subject to the direction of the Secretary, it is not a common specification for a departmental subunit. Establishment of a PBO to Administer Federal Student Aid FSA was established as the federal government's first PBO in 1998. When Congress established this structure, it departed from conventional organizational arrangements that were then in use within the federal government. The PBO model was drawn from government innovations in Great Britain in the 1980s and 1990s. It was then developed and promoted for American governmental use by the National Partnership for Reinventing Government (NPR), a major Clinton Administration governmental reform initiative. The Administration's rollout of the PBO touted the model's potential benefits and portrayed it as a commonsense development in the effort to streamline the federal government and make it more responsive to its "customers." The NPR initiative, led by Vice President Al Gore, aimed to improve federal government performance by reorganizing agencies and processes to be guided by market principles and incentives. NPR's first report put forth hundreds of recommendations. These recommendations were intended to lead to better government service delivery and greater "customer" satisfaction. In general, this would be accomplished through the streamlining of personnel practices, procurement, and other government operations; improvement of management tools and incentives; and promotion of efficiency and economy in administration. Administration-endorsed PBO-related legislation was introduced in late 1995, but it was not until early 1996 that the Vice President introduced the PBO concept as a major new focus of the ongoing NPR. The aim was to improve government service delivery by implementing certain functions through the use of business-like practices and incentive structures. Agencies reorganized as PBOs would be freed from adherence to certain procurement and civil service laws and would, at the same time, develop systems of performance incentives and accountability for results. In advocating for the creation of federal PBOs, Vice President Gore stated: Government agencies need to change their incentives and internal cultures to shift from a focus on process to a focus on customers and achieving results. They need to become more responsive to citizens, yet account for program costs and safeguard broader public interests. This can be done by creating performance-based organizations (PBOs) that set forth clear measures of performance, hold the head of the organization clearly accountable for achieving results, and grant the head of the organization authority to deviate from governmentwide rules if this is needed to achieve agreed-upon results. PBOs involve structural changes as well as changes in incentives affecting federal employees. The NPR identified seven candidates for conversion, but none has been formally converted into a PBO. However, one of the entities targeted for conversion, the Patent and Trademark Office, was statutorily reorganized and given many PBO-like structural characteristics. Because it has these features, some observers have referred to it as a PBO. Though not contemplated as a potential PBO within the scope of the initial NPR list, FSA represented the first organization aligned with the PBO framework outlined in the NPR. In addition to FSA, one other entity—the Air Traffic Organization of the Federal Aviation Administration—has been explicitly established as a PBO in statute. Legislation to Establish a PBO to Administer Federal Student Aid Prior to the establishment of FSA, federal student loan programs were administered by the Office of Student Financial Assistance Programs (SFAP), a unit within ED's Office of Postsecondary Education (OPE). As discussed below, in the mid-1990s, leadership of these programs had temporarily become divided between SFAP and a unit in the Secretary's office that had been established for the purpose of accelerating the implementation of the Direct Loan program. Although the Higher Education Amendments of 1998 ( P.L. 105-244 ) established FSA's PBO structure, interest in converting SFAP into a PBO seems to have arisen as early as 1996 amid growing concerns within Congress and ED that the student financial aid programs were "severe[ly]" mismanaged. The model was attractive to some congressional advocates of SFAP reform, as it appeared that its design features might address some of the agency's perceived problems while maintaining the financial assistance function within ED. Moreover, it appears that the possibility of establishing a PBO within ED to implement these programs was under consideration by the Secretary prior to Vice President Gore's introduction of the new organizational model in 1996, which, as described earlier, did not include SFAP as a candidate for conversion into a PBO. As the Clinton Administration was introducing the PBO model, congressional committees were monitoring and expressing concern about difficulties in the management of the student financial aid programs at ED. At a July 1996 hearing, ED's IG reported on a number of difficulties at ED, including program leadership being divided between OPE and the Senior Advisor to the Secretary for Direct Lending, poor coordination and communication between these offices, poor OPE staff morale, and a shortage of employees qualified in IT and financial analysis. Related problems included an interruption in efforts to improve the existing Federal Family Education Loan program, growth in the backlog of institutional cohort default rate appeals, confusion in the student loan community about where to find help for technical questions, concerns about the monitoring of financial statements and the procurement of needed IT, and difficulties with the processing the Free Application for Federal Student Aid (FAFSA). In a February 12, 1996, memorandum, the Secretary reportedly expressed an interest in establishing SFAP as a PBO. ED's IG testified in July of that year that such a transition appeared to be premature but that certain changes—such as leadership from a highly qualified chief executive officer to provide a stable, long-term leadership and consistency of purpose and a significant, focused reengineering effort—could be made to SFAP to prepare it for such a transition. In May 1997, the Advisory Committee on Student Financial Assistance (ACSFA) reported that implementation of financial aid programs was plagued by staff without the necessary experience, outdated computer systems and "a web of large, uncoordinated, uncompetitive contracts which fail to deliver on time and produce unacceptable cost overruns." ACSFA recommended restructuring the delivery of federal student aid under a PBO and reengineering Title IV systems and contracts, two processes the committee asserted were closely linked. During a July 1997 hearing, the Assistant Secretary heading OPE testified that the Administration was reviewing the PBO model among several different organizational modifications that might improve management of federal student assistance programs. By March 1998, the Secretary was voicing his support specifically for the PBO approach, stating that such a conversion would enhance ED's flexibility with regard to potential management and procurement reforms and allow it to more efficiently deliver student aid yet also hold it accountable for results and allow the Secretary to maintain control of policy. In September 1997, the chair and ranking member of the House Committee on Education and the Workforce subcommittee with jurisdiction over higher education policy introduced a standalone bill to establish a PBO within ED to manage the information systems associated with Title IV programs. In his introductory remarks, the chair noted problems with federal student aid information systems and financial statements before asserting, "A customer-focused, performance-based organization within the Department, run by an experienced Chief Operating Officer, can take the steps necessary to properly reengineer the current systems and contracts." Provisions from this bill were included in the HEA reauthorization bill as reported by the committee in April 1998. The Senate Committee on Labor and Human Resources reported out its main bill for HEA reauthorization in May 1998. This bill included provisions that were "developed in cooperation with the administration" to establish a federal student aid-related PBO in ED. The role of the PBO that would have been established by this legislation was arguably broader than that in the House committee-reported measure. The PBO established in the House bill would have been "a discrete management unit responsible for managing the information systems supporting" Title IV programs, whereas the Senate bill would have empowered the PBO "to administer various functions relating to student financial assistance programs authorized under" Title IV. Text from the committee reports concerning the PBO sections of the reauthorization legislation provides a snapshot of the committees' perceptions about the management of financial aid distribution programs by ED at the time. Report language also laid out the committees' intentions for and expectations of this change in organizational structure and management paradigm. Both the House and Senate committees of jurisdiction appeared to be concerned with perceived management problems at ED. The House Committee on Education and the Workforce discussed the prevalence and persistence of IT problems and their apparent impact on the ability of ED to deliver student aid economically, effectively, and efficiently. Specifically, the committee noted ED's limited progress in integrating numerous data systems despite legislative mandates; the tripling over five years of ED's budget for student aid information systems; and the fact that even with significant expenditures, student aid systems required dozens of paper forms and experienced "needless" process delays and breakdowns. The Senate Committee on Labor and Human Resources described a more general and overlapping set of issues related to the need to improve the administration of Title IV aid and problems regarding the Direct Loan Consolidation program, the printing of the FAFSA, and reports that ED was falling significantly behind in its efforts to become Year 2000 compliant. Both the House and Senate committees intended for the establishment of a PBO organizational structure to address the management problems they had identified. For example, the House Committee on Education and the Workforce noted that the purposes of the proposed change were to increase effectiveness, economy, and efficiency by giving administrators greater management flexibility while requiring greater accountability for results. The committee also expected that a PBO structure would accomplish the following aims that were specifically delineated in the HEA: Improve service to program participants, Reduce the costs of administering the programs, Increase accountability, Provide greater flexibility in management and administration of the programs, and Integrate the information systems that support the federal student aid programs. In doing so, the committee stated: The Committee firmly believes that a customer-based, Performance-Based Organization within the Department, operated by an experienced Chief Operating Officer can take the necessary steps to properly reengineer the current systems and contracts…. The Committee also believes the creation of a PBO will result in a more efficient, effective, less expensive and less bureaucratic financial aid delivery system. The end result should be a system that is easy for students and parents to use and one that ensures that students have the information they need to select the education that is best for them—all while ensuring that taxpayer funds are being used efficiently and effectively. The Senate Committee on Labor and Human Resources also identified its goal for the change, although it did so more generally. The committee also noted its effort to divide policy functions, which were to be retained by OPE, from operational functions, which were to be carried out by the new PBO: The goal of the performance-based organization has been, and remains, to improve the delivery of student financial aid to students and their families. In order to accomplish this, the committee has attempted to identify the functions performed by the Office of Postsecondary Education and segregate those that are essentially policy functions that must be retained by OPE from those that are administrative and that may appropriately be handled by the performance-based organization. The PBO will be responsible for administration of the information and financial systems that support student financial assistance programs as well as any additional functions that the Secretary determines are necessary or appropriate to improve the delivery of student aid. Both the Senate- and House-passed bills would have established a new PBO vested with responsibilities related to federal student aid delivery. Specific differences between the competing versions regarding the new entity's authority, purposes, functions, relationship with ED, and other organizational features were ironed out through a conference process that yielded a consensus measure. Resolution of the PBO-related differences does not appear to have been a sticking point in the conference process. The conference report was agreed to by the two chambers and President Clinton signed the Higher Education Amendments of 1998 into law on October 7, 1998. 2008 Higher Education Act PBO Amendments In 2008, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) amended the HEA PBO provisions. The report of the Senate Committee on Health, Education, Labor and Pensions noted its general approval, at that time, of the PBO as implemented: The committee applauds the efforts since the last reauthorization to implement the PBO. Schools and individuals have benefited from improved efficiency in originating, servicing and processing grant and loan aid. The ombudsman has provided needed guidance to students struggling to navigate the complex system. There is strong support for continuation of these efforts to make further progress in the delivery of student financial aid. In line with this assessment, the 2008 amendments appear to have clarified and expanded FSA's role in the administration of Title IV programs. They changed the characterization of the PBO's functions from "operational" to "administrative and oversight," seemingly broadening the mandate of the agency. In addition, whereas the previous provisions vested the PBO with responsibility for administration of the information and financial systems supporting Title IV programs, the 2008 amendments enlarged the scope of responsibilities beyond this specified support function to administration of "the Federal student financial assistance programs authorized under title IV." The HEOA also amended FSA's personnel and procurement flexibility provisions, as discussed below. Changes to Title IV Aid Affecting FSA's Operations Since FSA's inception, both statutory and regulatory changes have been made to the Title IV student aid programs. These changes may have had an effect on FSA's operations. At the time of FSA's formation in 1998, HEA Title IV authorized and ED administered two primary federal student loan programs: the Federal Family Education Loan (FFEL) program and the Direct Loan program. These two programs provided borrowers with loans for postsecondary education with substantially similar terms and conditions as one another, but each program had significantly different administrative structures. Private lenders originated FFEL program loans, and either they or secondary market loan purchasers (who bought loans from originating lenders) were responsible for completing many loan servicing tasks, including working with postsecondary institutions to track students' enrollment and loan eligibility status, billing borrowers, and conducting initial collection services if a loan became delinquent. Additionally, under the FFEL program, state and nonprofit guaranty agencies received federal funds to administer many aspects of the program, such as providing technical assistance to IHEs and lenders, providing credit and loan rehabilitation counseling to borrowers, and performing collections work. Under the Direct Loan program, the federal government essentially serves as the "banker" by providing loans to students and their families using federal capital. ED assumes the primary role in administering the Direct Loan program (described below), including providing technical assistance to IHEs, contracting with loan servicers to perform day-to-day administrative tasks, providing loan counseling to borrowers, and initiating collections work. In May 2008, in response to concerns about the continued availability of FFEL program loans due to several FFEL program lenders curtailing or ceasing their participation in the program, the Ensuring Continued Access to Student Loans Act of 2008 ( P.L. 110-227 ) granted ED the temporary authority to purchase student loans made under the FFEL program. In October 2008, P.L. 110-350 extended this authority through July 1, 2010. After purchasing loans made under the FFEL program, control of loan servicing was transferred to ED. In 2009, the SAFRA Act ( P.L. 111-152 , Title II) terminated the authority to make new loans under the FFEL program after June 30, 2010. Since July 1, 2010, the Direct Loan program has been the primary federal student loan program, although many FFEL program loans remain outstanding, and FFEL program lenders and guaranty agencies remain responsible for administering several aspects of those programs. These changes have vested FSA with a larger scope of responsibility than Congress might have originally contemplated when it authorized FSA's PBO structure, as FSA became responsible for administering a larger share of the federal student loan programs (in terms of loan volume and individual borrowers associated with these changes) than for which it had previously been responsible under the FFEL program. Moreover, the switch to almost 100% direct lending in 2010 had the effect of fundamentally altering the federal student loan marketplace. During the roughly 15-year period that the two programs operated concurrently, IHEs and borrowers were provided the opportunity to "shop around." That is, IHEs chose whether to apply to participate in the FFEL program or Direct Loan program, and the caliber of administrative and servicing work available within the respective loan programs may have been a factor in those decisions. Additionally, schools opting to participate in the FFEL program usually compiled preferred lender lists that they shared with students. Again, assessments of the caliber of administrative and servicing work provided through differing lenders likely factored into the selection of lenders for such lists. Borrowers attending FFEL program participating IHEs were free to select among an array of lenders, including but not limited to those on the preferred lender lists. There were opportunities available for IHEs and for borrowers who were dissatisfied with customer service to pursue other options. The competition that existed within the FFEL program and across the loan programs provided incentives for those involved in administrative and servicing work to provide enhanced customer service. By transitioning to a single model of federal student lending (the Direct Loan program) under which a single entity (the federal government) both makes and is responsible for administering loans, the federal student loan marketplace transitioned from one with some built-in incentives to provide enhanced customer service to one in which there may be less incentive to do so. Several other changes in the Title IV aid programs since FSA's creation as a PBO may have also had the effect of increasing the scope and complexity of FSA's administrative functions. These include but are not limited to the following: increases in the amount and type of aid benefits available to students, including extension of PLUS Loan availability to graduate and professional students under the Deficit Reduction Act of 2005 ( P.L. 109-171 ) and the authorization of the TEACH Grant program under the College Costs Reduction and Access Act of 2007 ( P.L. 110-84 ); authorization and implementation of myriad income-driven loan repayment plans that allow borrowers to make monthly payments in amounts indexed to their adjusted gross income; increased complexity of aid benefits, including establishment of a 6% interest rate cap on federal student loans during military service under the Servicemembers Civil Relief Act ( P.L. 108-189 ), the Public Service Loan Forgiveness (PSLF) program under the College Costs Reduction and Access Act, cumulative lifetime maximums on certain students' eligibility to receive Pell Grants established under the HEOA and amended under the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), and limitations placed on certain borrower's eligibility to borrow Direct Subsidized Loans established under the Moving Ahead for Progress in the 21 st Century Act ( P.L. 112-141 ); and changes made to aid administration, including the process to receive a discharge of federal student loans after a determination that a borrower is totally and permanently disabled as established under the HEOA and implemented via subsequent regulatory changes, the requirement that ED (via FSA) contract with not-for-profit loan servicers under the SAFRA Act, and regulatory changes to borrower defense to repayment discharge procedures. FSA Functions and Structure Section 141 of the HEA tasks FSA with managing administration and oversight of the Title IV federal student aid programs. Among other functions, FSA develops and maintains the FAFSA; obtains student aid funds from the Treasury and makes them available for disbursement to students; contracts with third parties that perform myriad administrative tasks associated with the Title IV programs (e.g., loan servicing); provides information on the Title IV programs to students, Title IV participants (e.g., IHEs), Congress, and other stakeholders; and provides oversight of Title IV program participants, including IHEs and the third-party loan servicers with which it contracts. The HEA specifically establishes two roles within FSA—the COO and the Student Loan Ombudsman—to carry out FSA's functions, but much of FSA's organizational structure has been established through administrative action by the COO. In addition, many outside entities may have an interest in or have asserted a role over aspects of the federal student aid programs. Thus, in coordination with ED, FSA maintains relationships with outside stakeholders, executive branch entities, and Congress. FSA also maintains relationships with offices within ED at large. Statutorily Specified FSA Functions HEA Section 141 specifies several high-level aspects of aid administration for which FSA is responsible. These include the following: The administrative, accounting, and financial management functions for the Title IV aid programs, including collection, processing, and transmission of data to students, IHEs, and other authorized stakeholders; development of specifications for software and procurement of systems to support Title IV aid administration; acquisitions of all hardware and software and procurement and management of all IT contracts to support Title IV aid administration; contracting for information and financial systems to support Title IV aid administration; providing customer service, training, and user support related to Title IV aid administration; and ensuring the integrity of the Title IV aid programs. Development, in consultation with the Secretary, of FSA's annual budget. The Secretary may delegate additional functions to FSA as necessary or appropriate to achieve FSA's purposes. FSA is given control of its budget allocations and expenditures, procurements, personnel decisions and processes, and other administrative and management functions but remains subject to the direction of the Secretary. The HEA specifies that the Secretary "shall maintain responsibility for the development and promulgation of policy and regulations" related to Title IV aid. In doing so, the HEA requires the Secretary to "request the advice of, and work in cooperation with" FSA. To fulfill its statutory responsibilities, FSA undertakes many discrete tasks (discussed below). Awarding, Disbursing, and Servicing Aid Students wishing to receive Title IV student aid must annually apply for assistance using the FAFSA, which is developed and maintained by FSA in accordance with specifications set forth in the HEA. After a student submits the FAFSA, an automated system contracted by FSA processes the FAFSA, and then IHEs (or the third-party servicers with which they contract) use information from it to calculate the amount of aid for which a student is eligible. FSA obtains funds from the Treasury and makes them available to IHEs, which in turn disburse those funds to students. Once a grant is disbursed, in many cases administrative functions are significantly decreased. However, FSA may be required to implement and/or oversee administrative functions after a grant has been disbursed. For instance, if an individual receives a Pell Grant in excess of the amount for which he or she is eligible, he or she may be required to return a portion to FSA. Once a Direct Loan program loan is disbursed, FSA assigns it to a contracted loan servicer. Loan servicers perform a variety of administrative functions such as collecting payments and performing delinquency prevention activities. FSA may, if necessary, assign a defaulted loan to a contracted private collection agency (PCA), which attempts to recover payment on defaulted loans from borrowers. FSA may also use other options to collect on defaulted Direct Loans, including referring a borrower's account to the Treasury Offset Program. Contracting In FY2018, FSA maintained major contracts with approximately 20 vendors, totaling about $1.1 billion. (These contracts constituted approximately 63% of appropriations provided for student aid administration in general in FY2018. ) Services for which FSA maintains contracts include servicing of Direct Loans and ED-held FFEL program loans and Perkins Loans, collection of defaulted Direct Loans and ED-held FFEL program loans and Perkins Loans, and IT infrastructure to support myriad tasks such as the processing of submitted FAFSAs. FSA also has a contract for the National Student Loan Data System (NSLDS), which is a central database for student aid. NSLDS maintains detailed administrative data to track Title IV grants and loans throughout their lifecycle and support Title IV administrative functions such as verifying a student's Title IV eligibility. Information and Assistance to Third-Party Stakeholders Numerous individuals and entities have a stake in the Title IV federal student aid programs and rely on FSA to provide timely and accurate information regarding the programs. Students, their families, and borrowers rely on FSA to provide information and assistance throughout the entire financial aid process. IHEs and FSA's third-party contractors rely on communications and assistance from FSA to administer various aspects of the aid programs. Members of Congress and the general public rely on FSA for information about the performance of the Title IV aid programs. FSA operates several websites that enable stakeholders to access relevant information about program operations. FSA maintains the website www.studentaid.gov , which is FSA's "primary online portal for customers" and the 'Information for Financial Aid Professionals' website, which consolidates guidance and resources related to Title IV administration for use by the entire financial aid community. FSA also operates several repositories of Title IV program data to enable it and stakeholders to access information about the programs and their performance. HEA Section 485B tasks ED with development of the NSLDS. FSA has primary responsibility for administration of the NSLDS and has contracted with a third party to operate it. FSA also maintains the Data Center—a centralized, publicly available source for selected administrative data and other information related to the Title IV programs. The Title IV program data on FSA's Data Center are often derived from NSLDS. In addition, FSA operates the Enterprise Data Warehouse Analytics, which contains data from multiple FSA data sources, such as NSLDS. It provides FSA with analytic tools to provide "quick and accurate access to inform internal and external data requests" and is often used to provide Title IV program data and analysis to internal stakeholders such as ED's Budget Office and to external stakeholders such as congressional requesters, other federal agencies, and the public. FSA also makes its statutorily required annual report to Congress publically available. Finally, the Ombudsman Group —a subunit within FSA—provides students and aid recipients with a single point of entry (the Feedback and Dispute Management System) to provide feedback or to file complaints and disputes about the Title IV programs. Oversight FSA has a large oversight role in ensuring that various Title IV program participants comply with Title IV program requirements. Both statute and regulations prescribe many aspects of the Title IV programs, including student aid program terms and conditions and requirements IHEs must meet to participate in the programs. IHEs and third-party contractors play a significant role in ensuring that the Title IV programs are administered properly. In addition, some Title IV programs (e.g., the campus-based aid programs ) vest a larger share of administrative functions with IHEs, while others (e.g., the FFEL program) vest additional administrative functions with outside entities such as guaranty agencies. IHEs and Their Third-Party Servicers FSA's oversight of IHEs relates largely to ensuring that they meet eligibility requirements to participate in the Title IV programs and that they (and any third-party servicers with which they may contract) properly administer the Title IV programs. FSA certifies an IHE's eligibility to participate in the Title IV programs and recertifies its eligibility thereafter. FSA verifies each IHE's accreditation status and whether the IHE is legally authorized to operate within a state. FSA also evaluates an IHE's financial responsibility and administrative capability to administer the Title IV programs. After an IHE is certified to participate in the Title IV programs, FSA ensures that it is conforming to eligibility and administrative requirements. FSA does this by performing program reviews and by reviewing required IHE compliance audits and financial statement audits conducted by third-party auditors. FSA reviews the IHE's required third-party compliance and financial statement audits and attempts to resolve issues with them. During a program review, FSA evaluates an IHE's compliance with Title IV requirements. Review priority is given to certain IHEs specified in statute (e.g., those IHEs with high cohort default rates). FSA has the authority to impose sanctions and corrective actions on IHEs and their third-party servicers. Examples include imposing fines, imposing specific conditions or restrictions related to administration of Title IV funds, and terminating Title IV participation. FSA Contractors FSA's oversight of its third-party contractors generally consists of ensuring that they fulfill the terms and conditions of their contracts with FSA. In general, federal agencies, including FSA, have a number of tools to help ensure a contractor adequately performs a contract. Examples include requiring corrective action, using performance-based incentives, and terminating the contract. FSA contracts with numerous third-parties for a variety of goods and services related to administration of the Title IV programs, including student loan servicers and PCAs. In FY2019, FSA contracted with 12 student loan servicers to perform a variety of tasks largely related to the Direct Loan program. FSA uses performance-based incentives to encourage loan servicers to meet desired results (e.g., ensuring borrowers are in current repayment status and meeting customer service satisfaction goals). It does so by basing the number of borrower loan accounts allocated and compensation levels on servicers' ability to meet stated goals. In addition, FSA issues guidance to loan servicers to assist them in day-to-day operations and conducts monitoring activities, such as completing annual compliance audits and assessing borrower-servicer interactions. FSA also contracts with numerous PCAs to attempt to collect the $140.3 billion in defaulted loans of 7.2 million borrowers. Similar to its oversight of loan servicers, FSA uses performance-based incentives to meet desired goals. PCA compensation is based on a PCA's overall performance. Previously awarded contracts have based borrower account allocation on PCA performance. However, current PCA contracts with FSA are not readily available for review, and it is unknown how future PCA contracts might be structured. In addition, FSA issues guidance to PCAs to assist them in day-to-day operations and conducts monitoring activities, such as assessing PCAs' interactions with borrowers. Entities Engaged in Selected Title IV Programs For FFEL program loans not held by ED, guaranty agencies administer many aspects of the program, such as providing default aversion assistance to FFEL program lenders and services related to the federal loan guarantee. In the campus-based programs, IHEs perform many of the administrative functions described earlier in this section (e.g., award disbursement and loan servicing) and are also afforded some discretion in determining the mix and amount of campus-based aid funds awarded to students. FSA oversees these entities in their fulfillment of these functions. Selected FSA Statistics As described above, the scope of FSA's operations covers many activities and responsibilities. Selected statistics and additional information provide insight into the scale of FSA's operations. Table 1 presents information on funds obligated for student aid administration. Table 2 presents data on full-time equivalent (FTE) employment for federal student aid administration. Table 3 presents selected trends relevant to student aid administration. To provide context and a sense of scale, in relation to ED as a whole, nearly every year since ED's creation as a Cabinet-level department (October 1979), functions currently under FSA have accounted for the majority of ED spending (including both Title IV aid disbursements and aid administration expenses). Moreover, while the number of FTE staff at ED has declined since FY1981, the number of FTEs at FSA has generally increased over time. In FY2016, FSA accounted for about one-third of ED's FTEs. It is estimated that the largest share of staff being supported through student aid administration funding are staff supported through loan servicing contracts (discussed below). Funding for Federal Student Aid Administration There are two broad categories of funding obligations for federal student aid administration: (1) salaries and expenses and (2) student loan servicing. Table 1 presents annual funding obligated for federal student aid for FY2009-FY2019. Over this period of time, obligations for federal student aid administration increased from $754 million in FY2009 to $1.7 billion in FY2019. Obligations for student aid administration have increased by 47% since FY2011 (the first full fiscal year in which no new FFEL program loans were made). Beginning with FY2016, obligations for loan servicing have constituted the majority of student aid administration costs. FTE Employment for Federal Student Aid Administration Figures on FTE employment for FY2009-FY2019 for federal student aid administration are presented in Table 2 . The number of FTE employees working on federal student aid administration has risen from 1,058 in FY2009 to 1,480 in FY2019, a 40% increase. Other offices within ED besides FSA also perform student-aid related administrative activities. In addition, a number of contractor staff (e.g., loan servicing staff) provide outsourced business operations for student aid administration. For example, FSA reported that approximately 12,000 contracted staff augmented its FTE employees in FY2016. Trends Relevant to Federal Student Aid Administration Over the past several years, the workload of FSA has increased considerably. Table 3 provides information related to FSA's workload, including the number of FAFSAs processed, the number of students receiving aid, the total dollar amount of federal student aid provided through the Title IV federal student aid programs, the total number of federal student loan recipients who have outstanding balances, and the total dollar amount of principal and interest outstanding. As shown in Table 3 , the number of individuals receiving Title IV aid and the number of FAFSAs processed peaked in FY2011 and FY2012, respectively. However, the total number of federal student loan recipients with outstanding loan balances and the total dollar amount of principal and interest outstanding increased substantially over the period examined and increased year-over-year for each complete fiscal year under review. FSA Structure Section 141 of the HEA establishes FSA's PBO structure as a discrete management unit within ED and subject to the direction of the Secretary in the exercise of its functions. FSA operates under the coordination of the Office of the Under Secretary, which is the office within ED that coordinates policies and programs related to postsecondary education, as well as vocational and adult education. Although the HEA specifically establishes two roles within FSA (the COO and the student loan ombudsman), much of FSA's organizational structure and leadership arrangements have been established through administrative action by the COO, subject to the direction of the Secretary. In addition, FSA interacts with various other offices within ED to facilitate the implementation of ED policies in aid administration. Statutorily Mandated Roles FSA is composed of numerous offices, each responsible for varying aspects of Title IV student aid administration. Two FSA roles are specifically mandated by the HEA: the chief operating officer and the student loan ombudsman. These offices have been charged with carrying out both statutory and administratively delegated functions, as discussed below. Chief Operating Officer (COO) The HEA assigns several responsibilities to FSA's COO. The Secretary has delegated additional responsibilities to the COO. In practice, while responsibilities are assigned or delegated to the COO, individual employees or offices within FSA may perform the day-to-day tasks associated with fulfilling those responsibilities. HEA Section 141(d) vests management of FSA in a COO and mandates several of the COO's activities and responsibilities. Annually, the COO and the Secretary must publically make available a five-year performance plan for FSA that establishes measurable goals and objectives for FSA. In developing the plan, the Secretary and the COO are to consult with stakeholders such as students, IHEs, and Congress. The COO is required annually to submit to Congress a report on FSA's performance that is to include, among other items, (1) an independent financial audit, (2) the results achieved during the year relative to the performance plan goals, (3) the evaluation of the COO and senior managers, and (4) recommendations for legislative and regulatory changes to improve administration of the Title IV student aid programs. In preparing the report, the COO is to establish appropriate ways to consult with stakeholders, including students and IHEs. FSA states that the Annual Report satisfies these responsibilities. HEA Section 142 authorizes the COO, subject to the authority of the Secretary, to procure property and services to perform its functions. In practice, while the Secretary is considered ED's senior procurement official, it appears that FSA typically has significant autonomy in its contracting functions. The HEA specifies that the Secretary maintains responsibility for the development and promulgation of policy and regulations related to Title IV aid. However, in developing and promulgating Title IV student aid policies and regulations, the Secretary is required to request the advice of and work in cooperation with the COO. FSA's Policy Liaison and Implementation Staff (PLIS) is the office within FSA that consults with the Secretary on Title IV student aid policies and regulations. Among other functions, PLIS implements policy (and supports FSA staff in implementing policy) developed by ED through the Office of the Secretary, the Office of the Under Secretary, and OPE. PLIS also works with the Office of the Under Secretary to formulate policy recommendations and identify policy issues affecting the Title IV student aid programs; provide advice on regulations, policies, administrative policy guidance, and procedures; prepare preliminary drafts of subregulatory guidance for consideration by ED and draft policy electronic announcements for review by FSA staff; and design, manage, and monitor the Experimental Sites Initiative. Finally, the HEA specifies that the COO is to disseminate information to stakeholders on the student loan ombudsman (described below). The Secretary may delegate additional functions to the COO (and FSA in general) to achieve FSA's purposes. Authorities that the Secretary has delegated to the COO include, but are not limited to, authority to take certain personnel actions, such as carrying out reductions-in-force for FSA in coordination with ED, approving telework agreements, and handling FSA employee grievances; programmatic authorities related to Title IV programs, such as awarding certain formula grants (e.g., awarding campus-based funds to IHEs) and entering into agreements with entities outside of ED (e.g., IHEs or other federal agencies); authority to compromise, waive, and write-off certain claims against individuals under Title IV programs, such as waiving or writing off the collection of current or defaulted federal student loans; authority to develop, implement, and manage an Employee Personnel Security Program and a Contractor Personnel Security Program in accordance with established ED directives and guidance. Student Loan Ombudsman HEA Section 141(f) specifies that the COO, in consultation with the Secretary, shall appoint an ombudsman "to provide timely assistance to borrowers of loans made, insured, or guaranteed under Title IV." Specifically, the ombudsman is to (1) review and attempt to informally resolve borrower disputes with Title IV loan program participants and (2) compile and analyze data on borrower complaints and make recommendations. Each year, the ombudsman is to submit to the COO (for inclusion in the COO's annual report) a report describing the ombudsman's activities and effectiveness during the preceding year. FSA's Ombudsman Group is the specific office tasked with fulfilling the HEA Section 141 requirements for a student loan ombudsman. The Ombudsman Group also administers FSA's comprehensive informal complaint resolution and customer inquiry/case resolution processes related to all Title IV student aid programs, not just those related to student loans, although the most frequent types of cases received by the Ombudsman Group relate to student loans. Addressing customer cases regarding non-loan Title IV student aid programs is not part of the ombudsman's specific statutory mandate. FSA's Relationship with Other Actors Many tasks related to student aid are vested (either through statute or secretarial authority) with other ED offices, and other executive branch entities may have an interest in or jurisdiction over aspects of federal student aid. In addition, FSA is subject to congressional direction (e.g., via amendments to the HEA or appropriations laws) and oversight. As such, FSA may have occasion to interact and maintain relationships with numerous outside stakeholders. ED's Office of the Secretary The Secretary "is responsible for the overall direction, supervision, and coordination of all activities of [ED] and is the principal adviser to the President on Federal policies, programs, and activities related to education in the United States." The Office of the Secretary directly oversees the Office of the Under Secretary (which, in turn, oversees FSA). In addition, the Office of the Secretary oversees several other entities that interact with FSA on a regular basis: The Office of the Inspector General is responsible for "identifying waste, fraud, abuse, and criminal activity involving ED funds, programs, and operations." To this end, it conducts independent audits and reviews of ED programs, including the Title IV student aid programs and FSA's operations. The Office of General Counsel (OGC) is responsible for providing "legal assistance to the Secretary concerning the programs and policies of the Department." OGC also provides legal assistance to other ED offices, including FSA. Among other services, OGC provides legal advice, litigation services, legislative services (e.g., drafts legislative proposals), and assistance in drafting subregulatory guidance. The Office of Budget Service has the lead responsibility for, among other functions, ED's budget, budget and related legislative policies for ED programs, and the review and analysis of ED program operations, including budget and policy implementation. It develops cost estimates for the Title IV student aid programs and maintains computer models to estimate such costs, coordinates methodology and data with FSA and OPE, and liaises with FSA other ED offices to analyze data sources and assumptions for the student aid cost estimation models. ED's Office of the Under Secretary The Office of the Under Secretary oversees policies, programs, and activities related to vocational and adult education, postsecondary education, college grant aid, and federal student loans. The Under Secretary directs and coordinates policies, programs, and activities related to postsecondary education and federal student aid. The Under Secretary also supervises FSA, which administers federal student aid, and OPE, which provides overall direction, coordination, and leadership on matters related to postsecondary education. The Under Secretary serves as the principal advisor to the Secretary on postsecondary education. As previously described, HEA Section 141 specifies that the Secretary maintains responsibility for the development and promulgation of policy and regulations related to Title IV aid but must coordinate with FSA. With Under Secretary oversight, OPE fulfills the policy development and promulgation role for the Secretary. OPE develops both regulations and subregulatory guidance for the Title IV student aid programs (e.g., Dear Colleague letters to financial aid professionals). In doing so, OPE liaises with FSA's PLIS (and other offices such as OGC) in the development, implementation, and dissemination of Title IV student aid policy. Other Executive Branch Entities Other executive branch entities may have some level of authority over or interest in aspects of federal student aid programs. As such, ED and FSA may maintain relationships with these entities to help ensure proper functioning of the aid programs. Based on its functions, FSA likely, at least in part, has played a role in these partnerships even when ED may be officially responsible. Executive branch entities with which ED and FSA may maintain relationships to help ensure proper functioning of the aid programs include the following: Department of the Treasury . FSA obtains funds from Treasury to make available to students in the form of federal student aid. FSA may refer a borrower's defaulted loan to the Treasury Offset Program for offset of certain benefits such as federal income tax refunds and Social Security benefits. Moreover, while the Debt Collections Improvement Act generally requires federal agencies to transfer nontax debts that are 180 days or more delinquent to Treasury's Fiscal Service for centralized debt collection (referred to as cross-servicing), since 2001, the Secretary of the Treasury has granted FSA a permanent exemption from this requirement. Thus, FSA is responsible for collecting delinquent and defaulted federal student loan debt assigned to or held by ED. The act also authorizes the Secretary of the Treasury to exempt certain classes of debt from cross-servicing. Since 2005, debts that are being collected through administrative wage garnishment and meet certain conditions have been exempted from cross-servicing. Consumer Financial Protection Bureau (CFPB) : The CFPB has asserted a role in ensuring compliance with consumer protection laws that may apply to federal student loans. For example, the CFPB has brought lawsuits against some FSA-contracted federal student loan servicers for consumer compliance violations relating to federal student loan servicing. CFPB also maintains resources for both federal student loan and private education loan borrowers and fields complaints from student loan borrowers. The CFBP and ED participated in an interagency task force to help ensure sufficient oversight of proprietary IHEs. However, it appears that the CFPB and ED may no longer be working together as closely as they previously had been. For example, in 2017, ED terminated its memoranda of understanding with the CFPB to share data and information relating to the student loan servicing market, stating that the CFPB violated the terms of the memoranda. Department of Justic e (DOJ) : DOJ may play a role in law enforcement related to federal student loans, including, through U.S. Attorneys' offices, prosecuting violations of federal criminal laws and representing the federal government in civil proceedings. For instance, FSA may refer a defaulted federal student loan borrower's account to DOJ for civil litigation against the borrower. In addition, DOJ may file lawsuits against federal student loan program participants, such as contracted student loan servicers, for failure to comply with federal statutes related to student loans and individuals for acts of fraud. Other executive branch entities with which ED and FSA may interact include the Federal Trade Commission, the Internal Revenue Service (IRS), the Department of Veterans Affairs, and the Social Security Administration. In processing the FAFSA, FSA's Central Processing System matches student provided information against other federal entities' databases to confirm elements of each student's aid eligibility. In total, the Central Processing System performs matches against databases maintained by the Department of Defense, DOJ, the Social Security Administration, the Department of Veterans Affairs, the Department of Homeland Security, and the Selective Service System. In addition, FSA's systems interface with the IRS Data Retrieval Tool, which links students', students' spouses, and parents' IRS tax information to the FAFSA and/or the income verification component of applying for and recertifying information for the various income-driven repayment plans. To initiate and/or maintain these relationships, ED and FSA may enter into formal agreements (e.g., memoranda of understanding) with the relevant federal entity or maintain a less formal interagency relationship. Congress Congress may guide and affect the way FSA operationalizes and manages the day-to-day functions of the federal student aid programs. First, Congress and the President may enact laws that impact or amend federal student aid programs or FSA itself. For example, Congress could amend the HEA Sections 141-143, which relate specifically to FSA as a PBO, or the Title IV student aid programs in general. In addition, during the appropriations process, Congress determines discretionary funding levels for FSA activities. In some instances, Congress may include stipulations or directives regarding the use of these funds. Second, Congress exercises oversight of FSA. This oversight may include requiring FSA or ED representatives to testify before Congress, requiring or requesting FSA to report additional information regarding its operations, and requesting that GAO or the IG conduct an in-depth investigation of FSA. Congress has exercised its oversight authority regarding Title IV aid administration numerous times in recent years. FSA's Performance under Five-Year Performance Plan The COO is required to annually report to Congress on FSA's progress in achieving its goals and objectives described in its five-year performance plan (also known as the strategic plan). Among other items, the performance plan is to address FSA's responsibilities in improving service to stakeholders, reducing costs of administering the Title IV student aid programs, improving and integrating the systems that support the student aid programs, and other areas identified by the Secretary. The Secretary and FSA, in consultation with stakeholders, develop the strategic objectives described in FSA's five-year performance plan. As part of the plan, FSA develops the metrics by which its performance under these strategic objectives are measured. FSA also sets its specific annual goals for meeting each metric. In doing so, most of its annual goals are based on FSA's performance under the metric in the prior year. Table 4 presents information on FSA's performance for each metric under its strategic objectives as set forth in its Strategic Plan: FY2015-19 for FY2016-FY2019. For each metric, FSA's goal and actual performance are presented. The text for FSA's actual performance under each measurement indicates whether FSA met its goal in the given year. Bolded text indicates that FSA did not achieve its goal, while regular text indicates that FSA did achieve its goal. In general, over the four fiscal years examined, FSA met most of its goals. FSA consistently met its goals relating to usership of its online resources (customer visits to studentaid.gov and social media channel subscribership), persistence among first-time filing aid recipients, percentage of contract dollars competed by FSA, and collection rate. In addition, it consistently met both of its goals under Strategic Goal C—improving operational efficiency and flexibility—which included goals on aid delivery cost per application and percentage of outstanding Direct Loans in current repayment status. For many instances in which FSA did not meet its goals, in the following year, FSA downwardly adjusted its goal under the relevant metric. For those instances in which FSA met its goal, whether it subsequently adjusted the goals in the following year varied. Assessments of FSA as a PBO Close observers assessed FSA's progress in addressing the congressionally identified issues that prompted FSA's establishment as a PBO in 1998. Immediately following the enactment of the HEA provisions establishing a PBO, ACSFA acknowledged the difficulty of simultaneously undertaking a major reorganization and system modernization. ACSFA noted the commitment and energy of the first permanent COO and praised "his willingness to communicate with the higher education community" as well as his early senior personnel choices. ACSFA also criticized the priorities of the new unit as well as its adherence to the congressional intent behind, and the requirements of, the new statute. Among other concerns, it noted that ED appeared to be transplanting the organizational arrangements of SFAP (FSA's predecessor), as an office of OPE, into a new PBO that reported directly to the Secretary without making more fundamental changes to its management and organizational structure; ED was failing to "adequately separate policy making and regulatory responsibilities of OPE and operations responsibilities of the PBO as intended by Congress;" and rather than "directing its attention and scarce resources toward solving its basic systems, data, and contract problems, the PBO appear[ed] to be … concentrating on the twin objectives of improving day-to-day customer service and providing students web access to their data through 'a single federal point of contact' for all financial aid transactions." In 2002, ACSFA reported, among other findings, that some progress had been made on transferring policymaking functions to OPE but that "functions related to institutional eligibility and guarantor and lender oversight" remained within the purview of FSA. ASFCA called for the transfer of these functions to OPE, with OPE consulting with FSA to ensure that proposed federal aid policies supported FSA operations. ACSFA also reported that FSA was strengthening the capacity of its management, systems, and operations staff while reducing its reliance on contractors and recommended FSA continue to do so. In addition, it expressed concern that minimal progress had been made on systems integration. ACSFA called for ED to "incorporate specific integration goals and schedules into its strategic and tactical plans and quicken the overall pace of data and systems integration as a means of reducing cost and increasing efficiency." By 2001, FSA had developed an organizational performance plan identifying three strategic goals: increase customer satisfaction, increase employee satisfaction, and reduce unit costs. However, ED's IG and GAO noted that it did not clearly address some of the new office's statutory purposes that had been identified during the HEA reauthorization process. For example, both entities found that the performance plan did not sufficiently address the means by which systems integration would be accomplished, nor did it include any objective measures of forward movement in that area. Both ED's IG and GAO recommended that FSA establish clear goals, strategies, and performance measures related to systems integration. FSA disagreed with the IG's recommendation, reasoning that the agency could not achieve its three stated goals without systems integration. In a response to the GAO recommendation, which came later, however, ED's Deputy Secretary agreed with the recommendation, committing to directing that FSA's performance plan "be revised to establish measurable goals and milestones for systems integration efforts to provide both direction to FSA and enhance its accountability." The GAO report also assessed the progress FSA had made in measuring and achieving its three strategic goals. It noted that FSA had made measurable progress in the general improvement of customer and employee satisfaction—two of its three strategic goals. With regard to its third goal (reduce unit costs), GAO found that the indicator FSA used to measure unit cost was deficient. GAO also noted that the relationship between FSA and ED was still evolving: Education continues to take steps to clarify FSA's level of independence and its relationship with other Education offices…. With the arrival of the current administration … Education established special interim operating procedures for all department units, including FSA, that were intended to ensure that personnel and financial resources are managed effectively and efficiently throughout the department.… Education now provides greater direction and oversight of FSA than was provided previously. Education is currently reviewing FSA's role and responsibilities as part of the departmentwide management planning effort. The results … will be used to guide future decisions concerning FSA's level of independence and its relationship to other department offices. In 2005, GAO removed the Title IV federal student aid programs from its High Risk List. The student aid programs had been on GAO's High Risk List since the list's inception in 1990. In removing the Title IV student aid programs from the list, GAO found that while FSA still needed to take additional steps to fully address some of its recommendations, overall, management of the programs had improved enough to warrant removal from the High Risk List. In removing the student aid programs from its High Risk List, GAO cited many factors, including FSA's "sustained improvements to address financial mismanagement and internal control weaknesses," receipt of an unqualified or "clean" opinion on its financial statements for FY2002-FY2004, actions to ensure that aid was not being awarded to ineligible students, actions to "integrat[e] its many disparate information systems," steps to reduce student loan default rates, and steps to address its "human capital challenges." In more recent years, FSA has been praised for its handling of the transition to 100% direct lending under the Direct Loan program and for other improvements to the administration of the Title IV aid programs, such as implementation of the IRS Data Retrieval Tool to allow students and their parents to import their federal income tax data directly into their FAFSA. Some more recent GAO and IG reports have noted cases in which FSA met its objectives. Some sizable issues have also been identified in GAO and IG reports, by some Members of Congress, and by other stakeholders. For example, FSA's oversight of its contracted loan servicers has come under scrutiny from Congress, ED's IG, GAO, and the CFPB. Seemingly large deficiencies in ED's implementation of and communication with borrowers about of the PSLF program have been identified by GAO and have garnered congressional interest as well. Concerns have also been raised over FSA's ability to identify and address poorly performing IHEs or those that may be at risk of closure. These more recent issues are discussed in more detail below. Current Issues ED's federal student aid operations were statutorily reorganized into a PBO with the hope of addressing significant management problems, including limited progress in integrating numerous data systems, student aid delivery delays and breakdowns, and infighting over student aid delivery turf among ED's senior managers. In this context, the then-untried PBO model seemed promising: It was built on the idea that business-like performance incentives and management flexibility would motivate and permit the organization and its leaders to provide economical, efficient, and effective service to student aid recipients. The organization would be given a higher-than-typical level of independence from political leadership and direction on operational processes in return for accountability for results, as measured by performance agreements and assessments. Potential concerns about independent policymaking by a PBO's leaders could be allayed by separating the policymaking functions from the operational functions. The former would remain accountable to Administration leadership, and the latter would be vested in the semi-independent PBO. While the establishment of FSA as a PBO seems to have addressed at least some of the congressional concerns prompting its establishment, new issues have arisen in recent years, and some of the previously cited issues that led to the adoption of a PBO approach may yet remain unresolved. Federal oversight entities and other outside observers have raised issues pertaining to FSA, including those relating to oversight, transparency, and accountability. As these issues receive continued attention, and as Congress contemplates the reauthorization of the HEA, this final section of the report highlights some of the issues relating to FSA's operations that have garnered attention over the past several years. Issues highlighted and options for addressing them have, for the most part, been gathered from reports from GAO, ED's IG, and outside organizations. CRS has identified some of the options available to address these issues. In some instances, documents referenced here refer to ED and/or the Secretary of Education and not specifically to FSA and/or its COO. However, based on its functions, FSA is likely pertinent to the topics being addressed. Where possible, CRS has indicated in footnotes where a cited source refers to ED more generally and CRS has inferred that FSA has some responsibility for a function or activity being discussed. Oversight Functions HEA Section 141 specifies that one of FSA's functions as a PBO is to ensure the integrity of the federal student aid programs. Thus, FSA is tasked with overseeing a variety of entities that play a role in administration of the Title IV student aid programs. FSA's oversight of IHEs and contracted loan servicers has been criticized in recent years. Some criticisms have focused on perceived deficiencies in FSA's assessment of IHEs, its ability to proactively mitigate risk in the Title IV programs, and its ability to resolve issues at IHEs in a timely manner. Similarly, FSA has experienced difficulties in its monitoring of loan servicers. Some of these difficulties seem to have stemmed from FSA providing incomplete or fragmented guidance to loan servicers, which have impeded their efforts to comply with requirements for servicing federally held loans and to assist borrowers in navigating the aid programs. The oversight issues introduced here are explored in greater depth below. Should any congressional action be taken to address these issues, Congress might consider whether or how it should specify desired outcomes and actions taken by FSA. There may be tradeoffs between meeting congressional goals and shoring up current perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. Consideration might also be given to the apparent difficulties in separating operational functions delegated to FSA from policymaking retained by ED. IHE Oversight FSA oversees, through enforcement activities, IHE compliance in meeting requirements to participate in the Title IV aid programs. These requirements are intended to ensure that IHEs provide sufficient educational quality, provide a level of consumer protection, and ensure administrative and fiscal integrity of Title IV programs at IHEs. Through oversight of the IHEs participating in the Title IV student aid programs, FSA is able to identify instances of noncompliance and take appropriate action, such as sanctioning IHEs or providing assistance to IHEs to come into compliance—both tools that can help mitigate student and taxpayer risk. Interest in the issue of FSA's oversight of IHEs has arisen, at least in part, due to the prominent closures of several large multi-campus IHEs in recent years, affecting thousands of students. In response to these closures, GAO and ED's IG have launched several investigations and have found that FSA staff do not always follow internal procedures for institutional review and that some internal procedures did not have controls in place to prevent IHEs from manipulating Title IV participation requirements. These frailties could result in failure to identify IHEs that are not complying with Title IV requirements or that are at risk of abruptly closing. For example, one IG report found that FSA did not conduct IHE program reviews in accordance with its own internal procedures, which could lead to "limited assurance that program reviews are appropriately identifying and reporting all instance of noncompliance." The IG noted that FSA staff did not consistently complete and maintain required program review forms, adequately document institutional fiscal testing requirements relating to Title IV aid disbursement at IHEs, or obtain all required information for review of an IHE's distance education programs. Perhaps relatedly, some FSA staff reported feeling "overwhelmed" with the amount of work they were required to perform in the time allotted, and some of their managers believed that allotted time may be inadequate to complete some more complex program reviews, which could have been contributing factors to FSA not consistently conducting program reviews according to procedures. In another report, the IG found that FSA needed to improve internal processes to help it identify IHEs that may be at risk of an abrupt closure. Specifically, the IG found that FSA did not act in a timely manner to resolve Corinthian College's (a large IHE that abruptly closed in 2015) failing composite score appeal, nor did it promptly require Corinthian College to post a letter of credit upon finding that the school's composite score was failing. The IG asserted that such weaknesses may enable some IHEs to avoid FSA sanctions or additional oversight, which in turn may result in a greater risk of harm to students (e.g., enrollment in an IHE that may be at risk of a precipitous closure) and loss of taxpayer funds (e.g., the cost of student loan discharges due to the IHE's closure). The IG also found that FSA had taken some steps to implement new tools and processes to help identify IHEs at risk of closure, such as participating in OPE efforts to enhance information sharing between ED and an IHE's accreditor and creating an enforcement office responsible for investigating complaints made against IHEs. It appears that the enforcement office has since been largely disbanded. However, it is possible that subsequent steps may have been taken to strengthen monitoring and response practices. Ensuring IHEs compliance with Title IV requirements arguably addresses one of the HEA-specified functions of FSA as a PBO: ensuring integrity of the Title IV aid programs. It also arguably addresses FSA's strategic goal to " proactively manage the student aid portfolio and mitigate risk ," which FSA describes as aimed to "strengthen FSA's role in working to ensure protection of customers and holding stakeholders accountable for their actions." Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed success (see Table 4 ). However, neither metric seems to directly address IHE oversight and accountability in the Title IV aid programs. Loan Servicer Oversight FSA-contracted loan servicers are tasked with various day-to-day administrative tasks associated with federal student loans and some other forms of student aid. FSA's oversight of loan servicers generally consists of ensuring that the loan servicers are meeting federal requirements for student loans (e.g., ensuring that borrowers' interest rates are correctly calculated) and fulfilling the terms and conditions of their contracts with FSA and providing guidance to loan servicers to enable them to meet such standards. Oversight of contracted loan servicers can help FSA mitigate risks in the Title IV program and enable it to help ensure the provision of effective customer service to students and their families. In recent years, issues associated with federal student loan servicing have received considerable attention. For instance, some have alleged that some loan servicers have engaged in undesirable conduct, such as steering borrowers away from more beneficial loan repayment options or providing inaccurate or incomplete information to borrowers. Still others have detailed borrowers' experiencing problems when seeking to have loan servicers resolve servicing errors, identified issues with loan payment processing that may cause problems for borrowers seeking to repay their loans, and identified issues with respect to the implementation of specific loan terms and conditions such as the PSLF program. Concerns raised about loan servicing have focused in particular on whether FSA is sufficiently reviewing, monitoring, and holding loan servicers accountable. GAO has reported that FSA's monitoring of loan servicers' interaction with borrowers may be insufficient to ensure that servicers are providing accurate information and quality customer service to borrowers. For instance, GAO found that FSA primarily monitored inbound calls from borrowers to loan servicers, which constitute a small percentage of the calls loan servicers participate in. Thus, GAO opined that "FSA may not be focusing its call monitoring on the most frequent and critical types of calls." GAO also found that FSA's call monitoring was poorly documented and its tracking of borrower complaints was disjointed, with complaints being tracked across multiple systems. While some of these issues have seemingly been resolved, it is unclear whether others have been resolved. Without a systematic approach to reviewing loan servicer interactions with borrowers, it may be difficult for FSA to target oversight of its loan servicers and improve its services to student loan borrowers. More recently, ED's IG found that while FSA regularly identifies instances of servicer noncompliance with federal servicing requirements, FSA neither tracked instances of noncompliance that were remedied by loan servicers nor analyzed information relating to the noncompliance. Moreover, the IG found that FSA rarely used available tools to hold loan servicers accountable, nor did FSA incorporate a performance metric relating to servicer compliance into the otherwise performance-driven terms of its contracts with loan servicers. Finally, the IG found that FSA employees did not always follow internal policy when evaluating interactions between servicers' representatives and borrowers. These issues may make it difficult for FSA to identify recurring issues in loan servicing, mitigate the risk of potential harm to borrowers for loan servicer noncompliance, and hold loan servicers accountable for poor servicing. A difficulty loan servicers may face in complying with requirements for servicing federally held students loans is the fragmented and incomplete guidance for a complex student loan system provided to them from FSA. GAO has found that FSA may provide insufficient guidance to servicers regarding certain aspects of loan administration, such as how to apply borrower over- or under-payments to an account balance. Moreover, when FSA does provide guidance, it may not consistently share that information with all loan servicers or all relevant individuals. Such gaps in authoritative guidance to loan servicers may create a risk of inconsistent interpretations of law and procedures, which could lead to inefficiencies in federal student loan administration and could negatively affect borrowers' abilities to use the features of their loan terms and conditions. To help address these concerns, Treasury has recommended, and Congress has previously directed, FSA to publish a common loan servicing policies and procedures manual. However, it appears that FSA has not published such a manual. Another difficulty loan servicers face is that federal student loan terms and conditions have become increasingly more complex over the years. This may contribute to some of the problems loan servicers have in administering them. For example, FSA recently stated that it, along with its loan servicers, is working to enhance communications with borrowers regarding the PSLF program's requirements but acknowledged that the program is fundamentally complex and that FSA does not have the authority to change congressionally mandated PSLF eligibility requirements. Thus, while there are likely instances in which FSA oversight of loan servicers could be strengthened to ensure that borrowers receive the loan benefits to which they are entitled, there may also be inherent difficulties in administering the loan programs themselves, which might be addressed with policy changes to the programs. Ensuring loan servicer compliance with Title IV and contract requirements arguably addresses one of the HEA-specified functions of FSA as a PBO—ensuring integrity of the Title IV aid programs—and FSA's strategic goal to " proactively manage the student aid portfolio and mitigate risk ." Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed results (see Table 4 ). While some of the metrics FSA has identified under this performance goal seem intended to address loan servicing practices, the extent to which they may do so is unclear. For instance, it is unclear whether the metrics used to assess the efficacy of FSA directly gauge the accuracy and completeness of information provided by their contracted loan services. Discussion of Issues in Oversight and the PBO Structure In determining the desired level of oversight of IHEs and loan servicers, Congress might consider whether to specify desired outcomes and actions to be taken by FSA. While FSA is tasked with the day-to-day functions of administering the Title IV programs, Congress can guide and affect these efforts in a variety of ways, including amending the portions of the HEA that relate to FSA's functions, providing stipulations regarding the use of annual appropriations, exercising oversight of FSA through mechanisms such as congressional hearings, further emphasizing the importance of stakeholder input (discussed below in the section entitled "Stakeholder Accountability"), or statutorily specifying more goals and performance metrics for FSA. Some of these changes might involve tradeoffs between improving perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. To the degree that additional statutorily specified direction might stipulate the way in which FSA is to conduct day-to-day operations, there may be potential for it to be in tension with the goal of accountability for results, as opposed to processes, that is key to the PBO model. Arguably, such action might also impair the agency's ability to make business-like operational decisions based on nonpolitical considerations rather than responsiveness to political leaders. The choice of the PBO model was predicated on the idea that ED's political leadership would retain policymaking functions and that the PBO's role would be limited to operational functions. Seemingly, ED and FSA have made organizational adjustments—such as FSA's Office of Policy Liaison and Implementation Staff, which consults with the Secretary on the development and promulgation of Title IV student aid policies and regulations—that allow for FSA input into the formal policymaking process that is at least nominally under the authority of ED. A different kind of policymaking—that which occurs as a byproduct of implementation—is a long noted facet of public administration that might prove more difficult to address. Issues around loan servicing illustrate how it may be difficult to completely remove policymaking from the operational functions delegated to FSA. For example, Congress sets the terms and conditions of federal student loans in general, and ED may add precision to them, while FSA designs and enforces contracts for loan servicers to administer the loan programs. However, a program's administration may shape how policies work in real life. For instance, some have observed that the payment structure of loan servicing contracts established by FSA may incentivize loan servicers to encourage borrowers to pursue one loan benefit (e.g., forbearance ) over another (e.g., income-based repayment), which may contradict ED's policy preferences. Although such policymaking through implementation probably can be reduced by limiting the scope of discretion in a delegated authority or by increasing oversight of the agency's activities, these steps might reduce agency efficiency and hinder the effectiveness of the PBO model. Transparency Numerous outside parties have a stake in the aid programs and rely on FSA to provide timely and accurate information about them. Criticisms have been raised that FSA may lack sufficient transparency regarding Title IV program operations. Congress and other entities with oversight responsibilities (e.g., the CFPB) sometimes seem to have incomplete or imperfect information on Title IV program performance and operations, which may make it difficult to make informed, well-honed policy or enforcement decisions. Many consumers are also seemingly have incomplete or imperfect consumer information on the Title IV programs and Title IV participation, which may make it difficult for them to make informed college-going and financial decisions. Some have called on FSA to publicly release a variety of data and to enhance communications regarding such information. It does not appear that FSA's PBO model would necessarily hinder transparency, nor would increasing transparency appear to be directly at odds with the model's design. However, there may be some tradeoffs between increasing transparency and maintaining the effectiveness of the PBO's business-like design, which was specifically intended to shield Title IV aid administration, at least in part, from political pressures and increase efficiency within the aid programs. Additionally, FSA must grapple with privacy requirements when contemplating the potential release of, and how to appropriately make available, many types of data in its possession. Information for Policymakers and Stakeholders Congress and other policymakers have an interest in understanding how the Title IV federal student aid programs operate and the outcomes associated with those programs, as the dollar amount of federal student aid awarded and number of aid recipients represents a large federal investment. In FY2019, FSA provided approximately $130.4 billion in Title IV aid to approximately 11.0 million students, and FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. Concerns have been raised that FSA may not provide access to information that may enable stakeholders to make informed policy recommendations and decisions. Some have noted that while FSA possesses large quantities of student-level records that measure grant and loan receipt, postsecondary education completion status, and loan repayment, FSA has "often been less than responsive to requests for data and research that would benefit the rest of the nation." Even when information on Title IV program performance is made available, some have found it to be insufficient. For example, ED's IG recently found that while FSA has provided, through its Data Center, information on the loan portfolio that was formerly unavailable, it does not include other potentially relevant information, such as more detailed information on costs to the federal government associated with the income-driven repayment plans and loan forgiveness programs—two loan features that are increasingly being used by borrowers and garnering attention—that could assist policymakers and the public understand the future impact of those loan terms. At least one federal entity has seemingly been unable to carry out some of its duties due to a perceived lack of transparency from FSA. The CFPB has indicated that recent FSA guidance to its contracted loan servicers regarding the release of certain student loan records may be hampering CFPB's ability to conduct supervisory examinations of them to ensure that they are in compliance with federal consumer protection law. The guidance prohibits loan servicers from responding directly to information requests by third parties, including regulators such as the CFPB, and specifies that, pursuant to the Privacy Act of 1974, third-party requests should be made directly to ED. Providing requested information to stakeholders arguably aligns with at least one of FSA's strategic goals: " Foster trust and collaboration among stakeholders ." Based on the three performance metrics FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4 ). However, generally speaking, the performance metrics do not appear to encompass the provision of timely and useful information to stakeholders. Moreover, it is unclear how some of the three performance metrics (e.g., collection rate) address the strategic goal in general. The metric " Ease of doing business with FSA " seems most relevant to the quality and timeliness of its efforts to meet the information needs of the stakeholders discussed here. However, it is not clear that this metric is constructed in a manner that would capture the extent to which FSA's efforts are successful in meeting the information needs of policymaking and oversight entities who presumably constitute high-priority stakeholders. Information for Members of the Public Members of the general public—particularly those who need or may need student aid—may have an interest in understanding how the Title IV programs operate and the outcomes associated with those programs. Their interests may relate to having access to information that allows them to make informed college-going and financial decisions and understanding potential financial risks associated with those decisions. Concerns have been raised that FSA may not be releasing some information relating to IHEs' performance in meeting Title IV institutional eligibility requirements that may be indicators of an IHE's educational quality or financial stability and may be of use to consumers when deciding in which IHEs to enroll. In one report, GAO found that while FSA publicly discloses information on some IHEs' financial composite scores (an indicator of an IHE's financial stability), it did not publicly disclose all IHEs' composite scores. Since the report's publication, FSA has taken some steps to enhance the availability and usefulness of publicly available composite score information. However, "without complete and transparent data on schools' financial conditions," which may include aspects other than an IHE's composite scores, "it may be difficult for students to make informed decisions as to whether a school is a safe investment of their time and money." Concerns have also been raised that FSA may not consistently provide information on federal student aid terms and conditions that may enable recipients to make sound financial decisions. GAO has found that while FSA makes available detailed information about loan terms and conditions, borrowers must often actively seek out the information. Moreover, FSA often relies on its loan servicers to communicate loan terms and conditions to borrowers, but there may be inconsistencies among loan servicers in the information they provide to borrowers. Communications about program requirements among borrowers, FSA, and loan servicers may also be imperfect. Inconsistent and/or imperfect information about program terms may lead to borrowers' being unaware of or confused about program requirements, which may put them at risk of making suboptimal financial decisions, some of which may lead to financial distress such as loan delinquency or default. FSA has taken steps to increase borrower awareness of some loan terms and conditions. However, all communication issues may not be fully resolved. In response to some of these concerns, Congress has on occasion directed FSA to perform customer outreach. Providing complete and accurate information to customers arguably addresses some of the HEA-specified purposes of FSA as a PBO: "to improve service to students and other participants in the student financial assistance programs authorized under title IV, including making those programs more understandable to students and their parents." It also arguably aligns with FSA's strategic goal of " i mprov[ing] quality of service for customers across the entire student aid life cycle ." Under the five metrics FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4 ). However, concerns over communications with customers remain. Discussion of Issues in Transparency and the PBO Structure Some have suggested that FSA's independence and leadership by non-political appointees enable it to be unresponsive to requests for information from Congress, political and career staff within ED, and outside stakeholders. They point out that the COO is accountable to the Secretary on the basis of measurable organizational and individual performance goals, arguably rendering removal by the Secretary or the President more difficult politically. With better access to information, it is argued, researchers and policymakers could more readily judge policies and federal investments. However, other factors, such as compliance with other federal statutes (e.g., ED's interpretation of its responsibilities under the Privacy Act of 1974), may hinder FSA's responsiveness to information requests. Increasing access to Title IV program performance and operations information might detract from or improve the effectiveness of the PBO's business-like design features. Sharing such information generally entails the ongoing development of information-sharing policies and procedures. Staff hours would be needed to carry out functions associated with the dissemination process, which could result in reduced economy and efficiency in addressing the PBO's statutory purposes—which do not explicitly include data sharing. Furthermore, it could increase scrutiny and evaluation of the agency's operational processes rather than the results by which PBO performance is to be measured. On the other hand, the sharing of such information could improve the ability of stakeholders to assess the results of FSA's work, perhaps using different measures of performance, and hence address accountability for results beyond the specific targets identified by FSA. Stakeholder Accountability Section 141 of the HEA mandates that FSA develop five-year performance plans and annual reports. In doing so, FSA is to engage with relevant stakeholders, which may enable it to glean new information about program performance, leverage that information to create efficiencies, and provide a level of accountability to stakeholders in its operations. In addition, the COO and senior managers are to enter into annual performance agreements that set forth measurable organizational and individual goals. The awarding of annual performance bonuses is tied to meeting these goals. Each of these provisions is intended to provide a layer of accountability to stakeholders, including students, borrowers, IHEs, FFEL program lenders and guaranty agencies, contracted student loan servicers, Congress, and other parties that may have an interest in federal student aid. Concerns about accountability relate to whether FSA is fulfilling its statutory mandate to consult with such stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make improvements. They also relate to whether FSA is sufficiently responsive to customer needs. Consideration might be given to whether improvement of performance agreements and measures and more meaningful use of stakeholder feedback may streamline operations at FSA and/or improve customer service to students and other aid participants—two statutorily specified purposes of establishing FSA as a PBO. Criticisms in this area raise questions about the effectiveness of the PBO's statutory performance planning and measurement mechanisms. Consideration might be given to amending these provisions. At least one stakeholder organization, representing student aid administrators, has reported that while FSA may reach out to stakeholders for input in developing its performance plans and annual reports, the engagement may be only perfunctory in nature and may not provide stakeholders a meaningful opportunity to provide potentially useful feedback to FSA to enable it to fulfill its functions. The same stakeholder organization has also asserted that performance metrics developed by FSA and ED are vague or inappropriate. GAO has raised concerns regarding how FSA communicates with aid recipients and whether it leverages information from customer interactions to make program improvements. Assertions of a lack of engagement with stakeholders and meaningful assessment of FSA's performance raise concerns about whether statutory mandates are being adhered to and whether FSA is sufficiently attuned to outside views to effectively and efficiently administer a program in which many actors are engaged. They also raise concerns about whether FSA is sufficiently accountable to those stakeholders. The extent to which FSA engages with and leverages information from student aid recipients and organizations who represent them may affect students and their families. They may be limited in their ability to shop around for postsecondary financial assistance, as Title IV student aid makes up approximately half of the financial assistance available to postsecondary students. Moreover, student loan borrowers often have even fewer options regarding choosing loan products to finance their postsecondary education, as private lenders are often unwilling to provide loans to individuals who may have limited creditworthiness, whereas Title IV student loans are generally made without regard to creditworthiness. In those instances where private education loans are made, they often do not contain the same favorable terms and conditions (e.g., availability of loan forgiveness programs) as Title IV student loans. It might be argued that because FSA has no comparable competitors, it may have less motivation to seek or respond to customer feedback to improve services. Arguably, the criticisms of FSA discussed above expose a potential flaw in the PBO model as implemented under the HEA. The ED Secretary and the FSA COO have a joint responsibility to set (in consultation with stakeholders) and measure organizational performance. They each have an incentive (as leaders of ED and FSA, respectively) to show continuous improvement in FSA performance. This incentive might affect the degree to which stakeholder input is incorporated into the process as well as the specificity and nature of the goals and measures adopted. Vague goals and measures with seemingly perfunctory stakeholder feedback processes could mask performance problems that might exist. Some potential changes in this area could maintain FSA as a PBO but also modify statutory provisions related to accountability and stakeholder input. Improvement of performance agreements and measures would seemingly be in line with the PBO model's results orientation. For example, Congress might more specifically identify in statute the domains and metrics to be used in establishing annual performance plans and evaluating agency performance. Such provisions have been enacted in other contexts, such as the performance accountability system that was established by the Workforce Innovation and Opportunity Act. Similarly, more meaningful incorporation of certain types of stakeholder feedback into the performance plan and evaluation process would seemingly be consistent with the PBO model. Potential approaches to emphasizing the importance of stakeholder input during this planning and assessment might include specifying in statute a more formal input process. For example, Congress has directed state agencies to solicit written comments from the public and to respond to such comments in writing when establishing career and technical education performance standards. Appendix A. Selected Bibliography The following appendix provides a bibliography of selected reports authored by ED's OIG and GAO that address FSA and its operations and that have been published since January 1, 2014. Sources listed in the bibliography largely relate to FSA but may also include information and findings relating to other ED offices, such as OPE. In some instances, sources refer to ED and/or the Secretary of Education and not specifically to FSA and/or its COO. CRS is including these documents in this bibliography as, given FSA's functions, some of the information in these reports likely relate to FSA. For each category, reports are presented in reverse chronological order. U.S. Department of Education, Office of Inspector General Federal Student Aid's Oversight of Schools' Compliance with Satisfactory Academic Progress Regulations , July 17, 2019. Federal Student Aid's Process to Select Free Application for Federal Student Aid Data Elements and Students for Verification , April 26, 2019. Federal Student Aid: Additional Actions Needed to Mitigate the Risk of Servicer Noncompliance with Requirements for Servicing Federally Held Student Loans , February 12, 2019. Federal Student Aid: Efforts to Implement Enterprise Risk Management Have Not Included All Elements of Effective Risk Management , July 24, 2018. Federal Student Aid's Contractor Personnel Security Clearance Process , April 17, 2018. The Department's Communication Regarding the Costs of Income-Driven Repayment Plans and Loan Forgiveness Programs , January 31, 2018. Federal Student Aid's Borrower Defense to Repayment Loan Discharge Process , December 8, 2017. Federal Student Aid's Processes for Identifying At-Risk Title IV Schools and Mitigating Potential Harm to Students and Taxpayers , February 24, 2017. Misuse of FSA ID and the Personal Authentication Service , September 26, 2016. FSA Oversight of the Development and Enhancement of Information Technology Products, June 30, 2016. Kathleen Tighe, ED Inspector General, "Servicemembers Civil Relief Act," letter to Senators Patty Murray, Elizabeth Warren, and Richard Blumenthal, February 29, 2016. Functionality of the Debt Management Collection System 2 , November 5, 2015. Federal Student Aid's Oversight of Schools Participating in the Title IV Programs , September 29, 2015. Review of Debt Management Collection System 2 (DMCS2) Implementation , August 24, 2015. Audit of the Followup Process for External Audits in Federal Student Aid , June 17, 2015. Pell Grant Lifetime Eligibility Limit , March 31, 2015. Federal Student Aid's Oversight of Schools' Compliance with the Incentive Compensation Ban , March 24, 2015. The U.S. Department of Education's Administration of Student Loan Debt and Repayment , December 11, 2014. Oversight of Guaranty Agencies During the Phase-Out of the Federal Family Education Loan Program , September 29, 2014. Review of Federal Student Aid's Oversight and Monitoring of Private Collection Agency and Guaranty Agency Security Controls , September 22, 2014. Handling of Borrower Complaints Against Private Collection Agencies , July 11, 2014. Third-Party Servicer Use of Debit Cards to Deliver Title IV Funds , March 10, 2014. Review of Federal Student Aid's Plans for Schools Closures by a For-Profit Entity , February 28, 2014. Title IV of the Higher Education Act Programs: Additional Safeguards Are Needed to Help Mitigate the Risks That Are Unique to the Distance Education Environment , February 21, 2014. U.S. Government Accountability Office Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion , GAO-19-595, September 5, 2019. Federal Student Loans: Education Needs to Verify Borrowers' Information for Income-Driven Repayment Plans , GAO-19-347, June 25, 2019. Priority Open Recommendations: Department of Education , April 9, 2019. Cybersecurity: Office of Federal Student Aid Should Take Additional Steps to Oversee Non-School Partners' Protection of Borrower Information , GAO-18-518, September 17, 2018. Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers , GAO-18-547, September 5, 2018. Federal Student Loans: Further Action Needed to Implement Recommendations on Oversight of Loan Servicers , GAO-18-587R, July 27, 2018. Federal Student Aid: Education's Postsecondary School Certification Process , GAO-18-481, July 17, 2018. Federal Student Loans: Actions Needed to Improve Oversight of Schools' Default Rates , GAO-18-163, April 26, 2018. Federal Student Aid: Better Program Management and Oversight of Postsecondary Schools Needed to Protect Student Information , GAO-18-121, November 27, 2017 (reissued December 4, 2017). Higher Education: Education Should Address Oversight and Communication Gaps in Its Monitoring of the Financial Condition of Schools , GAO-17-555, August 21, 2017. Student Loans: Oversight of Servicemembers' Interest Rate Cap Could be Strengthened , GAO-17-4, November 15, 2016. Federal Student Loans: Education could Improve Direct Loan Program Customer Service and Oversight , GAO-16-523, May 16, 2016. Federal Student Loans: Key Weaknesses Limit Education's Management of Contractors , GAO-16-196T, November 18, 2015. Federal Student Loans: Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and Forgiveness Options , GAO-15-663, August 25, 2015. Higher Education: Better Management of Federal Grant and Loan Forgiveness Programs for Teachers Needed to Improve Participant Outcomes , GAO-15-314, February 24, 2015. Higher Education: Education Should Strengthen Oversight of Schools and Accreditors , GAO-15-59, December 22, 2014 (reissued January 22, 2015). Federal Student Loans: Better Oversight Could Improve Defaulted Loan Rehabilitation , GAO-14-256, March 6, 2014. Appendix B. Selected Acronyms Used in This Report

The Office of Federal Student Aid (FSA), within the U.S. Department of Education (ED), is established as a performance-based organization (PBO) pursuant to Section 141 of the Higher Education Act (HEA). FSA is a discrete management unit "responsible for managing the administrative and oversight functions supporting" the HEA Title IV federal student aid programs, including the Pell Grant and the Direct Loan programs. As such, it is the largest provider of postsecondary student financial aid in the nation. In FY2019, FSA oversaw the provision of approximately $130.4 billion in Title IV aid to approximately 11.0 million students attending approximately 6,000 participating institutions of higher education (IHEs). In addition, in FY2019, FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. Among other functions, FSA develops and maintains the Free Application for Federal Student Aid (FAFSA); obtains funds from the Department of the Treasury to make aid available to students; contracts with numerous third parties to provide goods and services related to Title IV administration, such as student loan servicing; provides oversight of the numerous third parties (e.g., contracted student loan servicers and IHEs) that play a role in administering the Title IV programs; and provides information to third-party stakeholders—such as students, the public, and Congress—regarding Title IV program operations and performance. Responsibility for developing and promulgating policy and regulations relating to the Title IV programs, however, remains with the Secretary of Education. Congress established FSA's PBO structure under the Higher Education Amendments of 1998 ( P.L. 105-244 ) in response to a belief in Congress and ED that the Title IV student aid programs were "severe[ly]" mismanaged and that ED was in need of restructuring to improve federal student aid delivery. In general, PBOs are intended to be business-like, results-driven organizations that have clear objectives and measureable goals designed to improve an agency's performance and transparency. PBO leaders are to be held professionally accountable for meeting organization goals, with continued tenure and a portion of compensation linked to these measures of success. In exchange, PBOs and their leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies. Specific to FSA's structure as a PBO, the HEA vests management of FSA in a chief operating officer (COO) who is appointed based on demonstrated ability and without regard to political affiliation. Each year, the COO and the Secretary must agree on and publicly make available a five-year performance plan for FSA that establishes measurable goals and objectives addressing a variety of statutory specifications, such as FSA's responsibilities in improving customer service to stakeholders and reducing costs of administering the Title IV student aid programs. The COO is required to annually submit to Congress a report on FSA's performance. In addition, each year the COO and the Secretary, and the COO and FSA senior managers, enter into performance agreements that set forth measurable organizational and individual goals. The COO and senior managers are eligible to receive bonus compensation based on an evaluation of work performed relative to the annual goals specified in their annual performance agreements. The HEA provides FSA with some flexibilities with regard to traditional federal rules around hiring, compensation, and procurement. Since FSA's creation as a PBO, it has experienced some notable successes, including the Title IV aid programs' removal from the Government Accountability Office's High Risk List in 2005, the transition to 100% direct lending under the Direct Loan program, and implementation of the Internal Revenue Service (IRS) Data Retrieval Tool. Since FSA's establishment, the programs it administers have grown substantially larger, and the federal student aid programs and benefits have become substantially more complex to administer (e.g., with the addition of numerous loan forgiveness and income-driven repayment plans). In recent years, particularly over the last decade, several issues have arisen related to FSA's Title IV program administration. In broad terms, they pertain to oversight of entities participating in and helping with administration of Title IV programs, transparency, and accountability to certain stakeholders and consumers (i.e., aid recipients). Oversight issues relate to FSA's oversight of IHEs participating in the Title IV loan programs. Criticisms have focused on FSA's assessment of the well-being of IHEs and ability to proactively mitigate risk in the Title IV programs. Other concerns relate to FSA's oversight of its contracted student loan services, including its monitoring of such entities and the accountability of servicers to FSA in certain areas of their performance. Concerns have also been raised about the shortage of operational guidance FSA has provided to loan servicers to enable them to ensure they are meeting Title IV statutory and regulatory requirements and to assist borrowers in navigating the aid programs. Transparency issues relate to the extent to which FSA makes available information about the Title IV programs' performance and operations to relevant parties. Congress, other entities with oversight responsibilities, and other federal agencies sometimes have imperfect information on Title IV program performance and operations, which can make it difficult to make informed, well-honed policy or enforcement decisions. In addition, consumers may be faced with incomplete information on the Title IV programs and the IHEs that participate in such programs, which may make it difficult to make informed college-going and financial decisions. Stakeholder and borrower accountability issues include the extent to which FSA is fulfilling its statutory mandate to consult with relevant stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make program administration improvements. They also relate to whether FSA is sufficiently responsive to customer needs, especially given that FSA administers programs for which, arguably, there are no comparable competitors. As Congress contemplates the reauthorizations of the HEA, it might consider whether any adjustments should be made to address any of these issues and, if so, the extent to which any efforts to address issues might involve or affect FSA's PBO function and structure.

GAO_GAO-19-389

Background Administration and Oversight of the School Meals Programs The Food and Nutrition Service at USDA is responsible for overseeing the school meals programs at the federal level, which includes issuing regulations and guidance. The school meals programs are administered at the state level by a designated state agency—generally an education or agriculture agency—that issues guidance to school districts providing the meals. School districts are responsible for certifying students as eligible for free or reduced-price meals, providing children with nutritionally balanced meals each school day, and counting and claiming eligible meals for federal reimbursement, among other things. USDA and state agencies also conduct oversight of the school meals programs. Figure 1 summarizes the responsibilities of the different entities within the school meals programs. All students in schools operating the school meals programs may participate in the programs, and eligible students may be certified to receive free or reduced-price meals. Individual students can be certified into the school meals programs either through household application or direct certification. Household application. A household can submit an application that lists all sources of household income and the names of all household members, among other information. School districts compare this information to income-eligibility guidelines to determine whether the student is eligible for free or reduced-price meals. Alternatively, the household can indicate on the application that it participates in certain public-assistance programs—such as the Supplemental Nutrition Assistance Program (SNAP)—or that the student meets an approved designation, which confers categorical (automatic) eligibility for free meals. No documentation to support income listings—such as tax returns or pay stubs—is required at the time of application. Direct certification. Under the direct certification method, data matching is used to identify and certify students who are categorically eligible for free meals. State agencies are required by statute to match student enrollment records against SNAP records and may also match against records for other public-assistance programs or approved designations. Students who are directly certified into the school meals programs are eligible for free meals without a household application. Alternatively, schools can use certain program provisions to serve meals at no charge to all students (i.e., eligibility is not determined for each student individually on an annual basis). Community eligibility provision. Schools and school districts may apply for community eligibility if their percentage of students identified as eligible for free meals without an application—known as the identified student percentage—is at or above 40 percent. Meals served at schools using the community eligibility provision are reimbursed using a formula based on the identified student percentage. Other special provisions. Under these special provisions, schools generally use standard procedures to certify free and reduced-price eligible students and count meals by eligibility category to establish a base year. Following the base year, schools serve free meals to all students and are reimbursed based on the information collected in the base year. Meal Counting and Claiming USDA reimburses state agencies, which in turn reimburse school districts, for qualifying meals through the process of meal counting and claiming. A meal is reimbursable if it meets federal nutrition requirements and is not reimbursable if it is missing a required food component or fails to meet the meal pattern requirements. Meals are recorded at the point of sale in a school. Generally, individual meals are recorded as either free, reduced price, or paid based on the student’s certification status, unless the school is operating under community eligibility or a special provision. Reimbursable meals are tallied at each school. School districts aggregate meal tallies from each school and then report to the respective state agencies on a monthly basis. State agencies then aggregate the reports from each district and submit tallies of free, reduced-price, and paid meals to USDA. USDA then reimburses states for the amount reported. Meals in each category (free, reduced-price, and paid) are reimbursed at different rates. Oversight Given that the school meals programs are administered on a daily basis at schools across the country, USDA officials stated that the agency relies on two key oversight practices—management evaluations and administrative reviews—to monitor these programs. Management evaluations. USDA conducts management evaluations of state agencies’ administration of the school meals programs. USDA uses risk-based criteria, such as the level of turnover in state agency staff, to select the state agencies to review each year. According to USDA officials, starting in fiscal year 2019, USDA will automatically select a state agency for review if it has not been reviewed in the past 3 years. According to USDA guidance, examples of operations it reviews during management evaluations include (1) state oversight of certification and verification of students into the school meals programs, (2) administrative reviews of school districts conducted by state agencies, (3) claims for reimbursement, and (4) state oversight of compliance with federal meal pattern requirements, among other areas. According to USDA officials, if USDA considers state agencies reviewed in one year as high risk for program noncompliance, those agencies may receive an additional management evaluation in the following year focused on technical assistance. Administrative reviews. USDA develops guidance for administrative reviews in which state agencies review school districts’ administration of the school meals programs. State agencies are required to conduct administrative reviews of each of their school districts at least once in a 3-year review cycle. USDA guidance states that the objectives of administrative reviews include identifying noncompliance, providing technical assistance, and assessing fiscal actions. Among other things, state agency staff are to review a school district’s certification records and its meal counting and claiming data for the most recent month for which a claim for reimbursement was submitted. State agency staff are also to review school meals served while the staff are on-site to determine whether the meals contain the required food components. State agency staff are to record any identified noncompliance and also provide technical assistance to school district staff. Estimation of Improper Payments in the School Meals Programs The Improper Payments Information Act of 2002 (IPIA), as amended, requires agencies to identify, estimate, and report their improper payment amounts and to develop and implement improper payment reduction plans, among other things. USDA estimates improper payments for the school meals programs through a model based on its APEC study, which is conducted by contractors. The most recent APEC study (APEC II) was released in May 2015 and covered activity during the 2012–2013 school year. USDA conducts an APEC study about every 5 years, with APEC III expected to be released in 2020. Conducting the APEC study involves multiple sampling and data analysis efforts, including the following examples from APEC II. In-person surveys. Contractors conducted in-person surveys of over 3,000 sampled households to collect information on each household’s circumstances at the time of application, including income, household size, and receipt of other public-assistance benefits. Using this information, contractors determined a sampled student’s eligibility status and compared it to the school district’s master benefit list and application or direct certification documentation. Data matching. Contractors assessed the accuracy of the identified student percentage—the figure used to determine reimbursement for schools using the community eligibility provision—for over 100 sampled schools. To do so, contactors used an iterative process to match sampled students to SNAP and Temporary Assistance for Needy Families records, as well as additional data sources if necessary. Observation of meal service. Contractors observed approximately 25,000 lunch transactions and 23,000 breakfast transactions at over 400 sampled schools to identify the food items in each meal at the point of sale, whether the meal was served to a student or nonstudent, and whether the meal was recorded as reimbursable. USDA determined that conducting the APEC study annually would not be feasible. Instead, the APEC study includes a model that allows USDA to use program participation data to report estimated improper payment error rates on an annual basis. Changes in program participation data result in small changes to the estimated improper payment error rates USDA reports during years between APEC studies. Fraud Risk Management Standards and Guidance According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. In July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Risk Framework describes leading practices in four components, as shown in figure 2. The Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires the Office of Management and Budget (OMB) to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of controls established under OMB guidance, among other things. It is important to note that fraud and “fraud risk” are distinct concepts. Fraud is challenging to detect because of its deceptive nature. Additionally, once suspected fraud is identified, alleged fraud cases may be prosecuted. If the court determines that fraud took place, then fraudulent spending may be recovered. Fraud risk exists when individuals have an opportunity to engage in fraudulent activity, have an incentive or are under pressure to commit fraud, or are able to rationalize committing fraud. When fraud risks can be identified and mitigated, fraud may be less likely to occur. Although the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if fraud has not yet been identified or occurred. For example, suspicious billing patterns or complexities in program design may indicate a risk of fraud. Information to help identify potential fraud risks may come from various sources, including whistleblowers, agency officials, contractors, law-enforcement agencies, or beneficiaries. USDA Has Reported Taking Various Steps to Reduce Improper Payment Error Rates, but Redefined What It Considers to Be an Improper Payment in Fiscal Year 2018 USDA Reported Taking Steps to Reduce School Meals Improper Payment Error Rates USDA has reported various actions aimed at lowering the school meals improper payment error rates in its agency financial reports. These actions—including onetime actions and longer-term efforts—cover multiple aspects of the programs. The actions USDA reported included the creation of a new household application prototype intended to reduce applicant errors and the development of training for food service workers to address administrative errors. USDA also reported on mechanisms to collect information on program errors to support agency analysis and monitoring efforts. Examples of the reported actions are illustrated in figure 3 below. Because the study used to develop improper payment error rates in school meals programs—APEC—is conducted about once every 5 years, the effect of these actions is currently unknown. Estimated improper payment error rates reported in years between APEC studies will generally not reflect the effect of most actions until the next study is released. Currently, the next APEC study is expected to be released in 2020. Reported Error Rates for Fiscal Year 2018 Are Not Comparable to Prior Years Because of a Change in Definition USDA changed what it considers to be an improper payment in the school meals programs for fiscal year 2018 reporting, resulting in improper payment error rates that are not comparable to those of prior years. Specifically, USDA determined that meal claiming errors do not meet the definition of an improper payment. According to USDA, meal claiming errors occur when meals are incorrectly categorized as reimbursable or nonreimbursable at the point of sale. For example, a meal claiming error occurs when a meal that is missing a required meal component (e.g., the required quantity of a vegetable) is counted as reimbursable. USDA officials reported that the rationale for the change in what constitutes an improper payment is that meal claiming error does not result in the payment of federal funds for services that were not provided or that were provided to ineligible recipients. Agency officials also stated that the remedy for meal claiming error is to add the missing food component to the meal, so correcting the error would not reduce program payments. Although the errors will not be considered in determining the reported estimated improper payment error rates, USDA officials stated that the agency is committed to reducing meal claiming error and will continue to measure it as part of its periodic APEC studies. Prior to fiscal year 2018 reporting, meal claiming errors were considered improper payments. As a result, this change contributed to a significant decrease in the estimated improper payment error rates for the school meals programs reported for fiscal year 2018, as shown in figure 4. Accordingly, the results shown for 2015 through 2018 in figure 4 are not comparable. Limited Risk Assessment Hinders USDA’s Ability to Better Ensure Oversight Practices Address Fraud Risks Although USDA considers certain program integrity risks through specific processes, it has not assessed fraud risks in the school meals programs. As a result, USDA cannot determine whether its key oversight processes—extensive efforts designed for broad monitoring purposes— address areas at risk for fraud. The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile. Furthermore, federal internal control standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks. According to USDA officials, fraud in the school meals programs would look the same as nonfraudulent errors. For example, income listed on an application may be misreported intentionally or unintentionally. Consequently, agency officials stated that they have not established a process to plan or conduct a specific fraud risk assessment for these programs. Instead, fraud risks are considered through the agency’s efforts to assess overall program integrity risk in the programs. We have previously reported that integrating fraud risk management into a larger program integrity approach could limit the amount of resources and attention focused specifically on fraud prevention, detection, and response. The deceptive nature of fraud makes it harder to detect than nonfraudulent errors, potentially requiring control activities that are specifically designed to prevent and detect criminal intent. According to agency officials, USDA’s efforts to assess overall program integrity risks in the school meals programs include researching, monitoring, and reporting activities designed to identify areas of program operations susceptible to improper payments and program error. Specifically, agency officials stated that these efforts include research projects—the APEC study used to estimate improper payment error rates and other smaller-scale, informal projects—and a consideration of specific risks when annually determining which states USDA will review through management evaluations. These efforts to assess overall program integrity risk serve specific purposes and are not designed to identify or address fraud risks in the school meals programs. For example, the purpose of one research project mentioned by USDA officials was to identify challenges related to alternative service models for the School Breakfast Program, which include serving breakfast in locations other than a cafeteria and at a later time in the morning. USDA has not developed a process to consider these disparate efforts to comprehensively assess fraud risks. As a result, USDA’s efforts do not align with the overarching concepts of planning and conducting fraud risk assessments in the Fraud Risk Framework. The Fraud Risk Framework identifies leading practices for planning fraud risk assessments. Specifically, the leading practices include tailoring the fraud risk assessment to the program and planning to conduct the assessment at regular intervals and when there are changes to the program or operating environment. The leading practices also include identifying the tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. Information to help identify potential fraud risks may come from various sources, including whistleblowers, agency officials, contractors, law-enforcement agencies, or beneficiaries. Existing oversight efforts— such as USDA’s management evaluations and administrative reviews— may also be a useful source, as information on errors and noncompliance may highlight areas at risk for fraud. The Fraud Risk Framework also identifies leading practices for conducting fraud risk assessments, as illustrated in figure 5. Without a process to plan and conduct regular assessments, USDA cannot identify and assess fraud risks facing the school meals programs. Such information is necessary to appropriately design and implement an antifraud strategy—including specific controls like USDA’s key oversight processes—and evaluate and adapt its strategy and controls to improve fraud risk management in these programs. Conclusions Historically, the school meals programs have reported high estimated improper payment error rates. USDA has reported various steps to reduce the error rates, though a change in what USDA considers an improper payment in the school meals programs resulted in error rates for fiscal year 2018 that are not comparable to those of prior years. Although the two concepts are different, high improper payment error rates may suggest that the school meals programs may also be inherently vulnerable to fraud. However, USDA has not established a process to plan and conduct regular fraud risk assessments for the school meals programs, and existing efforts to assess specific risks in the school meals programs do not comprehensively consider fraud risks. According to leading practices, such an assessment is a pivotal step in managing fraud risks, helping to ensure that USDA’s key oversight efforts are targeted at areas at greatest risk for fraud in these programs, and helping safeguard the government’s substantial investment in them. Recommendation for Executive Action The Administrator of the Food and Nutrition Service should establish a process to plan and conduct regular fraud risk assessments for the school meals programs that align with the leading practices in the Fraud Risk Framework. (Recommendation 1) Agency Comments and Our Evaluation We provided a draft of this report to USDA for review and comment. On April 29, 2019, the Director of the Office of Program Integrity for Child Nutrition provided us with the agency’s oral comments on the draft report. FNS officials generally agreed with the recommendation in the draft report. FNS officials noted that the agency does not currently conduct a formal fraud risk assessment, but they explained that the agency considers fraud risks through multiple existing efforts. These efforts include APEC and other studies, as well as key oversight processes. For example, FNS noted that the APEC study aims to identify the factors that contribute to errors in the school meals programs. Officials explained that this study includes an interview of sampled households, in part to determine whether these households underreported income on their applications and whether such underreporting suggests anything about the applicants’ intent. As noted in our report, we agree that these efforts may be a useful source of information on areas at risk for fraud. However, we continue to believe that additional action is necessary to comprehensively assess fraud risks in the school meals programs, consistent with the Fraud Risk Framework. USDA also provided technical comments, which we incorporated into the report, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Agriculture, the FNS Administrator, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. Appendix I: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, the following staff members made key contributions to this report: Gabrielle M. Fagan, Assistant Director; James M. Healy, Analyst in Charge; and Matthew L. McKnight. Also contributing to this report were Rachel Frisk, Maria McMullen, Jean McSween, and Sabrina Streagle.

In 2018, almost 30 million children participated in the National School Lunch Program and over 14 million participated in the School Breakfast Program, with cash payments totaling almost $17 billion. Historically, the school meals programs have reported high estimated improper payment error rates, which suggest that these programs may also be vulnerable to fraud. GAO was asked to review improper payment error rates and potential fraud in the school meals programs. This report (1) describes steps USDA has reported taking since 2015 to lower improper payment error rates and (2) examines the extent to which USDA has assessed areas of risk for fraud in the school meals programs. GAO reviewed the results of the most recent study USDA uses to estimate improper payments in the school meals programs, as well as the error rates and actions to reduce them reported in USDA's agency financial reports from fiscal years 2015 through 2018. Further, GAO analyzed guidance for key oversight practices and documentation regarding USDA's risk assessment processes. GAO examined these processes against the leading practices in the Fraud Risk Framework for assessing fraud risks. GAO also interviewed agency officials. The Department of Agriculture (USDA) has reported various actions aimed at lowering estimated improper payment error rates in the National School Lunch Program and School Breakfast Program (school meals programs). Examples include a new application prototype intended to reduce applicant errors and training for food service workers to reduce administrative errors. USDA uses a model based on a periodic study to estimate improper payments, and reported error rates will generally not reflect the effect of most actions until USDA's next study is released, likely in 2020. However, in fiscal year 2018, USDA redefined what it considers an improper payment. Specifically, meal claiming errors—for example, meals that are missing a required nutritional component but that are counted as reimbursable—are no longer considered improper payments, resulting in error rates for fiscal year 2018 that are not comparable to prior years. USDA has not assessed fraud risks in the school meals programs, which hinders its ability to ensure that its key oversight practices—extensive processes designed for broad monitoring purposes—address areas at risk for fraud. The assess component of A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework) calls for managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile. USDA officials stated that the agency considers fraud risks through efforts to assess overall program integrity risk in the programs, which include research projects and consideration of specific risks when allocating monitoring resources. However, GAO found that USDA's efforts to assess risk do not comprehensively consider fraud risks. As a result, these efforts are not aligned with the overarching concepts of planning and conducting fraud risk assessments in the Fraud Risk Framework. Establishing a process to plan and conduct regular fraud risk assessments that align with the leading practices in the Fraud Risk Framework—including those in the figure below—will help USDA design and implement an antifraud strategy, as well as evaluate and adapt its strategy to improve fraud risk management in the school meals programs.

CRS_R46105

Introduction This report discusses twenty criminal law cases the United States Supreme Court decided during its 2018 term (Term). Twelve of the cases addressed sentencing issues: capital punishment, violent crime enhancements, supervised release, and excessive fines. Five featured the Court's analysis of pretrial questions associated with drunk driving, double jeopardy, and suits against law enforcement officers. Two decisions sought to discern congressional intent in cases involving firearms and sex offenders. An ineffective of assistance of counsel decision rounded out the Term. Sentencing Capital Punishment The High Court largely relied on existing case law to dispense with capital punishment cases on its 2018 docket. Thus, it held: (1) The prosecution's repeated, racially motivated misconduct during the defendant's six trials for the same murders precluded a creditable Batson finding that the prosecutor's challenge of an African-American prospective juror was based on race-neutral factors ( Flowers v. Mississippi ); (2) Ford and Panetti barred executing a death row inmate with a deteriorating mental condition that prevented him from understanding that he was being punished for his misconduct, regardless of the cause of his condition, but not if he could merely no longer remember the facts surrounding his offense ( Madison v. Alabama ); (3) A state's resubmission of previously rejected intellectual-disability analysis did not change the result ( Moore v. Texas ); (4) The "clearly established Supreme Court precedent" exception to the bar on federal habeas relief for state inmates only applies to precedents in place at the time of state proceedings ( Shoop v. Hill ); and (5) The Baze-Glossip standards apply with equal force both to a general challenge to a method of execution and to an "as-applied" challenge based on an inmate's individual circumstances ( Bucklew v. Precythe ). Flowers v. Mississippi, 139 S. Ct. 2228 (2019) Holding : "[T]he trial court at Flowers' sixth trial committed clear error in concluding that the State's peremptory strike of [a] black prospective juror … was not motivated in substantial part by discriminatory intent." Background : State authorities prosecuted Flowers six times for an offense in which a furniture store owner and three employees were shot to death. The state supreme court reversed Flowers' first and second convictions "due to numerous instances of prosecutorial misconduct." The state supreme court overturned Flowers' third conviction on the grounds of discriminatory jury selection. The fourth and fifth trials ended in hung juries. A sixth jury convicted Flowers of murder and sentenced him to death. Flowers argued that the prosecutor in his sixth trial used peremptory challenges in a racially discriminatory manner. Peremptory challenges allow prosecutors to have prospective jurors dismissed without having to explain the reason for the challenge. A prosecutor may not exercise peremptory challenges in a racially discriminatory manner. The Supreme Court in Batson v. Kentucky established a three-part test to assess claims of racially discriminatory use of peremptory challenges. First, the accused must make a prima facie showing that the challenge was made for discriminatory reasons. Second, the prosecutor has the burden of proving a race-neutral justification for the challenge. Third, the trial court must determine whether the prosecutor has satisfied his burden. The Mississippi Supreme Court considered the prosecutor's peremptory challenges to be race neutral based on valid and not pretextual reasons. The U.S. Supreme Court initially returned Flowers to the state courts for reconsideration in light of its decision in Foster v. Chatman . In Foster , the High Court held that the record demonstrated that the state judiciary had failed the third Batson test—determining whether the state had satisfied the standard that its peremptory strikes be race-neutral. On remand, the Mississippi Supreme Court maintained its earlier assessment—Flowers' trial court had not erred in finding that the prosecution's peremptory challenges were race-neutral. Supreme Court : The U.S. Supreme Court again reversed and returned the case to the Mississippi courts. The Court, speaking through Justice Kavanaugh, declared "[f]our critical facts, taken together, require reversal: First , in the six trials combined, the State employed its peremptory challenges to strike 41 of the 42 black prospective jurors that it could have struck. … Second , in the most recent trial, the sixth trial, the State exercised peremptory strikes against five of the six black prospective jurors. Third , at the sixth trial, in an apparent attempt to find pretextual reasons to strike black prospective jurors, the State engaged in dramatically disparate questioning of black and white prospective jurors. Fourth , the State then struck at least one black prospective juror, Carolyn Wright, who was similarly situated to white prospective jurors who were not struck by the State. Justice Alito concurred because of the "unique combinations of circumstances present." Justices Thomas and Gorsuch dissented on the grounds that the prosecutor had presented sufficient race-neutral reasons for the challenges. Madison v. Alabama, 139 S. Ct. 718 (2019) Holding : "First, under Ford and Panetti , the Eighth Amendment may permit executing Madison even if he cannot remember committing his crime. Second, under those same decisions, the Eighth Amendment may prohibit executing Madison even though he suffers from dementia, rather than delusions. The sole question on which Madison's competency depends is whether he can reach a 'rational understanding' of why the State wants to execute him." Background : The Supreme Court's Ford and Panetti decisions lie at the heart of the Court's decision in Madis on . In Ford v. Wainwright , the Court held that the Eighth Amendment prohibits executing a defendant who is insane. In Panetti v. Quarterman , the Court held that the state may not execute a death-row inmate "whose mental illness deprives him of 'the mental capacity to understand that [he] is being executed as a punishment for crime." During a dispute with his former girlfriend, Madison murdered a police officer. He was convicted and sentenced to death. As his case passed through the various stages of state and federal review, Madison suffered a series of strokes leaving him with a continuously eroding mental condition that he asserted precluded his execution. After Alabama set Madison's execution date, he petitioned the state court for a stay on the grounds of his mental health. The state court denied his petition. Madison then sought federal habeas corpus relief. The district court concluded that the state court had correctly interpreted federal law. The U.S. Court of Appeals for the Eleventh Circuit, however, held that if Madison could not remember the facts of his crime, he could not understand the link between his crime and the decision to execute him. The Supreme Court reversed and remanded the case with the observation that "[n]either Panetti nor Ford 'clearly established' that a prisoner is incompetent to be executed because of a failure to remember his commission of the crime, as distinct from a failure to rationally comprehend the concepts of crime and punishment as applied in his case." Back in state court, the government contended that: (1) neither Madison's memory loss nor any dementia barred his execution and (2) he had failed to prove that he was either delusional or psychotic which might have provided the grounds to stay his execution. The state court agreed and Madison asked the Supreme Court for review. Supreme Court : Speaking for the Court, Justice Kagan emphasized that the critical question was whether Madison lacked the mental capacity to "reach a 'rational understanding' of why the State wants to execute him." The Court returned the case to state court to determine with a reminder that Madison's loss of memory, alone, does not bar his execution but a want of mental capacity would bar to execution regardless of whether the incapacity resulted from dementia or delusion. In dissent, Justice Alito, joined by Justices Gorsuch and Thomas, objected that the case should be resolved solely on the basis for which certiorari was granted: "Does the Eighth Amendment prohibit the execution of a murderer who cannot recall committing the murder for which the death sentence was imposed?" Moore v. Texas, 139 S. Ct. 666 (2019) (Moore II) Holding : The Texas Court of Criminal Appeals again erred in assessing and denying a death-row inmate's claim of intellectual disability. Background : In 1980, a Texas state court convicted Moore and sentenced him to death for a murder committed during an attempted robbery. In 2002, the Supreme Court held in Atkins that the Eighth Amendment bars executing an intellectually-disabled death row inmate. In 2014, the Court in Hall held unconstitutional a "rigid rule" under which no one with an IQ above 70 could be considered "intellectually-disabled" for death penalty purposes. In the same year, a Texas state habeas court found Moore to be intellectually disabled and recommended that he be declared ineligible for the death penalty. The Texas Court of Criminal Appeals declined to do this in Moore I . Moore I : The Texas Court of Criminal Appeals faulted the state habeas court for failing to apply the Texas appellate court's Briseno standard for intellectual disability and applying the American Association on Intellectual and Developmental Disabilities' [AAIDD] standards instead. The Supreme Court vacated and remanded the case, faulting the Texas Court of Criminal Appeals' for, among other things, relying on unadjusted IQ scores in spite of the Court's Hall decision and using a lay assessment of intellectual disability in its Briseno standard. Moore II : On remand, the Texas Court of Criminal Appeals again concluded that Moore was not intellectually disabled for capital punishment purposes. The Supreme Court reversed and remanded the case to the Texas Court of Criminal Appeals with a per curiam opinion, which reiterated the standard that the lower court should use and identified instances in which the Texas court had applied the standard improperly. — The Supreme Court explained that to designate a death row inmate to be ineligible for execution, "a court must see: (1) deficits in intellectual functioning—primarily a test related criterion; (2) adaptive deficits, 'assessed using both clinical evaluation and individualized … measures;' and (3) the onset of these deficits while the defendant was still a minor." The Supreme Court cited "at least" five instances of the lower court misapplying the standard: First, the Texas Court of Criminal Appeals "overemphasized Moore's perceived adaptive strengths. But the medical community," we said, "focuses the adaptive-functioning inquiry on adaptive deficits." Second, the appeals court "stressed Moore's improved behavior in prison." But "[c]linicians … caution against reliance on adaptive strengths developed "in a controlled setting," as a prison surely is. Third, the appeals court "concluded that Moore's record of academic failure … childhood abuse [,] and suffering … detracted from a determination that his intellect and adaptive deficits were related." But "in the medical community," those "traumatic experiences" are considered "' risk factors' for intellectual disability." Fourth, the Texas Court of Criminal Appeals required "Moore to show that his adaptive deficits were not related to 'a personality disorder.' But clinicians recognize that the "existence of a personality disorder or mental-health issue … is 'not evidence that a person does not also have intellectual disability.'" Fifth, the appeals court directed state courts, when examining adaptive deficits, to rely upon certain factors set forth in a Texas case called Ex parte Briseno . … We criticized the use of these factors both because they had no grounding in prevailing medical practice, and because they invited "lay stereotypes" to guide assessment of intellectual disability. Emphasizing the Briseno factors over clinical factors, we said, "creat[es] an unacceptable risk that person with intellectual disability will be executed." Chief Justice Roberts, who had dissented earlier, concurred in the decision as the arguments the Court rejected earlier were no more persuasive when presented a second time. Justice Alito, joined by Justices Thomas and Gorsuch, contended that the Court had given the lower court insufficient guidance in Moore I and that the case should be returned with clearer instructions. Shoop v. Hill, 139 S. Ct. 504 (2019) Holding : Federal courts may not grant state prisoners habeas relief based on "clearly established" Supreme Court precedent when the precedent is established after the state proceedings concluded. Background : In 1986, an Ohio state court convicted Hill, and sentenced him to death, for kidnaping, raping, and murdering a 12-year old. Hill petitioned for federal habeas corpus relief following his unsuccessful state court appeals. In 2002, the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) returned Hill's habeas case to state court to address Hill's claim that his mental retardation prevented his execution in light of Atkins . The state courts found Hill competent for execution, and Hill again filed for federal habeas relief. Ordinarily, a federal court may not grant a state prisoner habeas relief unless the state courts have failed to follow clearly established Supreme Court precedent. Although Moore I occurred after the state court proceedings, the Sixth Circuit thought Moore I showed that Atkins was "clearly established." Supreme Court : The Sixth Circuit's reasoning did not convince the Supreme Court. The Court's per curiam opinion noted that following Atkins , the Supreme Court continued to elaborate on Atkins in both H a ll and Moore I . In addition, the Court noted the Sixth Circuit's use of Moore I 's analysis in its proceedings and opinion, concluding that, "[b]ecause the reasoning of the Court of Appeals leans so heavily on Moore [I] , its decision must be vacated." Bucklew v. Precythe, 139 S. Ct. 1112 (2019) Holding : A death-row inmate challenging the state's method of execution must show that the state's method involves a risk of severe pain and that a feasible, readily available alternative method will significantly reduce the risk of pain. The Supreme Court reasoned, "[E]ven if execution by nitrogen hypoxia were a feasible and readily implemented alternative to the State's chosen method, Mr. Bucklew has still failed to present any evidence suggesting that it would significantly reduce his risk of pain." Background : In 1996, Bucklew stole a car; kidnapped, beat, and raped his former girlfriend; murdered a man from whom she had sought refuge; attacked her mother with a hammer; and wounded an officer during the shootout that lead to his capture. Having exhausted his direct appeals and opportunities for collateral review, Bucklew sought a preliminary injunction at the eleventh hour to block his execution, claiming that an unusual medical condition would render the state's method of execution particularly painful and therefore uniquely cruel and unusual in violation of the Eighth Amendment. The federal district court granted the state's motion for summary judgment and the U.S. Court of Appeals for the Eighth Circuit affirmed. Supreme Court : The Supreme Court agreed. A decade earlier, Chief Justice Roberts and two colleagues in Baze v. Rees identified an Eighth Amendment standard governing challenges to methods of execution. First, the state's method must involve a risk of severe pain. Second, "[t]o qualify, the [proffered] alternative procedure must be feasible, readily implemented, and in fact significantly reduce a substantial risk of severe pain." Third, the state must unjustifiably persist in using its more painful method. Justices Thomas and Scalia had concurred in the result, reasoning that "a method of execution only violates the Eighth Amendment if it is deliberately designed to inflict pain." Several years later in Glossip v. Gross , when a second method of execution became more common, the Court applied the same standard (the "inmates did not show that the risks they identified were substantial and imminent … and … they did not establish the existence of a known and available alternative method of execution that would entail significantly less severe risk."). In 2019, Justice Gorsuch, writing for the Court, rejected Bucklew's contention that his unique situation warranted applying a standard other than that formulated in Baze and Glossip . From Justice Gorsuch's perspective, Baze-Glossip established that an Eighth Amendment analysis always involves comparing alternative levels of suffering. Bucklew failed to present evidence of a feasible, readily available alternative execution method or to establish that any such alternative would significantly reduce the risk of severe pain. The four dissenters argued that Glossip's sweeping language regarding its standard's applicability in all cases must be put in context and subject to the kind of exceptions that Bucklew raised. Violent Crime Cases Among other things, the Supreme Court's 2019 violent crime cases explored what constitutes a violent crime with respect to three statutes: 18 U.S.C. § 924(e) (The Armed Career Criminal Act (ACCA)), 18 U.S.C. § 924(c) (the firearm-in-furtherance statute), and 18 U.S.C. § 16 (the general definition statute). These provisions are similar with each having an elements clause and a residual clause. The ACCA defines the term "violent felony" as a felony that: (i) has as an element the use, attempted use, or threatened use of physical force against the person of another [the elements clause]; or (ii) is burglary, arson, or extortion, involves use of explosives [the specific offense clause], or otherwise involves conduct that presents a serious potential risk of physical injury to another [the residual clause]. Section 924(c) defines the term "crime of violence" to be "an offense that is a felony and: (A) has as an element the use, attempted use, or threatened use of physical force against the person or property of another, or (B) that by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense. Section 16 defines the term "crime of violence" as: (a) an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another, or (b) any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense. In 1990, the Supreme Court addressed an ACCA case in Taylor v. United States . Under the ACCA, courts must sentence defendants convicted of federal unlawful possession of a firearm to prison for at least 15 years if the defendant has three or more prior violent felony convictions. Taylor had a prior state burglary conviction in addition to other offenses. The ACCA defines violent felony to include "burglary," which the Court found to mean "unlawful or unprivileged entry into, or remaining in, a building or structure, with intent to commit a crime." To decide whether Taylor's state burglary conviction constituted an ACCA burglary conviction, the Court examined the state burglary statute to determine whether a jury would have to find each element of an ACCA burglary offense. The Court held that Taylor's state burglary conviction did not qualify as an ACCA predicate because his state conviction might not have required proof of each element of the ACCA offense ( e.g ., the state statute covered burglarizing a vehicle, while the ACCA limited burglaries to "building[s] or structure[s]"). Following Taylor , the Court declared the ACCA residual clause (" otherwise involves conduct that presents a serious potential risk of physical injury ") unconstitutionally vague in Johnson v. United States . Three years later in Sessions v. Dimaya , the Court found the residual clause in 18 U.S.C. § 16(b) (" any offense that … by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense ") to be unconstitutionally vague. In 2019, the Court found that Section 924(c)'s language (" involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense ") to be unconstitutionally vague in United States v. Davi s . At the same time, the High Court endorsed penalties under the elements and specific offenses clauses of the ACCA in Stokeling v. United Stat es , United States v. Stitt , and Quarles v. United States . United States v. Davis, 139 S. Ct. 2319 (2019) Holding : Section 924(c)'s residual clause is constitutionally vague. Background : In Davis , the government argued that the vagueness issue that permeated the residual clauses in the ACCA and Section 16(b) cases could be avoided if the courts abandoned the categorical approach and examined the facts underlying a particular conviction to determine whether the offense actually involved a substantial risk of injury to another. Davis committed a series of gas station robberies armed with a sawed off shotgun. He was convicted and sentenced for multiple Hobbs Act robbery offenses, possession of a firearm by a felon, and under Section 924(c)'s residual clause. The U.S. Court of Appeals for the Fifth Circuit held the residual clause to be unconstitutionally vague and vacated the Section 924(c) conviction. Supreme Court : The Supreme Court affirmed the Fifth Circuit's conclusion and returned the case to the lower courts for resentencing. The government had urged the Supreme Court to analyze the case using a "case-specific" approach rather than the "categorical" approach, conceding that the residual clause is unconstitutionally vague under the categorical standard. The Court acknowledged that a case-specific standard would alleviate at least some constitutional concerns. Justice Gorsuch, writing for the majority, explained that Section 924(c)'s text, context, and history preclude a case-specific approach. First, the residual clause refers to an "offense" that risks the use of physical force "by its nature." As Justice Gorsuch stated, "[I]n plain English, when we speak of the nature of an offense, we're talking about 'what an offense normally … entails, not what happened to occur on one occasion.'" Second, in the federal criminal code, statutes may refer to one of the twin definitions of a "crime of violence" in Sections 16 and 924(c). Justice Gorsuch stated: "To hold, as the government urges, that § 16(b) [the section's residual clause] requires the categorical approach while § 924(c)(3)(B) [that section's residual clause] requires the case-specific approach would make a hash of the federal criminal code." Third, Congress initially created the two sections within the same statute. At first, relying on the Section 16 definition for Section 924(c), and soon thereafter copying Section 16's definition into Section 924(c)(3). The Court stated: "What's more, when Congress copie[d] § 16(b)'s language into § 924(c) in 1986, it proceeded on the premise that the language required a categorical approach. By then courts had, as the government puts it, 'beg[u]n to settle' on the view that § 16(b) demanded a categorical analysis." Writing for the four dissenting Justices, Justice Kavanaugh favored a case-specific approach as consistent with Section 924(c)'s language and the principle of constitutional avoidance. United States v. Stitt, 139 S. Ct. 399 (2018) Holding : Under the ACCA's specific crimes clause, the generic crime of "burglary" covers unlawfully entering, or remaining in, a building or structure, including mobile homes, trailers, tents, or vehicles, if they are designed, adapted, or customarily used for overnight accommodations of individuals. Background : In Stitt, the Supreme Court expanded on Mathis v. United States in which it had held that merely breaking into a plane, boat, or truck may not constitute burglary under the ACCA. In Stitt , the Court said that breaking into a plane, boat, or truck that is designed or adapted for overnight accommodation is ACCA burglary. A federal jury convicted Stitt, who had six previous Tennessee aggravated burglary convictions, on a charge of being a felon in possession of a firearm. The Tennessee aggravated burglary statute outlaws "burglary of a habitation and defines 'habitation' as 'any structure … which is designed or adapted for the overnight accommodation of persons.' The term 'habitation' includes 'mobile homes, trailers, and tents,' as well as any 'self-propelled vehicle that is designed or adapted for the overnight accommodation of persons and is actually occupied at the time of initial entry by the defendant.'" The U.S. Court of Appeals for the Sixth Circuit concluded that the Tennessee statute was broader than the ACCA generic burglary definition and consequently could not serve as an ACCA predicate. Sims, whose case the Supreme Court joined with Stitt's, pleaded guilty to a felon-in-possession charge. His record included two ACCA predicate drug convictions and two convictions under the Arkansas residential burglary statute, which provides that residential burglary occurs when an individual "enters or remains unlawfully in a residential occupiable structure of another person with the purpose of committing … any offense punishable by imprisonment." A "'residential occupiable structure' means a vehicle, building, or other structure: (i)[i]n which any person lives; or (ii) [t]hat is customarily used for overnight accommodation of a person whether or not a person is actually present." The U.S. Court of Appeals for the Eighth Circuit "conclude[d] that Arkansas residential burglary categorically sweeps more broadly than [ACCA] generic burglary. Accordingly, Sims's Arkansas residential burglary convictions do not qualify as ACCA predicate offenses." Supreme Court : The Supreme Court unanimously overturned both appellate court decisions. In the opinion for the Court, Justice Breyer pointed out that the ACCA generic burglary definition represented an assumption of Congress's understanding of state law at the time of ACCA's enactment. In 1986, a majority of the states included vehicles, designed or adapted for overnight occupancy, within burglary's location element. He also noted that Congress crafted the ACCA with an eye to the risk of violent confrontations between an intruder and an occupant, a risk little altered by the physical characteristics of the lodging where the clash occurs. Quarles v. United States, 139 S. Ct. 1872 (2019) Holding : Under the ACCA's specific crimes clause, the generic burglary definition includes entry or remaining in a building or structure with the intent to commit a crime formed while remaining unlawfully present. Background : Grand Rapids, Michigan police officers arrested Quarles after he assaulted his girlfriend and threatened her with a gun. Quarles had previously committed third-degree home invasion and on two occasions committed assault with a deadly weapon. Third-degree home invasion occurs when an individual "breaks and enters a dwelling or enters a dwelling without permission, and, at any time while he or she is entering, present in, or existing the dwelling, commits a misdemeanor." Quarles argued that his home invasion conviction could not count as an ACCA predicate offense because the Michigan statute permitted conviction for conduct that the ACCA did not cover under its generic definition of burglary, which is "unlawful or privileged entry into, or remaining in, a building or structure, with intent to commit a crime." Neither the federal district court nor the U.S. Court of Appeals for the Sixth Circuit accepted Quarles' contention. Supreme Court : The Supreme Court affirmed. Writing for a unanimous Court, Justice Kavanaugh noted that, because "remaining" is continuous, the generic definition by condemning unlawfully remaining -in refutes "that burglary only occurs when the defendant has the intent to commit a crime at the exact mome nt when he or she fir st unlawfully remains in a building or structure." Justice Kavanaugh encapsulated the Court's view, stating: The Armed Career Criminal Act does not define the term "burglary." In Taylor , the Court explained that 'Congress did not wish to specify an exact formulation that an offense must meet in order to count as "burglary" for enhancement purposes. And the Court recognized that the definitions of burglary "vary" among the States. The Taylor Court therefore interpreted the generic term "burglary" in § 924(e) in light of: the ordinary understanding of burglary as of 1986 [when the ACCA was enacted]; the States' laws at that time Congress' recognition of the dangers of burglary; and Congress' stated objective of imposing increased punishment on armed career criminals who had committed prior burglaries. Looking at those sources, the Taylor Court interpreted generic burglary under § 924(e) to encompass remaining-in burglary. Looking at those same sources, we interpret remaining in-in burglary under § 924(e) to occur when the defendant forms the intent to commit a crime at any time while unlawfully present in a building or structure. Stokeling v. United States, 139 S. Ct. 544 (2019) Holding : Conviction under Florida robbery statute qualifies as a crime of violence under the ACCA elements clause. Backgrou nd : Police discovered a firearm in Stokeling's possession while investigating a burglary of a restaurant where he worked. At the time, he had already been convicted of home invasion, kidnapping, and robbery. At sentencing for the federal firearms charge, Stokeling challenged application of the ACCA. He argued that the Florida robbery statute under which he was convicted included "sudden snatch" robbery. Robbery under the ACCA's element clause reached only robberies that had "as an element the use, attempted use, or threatened use of physical force." Thus, he contended the broader Florida robbery statute did not qualify as a crime of violence under the ACCA's element clause. The district court agreed, but the U.S. Court of Appeals for the Eleventh Circuit reversed based on its earlier decisions. Supreme Court : The Supreme Court affirmed the Eleventh Circuit's opinion. Writing for the Court, Justice Thomas concluded "that the elements clause encompasses robbery offenses that require the criminal to overcome the victim's resistance." He noted that, as originally crafted, the ACCA recognized only prior robbery and burglary predicate convictions and defined "robbery" in terms that "mirrored the elements of the common-law crime of robbery, which has long required force or violence. At common law, an unlawful taking was merely larceny unless the crime involved 'violence.' And 'violence' was 'committed if sufficient force [was] exerted to overcome the resistance encountered.'" "Thus," Justice Thomas explained, "the application of the categorical approach to the Florida robbery statute is straightforward. Because the term 'physical force' in [the] ACCA encompasses the degree of force necessary to commit common-law robbery, and because Florida robbery requires the same degree of 'force,' Florida robbery qualifies as an ACCA-predicate offense under the elements clause." Joined by three members of the Court, Justice Sotomayor dissented, writing that the Florida statute allowed conviction based on a minimal level of force while the elements clause did not. Excessive Fines Timbs v. Indiana, 139 S. Ct. 682 (2019) Holding : The Eighth Amendment's Excessive Fines Clause is incorporated in the Fourteenth Amendment's Due Process Clause and therefore binds the States. Background : The Eighth Amendment denies federal officials authority to require excessive bail, impose excessive fines, or inflict cruel and unusual punishments. The Due Process Clause of the Fourteenth Amendment imposes on states many Bill of Rights limits on the federal government. The Supreme Court has held that the Due Process Clause incorporates the Eighth Amendment's Cruel and Unusual Punishment Clause. With insurance policy proceeds, Timbs bought a new Land Rover to use in his drug trafficking enterprise. Following his conviction, the state trial court did not order confiscation of the Land Rover, reasoning that the vehicle's forfeiture would violate the Eighth Amendment's Excessive Fines Clause as applied to the state through the Fourteenth Amendment. The Indiana Court of Appeals concurred. The Indiana Supreme Court, however, reversed the trial court's decision because it "decline[d] to find or assume incorporation until the [U.S.] Supreme Court decides the issue authoritatively," which the U.S. Supreme Court did in Timbs v. Indiana . Supreme Court : Writing for the Court, Justice Ginsburg traced the concept of excessive fines from the Magna Carte to the English Bill of Rights to the laws of a majority of the original thirteen states at the Constitution's ratification and finally to the laws of a vast majority of the states at the Fourteenth Amendment's ratification. Justice Ginsburg wrote: Like the Eighth Amendment's proscriptions of "cruel and unusual punishment" and "[e]xcessive bail," the protection against excessive fines guards against abuses of government's punitive or criminal-law-enforcement authority. This safeguard, we hold, is "fundamental to our scheme of ordered liberty," with "dee[p] root[s] in [our] history and tradition." The Excessive Fines Clause is therefore incorporated by the Due Process Clause of the Fourteenth Amendment. While the Justices agreed that the Fourteenth Amendment incorporates the Eighth Amendment's Excessive Fines Clause, Justices Thomas and Gorsuch viewed this as resulting from the Privileges and Immunities Clause rather than the Due Process Clause. In the Supreme Court, the State unsuccessfully challenged a feature of Eighth Amendment law, rather than incorporation itself. In Austin v. United States , the Court had held that forfeitures, authorized at least in part with punitive intent and effect, constitute fines for purposes of the Excessive Fines Clause, regardless of whether confiscation occurs by criminal trial or a civil in rem proceeding. The Court declined to re-examine Austin or to endorse less than full incorporation. Supervised Release United States v. Haymond, 139 S. Ct. 2369 (2019) Holding : By imposing a mandatory term of imprisonment after revoking supervised release based on finding by a preponderance of the evidence that Haymond had breached his conditions of supervised release, a federal court violated the Sixth Amendment's jury trial guarantee and the Fifth Amendment Due Process proof beyond-a-reasonable doubt standard for criminal cases. The Court left for the lower court to determine whether the error was harmless and, if not, the appropriate remedy. Background : Haymond involved the federal supervised release statute, 18 U.S.C. § 3583, which subjects federal inmates on their release from prison to certain conditions usually for a maximum of five years. For certain sex offenses, however, the supervised release term is at least five years and may be for the sex offender's entire life. Under the statute, a court may revoke an individual's supervised release and return him to prison if, by a preponderance of the evidence, the court finds that the individual has violated a condition of his release. Ordinarily, when a court revokes supervised release, it re-imprisons the individual for no longer than his remaining time of supervised release and, in any event, for no longer than five years. Under Subsection 3583(k), a court must sentence a sex offender registrant to re-imprisonment for at least five years when the court revokes his supervised release based on a sex offense. A federal jury convicted Haymond of possessing child pornography, which is punishable by imprisonment for not more than 10 years. The district court sentenced him to 38 months in prison and supervised release for 10 years thereafter. The court conditioned Haymond's supervised release on him committing no further crimes, submitting to periodic polygraph examinations, and consenting to searches by his probation officer. Haymond passed several polygraph tests, suggesting he had neither viewed nor possessed child pornography since his release. Yet, when Haymond's probation officer seized Haymond's cell phone, he found images of child pornography cached there. At his revocation hearing, Haymond presented expert testimony that the material could have been put on his cell phone without his knowledge. Nevertheless, the court concluded that it was more likely than not that Haymond had knowingly possessed child pornography in violation of a condition of his release. The court "with reservations" ordered him returned to prison for the mandatory minimum five years. The U.S. Court of Appeals for the Tenth Circuit reversed holding the mandatory minimum feature of the sentencing revocation procedure violates the Fifth and Sixth Amendments. Supreme Court : While five Justice agreed that Subsection 3583(k) is unconstitutional, they did not agree why. Joined by Justices Ginsburg, Sotomayor, and Kagan, Justice Gorsuch concluded that the subsection, which increased Haymond's term of imprisonment, applied a preponderance of the evidence standard, rather than providing for a jury to find guilt beyond a reasonable doubt: Based on the facts reflected in the jury's verdict, Mr. Haymond faced a lawful prison term of between zero and 10 years… But then a judge—acting without a jury and based only on a preponderance of the evidence—found that Mr. Haymond had engaged in additional conduct in violation of the terms of his supervised release. Under § 3583(k), that judicial factfinding triggered a new punishment in the form of a prison term of at least five years and up to life. So … the facts the judge found here increased 'the legally prescribed range of allowable sentences in violation of the fifth and Sixth Amendments. In this case, that meant Mr. Haymond faced a minimum of five years in prison instead of a little as none. Justice Breyer concurred in the judgment but not the rationale. For Justice Breyer, Subsection 3583(k) has three characteristics that together suggest the punishment is for a new crime rather than a continuation of punishment for the crime for which the jury convicted him: First , §3583(k) applies only when a defendant commits a discrete set of federal criminal offenses specified in the statute. Second , §3583(k) takes away the judge's discretion to decide whether violation of a condition of supervised release should result in imprisonment and for how long. Third , §3583(k) limits the judge's discretion in a particular manner: by imposing a mandatory minimum term of imprisonment of 'not less than 5 years' upon a judge's finding that a defendant 'has commit[ted] any' listed 'criminal offense.' Taken together, these features of §3583(k) more closely resemble the punishment of new criminal offenses, but without granting a defendant the rights including the jury right, that attend a new criminal prosecution. The plurality agreed to remand the case to the lower court to address whether the issue could be resolved by requiring that Subsection 3583(k) revocation hearings be conducted before a jury using the standard of proof beyond a reasonable doubt. Joined by Justices Thomas and Kavanaugh, Justice Alito wrote a dissent maintaining that a jury and "proof beyond a reasonable doubt" are not constitutionally required for supervisory release revocation proceedings and that to suggest otherwise has serious implications. Mont v. United States, 139 S. Ct. 1826 (2019) Holding : Time served in state pretrial detention while on federal supervised release tolls the running of the term of federal supervised release if time in state pretrial detention counts as time served for state conviction purposes. Background : On March 6, 2012, U.S. prison officials released Mont and he began serving a five-year term of federal supervised release, conditioned on not committing any new federal or state crimes. On June 1, 2016, state authorities arrested Mont on drug trafficking charges and held him in pretrial detention. On March 21, 2017, 15 days after Mont's term of supervised release was scheduled to expire, a state trial court sentenced him to six years in prison on state charges with credit for the 10 months he had served in state pretrial detention. On March 30, 2017, the U.S. District Court scheduled a supervisory release revocation hearing. Although Mont argued his term of supervised release had expired, the court revoked his supervised release and sentenced him to an addition 42 months in federal prison to be served upon completing his state sentence. The U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) affirmed on the basis of Sixth Circuit precedent interpreting the law governing supervised release. The statute stated, "[a] term of supervised release does not run during any period in which the person is imprisoned in connection with a conviction for a Federal, State, or local crime unless the imprisonment is for a period of less than 30 consecutive days." An earlier Sixth Circuit decision had concluded that, "[1] when a defendant is held for thirty days or longer in pretrial detention, and [2] he is later convicted for the offense for which he was held, and [3] his pretrial detention is credited as time served toward his sentence, then the pretrial detention is 'in connection with' a conviction and tolls the period of supervised release under § 3624." Supreme Court : In Mont, interpreting Section 3624 divided both the federal courts of appeals and the Supreme Court , a majority of which sided with the Sixth Circuit. Writing for the Court, Justice Thomas explained that a person in pretrial detention is "imprisoned," and such imprisonment may be "in connection with a conviction," albeit after the fact. Justice Thomas also noted that Section 3624 does not qualify imprisonment with " after conviction." While the statute identifies a precise point at which supervised release begins, it is less clear where it ends. Referring to the section's statutory setting and purpose, Justice Thomas recognized supervised release to be a "conditional liberty" during time of good behavior, but punishment nonetheless. Justice Thomas stated: "[I]t would be an exceedingly odd construction of the statute to give a defendant the windfall of satisfying a new sentence of imprisonment and an old sentence of supervised release with the same period of pretrial detention." Joined by Justices Breyer, Kagan, and Gorsuch, Justice Sotomayor dissented, observing, "I cannot agree that a person 'is imprisoned in connection with a conviction' before any conviction has occurred." U.S. Substantive Offense Statutes The Supreme Court examined the scope of federal statutes that establish various criminal offenses in two cases. In the first, the Court held that, in order to convict a foreign national unlawfully present in the United States with knowingly possessing a firearm, the government must prove that the defendant knew both that he was in possession of a firearm and that he was unlawfully present in the country ( Rehaif v. United States ). In the second, the Justices held that Congress had validly authorized the Attorney General to apply the Sex Offender Registration and Notification Act (SORNA) to offenders convicted before SORNA's enactment ( Gundy v. United States ). Firearms Rehaif v. United States, 139 S. Ct. 2191 (2019) Holding : Conviction of an alien unlawfully present in the United States for unlawful firearms possession requires proof that the alien knew both that he was in possession of a firearm and that he was unlawfully present. Background : Rehaif entered the United States on a student visa. When the university to which he was admitted dismissed him for poor performance, it advised him that he would lose his immigration status unless he enrolled elsewhere, which he did not do. He went to a shooting range where he purchased ammunition and practiced using the range's firearms. The ammunition he bought came from out-of-state and the firearms he used were from Austria. Federal law declares it unlawful for an individual, unlawfully present in the United States, to possess a firearm or ammunition that has been transported or shipped in interstate or foreign commerce. A second statute makes it a federal crime to knowingly engage in such unlawful possession. At his trial, the U.S. district court advised the jury that the government did not have to prove that Rehaif knew that he was in the U.S. unlawfully. The jury convicted Rehaif, and the court sentenced him to prison for 18 months. The U.S. Court of Appeals for the Eleventh Circuit (Eleventh Circuit) affirmed Rehaif's conviction on several grounds. The Eleventh Circuit noted that conviction requires proof of three elements: "(1) the defendant falls within one of the categories [of disqualified possessors] … ('the status element'); (2) the defendant possessed a firearm or ammunition ('the possession element'); and (3) the possession was 'in or affecting [interstate or foreign] commerce [(the jurisdictional element)].'" With regard to the status element, binding Eleventh Circuit case law dispensed with a mens rea requirement (sometimes referred to as a scienter, state of mind, or knowledge requirement). Supreme Court : The Supreme Court held that "the Government therefore must prove both that the defendant knew he possessed a firearm and also that he knew he belonged to the relevant category of persons barred from possessing a firearm," and reversed Rehaif's conviction. Speaking for a majority of the Court, Justice Breyer pointed out that mens rea questions are first and foremost a matter of congressional intent. He noted that the "longstanding presumption, traceable to the common law, that Congress intends to require a defendant to possess a culpable mental state regarding 'each of the statutory elements that criminalize otherwise innocent conduct.'" Nevertheless, he explained that the presumption does not necessarily apply to all of a crime's elements. For example, it rarely attaches to jurisdictional elements, such as interstate shipment or use of the mail, that "do not describe the 'evil Congress seeks to prevent,' but instead simply ensure that the Federal Government has the constitutional authority to regulate the defendant's conduct." Justice Breyer acknowledged that the Court has "typically declined to apply the presumption in favor of scienter in cases involving statutory provisions that form part of a 'regulatory' or 'public welfare' program and carry only minor penalties." Public welfare offenses generally involve a regulatory regime designed to protect the public from some exceptionally harmful product or device, such as mislabeled drugs, sulfuric acid, or hand grenades. These offenses ordinarily expose to criminal liability only those, such as manufacturers or shippers, who have placed themselves in a responsible relationship to such a public danger. Qualified regulatory statutes usually proscribe conduct that was innocent at common law and punish offenders relatively lightly. Here, Justice Breyer emphasized, the public welfare exception did not apply because the "firearms provisions before us are not part of a regulatory or public welfare program, and they carry a potential penalty of 10 years in prison that we have previously described as 'harsh.'" Consequences : On remand, the Court left the Eleventh Circuit to determine whether the erroneous jury instruction constituted harmless error. The Court left unresolved what is required to show that a defendant knew of his status. Federal law bars firearm possession by classes of individuals other than illegal aliens, i.e ., (1) convicted felons; (2) fugitives; (3) drug addicts; (4) the mentally disabled; (5) those dishonorably discharged from the armed services; (6) those who have denounced their U.S. citizenship; (7) those under certain restraining orders; and (8) those convicted of misdemeanor domestic violence. The Court "express[ed] no view, however, about what precisely the Government must prove to establish a defendant's knowledge of status" in the case of these other instances of disqualifying status. Justice Alito's dissent, which Justice Thomas joined, may have influenced the Court to limit the opinion's scope. Among other criticisms, Justice Alito focused on unlawful possession by others in addition to unlawfully present foreign nationals, stating: It [the unlawful possession statute] probably does more to combat gun violence than any other federal law. It prohibits the possession of firearms by, among others, convicted felons, mentally ill persons found by a court to present a danger to the community, stalkers, harassers, perpetrators of domestic violence, and illegal aliens. Today's decision will make it significantly harder to convict persons falling into some of these categories, and the decision will create a mountain of problems with respect to the thousands of prisoners currently serving terms for [unlawful possession] convictions. SORNA Gundy v. United States, 139 U.S. 2116 (2019) H olding : Authorizing the Attorney General to issue regulations, as soon as feasible, governing the registration requirements under the Sex Offender Registration and Notification Act (SORNA) for pre-Act offenders did not violate the nondelegation doctrine. Background : In Gundy v. United States , the defendant argued unsuccessfully that the federal statute featured an unconstitutional delegation of Congress's legislative authority. The alignment of the Justices, however, suggests that the Court may revisit the issue in the near future. Four Justices considered the delegation proper; three did not; one joined the Court too late to participate fully; and one voted with the four based on precedents that he considered occasionally marked by "extraordinarily capacious standards" and would have voted to reexamine. SORNA : Congress passed SORNA in 2006. Congress designed SORNA in order to provide a publicly available, online gateway to federal, state, tribal, and territorial registration systems that met certain minimum federal standards. It authorized the Attorney General to promulgate implementing regulations including provisions concerning SORNA's retroactive application. An individual with a qualifying state offense, who fails to follow SORNA's registration and updating requirements and subsequently travels interstate, is guilty of a federal crime. An individual with a qualifying federal, tribal, or territorial sex offense conviction, who fails to follow SORNA's registration and updating requirements, is also guilty of a federal offense . Second Circuit : While Gundy was on federal supervised release, a Maryland state court convicted him of a state sex offense and a federal court determined that he had violated the terms of his supervised release as a consequence. The federal court sentenced him to prison for two years to be served when he completed his Maryland sentence. While Gundy was serving time in Maryland, Congress passed SORNA and the Attorney General activated its retroactive application. Maryland prison authorities subsequently transferred Gundy to a federal correctional facility in Pennsylvania to serve his federal sentence. Gundy did not register under SORNA either while in state or federal custody. Towards the end of his sentence, federal authorities transferred him to a federal half-way house in New York and approved his request to travel unescorted from Pennsylvania to the half-way house. Thereafter, federal authorities charged him with interstate travel while failing to register as a sex offender. The district court dismissed the indictment under the misimpression that Gundy was not required to register. The U.S. Court of Appeals for the Second Circuit (Second Circuit) reversed. On remand from the Second Circuit, the district court convicted Gundy on the failure to register charge. The Second Circuit rejected his statutory interpretation arguments and observed that Gundy's other arguments on appeal were without merit "includ[ing] Gundy's argument—… made only for preservation purposes—that SORNA violates antidelegation principles." Supreme Court : Gundy asked the Court to review four questions: (1) Whether convicted sex offenders are 'required to register' under the federal Sex Offender Notification and Registration Act ('SORNA') while in custody, regardless of how long they have until release. (2) Whether all offenders convicted of a qualifying sex offense prior to SORNA's enactment are 'required to register' under SORNA not later than August 1, 2008. (3) Whether a defendant violates 18 U.S.C. § 2250(a), which requires interstate travel, where his only movement between states occurs while he is in the custody of the Federal Bureau of Prisons and serving a prison sentence. (4) Whether SORNA's delegation of authority to the Attorney General to issue regulations under 42 U.S.C. § 16913(d) [now 34 U.S.C. § 20913(d)] violates the nondelegation doctrine. The Justices addressed only the nondelegation question. While a majority agreed on the result, they did not agree on a rationale. Joined by Justices Ginsburg, Breyer, and Sotomayor, Justice Kagan declared that the "delegation easily passes constitutional muster" and voted to affirm the Second Circuit's pronouncement. Justice Alito also voted to affirm but did not join Justice Kagan's opinion, perhaps to avoid a 4-4 split on the Court. He explained that he thought the result was consistent with the Court's earlier cases, although he would prefer to reconsider them. Justice Gorsuch, joined by the Chief Justice and Justice Thomas, dissented. Justice Kavanaugh, who was seated late in the Court's term, did not participate in the case. The participating Justices read the Court's earlier cases differently. Justice Kagan pointed to the low bar the Court's earlier delegation decisions had set but conceded that the decisions had required a guiding "intelligible principle" or limiting policy statement to accompany the delegation. Justice Kagan noted, however, that the Court had only held a delegation to be invalid twice and then only because Congress had failed to provide "' any policy or standard' to confine discretion." She concluded that SORNA's direction to the Attorney General "to require pre-Act offenders to register as soon as feasible" was a far more confining policy statement than the "very broad delegations" the Court had approved in the past. Justice Gorsuch disputed the comparison, stating: "SORNA leaves the Attorney General free to impose on 500,000 pre-Act offenders all of the statute's requirements, some of them, or none of them. . . . In the end, there isn't … a single other case where we have upheld executive authority over matters like these on the ground they constitute mere 'details.'" He found none of the executive fact-finding or overlapping legislative-executive powers in SORNA's delegation to the Attorney General that he discerned in the Court's precedents. Justices Kagan and Alito's opinions looked only at Court precedents. Examining these, Justice Gorsuch declared that, as least in the case of SORNA, his colleagues should have been more demanding. He stated: "[W]hile Congress can enlist considerable assistance from the executive branch in filling up details and finding facts, it may never hand off to the nation's chief prosecutor the power to write his own criminal code. That 'is delegation running riot.'" Pretrial Five decisions in the Supreme Court's most recent term dealt with pre-trial matters. One confirmed the continued validity of the double jeopardy dual sovereign doctrine ( Gamble v. United States ). A second addressed circumstances under which the Fourth Amendment permits the warrantless performance of a blood alcohol test on an individual suspected of drunk driving ( Mitchell v. Wisconsin ). Three others discussed the obstacles individuals face when they seek to sue officers for the manner in which the officers performed their law enforcement duties ( Nieves v. Bartlett ; McDonough v. Smith ; and City of Escondido v. Emmons ). Double Jeopardy Gamble v. United States, 139 S. Ct. 1960 (2019) Holding : The dual sovereign doctrine of the Fifth Amendment's Double Jeopardy Clause, which permits successive state and federal prosecutions for the same misconduct, remains in force. Background : Police stopped Gamble for a traffic violation, smelled marijuana, and searched his car, uncovering a handgun. State authorities prosecuted him for unlawful firearm possession under state law. Federal authorities also prosecuted him for unlawful firearm possession under federal law based on the same incident. Gamble challenged his federal indictment on double jeopardy grounds. In light of the Double Jeopardy Clause's dual sovereignty doctrine, the district court refused to dismiss the indictment and the U.S. Court of Appeals for the Eleventh Circuit (Eleventh Circuit) affirmed. Gamble petitioned the Supreme Court to reconsider the validity of the dual sovereignty doctrine, and the Court agreed. Supreme Court : Gamble continues the status quo. All but two members of the Court voted to continue the dual sovereignty doctrine. Writing the majority opinion, Justice Alito noted that the Double Jeopardy Clause's reference to the "same offence" implies a ban only on prosecution under the laws of the same sovereign. Justice Alito reviewed a continuous line of cases beginning in the early Nineteenth Century that endorsed the dual sovereignty doctrine. These precedents pose an obstacle to rejecting the doctrine because s tare decisis counsels against abandoning earlier precedents, which the majority declined to do. Justices Ginsburg and Gorsuch dissented separately because they considered the doctrine "misguided" and "wrong." Drunk Driving Mitchell v. Wisconsin, 139 S. Ct. 2525 (2019) Holding : A suspect's loss of consciousness following a probable cause arrest for drunk driving will almost always qualify for the exigent circumstances exception to the Fourth Amendment's warrant requirement. (Plurality). Ba ckground : Mitchell is the latest case in which the Court has wrestled with Fourth Amendment requirements in drunk driving cases. In the 1966 decision Schmerber v. California , the defendant hit a tree while drunk and was taken to the hospital. There, the arresting police officer directed a doctor to take a sample of Schmerber's blood for a blood alcohol test. The Supreme Court recognized that the Fourth Amendment protects against warrantless bodily intrusions in drunk driving cases, but it held admissible the test results based on the circumstances. In 2013, the Court held that the natural dissipation of alcohol in blood, without more, does not justify warrantless blood alcohol tests in drunk driving cases. Three years later, the Court decided that officers with probable cause might conduct warrantless breath tests incident to an arrest but they could not administer warrantless blood tests incident to an arrest for drunk driving or under an implied consent theory. In Mitchell , officers, acting on a complaint, discovered the defendant stumbling around the edge of a lake with his van parked nearby. They arrested him after he failed a preliminary field breath test and took him to the police station for a more exacting breath test. Along the way, Mitchell became unconscious. When the officers were unable to administer a second breath test at the station because Mitchell had passed out, they took him to a hospital for a blood test. As a result of the test, officials charged him with drunk driving. Mitchell sought unsuccessfully to suppress the results of the blood tests. Wisconsin appellate courts affirmed his conviction, as did a divided U.S. Supreme Court. Supreme Court : For four of the Justices, the issue was a matter of balance. Justice Alito, speaking for the four, listed a series of factors documenting the states' compelling interest in access to a reliable test to determine the extent of a suspect's intoxication: Highway safety is a legitimate public interest; In a good year, alcohol-related deaths occur at the rate of no more than one per hour; States rely heavily on blood alcohol limits as an effective means of promoting highway safety; Enforcing blood alcohol limits depends on reliable testing methods; Alcohol in the blood dissipates rapidly so speed is of the essence; When a reliable breathalyzer test cannot be administered, a blood test is the only comparable alternative; and Drivers who cannot remain conscious represent an even greater threat. In the eyes of the four, "the only question left, under our exigency doctrine, is whether this compelling need justifies a warrantless search because there is, furthermore, 'no time to secure a warrant.'" And they concluded, "[w]hen police have probable cause to believe a person has committed a drunk-driving offense and the driver's unconsciousness or stupor requires him to be taken to the hospital or similar facility before police have a reasonable opportunity to administer a standard evidentiary breath test, they may almost always order a warrantless blood test to measure the driver's BAC [blood alcohol content] without offending the Fourth Amendment." Justice Alito acknowledged that the case should be remanded to the Wisconsin courts to permit Mitchell to offer any evidence that the "police could not have reasonably judged that a warrant application would interfere with other pressing need or duties." Justice Thomas concurred in the result because he would have recognized a per se rule under which the dissipation of alcohol in blood would always justify a warrantless, probable cause test. With Justices Ginsburg and Kagan, Justice Sotomayor noted that, because Wisconsin admitted there was time to get a warrant, she would have held that "the Fourth Amendment … requires police officers seeking to draw blood from a person suspected of drunk driving to get a warrant if possible." Because the lower courts had not addressed the exigent circumstance exception, Justice Gorsuch dissented on the grounds that the decision should have been postponed until the issue had been more fully developed below. Section 1983 Section 1983 establishes a cause of action for those deprived, under color of law, of some right under the U.S. Constitution or other federal law. The successful plaintiff must overcome at least three hurdles: He must (1) establish that he has been deprived of a right under color of law, e.g ., Nievers v. Bartlett ; (2) satisfy Section 1983's procedural requirements, e.g ., McDonald v. Smith ; and (3) overcome any claim of qualified immunity, e.g., City of Escondido v. Emmons . Nieves v. Bartlett, 139 S. Ct. 1715 (2019) Holding : The existence of probable cause to arrest precludes a Section 1983 civil liability claim based on an alleged First Amendment retaliatory arrest, unless "a plaintiff presents objective evidence that he was arrested when otherwise similarly situated individuals not engaged in the same sort of protected speech had not been." Background : Officers arrested Bartlett at a raucous "Arctic Man" sports festival and "beer blast" in a remote area of Alaska. In an earlier encounter with Officer Nieves, Bartlett had refused to speak to Officer Nieves. Bartlett and the officers disputed whether Bartlett: (1) was drunk; (2) was loud and belligerent on two occasions; (3) got into Officer Wright's face to provoke a confrontation, or spoke closely to the officer in order to be heard over the loud music; and (4) refused to back away from Officer Wright, or was slow to back away because of a bad back. Charges against Bartlett were later dismissed, and he sued the officers under Section 1983 on several grounds, including a retaliatory arrest claim. Bartlett alleged that, at the time of his arrest, Officer Nieves said: "[B]et you wish you would have talked to me now." The U.S. District Court dismissed the complaint because it found that the officers had probable cause to arrest Bartlett. The U.S. Court of Appeals for the Ninth Circuit reversed based on Ford v. City of Yakima in which the Ninth Circuit had ruled that probable cause does not preclude a Section 1983 retaliatory arrest claim. Supreme Court : The Supreme Court disagreed, stating: "Because there was probable cause to arrest Bartlett, his retaliatory arrest claim fails as a matter of law." Writing for the Court, Chief Justice Roberts, acknowledged that, as a general rule, a First Amendment retaliatory arrest claim will survive in the face of probable cause to arrest, if the arrestee demonstrates that similarly situated, but silent, individuals had not been arrested. The case triggered four individual opinions. Justice Thomas concurred in part and in the judgment, disagreeing with the majority's disparate-application exception. Justice Gorsuch and Justice Ginsburg concurred in part and dissented in part. Justice Gorsuch's position was that "the absence of probable cause is not an absolute requirement of such a claim, and its presence is not an absolute defense." Justice Ginsburg questioned whether the case was the appropriate vehicle for the rule the majority announced. Justice Sotomayor, in dissent, took the position that probable cause does not always doom a Section 1983 First Amendment retaliatory arrest claim. McDonough v. Smith, 139 S. Ct. 2149 (2019) Holding : Statute of limitations for a Section 1983 cause of action alleging falsification of evidence "began to run when criminal proceedings against him terminated in his favor." Background : McDonough was a commissioner on a local board of elections when allegations of forged absentee ballots surfaced. A grand jury indicted McDonough. He was arrested and held for bail. His first trial ended in a mistrial. The jury acquitted him in a second trial. Just short of three years after his acquittal, McDonough sued the special prosecutor in federal court under Section 1983, claiming denial of due process in the form of malicious prosecution and fabrication of evidence. The U.S. District Court dismissed the malicious prosecution claim against the special prosecutor on the grounds of absolute prosecutorial immunity. The court also ruled that the three-year statute of limitations on McDonough's fabrication claim began to run when McDonough became aware of the fabrication not when he was acquitted. Thus, the statute of limitations had expired by the time McDonough filed his Section 1983 complaint. The U.S. Court of Appeals for the Second Circuit (Second Circuit) affirmed. Supreme Court : The Second Circuit noted a circuit split over whether the statute of limitations on due process fabrication claims begins to run with the claimant's exoneration or with his knowledge of the fabrication and its improper use. The Supreme Court agree to hear the case in order to resolve the issue. Writing for the Court, Justice Sotomayor explained that state law governs the length of the statute of limitations in Section 1983 cases. Federal law, however, determines when the statute of limitations begins to run based on "common-law principles governing analogous torts." The inquiry starts with identifying the constitutional or other federal right said to have been abridged under color of law. Justice Sotomayor accepted the Second Circuit's presumption that the Due Process Clause was the basis for McDonough's fabrication claim. While the Second Circuit had decided that common-law malicious prosecution, with its "end-of-game" exoneration requirement, did not match McDonough's fabrication claim, the Court ruled that common-law malicious prosecution was the most closely analogous tort to McDonough's fabrication claim. Justice Sotomayor pointed out that one involves a malice-driven, groundless prosecution, the other a thrust for conviction slaked by the use of fabricated evidence. "At bottom," she declared, "both claims challenge the integrity of criminal prosecutions undertaken 'pursuant to legal process.'" Moreover, she noted, the Second Circuit's approach would mean starting the statute of limitations clock when use of the fabricated evidence became obvious—at trial or the return of the indictment. Either alternative presents the risk of parallel criminal and civil proceedings, and worse yet, the risk of inconsistent results. City of Escondido v. Emmons, 139 S. Ct. 500 (2019) Holding : "The Court of Appeals should have asked whether clearly established law prohibited the officers from stopping and taking down a man in these circumstances. Instead, the Court of Appeals defined the clearly established right at a high level of generality by saying only that the 'right to be free of excessive force' was clearly established." Background : Ametria Douglas shared an apartment with Maggie Emmons and Emmons' two children. Douglas' mother called 911 after hearing the sounds of fighting and a plea for help during an interrupted telephone conversation with her daughter. When officers arrived they found Douglas outside in the pool with the children. She assured them it was a false alarm. Nevertheless, the officers went to the apartment in order to conduct a "welfare check" (to make sure no one inside was injured or in danger). Emmons, who had charged her husband with domestic violence a month earlier, refused to let them in without a warrant. Then, Marty Emmons, who had been visiting his daughter, came out of the apartment and closed the door behind him. Officer Craig, who had instructed him to leave the door open, threw Marty Emmons to the ground. Marty Emmons subsequently sued Officer Craig and his fellow officers for unlawful search and seizure and the use of excessive force. Each of the parties moved for summary judgment in federal district court. Police officers and other public officials "performing discretionary functions, generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." The district court granted Officer Craig's motion of summary judgment on the excessive use of force claim because it concluded that "relevant legal authorities do not establish that the underlying conduct violate[d] clearly established law." The U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) reversed and held that Officer Craig was not entitled to qualified immunity because the "right to be free of excessive force was clearly established at the time of the events in question." Supreme Court : The Supreme Court reversed and sent the case back to the Ninth Circuit. As it has done in a number of recent cases, the Court reminded the Ninth Circuit that the circumstances of the cases that "clearly establish" a constitutional right must be closely analogous to the circumstance of the case at issue. The Court stated: "This Court has repeatedly told courts … not to define clearly established law at a high level of generality."… 'An officer cannot be said to have violated a clearly established right unless the right's contours were sufficiently definite that any reasonable official in the defendant's shoes would have under that he was violating it.'" Rather than ask whether the right to be free of excessive force was clearly established, the Ninth Circuit "should have asked whether clearly established law prohibited the officers from stopping and taking down a man in these circumstances." On remand, the Ninth Circuit concluded that Officer Craig was entitled to qualified immunity, since it could find no case "so precisely on point with this one as to satisfy the Court's demand for specificity." Appeals Ineffective Assistance of Counsel Garza v. Idaho, 139 S. Ct. 738 (2019) Holding : A defense attorney's failure to appeal in spite of a client request is presumptively prejudicial ineffective assistance of counsel "even when the defendant has signed an appeal waiver." Background : Garza entered into plea agreements covering state aggravated assault and possession of controlled substance charges. Garza waived his right to appeal in the agreements and his counsel did not file a notice of appeal. Thereafter, Garza sought post-conviction review (state habeas corpus) asserting his trial attorney had ignored his request to appeal and claiming ineffective assistance of counsel. The Sixth Amendment provides the criminally accused the right to "reasonably effective" assistance of counsel for his defense. Appellate courts overturn convictions or sentences when the defense counsel made "errors so serious that counsel was not functioning as the 'counsel' guaranteed the defendant by the Sixth Amendment" if "the deficient performance prejudiced the defense." Prejudice occurs when "counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable." The Court has held that prejudice may be assumed, stating: "[W]hen counsel's deficient performance deprives a defendant of an appeal that he otherwise would have taken, the defendant has made out a successful ineffective assistance of counsel claim entitling him to an appeal." Denying Garza's petition for relief, the trial court stated that Garza's waiver precluded him being a victim of ineffective assistance. The Idaho Court of Appeals and the Idaho Supreme Court affirmed. The U.S. Supreme Court reversed and remanded. Supreme Court : In the opinion, Justice Sotomayor focused on two concepts—notice of appeal and waiver of appeal—to rebut that Garza's filing a notice of appeal would breach his plea agreements and deny him their benefits. She explained that a notice of appeal is ministerial being "a simple, nonsubstantive act that is within the defendant's prerogative." She noted: (1) any "waiver of appeal" is limited to the language of the particular agreement; (2) some appellate issues cannot be waived; and (3) matters that are within the scope of the waiver are only binding if the prosecution elects to stand on its rights. Thus, she concluded, "simply filing a notice of appeal does not necessarily breach a plea agreement, given the possibility that the defendant will end up raising claims beyond the waiver's scope. And in any event, the bare decision whether to appeal is ultimately the defendant's, not counsel's, to make." Justice Sotomayor further found that Idaho's approach was inconsistent with precedent. Justice Sotomayor recalled the Flores-Ortega holding that "'a lawyer who disregards specific instructions from the defendant to file a notice of appeal acts in a manner that is professionally unreasonable.'" She stated: " Flores-Ortega 's reasoning shows why an appeal waiver does not complicate [a] straightforward application" and further commented: "As the Court explained, given that past precedents call for a presumption of prejudice whenever 'the accused is denied counsel at a critical state' it makes even greater sense to presume prejudice when counsel's deficiency forfeits an 'appellate proceeding altogether.'" She noted, "[a]fter all, there is no disciplined way to 'accord any presumption of reliability … to judicial proceedings that never took place,'" concluding "[t]hat rationale applies just as well here because … Garza retained a right to appeal at least some issues despite the waivers he signed. In other words, Garza had a right to a proceeding and he was denied that proceeding altogether as a result of counsel's deficient performance."

In 2019, the Supreme Court issued a sizeable number of criminal law decisions, which addressed several topics, including sentencing, pretrial, statutory construction, and ineffective assistance of counsel. This report discusses the following Supreme Court holdings in greater detail: Racially Discriminatory Jury Selection : "[T]he trial court at Flowers' sixth trial committed clear error in concluding that the State's peremptory strike of [a] black prospective juror … was not motivated in substantial part by discriminatory intent." Flowers v. Mississippi , 139 S. Ct. 2228 (2019). Execution of the Mentally Inc ompetent : "First, under Ford and Panetti , the Eighth Amendment may permit executing Madison even if he cannot remember committing his crime. Second, under those same decisions, the Eighth Amendment may prohibit executing Madison even though he suffers from dementia, rather than delusions. The sole question on which Madison's competency depends is whether he can reach a 'rational understanding' of why the State wants to execute him." Madison v. Alabama , 139 S. Ct. 718 (2019). Execution of the Intellectually Disabled : Texas Court of Criminal Appeals erred in assessing and denying a death-row inmate's claim of intellectual disability. Moore v. Texas , 139 S. Ct. 666 (2019). Habeas Jurisdiction : Federal courts may not grant state prisoners habeas relief based on Supreme Court precedent established after the completion of state proceedings. Shoop v. Hill , 139 S. Ct. 504 (2019). Method of Execution : A death row inmate challenging the state's method of execution must show that the state's method involves a risk of severe pain and that a feasible, readily available alternative method will significantly reduce the risk of pain. "[E]ven if execution by nitrogen hypoxia were a feasible and readily implemented alternative to the State's chosen method, Mr. Bucklew has still failed to present any evidence suggesting that it would significantly reduce his risk of pain." Bucklew v. Precythe , 139 S. Ct. 1112 (2019). Violent Crime Sentencing : The Armed Career Criminal Act's (ACCA) Section 924(c) residual clause purporting to provide an alternative definition for "crime of violence" is constitutionally vague. United States v. Davis , 139 S. Ct. 2319 (2019). Conviction under Florida robbery statute qualifies as a crime of violence under ACCA elements clause. Stokeling v. United States , 139 S. Ct. 544 (2019). Under the ACCA's specific crimes clause, the generic crime of "burglary" covers unlawfully entering, or remaining in, a building or structure, including mobile homes, trailers, tents, or vehicles, if they are designed, adapted, or customarily used for overnight accommodations of individuals. United States v. Stitt , 139 S. Ct. 399 (2018). Under the ACCA's specific crimes clause, the generic burglary definition includes entering with an intent to commit a crime or remaining in a building or structure after forming an intent to commit a crime . Quarles v. United , 139 S. Ct. 1872 (2019). Excessive Fines : The Eighth Amendment's Excessive Fines Clause is incorporated in the Fourteenth Amendment's Due Process Clause and is therefore binding on the States. Timbs v. Indiana , 139 S. Ct. 682 (2019). Supervised Release : Imposing a mandatory term of imprisonment after revoking supervised release, based on finding by a preponderance of the evidence that Haymond had breached the conditions of his supervised release, violated the Sixth Amendment's jury trial guarantee and the Fifth Amendment's Due Process beyond-a-reasonable doubt standard for criminal cases. The lower court will decide, at least initially, whether the error was harmless and, if not, the appropriate remedy. United State s v. Haymond , 139 S. Ct. 2369 (2019). A federal supervised release term does not run for a convict held in state pretrial detention if the time in state pretrial detention counts as time served for state conviction purposes. Mont v. United States , 139 S. Ct. 1826 (2019). Mens Rea : Conviction of an alien unlawfully present in the United States for unlawful firearms possession requires proof that the alien knew both that (1) he was in possession of a firearm and (2) he was unlawfully present. Rehaif v. United States , 139 S. Ct. 2191 (2019). Nondelegation : Authorizing the Attorney General to issue regulations governing registration requirements under the Sex Offender Registration and Notification Act (SORNA) for pre-Act offenders as soon as feasible did not violate the nondelegation doctrine. Gundy v. United States , 139 U.S. 2116 (2019). Double Jeopardy : The dual sovereign doctrine of the Fifth Amendment's Double Jeopardy Clause permits successive state and federal prosecutions for the same misconduct. Gamble v. United States , 139 S. Ct. 1960 (2019). Drunk Driving : A suspect's loss of consciousness following his probable cause arrest for drunk driving will almost always qualify for the exigent circumstances exception to the Fourth Amendment's warrant requirement. Mitchell v. Wisconsin , 139 S. Ct. 2525 (2019) (plurality). Section 1983 Litigation : Probable cause to arrest precludes a Section 1983 civil liability claim based on alleged First Amendment retaliation unless "a plaintiff presents objective evidence that he was arrested when otherwise similarly situated individuals not engaged in the same sort of protected speech had not been." Nieves v. Bartlett , 139 S. Ct. 1715 (2019). The statute of limitations for a Section 1983 cause of action alleging falsification of evidence "began to run when criminal proceedings against him terminated in his favor." McDonough v. Smith , 139 S. Ct. 2149 (2019). In assessing a Section 1983 qualified official immunity claim, "[t]he Court of Appeals should have asked whether clearly established law prohibited the officers from stopping and taking down a man in these circumstances. Instead, the Court of Appeals defined the clearly established right at a high level of generality by saying only that the 'right to be free of excessive force' was clearly established." City of Escondido v. Emmons , 139 S. Ct. 500 (2019). Ineffective Assistance of Counsel : A defense attorney's failure to honor his client's request to appeal is presumptively prejudicial ineffective assistance of counsel "even when the defendant has signed an appeal waiver." Garza v. Idaho , 139 S. Ct. 738 (2019).

GAO_GAO-20-418

Background In June 2018, DOD’s Chief Management Officer established the Community Services Reform Task Force to perform a business case analysis to determine whether consolidating the defense resale organizations would result in efficiencies. The task force conducted its work from July 2018 through November 2018, during which it collected financial and other data from the four resale organizations and conducted workshops with subject matter experts from the resale organizations. In November 2018, the military departments were given an opportunity to review the business case analysis, provide comments, and indicate whether they concurred with the analysis. In its business case analysis, the task force recommended consolidating the four defense resale organizations into a single organization. The task force stated that consolidation would eliminate duplication that currently exists across the resale organizations and increase the competitiveness, or financial viability, of defense resale, which has seen sales declines in recent years. Specifically, the task force recommended that a single chief executive officer or director be responsible for leading the organization and report to a single board of directors. The task force also recommended that separate leadership positions for commissary operations and exchange operations be established, and that a chief administrative officer manage the business functions that are common to the current resale organizations, such as information technology (IT), human resources, marketing, and finances. Figure 1 shows the task force’s recommended organizational chart for the consolidated resale organizations. The task force estimated that the time frame for consolidating the four defense resale organizations would be 5 years for implementation, and that consolidation would result in “net savings” (i.e., estimated savings minus estimated costs) ranging from about $690 million to $1.3 billion during the first 5 years, followed by annual net savings of approximately $390 million to $670 million every year thereafter. Specifically: Estimated savings: The task force estimated that consolidating the four defense resale organizations would result in savings in three areas: (1) reduction of the cost of goods sold in the commissaries and the exchanges; (2) reduction of the cost of goods and services that are not sold but are necessary for operating stores (e.g., plastic shopping bags and custodial services); and (3) reduction of payroll costs by eliminating redundant personnel. According to the task force, consolidation would result in estimated savings of $1.4 billion to $2.1 billion over the first 5 years, followed by annual savings of $470 million to $750 million. Estimated costs: The task force estimated that consolidating the defense resale organizations would result in costs from four areas: (1) development of new, common IT systems; (2) severance pay for separating employees and retention bonuses to incentivize employees to remain; (3) operation of a transformation management office, supported by private contractors, to implement the consolidation; and (4) costs to convert DeCA to a non-appropriated fund organization. According to the task force, consolidation would result in estimated costs of $700 million to $810 million over the first 5 years, followed by annual costs of $80 million. DOD’s Chief Management Officer in March 2019 and the Deputy Secretary of Defense in August 2019 both approved the results of the business case analysis and directed that plans be made for consolidation, pending congressional action to remove the statutory prohibition on consolidating the commissary and exchange systems. DOD’s Business Case Analysis Supporting Defense Resale Consolidation May Not Provide Reliable Savings and Cost Estimates The task force may have overestimated the expected savings from reducing the “cost of goods sold” (i.e., the cost of purchasing products that are resold in commissaries or exchanges) and underestimated the expected costs from IT consolidation and headquarters relocation. DOD’s Task Force May Have Overestimated the Expected Savings to Be Achieved from Reducing the Cost of Goods Sold The task force estimated that most of the savings (i.e., about 70 percent annually) to be achieved from consolidating the four defense resale organizations would result from reducing the cost of goods sold. According to the task force’s business case analysis, retailers often pay different costs for identical products, and mergers are an opportunity for retailers to compare costs across a larger combined organization and make decisions that maximize savings. In the case of a consolidated defense resale organization, the task force stated in its business case analysis that savings could be achieved by implementing what the task force called category management reforms and by obtaining the lowest cost for identical products sold by both commissaries and exchanges. Task force officials added that one board of directors and one chief executive officer overseeing the consolidated resale organization would be more likely to achieve savings than the current, individual boards of directors and chief executive officers of the resale organizations. GAO-18-151SP. DeCA and one or more exchange organization, or Two or more of the exchange organizations (and not DeCA). In addition to overlap in identical products sold, task force officials told us that savings from category management reforms are dependent, in part, on the amount of overlap in vendors that sell products to the resale organizations. Specifically, task force officials stated that there are opportunities to reduce cost of goods sold through negotiations with vendors that sell items to both DeCA and the exchange organizations. For example, task force officials stated that the consolidated organization could negotiate better prices with a vendor that sells family-size items to DeCA and single-size items to the exchange organizations, even though those items are not identical. Industry Benchmarks The industry benchmarks used by the task force are based on proprietary data gathered and owned by Boston Consulting Group based on its experience working with mergers and category management reforms in the private sector retail industry. These benchmarks were presented as a percentage of cost of goods sold; specifically, the task force estimated that savings from obtaining the lowest cost for identical items were from 1 to 1.5 percent of the cost of goods sold, and savings from category management efforts were from 2.5 to 4 percent of the cost of goods sold. We did not review and evaluate the underlying data that were used to develop the proprietary benchmarks. Based on this information, the task force calculated the estimated savings that would result from reducing the cost of goods sold by multiplying the total cost of goods sold for all four resale organizations in fiscal year 2017 ($9.5 billion) by industry benchmarks developed by Boston Consulting Group (see sidebar for more information on these benchmarks). This calculation showed an estimated annual savings of $329 million to $517 million from reducing the cost of goods sold. However, additional information from the task force suggests this savings estimate may be overstated because there is limited overlap in the products DeCA sells (i.e., groceries and household goods) and the products the exchange organizations sell (i.e., goods and services similar to retail stores). According to the task force, about $2.2 billion of DeCA’s cost of goods sold in fiscal year 2017 were for products also sold by at least one of the exchange organizations, which is equivalent to about 23 percent of the total cost of goods sold for the four resale organizations. This differs from the data provided in the business case analysis, which stated that 62 percent of the total cost of goods sold was for identical products sold by two or more resale organizations; however, that figure also includes products sold by two or more exchange organizations and not DeCA (we further discuss product overlap among the exchange organizations below). Given the more limited product overlap between DeCA and the exchange organizations, it is unclear whether using the total cost of goods sold for all four resale organizations as the basis for estimating savings was appropriate. Additionally, the business case analysis did not fully identify the amount of vendor overlap that exists between DeCA and the three exchange organizations, but the data that were provided in the business case analysis suggest that limited vendor overlap exists. Specifically, the business case analysis provided data for 10 vendors that sell to the defense resale organizations, but those vendors represent less than 20 percent of the cost of goods sold to DeCA and the exchange organizations in fiscal year 2017. Further, only 5 of the 10 vendors identified in the business case analysis sold goods to both DeCA and the exchange organizations, and their cost of goods sold accounted for about 10 percent ($972 million) of the total cost of goods sold for the four resale organizations ($9.5 billion). Based on these data, the extent of vendor overlap between DeCA and the exchange organizations—and, as a result, how much can be saved through category management reforms by consolidating DeCA and the exchange organizations—is unclear. Although the task force stressed the importance of a conservative estimate in both its business case analysis and in meetings with us, our assessment of the assumptions and methodology for estimating savings from the cost of goods sold found that a more conservative approach could have been used to better ensure estimated savings were not overstated. For example, one method could have been to multiply the benchmarks by the cost of goods sold for just the three exchange organizations (about $5.5 billion in fiscal year 2017, per the task force), as data provided by the task force indicate that about 67 percent of the cost of goods sold for the exchange organizations in fiscal year 2017 were for identical products sold by at least two exchange organizations. Another method, which task force officials suggested after we shared our concerns about their methodology, could have been to multiply the benchmarks by the cost of goods sold for the exchange organizations, plus the portion of DeCA’s cost of goods sold that overlaps with at least one exchange organization (about $2.2 billion in fiscal year 2017, per the task force). Either method would be more conservative than the one adopted in the business case analysis and would yield a savings estimate that is about 20 to 40 percent lower, but would be more consistent with the task force’s assertion that consolidation savings are dependent on the amount of overlap among the merging organizations. DOD policy states that an economic analysis should base its analysis of benefits on facts and data whenever possible. Additionally, our Assessment Methodology for Economic Analysis states that an economic analysis should examine the effects of an action by considering relevant alternatives and justifying what the world would be like under each alternative; describe and justify the analytical choices, assumptions, and data used; and assess how plausible adjustments to each important analytical choice and assumption affect the estimates of savings. Ensuring that the estimates for cost of goods savings are accurate is particularly important, as they account for approximately 70 percent of the task force’s overall savings estimate from consolidation. However, the task force did not fully identify and analyze in its business case analysis how many identical products are sold by both DeCA and the exchange organizations or how many vendors sell products to both DeCA and the exchange organizations. According to task force officials, they did not provide data on product overlap between DeCA and the exchange organizations because it would not change their savings methodology or estimate, and they did not provide more information on vendor overlap because of the proprietary nature of that data. However, the amount of product and vendor overlap that exists across the four resale organizations will have a direct effect on the amount of savings to be achieved from consolidation, as acknowledged by the task force. Without the task force reassessing the approach it used to estimate savings from the cost of goods sold and, if necessary, making adjustments to those estimates, decision makers in DOD and Congress may lack confidence in the reliability of the task force’s savings estimates in the business case analysis and will not have complete information as they consider defense resale consolidation. DOD’s Task Force May Have Underestimated the Expected Costs of Consolidating the Four Defense Resale Organizations Based on our analysis of the business case analysis, we found that DOD’s task force may have underestimated the expected costs of consolidating the four defense resale organizations in two areas: (1) the development of new, common IT systems and (2) the location of a new headquarters for the consolidated organization. Task Force May Have Underestimated the Cost of Consolidating Defense Resale Organizations’ IT Systems The task force estimated in its business case analysis that most of the costs (i.e., about 50 percent annually) of consolidating the four defense resale organizations will result from developing new, common IT systems to support the consolidated organization. In the business case analysis, the task force stated that it worked with the four resale organizations to calculate a cost estimate of $292 million to $352 million for developing five types of IT systems that are needed for the consolidated organization: merchandising, store inventory management, financial management and general ledger, transportation and logistics, and ecommerce. According to the business case analysis, the task force’s cost estimates for developing new, common IT systems for the consolidated organization were to be based on data provided by the resale organizations on recent or projected costs for replacing similar systems or performing major upgrades to existing systems, when available. For example, the task force’s estimate for the merchandising system was approximately $115 million, which the business case analysis stated is based on a $35 million estimate provided by AAFES, a $23.5 million estimate provided by NEXCOM, a $15 million estimate provided by MCCS, and a $41 million estimate provided by DeCA. However, the task force’s cost estimate for IT consolidation may be understated because it is based, in part, on less expensive minor IT system upgrades and partial replacements, according to the resale organizations. Based on our analysis of information provided to us by the resale organizations, about $140 million (about 40 percent) of the overall IT cost estimate was based on what the resale organizations described as minor upgrades or partial replacements. Specifically, while MCCS confirmed the cost estimates attributed to them in the business case analysis were for total IT system replacement costs, the other three resale organizations—AAFES, NEXCOM, and DeCA— disagreed with the task force’s characterization that all the data used to calculate IT system estimates represented costs for replacements or major upgrades. AAFES told us that the cost estimates cited in the business case analysis for its merchandising, financial management and general ledger, and transportation and logistics systems reflected minor upgrades of specific modules within the overall systems, and the cost to replace or upgrade the entire system would be significantly higher. NEXCOM stated that the cost estimates for upgrading its merchandising, store inventory management, and financial management and general ledger systems were for minor upgrades, not replacements or major upgrades, as stated by the task force. DeCA told us that the estimate for replacing its store inventory management system only represented 1 year of costs, even though DeCA plans to incur replacement costs through at least 2022. According to the task force, the task force and the resale organizations agreed on the methodology for estimating IT costs, and the subject matter experts from the resale organizations provided the cost data used in the business case analysis. However, based on information provided by the resale organizations, it appears that the task force may not have always based its cost estimate on replacement or major upgrade costs— consistent with the key assumption that new IT systems would be developed for the consolidated resale organization—but, rather, used minor upgrade or partial replacement costs in some cases. Specifically, task force officials told us they believed the estimates provided by the resale organizations were too high to be minor upgrades or partial replacements, based on their understanding of IT requirements for resale operations. Further, task force officials stated that their overall IT cost estimate was likely overstated, not understated. For example, they stated that their estimate is higher than what is typically spent for a private sector consolidation of similar size. However, the task force stated that it did not use private sector IT cost estimates in its business case analysis because it determined that public sector IT costs would likely be higher than private sector IT costs. Additionally, task force officials told us that some planned spending on existing IT systems by the four resale organizations would not be necessary as a result of consolidation. However, the business case analysis does not quantify how much future spending could be reduced or factor those reductions into the IT cost estimate. According to the GAO Cost Estimating and Assessment Guide, cost estimates are developed based on assumptions that are defined to establish the baseline conditions the estimate will be built from. Additionally, our Assessment Methodology for Economic Analysis states that an economic analysis should define an appropriate baseline that represents the best assessment of what the world would be like under that alternative. Thus, estimating costs that reflect the baseline conditions is a key step in developing a sound cost estimate. Additionally, we have previously reported that federal IT investments frequently fail or incur cost overruns and schedule slippages. As such, high-quality data are imperative for ensuring proper management and oversight of IT investments. The task force’s IT cost estimate is particularly important, as it represents about 50 percent of the total estimated costs for defense resale consolidation. Until the task force consults with the resale organizations to reassess the methodology for estimating IT costs, decision makers in DOD and Congress may not have a reliable and complete understanding of the estimated costs for the implementation of new, common IT systems, which is information DOD and Congress need as they consider defense resale consolidation. DOD’s Task Force Did Not Provide a Cost Estimate for Relocating the Four Defense Resale Organizations to a New Headquarters Location According to the task force, there would be costs associated with relocating AAFES, NEXCOM, MCCS, and DeCA to a new headquarters location, to include relocating existing personnel, hiring new personnel, and obtaining real estate. Although no relocation options were presented in the business case analysis, task force officials told us there are multiple options for where to locate the headquarters of a consolidated resale organization. One option cited by the task force would be to create a new headquarters in the Washington, DC, area, which would be the most expensive option, as it would likely involve acquiring new real estate and hiring personnel in a high-cost region. Another option cited by the task force would be to locate all exchange operations and staff at the existing AAFES headquarters in Dallas, TX, and maintain commissary operations and staff at the existing DeCA headquarters at Fort Lee, VA. This option would likely be less expensive, as personnel and available real estate are already present at both locations. In January 2020, task force officials also told us that an even less expensive option they might consider is maintaining commissary and exchange headquarters staff at their current locations, but having personnel work for the consolidated organization, rather than for DeCA or the exchange organizations. Despite the potential for relocation costs, the task force did not include a range of cost estimates for different relocation options in its business case analysis. According to task force officials, relocation cost estimates were not included because the headquarters location has not been chosen, and costs will vary widely depending on the chosen location. While actual relocation costs will depend on the chosen headquarters location, this fact does not prevent the task force from presenting a range of cost estimates in advance of that decision being made. Task force officials also said that including relocation cost estimates would not have changed the conclusion of the business case analysis. However, without a range of relocation cost estimates, we were unable to assess the effect of relocation costs on the conclusion of the business case analysis. DOD policy states that an economic analysis should quantify the costs associated with each alternative under consideration whenever possible so that they may be included in the economic analysis calculation. Additionally, our Assessment Methodology for Economic Analysis states that an economic analysis should quantify the important costs, where feasible, to inform decision makers about the economic effects of a proposed action. Without developing and providing a range of relocation cost estimates from the least expensive option to the most expensive, decision makers in DOD and Congress will not be fully informed about the costs of consolidation, which is necessary information for deciding whether to consolidate the four defense resale organizations. Military Departments Officially Concurred with the Business Case Analysis, but DOD Did Not Share Their Accompanying Comments with Congress The military departments officially concurred with the task force’s business case analysis for consolidating the four defense resale organizations. However, the military departments also provided written comments that detailed concerns with fundamental aspects of the business case analysis, to include: the use of proprietary industry benchmarks; estimated savings, costs, and timeline of the consolidation; and the proposed governance structure for the new resale organization. In an April 2019 report to Congress that summarized the business case analysis, DOD stated that the military departments agreed with the consolidation. However, the report did not disclose the military departments’ comments and concerns on the business case analysis, which are relevant as Congress considers defense resale consolidation. In their written comments, the military departments either stated concerns about the consolidation or included critical comments from the exchange organizations—all of which opposed the consolidation. Specifically: The Army concurred with the business case analysis but noted that funding for morale, welfare, and recreation programs must be preserved or increased as a result of the consolidation. In addition, the Army’s comment letter included as an attachment written comments from AAFES, which expressed opposition to the consolidation and detailed concerns with the business case analysis. For example, AAFES stated that the business case analysis relied on unverifiable, proprietary industry benchmarks that overstated the benefits of consolidation, underestimated the costs and time to consolidate, and did not account for recent efforts by the resale organizations to reduce costs by collaborating on a purchasing alliance. The Air Force also concurred with the business case analysis, but noted in its comments that mergers and acquisitions have historically cost more, taken longer, and saved less than originally expected. As a result, the Air Force recommended that a phased implementation plan be followed to guard against financial risk. The Air Force also stated that morale, welfare, and recreation funding currently provided by the exchanges should be maintained while opportunities are examined to reduce the need for appropriated funding. The Navy initially non-concurred with the business case analysis in December 2018. In its comment letter, the Navy stated that the task force’s analysis was flawed beyond repair and included comments from NEXCOM and MCCS that also opposed consolidation. For example, the exchanges’ comments stated that the expected cost savings were overstated, that potential inefficiencies from consolidation were not discussed, and that the resale organizations could achieve cost savings through greater collaboration without the need for consolidation. NEXCOM and MCCS also stated concern that the task force’s savings projection relied heavily on unverifiable industry benchmarks. In addition, MCCS expressed concern that consolidation could result in unexpected costs from separating exchange operations from the rest of MCCS operations, which also include the Marine Corps’ morale, welfare, and recreation and family programs. In January 2019, the Navy changed its position to concur subject to several significant comments and clarifications, and attached a letter detailing comments and concerns similar to those it submitted with its original non-concurrence in December 2018. Officials from the resale organizations further articulated their concerns about the business case analysis when they met with us. For example, resale officials told us they are concerned that savings are overstated, that costs are understated, and that the proprietary benchmarks used by the task force are unverifiable or may not be applicable to the public sector. Exchange officials also stated that they are worried about the effect of consolidation on morale, welfare, and recreation funding generated by the exchanges. Specifically, exchange officials are concerned that exchange revenue currently used for morale, welfare, and recreation programs could be used to pay for consolidation expenses or to reduce the amount of appropriated funds allocated to the commissaries. Despite the concerns detailed in the comments from the military departments and resale organizations, DOD did not include them in its April 2019 report to Congress summarizing the results of the business case analysis. The National Defense Authorization Act for Fiscal Year 2019 required DOD to include in its report the recommendations of the Secretaries of the military departments regarding the plan to consolidate the defense resale organizations. When we asked the task force why DOD did not provide Congress with the comments and concerns cited by the military departments and the resale organizations, officials stated that they were advised by DOD’s Office of General Counsel not to include the comments because they contained information that may have disclosed DOD’s deliberative process. Task force officials also stated that the savings, cost, and timeline estimates in the business case analysis were conservative, and that the proprietary industry benchmarks are based on years of experience by Boston Consulting Group and similar to those cited by prior studies. Regarding the purchasing alliance formed by the resale organizations to reduce their cost of goods sold, task force officials stated they do not believe such efforts to reduce costs will be sustained without a single chief executive officer and board of directors to ensure those efforts continued, as recommended in the business case analysis. Finally, the task force stated in the business case analysis that any savings achieved from consolidation could be used to increase morale, welfare, and recreation funding or reduce appropriations used to fund DeCA, and that decisions on how to allocate savings will be made by the proposed board of directors. According to task force officials, some of the concerns articulated by the military departments and the exchanges could be motivated by a general opposition to consolidation. However, without a more complete reporting of the military departments’ perspectives on consolidation and the task force’s response to those comments, Congress may be unaware of the views various organizations within DOD have regarding the business case analysis, which is relevant information as Congress considers defense resale consolidation. Moreover, fully reporting the comments and concerns could strengthen trust and collaboration among the task force, military departments, and resale organizations on any future resale reforms. Conclusions Four defense resale organizations currently operate about 240 commissaries (operated by DeCA) and 2,500 exchange facilities (operated by AAFES, NEXCOM, and MCCS) worldwide to provide reduced-priced groceries and retail goods and services to DOD servicemembers, their families, and retirees. DeCA operations are funded in part by appropriations, which have totaled approximately $1.3 billion in recent years. By law the commissary and exchange organizations must be operated separately. In November 2018, a DOD task force completed a business case analysis and concluded that consolidating the four defense resale organizations into a single organization would result in several hundred million dollars in annual cost savings. However, we found that the task force’s projected savings from reducing the cost of goods sold may be overestimated, and that projected costs for IT development and headquarters relocation may be underestimated. Further, while the military departments concurred with the task force’s recommendation to consolidate, DOD did not fully share their comments and concerns about the business case analysis with Congress. DOD’s proposed consolidation will cost several hundred million dollars, take years to implement, and involve multiple DOD organizations. Given the cost and complexity of the proposed defense resale consolidation, DOD can ensure that Congress has the reliable information it needs to consider consolidation by reviewing and updating savings and cost estimates and sharing comments and concerns from the military departments. Recommendations for Executive Action We are making the following four recommendations to DOD. The Secretary of Defense should ensure that the DOD Chief Management Officer direct the task force to reassess its approach to estimating savings from cost of goods sold—to include reassessing its use of the cost of goods sold for all four defense resale organizations rather than, for example, just for the three exchange organizations—and make any necessary adjustments to its savings estimates for consolidation and provide that updated information to Congress. (Recommendation 1) The Secretary of Defense should ensure that the DOD Chief Management Officer direct the task force, in consultation with the resale organizations, to reassess its methodology for estimating IT costs of consolidation, and make any necessary adjustments to its range of IT cost estimates and provide that updated information to Congress. (Recommendation 2) The Secretary of Defense should ensure that the DOD Chief Management Officer direct the task force to develop a range of cost estimates for relocating the defense resale organizations, and adjust its range of cost estimates for consolidation and provide that updated information to Congress. (Recommendation 3) The Secretary of Defense should ensure that the DOD Chief Management Officer provide additional written information to Congress on the comments and concerns from the military departments and resale organizations on the task force’s November 2018 business case analysis, as well as the task force’s response to those comments and concerns. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this product to DOD for review and comment. In its comments, reproduced in appendix III and summarized below, DOD concurred with the first three recommendations and did not concur with the fourth recommendation. DOD also provided technical comments, which we incorporated as appropriate. DOD stated in its letter that it continues to firmly believe that consolidation of above-store operations of DeCA and the military exchanges is the right path forward and that it intends to move forward with this effort. DOD also requested that we consider the first three recommendations as implemented, based on information provided in the letter and as detailed below. Regarding the first recommendation for the task force to reassess its approach to estimating savings from cost of goods sold—to include reassessing its use of cost of goods sold by all four defense resale organizations rather than, for example, just the three exchange organizations—and make any necessary adjustments to its savings estimates for consolidation and provide that updated information to Congress, DOD stated that it had reassessed its approach and found that there is significant overlap and, therefore, savings opportunity in products sold by DeCA and the exchanges. DOD also provided revised savings estimates that exclude DeCA’s cost of goods sold from its methodology that show net savings ranging from $309 million to $739 million in the first 5 years of consolidation, followed by $255 million to $457 million per year thereafter. These figures are about 44 percent to 55 percent lower than the business case analysis’s estimate for the first 5 years and about 32 to 35 percent lower per year thereafter. By providing these revised savings estimates, we believe that DOD has addressed the intent of the recommendation. With regard to the second recommendation for the task force to reassess its methodology for estimating IT costs of consolidation, and make any necessary adjustments to its range of IT cost estimates and provide that updated information to Congress, DOD stated that the task force followed up with AAFES, NEXCOM, and DeCA to get an update on the cost estimates these entities expressed concern about to us. However, according to DOD, those resale organizations were unable to provide alternate data to use in place of the numbers in the business case analysis. DOD further stated in its letter that because no alternative data were provided, the department will continue to use the estimate in the business case analysis and will reengage with the resale organizations to develop more detailed IT design plans and make any necessary updates to the IT cost estimates as integration planning moves forward. As DOD develops its more detailed IT design plans and associated cost estimates, we will follow up with the department, including the resale organizations, to determine whether this recommendation has been addressed. In commenting on the third recommendation for the task force to develop a range of cost estimates for relocating the defense resale organizations, and adjust its range of cost estimates for consolidation and provide that updated information to Congress, DOD provided three possible courses of action, along with corresponding cost estimates. These possible courses of action, from least expensive to most expensive, are: (1) maintain operations at all four existing locations (no cost); (2) maintain commissary operations at DeCA headquarters, perform all exchange functions at AAFES headquarters, and close the NEXCOM and MCCS headquarters (one-time costs of $5.5 million and recurring annual costs of $1.3 million); and (3) create a new headquarters to perform all commissary and exchange operations near Washington, D.C. (one-time costs of $19.6 million and recurring annual costs of $19.7 million). DOD stated that consolidation would still result in financial benefits, even if the department chooses the most costly of these courses of action. By providing these cost estimates, we believe that DOD has addressed the intent of the recommendation. While we have determined that DOD has met the intent of the first and third recommendations, we also note that, in its comment letter, the department questioned some aspects of our analysis and conclusions regarding the first three recommendations. We stand by our analysis and conclusions and offer the following response: DOD stated in its comment letter that modifying the business case analysis’s approach to cost of goods savings would result in an incorrect use of benchmarks and go against industry best practice. For example, DOD stated that estimating savings by using the cost of goods sold for just the three exchange organizations, or for the three exchange organizations plus a portion of DeCA, would be flawed. However, as noted in our report, the latter method was recommended to us by task force officials when we raised concerns about the accuracy of the task force’s savings estimates in the business case analysis. In addition, multiplying the benchmarks by the cost of goods sold for the exchange organizations, as opposed to for all four resale organizations, would be more consistent with the assertion in the business case analysis that consolidation savings are dependent on the overlap among the merging organizations. DOD questioned the accuracy of some of our figures in the report by providing different data on product and vendor overlap between DeCA and the exchange organizations. However, this information was not included in the task force’s business case analysis or offered to us during the course of our audit. In addition, when we asked for supporting documentation that would allow us to validate the new figures, DOD did not provide any. DOD stated in its comments that excluding all or including only a portion of DeCA’s cost of goods sold implies that there is no opportunity to achieve savings between DeCA and the exchanges. Our report does not make this assertion, but rather offers a methodology that would result in a more conservative savings estimate, consistent with the data presented in the business case analysis and provided by task force officials, to better ensure that estimated savings were not overstated. As noted above, DOD did not concur with the fourth recommendation for the department’s Chief Management Officer to provide additional written information to Congress on the comments and concerns from the military departments and resale organizations on the task force’s November 2018 business case analysis, as well as on the task force’s response to those comments and concerns. DOD stated in its written response to our report that the department considered all the comments submitted in its decision-making process and that all of the military department secretariats agreed with above-store consolidation, despite their comments on the business case analysis. DOD further stated that the military department comments regarding the business case analysis were shared with congressional committee professional staff, and DOD suggested in its letter that this recommendation be closed. However, DOD’s written response did not provide information on which comments were shared, whether those comments were communicated in writing or orally, or which committee or committees received information on the comments. In their written comments on the business case analysis, the military departments detailed concerns with fundamental aspects of the analysis, to include: the use of proprietary industry benchmarks; estimated savings, costs, and timeline of consolidation; and the proposed governance structure for the new resale organization. We continue to believe that implementing this recommendation would help ensure that Congress has the full information it needs as it considers defense resale consolidation and would also help strengthen trust and collaboration among the various DOD stakeholders involved in defense resale, particularly given their role in any consolidation, should one occur. We will follow up with DOD as part of our regular recommendation follow- up process. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Secretaries of the Army, Air Force, and Navy. In addition, the report is available at no charge on our website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Prior GAO Work on Commissaries and Exchanges The National Defense Authorization Act for Fiscal Year 2016 mandated that the Department of Defense (DOD) report on DOD’s plan to achieve budget neutrality for commissaries and exchanges—which DOD interpreted as ending the use of appropriated funding—and included a provision for us to assess DOD’s report. In November 2016, we found that DOD’s May 2016 report did not provide a plan for achieving budget neutrality. DOD reported that it would not be able to eliminate fully the use of appropriated funds for defense resale, but the department did not provide detailed information supporting that conclusion. Instead, the report stated that DOD expected to achieve $2 billion in cost savings over a 5-year period from fiscal year 2017 through fiscal year 2021. However, we found that the report did not include any assumptions, methodology, or specific time frames related to initiatives that would lead to these savings. We recommended that DOD provide information to Congress to support its conclusion about budget neutrality and develop a plan for achieving reductions to defense resale appropriations. DOD concurred with our recommendations, but as of February 2020 had not addressed them. In March 2017, we reported on DOD’s commissary operations, including the extent to which the Defense Commissary Agency (DeCA) had assurance that it was maintaining the desired savings rate for its customers. DeCA’s desired savings rate—which at the time of our March 2017 report was 30 percent and is now 23.7 percent—shows how much a customer can expect to save on grocery purchases at a commissary in comparison to purchases at other local grocery stores. We found that DeCA lacked reasonable assurance that it was maintaining its desired savings rate for commissary customers because of weaknesses in its methodology for calculating the savings rate. For example, the methodology did not use a random sample of overseas commissaries or account for seasonal and geographic variations in item prices. We also found that DeCA’s business model departed from practices generally employed by commercial grocery stores. For example, DeCA did not assess the contribution of the sale of each product to a given store’s total sales in determining which products to sell, and it had not conducted cost- benefit analyses for its use of stocking and custodial service contracts or product distribution options across all commissaries. We recommended that DOD (1) address limitations identified in its savings rate methodology; (2) develop a plan with objectives, goals, and time frames to improve efficiency in product management; and (3) conduct comprehensive cost-benefit analyses for service contracts and distribution options. As of February 2020, DOD had addressed the first two recommendations but had not addressed the third recommendation. Appendix II: Assessment of the Department of Defense’s (DOD) Business Case Analysis on Defense Resale Consolidation We assessed DOD’s business case analysis on consolidating the four defense resale organizations against the five key elements of an economic analysis, as described in our Assessment Methodology for Economic Analysis (see table 1). Appendix III: Comments from the Department of Defense Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments Elizabeth A. Field, (202) 512-2775 or fielde1@gao.gov In addition to the contact named above, Suzanne Perkins (Assistant Director), Geoffrey Peck (Analyst-in-Charge), Pedro Almoguera, Noah Gerber, Mae Jones, Matthew Kienzle, Amie Lesser, Felicia Lopez, and Jeanne Sung made key contributions to this report.

DOD operates about 240 commissaries and 2,500 exchanges that sell groceries and retail goods and services to servicemembers, their families, and retirees. Commissaries and exchanges are operated by four resale organizations, and in November 2018 a DOD task force completed a business case analysis on consolidating those organizations. The National Defense Authorization Act for Fiscal Year 2020 included a provision for GAO to review DOD's business case analysis. This report evaluates the extent to which (1) DOD's business case analysis for consolidating the four resale organizations provided reliable savings and cost estimates and (2) the military departments concurred with the business case analysis and DOD shared their accompanying comments with Congress. GAO evaluated the business case analysis against DOD- and GAO-identified key elements of economic analyses; reviewed comments on the business case analysis; and interviewed DOD officials. A Department of Defense (DOD) task force's business case analysis for consolidating the defense resale organizations—the Defense Commissary Agency (DeCA), the Army and Air Force Exchange Service, the Navy Exchange Service Command, and Marine Corps Community Services—may not provide reliable savings and cost estimates. These organizations sell groceries and retail goods to servicemembers, their families, and retirees. The task force recommended consolidating the four resale organizations into a single organization, estimating “net savings” (i.e., savings minus costs) of about $690 million to $1.3 billion during the first 5 years. However, the task force may have overestimated savings and underestimated costs. Savings from reducing the cost of goods sold. The task force estimated that DOD would save several hundred million dollars annually by reducing the cost of purchasing goods that are resold in stores. Specifically, the task force multiplied the fiscal year 2017 total cost of goods sold for all four resale organizations by industry benchmarks, reasoning that mergers lead to more savings when merging organizations sell a high amount of identical products. However, task force data show that DeCA and the exchange organizations have limited identical products; the overlap between DeCA products and those of at least one exchange organization amounts to less than one-third of the total cost of goods sold. Thus, multiplying the benchmarks by the total cost of goods sold for all four organizations may not have been appropriate. Information technology (IT) costs. The task force estimated the costs of developing new, common IT systems to operate a consolidated resale organization to be between $326 million and $401 million, about 50 percent of estimated consolidation costs. The task force stated that it based IT cost estimates on data resale organizations provided for major upgrades or system replacements. But GAO found that about 40 percent of the IT cost estimate was based on minor upgrades or partial replacements, not major upgrades or system replacements. Thus, the estimate may be understated. Headquarters relocation costs. According to the task force, there will be costs if DOD decides to relocate the four defense resale organizations to a new headquarters location. However, the task force did not include cost estimates for relocation in its business case analysis. According to federal law, the operation of the commissary and exchange systems may not be consolidated unless authorized by Congress. Until the task force reassesses and updates, as necessary, its savings and costs estimates, DOD and Congress will not have reliable information to consider resale consolidation. The military departments officially concurred with the business case analysis, but provided written comments detailing fundamental concerns with the analysis, such as the use of proprietary industry benchmarks and the estimated savings and costs. In April 2019, DOD reported to Congress that the military departments agreed with consolidation, but did not disclose the accompanying comments. Without more complete reporting of those comments, Congress has limited visibility of the views of the organizations involved in a potential consolidation.

GAO_GAO-20-483T

The Biodefense Strategy Provides Opportunity to Create an Enterprise-Wide Approach, but Implementation Challenges Remain We found that the National Biodefense Strategy and associated plans bring together all the key elements of federal biodefense capabilities, which presents an opportunity to identify gaps and consider enterprise- wide risk and resources for investment trade-off decisions. However, challenges with planning to manage change; limited guidance and methods for analyzing capabilities; and lack of clarity about decision- making processes, roles, and responsibilities while adapting to a new enterprise-wide approach could limit the success of the Strategy’s implementation. Framework Created to Assess Enterprise-Wide National Biodefense Capabilities The National Biodefense Strategy and its associated plans bring together the efforts of federal agencies with significant biodefense roles, responsibilities, and resources to address naturally-occurring, accidental, and intentional threats. The Strategy and plans also provide processes for collecting and analyzing comprehensive information across the enterprise, an important step toward the kind of enterprise-wide strategic decision-making we have called for. The Strategy defines the term “biothreat” broadly to include all sources of major catastrophic risk, including naturally-occurring biological threats, the accidental release of pathogens, and the deliberate use of biological weapons. Officials we interviewed noted that this is the first time that the federal government has identified activities across the whole biodefense enterprise and assessed resources and gaps to address multiple sources of threat regardless of source. The Strategy also outlines high-level goals and objectives to help define priorities. NSPM-14, which was issued to support the strategy, established a structure and process by which federal agencies can assess enterprise-wide biodefense capabilities and needs, and subsequently develop guidance to help inform agency budget submissions. NSPM-14 lays out, in broad strokes, a process to identify biodefense efforts and assess how current resources support the Strategy, how existing programs and resources could better align with the Strategy, and how additional resources, if available, could be applied to support the goals of the Strategy. As shown in figure 1, this process begins through a data call with participating agencies documenting all biodefense programs, projects, and activities within their purview in a biodefense memorandum. In interviews, officials from participating agencies stated that the NSPM- 14 processes constitute a new approach to identifying gaps and setting budget priorities for biodefense, and that they viewed the approach as generally well designed. Additionally, agency officials said that the assessment and joint policy guidance development process outlined in NSPM-14 offered some promise for helping agencies identify the resources necessary to achieve the Strategy’s goals. Nevertheless, officials from all of the agencies we interviewed, even those with the most optimistic views on the leadership and governance structure design, tempered their responses with the caveat that implementation is in such early stages that it remains to be seen how effective these structures will actually be once tested. Implementation Challenges Remain In our February 2020 report, we also identified challenges that if not addressed could hinder enterprise-wide biodefense efforts. Specifically, although the Strategy and associated plans establish the foundation for enterprise risk management, we and biodefense agency officials identified multiple challenges that could affect the Strategy’s implementation. These include challenges individual agencies faced during the initial data collection process as well as a lack of planning and guidance to support an enterprise-wide approach. In our analyses and interviews, we found that parts of the process in the first year were underdeveloped, raising questions about (1) the plans to support change management practices and ensure that early-implementation limitations do not become institutionalized in future years’ efforts; (2) guidance and methods for meaningfully analyzing the data; and (3) the clarity of decision-making processes, roles, and responsibilities. Challenges adapting to new procedures. During our interviews, agency officials reported challenges they faced in the first-year’s data collection effort. These challenges may have led to incomplete data collection, but are not wholly unexpected given they occurred in the context of the individual agencies and officials adapting to new procedures and a broader cultural shift from how they have approached their biodefense missions in the past. Officials told us that because of the learning involved the first time through the process, agencies may not have submitted complete or detailed information about their biodefense programs. Some officials we interviewed voiced concern that this first-year effort could set a poor precedent for these activities in future years if the challenges are not acknowledged and addressed. For example, an official noted that committing to the first-year’s results as the “baseline” for future years of the Strategy’s implementation could compound or institutionalize the issues encountered in the first year. Officials from HHS and Office of Management and Budget staff stressed that this process will be iterative, with the first year being primarily about outlining the existing biodefense landscape. Our prior work on organizational transformations states that incorporating change management practices improves the likelihood of successful reforms and notes that it is important to recognize agency cultural factors that can either help or inhibit reform efforts. However, the agencies involved in implementing the Strategy do not have a plan that includes change management practices that can help prevent these challenges from being carried forward into future efforts, and help reinforce enterprise-wide approaches, among other things. To address this issue, we recommended the Secretary of HHS direct the Biodefense Coordination Team to establish a plan that includes change management practices—such as strategies for feedback, communication, and education—to reinforce collaborative behaviors and enterprise-wide approaches and to help prevent early implementation challenges from becoming institutionalized. HHS concurred with this recommendation. Guidance and methods for analyzing data. We found a lack of clear procedures and planning to help ensure that the Biodefense Coordination Team is prepared to analyze the data, once it has been collected, in a way that leads to recognition of meaningful opportunities to leverage resources in efforts to maintain and advance national biodefence capabilities. In particular, HHS (1) has not documented guidance and methods for analyzing the data, including but not limited to methods and guidance for how to account for the contribution of nonfederal capabilities; and (2) does not have a resource plan for staffing and sustaining ongoing efforts. Specifically, we found that the processes for the Biodefense Coordination Team to analyze the results of all the individual agency data submissions and identify priorities to guide resource allocation were not agreed upon or documented prior to the agency efforts and continue to lack specificity and transparency. In our interviews, officials from four agencies said they were uncertain about fundamental elements of the implementation process, including how information gathered will be used to identify gaps and set priorities. Additionally, the initial effort to collect information on all programs, projects, and activities focused on existing federal activities and did not include a complete assessment of biodefense capabilities at the nonfederal level ̶ capabilities needed to achieve the goals and objectives outlined in the Strategy. Officials we interviewed also expressed concern about the resources that the Biodefense Coordination Team had available to it, both in the first year and on an ongoing basis. The officials told us that not all agencies were able to provide a full-time detailee to help support the team. We have previously reported that agencies need to identify how interagency groups will be funded and staffed. However, officials from multiple agencies told us that the initial planning for the staffing and responsibilities for the Biodefense Coordination Team had not been finalized. Without a plan to help ensure sufficient resources and mitigate resource challenges for ongoing efforts, the Biodefense Coordination Team risks not having the capacity it needs to conduct meaningful analysis, which would undermine the vision created by the Strategy and NSPM-14. To address these issues, we recommended the Secretary of HHS direct the Biodefense Coordination Team to (1) clearly document guidance and methods for analyzing the data collected from the agencies, including ensuring that nonfederal resources and capabilities are accounted for in the analysis, and (2) establish a resource plan to staff, support, and sustain its ongoing efforts. HHS concurred with both recommendations. Roles and responsibilities for joint decision-making. The governing bodies overseeing the National Biodefense Strategy’s implementation— the Biodefense Steering Committee and Biodefense Coordination Team—did not clearly document key components of the assessment process and roles and responsibilities for joint decision-making in the first year of NSPM-14 implementation. This raises questions about how these bodies will move from an effort to catalog all existing activities to decision- making that accounts for enterprise-wide needs and opportunities. For example, officials from multiple agencies were not certain how the governing bodies would make joint decisions regarding priority-setting and the allocation of resources, how they would assign new biodefense responsibilities if gaps were identified, and to what extent the Biodefense Steering Committee could enforce budgetary priorities, if at all. We also found a lack of shared understanding and agreement about how the interagency process would work to align resources toward any identified gaps and reconfigure resources for any identified redundancies or inefficiencies. Additionally, we found that Presidential memorandums guiding the process did not detail specific decision-making principles or steps for reaching consensus or even for raising decision points about how to best leverage or direct resources across the enterprise in response to any gaps or inefficiencies. Similarly, agency officials we interviewed were not clear how this process would work, how decisions would be made, or how agencies would agree to take on new responsibilities to bridge gaps to achieve the Strategy’s goals. Further, the governing bodies have not fully defined the roles and responsibilities for making enterprise-wide decisions that affect individual agency budgets and for enforcing enterprise-wide budget priorities. As with other parts of the NSPM-14 implementation process, the details regarding specific roles and responsibilities for directing and enforcing budget decisions lack detail and specificity. Additionally, officials from four agencies stated that the charter for the Biodefense Coordination Team has not been finalized, further delaying the articulation of roles and responsibilities and the ability to establish a shared agenda and common operating picture. As a result, some officials remain skeptical of the effectiveness of any decisions made. We previously reported that effective national strategies should help clarify implementing organizations’ relationships in terms of leading, supporting, and partnering. In the context of the Strategy, that includes how enterprise-wide decisions about leveraging or directing resources to fill gaps and reduce inefficiency will be made and by whom. Similarly, our previous work has found that articulating and agreeing to a process for making and enforcing decisions and clarifying roles and responsibilities can improve the clarity surrounding a shared outcome, and that articulating these agreements in formal documents can strengthen agency commitment to working collaboratively and provide the overall framework for accountability and oversight. Uncertainty around the mechanisms to identify enterprise-wide priorities along with the lack of clearly documented and agreed upon processes, roles, and responsibilities for joint decision-making jeopardize the Strategy’s ability to enhance efficiency and effectiveness of the nation’s biodefense capabilities. To address this issue, we recommended that the Secretary of HHS direct the Biodefense Coordination Team to clearly document agreed upon processes, roles, and responsibilities for making and enforcing enterprise-wide decisions. HHS concurred. In conclusion, the current COVID-19 outbreak demonstrates that responding to the ever-changing nature and broad array of biological threats is challenging. The National Biodefense Strategy calls for the need to improve state, local, tribal, territorial, private sector, federal, regional, and international surveillance systems and networks to contain, control and respond to biological incidents. As the current coronavirus outbreak continues to cross regional and international borders, the federal government must take necessary steps to protect the American public. At the same time, we must not lose sight of the next threat. The National Biodefense Strategy and NSPM-14 put in place a framework to be able to assess threats and make difficult decisions about how to apply limited resources to achieve the best benefit. However, the Strategy is only as good as its implementation. Taking the necessary steps to address the recommendations we have made regarding managing this cultural change, analyzing data, ensuring sufficient resources to maintain implementation efforts, and clearly articulating roles and responsibilities for joint decision-making will better position our nation for the threats we face today and in the future. Chairwoman Maloney, Ranking Member Jordan, and Members of the Committee, this concludes our prepared statement. We would be happy to respond to any questions you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff has any questions concerning this testimony, please contact Christopher P. Currie at (404) 679-1875, CurrieC@gao.gov or Mary Denigan-Macauley at (202) 512-7114, DeniganMacauleyM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Kathryn Godfrey (Assistant Director), Susanna Kuebler (Analyst- In-Charge), Michele Fejfar, Eric Hauswirth, Tracey King, and Jan Montgomery. Key contributors for the previous work that this testimony is based on are listed in each product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

GAO has reported on the inherent fragmented nature of the federal and nonfederal resources needed to protect the nation from potentially catastrophic biological threats. GAO called for a strategic approach to help the federal government better leverage resources and manage risk The White House issued the National Biodefense Strategy and the Presidential Memorandum on the Support for National Biodefense to promote a more efficient and coordinated biodefense enterprise. The National Defense Authorization Act for Fiscal Year 2017 included a provision that GAO review the strategy. This testimony highlights key findings from our February 2020 report, which analyzed the extent to which the Strategy and related implementation efforts are designed to allow an enterprise-wide approach. Issued in September 2018, the National Biodefense Strategy (Strategy) and implementation plan, along with National Security Presidential Memorandum-14 (NSPM-14), are designed to enhance national biodefense capabilities. NSPM-14 established a governance structure composed of relevant federal agencies and chaired by the Secretary of Health and Human Services (HHS) to guide implementation. It also required federal agencies with biodefense responsibilities to collect and assess data on their biodefense activities to, among other things, identify gaps. There are a number of challenges, however, that could limit long-term implementation success. Among other things, there was no documented methodology or guidance for how data are to be analyzed to help the enterprise identify gaps and opportunities to leverage resources, including no guidance on how nonfederal capabilities are to be accounted for in the analysis. Agency officials were also unsure how decisions would be made, especially if addressing gaps or opportunities to leverage resources involved redirecting resources across agency boundaries. Although HHS officials pointed to existing processes and directives for interagency decision making, GAO found there are no clear, detailed processes, roles, and responsibilities for joint decision-making, including how agencies will identify opportunities to leverage resources or who will make and enforce those decisions. As a result, questions remain about how this first-year effort to catalogue all existing activities will result in a decision-making approach that involves jointly defining and managing risk at the enterprise level. Without clearly documented methods, guidance, processes, and roles and responsibilities for enterprise-wide decision-making, the effort runs the risk of failing to move away from traditional mission stovepipes toward a strategic enterprise-wide approach that meaningfully enhances national capabilities.

CRS_R46262

C ongressional employees are retained to perform public duties that include assisting Members in official responsibilities in personal, committee, leadership, or administrative office settings. The roles, duties, and activities of congressional staff are matters of ongoing interest to Members of Congress, congressional staff, groups, and individuals, including those who raise concerns about congressional operations. Most observers recognize that Congress does not function without staff, but there is little systematic attention to what staff do, or what Members expect of them. In congressional offices, there may be interest in identifying Member expectations of congressional staff duties by position from multiple perspectives, including assessment of staffing needs in Member offices; guidance in setting position expectations, qualifications, and experience when offices choose to hire staff; and informing current and potential congressional employees of position expectations. Members of the House and Senate generally establish their own employment policies and practices for their personal offices. It is arguably the case that within Member offices, a common group of activities is executed for which staff with relevant skillsets and other qualifications are necessary. A body of publicly available job advertisements for staff positions from a number of different offices can shed light on the expectations Members have for position duties, as well as staff skills, characteristics, experience, and other expectations. For 33 commonly used congressional staff position titles, this report describes the most frequently listed job duties, applicant skills, characteristics, prior experiences, and other expectations found in a sample of job advertisements placed by Members of Congress between approximately December 2014 and September 2019 seeking staff in their offices. Table 1 lists the position titles and the frequency with which advertisements for them appeared in the sample. Identifying Job Advertisements for Congressional Staff Positions Data used in developing sample position expectations were taken from several publicly available sources, including the following, over the periods specified: The House Employment Bulletin, published weekly by the House Vacancy Announcement and Placement Service (HVAPS) in the Human Resources Office of the House Chief Administrative Officer (CAO). Data were collected from ads published between approximately January 2015 and September 2019. The Employment Bulletin, published online by the Senate "as a service to Senate offices choosing to advertise staff vacancies." Data were collected from ads, which were not dated, appearing from approximately July 2016 to July 2019. The House GOP Job and Resume Bank, which posts ads on behalf of the House Republican Conference on Facebook. Ads were collected between approximately January and June 2017. Other ads were collected from the period between approximately December 2014 and January 2017 from the House GOP Job Bank web page on the website of Representative Virginia Foxx during part of her tenure as the House Republican Conference Secretary. The Job Announcements Board hosted by Representative Steny Hoyer during part of his tenure as House Minority Whip. Data were collected from ads posted between approximately January 2016 and December 2017. Categorizing and Coding Job Advertisements More than 1,800 ads were collected from all sources. Duplicate ads resulting from posts to more than one source, and ads that appear to have been frequently reposted, were removed, as were ads for positions in congressional settings other than personal offices, yielding 880 ads for positions in Member personal offices. Substantially similar position titles (e.g., deputy scheduler and state deputy scheduler) for which there were five or more ads were identified and grouped together, as were related job titles (e.g., positions designated as district, field, or regional representative that had essentially similar job duties and expectations) for which there were five or more substantially similar ads, yielding a total of 704 ads. Ads for the 33 identified position titles were further categorized if there were five or more ads that specified the advertised position as "not entry level" or other signifier of presumptive advanced status. The 704 ads were coded against a variety of variables within eight categories, including ad tracking information; ad details; position responsibilities and responsibility areas; expected job skills, qualifications, and credentials; application materials; and office type. The distribution of ads by job title and level is provided in Table 1 . Solicitations of applicants for congressional staff appear to originate in a highly decentralized manner. Means of identifying appropriate candidates might potentially include reassigning staff within offices, placing ads in services that make them available by subscription, word of mouth, and other nonpublic means of identifying potential applicants for congressional staff positions. Consequently, it cannot be determined whether the dataset of ads analyzed in this report is representative of all congressional employment solicitations. In addition, the process by which candidates for some Member office senior staff positions are identified may not be public-facing. Based on information specified within the ads, most position titles were identified by one of the following four primary responsibility areas (some positions were identified by up to three responsibility areas): Legislative, Policy, and Oversight, Media, Messaging, and Speeches, Constituent Communications, Outreach, and Service, and Office Administration and Support. For each position, at least one sample position description was created based on the coded data. Information includes the most frequently occurring of the following: primary responsibility areas; widely expected duties, typically up to six of the most frequently occurring duties specified in all ads for that position; other potential duties, typically up to six other duties mentioned in more than one ad; applicant information, including characteristics, skills, and knowledge and prior experience; and other expectations. Concluding Observations Categorizing congressional staff positions by position title relies on an assumption that similarly titled positions in House and Senate personal offices carry out the same tasks under essentially similar circumstances. While personal offices may carry out similar activities, the assumption might be questionable given the differences in staff resources in House and Senate offices, as well as potential differences within offices of each chamber. Generalizations about staff roles and duties may also be limited in some ways due to the broad discretion Members have with regard to running their office activities. Variations from office to office, which might include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which sample position expectations provided here match operational practices in all congressional offices. Sample Position Expectations Caseworker18 Communications Director19 Communications Director, "Senior Level" or "Not Entry Level"20 Constituent Services Representative21 Correspondence Manager22 Deputy Press Secretary23 Deputy Scheduler24 Deputy Scheduler/Assistant to Chief of Staff25 Digital Director/Press Assistant26 Digital Media Director27 District Director28 Executive Assistant29 Executive Assistant/Scheduler30 Executive Assistant/Scheduler, "Not Entry Level"31 Field, District, or Regional Representative32 Field Representative/Caseworker33 Legislative Aide34 Legislative Assistant35 Legislative Assistant, "Not Entry Level"36 Legislative Correspondent37 Legislative Correspondent/Press Assistant38 Legislative Correspondent/Staff Assistant39 Legislative Counsel40 Legislative Director, House41 Legislative Director "Senior Level," or "Not Entry Level"42 Legislative Director, Senate43 Military Legislative Assistant44 Press Assistant45 Press Secretary46 Regional Coordinator47 Scheduler48 Scheduler, "Not Entry Level"49 Scheduler/Office Manager50 Senior Legislative Assistant51 Speechwriter52 Staff Assistant53 Staff Assistant/Driver54 Staff Assistant/Press Assistant55 Systems Administrator56

The roles, duties, and activities of congressional staff are matters of ongoing interest to Members of Congress, congressional staff, and observers of Congress. Members of the House and Senate establish their own employment policies and practices for their personal offices. It is arguably the case that within Member offices, a common group of activities is executed for which staff are necessary. Accordingly, a group of job advertisements for those positions from a number of different offices can shed light on the expectations Members have for position duties, as well as staff skills, characteristics, experience, and other expectations. This report provides a set of 39 widely expected job duties, applicant skills, characteristics, prior experiences, and other expectations based on a sample of ads placed by Members of Congress between approximately December 2014 and September 2019 seeking staff in their offices for 33 position titles: Sample position expectations might assist Congress from multiple perspectives, including assessment of staffing needs in Member offices; guidance in setting position expectations, qualifications, and experience when offices need to hire staff; and informing current and potential congressional employees of position expectations. At the same time, categorizing congressional staff positions by position title relies on an assumption that similarly titled positions in House and Senate personal offices carry out the same tasks under essentially similar circumstances. Although personal offices may carry out similar activities, the assumption might be questionable given the differences in staff resources in House and Senate offices, as well as potential differences among offices of each chamber, particularly the Senate. Genera lizations about staff roles and duties may also be limited in some ways due to the broad discretion Members have with regard to running their office activities. Variations from office to office, which might include differences in job duties, work schedules, office emphases, and other factors, may limit the extent to which sample position expectations might match operational practices in all congressional offices. This is one of several CRS products on congressional staff. To access those products, see CRS Report R44688, Congressional Staff: CRS Products on Size, Pay, and Job Tenure .

GAO_GAO-19-344

Background Overview of the Military Justice System According to the 2015 report ordered by the Secretary of Defense and issued by the Military Justice Review Group, the military justice system is designed to ensure discipline and order in the armed forces, since crimes committed by servicemembers have the potential to destroy the bonds of trust, seriously damage unit cohesion, and compromise military operations. The jurisdiction of the UCMJ extends to all places and applies to all active-duty servicemembers. UCMJ jurisdiction applies to other individuals as well, such as members of the National Guard or reserves who are performing active-duty service; retired members who are entitled to pay or are receiving hospitalization in a military hospital; prisoners of war in custody of the armed forces; persons serving with or accompanying the armed forces in the field in time of declared war or contingency operations, such as contractors; and members of organizations such as the National Oceanic and Atmospheric Administration and the Public Health Service when assigned to and serving with the armed forces. In creating the military justice system, Congress established three types of military courts, called courts-martial: summary, special, and general. Each of these types respectively is intended to deal with progressively more serious offenses, and each court-martial type may adjudicate more severe maximum punishments as prescribed under the UCMJ. In addition, an accused servicemember can receive nonjudicial punishment under Article 15 of the UCMJ, by which a commander can punish a servicemember without going through the court-martial process. Table 1 provides an overview of nonjudicial punishments and the three different types of courts-martial. The Military Justice Act of 2016 enacted significant reforms to the UCMJ, most of the provisions of which became effective on January 1, 2019. These reforms included changes such as limitations on the types of punishments permitted with nonjudicial punishments, changes to required size of the panel, or jury, and changes to what judicial outcomes are subject to automatic appeal. There are some areas where individual services supplement but remain consistent with the UCMJ. For example, the Air Force provides a right to counsel in certain forums where the services are not required to do so. In addition to the reforms affecting the UCMJ, the Military Justice Act of 2016 also directed changes to military justice data collection and accessibility. Specifically, section 5504 of the Military Justice Act of 2016 directed the Secretary of Defense to prescribe uniform standards and criteria pertaining to case management, data collection, and accessibility of information in the military justice system. As a result, the DOD Office of General Counsel authorized the establishment of the Article 140A Implementation Subcommittee of the Joint Service Committee on Military Justice to, among other things, assess each service’s case management system, recommend what data fields the services should collect, propose uniform definitions for the data fields the services should collect, and recommend standardized methods and data field definitions to improve the collection of data concerning race and ethnicity of individuals involved in the military justice system. The subcommittee conducted a study and submitted its recommendations to the Joint Service Committee Voting Group on July 2, 2018, and the Voting Group submitted a report and its agreed upon recommendations to the DOD Office of General Counsel on August 24, 2018. The Military Justice Act of 2016 provides that the Secretary of Defense was to carry out this mandate by December 23, 2018, and that the Secretary’s decisions shall take effect no later than December 23, 2020. On December 17, 2018, the General Counsel of the Department of Defense issued uniform standards and criteria, which directed that each military justice case processing and management system be capable of collecting uniform data concerning race and ethnicity. Military Justice Process From fiscal years 2013 through 2017, more than 258,000 active-duty servicemembers were disciplined for a violation of the UCMJ, out of more than 2.3 million unique active-duty servicemembers who served across all of the military services during this period. Figure 1 shows the number of cases of each type of court-martial and of nonjudicial punishments in each of the military services. There are several steps in the discipline of a servicemember who allegedly commits a crime under the UCMJ, which are summarized in figure 2 below. The military justice process begins once an offense is alleged and an initial report is made, typically to law enforcement, an investigative entity, or the suspect’s chain of command. Policies for initiating criminal investigations by military criminal investigative organizations (MCIO) and procedures for investigating criminal allegations are set forth in DOD and service guidance. At this time, the commanding officer or law enforcement will conduct an inquiry or investigation into the accusations and gather all reasonably available evidence. MCIOs have the authority and independent discretion to assume investigative jurisdiction, and do not require approval from any authority outside of the MCIO to conduct such an investigation—commanders outside of the organization are not to impede or interfere with such decisions or investigations by the MCIO. If an MCIO is involved in the inquiry, the investigative entity is to gather all reasonably available evidence and provide the commanding officer with unbiased findings that reflect impartiality as required by DOD instruction. According to service officials, during the conduct of the criminal investigation, the subject of the investigation has the right to obtain legal counsel at any time. After an investigation, the first step toward initiation of a court-martial is when the accused is presented with a list of charges signed by the accuser under oath, which is called preferral of charges; the accuser who prefers the charges may be anyone subject to the UCMJ. After charges are preferred, the charges are forwarded to an officer with sufficient legal authority to convene a court-martial, also known as the “convening authority.” The convening authority in receipt of preferred charges may, among other actions and depending on the nature of the charges and the level of the convening authority, refer the case to its own court or forward the case to a superior commander for disposition, for example, to a general court-martial convening authority. The general court-martial convening authority would have similar options: to dismiss the charges, refer them to a general or special court-martial, or take some lesser action. Before any case is referred to a general court-martial, the case must proceed through a preliminary hearing under Article 32 of the UCMJ, unless waived by the accused. The Article 32 hearing is presided over by an impartial judge advocate, or another individual with statutory authority, who is appointed by the convening authority and makes a recommendation to the convening authority. We analyzed general and special courts-martial that were preceded by investigations recorded in databases maintained by MCIOs, which we refer to as recorded investigations, and general and special courts-martial that did not have a record within an MCIO database. As shown in figure 3 below, the majority of general and special courts-martial, ranging from 53 percent to 74 percent across the services, had a recorded investigation, while the remaining cases would have been investigated by other sources, such as local civilian law enforcement, command investigations, or in the case of the Air Force, their military law enforcement forces. Once referred to a general or special court-martial, an accused servicemember may be tried by a military judge alone or by a military judge with a military jury, referred to as members of the court-martial. If the accused servicemember is tried by a military jury, the members of the court-martial determine whether the accused is proven guilty and, if the accused requests sentencing by the members, adjudicate a sentence. Otherwise, the military judge adjudicates the sentence. If the accused is tried by a military judge alone, the judge determines guilt and any sentence. In a summary court-martial, a single commissioned officer who is not a military judge adjudicates minor offenses and a sentence. Convictions at the general and special court-martial level are subject to a post-trial process and may be appealed to higher courts in cases where the sentence reaches a certain threshold. For example, depending on the forum and the adjudged sentence, the accused may be entitled to appellate review by the service Court of Criminal Appeals, and may be able to request or waive assignment of appellate defense counsel, or waive appellate review entirely. Depending, again, on forum and sentence, some cases that do not qualify for appellate review will receive review by a judge advocate to, among other things, determine that the court had jurisdiction and that the sentence was lawful. Some cases may then be further reviewed by the Court of Appeals for the Armed Forces, as well as by the U.S. Supreme Court at their discretion, if the case was reviewed by the Court of Appeals for the Armed Forces. The military justice system, like the civilian criminal justice system, provides avenues for accused servicemembers to raise allegations of discrimination, improprieties in investigations, improprieties in disposition, and improprieties in the selection of panel members at the court-martial proceeding, before a military judge and on appellate review. The Military Justice Act of 2016 requires that legal training be provided to all officers, with additional training for commanders with authority to take disciplinary actions under the UCMJ. Definitions of Race, Ethnicity, and Gender The Office of Management and Budget (OMB) has established standards for collecting, maintaining, and presenting data on race and ethnicity for all federal reporting purposes. These standards were developed in cooperation with federal agencies to provide consistent data on race and ethnicity throughout the federal government. OMB standards establish the following five categories of race: American Indian or Alaska Native: A person having origins in any of the original peoples of North and South America (including Central America), and who maintains tribal affiliation or community attachment. Asian: A person having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent including, for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the Philippine Islands, Thailand, and Vietnam. Black or African American: A person having origins in any of the black racial groups in Africa. Native Hawaiian or Other Pacific Islander: A person having origins in any of the original peoples of Hawaii, Guam, Samoa, or other Pacific Islands. White: A person having origins in any of the original peoples of Europe, the Middle East, or North Africa. The OMB standards also establish two categories of ethnicity. Hispanic or Latino: A person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin, regardless of race. Not Hispanic or Latino: A person not having the above attributes. In addition to defining race and ethnicity for federal administrative reporting and record keeping requirements, OMB standards provide two methods for federal agencies to follow regarding the collection of data on race and ethnicity. 1. Separate questions shall be used for collecting information about race and ethnicity wherever feasible. In this case, there are 5 categories of race noted above which individuals can select, and individuals can identify with more than one category of race. In addition to race, individuals can select one of the two ethnicity categories above. 2. If necessary, a single question or combined format can be used to collect information about race and ethnicity, where the following categories are provided for individuals: American Indian or Alaska Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or other Pacific Islander, and White. In this instance, individuals can also select more than one category. Information collected on servicemembers’ gender is governed by DOD guidance. DOD Instruction 1336.05 provides that information collected on a servicemember’s gender is based on reproductive function. It provides that there are three options that can be selected when inputting a servicemember’s gender: male, female, or unknown. Racial and Gender Disparities in the Civilian Justice System Racial and gender disparities in the civilian criminal justice system have been the subject of several studies in the past decade. While the civilian and military justice systems differ from each other, we reviewed information about racial and gender disparities in the civilian criminal justice system to enhance our understanding of the complexities of the issues, including how others had attempted to measure disparities. Some studies have assessed the rates at which minority groups are policed. For example, a Department of Justice study of data from the Bureau of Justice Statistics’ 2011 Police-Public Contact survey found that Black drivers were more likely than White or Hispanic drivers to be pulled over in a traffic stop; specifically, the study found that 10 percent of White drivers and 10 percent of Hispanic drivers were pulled over in a traffic stop, compared to 13 percent of Black drivers. This study also found that Black and Hispanic drivers were more likely to be searched once they were pulled over by the police; specifically, the study found that 2 percent of White drivers stopped by police were searched, compared to 6 percent of Black drivers and 7 percent of Hispanic drivers. In addition, U.S. government data shows that racial disparities exist among individuals who are arrested. For example, data from the Federal Bureau of Investigation’s Uniform Crime Reporting Program, which compiles data from law enforcement agencies across the country, indicates that in 2016, Black individuals represented 26.9 percent of total arrests nationwide, but comprised 13.4 percent of the U.S. population according to U.S. census data estimates as of July 1, 2017. This data also shows that 69.6 percent of all arrested individuals were White, while White individuals comprised 76.6 percent of the U.S. population. Studies have also identified racial and gender disparities in civilian justice sentencing. In 2010 and 2017, the U.S. Sentencing Commission reported that Black male offenders received longer sentences than similarly situated White male offenders. Specifically, in 2017, the Commission analyzed federal sentencing data and reported that Black male offenders received sentences that on average were 19.1 percent longer than similarly situated White males for fiscal years 2012 to 2016. This analysis controlled for factors such as type of offense, race, gender, citizenship, age, education level, and criminal history. This study also found that female offenders of all races received shorter sentences than White male offenders. Similarly, the Commission’s 2010 report found that Black offenders received sentences that were 10 percent longer than those imposed on White offenders from December 2007 through September 2009, and male offenders received sentences that were 17.7 percent longer than female offenders, after controlling for the same factors as noted for the 2017 study, among others. Finally, racial and gender disparities have been identified among incarcerated populations. According to data from the Bureau of Justice Statistics, for prisoners with sentences of 1 year or more under the jurisdiction of state or federal correctional officials in 2016, Black males were six times more likely to be imprisoned than White males, and Hispanic males were 2.7 times more likely to be imprisoned than White males. The racial disparities were more pronounced for younger males, where Black males aged 18 to 19 were approximately 11.8 times more likely than White males of the same age to be imprisoned. The Bureau also reported that Black females were imprisoned at approximately twice the rate of White females. We did not assess the methodologies used in any of these studies or the reliability of the data cited in the studies; these studies are discussed here to provide broader context for the discussion about racial and gender disparities in the military justice system. The Military Services Collect and Maintain Gender Information, but Do Not Collect and Maintain Consistent Information about Race and Ethnicity, Limiting Their Ability to Collectively or Comparatively Assess Data to Identify Any Disparities The military services collect and maintain gender information, but they do not collect and maintain consistent information about race and ethnicity in their investigations, military justice, and personnel databases. This limits the military services’ ability to collectively or comparatively assess these demographic data to identify any racial or ethnic disparities in the military justice system within and across the services. The military services use different databases to collect and maintain information for investigations, courts-martial, and nonjudicial punishments. All of the databases collect and maintain gender information, but the Coast Guard’s military justice database does not have the capability to query or report on gender data. While the military services’ databases collect and maintain complete data for race and ethnicity, the information collected and maintained about race and ethnicity is not consistent among the different databases within and across the services. Moreover, the Coast Guard, the Navy, and the Marine Corps do not collect and maintain complete and consistent servicemember identification data, such as social security number or employee identification number, in their respective military justice databases, although DOD leadership recently directed improvements in this area. Finally, the military services do not report data that provides visibility into disparities in the military justice system, and DOD and the services lack guidance about when potential racial, ethnic, or gender disparities should be further reviewed, and what steps should be taken to conduct such a review if needed. The Military Services Use Different Databases to Collect and Maintain Information for Investigations, Courts- Martial, and Nonjudicial Punishments Each military service uses a different database to collect and maintain information on investigations and courts-martials, and, in some services, nonjudicial punishments, as shown in figure 4. For three of the military services—the Army, the Navy, and the Coast Guard—the databases listed in figure 4 include information about some, but not all, of their nonjudicial punishment cases. Additionally, the nature of the information collected by each of the services’ databases varies, as noted below. Investigations. The Army collects and maintains information on investigations conducted by the Army Criminal Investigation Command in the Army Law Enforcement Reporting and Tracking System database. According to Army officials, the Office of the Provost Marshal General and the Army Criminal Investigation Command developed this database to replace a 2003 system, the Army Criminal Investigation and Intelligence System, and a significant part of the military police’s 2002 system, the Centralized Operations Police Suite. The officials said that the Army Law Enforcement Reporting and Tracking System has been operational since 2015, and has become the primary case management system for all Army law enforcement professionals. However, Army officials said that cases involving commander-led investigations are unlikely to be recorded in this database. Courts-martial and nonjudicial punishments. The Army uses Military Justice Online and the Army Courts-Martial Information System to collect data on court-martial cases. According to Army officials, Military Justice Online, created in 2008, is a document- generating system that primarily is used by the Army’s judge advocate general corps and promotes uniformity in case processing among the Army’s staff judge advocate offices. Military Justice Online includes information about courts-martial, some nonjudicial punishments, administrative separations, and administrative reprimands of servicemembers. Army officials said that the Army Courts-Martial Information System, which has been used since 1989, serves as the Army trial judiciary’s case tracking system and is used by the Army’s trial judiciary to track court-martial cases. Investigations. The Air Force military criminal investigative organization, the Office of Special Investigations, uses a system called the Investigative Information Management System to collect and maintain information related to investigations. According to Air Force officials, the Investigative Information Management System has been in use since 2001. Courts-martial and nonjudicial punishments. The Air Force uses the Automated Military Justice Analysis and Management System, which is designed to be a case management system to collect comprehensive information for both court-martial cases and nonjudicial punishments. According to Air Force officials, the Automated Military Justice Analysis and Management System has been in use since 1974. Investigations. According to Navy officials, the Navy and Marine Corps’ joint system for maintaining and collecting information related to investigations is the Consolidated Law Enforcement Operations Center, which has been in use since 2004. Navy officials said that this database initially contained information regarding Navy and Marine Corps law enforcement incidents and criminal investigations, but began to include investigations conducted by the Naval Criminal Investigative Service in 2012. Courts-martial. The Navy and the Marine Corps both use the Case Management System to collect and maintain information about military justice matters with involvement by a Navy or Marine Corps legal office, including special and general court-martial cases. This system was initially developed by the Marine Corps to track information about legal services provided by their legal offices. According to Navy and Marine Corps officials, the system has been in use by the Marine Corps since 2010 and by the Navy since 2013. Officials from the Marine Corps said that although the Case Management System has been in use since 2010, the system was not widely used until 2012. Nonjudicial punishments. The Marine Corps Total Force System, the Marine Corps personnel database, collects and maintains information on summary courts-martial and nonjudicial punishments for cases where there was a conviction or punishment. According to Marine Corps officials, this system has been in use since 1995. Navy officials said that their personnel database records information about nonjudicial punishments if the punishment involved a change in pay or grade. The services’ military justice Case Management System includes information on some nonjudicial punishment cases in the Navy and the Marine Corps, which Navy and Marine Corps officials said was for those cases that had involvement by their legal offices. Investigations. The Coast Guard Investigative Service uses the Field Activity Case Tracking System to collect and maintain information on servicemembers investigated for violations of the UCMJ. According to Coast Guard officials, this system has been in use since July 2014. Courts-martial. According to Coast Guard officials, the Coast Guard uses Law Manager to collect and maintain administrative information on court-martial cases. Law Manager has been in use since 2000, but was not used for court-martial data until 2003. Nonjudicial punishments. Coast Guard officials said that their military justice database contains records of nonjudicial punishments if a case involved their legal offices. In addition, according to Coast Guard officials, Direct Access, the Coast Guard’s personnel database, also collects and maintains information about some court-martial cases and nonjudicial punishments if the punishment resulted in a change in rank or pay or an administrative action against the accused servicemember. The Military Services Collect and Maintain Gender Data, but the Coast Guard Can Not Query or Report on Gender Data from its Military Justice Database All of the military services collect and maintain gender information in their investigations, military justice, and personnel databases, but are inconsistent in whether they allow an unknown or unspecified gender, and the Coast Guard’s military justice database does not allow Coast Guard officials to query or report on gender data. Table 2 below summarizes how data regarding the servicemember’s gender is entered into the services’ databases and the number of potential gender options. Each database identifies at least two potential options—male and female—for data related to the servicemember’s gender, while about half of the databases (8 of 15) provide a third option to indicate that the gender is either unknown or not specified. Each of the military services’ investigations, military justice, and personnel databases maintained gender data for almost 100 percent of servicemembers, except we were unable to determine this completion rate for the Coast Guard’s military justice database. We could not determine the completeness of the Coast Guard’s gender data in its military justice database because, as previously noted, its military justice database does not have the capability to query on gender data. Standards for Internal Control in the Federal Government states that management should use quality information and obtain data on a timely basis so they can be used for effective monitoring. However, the Coast Guard does not have visibility over the gender of servicemembers prosecuted for UCMJ violations without merging data from multiple databases, which can be a labor-intensive and time-consuming process. According to Coast Guard officials, information regarding the gender of servicemembers prosecuted for UCMJ violations can be recorded in its military justice database, but gender is not a field that can be searched on or included in the reports they run using information from their military justice database, because of the way the military justice module in the database was designed. Coast Guard officials told us that the military justice database—Law Manager—was designed to determine the status of court-martial cases, and captures attributes that are generated by relevant UCMJ documents. Those official documents do not require the annotation of demographics such as gender, so this information is not used in Law Manager. A Coast Guard official indicated that it would be feasible to modify Law Manager to make it easier to run reports and queries that include gender information. The ability to query and report on the gender of servicemembers in its military justice database would provide the Coast Guard with more readily available data to identify or assess any gender disparities that may exist in the investigation and trial of military justice cases. The Military Services Do Not Collect and Maintain Consistent Data for Race and Ethnicity Each of the military services’ databases collect and maintain complete data for race and ethnicity, but the military services do not collect and maintain consistent information regarding race and ethnicity in their investigations, military justice, and personnel databases. Additionally, the military services have not developed a mechanism to aggregate the data into consistent categories of race and ethnicity to allow for efficient analysis and reporting of consistent demographic data. The number of potential responses for race and ethnicity within the 15 databases across the military services ranges from 5 to 32 options for race and 2 to 25 options for ethnicity, which can complicate cross-service assessments. For example, the Army’s personnel database maintains 6 options for race and 23 options for ethnicity, whereas the Coast Guard’s personnel database maintains 7 options for race and 3 for ethnicity. Table 3 summarizes how the databases used by the military services vary in how the servicemember’s race is entered and the number of potential race options. Table 4 shows that the military services’ databases also vary in how information about servicemembers’ ethnicity is entered into the databases and the number of potential ethnicity options that are collected. Although the data collected and maintained was not consistent within and across the military services, each of the military services’ databases maintained race and ethnicity data for at least 99 percent of the servicemembers, with the exception of the Coast Guard. The Coast Guard does not track information about race or ethnicity in its military justice database. Coast Guard officials stated that this is because Law Manager was designed to determine the status of court-martial cases, and captures attributes that are needed to generate relevant UCMJ documents, such as court pleadings. Demographic information such as race and ethnicity is not included in these official documents, so this information is not input into Law Manager. Further, four of the databases we reviewed—including both of the Army’s military justice databases, and the Navy and the Marine Corps’ military justice databases—collect information on race and ethnicity in a combined data field as shown in table 4, whereas the other databases collect and maintain race and ethnicity information in two separate fields. Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity’s objectives. Among other things, attributes of this internal control principle call for management to identify information requirements; obtain relevant data from reliable sources that are reasonably free from error; ensure that the data it receives is timely and reliable; and process the data obtained into quality information— information that is appropriate, current, complete, and accurate. In addition, federal internal control standards call for management to design the entity’s information system and related control activities to achieve objectives and respond to risks, thereby enabling information to become available to the entity on a timelier basis. Further, the Military Justice Act of 2016 required the Secretary of Defense to prescribe uniform standards and criteria for various items, including data collection and analysis for case management at all stages of the military justice system, including pretrial, trial, post-trial, and appellate processes, by December 2018. On December 17, 2018, the General Counsel of the Department of Defense issued the uniform standards and criteria required by article 140a of the Military Justice Act of 2016. As part of these uniform standards, the services were directed to collect data related to race and ethnicity in their military justice databases, and to collect racial and ethnic data in separate data fields. The standards provide that the services may have their military justice databases capture expanded ethnic or racial categories; however, for reporting purposes, expanded categories will aggregate to those categories listed in the standards. For race, the services will choose from six designations: (1) American Indian/Alaska Native, (2) Asian, (3) Black or African American, (4) Native Hawaiian or Other Pacific Islander, (5) White, or (6) Other. For ethnicity, the services will choose from two options: (1) Hispanic or Latino, or (2) Not Hispanic or Latino. These categories are consistent with the OMB standards for collecting and presenting such data. The military services are to implement the Secretary’s direction no later than December 23, 2020. However, DOD has applied these newly issued standards only to the military justice databases and not to the investigations and personnel databases. DOD officials stated that the investigations and personnel databases do not fall under the charter of the DOD General Counsel, which issued the standards for the military justice databases. Hence, these uniform standards do not apply to the military services’ investigations and personnel databases. We were able to analyze data across the investigations, military justice, and personnel databases by merging data from these databases, but this took multiple, detailed steps and would not be an efficient approach for routine analyses. Taking steps to develop the capability to present the race and ethnicity data in the military services’ personnel and investigations databases using the same categories included in the December 2018 standards for the military justice databases would allow for more efficient analysis of consistent demographic data. This could be done through either collecting and maintaining race and ethnicity data in the investigations and personnel databases using the December 2018 uniform standards or developing a capability to aggregate the data into the race and ethnicity categories included in the standards. The Navy, the Marine Corps, and the Coast Guard Did Not Collect and Maintain Complete Servicemember Identification Data, but Improved Collection Has Been Directed The Navy, the Marine Corps, and the Coast Guard did not collect and maintain complete servicemember identification data, such as social security number or employee identification number, in their military justice or investigations databases; however, DOD recently directed them to do so. In the course of conducting our analysis, in some instances, we could not match personnel records with military justice records because the social security number or employee identification number in the military justice database did not match the information in the personnel database. In other instances, we could not match personnel records with military justice records because the military justice records did not contain a social security number or employee identification number to match with information found in their personnel record. As shown in table 5, we initially were unable to match 5 percent of Navy military justice cases, 12 percent of Marine Corps military justice cases, 18 percent of Coast Guard investigation cases, and 6 percent of Coast Guard military justice cases. On December 17, 2018, the General Counsel of the Department of Defense issued the uniform standards and criteria required by article 140a of the Military Justice Act of 2016. As part of these uniform standards, the services were directed to collect either the social security number or DOD identification number in their military justice databases. The military services are to implement the Secretary’s direction no later than December 23, 2020. The Military Services Do Not Consistently Report Data that Provides Visibility into Any Disparities, and DOD Has Not Identified When Disparities Should Be Examined Further Although some military services report demographic information about the subjects of military justice actions internally, the military services do not externally report data that provides visibility into, or would enable an analysis of, the extent of racial, ethnic, or gender disparities in the military justice system. Service officials from all of the military services told us that they compile internal quarterly or monthly staff judge advocate reports, which include the total number of each type of court-martial handled by their legal offices and of nonjudicial punishments. According to service officials, in the Air Force and the Army these reports include demographic information about servicemembers involved in these cases, such as the total number of each type of case broken out by the subject’s race, ethnicity, or gender, but the Navy, Marine Corps, and Coast Guard reports do not include this demographic information, and there is no requirement to do so. Regarding external reporting, the UCMJ directs the Court of Appeals for the Armed Forces, the Judge Advocates General, and the Staff Judge Advocate to the Commandant of the Marine Corps to submit annual reports on the military justice system to the Congressional Armed Services Committees, the Secretary of Defense, the secretaries of the military departments, and the Secretary of Homeland Security. These reports are to include information on the number and status of pending cases handled in the preceding fiscal year, among other information. The annual reports include the total number of cases each service handled for each type of court-martial and for nonjudicial punishments. However, these annual reports do not include demographic information about servicemembers who experienced a military justice action, such as breakdowns by race or gender, because the reporting requirement does not direct the services to include such information. A DOD official expressed concern about expanding the reporting requirement to have public dissemination of race, ethnicity, and gender information due to the potential for misinterpretation, but stated that such reporting requirements for internal use would be beneficial. However, Congress and members of the public have expressed an interest in this information. Standards for Internal Control in the Federal Government state that management should externally communicate the necessary quality information to achieve the entity’s objectives. Furthermore, these standards state that management should use quality information to make informed decisions and evaluate the entity’s performance. According to DOD guidance, the Joint Service Committee on Military Justice, a committee comprised of representatives from each service’s legal office, is responsible for reviewing the Manual for Courts-Martial and the UCMJ on an annual basis. The Joint Service Committee can consider suggested changes to the UCMJ or the Manual for Courts-Martial or its supplementary materials from the services or from the general public. The Joint Service Committee then determines whether to propose any desired amendments to the UCMJ, or the Manual for Courts-Martial or its supplementary materials. If the Joint Service Committee finds that an amendment to either the Manual for Courts-Martial or the UCMJ is required, the committee will provide the General Counsel of DOD with a draft executive order containing the recommended amendments or will forward a legislative proposal to amend the UCMJ. While it is unclear whether the committee has ever considered or proposed an amendment to the UCMJ or Manual for Courts-Martial that would require the external reporting on an annual basis of demographic information about the race, ethnicity, and gender of servicemembers charged with violations of the UCMJ, no such change has been made. Reporting this information would provide servicemembers and the public with greater visibility into potential disparities and help build confidence that DOD is committed to a military justice system that is fair and just. Furthermore, DOD has not issued guidance that establishes criteria to specify when any data indicating possible racial, ethnic, or gender disparities in the investigations, trials, or outcomes of cases in the military justice system should be further reviewed, and to describe what steps should be taken to conduct such a review if it were needed. GAO’s Standards for Internal Control in the Federal Government provides that an agency needs to establish a baseline in order to perform monitoring activities. The baseline helps the agency understand and address deficiencies in its operations. While equal employment opportunity enforcement is a very different context than the military justice system, other federal agencies have developed such criteria in the equal employment opportunity context that can indicate when disparities should be examined further. For example, the Department of Justice, the Department of Labor, the Equal Employment Opportunity Commission, and the Office of Personnel Management use a “four-fifths” test to determine when differences between subgroups in the selection rates for hiring, promotion, or other employment decisions are significant. These criteria, though inexact, provide an example of the type of criteria that DOD could consider using as a basis for determining when disparities among racial or gender groups in the military justice process could require further review or analysis. By issuing guidance that establishes criteria for determining when data indicating possible racial and gender disparities in the investigations, trials, or outcomes of cases in the military justice system should be further examined, and describes the steps that should be taken to conduct such further examination, DOD and the services would be better positioned to monitor the military justice system to help ensure that it is fair and just, a key principle of the UCMJ. Racial and Gender Disparities Exist in Military Justice Investigations, Disciplinary Actions, and Case Outcomes, but Have Not Been Comprehensively Studied to Identify Causes Racial and gender disparities exist in investigations, disciplinary actions, and punishment of servicemembers in the military justice system, and gender disparities exist in convictions in the Marine Corps. Our analysis of available data from fiscal years 2013 through 2017, which controlled for attributes such as race, gender, rank, education, and years of service, found racial and gender disparities were more likely in actions that first brought servicemembers into the military justice system. Specifically, we found that: Black, Hispanic, and male servicemembers were more likely than White and female servicemembers to be the subjects of recorded investigations in all of the military services, and were more likely to be tried in general and special courts-martial in the Army, the Navy, the Marine Corps, and the Air Force. There were fewer statistically significant racial and gender disparities in most military services in general and special courts-martial that were preceded by a recorded investigation than in general and special courts-martial overall. We also found that statistically significant racial and gender disparities in general and special courts-martial that did not follow a recorded investigation were similar to those we identified for general and special courts-martial overall. Black and male servicemembers were more likely than White and female servicemembers to be tried in summary courts-martial and to be subjects of nonjudicial punishment in the Air Force and the Marine Corps. The Army and the Navy did not maintain complete data, and the Coast Guard had too few summary courts-martial for us to analyze, and did not maintain complete nonjudicial punishment data. We identified fewer statistically significant racial or gender disparities in case outcomes—convictions and punishment severity. Specifically: Race was not a statistically significant factor in the likelihood of conviction in general and special courts-martial in the Army, the Navy, the Marine Corps, and the Air Force, but gender was a statistically significant factor in the Marine Corps. Black servicemembers were less likely to receive a more severe punishment in general and special courts-martial compared to White servicemembers in the Navy but there was no statistically significant difference for Black servicemembers in the Marine Corps, the Army, and the Air Force. Additionally, there were no statistically significant differences for Hispanic servicemembers in the Navy, the Marine Corps, the Army, or the Air Force; and males were more likely than females to receive a more severe punishment in the Marine Corps, the Army, and the Air Force. Finally, DOD and the military services have taken some steps to study racial and gender disparities in the military justice system over the last several decades, but they have not comprehensively studied the extent or causes of any disparities. Black, Hispanic, and Male Servicemembers Were More Likely to Be Subjects of Recorded Investigations and Tried in General and Special Courts-Martial Black, Hispanic, and Male Servicemembers Were More Likely to Be Subjects of Recorded Investigations in All of the Military Services Black, Hispanic, and male servicemembers were more likely than White or female servicemembers to be the subjects of recorded investigations in all of the military services, after controlling for other attributes, as shown in figure 5. Servicemembers in the Other race category were more likely than White servicemembers to be the subjects of recorded investigations in the Navy, but were less likely in the Army. Our analyses did not identify any statistically significant differences for servicemembers in the Other race category from the Air Force, the Marine Corps, or the Coast Guard. For the Army, the Navy, the Marine Corps, and the Air Force, Black, Hispanic, and male servicemembers were more likely than White and female servicemembers to be tried in general and special courts-martial after controlling for other attributes, as shown in figure 6 below. Servicemembers in the Other race category were more likely than White servicemembers to be tried in general and special courts-martial in the Navy, but we found no statistically significant differences in the likelihood of servicemembers in the Other race category in the Army, the Marine Corps, and the Air Force to be tried in general and special courts-martial compared to White servicemembers. We could not analyze Coast Guard cases due to the small number of general and special courts- martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. More Statistically Significant Racial and Gender Disparities Found in General and Special Courts-Martial Cases without a Recorded Investigation than with a Recorded Investigation When separating general and special court-martial cases into those that either were or were not preceded by an investigation recorded in an MCIO database, we found fewer statistically significant racial and gender disparities in most of the military services in general and special courts- martial that were preceded by a recorded investigation. However, statistically significant racial and gender disparities were also present in general and special courts-martial that did not follow a recorded investigation in all services included in this analysis, which would include cases where the investigation was performed by the servicemember’s command. Specifically, as shown in figure 7 below, we found that Black, Hispanic, Other, and male servicemembers in the Army, Hispanic servicemembers in the Marine Corps, and males in the Air Force were more likely than White or female servicemembers to be tried in general and special courts- martial following a recorded investigation, after controlling for other attributes. We found no statistically significant differences in the likelihood of any other racial or gender groups to be tried in general and special courts-martial following a recorded investigation in any other services. Our analyses of general and special courts-martial with a recorded investigation generally found fewer statistically significant differences compared to the results of our analyses for all special and general courts martial. We also found that Black and male servicemembers in all of the military services were more likely than White and female servicemembers to be tried in general and special courts-martial without a recorded investigation after controlling for other attributes, as shown in figure 8 below. Further, Hispanic servicemembers in the Army were more likely than White servicemembers to be tried in general and special courts-martial without a recorded investigation, but we found no statistically significant differences in the likelihood of Hispanic servicemembers to be tried in general and special courts-martial without a recorded investigation in the Marine Corps, the Navy, or the Air Force. We found no statistically significant differences in the likelihood of servicemembers in the Other race category to be tried in general and special courts-martial compared to White servicemembers in all of the military services. Our findings of racial and gender disparities in general and special courts-martial without a recorded investigation found statistically significant differences for Black and male servicemembers consistent with the differences we identified for general and special courts-martial overall, as shown in figure 6 above. Black and Male Servicemembers Were More Likely to Be Subject to Summary Courts- Martial and Nonjudicial Punishment in the Air Force and Marine Corps, and the Other Services Lack Data Black and Male Servicemembers Were More Likely to Be Tried in Summary Courts-Martial in the Air Force and Marine Corps, and the Army and Navy Lack Data Black and male servicemembers were more likely than White or female servicemembers to be tried in summary courts-martial in the Air Force and the Marine Corps after controlling for other attributes, as shown in figure 9 below. We did not identify any statistically significant differences in summary courts-martial rates for servicemembers who identified as Hispanic or in the Other race category in either the Air Force or the Marine Corps. We could not determine whether there were racial or gender disparities for summary courts-martial in the Army, the Navy, and the Coast Guard due to data limitations. We could not analyze Coast Guard cases due to the small number of summary courts-martial adjudicated in the Coast Guard from 2013 through 2017. We could not determine whether disparities existed among servicemembers tried in summary courts-martial in the Army and the Navy because the Army and the Navy did not collect complete summary courts-martial data in their investigations, military justice, or personnel databases. Specifically, as part of our data reliability checks, we identified the total number of summary courts-martial that the Army and the Navy reported in the Court of Appeals for the Armed Forces annual reports for fiscal years 2013 through 2017, and compared these totals to the number of cases we identified in their military justice databases. While our comparisons are not exact, due to differences in the dates we used to count the number of cases, we found that approximately 60 percent of the Army’s reported summary courts-martial cases and less than 50 percent of the Navy’s reported summary courts-martial cases were included in their military justice databases. Army and Navy officials cited several reasons why complete summary courts-martial information was not collected. First, they said that the services are not required to collect and maintain complete data on summary courts-martial because these cases result in non-criminal convictions under the UCMJ. Summary courts-martial are typically used for minor offenses, and the accused is not guaranteed the right to be represented by a military attorney. As a result, military attorneys may not be involved in summary courts-martial. Army and Navy officials said that if military attorneys are not involved in the case, there is not likely to be a record of the case in their service’s military justice database. In contrast, Air Force officials said that they provide a military attorney to represent the accused in summary courts-martial; as a result, Air Force officials said their attorneys create records for these cases in the Air Force’s military justice database. The Marine Corps does not maintain summary court- martial data in its military justice database but tracks summary courts- martial in its personnel database. Officials in the Navy and the Army told us that the lack of complete summary court-martial data in their military justice databases is also in part because these systems were not designed to serve as repositories for complete military justice data. Instead, the officials said that the military justice databases were primarily created to assist attorneys in generating trial documents, meeting timeframes, and other aspects of case management. Nevertheless, Army officials said they plan to start collecting more complete summary court-martial information. Specifically, Army officials said that the Army is encouraging their judge advocate general staff to create records for all summary courts-martial in the service’s military justice database. The absence of complete summary court-martial data in the military justice databases of the Army and the Navy limits these services’ visibility into any disparities that may exist among servicemembers involved in these types of military justice proceedings. On December 17, 2018, the General Counsel of the Department of Defense issued the uniform standards and criteria required by article 140A of the Military Justice Act of 2016. As part of these uniform standards, the services were directed to collect certain information about all cases in their military justice databases, which a DOD official said includes summary courts-martial cases. The military services are to implement the Secretary’s direction no later than December 23, 2020. Black and Male Servicemembers Were More Likely to Be Subject to Nonjudicial Punishments in the Air Force and the Marine Corps, and the Army, Navy, and Coast Guard Lack Data Black and male servicemembers were more likely than White or female servicemembers to be subject to nonjudicial punishments in the Air Force and the Marine Corps, after controlling for other attributes, as shown in figure 10 below. In the Air Force, we found that Hispanic servicemembers were more likely than White servicemembers to receive nonjudicial punishments, while we observed no statistically significant differences in nonjudicial punishment rates for Hispanic servicemembers in the Marine Corps. Servicemembers in the Other race category in the Marine Corps were less likely to receive nonjudicial punishments, but we observed no statistically significant differences in nonjudicial punishment rates for servicemembers in the Other race category in the Air Force. However, we could not determine whether there were racial or gender disparities among servicemembers subject to nonjudicial punishments in the Army, the Navy, and the Coast Guard because these services do not collect complete nonjudicial punishment data, such as data on the servicemember’s race, ethnicity, gender, offense, and punishment, in any of their databases. As part of our data reliability checks, we identified the total number of nonjudicial punishments that the Army, the Navy, and the Coast Guard reported in the Court of Appeals for the Armed Forces annual reports for fiscal years 2013 through 2017, and compared these totals to the number of cases we identified in their military justice and personnel databases. As shown in figure 11 below, we found that 65 percent of the Army’s reported nonjudicial punishments, 8 percent of the Navy’s reported nonjudicial punishments, and 82 percent of the Coast Guard’s reported nonjudicial punishments were recorded in their military justice databases. Officials from these services cited several reasons why they did not have complete information about all nonjudicial punishments. First, they said that the services are not required to track nonjudicial punishment cases because they are non-criminal punishments that are typically imposed for less serious offenses. Army and Navy officials noted that complete records of these punishments are not recorded at least in part because nonjudicial punishments are not meant to follow servicemembers throughout their career, but instead are intended to incentivize servicemembers to correct their behavior. Because nonjudicial punishments are not criminal punishments, the process afforded to servicemembers in nonjudicial punishment proceedings differs as well. For example, the servicemember is not guaranteed the right to representation by a military attorney. Army and Navy officials noted that their military justice databases contain records of nonjudicial punishments if there was legal involvement by the Judge Advocate General’s Corps in the case. Similarly, Coast Guard officials said that their military justice database contains records of nonjudicial punishment if a case originated as a criminal case involving a judge advocate, for example, if charges were preferred. According to Air Force and Marine Corps officials, the Air Force maintains complete nonjudicial punishment data in its military justice database, and the Marine Corps maintains complete nonjudicial punishment data in its personnel database. Standards for Internal Control in the Federal Government state that management should use quality information to achieve an entity’s objectives. Additionally, management should identify information requirements; ensure that the data it receives are timely and reliable; and process the data obtained into quality information. Officials from the Army, the Navy, and the Coast Guard expressed concerns regarding the feasibility of collecting and maintaining information about all nonjudicial punishments. Army officials stated that the collection and maintenance of all nonjudicial punishment data would be a substantial administrative burden due to the number of nonjudicial punishments awarded to servicemembers every week. Navy officials also stated that it would be a significant challenge to collect and maintain information about all nonjudicial punishments in either the Navy’s military justice database or its personnel database. They stated that there are few individuals who have access and can input data into the military justice database, and to expand the scope of criminal justice data collected in that manner, more people would have to be hired or assigned to assist with data entry. Similarly, Coast Guard officials said that tracking all nonjudicial punishment cases would be a difficult addition to their current data collection and maintenance workload. Coast Guard officials further stated that in addition to providing commanders with an essential means of providing good order and discipline, nonjudicial punishment also may promote positive change. Some Coast Guard officials stated concerns that recording all nonjudicial punishments in a database may inhibit the rehabilitative component of nonjudicial punishment. While the Army, Navy, and Coast Guard officials expressed these concerns, none of these military services had formally assessed the feasibility of collecting data on nonjudicial punishments. The absence of complete nonjudicial punishment data limits the military services’ visibility into the vast majority of legal punishments imposed on servicemembers under the UCMJ every year. Without such data, these three services will remain limited in their ability to assess or identify disparities among populations subject to this type of punishment. Few Statistically Significant Racial or Gender Disparities Exist in Likelihood of Conviction or Severity of Punishment, but the Coast Guard Does Not Collect and Maintain Complete Data Race Was Not a Statistically Significant Factor in Convictions in General and Special Courts-Martial, but Gender Was in the Marine Corps Among the servicemembers convicted in general and special courts- martials, we found no statistically significant differences regarding the likelihood of conviction among racial groups in the Army, the Navy, the Marine Corps, and the Air Force, while controlling for other attributes, as shown in figure 12 below. In the Marine Corps, male servicemembers were more likely to be convicted compared to female servicemembers. We found no statistically significant differences in the likelihood of convictions between males and females in the Army, the Air Force, and the Navy. In the military services that maintained complete punishment data—the Army, the Navy, the Marine Corps, and the Air Force—we found that minority servicemembers were either less likely to receive a more severe punishment in general and special courts-martial compared to White servicemembers, or there were no statistically significant differences in punishments among racial groups. Our findings regarding gender varied among the services. Male servicemembers were more likely to receive a more severe punishment compared to females in the Marine Corps, the Army, and the Air Force; for the Navy, we found there were no statistically significant differences in punishments between males and females. Navy and Marine Corps: Among servicemembers that were convicted in general and special courts-martial in the Marine Corps, we found no statistically significant differences regarding minority servicemembers being more likely or less likely to receive a dismissal or discharge punishment versus some other punishment, while controlling for other attributes, as shown in figure 13 below. In the Navy, among servicemembers that were convicted in general and special courts- martial, Black servicemembers were less likely than White servicemembers to receive a discharge or dismissal. We found no statistically significant differences regarding Hispanic servicemembers or those of Other races in the Navy. In the Marine Corps, among servicemembers that were convicted in general and special courts-martial, male servicemembers were more likely than female servicemembers to receive a discharge or dismissal. In the Navy, there were no statistically significant differences in punishments between males and females. Army and Air Force: We found no statistically significant differences regarding Black or Hispanic servicemembers being more likely or less likely to receive a more severe punishment in the Air Force or the Army, while controlling for other attributes, as shown in figure 14 below. We also found that servicemembers in the Other race group were less likely to receive a more severe punishment compared to White servicemembers in the Army, but punishment results for servicemembers in the Other race group in the Air Force were not statistically significant. Additionally, we found that male servicemembers were more likely to receive a more severe punishment compared to female servicemembers in the Army and the Air Force. We could not determine disparities in case outcomes—convictions and punishment severity—in the Coast Guard’s general and special courts- martial for fiscal years 2013 through 2017 because the Coast Guard did not collect and maintain complete conviction and punishment data in its military justice database. Specifically, 16 percent of all Coast Guard cases were missing conviction and punishment data. When broken down by court-martial type, 20 percent of general court-martial cases, 15 percent of special court-martial cases, and 4 percent of summary court- martial cases were missing conviction and punishment data. Coast Guard officials acknowledged that incomplete conviction and punishment data entry is a consistent problem. They said that data entry had improved recently. On December 17, 2018, the General Counsel of the Department of Defense issued the uniform standards and criteria required by article 140a of the Military Justice Act of 2016. As part of these uniform standards, the services were directed to collect information about the findings for each offense charged, and the sentence or punishment imposed. The military services are to implement the Secretary’s direction no later than December 23, 2020. DOD and the Military Services Have Conducted Some Assessments of Military Justice Disparities, but Have Not Studied the Causes of Disparities DOD and the military services have conducted some assessments of disparities in the military justice system. We previously reported in 1995 on DOD studies on discrimination and equal opportunity, and found DOD and the services conducted seven reviews of racial disparities in discipline rates between 1974 and 1993. Since our 1995 report through 2016, DOD and service assessments of military justice disparities have been limited. Officials in the Office of Diversity, Equity and Inclusion (ODEI) noted DOD has not conducted any department-wide assessments of racial or gender disparities in military justice during this period. The military services’ diversity offices also were not able to identify any service-specific reviews of disparities in military justice. However, the military services have some initiatives to examine and address disparities in military justice. For example, Air Force officials said that in May 2016, the Air Force conducted a servicewide data call to solicit information about cases involving a challenge to a member of a court-martial based on race or a motion for selective prosecution. The officials said that a thorough review revealed no evidence of selective prosecution in Air Force courts-martial. In addition, the Air Force has conducted analyses of its own military justice data. Specifically, the Air Force routinely analyzes military justice data using a rates-per-thousand analysis to identify whether certain demographic groups are tried by court-martial or subject to nonjudicial punishments at higher rates than others. These Air Force analyses found that Black and male servicemembers were more likely than White and female servicemembers to be subject to courts-martial and nonjudicial punishments from fiscal years 2013 through 2017, which is consistent with what we found. However, the other services do not routinely conduct such analyses. Moreover, DOD has conducted climate surveys to address servicemembers’ perceptions of bias. In 2013, for example, DOD conducted service-wide equal opportunity surveys that queried servicemembers on whether they believed they received nonjudicial punishment or a court martial they should not have, and whether they believed their race or ethnicity was a factor. The survey responses showed that 1.3 percent of servicemembers indicated experiencing a perceived undue punishment, a result that was unchanged from the 2009 survey. Minority members were more likely to indicate experiencing perceived undue punishment than White members, but there were no significant differences between racial or ethnic groups who indicated experiencing undue punishment. ODEI officials told us that their office did not make any recommendations related to military justice as a result of these 2013 survey results because the findings were too small to warrant such steps. Moreover, ODEI officials said that while they have not completed their analysis of the 2017 survey data, the question about receiving nonjudicial punishment or court-martial had been removed from the 2017 survey. ODEI officials explained that the question was removed because the perception of unfair punishment was not the goal of the survey, although they said that the question could be reinstated for future surveys if the goals for the survey change. In June 2017, ODEI initiated a review of the military justice system following the publication of a report by a non-profit organization that found racial disparities in military justice actions. According to ODEI officials, their review assesses disparities in the military justice system using a similar analysis to that in the non-profit organization’s report, which analyzed rates of military justice actions per thousand servicemembers. ODEI officials told us they also observed racial and gender disparities among servicemembers involved in the military justice system in their own analysis of the service data. The officials said that the report on the results of their review will not directly address the issue of whether bias exists in the military justice process or the causes of any disparities, but will serve as a precursor to a future research study that looks more comprehensively into the issue of whether bias exists in the military justice system. ODEI officials said that their report should be issued in 2019. Standards for Internal Control in the Federal Government state that management uses quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. The standards further provide that management should evaluate issues identified through monitoring activities and determine appropriate corrective actions. Officials from DOD and the military services acknowledged that they do not know the cause of the racial and gender disparities that have been identified in the military justice system. This is because they have not conducted a comprehensive evaluation to identify potential causes of these disparities and make recommendations about any appropriate corrective actions to remediate the cause(s) of the disparities. By conducting a comprehensive analysis into the causes of disparities in the military justice system, DOD and the military services would be better positioned to identify actions to address disparities, and thus help ensure that the military justice system is fair and just, a key principle of the UCMJ. Conclusions The single overarching principle of the UCMJ is that a system of military law can foster a highly disciplined force if it is fair and just, and is recognized as such by both members of the armed forces and by the American public. DOD and the military services collect and maintain data on the race, ethnicity, and gender of all servicemembers. However, these data vary within and across the services, limiting the ability to collectively or comparatively assess military justice data to identify any disparities. DOD has recently taken steps to address this issue by directing the military services to, no later than December 23, 2020: collect uniform race and ethnicity data in their military justice databases, or aggregate any expanded ethnic or racial categories to the categories listed in the standards; collect either the social security number or DOD identification number in their military justice databases; and collect complete summary courts-martial information. It will be important for the military services to complete these actions to allow for efficient analysis and reporting of consistent military justice data. However, the newly issued standards apply only to the military justice databases and not to the investigations and personnel databases. The ability to query and report on the gender of servicemembers in its military justice database would provide the Coast Guard with more readily available data to identify or assess any gender disparities that may exist in the investigation and trial of military justice cases without merging data from multiple databases. Moreover, taking steps to develop the capability to present the race and ethnicity data from the military services’ personnel and investigations databases using the same categories included in the December 2018 standards for the military justice databases would enable DOD and the military services to more easily and efficiently assess the extent to which there are any racial or ethnic disparities throughout the military justice process. Further, DOD’s annual reports about the number and status of pending military justice cases do not include demographic information, such as breakdowns by race or gender, about servicemembers who experienced a military justice action. Reporting this information would provide servicemembers and the public with greater visibility into potential disparities and help build confidence that DOD is committed to a military justice system that is fair and just. Moreover, DOD does not have guidance that establishes criteria to determine when data indicating possible disparities among racial, ethnic, or gender groups in the investigations, trials, or outcomes of cases in the military justice system should be further reviewed, or describes the steps that should be taken to conduct such further review. By establishing such criteria, DOD and the services would be better positioned to monitor the military justice system to help ensure that it is fair and just, a key principle of the UCMJ. Our analysis of available data identified racial and gender disparities in all of the military services for servicemembers with recorded investigations, and for four of the military services for trials in special and general courts- martial, but these disparities generally were not present in the convictions or punishments of cases. These findings suggest disparities may be limited to particular stages of the military justice process for the period covered by our analysis. However, we were unable to determine whether there were disparities among servicemembers subject to nonjudicial punishments in the Army, the Navy, and the Coast Guard because these services do not collect complete nonjudicial punishment data, such as data on the servicemember’s race, ethnicity, gender, offense, and punishment for all nonjudicial punishments, in any of their databases. The absence of complete nonjudicial punishment data in the Army, the Navy, and the Coast Guard limits their visibility into the vast majority of legal punishments imposed on servicemembers under the UCMJ every year. Without such data, these three services will remain limited in their ability to assess or identify disparities among populations subject to this type of punishment. Finally, DOD recently conducted a study of racial and gender disparities in the military justice system, and expects to complete its report in 2019. However, this study will not assess the causes of the racial and gender disparities identified in the military justice system. Our findings of racial and gender disparities, taken alone, do not establish whether unlawful discrimination has occurred, as that is a legal determination that would involve other corroborating information along with supporting statistics. By conducting a comprehensive evaluation of the causes of these disparities, DOD and the military services would be better positioned to identify actions to address disparities, and thus help ensure that the military justice system is fair and just, a key principle of the UCMJ. Recommendations for Executive Action We are making a total of 11 recommendations, including 3 to the Secretary of Homeland Security, 3 to the Secretary of Defense, 2 to the Secretary of the Army, 2 to the Secretary of the Navy, and 1 to the Secretary of the Air Force. The Secretary of Homeland Security should ensure that the Commandant of the Coast Guard modifies the Coast Guard’s military justice database so that it can query and report on gender information. (Recommendation 1) The Secretary of the Army should develop the capability to present servicemembers’ race and ethnicity data in its investigations and personnel databases using the same categories of race and ethnicity established in the December 2018 uniform standards for the military justice databases, either by (1) modifying the Army’s investigations and personnel databases to collect and maintain the data in accordance with the uniform standards, (2) developing the capability to aggregate the data into the race and ethnicity categories included in the uniform standards, or (3) implementing another method identified by the Army. (Recommendation 2) The Secretary of the Air Force should develop the capability to present servicemembers’ race and ethnicity data in its investigations and personnel databases using the same categories of race and ethnicity established in the December 2018 uniform standards for the military justice databases, either by (1) modifying the Air Force’s investigations and personnel databases to collect and maintain the data in accordance with the uniform standards, (2) developing the capability to aggregate the data into the race and ethnicity categories included in the uniform standards, or (3) implementing another method identified by the Air Force. (Recommendation 3) The Secretary of the Navy should develop the capability to present servicemembers’ race and ethnicity data in its investigations and personnel databases using the same categories of race and ethnicity established in the December 2018 uniform standards for the military justice databases, either by (1) modifying the Navy’s investigations and personnel databases to collect and maintain the data in accordance with the uniform standards, (2) developing the capability to aggregate the data into the race and ethnicity categories included in the uniform standards, or (3) implementing another method identified by the Navy. (Recommendation 4) The Secretary of Homeland Security should ensure that the Commandant of the Coast Guard develops the capability to present servicemembers’ race and ethnicity data in its investigations and personnel databases using the same categories of race and ethnicity established in the December 2018 uniform standards for the military justice databases, either by (1) modifying the Coast Guard’s investigations and personnel databases to collect and maintain the data in accordance with the uniform standards, (2) developing the capability to aggregate the data into the race and ethnicity categories included in the uniform standards, or (3) implementing another method identified by the Coast Guard. (Recommendation 5) The Secretary of Defense should ensure that the Joint Service Committee on Military Justice, in its annual review of the UCMJ, considers an amendment to the UCMJ’s annual military justice reporting requirements to require the military services to include demographic information, including race, ethnicity, and gender, for all types of courts-martial. (Recommendation 6) The Secretary of Defense, in collaboration with the Secretaries of the military services and the Secretary of Homeland Security, should issue guidance that establishes criteria to specify when data indicating possible racial, ethnic, or gender disparities in the military justice process should be further reviewed, and that describes the steps that should be taken to conduct such a review. (Recommendation 7) The Secretary of the Army should consider the feasibility, to include the benefits and drawbacks, of collecting and maintaining complete information for all nonjudicial punishment cases in one of the Army’s databases, such as information on the servicemembers’ race, ethnicity, gender, offense, and punishment imposed. (Recommendation 8) The Secretary of the Navy should consider the feasibility, to include the benefits and drawbacks, of collecting and maintaining complete information for all nonjudicial punishment cases in one of the Navy’s databases, such as information on the servicemembers’ race, ethnicity, gender, offense, and punishment imposed. (Recommendation 9) The Secretary of Homeland Security should ensure that the Commandant of the Coast Guard considers the feasibility, to include the benefits and drawbacks, of collecting and maintaining complete information for all nonjudicial punishment cases in one of the Coast Guard’s databases, such as information on the servicemembers’ race, ethnicity, gender, offense, and punishment imposed. (Recommendation 10) The Secretary of Defense, in collaboration with the Secretaries of the military services and the Secretary of Homeland Security, should conduct an evaluation to identify the causes of any disparities in the military justice system, and take steps to address the causes of these disparities as appropriate. (Recommendation 11) Agency Comments and Our Evaluation We provided a draft of this report to DOD and the Department of Homeland Security for review and comment. Written comments from DOD and the Department of Homeland Security are reprinted in their entirety in appendixes X and XI, respectively. DOD and the Department of Homeland Security provided additional technical comments, which we incorporated in the report, as appropriate. In written comments, DOD concurred with six recommendations, and partially concurred with two recommendations that were directed to the Secretary of Defense. The Department of Homeland Security concurred with the three recommendations directed to the Secretary of Homeland Security. DOD concurred with our six recommendations to present servicemembers’ race and ethnicity data in each of the military services’ respective investigations and personnel databases using the same categories of race and ethnicity established for their military justice databases; consider an amendment to the UCMJ’s annual military justice reporting requirements to require the military services to include demographic information for all types of courts-martial; and consider the feasibility of collecting and maintaining complete information for all nonjudicial punishment cases. DOD partially concurred with two of our recommendations, agreeing with the content, but requesting that we modify the recommendations to direct them to more appropriate entities. Specifically, DOD concurred with our recommendations that guidance should be issued to establish criteria specifying when data indicating possible racial, ethnic, or gender disparities require further review and the steps that will be taken to conduct the review; and to conduct an evaluation to identify the causes of any racial or gender disparities in the military justice system and, if necessary, take remedial steps to address the causes of these disparities. For both recommendations, DOD suggested that the Secretary of Homeland Security be added, and that we remove the DOD Office for Diversity, Equity and Inclusion and the Commandant of the Coast Guard, as they fall under the Secretary of Defense and the Secretary of Homeland Security, respectively. We agree with DOD’s suggestions, and we have modified both recommendations accordingly. In an email correspondence, the Department of Homeland Security and the Coast Guard concurred with the updates. In its written comments, the Department of Homeland Security concurred with our three recommendations to modify the Coast Guard’s military justice database so that it can query and report on gender information, to present servicemembers’ race and ethnicity data in its investigations and personnel databases using the same categories of race and ethnicity established for the military justice database, and to consider the feasibility of collecting and maintaining complete information for all nonjudicial punishment cases. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of Defense, and the Acting Secretary of Homeland Security. In addition, this report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your members of your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in Appendix XII. Appendix I: Objectives, Scope, and Methodology The objectives of this report were to assess the extent to which (1) the military services collect and maintain information about the race, ethnicity, and gender of servicemembers investigated and disciplined for violations of the Uniform Code of Military Justice (UCMJ) that can be used to assess disparities; and (2) there are racial and gender disparities in investigations, disciplinary actions, and case outcomes in the military justice system, and whether the Department of Defense (DOD) and the military services have taken steps to study any identified disparities. Methods Used to Address Both Objectives To address both of our objectives, we analyzed data collection, data maintenance, and military justice disciplinary actions involving active-duty servicemembers in the Army, the Navy, the Marine Corps, the Air Force, and the Coast Guard. Although the Coast Guard is part of the Department of Homeland Security, the Coast Guard is a military service and a branch of the armed forces at all times. We analyzed military justice actions initiated and recorded in service investigations and military justice databases between fiscal years 2013 through 2017. We chose this time period because it provided the most recent history of available military justice data at the time of our review. We requested record-level data from each of the military services’ personnel, investigations, and military justice databases, which resulted in a total of 15 data requests. Table 6 below provides an overview of the databases included in our review, broken out by database type. We sent individual data requests that were tailored based on our conversations with service officials and our own analysis of the availability of data. In addition to requesting the race, ethnicity, and gender of servicemembers subject to military justice actions, we also requested other demographic and administrative attribute data—such as rank, age, years of service, duty station, and occupation—from the services’ personnel databases to include in our statistical models. We identified these attributes by reviewing relevant literature and interviewing agency officials. Personnel databases. We requested and received monthly snapshots with record-level data on all active-duty servicemembers in each of the military services from fiscal years 2013 through 2017. Specifically, we requested demographic and administrative data, including race, ethnicity, gender, rank, education, age or date of birth, years of service, occupation, location or duty station, deployed status, administrative or disciplinary actions and dates, character of service separation, and servicemembers’ unique identifiers (social security number and employee identification number). Investigations databases. We requested and received record-level data on all investigations recorded in a military service military criminal investigative organization (MCIO) database that were initiated from fiscal years 2013 through 2017, where the subject of the investigation was an active-duty servicemember. For each case, we requested certain attribute data on the investigation subject, including race, ethnicity, gender, rank, age or date of birth, service and component, offense(s) investigated, case initiation date, investigation source, investigating entity, investigation outcome and date, incident location, and the subject’s unique identifier, such as social security number or employee identification number. In some services not all of these attributes were available or requested. For example, since the Air Force database only included investigations conducted by the Air Force Office of Special Investigations, we did not request information about the investigating entity. In addition, the Navy Criminal Investigative Service provided us with data about and we analyzed closed cases only, whereas the Army and the Air Force MCIOs provided us with data about and we analyzed all cases in their database during the period of our review. Military justice databases. We requested and received record-level data on all cases where a servicemember was subject to disciplinary proceedings under the Uniform Code of Military Justice (UCMJ) from fiscal years 2013 through 2017. For each case where charges were preferred against a servicemember during this period, we requested demographic and administrative data on the servicemember as well as key information related to their case, including race, ethnicity, gender, rank, age or date of birth, component, case type and forum, offense(s) charged, case disposition and date, appeals status, case outcome or sentence, disciplinary action taken, date charges were first preferred, and the servicemember’s unique identifier, such as social security number or employee identification number. We received general and special courts- martial data from all of the services from their military justice databases. For the Army, in addition to data from their military justice database, Military Justice Online, we also received courts-martial data from a separate database, called the Army Court-Martial Information System (ACMIS), which is used by the service’s trial judiciary to track courts- martial. For summary courts-martial and nonjudicial punishments, the services varied in the extent that and the location where they collected and maintained complete data for these two military justice actions, as is discussed further earlier in this report. In the Air Force, summary courts-martial and nonjudicial punishment data is maintained in the service’s military justice database, the Automated Military Justice Analysis and Management System. The Marine Corps did not collect and maintain complete data about summary courts-martial or nonjudicial punishments in its military justice database, however, its personnel database included information about all summary courts-martial and nonjudicial punishments imposed on servicemembers during the period of our review. The Army and the Navy did not collect and maintain complete data about summary courts-martial or nonjudicial punishments in their military justice databases, or other databases. In these services, summary courts-martial and nonjudicial punishments were recorded in their military justice databases if these actions had involvement by the services’ legal offices. Further, summary courts-martial and nonjudicial punishments were recorded in the personnel databases used by these services only if these actions resulted in an administrative action against the accused, such as a forfeiture of pay or reduction in grade. The Coast Guard did not collect and maintain complete data about nonjudicial punishments in its military justice database or other databases; nonjudicial punishments were recorded in its military justice database if a legal office was involved in the action. Further, nonjudicial punishments were recorded in the Coast Guard’s personnel database if they resulted in an administrative action against the accused, such as a forfeiture of pay or reduction in grade. Methods Used to Evaluate Collection and Maintenance of Data To evaluate the extent to which the military services collect and maintain race, ethnicity, and gender data about servicemembers investigated and disciplined for violations of the UCMJ, we first reviewed service guidance, user manuals, and other documents related to the services’ investigations, military justice, and personnel databases. We reviewed these documents to determine: the types of data officials are required to collect and maintain; and the internal procedures the services follow in inputting information about race, ethnicity, and gender data into each type of database. For example, we determined whether collection of this information was mandatory, and how this information was entered into and recorded in each database. Specifically, we determined whether information about race, ethnicity, and gender was entered into each database manually, using a drop-down menu, or was auto-populated from another database. Further, we identified the number of possible response options that each database contained for each of these demographic fields. Second, we interviewed service officials who manage and use the military justice, investigations, and personnel databases to discuss: which fields in each database track the race, ethnicity, and gender of how these data are input and their insights regarding the reliability of these data. Specifically, we interviewed officials from the legal branches of the military services, including the Army Office of the Judge Advocate General, the Navy Judge Advocate General’s Corps, the Marine Corps’ Judge Advocate Division, the Air Force Judge Advocate General’s Corps, and the Coast Guard Office of the Judge Advocate General. In addition, we spoke with officials in the military criminal investigative organizations (MCIO), including the Army Criminal Investigation Command, the Naval Criminal Investigative Service, the Air Force Office of Special Investigations, and the Coast Guard Investigative Service. We also interviewed officials from the manpower and personnel offices of the services with responsibility for the services’ personnel databases, including the Army’s Human Resources Command and the Office of the Deputy Chief of Staff; the Navy’s Personnel Command; the Marine Corps Manpower and Reserve Affairs Manpower Information Systems Branch; the Air Force Personnel Center; and the Coast Guard’s Personnel Service Center. Finally, we analyzed the data we received from the investigations, military justice, and personnel databases to determine the completeness of the race, ethnicity, and gender information that was recorded in each of the databases. We assessed the military services’ systems and procedures for collecting data against DOD and service guidance and relevant federal internal control standards. Methods Used to Evaluate Racial, Ethnic, and Gender Disparities To evaluate the extent to which there are racial, ethnic, and gender disparities in investigations, disciplinary actions, and case outcomes, we analyzed data from the military services’ investigations, military justice, and personnel databases to determine summary statistics and we then conducted bivariate and multivariate regression analyses. Investigations. We focused on alleged violations of the UCMJ that were recorded in databases used by service-specific MCIOs. Investigations are recorded in the MCIO databases when a servicemember is the subject of a criminal allegation made by another person; for purposes of this report, we say the servicemember had a “recorded investigation” to describe these cases. We analyzed investigation information from the databases used by each of the military services’ MCIOs. Specifically, we analyzed data from the Army’s Criminal Investigation Command, which included cases investigated by military police and Criminal Investigation Command; the Navy and Marine Corps’ Naval Criminal Investigative Service, which included cases investigated by the Naval Criminal Investigative Service and military police; the Air Force’s Office of Special Investigations, which included only Office of Special Investigations cases; and the Coast Guard Investigative Service, which included only Coast Guard Investigative Service cases. Our analysis of recorded investigations data did not include investigations conducted by a servicemember’s command, because those investigations are not recorded in the MCIO databases. Military Justice Discipline. We included in our definition of servicemembers disciplined for a violation of the UCMJ those servicemembers with cases that resulted in a trial in any type of court- martial (general, special, and summary), or servicemembers who were subject to a nonjudicial punishment from fiscal years 2013 through 2017. We analyzed data for trials in general and special courts-martial separately from trials in summary courts-martial because general and special courts-martial result in a criminal conviction if the servicemember is found guilty, while summary courts-martial are not a criminal forum and do not result in a criminal conviction. We analyzed general and special courts-martial cases together due to the small number of cases for some racial or gender groups. In addition, we also separated general and special courts-martial into cases that either were or were not preceded by an investigation recorded in an MCIO database. Our analysis of general and special courts-martial cases without a recorded investigation included those general and special courts-martial that were investigated by a servicemember’s command or other law enforcement entities. We used the preferral date, or the date when an accused servicemember was first charged with a violation, to count the number of courts-martial that occurred in a given fiscal year. However, each military service uses the date in which the court-martial judgment was given when reporting the number of each type of court-martial in their annual reports to the Court of Appeals for the Armed Forces. As a result, the number of court-martial cases in a given year analyzed for our review differs from what was reported in the annual reports. In discussions with officials after we had completed our preliminary analyses, they recommended that we use the referral date instead of the preferral date, so that our total number of cases would be more consistent with the number of cases that they reported. However, changing the date for grouping cases would have required us to request new military justice data from each of the military services, and conduct additional work. Above all, using the preferral date would not impact the findings of racial and gender disparities. In addition, our analyses only counted cases that were ultimately tried at general, special, or summary courts-martial, and excluded those cases where charges were dismissed, withdrawn, or subject to some alternate resolution. For nonjudicial punishments, we used the date that the punishment was imposed. To prepare the data for our analyses and ensure that we had consistent profiles for the race, ethnicity, and gender of the servicemembers, we merged records from the military services’ investigations, military justice, and personnel databases. We merged records using servicemembers’ unique identifiers, such as social security number or employee identification number, that were common among a particular service’s databases. In some instances—a small proportion of cases—we could not match personnel records with military justice records because the social security number or employee identification number in the military justice database did not match the information in the personnel database. In other instances, we could not match personnel records with military justice records because the military justice records did not contain a social security number or employee identification number to match with information found in their personnel record. We first tried to match these cases using the servicemembers’ name and date of birth; however, in some cases we were unable to match personnel records with investigations or military justice cases. As a result, we compiled lists of those cases we were unable to match, and we provided the services with lists of these cases. Service officials manually looked up this data and provided us with the missing social security numbers or employee identification numbers for these cases so that we could complete our analyses. These manual look up efforts increased our match rates so that we had a data set that we determined was sufficiently complete to perform our analyses. For servicemembers who were the subjects of military justice actions, we used the attribute data that was available in the personnel database at the time an investigation or disciplinary action was initiated (the preferral date for courts-martial). For our total service populations, which included servicemembers who were not the subject of a military justice action, we used their attribute data from the “median” snapshot of the five fiscal years of personnel data we received. Based on discussions with service officials, we treated the personnel databases as the authoritative sources for servicemembers’ demographic and administrative data. For some services when needed, if we identified a discrepancy in the race or gender value for a servicemember between the data in the personnel and military justice databases, we used the value recorded in the personnel database because service officials had told us that the personnel databases were the official sources for demographic data such as race and gender, and would be more likely to contain more reliable data for these fields than the investigations or military justice databases. For some services where there were cases where an attribute value was missing in the personnel database, we used the military justice or investigative database as a secondary source for this information. In merging the records from the personnel, military justice, and investigations databases, we created a single data file for each service that contained attribute data for all active-duty servicemembers, as well as complete information on the investigation and discipline of servicemembers who were the subject of a military justice action from fiscal years 2013 through 2017. In using this methodology to merge the records, the total number of servicemembers we use in our report when discussing the total service populations for each service is greater than the total active-duty force end strength of that service in any given fiscal year. This is because our total service populations represent the number of unique individuals who served on active duty from fiscal years 2013 through 2017. In addition, as part of our data preparation, we consolidated the various race and ethnicity values in the service personnel databases to the five groups for race and the two groups for ethnicity established by Office of Management and Budget (OMB) standards for maintaining, collecting, and presenting data on race and ethnicity for all federal reporting purposes. The five race groups in the standards are American Indian or Alaska Native; Asian; Black or African American; Native Hawaiian or Other Pacific Islander; and White. The two ethnic groups are Hispanic or Latino and Not Hispanic or Latino. First, we collapsed race and ethnicity data into a single combined field. Specifically, we grouped individuals of Hispanic ethnicity together, regardless of their racial identification, so that we could compare those of Hispanic ethnicity to other racial groups. We did this in part because of the ways in which some of the services record these data in their databases. For example, the Navy’s and the Marine Corps’ military justice databases do not have separate fields for race and ethnicity; instead, the values are tracked in a single field. Throughout the discussion for objective 2 of this report, we refer to the combined race and ethnicity values as race. We then consolidated races to the five racial groups in the OMB standards. When military service personnel databases included different or additional possible options for race and ethnicity than the groups established by the OMB standards, we consolidated the options in accordance with the definitions for each race and ethnicity listed in the OMB standards. Given the small number of cases in some racial groups, we collapsed certain racial groups into an “Other” group in order to report statistically reliable results. The “Other” group includes individuals who identified as Asian, Native Hawaiian/Other Pacific Islander, American Indian/Alaska Native, and multiple races. Summary statistics. We analyzed data from the military services’ investigations, military justice, and personnel databases to determine the extent to which racial and gender groups were the subjects of recorded investigations, tried in courts-martial, and subject to nonjudicial punishments (for Army and Marine Corps, services for which we had complete data) at higher rates or lower rates than each racial and gender group’s proportion of the overall service populations. Other than our analysis of recorded investigations, we did not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. To conduct this analysis, we used data on all active-duty servicemembers to identify what proportion each racial group (White, Black, Hispanic, and Other) and gender group (male, female) made up of the overall service population from fiscal years 2013 through 2017. We then used data from the services’ military justice or personnel databases to calculate the representation of each racial and gender group as a percent of the population subjected to each type of military justice action. We also examined the rates at which certain racial and gender groups were charged with drug offenses (Article 112a) and sexual assault offenses (Article 120) compared to their proportions of the overall service populations. See Appendix III for information regarding recorded investigations and general and special courts-martial of drug and sexual assault offenses. We analyzed these two specific UCMJ offenses because officials from some services told us that an investigation into these offenses may frequently be mandatory, and thus could potentially mitigate the risk of bias. To conduct this analysis, we used offense data from the services’ military justice databases to determine each racial and gender group’s representation in the population that was the subject of a military justice action for a drug, sexual assault, or other offense type. Bivariate and Multivariate Regression Analyses. We developed a logistic regression model using the data we received from the services’ investigations and military justice databases to determine the extent that certain attributes were associated with higher rates of investigation or discipline of servicemembers. We conducted bivariate logit analyses to estimate the association between select attribute factors (or independent variables) and the outcome variables (the dependent variable) in a binary format, except for the two offense outcome variables. Table 7 below lists all of the dependent and independent variables we used in our analyses. To conduct our statistical analyses, we created groups for each demographic and administrative attribute (independent variable) that we tested in our regression model. We created these groups based on input and guidance from service officials. While the modeling subgroups we created are largely consistent across services, some values are different for certain services. Table 8 summarizes the modeling groups we constructed for each service for each attribute included in our regression analyses. When analyzing the severity of punishments, we developed two groups for the Navy and the Marine Corps, and three groups for the Air Force and the Army, as shown in table 9 below. We did not create a third punishment group for confinement without dismissal or discharge for the Navy and the Marine Corps because of the small number of cases with confinement that did not also include some sort of discharge. Based on discussions with service officials, we determined that a sentence resulting in a dismissal or discharge was the most severe punishment outcome. Typically, a logistic regression model is appropriate when the model outcome is a binary (yes/no) response. Because the punishment groups for the Army and the Air Force were not binary, they could not be analyzed using a multivariate logistic regression. Instead, we used an ordered logit model, also called an ordered logistic regression model, to analyze punishment severity in the Army and the Air Force. An ordered logistic regression is an extension of the logistic regression model that applies to dependent variables where there are more than two response categories. This model allowed us to examine the degree to which a racial or gender group was more likely or less likely than another group to receive a more severe punishment in general and special courts-martial, while controlling for other attributes, such as gender, education, rank, composition of panel, and offense type. To conduct this analysis, we reviewed outcome data from the services’ personnel, investigations, and military justice databases. Based on our bivariate analyses, we determined which variables were significantly associated with military justice actions, and that appeared to be statistically significant predictors of an individual’s likelihood to be subject to a military justice action. Appendix IX includes a summary of those indicators for each of the services. We also examined correlation matrices of the independent variables to determine where there were high correlations between two variables. Where variables were highly correlated, we chose one variable over the others or created a hybrid variable combining those two variables. Specifically, we excluded age and years of service for most of the military services, due to high correlation with the rank variable. Based on our discussions with service officials, they indicated that rank would be the preferred variable to include in our analyses if selecting only one variable among rank, age, and years of service. However, for the Air Force, based on discussion with Air Force officials, we did control for years of service among the lower enlisted ranks (E1-E4). In addition, we could not include education for the Army due to variability and overlapping values in the data. Further, we chose not to model attributes such as occupation and location due to the great variability in these data and the difficulty in creating groups and reaching agreement about those groups with service officials. Based on these results, we then conducted a series of multivariate logistic regression models. Multivariate logistic regression modeling is a statistical method that examines several variables simultaneously to estimate whether each of these variables are more likely or less likely to be associated with a certain outcome. A multivariate regression analysis analyzes the potential influence of each individual factor on the likelihood of a binary outcome (e.g., a specific military justice action) while simultaneously accounting for the potential influence of the other factors. This type of modeling allowed us to test the association between servicemember characteristics, such as race or gender, and the odds of a military justice action (shown as the outcome variables in table 7 above), while holding other servicemember attributes constant (such as gender, rank, and education, shown as the independent variables in table 7 above). We conducted a separate regression for each of the military justice actions listed as an outcome variable. We selected this type of model because it could account for the attributes simultaneously. For the purposes of consistency, in our multivariate regression analyses, we made all racial comparisons with White servicemembers as the reference category. Similarly, we made all gender comparisons with female servicemembers as the reference category. A logistic regression model provides an estimated odds ratio, where a value greater than one indicates a higher or positive association; in this case, between the race, ethnicity, or gender of a servicemember (the independent variables) and the likelihood of being the subject of a military justice action (the dependent, or outcome, variable). An estimated odds ratio less than one indicates lower odds or likelihood of being the subject of a military justice action when a factor—here, a specific demographic or administrative attribute—is present. The statistical significance of the logistic regression model results is determined by a p-value of less than 0.05. As a result, in our report we state that odds ratios that are statistically significant and greater than 1.00 or lower than 1.00 indicate that individuals with that characteristic are more likely or less likely, respectively, to be the subject of a particular outcome or military justice action. In cases where the p-value was greater than 0.05, we report that we could not identify any statistically significant differences, which means that we could not conclude that there was an association between race or gender and the likelihood of a military justice action. We report the results from our regression models as odds ratios. We generally report multivariate results from testing associations between key attributes—including race, ethnicity, gender, rank, and education—on a servicemember’s likelihood of being investigated and disciplined for a UCMJ violation. In the body of this report, we focused on race and gender disparities among servicemembers investigated and disciplined for violations of the UCMJ, while holding other factors constant; however, our analyses of recorded investigations and general and special courts- martial for drug and sexual assault offenses are discussed in Appendix III. In all of these analyses for the Air Force, we also controlled for years of service among the lower enlisted ranks (E1-E4). In the analyses we conducted for the Army, we could not control for education, but we were able to control for age. All regression models are subject to limitations. For our analyses, the limitations included: Results of our analyses are associational and do not imply a causal relationship. We did not identify the causes of any racial or gender disparities, and the results of our work alone should not be used to make conclusions about the military justice process. Our analyses of these data in finding the presence or absence of racial or gender disparities, taken alone, do not establish the presence or absence of unlawful discrimination, as that is a legal determination that would involve other corroborating information along with supporting statistics. We could not assess some attributes that potentially could be related to a servicemember’s likelihood of facing a military justice action in the data analyzed for this review. For example, a servicemember’s socioeconomic background or receipt of a waiver upon entering the service could potentially be related to the likelihood of being investigated, tried in a court-martial, or subject to a nonjudicial punishment. However, we were unable to test these associations because most services indicated they did not have information about socioeconomic status or waivers in the databases that we requested data from. Furthermore, while some other attributes may have been available—such as marital status of the subject or the number of dependent children—we did not include these attributes in our data requests because we prioritized analyzing other demographic factors based on our background research and conversations with service officials. As outlined above, we incorporated input from service officials to the extent possible as we prepared our modeling groups for the demographic and administrative attributes we tested, such as rank, education, and years in service. However, this process was necessarily imprecise. Our modeling results may have been impacted by our discretionary decisions to include certain values in the groups we created for these variables. Data reliability. We conducted data reliability assessments on the datasets we received from the databases in our review. We examined the documentation officials provided to us on each database and conducted electronic tests on the data we received to check for completeness and accuracy. We also sent data reliability questionnaires to database managers about how the data are collected and their appropriate uses, and had discussions with database managers to discuss the reliability of the data in their databases. When we determined that particular fields were not sufficiently reliable, we excluded them from our analysis. For example, we did not use data in our analysis where a substantial number of values were missing. We also checked to see that the values for variables were internally consistent and that results were not affected unduly by outlier values that might suggest miscoded values. For the purposes of our analysis, we found the variables we ultimately reported on to be sufficiently reliable. Furthermore, due to the sensitivity of the information analyzed in this report, we did not include information in instances where the number of servicemembers subjected to a particular military justice action was fewer than 20, to protect privacy. Literature review. To assess the extent to which disparities in the military justice system and the civilian justice system had been previously assessed, we conducted a literature review. To identify relevant publications about disparities in the military justice system and the civilian justice system, we performed a literature search of a number of bibliographic databases, including ProQuest Academic, ProQuest Dialog, Scopus, EBSCO, and HeinOnline. We also searched two think tank search engines: Policy File and the Think Tank Search (from the Harvard Kennedy School). We received the following types of publications: scholarly/peer reviewed material, dissertations, and association/think tank/nonprofit publications. To identify publications by DOD and the services related to the military justice system, we reviewed prior GAO reports and asked officials at the DOD Office of Diversity, Equity and Inclusion, and in the services’ respective diversity and inclusion offices to identify relevant publications. We concluded our searches in October 2018. We also asked the service Judge Advocate General offices for publications relevant to disparities in military justice. We also identified publications in our own background information search. We reviewed those publications that assessed racial, ethnic, or gender disparities among servicemembers in the military justice system. While the civilian and military justice systems differ from each other, we selected a few nationwide studies examining disparities in the civilian justice system to summarize in the background section of our report, in order to enhance our understanding of the complexities of the issues, including how others have attempted to measure disparities. We did not assess the methodologies used in any of these studies or the reliability of the data cited in the studies; the studies related to the civilian justice system are discussed in our report to provide broader context for the discussion about racial and gender disparities in the military justice system. We conducted this performance audit from November 2017 to May 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform an audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Summary Statistics and Bivariate Results for Regression Analyses Rate and Likelihood of Recorded Investigations by Race and Gender As shown in figure 15 below, our analysis of data contained in the military services’ military criminal investigations databases found that Black servicemembers were subjects of recorded investigations at a higher rate compared to their proportion of the overall service population in all of the military services. Hispanic servicemembers were the subjects of recorded investigations at a higher rate compared to their proportion of the overall service population in the Navy and the Air Force, at a lower rate in the Marine Corps, and at the same rate in the Army. Additionally, we found that males were the subjects of recorded investigations at higher rates than their share of the general service population in all of the military services. In addition, figure 15 above also shows the results of our bivariate analyses, which calculated the degree to which one racial or gender group was more likely or less likely than another racial or gender group to be the subject of recorded investigations. Our bivariate analyses found that Black and male servicemembers in all of the military services were statistically significantly more likely to be the subjects of recorded investigations for alleged UCMJ violations than servicemembers of all other races or females. Hispanic servicemembers were statistically significantly more likely in the Navy, the Air Force, and the Coast Guard, and were statistically significantly less likely in the Army to be the subjects of recorded investigations than servicemembers of all other races. Servicemembers in the Other race category were statistically significantly less likely than servicemembers of all other races to be the subjects of recorded investigations in the Army and the Marine Corps. Our bivariate analyses did not show any statistically significant differences for servicemembers in the Other race category in the Navy, the Air Force, or the Coast Guard, or Hispanic servicemembers in the Marine Corps. Rate and Likelihood of Trial in General and Special Courts-Martial As shown in figure 16 below, Black, Hispanic, and male servicemembers in all of the military services included in this analysis were represented at a higher rate than their proportions of the overall service population. White and female servicemembers in all of the military services were represented at a lower rate than their proportions of the overall service population. Servicemembers in the Other race category were represented at a higher rate in the Navy, at a lower rate in the Army and the Air Force, and at the same rate in the Marine Corps compared to their proportion of the overall service population. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. The bivariate regression analysis results in figure 16 above calculate the degree to which one racial or gender group was more likely or less likely than servicemembers of all other races and genders to be tried in general and special courts-martial. We found that Black and male servicemembers in all of the military services were more likely to be tried in general and special courts-martial than servicemembers of all other races or females. Our bivariate analyses found that Hispanic servicemembers in the Army were more likely to be tried in general and special courts-martial than servicemembers of all other races. We found no statistically significant differences in the likelihood of Hispanic servicemembers to be tried in general and special courts-martial compared to servicemembers of all other races in the Navy, the Marine Corps, and the Air Force. White and female servicemembers in all of the military services were less likely to be tried in general and special courts- martial than servicemembers of other races or males. Furthermore, servicemembers in the Other race category were more likely in the Navy and less likely in the Army to be tried in general and special courts-martial than servicemembers of other races. We found no statistically significant differences in the likelihood of servicemembers in the Other race category to be tried in general and special courts-martial in the Marine Corps and the Air Force compared to servicemembers of other races. Rate and Likelihood of Trial in General and Special Courts-Martial Following a Recorded Investigation As shown in figure 17 below, for trials in general and special courts- martial that followed a recorded investigation, Black servicemembers were represented at a lower rate in the Army, the Navy, and the Marine Corps, and at the same rate in the Air Force compared to their proportions of the service population that had recorded investigations. Hispanic servicemembers in trials of general and special courts-martial following a recorded investigation were represented at a higher rate than their proportion of the overall service population that had recorded investigations in the Army and the Marine Corps, and at the same rate in the Navy and the Air Force. White servicemembers were represented at a lower rate in the Army, the Navy, and the Marine Corps, and at the same rate in the Air Force compared to their proportions of the service population with recorded investigations. Servicemembers in the Other race category were represented at a higher rate in the Army, the Navy, and the Marine Corps, and at the same rate in the Air Force compared to their proportions of the overall service population with recorded investigations. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. Male servicemembers with trials in general and special courts-martial that followed a recorded investigation were represented at a higher rate in all of the military services compared to their proportions of the service population that had recorded investigations. Females were represented at a lower rate in all of the military services compared to their proportions of the service population that had recorded investigations. As shown in figure 17 above, our bivariate regression analyses showed that, in the Army, White servicemembers were statistically significantly less likely to be tried in general and special courts-martial following a recorded investigation than servicemembers of all other races, whereas Hispanic servicemembers were statistically significantly more likely to be tried following a recorded investigation. In the Navy, servicemembers in the Other race category were statistically significantly more likely to be tried in general and special courts-martial following a recorded investigation than servicemembers of all other races. Males were more likely, and females were less likely, to be tried in general and special courts-martial following a recorded investigation in the Army and the Air Force. The remaining odds ratios shown in figure 17 above were not statistically significant. Rate and Likelihood of Trial in General and Special Courts-Martial without Recorded Investigation We identified racial and gender disparities in the rate and likelihood of trial in general and special courts-martial in cases without a recorded investigation in all of the military services. Specifically, as shown in figure 18 below, for trials in general and special courts-martial without a recorded investigation, Black and male servicemembers in all of the military services were represented at a higher rate than their proportion of the service population that did not have a recorded investigation. Hispanic servicemembers were represented at a higher rate in the Army and the Marine Corps, and at the same rate in the Navy and the Air Force compared to their proportions of the service population that did not have a recorded investigation. Servicemembers in the Other race category were represented at a lower rate in the Marine Corps and the Air Force, and at the same rate in the Army and the Navy compared to their proportion of the overall service population that did not have a recorded investigation. White and female servicemembers in all of the military services were represented at a lower rate than their proportions of the overall service population without a recorded investigation. We could not analyze Coast Guard cases due to the small number of general and special courts- martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. The bivariate regression analysis results in figure 18 above calculate the degree to which one racial or gender group was more likely or less likely than servicemembers of all other races and genders to be tried in general and special courts-martial without a recorded investigation. We found that Black and male servicemembers in all of the military services were more likely to be tried at special and general courts-martial that were not preceded by a recorded investigation than servicemembers of all other races or females. White and female servicemembers in all of the military services were less likely to be tried at special and general courts-martial that were not preceded by a recorded investigation than servicemembers of all other races and males. We found no statistically significant differences in the likelihood of Hispanic servicemembers or servicemembers in the Other race category in any of the military services being tried in general and special courts-martial without a recorded investigation compared to servicemembers of all other races. Rate and Likelihood of Trial in Summary Courts- Martial in the Air Force and the Marine Corps We identified racial and gender disparities in the rate and likelihood of trial in summary courts-martial in the Air Force and the Marine Corps. Specifically, as shown in figure 19 below, Black and male servicemembers were tried in summary courts-martial for UCMJ violations at higher rates than their share of the overall service population in the Air Force and the Marine Corps. White and Hispanic servicemembers were tried in summary courts-martial at lower rates than their share of the overall service population in both services. Servicemembers that were included in the Other race category were tried at higher rates in the Air Force, and at lower rates in the Marine Corps. We could not determine whether there were any racial or gender disparities for summary courts-martial in the Army and the Navy because these services did not collect complete summary court-martial data— information about all summary court-martial cases, to include demographic information about the subject—in their investigative, military justice, or personnel databases, as discussed above in the report. We could not analyze Coast Guard cases due to the small number of summary courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. The bivariate regression analysis results in figure 19 above calculate the degree to which one racial or gender group was more likely or less likely than servicemembers of all other races and genders to be tried in summary courts-martial. We found that Black servicemembers in the Marine Corps and the Air Force were more likely to be tried in summary courts-martial than servicemembers of all other races. We also found that male servicemembers were more likely than their female counterparts to be tried in summary courts-martial in the Marine Corps and the Air Force. We observed no statistically significant differences in summary court- martial rates for servicemembers in the Other race category in either the Marine Corps or the Air Force, or for Hispanic servicemembers in the Marine Corps. Rate and Likelihood of Nonjudicial Punishments in the Air Force and the Marine Corps As shown in figure 20 below, we found that Black and male servicemembers were subject to nonjudicial punishment for UCMJ violations at a higher rate than their share of the overall service population in the Marine Corps and the Air Force. White servicemembers were subject to nonjudicial punishments at lower rates than their share of the overall service population in both services, and Hispanic servicemembers were subject to nonjudicial punishments in a proportion equal to their share of the general service population in both services. Servicemembers that were included in the Other race category were subject to nonjudicial punishment at lower rates than their share of the overall service population in the Marine Corps and the Air Force. We could not analyze nonjudicial punishments in the Army, the Navy, and the Coast Guard because these services do not collect complete nonjudicial punishment information. The bivariate regression analyses in figure 20 above calculate the degree to which one racial or gender group was more likely or less likely than another racial or gender group to be subject to nonjudicial punishment. We found that Black and male servicemembers were more likely than servicemembers of all other races or female servicemembers to receive nonjudicial punishments in the Marine Corps and the Air Force. We also found that Hispanic servicemembers in the Air Force were less likely to be subject to nonjudicial punishment, but we observed no statistically significant difference for Hispanic servicemembers in the Marine Corps. Servicemembers in the Other race category were less likely to be subject to nonjudicial punishment than servicemembers of all other races in the Marine Corps and the Air Force. Rate and Likelihood of Conviction in General and Special Courts-Martial As shown in figure 21 below, we found that Black servicemembers were convicted in general and special courts-martial at a lower rate in the Army and the Air Force, and at an equal rate in the Navy and the Marine Corps compared to their proportion of the overall general and special courts- martial population. In the Army, the Navy, and the Marine Corps, Hispanic servicemembers were convicted in general and special courts- martial at an equal rate compared to their proportion of the overall general and special courts-martial population. Compared to their proportion of the overall general and special courts-martial population, Hispanic servicemembers were convicted at a lower rate in the Air Force. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. As shown in figure 21 above, bivariate regression analyses found that, in the Army, White servicemembers were statistically significantly more likely to be convicted, whereas Black servicemembers were statistically significantly less likely to be convicted in general and special courts- martial compared to all other servicemembers. White servicemembers in the Air Force were also statistically significantly more likely to be convicted in general and special courts-martial compared to all other servicemembers. In the Marine Corps, we found that males were more likely to be convicted than females, whereas in the Air Force, males were less likely to be convicted than females. The remaining odds ratios shown in figure 21 above were not statistically significant. Rate and Likelihood of More Severe Punishment As shown in figures 22 and 23 below, we found that Black servicemembers received a more severe punishment at a lower rate compared to their share of the convicted service population in the Army, the Navy, and the Air Force. We also found that Hispanic servicemembers received a more severe punishment at a lower rate compared to their share of the convicted service population in the Air Force, but at a higher rate in the Marine Corps. We found that male servicemembers in the Marine Corps and the Air Force received a more severe punishment at a higher rate, and at the same rate in the Army and the Navy, compared to their share of the convicted service population. Females received a more severe punishment at a lower rate in the Air Force and the Marine Corps, and at the same rate in the Army and the Navy, compared to their share of the convicted service population. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. The bivariate regression analyses in Figures 22 and 23 above calculated the degree to which one racial or gender group was more likely or less likely than another racial or gender group to be dismissed or discharged after a conviction in general and special courts-martial. In the Navy, we found that Black servicemembers were statistically significantly less likely to be dismissed or discharged after conviction in general and special courts-martial compared to all other servicemembers. We found no statistically significant differences regarding minority servicemembers being more likely or less likely to be dismissed or discharged after conviction in general and special courts-martial in the Marine Corps, or to receive a more severe punishment in the Army or the Air Force. We found that males in the Marine Corps and the Air Force were more likely to be dismissed or discharged or receive a more severe punishment after conviction than females, but we did not find any statistically significant differences regarding male servicemembers in the Army or the Navy. Appendix III: Analysis of Drug Offenses, Sexual Assault Offenses, and All Other Offenses This appendix contains several figures that show the underlying data related to drug and sexual assault offenses from fiscal years 2013 through 2017 for the Army, the Navy, the Marine Corps, and the Air Force. Across most military services, Black, Hispanic, and male servicemembers were the subjects of recorded investigations and tried in general and special courts-martial at higher rates than their shares of the overall service population for drug offenses, sexual assault offenses, and all other offenses. We found that the likelihood of conviction varied among the services for these two offenses. We analyzed these two specific Uniform Code of Military Justice (UCMJ) offenses separately from all other offenses because service officials told us that an investigation into these offenses may frequently be mandatory, and thus could potentially mitigate the risk of bias. We analyzed data for these offenses for recorded investigations, trials in general and special courts-martial, and convictions from fiscal years 2013 through 2017 to assess the extent to which racial and gender disparities may exist. Our analyses of the services’ investigation, military justice, and personnel databases, as reflected in these figures, taken alone, do not establish the presence or absence of unlawful discrimination. Recorded Investigations of Drug and Sexual Assault Offenses We identified racial and gender differences in recorded investigation rates for drug offenses, sexual assault offenses, and all other offenses compared with the total service populations. Our analysis focused on alleged UCMJ violations for these offenses that were recorded in the Military Criminal Investigative Organization (MCIO) investigations databases. Other investigations conducted within the military, such as command investigations, were not considered in this analysis. For example, as shown in figure 24 below, Black servicemembers were the subjects of recorded investigations for drug offenses, sexual assault offenses, and all other offenses at a higher rate than their share of the overall service population across all military services. Hispanic servicemembers were the subjects of recorded investigations for drug offenses, sexual assault offenses, and all other offenses at a higher rate than their share of the overall service population in the Air Force, but were the subjects of recorded investigations for drug offenses at a lower rate than their share of the overall service population in both the Army and the Marine Corps. Male servicemembers were the subjects of recorded investigations for drug offenses and sexual assault offenses at a higher rate than their share of the overall service population across all of the military services. General and Special Courts-Martial Trials for Drug and Sexual Assault Offenses We found that White servicemembers were tried for drug offenses, sexual assault offenses, and all other offenses in general and special courts- martial at lower rates than their share of the overall service population across all of the military services. Black servicemembers were tried for drug offenses, sexual assault offenses, and all other offenses in general and special courts-martial at a higher rate than their share of the overall service population in all of the military services. Hispanic servicemembers were tried for drug offenses in general and special courts-martial at a lower rate in the Navy and the Marine Corps, and at a higher rate in the Air Force, compared to their share of the overall service population. Hispanic servicemembers were tried for sexual assault offenses at a higher rate than their proportion of the overall service population in all of the military services. Female servicemembers were tried for drug offenses, sexual assault offenses, and all other offenses in general and special courts-martial at lower rates than their share of the general service population in the Army, the Navy, and the Air Force, and were tried for sexual assault offenses and all other offenses at lower rates than their share of the overall service population in the Marine Corps. Figure 25 below shows the gender and racial composition of general and special court-martial trials for drug offenses, sexual assault offenses, and all other offenses. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. Likelihood of Conviction for Drug and Sexual Assault Offenses We conducted multivariate regression analyses to calculate the degree to which servicemembers charged with drug offenses and sexual assault offenses were more likely or less likely than a composite variable comprised of all other offenses to be convicted in general and special courts-martial, while controlling for other attributes, such as race, gender, education, and rank. As shown in figure 26 below, we did not identify any statistically significant difference in conviction rates for drug offenses compared to all other offenses in the Army, the Navy, the Marine Corps, and the Air Force. Sexual assault offenses were less likely to result in a conviction in the Army, the Navy, and the Air Force, and there was no statistically significant difference for the Marine Corps. We could not analyze Coast Guard cases due to the small number of general and special courts-martial adjudicated in the Coast Guard from fiscal years 2013 through 2017. Appendix IV: Army Data and Analyses This appendix contains several tables that show the underlying data and analyses used throughout this report relating to Army personnel and military justice disciplinary actions from fiscal years 2013 through 2017. We did not include populations that contained fewer than 20 servicemembers in the total populations presented in these tables to ensure the protection of sensitive information. As a result, the total populations presented in this appendix may vary among the different tables and may vary from the total populations presented in the body of the report. Our analyses of the Army’s investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Multivariate Regression Analyses of Army Data The multivariate results listed below in table 17 show the odds ratios for the multivariate regression analyses of the Army data. We used logistic regression to assess the relationship between the independent variables, such as race, education, rank, or gender, with the probability of being subject to a military justice action. Logistic regression allows for the coefficients to be converted into odds ratios. Odds ratios that are statistically significant and greater than 1.00 indicate that individuals with that characteristic are more likely to be subject to a military justice action. For example, an odds ratio of 1.55 for Black servicemembers would mean that they are 1.55 times more likely to be subject to a military justice action compared to White servicemembers. Odds ratios that are statistically significant and lower than 1.00 indicate that individuals with that characteristic are less likely to be subject to a military justice action. We excluded years of service from the Army analyses due to high correlation with the rank variable. Appendix V: Navy Data and Analyses This appendix contains several tables that show the underlying data and analyses used throughout this report relating to Navy personnel and military justice disciplinary actions from fiscal years 2013 through 2017. We did not include populations that contained fewer than 20 servicemembers in the populations presented in these tables to ensure the protection of sensitive information. As a result, the populations presented in this appendix may vary among the different tables and may vary from the populations presented in other places in this report. Our analyses of the Navy’s investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Multivariate Regression Analyses of Navy Data The multivariate results listed below in table 26 show the odds ratios for the multivariate regression analyses of Navy data. We used logistic regression to assess the relationship between the independent variables, such as race, education, rank, or gender, with the probability of being subject to a military justice action. Logistic regression allows for the coefficients to be converted into odds ratios. Odds ratios that are statistically significant and greater than 1.00 indicate that individuals with that characteristic are more likely to be subject to a military justice action. For example, an odds ratio of 1.55 for Black servicemembers would mean that they are 1.55 times more likely to be subject to a military justice action compared to White servicemembers. Odds ratios that are statistically significant and lower than 1.00 indicate that individuals with that characteristic are less likely to be subject to a military justice action. We excluded age and years of service from the Navy multivariate regression analyses due to high correlation with the rank variable. Appendix VI: Marine Corps Data and Analyses This appendix contains several tables that show the underlying data and analyses used throughout this report relating to Marine Corps personnel and military justice disciplinary actions from fiscal years 2013 through 2017. We did not include populations that contained fewer than 20 servicemembers in the populations presented in these tables to ensure the protection of sensitive information. As a result, the populations presented in this appendix may vary among the different tables and may vary from the populations presented in other places in this report. Our analyses of the Marine Corps investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Multivariate Regression Analyses of Marine Corps Data The multivariate results listed below in table 35 show the odds ratios for the multivariate regression analyses of Marine Corps data. We used logistic regression to assess the relationship between the independent variables, such as race, education, rank, or gender, with the probability of being subject to a military justice action. Logistic regression allows for the coefficients to be converted into odds ratios. Odds ratios that are statistically significant and greater than 1.00 indicate that individuals with that characteristic are more likely to be subject to a military justice action. For example, an odds ratio of 1.55 for Black servicemembers would mean that they are 1.55 times more likely to be subject to a military justice action compared to White servicemembers. Odds ratios that are statistically significant and lower than 1.00 indicate that individuals with that characteristic are less likely to be subject to a military justice action. We excluded age and years of service from the Marine Corps multivariate regression analyses due to high correlation with the rank variable. Appendix VII: Air Force Data and Analyses This appendix contains several tables that show the underlying data and analyses used throughout this report relating to Air Force personnel and military justice disciplinary actions from fiscal years 2013 through 2017. We did not include populations that contained fewer than 20 servicemembers in the populations presented in these tables to ensure the protection of sensitive information. As a result, the populations presented in this appendix may vary among the different tables and may vary from the populations presented in other places in this report. Our analyses of the Air Force’s investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Multivariate Regression Analyses of Air Force Data The multivariate results listed below in table 45 show the odds ratios for the multivariate regression analyses of Air Force data. We used logistic regression to assess the relationship between the independent variables, such as race, education, rank, or gender, with the probability of being subject to a military justice action. Logistic regression allows for the coefficients to be converted into odds ratios. Odds ratios that are statistically significant and greater than 1.00 indicate that individuals with that characteristic are more likely to be subject to a military justice action. For example, an odds ratio of 1.55 for Black servicemembers would mean that they are 1.55 times more likely to be subject to a military justice action compared to White servicemembers. Odds ratios that are statistically significant and lower than 1.00 indicate that individuals with that characteristic are less likely to be subject to a military justice action. We controlled for years of service among the lower enlisted ranks (E1- E4), but excluded age from the Air Force multivariate regression analyses due to high correlation with the rank and years of service variables. Appendix VIII: Coast Guard Data and Analyses This appendix contains several tables that show the underlying data and analyses used throughout this report relating to Coast Guard personnel and military justice disciplinary actions from fiscal years 2013 through 2017. We did not include populations that contained fewer than 20 servicemembers in the populations presented in these tables to ensure the protection of sensitive information. As a result, the populations presented in this appendix may vary among the different tables and may vary from the populations presented in other places in this report. Our analyses of the Coast Guard’s investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Multivariate Regression Analyses of Coast Guard Data The multivariate results listed below in table 52 show the odds ratios for the multivariate regression analyses of Coast Guard data. We used logistic regression to assess the relationship between the independent variables, such as race, education, rank, or gender, with the probability of being subject to a military justice action. Logistic regression allows for the coefficients to be converted into odds ratios. Odds ratios that are statistically significant and greater than 1.00 indicate that individuals with that characteristic are more likely to be subject to a military justice action. For example, an odds ratio of 1.55 for Black servicemembers would mean that they are 1.55 times more likely to be subject to a military justice action compared to White servicemembers. Odds ratios that are statistically significant and lower than 1.00 indicate that individuals with that characteristic are less likely to be subject to a military justice action. We excluded age and years of service from the Coast Guard analyses due to high correlation with the rank variable. Appendix IX: Key Indicators for Military Justice Actions We found that age, rank, length of service, and education were indicators of a servicemember’s likelihood of being the subject of a recorded investigation, court-martial, or nonjudicial punishment across the military services. To analyze age, rank, length of service, and education, we used bivariate regression analyses to determine which sub-population of each attribute was most likely to be subject to a recorded investigation, court-martial, or nonjudicial punishment. This appendix contains several tables that show the rank, education, length of service, and age groups most likely to be subject to a recorded investigation, tried in general and special courts-martial, tried in summary court-martial, and receive a nonjudicial punishment for all services from fiscal years 2013 through 2017. For the Coast Guard, we could not analyze age, rank, length of service, and education as indicators for courts-martial or nonjudicial punishment due to the small number of recorded military justice cases from fiscal years 2013 through 2017. Our analyses of the services’ investigations, military justice, and personnel databases, as reflected in these tables, taken alone, do not establish the presence or absence of unlawful discrimination. Appendix X: Comments from the Department of Defense Appendix XI: Comments from the Department of Homeland Security Appendix XII: GAO Contact and Staff Acknowledgments GAO Contact Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov. Staff Acknowledgments In addition to the contact named above, key contributors to this report were Kimberly C. Seay, Assistant Director; Parul Aggarwal; Christopher Allison; Renee S. Brown; Vincent M. Buquicchio; Won (Danny) Lee; Amie M. Lesser; Serena C. Lo; Dae B. Park; Samuel J. Portnow; Clarice Ransom; Christy D. Smith; Preston Timms; and Schuyler Vanorsdale.

The Uniform Code of Military Justice (UCMJ) was established to provide a statutory framework that promotes fair administration of military justice. Every active-duty servicemember is subject to the UCMJ, with more than 258,000 individuals disciplined from fiscal years 2013-2017, out of more than 2.3 million unique active-duty servicemembers. A key principle of the UCMJ is that a fair and just system of military law can foster a highly disciplined force. House Report 115-200, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018, included a provision for GAO to assess the extent that disparities may exist in the military justice system. This report assesses the extent to which (1) the military services collect and maintain consistent race, ethnicity, and gender information for servicemembers investigated and disciplined for UCMJ violations that can be used to assess disparities, and (2) there are racial and gender disparities in the military justice system, and whether disparities have been studied by DOD. GAO analyzed data from the investigations, military justice, and personnel databases from the military services, including the Coast Guard, from fiscal years 2013-2017 and interviewed agency officials. The military services collect gender information, but they do not collect and maintain consistent information about race and ethnicity in their investigations, military justice, and personnel databases. This limits their ability to collectively or comparatively assess these data to identify any disparities (i.e., instances in which a racial, ethnic, or gender group was overrepresented) in the military justice system within and across the services. For example, the number of potential responses for race and ethnicity across the military services' databases ranges from five to 32 options for race and two to 25 options for ethnicity, which can complicate cross-service assessments. The services also are not required to and, thus, do not report demographic information in their annual military justice reports—information that would provide greater visibility into potential disparities. GAO's analysis of available data found that Black, Hispanic, and male servicemembers were more likely than White or female members to be the subjects of investigations recorded in databases used by the military criminal investigative organizations, and to be tried in general and special courts-martial in all of the military services when controlling for attributes such as rank and education. GAO also found that race and gender were not statistically significant factors in the likelihood of conviction in general and special courts-martial for most services, and minority servicemembers were either less likely to receive a more severe punishment than White servicemembers or there was no difference among racial groups; thus, disparities may be limited to particular stages of the process. The Department of Defense (DOD) has taken some steps to study disparities, but has not comprehensively evaluated the causes of racial or gender disparities in the military justice system. Doing so would better position DOD to identify actions to address disparities and help ensure the military justice system is fair and just. Note: These analyses, taken alone, should not be used to make conclusions about the presence or absence of unlawful discrimination. These multivariate regression analysis results estimate whether a racial or gender group is more likely or less likely to be the subject of an investigation or a trial in general or special courts-martial after controlling for race, gender, rank, and education, and in the Air Force, years of service. GAO made all racial comparisons to White servicemembers and all gender comparisons to females. GAO grouped individuals of Hispanic ethnicity together, regardless of race.

CRS_R45769

Introduction The U.S. Constitution establishes a two-step process for the House and Senate to remove federal officials—including the President, Vice President, judges, and other civil officers—for "Treason, Bribery, or other high Crimes and Misdemeanors." Under the Constitution, the House alone has the power to formally charge—that is, impeach—a federal official. A House majority can accomplish this by adopting articles of impeachment, which are effectively written accusations (similar to an indictment in ordinary criminal proceedings). The Senate alone has the power to try an impeachment and render a verdict regarding whether the individual should be removed from office and possibly barred from holding future office. Two-thirds of Senators voting must agree to convict and remove an official from office. The Senate could also separately decide to disqualify an officer from holding future federal office. Disqualification requires only a majority vote. The procedures the House has developed for accomplishing this constitutional responsibility are described below. The House has used this process mostly to impeach federal judges, although the House has also impeached two Presidents and one Cabinet official. The Senate has voted to remove eight of these officials, and all of them were federal judges. The summary of the rules and procedures the House might use to impeach a federal official presented here is drawn from published sources of congressional rules and precedents, as well as the public record of past impeachment proceedings. It relies as well upon in-depth research conducted by Betsy Palmer and Susan Navarro Smelcer, formerly of CRS, on the practice in both chambers with respect to the impeachment of federal judges. This report provides an overview of the procedures and should not be treated or cited as an authority on congressional proceedings. Consultation with the Parliamentarian of the House is always advised regarding the possible application of rules and precedents. For more information on impeachment, including a discussion of which federal officers are subject to impeachment and possible grounds for impeachment, see CRS Report R44260, Impeachment and Removal , by Jared P. Cole and Todd Garvey. Overview The impeachment process may be initiated as the result of various actions and events, including the receipt and referral of information from an outside source, investigations by congressional committees under their general authority, or the introduction of articles of impeachment in the form of a House resolution. Regardless of what might instigate an inquiry into whether impeachment is warranted, there are normally three formal stages of congressional action. First, an impeachment inquiry is authorized, and this is most often accomplished through the adoption of a simple resolution (H.Res.___) directing the Judiciary Committee to investigate an official. Second, the committee conducts its investigation, prepares articles of impeachment, and reports them to the House. Third, the full House considers the articles of impeachment and, if they are adopted, appoints managers from the committee to present the articles in the Senate. As discussed in detail below, the House relies upon many of its usual procedures to consider the resolution explicitly initiating an investigation, conduct the investigation, and consider the articles of impeachment. Initiation of the Process Introduction of a Simple Resolution A Member can initiate an impeachment process by drafting a simple resolution and placing it in the House hopper, the way all simple resolutions are submitted to the House. If the resolution directly calls for an impeachment, it will be referred to the Committee on the Judiciary. If it instead calls for an investigation of an official by a standing committee or proposes the creation of a special committee for that purpose, the resolution will be referred to the Committee on Rules, which has jurisdiction over the authorization of committee investigations. No special procedures restrict when such a resolution can be submitted, although historically they have been submitted relatively infrequently. Raising a Question of the Privileges of the House A resolution calling for an impeachment can also be offered on the floor by any Member as a question of the privileges of the House instead of being submitted through the hopper. To do so, a Member gives notice of his or her intent to call up such a resolution. The Speaker must then schedule a time to consider the resolution within two legislative days. (The majority and the minority leader do not need to give notice; if either leader raises a qualifying question of privileges of the House on the floor, it is considered immediately.) The full House could dispose of an impeachment resolution raised in this fashion in any number of ways, including by referring it to the Judiciary Committee instead of by voting on the resolution directly. The House could also agree to a motion to table the resolution and thereby dispose of it permanently and adversely. Impeachment has been attempted using this method in recent years, but none of the attempts has resulted in approval of articles of impeachment. In cases in which an official has been impeached, the House has always chosen to conduct an investigation first. A resolution offered from the floor that proposed a committee investigation, instead of directly impeaching an officer, would not give rise to a proper question of the privileges of the House. Outside and Preliminary Investigations Material related to the conduct of a federal official might reach the House and be referred to committee prior to the adoption of a resolution directing a committee to conduct an investigation. Historically, this has included petitions and materials from citizens. In addition, standing committees, under their general investigatory authority, can seek information and research charges against officers prior to the approval of a resolution to authorize an impeachment investigation. With respect to federal judges, the Judicial Conduct and Disability Act of 1980 established a process within the judicial branch for responding to complaints about judges. Findings from those investigations could result in the Judicial Conference of the United States informing the House that the impeachment of a judge may be warranted. A letter reporting that the Judicial Conference had reached such a determination would be referred to the Judiciary Committee. Recent impeachments of federal judges were initiated by resolutions submitted after (or near the time of) the receipt of such a determination from the Judicial Conference. In the last presidential impeachment, a communication from the independent counsel appointed to investigate President Bill Clinton was referred to the Committee on the Judiciary pursuant to an original resolution reported by the Rules Committee. The resolution also directed the Judiciary Committee to review the information from the independent counsel "to determine whether sufficient grounds exist to recommend to the House that an impeachment inquiry be commenced." The House, in this case, later adopted a resolution reported by the Judiciary Committee to authorize an investigation by the committee. Authorization of Committee Investigation If a resolution authorizing an impeachment investigation was introduced through the hopper and referred to the Rules Committee, that committee would then choose whether to report the resolution to the full House for consideration. If reported, the resolution would be privileged, which means a Member could call it up on the floor, though only at the direction of the Rules Committee. The resolution would then be considered under the hour rule, a method of considering legislation in the House that permits Members to speak for up to an hour—but also allows a numerical majority to vote to end debate and limit the opportunity for amendment. Specifically, the Member who called up the resolution would be recognized for one hour. Debate on the resolution would likely last for that hour or even less, because a majority in the House could agree to order the previous question on the resolution. When the House votes to order the previous question, it ends debate and any opportunity for amendment. A motion to recommit the resolution with or without instructions could be offered after the previous question was ordered, but it would not be debatable. The House could also, however, choose to consider the resolution under any of its other regular processes, including suspension of the rules (requiring a two-thirds vote for passage), a rule from the Rules Committee (requiring only a majority vote), or unanimous consent. The two most recent resolutions adopted by the House to authorize an impeachment investigation were taken up by unanimous consent at the request of the Rules Committee chair. Rather than convene a committee meeting to order the resolutions reported with a quorum present, the chair asked unanimous consent that the House discharge the Rules Committee and agree to the resolution. Both of these resolutions concerned federal judges, and they were agreed to without debate. In the three previous instances of judicial impeachments, however, the House did not approve a resolution explicitly authorizing an impeachment inquiry. The Rules of the House since 1975 have granted committees the power to subpoena witnesses and materials, administer oaths, and meet at any time within the United States—powers that were previously granted through resolutions providing blanket investigatory authorities that were agreed to at the start of a Congress or through authorizing resolutions for each impeachment investigation. In two of the three recent cases, the House agreed to separate resolutions to allow committee counsel to take affidavits and depositions. If the House does approve an authorizing resolution, then in addition to the Rules Committee, the Judiciary Committee can report an original resolution authorizing an impeachment investigation if impeachment resolutions have been referred to the committee. In the case of the most recent authorization of a presidential impeachment inquiry, the Judiciary Committee reported such a resolution, and the full House debated it. As mentioned above, pursuant to a resolution agreed to by the House, the Judiciary Committee reviewed material submitted by an independent counsel appointed to investigate President Bill Clinton. The Judiciary Committee then reported a resolution ( H.Res. 581 , 105 th Congress) authorizing an investigation into whether sufficient grounds existed for the impeachment of the President. The resolution was privileged for immediate consideration. The chair of the Judiciary Committee called up the resolution and asked unanimous consent that instead of being recognized for the normal one hour, his time be extended to two hours, half of which he would yield to the ranking member of the Judiciary Committee for purposes of debate only. After debate under the terms of this unanimous consent agreement, the House ordered the previous question on the resolution by voice vote, ending further debate of the resolution. A minority-party Representative offered a motion to recommit, and, pursuant to a unanimous consent agreement, the motion was debated for 10 minutes before being defeated on a roll call vote. As noted, absent this unanimous consent agreement, the motion to recommit would not have been debatable. The resolution was then agreed to by a record vote, 258-176. In the 93 rd Congress (1973-1974), multiple resolutions to impeach President Richard M. Nixon were introduced and referred to the Judiciary Committee. The committee began an examination of the charges against the President under its general investigatory authority. The House also approved a resolution, reported by the House Rules Committee, providing additional investigation authority that did not specifically mention impeachment. In late 1973, the House agreed to another resolution that provided for additional expenses of the committee, and floor debate and the report from the Committee on House Administration indicate that the funds were intended in part for the impeachment inquiry. On February 1, 1974, the Judiciary Committee reported an original resolution ( H.Res. 803 ; H.Rept. 93-774) mandating an investigation to determine whether the House should impeach President Nixon and continuing the availability of funds. On February 6, 1974, the chairman of the Judiciary Committee called up the resolution as a question of privilege. It was debated under the hour rule, with the chairman yielding time to other Members for purposes of debate only. The Judiciary Committee chair moved the previous question before any other Member was recognized to control time under the hour rule, and the House ordered the previous question 342-70. The resolution authorizing the investigation was then agreed to, 410-4. Committee Action The standing rules of the House that affect committee investigations apply as well to impeachment investigations by the Judiciary Committee. A resolution authorizing an impeachment investigation might place additional limitations, or grant additional authorities, to the committee. In addition, the committee itself might adopt rules specific to an impeachment inquiry. It has not been unusual for the Judiciary Committee to authorize subcommittees or to create task forces to conduct impeachment investigations, and in that case the full committee would establish the authority of the subcommittee or task force. Investigation and Hearings Under House Rule XI, committees have the authority to subpoena persons or written records, conduct hearings, and incur expenses (including travel expenses) in connection with investigations. Rule XI, clause 2(h)(2), requires two committee members to take testimony or receive evidence. In past impeachment proceedings, the House has agreed to resolutions authorizing committee staff to take depositions without Members present, and the Judiciary Committee has agreed to internal guidelines for the mode and conduct of depositions. In the 116 th Congress, pursuant to H.Res. 6 , the chairs of all standing committees (except the Rules Committee) as well as the Permanent Select Committee on Intelligence may order the taking of depositions by committee counsel. In modern practice, the federal official under investigation is generally allowed certain rights, including the right to be represented by counsel. If a committee were to conduct hearings, these proceedings would generally be governed by House and committee rules (and any specific rules agreed to in the authorizing resolution). Under House Rule XI, notice of hearings must be provided one week in advance, and members of the committee are guaranteed the right to question witnesses under the five-minute rule. Hearings are generally public, but they could be closed pursuant to regular House rules that allow the committee to agree, by holding a vote in public session with a majority of the committee present, to close a hearing for three specific reasons: the evidence or testimony would endanger national security, compromise sensitive law enforcement information, or would tend to "defame, degrade, or incriminate the witness." Again, the resolution authorizing an impeachment investigation could alter these procedures. The Judiciary Committee conducted multiple public hearings in connection with the impeachment of federal judges in 2009. The committee had created a task force to investigate whether two federal judges should be impeached. The task force conducted hearings during which they heard from a variety of witnesses, including law professors with expertise on impeachable offenses, individuals with information about the crimes the judges were accused of committing, and task force attorneys who reported on the status of the investigation. In 1998, the Judiciary Committee held four hearings in connection with the impeachment of President Clinton. The committee received testimony from 19 experts on the history of impeachment at one hearing and from the independent counsel at another. Various witnessed testified at a third hearing on the consequences of perjury and related crimes. Over two days of hearing in early December 1998, at the request of the Administration, the committee also heard testimony from White House counsel. In recent decades, it has been more common than not that a congressional committee used information provided from another outside investigation. In four of the five judicial impeachment investigations undertaken by the Judiciary Committee since 1980, "the accused judge had either been subject to a federal criminal trial or pled guilty to a federal criminal charge prior to the initiation of impeachment proceedings in the House." In the case of the impeachment of President Bill Clinton, as mentioned above, the results of an independent counsel investigation alleging impeachable offenses were submitted to the House and referred to the Judiciary Committee. Markup of Articles of Impeachment A committee charged with investigating impeachable offences might, after conducting its investigation and reviewing any evidence submitted from other investigations, meet to consider articles of impeachment, and such a meeting is referred to as a markup. The articles of impeachment are in the form of a simple resolution (H.Res.___). The procedures for considering and reporting out an impeachment resolution are the same as those used for other legislation. Notice must generally be given of the proposed meeting, and the text of the articles of impeachment must generally be available 24 hours in advance of the meeting, although House Rule XI, clause 2 (g)(3)(B), provides some exceptions to these requirements. Members of the committee could expect an opportunity to offer amendments to the articles of impeachment, which would be debated under the five-minute rule. Importantly, a majority of the committee must be physically present at the time of the vote to report. Alternatively, after an investigation, the committee might also choose to report a recommendation that impeachment was not warranted. In the case of the two most recent presidential impeachments, the Judiciary Committee held a public, televised markup of the impeachment articles for several days. A motion to recommend a resolution to impeach President Nixon was considered by the Judiciary Committee for six days at the end of July 1974. The committee agreed to special procedures for the markup, such as a 10-hour period for "general debate," and each article of impeachment was considered separately for amendment. The resolution included two articles of impeachment, which were both agreed to, as amended. A third article of impeachment was proposed as an amendment and agreed to, and two additional articles offered as amendments were rejected. The President resigned before the committee reported an impeachment resolution to the full House. In 1998, the Judiciary Committee considered articles impeaching President Clinton for three days in December under procedures modelled after those used in 1974. A unanimous consent agreement provided that the four articles of impeachment included in the chairman's draft resolution would be debated, amended, and voted on separately. Each member of the committee was allotted 10 minutes for an opening statement. The committee considered and agreed to an amendment to Article I and an amendment to Article IV. All four articles were agreed to, and a resolution ( H.Res. 611 , 105 th Congress) was reported to the House. A written report was prepared and several Members submitted additional, minority, and dissenting views, a right protected under House Rule XI, clause 2(l), if notice of intent is given at the time a committee approves a matter. Member Access to Information Prior to Full House Consideration Under House Rule XI, clause 2(e), committee records are the property of the House, and all Members can have access to them. The committee may, however, place reasonable restrictions on where, when, and how Members might access the records. In addition, access to committee investigatory material might be limited, at least for a time, while the committee determines if it qualifies as a committee record under House Rule XI, and, if so, if release is prohibited pursuant to other House rules. A committee might also take actions to protect the confidentiality of investigative materials. The primary mechanism by which an investigating committee can and has chosen to limit access to inquiry information is through the use of executive—or closed—session. Under House Rule XI, clause 2(g)(1), a committee can operate in executive session by majority vote, a quorum being present, to restrict attendance at a business session to only committee members or others authorized by the committee. Similarly, a committee can receive evidence or testimony as if in executive session, which, under Rule XI, clause 2(k)(7), may only be released through authorization by the committee. Even when access to information received in executive session is granted to Members, the material may be subject by the committee to further conditions under which it may be viewed. In addition, the copying, releasing, or taking notes on materials received in executive session is strictly prohibited without permission of the committee. Executive sessions were periodically used during the inquiries into Presidents Nixon and Clinton. Further restrictions on access to information can be adopted by the House or the investigating committee. As previously mentioned, the Judiciary Committee adopted special procedures by unanimous consent in 1974 that, among other provisions, limited access to information to select individuals within the committee and laid out rules for staff. As a precursor to the formal impeachment inquiry of President Clinton, the House agreed to H.Res. 525 during the 105 th Congress directing the Judiciary Committee to review the independent counsel's report to Congress to determine if impeachment proceedings were warranted. Section 4 of the resolution limited access to executive session material to the Judiciary Committee and employees designated by the chairman and ranking member—a more strict requirement than called for under House Rule XI. Notably, the resolution also made 445 pages of the independent counsel's report immediately available to the public and set a deadline by which the rest of the report would be released from its executive session status based on recommendations by the committee. Prior to the adoption of H.Res. 525 , House leadership reportedly discussed at length the issue of access to the independent counsel report by the public, the President, and Members of the House. Consideration of Articles of Impeachment on the House Floor Although floor consideration of an impeachment resolution largely resembles floor consideration of legislation, there is one difference regarding disorderly language: Under regular House procedures, it is not in order to use language that is personally offensive toward the President, which would include accusations that the President committed a crime or allusions to unethical behavior. During consideration of an impeachment resolution, however, remarks in debate can refer to the alleged misconduct of the President that is under consideration by the House. Members should still abstain from other language "personally offensive" to the President. Reported by the Judiciary Committee Articles of impeachment reported by the Judiciary Committee are privileged for immediate consideration on the House floor. The chair of the committee (or a designee) could call up the resolution containing the articles at any time other business is not pending, and the resolution would be considered immediately under the hour rule. Under this procedure, a majority of the House controls the length of debate and can prevent amendment. After some debate, the majority could vote to order the previous question, which, as mentioned above, brings the House to an immediate vote on the main question: whether to agree to the impeachment resolution, in this case. Passage is by simple majority vote. A motion to recommit the impeachment resolution, with or without instructions, would be in order after the previous question was ordered but before the vote on the resolution. This motion, however, would not be subject to debate. As is always the case, any instructions in the motion to recommit must be germane to the resolution. In the two most recent instances in which the House considered an impeachment resolution of a federal judge, the resolution was called up as privileged and debated for an hour, and no Member offered a motion to recommit. In both cases, a Member demanded a division of the resolution, which allowed the House to vote separately on each article of impeachment. When the House considered a resolution ( H.Res. 611 , 105 th Congress) to impeach President Clinton, the reported resolution was called up as a question of privilege. A unanimous consent request propounded by the majority floor manager that provided for four hours of debate on the resolution, equally divided, and 10 minutes of debate on a motion to recommit was objected to. The House then considered the resolution for several hours, as no Member moved the previous question, until another unanimous consent agreement was propounded and agreed to. This agreement allowed debate to continue until 10 p.m. that night and provided for an additional hour of debate the next day, a Saturday. It further provided that if a motion to recommit with instructions was offered, it would be debatable for 10 minutes. On the second day of consideration, after the previous question was ordered, a Member moved to recommit the impeachment resolution with instructions. The instructions proposed an amendment to censure the President. The Speaker, however, ruled that the amendment in the instructions was not germane. The House sustained the ruling of the Speaker by voting to table an appeal. A Member demanded a division of the resolution, and the House agreed to two of the four articles of impeachment under consideration. In the case of the Nixon impeachment proceedings, the full House never acted on a resolution of impeachment. As noted, President Nixon resigned before the Judiciary Committee reported its recommendation that the President be impeached. The House approved a resolution using the suspension of the rules procedure acknowledging that the Judiciary Committee had approved articles of impeachment, commending the members of the Judiciary Committee for their work, and providing for the printing of its report. Rather than considering an impeachment resolution under the hour rule, the House could also choose to consider an impeachment resolution under the terms of a resolution reported by the Rules Committee (a special rule). This process would operate in the same two-step way it does for major legislation in the House. The House would first debate the Rules Committee-reported resolution setting the terms for consideration of the impeachment resolution. The rule from the Rules Committee could provide for a particular length of debate, structure any amendment process, and potentially structure voting to allow each article to be voted on separately. It could preclude motions that would otherwise be in order under the hour rule, such as a motion to table the resolution. After the House agreed to the rule, it would then consider the impeachment resolution under the terms established by that rule. Finally, consideration and debate of an impeachment resolution could be governed by a unanimous consent agreement. The House might take up the resolution by unanimous consent or call it up as a question of privilege and change the terms of its consideration by unanimous consent, such as was described above in the case of the Clinton impeachment resolution. A unanimous consent agreement can structure consideration just like a special rule, but it is agreed to without a vote and usually with little or no floor debate. The major difference is that, procedurally, it is necessary for all Representatives to support a unanimous consent agreement, while only a simple majority is necessary to agree to a special rule. The fact that the same terms for consideration could be established through a rule can influence unanimous consent agreements. Offered on the Floor as a Question of the Privileges of the House As described in an earlier section of this report, any Member of the House could also offer on the floor a resolution containing articles of impeachment as a "question of the privileges of the House." Taking this action will not necessarily result in a direct vote on the articles of impeachment or even debate of the articles, because the House could choose instead to take a different action on the resolution, such as to refer it to the Judiciary Committee. To raise a question of the privileges of the House, a Member would take the following steps: Draft a resolution containing articles of impeachment. Consult with the Office of the House Parliamentarian to ensure that the resolution qualifies as a question of the privileges of the House. On the House floor, rise to give notice of intent to offer a question of the privileges of the House. The Member giving notice reads the draft resolution in full on the floor. (The majority and minority leader do not need to give notice; a question of the privileges of the House raised by either leader would be considered immediately.) The Speaker is required to schedule consideration of the question of the privileges of the House within two legislative days. At a time scheduled by the Speaker, rise to offer the resolution as a question of the privileges of the House. The Speaker will rule as to whether the resolution constitutes a proper question of the privileges of the House. If it does, the resolution will be assigned a number and will be pending before the House for consideration. A question of the privileges of the House is considered under the hour rule. Often, the House votes to dispose of such resolutions by referring them to committee or by tabling them. The House could also order the previous question to end debate on the resolution and then vote directly on it. However, the House has never impeached an officer without a committee investigation. Appointment and Role of House Managers in the Senate Trial After the House has agreed to articles of impeachment, it then appoints Members to serve as managers in the Senate trial. In recent practice, the House has appointed managers by agreeing to a House resolution. The House also, by resolution, informs the Senate that it has adopted articles of impeachment and authorizes the managers to conduct the trial in the Senate. The House could agree to separate resolutions or, as has been the case with recent impeachments, to a single resolution accomplishing each of these purposes. Such resolutions are privileged, and sometimes they have been taken up and agreed to by unanimous consent. After the Senate receives the resolution(s) from the House, the Senate informs the House when the managers can present the articles of impeachment to the Senate. At the appointed time, the House managers read the resolution authorizing their appointment and the resolution containing the articles of impeachment on the Senate floor and then leave until the Senate invites them back for the trial. At the trial, the House managers, who might be assisted by outside counsel, present evidence against the accused and could be expected to respond to the defense presented by the accused (or his or her counsel) or to questions submitted in writing by Senators. A full description of Senate procedures in an impeachment trial is beyond the scope of this report. The Senate has a special set of rules—agreed to in the 19 th century—that provide some guidance for impeachment trial proceedings. However, in modern practice the Senate has agreed to alternative or supplemental procedures both for judicial impeachment trials and the impeachment trial of President Clinton. The 19 th -century impeachment trial rules seemingly require a series of actions by the Senate upon the receipt of articles of impeachment from the House. The Senate, however, just like the House, can set aside its rules by, for example, agreeing to a simple resolution. Under the regular rules of the Senate that govern consideration of legislation, such a resolution would not be subject to any debate restrictions. As a result, in that circumstance, a cloture process, requiring the support of three-fifths of the Senate, would be necessary to reach a vote on the resolution. Once the Senate has convened as a Court of Impeachment, however, the impeachment trial rules, not the regular rules of the Senate, will apply. The Senate impeachment trial rules and related precedents restrict debate on many resolutions and motions. The debate restrictions could allow a simple majority to determine some procedures for responding to articles of impeachment sent from the House.

Under the U.S. Constitution, the House of Representatives has the power to formally charge a federal officer with wrongdoing, a process known as impeachment. The House impeaches an individual when a majority agrees to a House resolution containing explanations of the charges. The explanations in the resolution are referred to as "articles of impeachment." After the House agrees to impeach an officer, the role of the Senate is to conduct a trial to determine whether the charged individual should be removed from office. Removal requires a two-thirds vote in the Senate. The House impeachment process generally proceeds in three phases: (1) initiation of the impeachment process; (2) Judiciary Committee investigation, hearings, and markup of articles of impeachment; and (3) full House consideration of the articles of impeachment. Impeachment proceedings are usually initiated in the House when a Member submits a resolution through the hopper (in the same way that all House resolutions are submitted). A resolution calling for the impeachment of an officer will be referred to the Judiciary Committee; a resolution simply authorizing an investigation of an officer will be referred to the Rules Committee. In either case, the committee could then report a privileged resolution authorizing the investigation. In the past, House committees, under their general investigatory authority, have sometimes sought information and researched charges against officers prior to the adoption of a resolution to authorize an impeachment investigation. Impeachment proceedings could also be initiated by a Member on the floor. A Member can offer an impeachment resolution as a "Question of the Privileges of the House." The House, when it considers a resolution called up this way, might immediately vote to refer it to the Judiciary Committee, leaving the resolution in the same status as if it had been submitted through the hopper. Alternatively, the House might vote to table the impeachment resolution. The House could also vote directly on the resolution, but in modern practice, it has not chosen to approve articles of impeachment called up in this fashion. Instead, the House has relied on the Judiciary Committee to first conduct an investigation, hold hearings, and report recommendations to the full House. Committee consideration is therefore typically the second stage of the impeachment process. In recent decades, it has been more common than not that the Judiciary Committee used information provided from another outside investigation. The committee might create a task force or a subcommittee to review this material and collect any other information through subpoenas, depositions, and public hearings. Impeachment investigations are governed by the standing rules of the House that govern all committee investigations, the terms of the resolution authorizing the investigation, and perhaps additional rules adopted by the committee specifically for the inquiry. If the committee determines that impeachment is warranted, it will mark up articles of impeachment using the same procedures followed for the markup of other legislation. If the Judiciary Committee reports a resolution impeaching a federal officer, that resolution qualifies for privileged consideration on the House floor; its consideration is the third stage of the impeachment process. The resolution can be called up at the direction of the committee and considered immediately under the hour rule in the House. If called up this way, amendments could be precluded if a majority voted to order the previous question. A motion to recommit, with or without instructions, is in order but is not subject to debate. Alternatively, the House might alter these procedures by unanimous consent to, for example, set a longer time for debate or to allow brief debate on a motion to recommit. A resolution reported from the Rules Committee could also be used to structure floor debate. If the House approves the impeachment resolution, it will appoint managers to present and argue its case against the federal officer in front of the Senate.

GAO_GAO-19-698

Background Types of Missions Conducted by EOD Forces The military services – Army, Navy, Air Force, and Marine Corps – have highly trained EOD personnel to eliminate explosive hazards in support of a variety of events and activities, ranging from major combat operations and contingency operations overseas to assisting the Secret Service in its protection of the President of the United States (see fig.1). EOD forces are dispersed worldwide to meet combatant commanders’ operational requirements related to these missions. Although the services’ EOD forces support combatant commanders, NORTHCOM’s Joint Force Headquarters-National Capital Region coordinates EOD force support of land-based homeland defense and DSCA missions. EOD forces conduct combat-related and DSCA missions that support national military objectives. EOD combat-related missions include preparations for combat such as training and exercises, and the wartime execution of EOD missions. EOD forces play a major role in all phases of combat operations. For example, these forces contribute to information gathering during operations and serve to enable the safe conduct of operations within an operational area. Additionally, EOD forces support freedom of maneuver and force protection. Further, they may directly support missions such as counterterrorism, deterring and defeating aggression, and countering weapons of mass destruction, among others across the spectrum of operations. Officials from each service stated that EOD forces prepare for these combat-related missions during predeployment in-garrison periods. EOD forces also conduct DSCA missions when they are not engaged in combat-related missions. DOD provides EOD forces when requested in advance by specific federal agencies and approved by the appropriate DOD official. Officials stated that generally, EOD forces undertake VIP support missions during in-garrison periods, just after returning from combat-related deployments or while preparing for the next deployment. DOD Guidance and Processes Related to EOD Manpower and Risks The military services collectively have more than 6,300 EOD positions to fulfill combatant command missions, and demand for EOD manpower and expertise is high. Each service determines the number of EOD technicians it needs based on its respective requirements, which consider combatant commanders’ wartime missions and plans. According to a DOD official, the services take into account the long lead times—up to 3 years in one service—that can be necessary to produce qualified and experienced EOD specialists. In accordance with DOD policy, when considering EOD wartime requirements, service officials should make certain that national military objectives can be accomplished using a minimum of manpower that produces maximum combat power. DOD policy also states that a formal validated process is to be used to determine wartime manpower requirements. Generally, manpower requirements are the amount of personnel needed to accomplish a job, mission, or program. Joint doctrine outlines mission tasks associated with EOD units. Once a service determines the tasks required of a particular community (such as EOD), the service then sizes its forces (i.e., determines the manpower requirement) according to the demand for those tasks among the combatant commands. Risk is the effect of uncertainty on objectives with the potential for either a negative outcome or a positive outcome or opportunity. In the military, accurately appraising risk allows leaders and staffs to manage and communicate risk effectively to inform decisions across disparate processes. Joint doctrine describes a planning process that aligns resources and military activities, and enables leaders to examine risks, among other factors, to determine a preferred course of action to achieve an objective. Planning for EOD involves military manpower systems that accurately determine the required EOD forces and decision makers who decide how much risk is acceptable if or when there is a shortfall of EOD forces. According to DOD doctrine on joint planning, regardless of the efforts to mitigate it, some level of risk will remain and should be identified to senior leaders so there is a common understanding of the decisions required and the potential effects of those decisions. Commanders must include a discussion of risk in their interaction with DOD senior leaders and that discussion must be in concrete terms that enable and support decision- making. In the context of strategic and military risk evaluation during joint planning, combatant commanders and DOD’s senior leaders work together to reach a common understanding of risk, decide what risk is acceptable, and minimize the effects of accepted risk by establishing appropriate risk controls. Military Services’ Processes for Determining EOD Manpower Levels Focus on Combat- Related Missions, but Do Not Consider the Increasing Demand for Some DSCA Missions The military services’ processes for determining EOD manpower levels are based on combat-related missions and, accordingly, do not fully consider DSCA missions. However, DOD provides EOD resources for various DSCA missions such as: aiding in the protection of the President of the United States and dignitaries through VIP support missions; providing assistance to law enforcement agencies and other civil authorities in the United States and its territories when necessary to save lives under DOD’s immediate response authority; and rendering safe military munitions when requested by civil authorities (see fig. 2). EOD and manpower officials from each of the military services explained that, in practice, their respective services focus on combat-related missions and do not consider DSCA missions in determining the number of EOD personnel needed. Specifically: According to Army officials, the Total Army Analysis process that is used to size Army forces considers core functions for combat operations and warfighting requirements. They explained that this process does not consider DSCA requirements in determining the number of EOD forces needed. In Army guidance, manpower is based on wartime missions and wartime requirements for sustained combat operations, among other types of information. Due in part to force structure adjustments and the drawdown of EOD forces, since 2014, according to information provided by the Army, the Army has reduced more than 800 EOD positions, the equivalent of two EOD battalions and 13 EOD companies. According to Navy officials, the Navy makes manpower decisions with a focus on wartime requirements by analyzing required operational capabilities against the projected operational environment. In Navy manpower guidance, this analysis is critical to developing fleet manpower requirements for units such as EOD forces. Navy officials explained that the process does not consider the DSCA mission in determining EOD manpower. The Air Force’s EOD manpower standard, which has been updated through 2013, is based on in-garrison needs and wartime requirements. In Air Force manpower guidance, manpower is described as a critical resource that enables combat capability; the guidance further notes that manpower requirements are identified and resources are subsequently allocated for peacetime and wartime missions. However, Air Force officials stated that the process focuses on results for combat-related missions and does not specifically include DSCA requirements. According to Marine Corps officials, the Marine Corps’ EOD forces are sized to support Marine Expeditionary Forces for deployment for overseas combat operations. The Marine Corps’ manpower guidance describes a force structure process designed to identify and provide the capabilities, including personnel and equipment, necessary to accomplish mission essential tasks. Marine Corps officials stated that the service does not receive additional EOD manpower specifically for DSCA missions. Although service manpower calculations do not reflect DSCA missions, one of the DSCA missions—VIP support—is manpower intensive and occurs frequently. Specifically, the workload for VIP support can be substantial and has increased from about 248,000 man-hours in fiscal year 2007 to over 690,000 man-hours in fiscal year 2017. According to a NORTHCOM official, this rise is due to an increase in the different types and complexity of threats requiring more EOD personnel to sufficiently support civil authorities. Figure 3 below illustrates the increase in the amount of time the EOD forces have spent on VIP support missions. The military services have a long-standing practice of providing support to civil authorities, including EOD support. DOD support to civil authorities is grounded or reflected in statute and DOD guidance. For example, the Presidential Protection Assistance Act of 1976 requires executive agencies, including DOD, to assist the Secret Service on a temporary basis in protecting the President, the Vice President and other persons— such as visiting foreign dignitaries (see fig.4). In addition, the National Military Strategy and current homeland defense strategy prioritize defending the homeland and providing support to civil authorities. Moreover, DOD guidance addresses DSCA generally as well as specific support to the Secret Service, Department of Homeland Security, and law enforcement. Further, the Secretary of Defense approved a Joint Staff standing execute order (EXORD) which is used to execute routine VIP support missions related to the protection of dignitaries on short notice. This order authorizes NORTHCOM to provide EOD support to the Secret Service and U.S. Department of State within the NORTHCOM area of operations, and to coordinate that support at locations worldwide. Joint doctrine for EOD also lists DSCA as one of nine military missions that EOD forces may directly support, and states that the majority of EOD DSCA missions will be in support of law enforcement or emergency support agencies. Finally, the military services’ Inter-Service Responsibilities for Explosive Ordnance Disposal lists several common responsibilities of the military services’ EOD assets that include providing support to civilian agencies such as the Secret Service. While the DSCA mission is emphasized in departmental guidance and support of civil authorities has placed increasing and significant demands on EOD forces, the military services do not fully consider these factors in determining the appropriate number of EOD forces. According to EOD officials, this is because the primary mission of EOD forces is to conduct combat missions in support of combatant commanders and meet operational plans. Service officials stated that DSCA missions are not priority missions when it comes to sizing their respective forces, and that they do not routinely increase EOD manpower in order to provide support to other federal agencies. Standards for Internal Control in the Federal Government state that management should design control activities to achieve objectives and respond to risks. Specifically, management should ensure policies and procedures are relevant and effective in achieving an entity’s objectives. In addition, the standards state that management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives. Quality information is information that is appropriate, current, complete, accurate, accessible, and provided on a timely basis. DOD manpower policy states that manpower management shall be flexible, adaptive to program changes, and responsive to new management strategies, and that existing policies, procedures, and structures shall be periodically evaluated to ensure efficient and effective use of manpower resources. However, the military services’ current processes for determining the appropriate amount of EOD manpower do not fully account for the increase in DSCA missions requiring EOD support. While it is understandable that the services prioritize combat missions when determining EOD requirements, they are not considering all available information in their decision-making process. This lack of consideration limits their ability to efficiently and effectively achieve their objectives and manage risks. Accounting for the increase in EOD manpower demand may not necessarily result in an increase in manpower; however, the services will be better prepared to understand the demand on existing EOD forces and evaluate any resulting risks. Ultimately, unless the military services update appropriate guidance to ensure that they consider the total EOD force required to support combat-related and DSCA missions, decision makers cannot accurately assess the sufficiency of EOD forces to meet both missions and the associated risks. DOD Cannot Evaluate the Effects of VIP Support Missions on Military Preparedness Because the Services Are Not Required to Notify Decision Makers DOD cannot evaluate the effects of VIP support missions on military preparedness because current VIP support mission guidance does not require the military services to notify the Joint Staff and appropriate combatant commands when military preparedness is negatively affected by these missions. According to officials from the military services, the execution of VIP support missions introduces risk that threatens the services’ abilities to execute combat-related missions. Specifically, military preparedness is degraded when the services’ EOD forces are unable to concurrently complete predeployment tasks, such as training for combat, because the forces are called upon to execute routine VIP support missions. Officials told us that EOD forces can only conduct these VIP support missions during the time period when EOD forces are scheduled to conduct predeployment tasks and accomplish training. As a result, according to officials, VIP support missions can deleteriously affect military preparedness for EOD forces. In multiple instances, missions supporting civil authorities have stressed the Army’s EOD capabilities, resulting in missed training and the inability to participate in exercises and activities supporting combat-related missions, according to statements and data provided by the Army. Furthermore, fulfilling VIP support missions can be particularly difficult because short-notice demand for EOD teams often exceeds the planned VIP support demand that can be supported. As a result, Army EOD teams are sometimes dispatched at the expense of military preparedness for combat-related missions in support of combatant commands, according to Army officials. Specific details of the effect recent VIP support missions have had on the Army’s EOD capabilities are included in our July 2019 restricted report. Officials from other services also acknowledged that undertaking routine VIP support missions comes at the expense of training for combat-related missions because of the high demand for and limited number of EOD forces. According to a senior Navy official, that service has sometimes refused mission requests to protect dignitaries because of its inability to meet operational demands, such as deployments and training for its EOD forces and support missions to protect dignitaries simultaneously. When this occurs, however, NORTHCOM will ask another service to accept the mission, thereby putting increased demand on that other service’s EOD forces that, in turn, may conflict with their scheduled training and preparations for combat missions, according to military service officials. Because NORTHCOM has few permanently assigned forces to conduct VIP support missions, it must instead rely on EOD forces from each of the military services that are in-garrison and preparing for but not currently deployed to a combat-related mission. According to DOD guidance, DOD’s ability to grant Secret Service requests for support is to be evaluated based on a number of factors, one of which is the effect on military preparedness. For example, DOD Directive 3025.18, Defense Support of Civil Authorities (DSCA), specifies that requests from civil authorities for assistance shall be evaluated for several factors, including the impact on DOD’s ability to perform its other primary missions. The guidance also provides that the Chairman of the Joint Chiefs of Staff is responsible for advising the Secretary of Defense on the effects of requests for civil support on national security and military readiness. According to joint doctrine, a commander’s tasks associated with the function of command and control include managing risk—such as that arising from EOD support for other agencies protecting dignitaries—as well as communicating and ensuring the flow of information across the staff and joint force, and to higher authorities. Additionally, in the context of evaluating strategic and military risk during joint planning, combatant commanders and senior DOD leaders work together to reach a common understanding of risk, decide what risk is acceptable, and minimize the effects of accepted risk. The Standards for Internal Control in the Federal Government also addresses the importance of an entity using quality information to achieve its objectives. Specifically, management should use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. As previously mentioned, the Joint Staff has issued a Secretary of Defense-approved EXORD that provides guidance for the military to provide EOD support to the Secret Service and Department of State for routine VIP support missions. However, this EXORD does not specify a requirement for the services to notify DOD stakeholders regarding the effect on military preparedness for combat missions. As a result, the military services are not advising the Joint Staff or NORTHCOM when these VIP support missions are adversely affecting EOD military preparedness for combat-related missions. Regarding military preparedness, the absence of a notification requirement precludes decision makers from understanding the risk to EOD forces’ ability to perform their primary mission. Decision makers need this information to carry out their responsibilities and assess risk to ensure efficient and effective accomplishment of both VIP support missions and preparation for combat-related missions for combatant commands. Conclusions The military services’ EOD forces provide the combatant commanders necessary capabilities for combat and combat-related missions. They also provide capabilities through their DSCA missions that are important to supporting U.S. law enforcement agencies and other federal, state, and local civil authorities. DOD has manpower processes that result in careful consideration of the requirements of the combatant commander for combat-related missions. However, those manpower processes do not fully consider DSCA missions, such as the VIP support mission and its accompanying substantial workload. Until DOD processes begin to consider the demand for EOD support for both types of missions, decision makers cannot know the complete manpower requirement for EOD. Consequently, the extent to which the services’ EOD forces are sufficient or insufficient to meet national military objectives cannot be fully known. Furthermore, DOD lacks a requirement in guidance specific to the VIP support mission to notify stakeholders regarding the effects of such missions on military preparedness for combat-related missions. As a result, DOD may not be fully considering risks associated with the use of EOD forces for VIP support on the preparation and training of those forces for combat-related missions. Recommendations for Executive Action We are making the following four recommendations to DOD. The Secretary of the Army should update Army manpower guidance, or other guidance as appropriate, to ensure that all missions conducted by EOD forces, including DSCA missions, are considered in determining the required number of EOD forces. (Recommendation 1) The Secretary of the Air Force should update Air Force manpower guidance, or other guidance as appropriate, to ensure that all missions conducted by EOD forces, including DSCA missions, are considered in determining the required number of EOD forces. (Recommendation 2) The Secretary of the Navy should update Navy and Marine Corps manpower guidance, or other guidance as appropriate, to ensure that all missions conducted by EOD forces, including DSCA missions, are considered in determining the required number of EOD forces. (Recommendation 3) The Secretary of Defense should ensure that the Chairman of the Joint Chiefs of Staff, in collaboration with the combatant commands, incorporate into the appropriate guidance a requirement that the military services notify the Joint Staff and the affected combatant commands when the execution of VIP support missions negatively affects the preparedness of EOD units for combat-related missions. (Recommendation 4) Agency Comments We provided a draft of this report to DOD for review and comment. DOD did not provide comments. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Secretaries of the Army, Navy, and Air Force. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. Appendix I: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Guy LoFaro, (Assistant Director), Ben Atwood, Naba Barkakati, Christopher Gezon, Amie Lesser, Dennis Mayo, Paulina Reaves, Michael Silver, Michael Shaughnessy, Stephen Woods, and Lillian Yob made contributions to this report.

EOD forces are a high demand, critical asset that support DOD's ability to execute military operations. DOD increased the number of EOD forces by more than 70 percent from 2002 to 2012 because of increased demand. When not deployed, EOD forces provide support to civil authorities. One of these missions is protecting U.S. and foreign dignitaries—also referred to as VIP support missions. House Report 115-200 included a provision for GAO to review matters related to EOD capabilities and requirements. This report assesses the extent to which (1) the military services consider all combatant command EOD requirements, including DSCA, in determining the number of EOD personnel needed, and (2) DOD evaluates the effect of VIP support missions on the military preparedness of EOD forces. GAO reviewed relevant guidance, analyzed EOD data, and interviewed EOD and manpower officials. This is a public version of a sensitive report that GAO issued in July 2019. Information that DOD deemed sensitive has been omitted. The military services' processes for determining the necessary number of explosive ordnance disposal (EOD) personnel are based on combat-related missions. However, these processes do not fully consider some defense support of civil authority (DSCA) missions that EOD forces conduct. Demand for EOD forces for DSCA missions can be manpower-intensive and frequent. For example, EOD forces' workload for protecting U.S. and foreign dignitaries—also referred to as Very Important Person (VIP) support missions—increased from about 248,000 to over 690,000 man-hours in fiscal years 2007 to 2017 (figure). However, according to officials, the services do not consider DSCA missions in determining the number of EOD personnel needed, instead focusing on combat-related missions. Unless the Department of Defense (DOD) ensures that the services update guidance to consider the total EOD force required to support both missions, decision makers cannot accurately assess the EOD forces' sufficiency. DOD guidance specific to VIP support missions does not include a requirement for the services to report on the effect of VIP support missions on military preparedness. According to officials, military preparedness is degraded when the services' EOD forces are unable to concurrently complete predeployment tasks such as training for combat. Per DOD guidance, Secret Service support requests are to be evaluated based on their effects on military preparedness. Without this information, decision makers are precluded from understanding the risk to EOD forces' military preparedness resulting from the routine VIP support missions. Decision makers need this information to ensure efficient and effective accomplishment of both VIP support missions and preparation for combat-related missions for affected combatant commands.

GAO_GAO-20-36

Background Immigration Enforcement Priorities Priority Enforcement Program. Under PEP, which was in effect from January 5, 2015 until February 20, 2017, DHS personnel were directed to, among other things, prioritize the apprehension, detention, and removal from the United States of aliens who pose a threat to national security, border security, and public safety, including convicted felons. It further directed DHS personnel to prioritize for removal new immigration violators and those who had been issued a final order of removal on or after January 1, 2014 and to exercise prosecutorial discretion, as appropriate, in accordance with these priorities and existing guidance. A 2011 ICE memorandum identified factors to consider when exercising prosecutorial discretion, such as the length of the individual’s presence in the United States, whether the person or person’s immediate relative has served in the U.S. military, on the basis of humanitarian reasons such as personal or family illness, among other factors. Executive Order 13768. Executive order 13768, issued on January 25, 2017, focuses on immigration enforcement within the United States. Among other things, the executive order lays out the administration’s immigration enforcement priorities for removable aliens. Specifically, the executive order prioritizes for the removal from the United States aliens who are removable based on certain criminal and security grounds in the Immigration and Nationality Act; as well as removable aliens who have been convicted of, charged with, or committed acts that constitute a criminal offense; have engaged in fraud or otherwise abused any government program; or who are determined to otherwise pose a risk to public safety or national security. In addition, it calls for the termination of the PEP and reinstitution of Secure Communities. See table 1 for a description of enforcement priorities for the removal of aliens from the United States under PEP and Executive Order 13768. The Secretary of Homeland Security issued the 2017 DHS memo to implement Executive Order 13768. According to the 2017 DHS memo, in addition to the priorities outlined in the executive order, the Director of ICE, Commissioner of CBP, and Director of U.S. Citizenship and Immigration Services may allocate resources to prioritize enforcement activities as they deem appropriate, such as by prioritizing enforcement actions against convicted felons or gang members. ICE issued a memo further directing efforts to implement the executive order and apply the guidance from the 2017 DHS memo. The ICE memo stated that ICE was to review all existing policies and guidance documents and revise or rescind relevant policies in order to ensure consistency with the executive order. In addition, ICE’s Office of the Principal Legal Advisor (OPLA) issued additional guidance to OPLA attorneys to implement the 2017 DHS memo. OPLA is responsible for providing legal advice, training, and services to support the ICE mission, and for defending the interests of the United States in the administrative and federal courts including immigration court proceedings. See figure 1 for a timeline of DHS memoranda and Executive Order establishing immigration enforcement priorities from 2015 to 2018. Prosecutorial Discretion. Prosecutorial discretion is the longstanding authority of an agency charged with enforcing a law to decide where to focus its resources and whether or how to enforce, or not to enforce, the law against an individual. Due to limited resources, ICE cannot respond to all immigration violations or remove all persons who are determined to be in the United States without legal status, and therefore, must exercise prosecutorial discretion in the enforcement of the law. In accordance with the DHS, ICE, and OPLA memos, agents and officers are to exercise prosecutorial discretion on a case-by-case basis based on the individual facts presented in consultation with the head of the field office, and prosecutorial discretion is not to be exercised in a manner that exempts or excludes a specified class or category of foreign nationals from enforcement of the immigration laws. Agency Roles and Responsibilities ICE’s ERO conducts civil immigration enforcement actions, which includes administrative arrests, detentions, and removals. Arrests. ERO arrests aliens for civil violations of U.S. immigration laws. Through the Criminal Alien Program, ICE identifies and arrests potentially removable aliens who are incarcerated within federal, state, and local prisons and jails. The National Fugitive Operations Program identifies and arrests removable aliens who are at-large. ICE does not detain all aliens it arrests, due to lack of bed space, among other factors. To inform custody decisions for aliens who are arrested and not subject to mandatory detention, ICE guidance requires officers to consider certain factors, including risk of flight, risk of harm to public safety, and special vulnerabilities. For example, individuals with a physical or mental illness or disability, or individuals who fear being harmed in detention based on their sexual orientation or gender identity may be considered for release or alternatives to detention (ATD) based on these special vulnerabilities. The ATD program requires that, among other things, aliens released into the community agree to appear at all hearings and report to ICE periodically. Non-detained Unit. ERO is also responsible for supervising and ensuring that aliens who are not held in detention facilities comply with requirements to appear in immigration court for their administrative removal proceedings. ICE uses one or more release options when it determines that an alien can be released from ICE custody—including bond, order of recognizance, order of supervision, parole, and on condition of participation in the ATD program. Total ATD enrollment numbers ranged from about 29,000 in calendar year 2015 to over 78,000 in calendar year 2018. ICE does not track specific characteristics of individuals enrolled in ATD programs, including aliens who are pregnant, nursing, disabled, elderly, primary caregivers of minor children, among others. ICE may also release aliens on bond or an order of recognizance who do not pose a threat to public safety, present a low risk of flight, and who are not required to be detained. In addition, in rare instances, ICE may release an alien on an order of supervision when there is no significant likelihood of removal in the reasonably foreseeable future. For example, ICE may not be able to coordinate travel arrangements for certain aliens with final orders of removal who are from countries with which the United States does not have repatriation agreements. An alien subject to a final order of deportation or removal may also request a stay of deportation or removal. ICE may also release certain aliens on parole for urgent humanitarian reasons or significant public benefit, or for a medical emergency or legitimate law enforcement objective, on a case-by-case basis. Detentions. ICE is responsible for providing safe, secure, and humane confinement for detained aliens in the United States who may be subject to removal while they await the resolution of their immigration cases or who have been ordered removed from the United States. This includes aliens transferred to ICE from CBP who were apprehended at or between ports of entry. In fiscal year 2019, ERO oversaw the detention of aliens in 147 facilities authorized to house detainees for over 72 hours. ICE manages these facilities in conjunction with private contractors, state and local governments, and through contract with another federal agency. Within ERO, ICE Health Service Corps (IHSC) is responsible for providing direct medical, dental, mental health care, and public health services to detainees in 20 facilities authorized to house detainees for over 72 hours. Facilities serviced by IHSC include service processing centers, contract detention facilities, dedicated intergovernmental service agreement facilities, and family residential centers. IHSC medical staff are to monitor and implement policy provisions related to pregnant and mentally ill detainees. At detention facilities that are not staffed with IHSC personnel, similar services are provided by local government staff or private contractors and overseen by ICE. Removals. ICE removes aliens who have been determined to be removable and not eligible for any requested relief or protection pursuant to an administrative final order of removal. A removal is defined as the compulsory and confirmed movement of an inadmissible or deportable alien out of the United States. ICE removals include both aliens arrested by ICE and aliens who were apprehended by CBP and transferred to ICE. ERO operates across 24 areas of responsibility nationwide and each area of responsibility is led by a field office director. Each ERO field office director is required by ICE policy to designate supervisory level employees to serve, as a collateral duty, as field liaisons for their area of responsibility tasked with monitoring and implementing the provisions of policies for certain selected populations. These field liaison roles include the LGBTI Field Liaison, Child Welfare Field Point of Contact, Supporting Disability Access Coordinator, and Juvenile Coordinator. In addition to ERO and OPLA, ICE Homeland Security Investigations (HSI) conducts worksite enforcement operations among other law enforcement operations such as oversight of the Student and Exchange Visitor program. This includes arresting undocumented workers and employers who knowingly hire them. We did not include HSI worksite enforcement arrests in our analysis of ICE arrest data because we were unable to identify the number of unique arrests in these data for the purpose of depicting general arrest trends. ERO Arrests, Detentions, and Removals Varied during Calendar Years 2015 through 2018, Increasing Overall ERO arrests, detentions, and removals varied during calendar years 2015 through 2018, and increased overall for the period, as shown in figure 2. Specifically, males, aliens from four countries—Mexico, Guatemala, El Salvador, and Honduras—and convicted criminals accounted for the majority of ICE arrests and removals. The majority of ICE detentions were made up of males, aliens from the same four countries, and non- criminals. See appendix II for additional information on ERO arrests, detentions, and removals by gender, country of citizenship, arresting agency, and criminality. ERO Arrests. The number of ERO arrests varied from calendar years 2015 through 2018 but increased overall from 112,870 in 2015 to 151,497 in 2018, see figure 2 above. Male aliens, citizens of four countries— Mexico, Guatemala, El Salvador and Honduras—and arrests of aliens from state and local jails, through the Criminal Alien Program, accounted for the majority of these arrests each year from 2015 through 2018. Further, ERO arrests increased in all ERO areas of responsibility from calendar years 2015 and 2016, when PEP was in effect, to calendar years 2017 and 2018, following implementation of the 2017 DHS memo. Arrests of convicted criminals accounted for the majority of arrests in all areas of responsibility during both periods. However, as shown in figure 3, the proportion of arrests of convicted criminals decreased in each area of responsibility due to an increased number of arrests of non-criminals following the implementation of the 2017 DHS memo. See appendix II for additional information on ERO arrests by gender, country of citizenship, arresting agency, and criminality. ERO Detentions. The number of ERO detentions varied from calendar years 2015 through 2018 but increased overall from 324,320 in 2015 to 438,258 in 2018. Male aliens and citizens of four countries—Mexico, Guatemala, El Salvador and Honduras—collectively accounted for most ERO detentions. The majority of detentions resulted from CBP arrests at or between ports of entry. While the number of ERO detentions of convicted criminals stayed relatively stable from 2015 to 2018, the number of detentions of non-criminals increased from 171,856 in 2015 to 279,469 in 2018 and accounted for the majority of ERO detentions each year, as shown in figure 4. See appendix II for additional information on detentions by gender, country of citizenship, arresting agency, and criminality. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” According to ICE officials, administrative arrests of non-criminals include individuals who have been charged but not convicted of a crime as well as those with no prior criminal history. According to ICE, ICE officers electronically request and retrieve criminal history information about an alien from the FBI’s National Crime Information Center database, which maintains a repository of federal and state criminal history information, and other sources. We used ICE’s determination of criminality for our analysis. ERO Removals. The number of ERO removals varied from calendar years 2015 through 2018 but increased overall from 231,559 in 2015 to 261,523 in 2018. Male aliens and citizens of four countries—Mexico, Guatemala, El Salvador and Honduras—collectively accounted for most ERO removals. The majority of removals resulted from CBP arrests at or between ports of entry. While removals of both convicted criminals and non-criminals increased overall, removals of convicted criminals accounted for the majority of removals each year, see figure 5. See appendix II for additional information on removals by gender, country of citizenship, arresting agency and criminality. ICE Has Operational Policies for Certain Selected Populations, and Revised Its Policies As Needed to Align with the 2017 DHS Memo According to ICE officials, in early 2018, ERO conducted a review of all existing policies and related documents to help ensure alignment with the 2017 DHS memo, resulting in operational policies related to six of the eight selected populations discussed in this report. The six policies in effect as of July 2019 for the selected populations provide direction and guidance to ERO officers on the identification, detention, care, and removal of aliens who are: individuals with mental disorders, transgender, individuals with disabilities, parents of minors, pregnant, and juveniles. Of the six policies in effect, three were not impacted by the 2017 DHS memo and ERO did not make changes to these policies; two were impacted by the 2017 DHS memo and were revised to remove language ERO determined to be inconsistent with the memo; and guidance on managing juveniles was first issued after the 2017 DHS memo. For the remaining two populations, ERO does not have a separate policy on care provided to detainees who are nursing and as a result of the policy review, rescinded a prior policy related to exercising prosecutorial discretion for elderly individuals, as shown in figure 6. Individuals with Mental Disorders. In May 2014, ICE issued a memo titled Identification of Detainees with Serious Mental Disorders or Conditions, which sets forth procedures to assist ICE and detention facility personnel in identifying detainees with serious mental disorders or conditions in order to assess appropriate facility placement and treatment. To identify individuals with mental disorders, ICE’s national detention standards require facilities to conduct an initial medical screening for all detainees, including a documented mental health screening, a 14-day full medical assessment, with mental health components, and timely referral for follow-up mental evaluations, diagnosis, and treatment. ICE’s policy also requires detention facilities to notify ICE field office directors of detainees with specified serious mental disorders. In addition, the policy requires that relevant personnel meet regularly to monitor the cases of detainees with serious mental disorders until their removal or release. ERO officials in all six areas of responsibility we visited said that these meetings are conducted weekly or biweekly with attorneys, medical staff, and ERO management staff to discuss and evaluate the needs of each detainee’s medical care and security needs. According to ICE, this memo did not need to be revised to align with the 2017 DHS Memo. Our analysis of ICE data shows that the number of detentions of individuals with mental disorders at IHSC-staffed facilities varied from calendar years 2015 through 2018 but increased overall from 8513 to 8796 individuals. Transgender Individuals. In June 2015, ICE issued a memo titled Further Guidance Regarding the Care of Transgender Detainees, which provides guidance regarding the placement and care of transgender adult detainees in ERO custody. This memo provides guidance for initial processing of transgender detainees who voluntarily disclose their gender identity to detention officers. Further, when a detainee self-identifies as transgender, the memo directs ERO officers to make individualized placement determinations to ensure the detainee’s safety, and to ensure the facility chosen for placement is able to provide appropriate care for the individual, and to the extent practicable to consider the availability of medical personnel who have experience providing care and treatment to transgender detainees, including the delivery of hormone therapy. This memo also directs ERO to designate a National LGBTI Coordinator to serve as the primary point of contact and subject matter expert for ERO regarding the care and treatment of detainees in ERO custody who self- identify as transgender. Specifically, the National LGBTI Coordinator is to evaluate and report information from all relevant ICE data systems regarding the demographics, care, and custody of transgender detainees and ensure field compliance with the provisions of this memo, among other things. Further, each field office is required to have a LGBTI Field Liaison, appointed by the Field Office Director. The memo directs LGBTI Field Liaisons to provide regular updates to the national ERO LGBTI Coordinator and ERO Headquarters on the progress of implementing and maintaining the provisions of this memo, which includes determining the appropriateness of facilities to house transgender detainees. In addition, the memo requires certain detention facilities to convene a meeting no later than 72 hours after a transgender detainee’s arrival to the facility to assess medical, psychological, and housing needs. During our site visits, officers in three of the six areas of responsibility we visited said that they conduct these meetings with relevant ERO management staff and medical officials in accordance with the memo. According to ICE officials, the transgender care memo did not need to be revised to align with the 2017 DHS Memo. The transgender care memo states that field office directors may exercise prosecutorial discretion for transgender individuals who are not subject to mandatory detention. Field ERO officers in five of the six areas of responsibility we visited explained that ERO generally does not detain transgender individuals unless their criminal histories warrant detention, in accordance with the memo. Specifically, officers in three of these five areas of responsibility reported that transgender individuals are likely to be released on bond or under an order of supervision. However, in the sixth area of responsibility, one ERO officer observed an increase in the detention of transgender individuals beginning in early 2017, which the official attributed to the revised priorities described in the 2017 DHS memo. In addition, attorneys from three NGOs we met with also observed an increase in the detention of transgender individuals or described ongoing challenges related to a decrease in the availability of dedicated transgender housing facilities. They also provided anecdotes of transgender clients who had been detained or who experienced challenges obtaining access to appropriate medical care while in detention. Our analysis of ICE data shows that the number of detentions of transgender individuals increased from 237 in calendar year 2016 to 284 in calendar year 2018. While ICE does not have separate policies for aliens who are lesbian, gay, bisexual, or intersex, the national LGBTI coordinator and LGBTI field liaisons also serve as subject matter experts for the care and treatment of these detainees. In addition, the transgender care memo prohibits discrimination or harassment of any kind based on a detainee’s sexual orientation or gender identity. As such, ERO officers may take steps to protect a detainee who expresses safety concerns based on their sexual orientation, according to ERO officials. According to ERO officers in five of the six areas of responsibility we visited, they do not ask detainees about sexual orientation unless the individual voluntarily discloses this information. Additionally, ERO officers in the same five areas of responsibility stated that they do not take sexual orientation into consideration for detention or housing decisions, unless an individual specifically requests protective custody due to safety concerns or harassment. Individuals with Disabilities. In December 2016, ERO issued a directive titled Assessment and Accommodations for Detainees with Disabilities, which establishes policy and procedures for ERO to oversee and communicate with detention facilities on the identification, assessment, and accommodation of detainees with disabilities. According to this directive, ERO field leadership is to notify detention facilities in each area of responsibility of their existing obligations under federal law to accommodate detainees with disabilities. These obligations include maintaining a process to identify these detainees through observation, assessments, screenings, and self-identification; notifying detainees of their right to request accommodations; and establishing a process to inform a detainee of the final decision on the request for accommodations, including whether the facility will provide alternative accommodations that are equally effective as those requested; among other things. In addition, this directive requires ERO to designate an ERO disability access coordinator who is to serve as the primary point of contact and subject matter expert for ERO headquarters and the field regarding the accommodation of, and communication with, detainees with disabilities in ERO custody. Among other duties, the ERO disability access coordinator is responsible for evaluating information from all relevant ICE data systems regarding the identification, care, approved accommodations and custody of detainees with disabilities; as well as maintaining records of detainees with communication and mobility impairments, including records of denials of detainee requests for accommodations by facilities. According to the directive, detainees with communication impairments include detainees with hearing, visual, and speech impairments (e.g., detainees who are deaf or hard of hearing, blind, or nonverbal). Detainees with mobility impairments include detainees with physical impairments who require a wheelchair, crutches, prosthesis, cane, other mobility device, or other assistance. Accommodations for these impairments may include accessible showers, Braille material, or note takers for persons with physical and sensory impairments, among other things. The ERO disability access coordinator is also responsible for helping to ensure compliance with the provisions of this directive. Field office directors are required to appoint at least one supervisory-level employee to serve as the supporting disability access coordinator for each area of responsibility. Supporting disability access coordinators are responsible for serving as the main point of contact for their field office regarding compliance with federal law and DHS, ICE, and ERO regulations, detention standards, policies, and procedures related to detainees with disabilities. Supporting disability access coordinators are also responsible for collaborating and communicating with ERO headquarters, field office, detention facility, and health care personnel to monitor the care and treatment of detainees with disabilities, among other things. In all six areas of responsibility we visited, supporting disability access coordinators and medical staff told us that they track detainees who receive accommodations for communication and mobility impairments by recording the accommodation on a form that they submit to ERO headquarters. According to ICE, the Assessment and Accommodations for Detainees with Disabilities directive did not need to be revised to align with the 2017 DHS Memo. This directive states that it is meant to implement and complement the requirements of Section 504 of the Rehabilitation Act of 1973 and states that detainees with disabilities will be provided an equal opportunity to access, participate in, or benefit from in-custody programs, services, and activities, and that detainees with disabilities will be provided with auxiliary aids and services as necessary to allow for effective communication. Further, the directive states that a field office director may consider releasing from ICE custody a detainee with an impairment or disability who is not subject to mandatory detention. ERO officers in five areas of responsibility we visited reported that they consult with the supporting disability access coordinator, medical staff, or a supervisor to determine whether local detention facilities are able to provide appropriate accommodations. Our analysis of ICE data shows that the number of detentions of individuals with communication and mobility impairments increased from 434 to 530 in calendar years 2017 to 2018. Parents or Legal Guardians of Minors. In August 2017, ICE issued a policy titled Detention and Removal of Alien Parents or Legal Guardians, which provides guidance regarding the detention and removal of alien parents and legal guardians, including those with children who are U.S. citizens and legal permanent residents and parents with ongoing cases in family court or child welfare proceedings in the United States. This policy directs ERO to designate a child welfare coordinator to serve as the primary point of contact and subject matter expert for all ICE personnel regarding child welfare issues related to detained alien parents. The child welfare coordinator is also responsible for evaluating information from all relevant ICE data systems regarding detained alien parents or legal guardians of U.S. citizen and legal permanent resident minors and sharing appropriate information with field points of contact, among other things. Specifically, this policy directs field office directors to make appropriate arrangements for detained parents to attend child welfare proceedings. ERO officers in three of the six areas of responsibility we visited stated that they coordinate visits to family courts for the detained parent to appear at these hearings. The field office director in each area of responsibility is to designate a field point of contact to communicate with the child welfare coordinator and address public inquires related to detained parents or legal guardians in ERO custody. The August 2017 policy superseded an August 2013 policy titled Facilitating Parental Interests in the Course of Civil Immigration Enforcement Activities, which ERO revised to align with the 2017 DHS memo. In the revised policy, ERO removed language indicating that field office directors should weigh whether an exercise of prosecutorial discretion may be warranted for an alien who is a parent or legal guardian of a U.S. citizen or legal permanent resident minor or is a primary caretaker of a minor, and to exercise such discretion as early as possible. ERO officers in five of the six areas of responsibility we visited stated that they typically do not detain parents of minors, unless criminal history warrants detention. Attorneys we met with from a NGO that provides services to immigrant families and refugees stated that they have observed an increase in the number and length of detentions of parents or legal guardians of minors since January 2017. We were not able to identify trends in detention of detained parents because ERO does not collect or maintain data on this population in a readily available format. Pregnant Women. In December 2017, ICE issued a directive titled Identification and Monitoring of Pregnant Detainees, which sets forth policy and procedures to ensure pregnant detainees in ICE custody for immigration violations are identified, monitored, tracked, and housed in an appropriate facility to manage their care. According to ICE policy on women’s health, pregnant women are identified upon arrival to a detention facility because all women of childbearing age undergo a pregnancy test during intake processing. According to the December 2017 directive, IHSC personnel are responsible for notifying the field office director and IHSC headquarters, as soon as practical, when a pregnant detainee is identified; monitoring the condition of pregnant detainees, including the general health of the pregnant detainee and medical condition of the fetus; and communicating with the field office director about any specific risk factors or concerns. In addition, IHSC personnel are to provide oversight and review of facility capabilities to determine if the needs of a pregnant detainee can be accommodated and recommend to the field office director when a transfer to another facility is necessary for appropriate medical care. Further, IHSC personnel are to develop and maintain a system for tracking and monitoring all pregnant detainees. This policy superseded an August 2016 version with the same title, which ERO revised to align with the 2017 DHS memo, according to ICE officials. In the revised version, ERO removed language stating that absent extraordinary circumstances pregnant women will generally not be detained by ICE. In five of the six areas of responsibility we visited, ERO officers stated that unless mandatory detention is required, they still generally avoid detaining pregnant women. In addition, ERO officers in all six areas of responsibility we visited stated that they are less likely to detain and may release a woman who is having a high risk pregnancy or in the third trimester of her pregnancy. However, an official in the sixth area of responsibility noted that under the revised policy, pregnant women may be detained during the third trimester, if she is likely to be removed quickly and has medical clearance to fly. Officers in two of the six areas of responsibility we visited noted that pregnant women may also be released on bond, under an order of supervision, or other non- detention options, after assessing the facts of the case. Attorneys and policy advocates we met with from three NGOs that represent a range of immigrant populations stated that they have observed increases in the detention of pregnant women since January 2017. Attorneys from another NGO we met with provided anecdotes of cases of pregnant detainees who experienced medical challenges, including miscarriages while in custody. Our analysis of ICE data shows that the number of detentions of pregnant women varied, but increased overall, from 1380 in calendar year 2016 to 2098 in calendar year 2018. Juveniles. In April 2018, ICE issued the Field Office Juvenile Coordinator Handbook to guide ERO staff in processing, transporting, managing, and removing juveniles—persons encountered by ERO who have not reached 18 years of age. Field office juvenile coordinators, who serve as local subject-matter experts on juvenile matters for each area of responsibility, provide policy guidance to ERO personnel within their areas of responsibility, and assist with case review and custody redeterminations. Field office juvenile coordinators are also required to coordinate with other federal agencies including the Office of Refugee Resettlement, where juveniles designated as unaccompanied alien children are typically transferred. According to ERO policy, unaccompanied alien children apprehended by ERO or transferred into ERO custody by CBP are to be placed in the care of the Office of Refugee Resettlement within 72 hours of identification, if they are not repatriated at the border. The Field Office Juvenile Coordinator Handbook was released after the 2017 DHS memo and aligns with the 2017 DHS Memo. According to officers in four of the six areas of responsibility we visited, ERO does not target juveniles for arrests, unless they have criminal records. For example, officers we met with in one area of responsibility stated that ERO typically does not target juveniles in that location, unless they are affiliated with gangs, because they are unlikely to pose a public safety threat. Our analysis of ICE data shows that the number of arrests of juveniles varied, but increased overall, from calendar years 2015 through 2018. We excluded juveniles from our analysis of individual ICE detention data because ICE is generally not responsible for detaining juveniles, as discussed above. Nursing Women. While ICE does not have a separate policy on the care, detention, or removal of women who are nursing, the 2017 Directive on Women’s Health Services provides guidance to IHSC staff on the delivery and administration of health services to this population. According to this directive, women who are nursing are identified during initial processing before being placed into custody at a detention facility because ERO officials and medical personnel are required to ask women if they are breastfeeding. Medical personnel make recommendations pertaining to the detention of women who are nursing, and in most cases, these detainees are placed in IHSC-staffed facilities. IHSC personnel record and use this information to monitor the care and needs of women who are nursing, according to IHSC officials. In five of the six areas of responsibility we visited, officers stated that they typically do not detain women who are nursing, unless their criminal histories warrant detention. Specifically, health officials in one of the five areas of responsibility explained that if a nursing mother is detained, she is typically released within a few hours or placed on bond or order of supervision. Our analysis of ICE data shows that the number of detentions of nursing women at IHSC-staffed facilities varied from calendar years 2015 through 2018 but increased overall from 157 in 2015 to 381 in 2018. Elderly Individuals. ICE no longer has a policy guiding the detention or care of elderly detainees. According to ICE guidance on assessing individuals with special vulnerabilities during the intake process, ICE generally considers someone to be elderly starting at age 65. However, the guidance instructs agents and officers to assess whether these individuals have physical indicators of infirmity or fragility caused by old age when making decisions regarding detaining or releasing them. In February 2018, as part of its effort to align internal policies with the 2017 DHS memo, ERO rescinded a 2009 policy directing officers to administratively close cases of non-criminal fugitives who are 70 years old or older for humanitarian/health reasons. ERO officers in five of the six areas of responsibility we visited reported that they do not target individuals who are elderly and continue to consider criminal history and medical condition when deciding whether to detain them. For example, officials in one of these five areas of responsibility explained that someone who committed an aggravated felony would be subject to mandatory detention regardless of age, but if the individual has a serious medical condition, such as advanced cancer, ERO may decide to release them from custody because the agency would be responsible for the cost of their medical treatments while they are in custody. Officers in the sixth area of responsibility said they have started to detain individuals who are elderly following the issuance of the 2017 DHS memo, but noted that they coordinate with the courts to expedite these hearings before an immigration judge who may order the release of an elderly detainee. Attorneys we met with from a NGO that provides services to immigrant families and refugees stated that they have observed an increase in detentions of individuals who are elderly, and only those with serious medical issues were considered for release. Our analysis of ICE data shows that the number of detentions of individuals who were elderly varied, increasing overall, from 882 in calendar year 2015 to 1159 in calendar year 2018. Data Indicate Detentions of Selected Populations Varied, Increasing Overall; but ICE Lacks Readily Available Data on All Detained Parents or Legal Guardians of Minors Available ICE data show that detentions of most of the selected populations in our review varied between calendar years 2015 and 2018. Specifically, detentions of transgender individuals and pregnant women increased from calendar years 2016 to 2018, after ICE began collecting data for these populations. Similarly, detentions of individuals with disabilities increased from 2017 to 2018, after ICE began collecting data for this population. Detentions of individuals with mental disorders and nursing women at IHSC-staffed facilities varied from calendar years 2015 to 2018. Finally, detentions of individuals who were elderly varied, increasing overall during the same timeframe. We were unable to obtain data on parents or legal guardians of minors in ICE custody because ICE does not collect or maintain data on this population in a readily available format. ICE Data Show Detentions of Most Selected Populations Varied, Increasing Overall Detentions of Transgender Individuals Increased from 2016 through 2018; the Majority Resulted from CBP Arrest and Were Detentions of Non-Criminals ICE began collecting and maintaining data on transgender individuals who voluntarily disclose their gender identity to ICE officers in November 2015, as previously discussed. ERO officials said they use these data to monitor the placement and care of transgender individuals in ICE custody, in accordance to ICE’s memo on Further Guidance Regarding the Care of Transgender Detainees. These data show that the number of detentions of transgender individuals increased from calendar years 2016 through 2018, as shown in table 2. Detentions resulting from CBP arrests accounted for about half of the total detentions of transgender individuals in 2016 and 2017, increasing to 69 percent in 2018. Also shown in table 2, detentions of non-criminal transgender individuals increased from calendar years 2016 through 2018, increasing from 46 percent of total detentions of transgender individuals in 2016 to 71 percent in 2018. Detentions of non-criminal transgender individuals include both detentions of individuals with pending criminal charges (ranging from 12 to 24 percent) and individuals with no recorded criminal history (ranging from 76 to 88 percent). Detentions resulting from CBP arrests comprised most of these detentions (ranging from 77 to 91 percent). Detentions of transgender individuals with criminal convictions decreased over the same period, and most resulted from ICE arrests (ranging from 71 to 84 percent). For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” According to ICE officials, administrative arrests of non-criminals include individuals who have been charged with, but not convicted of a crime, (we refer to these as “aliens with pending criminal charges”), as well as those with no prior criminal history, (we refer to these as “aliens with no recorded criminal history”). According to ICE, ICE officers electronically request and retrieve criminal history information about an alien from the FBI’s National Crime Information Center database, which maintains a repository of federal and state criminal history information, and other sources. We used ICE’s determination of criminality for our analysis. Detentions of Individuals with Disabilities Increased from 2017 to 2018; the Majority Resulted from ICE Arrests and Were Detentions of Convicted Criminals ICE began collecting and maintaining data on certain detainees with disabilities–i.e., those with communication and mobility impairments— who disclosed their impairment or who were identified by facility staff as having an impairment in January 2017, in accordance with its directive, titled Assessment and Accommodations for Detainees with Disabilities. These data show that detentions of individuals with disabilities increased from calendar years 2017 to 2018, as shown in table 3. Detentions resulting from ICE arrests accounted for the majority of these detentions (70 percent in 2017 and over 50 percent in 2018). Also shown in table 3, detentions of convicted criminals with disabilities decreased from calendar years 2017 to 2018, and accounted for the majority of total detentions of this population (67 percent in 2017 and 53 percent in 2018). Most of these detentions resulted from ICE arrests (89 percent in 2017 and 72 percent in 2018). Detentions of non-criminals in this population increased from calendar years 2017 to 2018. Detentions of individuals with no recorded criminal history accounted for most detentions of non-criminals in this population (71 percent in 2017 and 79 in 2018 percent), and the majority resulted from CBP arrests (68 percent in 2017 and 74 percent in 2018). ICE began collecting and maintaining data on pregnant women in ICE’s custody in June 2015. IHSC officials said they use these data to monitor the condition of pregnant women in ICE custody, including the term of the pregnancy, general health of the pregnant detainee, and medical conditions of the fetus, in accordance to ICE’s directive on Identification and Monitoring of Pregnant Detainees. These data show that the number of detentions of pregnant women varied, but increased overall from calendar years 2016 through 2018, as shown in table 4. Detentions resulting from CBP arrests accounted for most of the total detentions of pregnant women each year (ranging from 90 to 96 percent). Also shown in table 4, detentions of non-criminal pregnant women varied from calendar years 2016 through 2018, but increased overall. Detentions of non-criminal pregnant women accounted for most of the total detentions of pregnant women each year (ranging from 91 to 97 percent), and detentions of women with no recorded criminal history accounted for almost all of these detentions (ranging from 96 to 99 percent). Detentions of convicted criminal pregnant women also increased overall for the period. ICE began collecting and maintaining data needed to identify individuals with mental disorders at IHSC-staffed facilities in August 2013. According to IHSC officials, ICE does not collect these data for non-IHSC staffed facilities, in part because many of these facilities do not have electronic health records. However, IHSC personnel are notified of detainees with mental disorders at non-IHSC staffed facilities and these individuals may be transferred to another facility if the current facility is unable to provide appropriate care. While we were not able to present the overall number of detentions of individuals with mental disorders in ICE custody, we reviewed available ICE data to indicate the number and characteristics of detentions of individuals with mental disorders at IHSC- staffed facilities. These data show that the number of detentions of individuals with mental disorders at IHSC-staffed facilities varied from calendar years 2015 through 2018, as shown in table 5. Detentions resulting from CBP arrests accounted for the majority of these detentions (ranging from 53 to 67 percent) in 2015, 2016, and 2018. In 2017, detentions resulting from ICE arrests accounted for the majority (51 percent) of these detentions. Also shown in table 5, detentions of non-criminals with mental disorders varied from calendar years 2015 through 2018. These detentions accounted for the majority of total detentions of individuals with mental disorders in 2015, 2016, and 2018 (ranging from about 53 to 58 percent). Detentions of individuals with no recorded criminal history accounted for most detentions of non-criminals for this population (ranging from 79 to 92 percent), and most resulted from CBP arrests (ranging for 77 to 97 percent). Detentions of convicted criminals with mental disorders varied over the period and the majority resulted from ICE arrests (ranging from 71 to 79 percent). IHSC began collecting and maintaining data needed to identify women who are nursing at IHSC-staffed facilities, which is where ICE typically detains women who are nursing, in August 2013. These data are used to monitor the care and needs of women who are nursing, according to IHSC officials. While we were not able to present the overall number of detentions of nursing women in ICE custody, we reviewed available ICE data to indicate the number and characteristics of detentions of nursing women at IHSC-staffed facilities. These data show that the number of detentions of nursing women at IHSC-staffed facilities varied from calendar years 2015 through 2018, as shown in table 6. Detentions resulting from CBP arrests accounted for most of the detentions of women who were nursing each year (ranging from 98 to 99 percent). Also shown in table 6, detentions of both non-criminal and convicted criminal nursing women at IHSC-staffed facilities varied from calendar years 2015 through 2018. Detentions of non-criminal women who were nursing accounted for most of the total detentions of nursing women at IHSC-staffed facilities each year (ranging from 98 to 99 percent), and detentions of women who were nursing with no recorded criminal history accounted for almost all of these detentions (ranging from 99 to 100 percent), and resulted from CBP arrests (ranging from 98 to 100 percent). From calendar year 2015 through 2018, ICE collected and maintained data on a detainee’s date of birth and is able to identify whether an individual is elderly, defined as someone who is over 65 years old, by calculating the individual’s age at the time they are detained. ICE does not collect or maintain specific data on whether an individual is elderly because it does not have a separate policy for elderly detainees. Rather, ICE considers an individual’s health, criminal history, and other factors when making detention determinations, according to officials. ICE data show that the number of detentions of individuals who were elderly varied, but increased overall from calendar years 2015 through 2018, as shown in table 7. Detentions resulting from ICE arrests accounted for the majority of detentions of individuals who were elderly each year (ranging from 64 to 71 percent). Also shown in table 7, detentions of both non-criminal and criminal individuals who were elderly varied from calendar years 2015 through 2018, and increased overall. Detentions of convicted criminals accounted for the majority of detentions of individuals who were elderly each year (ranging from 65 to 74 percent) and most of these detentions resulted from ICE arrests (ranging from 82 to 85 percent). Detentions of individuals who were elderly with no recorded criminal history accounted for most detentions of non-criminal individuals who were elderly (ranging from 80 to 91 percent), and the majority resulted from CBP arrests (ranging from 70 to 74 percent). ICE Does Not Readily Know How Many Parents or Legal Guardians of U.S. Citizens and Legal Permanent Resident Minors It Has in Custody While ICE collects information on detained parents or legal guardians, including those of U.S. citizens and legal permanent resident minors, this information is not maintained in a readily available format that would allow ICE to systematically identify such detained parents and ensure officers are collecting information on this population as required by policy. According to ICE officials, before making custody determinations, ICE officers are instructed to inquire whether arrested aliens are parents or legal guardians of minors, including parents of U.S. citizen and legal permanent resident minors. ICE officers are to enter this information in a separate tab in the ENFORCE Alien Detention Module, a subsystem within ICE’s data system for recording information about individuals in its custody. This information on detained parents, however, cannot be readily searched to identify all detained parents or legal guardians in custody. Therefore, ICE does not know how many detained parents or legal guardians are in custody, including parents of U.S. citizen and legal permanent resident minors, during any given time. In accordance with a currently recurring Congressional reporting requirement, ICE generates a semi-annual report on removals of parents of U.S.-born citizen children. However, officials explained that they must review this information manually to generate the report and added that ICE is not required to report in an aggregate way on detained parents of U.S. citizen or legal permanent residents. ICE also tracks individual cases requiring specific actions, such as arranging transportation for parents to attend child welfare proceedings or accommodating visitation for parents with mandated child visitation schedules. However, according to ICE officials, these parents represent a small proportion of all parents in ICE custody. ICE’s policy on Detention and Removal of Alien Parents or Legal Guardians requires ICE personnel to enter information into ENFORCE once a detained alien has been determined to be a parent or legal guardians of a U.S. citizen or legal permanent resident minor. As previously mentioned, this policy also requires the Child Welfare Coordinator to evaluate information from all relevant ICE data systems regarding detained parents or legal guardians of minors, including parents of U.S. citizen and legal permanent resident minors, and share appropriate information with the ERO field points of contact. ICE’s policy further states that in pursuing the enforcement of U.S. immigration laws against parents of minors, ICE personnel should remain cognizant of the impact enforcement actions may have on U.S. citizen or legal permanent resident minors. Standards for Internal Control in the Federal Government call for design of any data collection to collect quality information, and for management to use quality information to make informed decisions and evaluate the entity’s performance in achieving key objectives and addressing risks. Because information entered into ICE’s data system on detained parents or legal guardians, including those of U.S. citizen or legal permanent resident minors, is not maintained in a readily available format, ICE headquarters officials cannot ensure that ICE officers are collecting and entering this information into the system as required by policy. According to ICE officials, the agency had previously considered implementing a system update to readily identify certain detained parents of minors, but as of October 2019 is no longer considering this update. Collecting and maintaining information in a readily available format on detained parents of U.S. citizen or legal permanent resident minors could help ensure that ICE personnel can identify, evaluate, and share information on this population, as required by ICE policy. In addition, collecting and evaluating this information would provide greater transparency regarding the impacts of ICE’s enforcement actions on U.S. citizen or legal permanent resident minors. Conclusions In 2015, DHS reported that about 12 million aliens were residing in the United States without lawful status or presence, which includes parents of U.S. citizen, legal permanent resident, and alien minors. Through its policies, ICE has established the importance of collecting and maintaining information on detained parents and legal guardians of U.S. citizen and legal permanent resident minors. However, because ICE has not implemented a process to collect or maintain this information in a readily available format, it does not have reasonable assurance that it can identify all detained parents and legal guardians of U.S. citizen and legal permanent resident minors. Therefore, ICE cannot evaluate and share this information and ensure its officers are collecting information on this population in accordance with its policy. Implementing a process to collect and maintain this information in a readily available format would allow ICE to better assess the impacts of its enforcement actions on U.S. citizen and legal permanent resident minors and help improve ICE oversight efforts. Recommendation for Executive Action The Director of ICE should implement a process to collect and maintain data in a readily available format on detained parents or legal guardians of U.S. citizen and legal permanent resident minors to ensure that information on this population is entered into ICE’s data system as required by policy. (Recommendation 1) Agency Comments and Our Evaluation We provided a draft of this report for review and comment to DHS. DHS provided comments, which are reproduced in appendix XI. DHS also provided technical comments, which we incorporated, as appropriate. DHS did not concur with our recommendation. Specifically, in its comments, DHS stated that data on detained parents or legal guardians of U.S. citizens and legal permanent residents are available to approved EARM users and that we did not identify any problems with the quality of the data. However, as we noted in our report, these data are not readily available because ICE’s data on family relationships, including parents or legal guardians of U.S. citizens and legal permanent resident minors, can only be accessed by manually reviewing each separate case file in EARM. To that end, we or anyone else wishing to do so are unable to determine whether there are problems with the data as ICE is not able to provide aggregate data that would allow us to assess the quality or to report on these data. In its comments, DHS states that ICE does not have any requirement or need to aggregate data on this particular group and doing so would not better inform ICE’s decision making processes. However, as noted in the report, ICE’s policy states that in pursuing the enforcement of U.S. immigration laws against parents of minors, ICE personnel should remain cognizant of the impact enforcement actions may have on U.S. citizen or legal permanent resident minors. Without making these data readily available, ICE is not able to account for the overall impact of its enforcement actions on U.S. citizen or legal permanent resident minors whose parents or legal guardians have been detained. Additionally, headquarters and field officials we met with during the course of this review agreed that having this information readily available would be useful. They also explained that ICE was developing a method to better track and report on primary caregivers of children. However, in October 2019, ICE officials stated that the agency is no longer considering this improvement. We continue to believe that collecting and maintaining information in a readily available format on detained parents or legal guardians of U.S. citizen or legal permanent resident minors could help ensure that ICE personnel can identify, evaluate, and share information on this population, as required by ICE policy. Without such data, ICE headquarters officials cannot ensure that ICE officers are collecting and entering this information into the system as required. In addition, collecting and evaluating this information would provide greater transparency regarding the impacts of ICE’s enforcement actions on U.S. citizen or legal permanent resident minors. We are sending copies of this report to the appropriate congressional committees, and the Acting Secretary of the Department of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XII. Appendix I: Objectives, Scope, and Methodology This appendix provides additional information on our objectives, scope, and methodology. Specifically, our objectives were to examine the following questions: 1. What does ICE data show about ICE arrests, detentions, and removals from calendar years 2015 through 2018? 2. What policies are in effect for selected populations and what changes did ICE make to align these policies with the 2017 DHS memo? 3. To what extent does ICE collect data on selected populations in detention and what do these data show? To address our first question, we analyzed individual-level data from the U.S. Immigration and Customs Enforcement (ICE) Integrated Decision Support (IIDS) database, to determine the total number of ICE Enforcement and Removal Operations (ERO) administrative arrests (arrests), detentions, and removals from January 2015 (the start of the Priority Enforcement Program) through December 2018 (to include the first two years for the 2017 DHS Memo). ERO conducts civil immigration enforcement actions, which includes arrests for civil violations of U.S. immigration laws, detentions, and removals. Arrests. We analyzed individual-level arrest data from IIDS to determine the total number of ERO arrests for each calendar year 2015 through 2018. We examined multiple data fields from the individual-level arrest data, including alien file number, family name, given name, gender, country of citizenship, arrest date, area of responsibility, and criminality, among other variables. Because aliens may have multiple arrests, we used alien number and arrest date to identify the unique number of arrests rather than the number of unique aliens who were arrested. We excluded from our analysis arrest records that had a missing alien number, an invalid alien number— i.e., that included all zeroes or had duplicate alien number and arrest date combinations—or records that indicated test in the name fields. We analyzed these data to determine total numbers of arrests by gender, country of citizenship, criminality, arresting program, and area of responsibility. To determine the number of arrests by gender, we analyzed IIDS individual-level arrest data. We also analyzed these data to determine the number of arrests by criminality for each gender, using ICE’s determination of criminality for our analysis, as discussed below. To determine the number of arrests by country of citizenship, we analyzed IIDS individual-level arrest data. ICE obtains country of citizenship data from arrest reports, which may be based on documentation or self-reported. To determine the number of arrests by criminality, we analyzed IIDS individual-level arrest data. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” According to ERO officials, arrests of non-criminals include individuals who have been charged but not convicted of a crime as well as those with no prior criminal history. According to ICE, ICE officers electronically request and retrieve criminal history information about an alien from the FBI’s National Crime Information Center (NCIC) database, which maintains a repository of federal and state criminal history information. ICE officers are also able to manually enter criminal history information in ICE’s data system if they discover additional criminal history information that was not available in NCIC. ICE officers may also check for criminal convictions committed outside the United States, on a case-by-case basis. Most of the ICE data we reviewed indicated criminal or non-criminal history, where criminal included convictions, and non-criminal included both pending criminal charges and other immigration violations. Therefore, wherever we referred to criminality, we used ICE’s determination of criminality—criminal or non-criminal—for our analysis. To determine the number of arrests by arresting program, we analyzed IIDS individual-level arrests data to determine the number of arrests at-large in the communities by ICE’s fugitive operations teams and those resulting from an incarceration in federal, state, and local prisons and jails through the Criminal Alien Program. To determine the number of arrests by ERO area of responsibility, we analyzed IIDS individual-level arrests data for calendar years 2015 through 2018. We also used these data to calculate the proportion of arrests of convicted criminals by ERO area of responsibility. We compared the number of arrests across the 24 ERO areas of responsibility to examine the differences in enforcement actions between the years the Priority Enforcement Program were in effect (2015-2016) and the years immediately following implementation of the DHS memo (2017-2018). We excluded from our analysis arrest records that had a missing or unknown area of responsibility. We also analyzed IIDS individual-level arrest data to determine the total number of arrests of juveniles during calendar years 2015 through 2018. Because aliens may have multiple arrests, we used alien number and arrest date to identify the unique number of arrests rather than the number of unique aliens who were arrested. We excluded from our analysis arrest records that had a missing alien number, an invalid alien number—i.e., that included all zeroes or had duplicate alien number and arrest date combinations. We used these data to determine the total number of arrests of juveniles by age and gender. Detentions. We analyzed individual-level detention data from IIDS to determine the total number of ERO detentions during calendar years 2015 through 2018. We examined multiple data fields from the individual-level detention data, including alien file number, person id, family name, given name, gender, country of citizenship, arresting agency, criminality, detention facility, book-in date, book-out date, release reason, and length of stay, among other variables. Because aliens may have multiple detentions, we used alien number and initial book-in date fields—i.e., the first date the individual is taken into ICE custody—to identify the unique number of detentions rather than the number of unique aliens who were detained. We excluded from our analysis arrest records that had a missing alien number or had an invalid alien number—i.e., that included all zeroes. We analyzed these data to determine total numbers of detentions by gender, country of citizenship, arresting agency, and criminality. To determine the number of detentions by gender, we analyzed IIDS individual-level detention data. We also analyzed these data to determine the number of detentions by arresting agency—ICE or U.S. Customs and Border Protection (CBP)—and criminality for each gender. We included all detentions resulting from both ICE and CBP arrests because ICE is responsible for detaining certain aliens apprehended by CBP at or between ports of entry. To conduct our analysis, we used ICE’s determination of criminality— criminal or non-criminal—which ICE determines by conducting electronic criminal history checks, as previously discussed. To determine the number of detentions by country of citizenship, we analyzed IIDS individual-level detention data. ICE obtains country of citizenship data from arrest reports, which may be based on documentation or self-reported. To determine the number of detentions by arresting agency, we analyzed IIDS individual-level detention data for detentions resulting from ICE arrests and those resulting from CBP arrests at or between ports of entry. To determine the number of detentions by criminality, we analyzed IIDS individual-level detention data. We also examined the extent to which detentions varied by criminality and arresting agency. To conduct our analysis, we used ICE’s determination of criminality— criminal or non-criminal—which ICE determines by conducting electronic criminal history checks, as previously discussed. Removals. We analyzed individual-level removal data from IIDS to determine the total number of ERO removals during calendar years 2015 through 2018. We examined multiple data fields from the individual-level removal data, including alien file number, family name, given name, gender, country of citizenship, criminality, arresting agency, and removal date, among other variables. Because aliens may have multiple removals, we used alien number and removal date to identify the unique number of removals rather than the number of unique aliens. We excluded from our analysis removal records that had a missing alien number, an invalid alien number—i.e., that included all zeroes, or had duplicate alien number and removal date combinations, or records that indicated test in the name fields. We analyzed these data to determine total numbers of removals by gender, country of citizenship, arresting agency, and criminality. To determine the number of removals by gender, we analyzed IIDS individual-level removal data. We also analyzed these data to determine the number of removals by arresting agency and criminality for each gender. To conduct our analysis, we used ICE’s determination of criminality—criminal or non-criminal—which ICE determines by conducting electronic criminal history checks, as previously discussed. To determine the number of removals by country of citizenship, we analyzed IIDS individual-level data. ERO obtains country of citizenship data from arrest reports, which may be based on documentation or self-reported. To determine the number of removals by arresting agency, we analyzed IIDS individual-level removal data for removals resulting from ERO arrests and those resulting from CBP arrests at or between ports of entry. To determine the number of removals by criminality, we analyzed IIDS individual-level removal data. To conduct our analysis, we used ICE’s determination of criminality—criminal or non-criminal— which ICE determines by conducting electronic criminal history checks, as previously discussed. We determined that the data used in each of our analyses were sufficiently reliable for the purposes of this report by analyzing available documentation, such as related data dictionaries; interviewing ICE officials knowledgeable about the data; conducting electronic tests to identify missing data, anomalies, or erroneous values; and following up with officials, as appropriate. We also analyzed arrest data from Homeland Security Investigations (HSI) worksite enforcement to determine the total number of criminal and administrative arrests conducted by HSI worksite enforcement between January 2015 and December 2018. We were unable to use these data for the purposes of reporting the total number of arrests by HSI worksite enforcement for each calendar year. Specifically, we identified combined arrest, charge, and conviction dates in the same field, among other issues, which limited our ability to identify the number of aliens arrested by HSI as a result of worksite enforcement operations each year. To address our second question, we reviewed a master list of ICE policies and interviewed policy officials to identify policies related to individuals with special vulnerabilities. Based on this review as well as input from nongovernmental organizations (NGOs) that serve or represent various populations, we selected eight populations including aliens who are: lesbian, gay, bisexual, transgender, and intersex (LGBTI), individuals with disabilities, juveniles, parents or legal guardians of minors, pregnant, individuals with mental disorders, women who are nursing, or individuals who are elderly. To identify the changes ICE made to align these policies with the 2017 DHS memo, we reviewed specific provisions in the executive order and implementing memoranda. We then analyzed existing policies as well as policies that ICE revised or rescinded to align with the 2017 DHS memo, including policies related to prosecutorial discretion and selected populations. We conducted interviews with officials from ICE headquarters offices, including the Office of the Principal Legal Advisor, Office of Policy, Homeland Security Investigations, as well as program officials within ERO, including Domestic Operations, Fugitive Operations, and Custody Management Divisions. We met with six national organizations that serve or represent immigrants as well as six state or regional organizations that serve or represent immigrants in the locations we visited to obtain their perspectives on how the policies affected the individuals they represent. The perspectives of NGOs are not generalizable and my not be indicative of care provided at all detention facilities. We selected these NGOs to reflect a range of types of populations served or represented as well as based on their proximity to ICE areas of responsibility we visited, see table 8 for more information on the organizations we interviewed. We conducted site visits to six selected ICE ERO areas of responsibility (Atlanta, Dallas, Los Angeles, San Diego, St. Paul, and Washington, D.C.) and interviewed ICE officials to obtain their perspectives on the policy revisions. We selected these locations based on the prevalence of arrests in fiscal year 2017, percent changes in arrests from fiscal year 2016 to 2017, and geographical dispersion. Specifically, we identified locations that had the highest arrest numbers in fiscal year 2017 or the largest percentage increases in arrests from fiscal years 2016 to 2017, and then selected locations that provided wide geographical representation. In each location we met with ERO liaisons and officers responsible for monitoring and implementing the provisions of policies for certain selected populations, as well as detention and deportation officers and supervisors who oversee the detention and removal of aliens, including those with special vulnerabilities. We also met with ICE medical staff in areas of responsibility with this position. In one area of responsibility, we limited our visit to a detention facility and met with the staff at that facility due to its proximity to another area of responsibility we visited. The information obtained from these site visits is not generalizable and may not be indicative of care provided to all populations at all detention facilities, but provided insights into how selected ICE areas of responsibility conduct enforcement activities and implement immigration enforcement policies. To address our third question, we reviewed multiple data sources that ICE uses to track information on certain aliens with special vulnerabilities in detention and matched these data with IIDS individual-level detention data to determine what ICE data show about detentions of selected populations between January 2015 and December 2018. To conduct our analysis, we first excluded records that contained missing alien numbers or alien numbers that were all zeroes. Then, we matched each data source to the IIDS detention data using alien number and excluded additional records we were unable to match. Because aliens may have multiple detentions, we compared the admission or book-in date from each data source with the book-in dates from the IIDS detention data, and excluded additional records with dates beyond 30 days apart. We analyzed this information to determine the total number of detentions for six of the eight selected populations (aliens who are: transgender, individuals with disabilities, pregnant, individuals with mental disorders, nursing, and elderly); and the number of detentions resulting from ICE versus CBP arrests; as well as detentions by criminality and the length of detention for each of these six populations. We excluded juveniles from our analysis because ERO is generally not responsible for detaining juveniles. To determine the extent to which ICE maintains data on detained parents or legal guardians of minors, we reviewed ICE policies pertaining to detained parents, including those that set forth requirements for tracking detained parents or legal guardians of U.S. citizens and legal permanent resident minors. We also interviewed ERO officials about ICE’s data collection processes and any limitations with the data it collects and maintains. We assessed ICE’s efforts to track this population against agency policy. To conduct our analysis of criminality for each population, we used ICE’s determination of criminality—criminal or non-criminal—which ICE determines by conducting electronic criminal history checks, as previously discussed. We also analyzed IIDS data on criminal charges for detentions of aliens that resulted from ICE arrests to determine the type of charges (e.g., immigration-related or other criminal charges) associated with these detentions. To conduct our analysis on length of detention, we compared initial book-in date with the most recent book-out date to calculate the total days in detention for each of our selected populations. Transgender Individuals: We matched ERO records for transgender detainees from calendar years 2016 through 2018 with IIDS individual-level detention data to determine the total number of detentions of transgender individuals, as well as the number of detentions by arresting agency, criminality, and length of detention. We excluded 4 of the unique transgender detainee records for 2016, 33 for 2017 and 27 for 2018. These records were excluded because we were unable to match these records to the IIDS individual level- detention data using alien number and book-in date combinations. According to ICE officials, this may be due to data entry errors. Our analysis is based on those records we were able to match: 228 for 2016, 241 for 2017, and 277 for 2018. ICE also recorded 55 transgender detainees in 2015; however, we excluded these records from our analysis since ICE did not collect complete data on this population in 2015. For the LGBTI population, ICE only collects and maintains data on transgender individuals in detention. Therefore, we were only able to analyze data for this subset of the LGBTI population. Individuals with Disabilities: We matched ERO records for individuals with communication and mobility impairments in ERO custody during calendar years 2017 and 2018 with IIDS individual- level detention data to determine the total number of detentions of these individuals, as well as the number of detentions by arresting agency, criminality, and length of detention. We excluded 5 of the unique detainee records for 2017, and 1 for 2018 because we were unable to match these records to the IIDS individual level-detention data using alien number and book-in date combinations. According to ICE officials, this may be due to data entry errors. Our analysis is based on those records we were able to match: 424 for 2017, and 516 for 2018. When ICE began collecting these data, it included aliens who were placed in detention prior to January 2017. We excluded 99 records for this reason from our analysis since ICE did not collect complete data on this population prior to January 2017. Pregnant Women: We matched ICE Health Service Corps (IHSC) records for pregnant women in ERO custody during calendar years 2016 through 2018 with IIDS individual-level detention data to determine the total number of detentions of pregnant women, as well as the number of detentions by arresting agency, criminality, and length of detention. We excluded 60 of the unique pregnant detainee records for 2016, 20 for 2017 and 32 for 2018 because we were unable to match these records to the IIDS individual-level detention data using alien number and book-in date combinations. According to ICE officials, this may be due to data entry errors. Our analysis is based on those records we were able to match: 1,377 for 2016, 1,150 for 2017, and 2,094 for 2018. ICE also recorded 675 pregnant detainees in 2015; however, we excluded these records from our analysis since ICE did not collect complete data on this population in 2015. Elderly Individuals: We analyzed data records in IIDS for elderly individuals (those 65 years or older at the time of initial book-in) in ERO custody during calendar years 2015 through 2018 to determine the total number of detentions of elderly individuals, as well as the number of detentions by arresting agency, criminality, and length of detention. According to ERO, the agency does not maintain separate data records for elderly individuals in ERO custody; however, ERO officials were able to identify these detainees by calculating their age at the time they were detained. We excluded 4 of the unique elderly detainee records for 2015, 3 for 2016 and 4 for 2018 because we were unable to match these records to the IIDS individual-level detention data using alien number and book-in date combinations. According to ICE officials, this may be due to data entry errors. Our analysis is based on those records we were able to match: 863 for 2015, 736 for 2016, 763 for 2017, and 1,132 for 2018. Individuals with Mental Disorders and Nursing Women: We matched IHSC records for individuals with mental disorders and nursing women detained at IHSC-staffed facilities during calendar years 2015 through 2018 with IIDS individual-level detention data to determine the total number of detentions of each of these populations, as well as the number of detentions by arresting agency, criminality, and length of detention. Because ICE did not maintain data on individuals with mental disorders or nursing women detained at the over 200 non-IHSC staffed facilities, our findings for these two populations are not generalizable, but provided valuable insights into these detentions. We excluded 207 of the unique detainee with mental disorders records for 2016, 850 for 2017, and 1,233 for 2018 because we were unable to match these records with the IIDS individual-level detention data using alien number and book-in date combinations. Our analysis is based on the unique detainee with mental disorders records we were able to match: 8,138 for 2015, 9,466 for 2016, 8,643 for 2017, and 8,501 for 2018. Similarly, we excluded 2 of the unique nursing detainee records for 2015, 3 for 2017 and 5 for 2018 for the same reason. Our analysis is based on the unique nursing detainee records we were able to match: 157 for 2015, 399 for 2016, 564 for 2017, and 381 for 2018. According to ICE officials, this may be due to data entry errors. We assessed the reliability of the data used in each of our analyses by analyzing available documentation, such as related data dictionaries; interviewing ERO officials knowledgeable about the data; conducting electronic tests to identify missing data, anomalies, or erroneous values; and following up with officials, as appropriate. We determined the data were sufficiently reliable for depicting general trends in detentions for the selected populations. We conducted this performance audit from November 2017 to December 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Enforcement and Removal Operations Arrests, Detentions, and Removals, 2015-2018 The number of Enforcement and Removal Operations (ERO) administrative arrests (arrests) by gender, country of citizenship, ICE enforcement program, criminality, and area of responsibility from calendar years 2015 through 2018. The number of detentions by gender, country of citizenship, arresting agency, and criminality from calendar years 2015 through 2018. The number of removals by gender, country of citizenship, arresting agency, and criminality from calendar years 2015 through 2018. We analyzed individual-level Immigration and Customs Enforcement (ICE) data to identify ERO arrests, detentions, and removals during calendar years 2015 through 2018. Arrests The Number of Arrests Varied during the Period, Increasing Overall. The number of ERO arrests varied from calendar years 2015 through 2018, and increased more than 30 percent overall for the 4-year period (from 112,870 arrests in 2015 to 151,497 arrests in 2018). During the two years Priority Enforcement Program (PEP) was in effect, the number of ERO arrests varied little, decreasing 5 percent from 2015 to 2016. Following issuance of the 2017 DHS memo, ERO arrests increased 41 percent from 2016 to 2017, and stayed relatively the same from 2017 to 2018. Arrests by Gender. Each year from calendar years 2015 through 2018, arrests of males accounted for the majority of ERO arrests (ranging from 92 to 93 percent), as shown in figure 7. Arrests by Country of Citizenship. Each year from 2015 through 2018, ERO arrests of citizens of Mexico, Guatemala, El Salvador, and Honduras collectively accounted for about 86 percent of all ERO arrests, with individuals from Mexico accounting for the majority (ranging from 59 to 65 percent), as shown in figure 8. All other individual countries collectively accounted for about 14 to 15 percent of total arrests each year. Arrests by ICE Enforcement Program. Arrests of individuals from federal, state and local prisons and jails, through the Criminal Alien Program, accounted for the majority (ranging from 72 to 76 percent) of ERO arrests each calendar year from 2015 through 2018, as shown in figure 9. Arrests of individuals at-large through Fugitive Operations (ranging from 17 to 19 percent) and other programs accounted for the balance of the arrests each year. Criminal Alien Program arrests also accounted for most of the increase in ERO arrests in calendar years 2017 and 2018 (see figure 9). Arrests by Criminality. As shown in figure 10, the number and proportion of ERO arrests of non-criminals aliens increased each year from calendar years 2015 through 2018. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” Specifically, the arrests of non-criminals increased from 13,494 (12 percent of total arrests) in 2015 to 51,513 (34 percent of total arrests) in 2018. According to ERO officials, arrests of non-criminals include individuals who have been charged with but not convicted of a crime as well as those with no prior criminal history. The number of ERO arrests of convicted criminals stayed relatively stable from calendar years 2015 to 2018, ranging between about 91,000 and 107,000. Each of these years, arrests of convicted criminals comprised the majority of total arrests, but decreased from 88 percent in 2015 to 66 percent in 2018. Most arrests of convicted criminals resulted from the Criminal Alien Program (ranging from 76 to 80 percent), followed by Fugitive Operations (ranging from 15 to 19 percent). Arrests by Areas of Responsibility. The number of ERO arrests increased in all ERO areas of responsibility when comparing calendar years 2015 and 2016, when PEP was in effect, to calendar years 2017 and 2018, following implementation of the 2017 DHS memo. These increases ranged from less than 1 percent increase in the Los Angeles area of responsibility to a 99 percent increase in the Miami area of responsibility. Arrests of convicted criminals accounted for the majority of total arrests in all areas of responsibility. However, the proportion of arrests of convicted criminals to total arrests decreased in all areas of responsibility from 2015 and 2016 to 2017 and 2018. This decrease is partially due to the increase in the number of ERO arrests of non- criminals in all areas of responsibility during these years. Table 9 presents total numbers of ERO arrests for each of ERO’s 24 areas responsibility nationwide. It also presents the percentage of arrests of convicted criminals by area of responsibility for calendar years 2015 and 2016 combined and calendar years 2017 and 2018 combined. Detentions The Number of Detentions Varied, Increasing Overall. The number of ERO detentions varied from calendar years 2015 through 2018, and increased more than 30 percent overall for the 4-year period (from 324,320 detentions in 2015 to 438,258 detentions in 2018). ERO detention data include detentions resulting from both ICE and CBP arrests. During the two years PEP was in effect, the number of ERO detentions increased 13 percent, from 324,320 in 2015 to 366,740 in 2016. Following issuance of the 2017 DHS memo, ERO detentions decreased 15 percent from 2016 to 2017 (from 366,740 to 310,309 detentions), and increased 41 percent from 2017 to 2018 (to 438,258 detentions). Detentions by Gender. Each year from calendar years 2015 through 2018, detentions of males accounted for the majority of ERO detentions (ranging from 74 to 81 percent), as shown in figure 11. Detentions by Country of Citizenship. Each year from 2015 through 2018, ERO detentions of citizens of Mexico, Guatemala, El Salvador, and Honduras collectively accounted for the most detentions (ranging from 84 to 89 percent). All other individual countries collectively accounted for 11 to 16 percent of total detentions each year, as shown in Figure 12. Detentions by Arresting Agency. Detentions resulting from CBP arrests at or between ports of entry accounted for the majority of ERO detentions each year from calendar years 2015 through 2018 (ranging from 52 to 71 percent). Detentions resulting from CBP arrests also accounted for most of the variation in detentions from year to year, as shown in figure 13. Detentions resulting from ICE arrests varied little from 2015 to 2016, increased in 2017, and then varied little from 2017 to 2018. Detentions by Criminality. As shown in figure 14, the number of ERO detentions of non-criminals varied, but increased overall from calendar years 2015 to 2018. These detentions accounted for the majority of total ERO detentions each year (ranging from 53 to 64 percent). The variation in the number of detentions of non-criminals was partially due to fluctuations in detentions that resulted from CBP arrests. The number of ERO detentions of convicted criminals stayed relatively stable from 2015 to 2018, and accounted for the minority of total ERO detentions (ranging from 36 to 47 percent). The majority of these detentions resulted from ICE arrests (ranging from 64 to 76 percent) rather than CBP arrests. Removals The Number of Removals Varied, Increasing Overall. The number of ERO removals varied from calendar years 2015 through 2018, and increased 13 percent overall for the 4-year period (from 231,559 removals in 2015 to 261,523 removals in 2018). ERO removal data include removals resulting from both ICE and CBP arrests. During the two years PEP was in effect, the number of ERO removals varied little, increasing 6 percent from 2015 to 2016. Following issuance of the 2017 DHS memo, ERO removals decreased 12 percent in 2017, and increased 21 percent from 2017 to 2018. Removals by Gender. Removals of male aliens accounted for most of ERO removals (about 90 percent) each year from calendar years 2015 through 2018, as shown in figure 15. Removals by Country of Citizenship. In addition, from calendar years 2015 through 2018, ERO removals of citizens of Mexico, Guatemala, El Salvador, and Honduras collectively accounted for most of the removals each year (ranging from 90 to 94 percent). Citizens of all other countries collectively accounted for 6 to 10 percent of total removals each year, as shown in figure 16. Removals by Arresting Agency. Each year, removals resulting from CBP arrests at or between ports of entry accounted for the majority of total ERO removals (ranging from 60 to 74 percent). ERO removals resulting from CBP arrests also accounted for most of the variation in total removals from year to year, as shown in figure 17. Removals by Criminality. The number and proportion of ERO removals of non-criminals varied, but increased overall, from calendar years 2015 through 2018, as shown in figure 18. Specifically, removals of non- criminals increased from 40 percent of total removals in 2015 to 43 percent of total removals in 2018. Most removals of non-criminals resulted from CBP arrests (ranging from 80 to 95 percent), rather than ICE arrests. ERO removals of convicted criminals varied, increasing overall, from calendar years 2015 to 2018, and accounted for the majority of total ERO removals each year (ranging from 55 to 60 percent). Removals of convicted criminals resulted from CBP and ICE arrests at approximately equal levels. Appendix III: Enforcement and Removal Operations Arrests, Detentions, and Removals of Males, 2015-2018 This appendix presents the overall number of Enforcement and Removal Operations (ERO) administrative arrests (arrests), detentions, and removals of males from calendar years 2015 through 2018, including the number of arrests by criminality and the number of detentions and removal by criminality and arresting agency. We analyzed individual- level Immigration and Customs Enforcement (ICE) data to identify ERO arrests, detentions, and removals of males during calendar years 2015 through 2018. Arrests The Number of Arrests of Males Generally Increased. The number of ERO arrests of males varied from calendar years 2015 through 2018 but generally increased by 32 percent across the period, as shown in figure 19. During the two years the Priority Enforcement Program (PEP) was in effect, between calendar years 2015 and 2016, the number of ERO arrests remained stable, decreasing by about 5 percent in that period. The following year, after the issuance of the 2017 DHS memo in February 2017, ERO arrests increased by about 40 percent from calendar years 2016 to 2017, and decreased by less than 1 percent in calendar year 2018. Arrests of Males by Criminality. During the same time, the proportion of ERO arrests of convicted criminal males decreased each year from 90 percent of total arrests of males in calendar year 2015 to 69 percent in calendar year 2018, as shown in figure 19. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” Conversely, the proportion of ERO arrests of non-criminal males increased each year, from 10 percent of total arrests of males in calendar year 2015 to 31 percent of total arrests in calendar year 2018. According to officials, arrests of non-criminals include individuals who have been charged with but not convicted of a crime as well as those with no prior criminal history. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” According to ICE officials, administrative arrests of non-criminals include individuals who have been charged with but not convicted of a crime as well as those with no prior criminal history. According to ICE, ICE officers electronically request and retrieve criminal history information about an alien from the FBI’s National Crime Information Center database, which maintains a repository of federal and state criminal history information, and other sources. We used ICE’s determination of criminality for our analysis. Detentions Detentions of Males Increased Overall. The number of ERO detentions varied from calendar years 2015 through 2018, but increased overall by 32 percent over the period, as shown in figure 20. ERO detention data include detentions resulting from both ICE and U.S. Customs and Border Protection (CBP) arrests. During the two years PEP was in effect, the number of ERO detentions of males increased by more than 8 percent from calendar years 2015 to 2016. Following the issuance of the 2017 DHS memo, the number of male detentions decreased by more than 8 percent in calendar year 2017, and increased again in calendar year 2018, by over 32 percent. Detentions of Males by Arresting Agency. Detention of males resulted from both ICE and CBP arrests from calendar years 2015 through 2018, as shown in figure 20. For all the years in this period, except calendar year 2017, detentions resulting from a CBP arrest at or between ports of entry account for the majority of the detentions of males (ranging from about 58 to 63 percent). In calendar year 2017, detentions resulting from ICE arrests accounted for about 56 percent of all male detentions. Detentions of Males by Criminality. During the same time, the number and proportion of ERO detentions of convicted criminal males varied, ranging from 45 to 57 percent of all detentions of males, as shown in figure 21. The majority of these detentions resulted from ICE arrests, ranging from 66 to 77 percent of all convicted criminal male detentions. The number of ERO detentions of non-criminal males also varied, ranging from 43 to 55 percent of all detentions of males. Detentions of non- criminal males primarily resulted from CBP arrests, which ranged from 69 to 93 percent of detentions of non-criminal males between calendar years 2015 and 2018. Removals Removals of Males Increased Overall. The number of ERO removals of males varied from calendar years 2015 through 2018, but increased overall by 14 percent over the period, as shown in figure 22. ERO removal data include removals resulting from both ICE and CBP arrests. During PEP, which was in effect from calendar years 2015 and 2016, the number of ERO removals of males increased by about 6 percent. From calendar years 2016 to 2017, following the issuance of the 2017 DHS memo, the number of these removals decreased by more than 11 percent, then increased by more than 20 percent in calendar year 2018. Removals of Males by Arresting Agency. From calendar years 2015 to 2018, the majority of ERO removals of males resulted from CBP arrests at or in between ports of entry (ranging from 58 to 72 percent), as shown in figure 22. Removals of Males by Criminality. From calendar years 2015 through 2018, ERO removals of convicted criminal males accounted for the majority of removals each year, ranging from 58 to 63 percent of the total removal of males, as shown in figure 23. The removals of convicted criminal males were the result of both CBP and ICE arrests. For all the years in this period, except calendar year 2017, removals resulting from a CBP arrest account for the majority of the removals of convicted criminal males (ranging from about 52 to 56 percent). In calendar year 2017, removals resulting from ICE arrests accounted for about 56 percent of all removals of convicted criminal males. ERO removals of non-criminal males varied, increasing overall, from calendar years 2015 to 2018, and accounted for the minority of ERO removals of males each year (ranging from 37 to 42 percent). Most of the removals of non-criminal males were as a result of CBP arrests, ranging from 79 to 95 percent of all removals of non-criminal males. Appendix IV: Enforcement and Removal Operations Arrests, Detentions, and Removals of Females, 2015-2018 This appendix presents the overall number of Enforcement and Removal Operations (ERO) administrative arrests (arrests), detentions, and removals of females from calendar years 2015 through 2018, including the number of arrests by criminality and the number of detentions and removals by criminality and arresting agency. We analyzed individual- level Immigration and Customs Enforcement (ICE) data to identify ERO arrests, detentions, and removals of females during calendar years 2015 through 2018. Arrests The Number of Arrests of Females Generally Increased. The number of ERO arrests of females generally increased more than 70 percent from calendar years 2015 through 2018, as shown in figure 24. Between 2015 and 2016, the two years the Priority Enforcement Program (PEP) was in effect, the number of ERO arrests remained stable, decreasing by less than 1 percent in that period. Following the issuance of the 2017 DHS memo, ERO arrests increased by 65 percent from calendar years 2016 to 2017, and increased by less than 5 percent in calendar year 2018. Arrests of Females by Criminality. During the same time, the proportion of arrests of non-criminal females increased each year from 43 percent in calendar year 2015 to 63 percent of total arrests of females in calendar year 2018. For the purposes of this report and our presentation of ICE data, we refer to potentially removable aliens without criminal convictions known to ICE as “non-criminals” and aliens with criminal convictions known to ICE as “convicted criminals.” According to officials, arrests of non-criminals include individuals who have been charged with but not convicted of a crime as well as those with no prior criminal history. Conversely, the proportion of ERO arrests of convicted criminal females decreased each year from 57 percent in calendar year 2015 to 37 percent in calendar year 2018, as shown in figure 24. Detentions Detentions of Females Increased Overall. The number of ERO detentions varied from calendar years 2015 through 2018, and increased more than 45 percent over the period, as shown in figure 25. ERO detention data include detentions resulting from both ICE and U.S. Customs and Border Protection (CBP) arrests. During the two years PEP was in effect, the number of ERO detentions of females increased by more than 28 percent from calendar years 2015 through 2016. Following the issuance of the DHS memo, the number of detentions decreased by about 36 percent in 2017, then increased by over 77 percent in calendar year 2018. Detentions of Females by Arresting Agency. Detentions of females resulting from CBP arrests at or between ports of entry accounted for most of the detentions of females each year from calendar years 2015 through 2018 (ranging from 84 to 94 percent), as shown in figure 25. Detentions of Females by Criminality. As shown in figure 26, the number of ERO detentions of non-criminal females varied, but increased overall from calendar years 2015 to 2018. These detentions accounted for most of the total ERO detentions of females each year (ranging from 87 to 92 percent). Most of the detention of non-criminal females resulted from CBP arrests (ranging from 91 to 98 percent) rather than ICE arrests. The number of ERO detentions of convicted criminal females stayed relatively stable from calendar years 2015 through 2018, and accounted for the minority of total ERO detentions (ranging from 8 to 13 percent). CBP and ICE arrests accounted for approximately the same number of detentions of convicted criminal females. Removals Removals of Females Increased Overall. The number of ERO removals of females remained relatively stable from calendar years 2015 through 2018, but increased overall by 6 percent over the period, as shown in figure 27. ERO removal data include removals resulting from both ICE and CBP arrests. During the PEP, which lasted from calendar years 2015 and 2016, the number of ERO removals increased by more that 2 percent. From calendar years 2016 to 2017, following the issuance of the 2017 DHS memo, the number of ERO removals decreased by more than 14 percent, then increased by more than 20 percent in 2018. Removals of Females by Arresting Agency. Each calendar year, removals resulting from CBP arrests at or between ports of entry accounted for most of the ERO removals of females (ranging from 80 to 90 percent), as shown in figure 27. Removals of Females by Criminality. From calendar years 2015 through 2018, the majority of ERO removals were of non-criminal females (ranging from 66 to 72 percent), as shown in figure 28. Most removals of non-criminal females resulted from CBP arrests (ranging from 88 to 97 percent), rather than ICE arrests. ERO removals of convicted criminal females varied, increasing overall, from calendar years 2015 to 2018, and accounted for the minority of ERO removals of females each year (ranging from 28 to 34 percent). The majority removals of convicted criminal females also resulted from CBP arrests (ranging from 56 to 71 percent). Appendix V: Enforcement and Removal Operations Arrests of Juveniles by Age and Gender, 2015-2018 This appendix presents the overall number of Enforcement and Removal Operations (ERO) administrative arrests (arrests) of juveniles—persons encountered by ERO who have not reached 18 years of age—as well as the number of juvenile arrests by age and gender. We analyzed individual-level Immigration and Customs Enforcement (ICE) data to identify the number of ERO arrests of juveniles during calendar years 2015 through 2018. The Number of Arrests of Juveniles Increased Overall. The number of ERO arrests of juveniles increased overall by 53 percent from calendar years 2015 through 2018, as shown in figure 29. During the two years the Priority Enforcement Program was in effect, ERO arrests of juveniles increased 47 percent (from 887 arrests in 2015 to 1,307 arrests in 2016). Following issuance of the 2017 DHS memo, ERO arrests of juveniles increased 76 percent in calendar year 2017 (2,294 arrests), and decreased 41 percent in calendar year 2018 (1,361 arrests). Arrests of Juveniles by Age. The proportion of arrests for juveniles of all age groups—ages 0 to 6, 7 to 12, and 13 to 17—varied between calendar years 2015 and 2018, as shown in figure 30. For instance, the proportion of arrests of juveniles ages 0 to 6 between calendar years 2015 and 2018, ranged from 31 to 43 percent of the total number of arrests of juveniles. The proportion of arrests of juveniles ages 7 to 12 ranged from 16 percent to 23 percent of total arrests of juveniles during this same period while arrests of juveniles ages 13 to 17, during the same period ranged from 34 percent to 50 percent of total arrests of juveniles. Arrests of Juveniles by Gender. Each calendar year from 2015 through 2018, arrests of male juveniles accounted for the majority of ERO arrests of juveniles (ranging from 57 to 66 percent), as shown in figure 31. Appendix VI: Enforcement and Removal Operations Administrative Arrests by Country of Citizenship This appendix presents the number of U.S. Immigration and Customs Enforcement (ICE) Enforcement and Removal Operations (ERO) administrative arrests by country of citizenship for calendar years 2015 through 2018. Each year from 2015 through 2018, ERO administratively arrested aliens from over 200 countries. Appendix VII: Enforcement and Removal Operations Detentions by Country of Citizenship This appendix presents the number of U.S. Immigration and Customs Enforcement (ICE) Enforcement and Removal Operations (ERO) detentions by country of citizenship for calendar years 2015 through 2018. Each year from 2015 through 2018, ERO detained aliens from over 200 countries. Appendix VIII: Enforcement and Removal Operations Removals by Country of Citizenship This appendix presents the number of U.S. Immigration and Customs Enforcement (ICE) Enforcement and Removal Operations (ERO) removals by country of citizenship for calendar years 2015 through 2018. Each year from 2015 through 2018, ERO removed aliens from almost 200 countries. Appendix IX: Review of Available Criminal Charges for Detentions of Selected Populations Resulting from ICE Arrests This appendix presents the number and type of criminal charges of U.S. Immigration and Customs Enforcement (ICE) Enforcement and Removal Operations (ERO) detentions of selected populations (aliens who are: transgender, individuals with disabilities, pregnant, individuals with mental disorders, women who are nursing, or individuals who are elderly) resulting from ICE arrests. ICE administrative arrests of aliens for civil violations of U.S. immigration laws include arrests of both aliens with prior criminal convictions and those without prior criminal convictions. According to ICE, ICE officers electronically request and retrieve criminal history information about an alien from the FBI’s National Crime Information Center (NCIC) database, which maintains a repository of federal and state criminal history information. ICE officers are also able to manually enter criminal history information in ICE’s data system if they discover additional criminal history information that was not available in NCIC. ICE officers may also check for criminal convictions committed outside the United States, on a case by case basis. To identify which convictions or charges were immigration-related for these selected populations, we reviewed the criminal history information recorded in ICE’s data system by ICE officers. m ICE collected data to identify each of these populations beginning at different timeframes or subsets within the population, as shown below. For information on the number of detentions of selected populations resulting from ICE arrests by criminal charge type, see tables 13 through 18. Appendix X: Length of Detentions of Selected Populations This appendix presents the length of U.S. Immigrations and Customs Enforcement (ICE) Enforcement and Removal Operations detentions of selected populations—aliens who are: transgender, individuals with disabilities, pregnant, individuals with mental disorders, women who are nursing, or individuals who are elderly. Available ICE data varied for each of these populations because ICE began collecting these data at different time periods. In addition, the length of some detentions from a particular year may be undetermined because they were still ongoing at the time of our review (as of May 15, 2019). We present available data for each of the populations. Detentions of Transgender Individuals. Based on available records each year from 2016 through 2018, the majority of detentions of transgender individuals were 90 days or less (ranging from 62 to 70 percent), as shown in table 19. Detentions of Individuals with Disabilities. Based on available records in calendar years 2017 and 2018, the majority of detentions of individuals with disabilities were 90 days or less (56 and 65 percent, respectively), as shown in table 20. Detentions of Pregnant Women. From calendar years 2016 through 2018, the majority of detentions of pregnant women were 15 days or less (ranging from 71 to 93 percent), as shown in table 21. Detentions of Individuals with Mental Disorders at ICE Health Service Corps-staffed facilities. Based on available records each year from calendar years 2015 through 2018, the majority of detentions of individuals with mental disorders at ICE Health Service Corps (IHSC)- staffed facilities were 90 days or less (ranging from 59 to 71 percent), as shown in table 22. Detentions of Nursing Women at IHSC-staffed facilities. From calendar years 2015 through 2018, most detentions of nursing women at IHSC-staffed facilities were 30 days or less (ranging from 77 to 97 percent), as shown in table 23. Detentions of Elderly Individuals. Based on available records each year from calendar years 2015 through 2018, most of the detentions of elderly individuals were 90 days or less (ranging from 80 to 84 percent), with the majority being of 30 days or less, as shown in table 24. Appendix XI: Comments from the Department of Homeland Security Appendix XII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact name above, Meg Ullengren (Assistant Director), Carissa Bryant (Analyst-in-Charge), Hiwotte Amare, Michele Fejfar, Eric Hauswirth, Dainia Lawes, Marycella Mierez, Heidi Nielson, and Claire Peachey made key contributions to this report.

In January 2017, the President issued Executive Order 13768 that instructs the Department of Homeland Security (DHS) to enforce U.S. immigration law against all removable individuals. In February 2017, the Secretary of DHS issued a memorandum (2017 DHS memo) establishing policy and providing guidance related to the Executive Order. Within DHS, ICE is responsible for providing safe confinement for detained aliens, including certain vulnerable populations. GAO was asked to review ICE immigration enforcement priorities, including those for vulnerable populations. This report examines (1) ICE data on arrests, detentions, and removals from calendar years 2015 through 2018; (2) the policies in effect for selected populations and any changes ICE made to align these policies with the 2017 DHS memo; and (3) the extent to which ICE collects data on selected populations and what those data show. GAO analyzed ICE data on arrests, detentions, and removals from calendars years 2015 through 2018; reviewed policies and documents on eight populations GAO selected based on ICE policies and input from organizations that represent various vulnerable populations; and interviewed agency officials. The numbers of administrative arrests (arrests), detentions, and removals of aliens (people who are not citizens or nationals of the United States) by U.S. Immigration and Customs Enforcement (ICE) varied during calendar years 2015 through 2018, and increased overall for the period. Males, aliens from four countries—Mexico, Guatemala, El Salvador, and Honduras—and convicted criminals accounted for the majority of ICE arrests and removals. The majority of detentions were made up of males, aliens from the same four countries, and non-criminals. ICE has policies related to six of the selected populations GAO examined, including aliens who are: transgender, individuals with disabilities, individuals with mental disorders, juveniles, parents of minors, and pregnant. These policies provide guidance on identifying, detaining, caring for, and removing aliens in these populations. After issuance of the 2017 DHS memo, ICE removed language from its existing policies for individuals who are pregnant and parents of minors that it determined to be inconsistent with 2017 DHS memo. Available ICE detention data show that detentions of transgender and pregnant individuals increased from calendar years 2016 to 2018 and detentions of individuals with disabilities increased from 2017 to 2018. Detentions at facilities staffed by ICE medical personnel of individuals with mental disorders and women who are nursing varied from calendar years 2015 to 2018. We found that ICE does not collect or maintain readily available data on detained parents or legal guardians of U.S. citizen or legal permanent resident minors, as required by ICE policy. Without such information, ICE headquarters officials cannot ensure that ICE officers are collecting and entering this information into the system as required by policy. ICE officials said they have considered actions to identify this population, but are no longer considering these actions as of October 2019. Maintaining these data in a readily available format could help ensure that ICE personnel identify, evaluate, and share information on this population.

GAO_GAO-19-537

Background The DATA Act was enacted May 9, 2014, for purposes that include expanding on previous federal transparency legislation by requiring the disclosure of federal agency expenditures and linking agency spending data to federal program activities, so that both policymakers and the public can more effectively track federal spending. The act also holds agencies accountable for submitting complete and accurate data to Treasury and requires that agency-reported award and financial data comply with OMB and Treasury data standards. The DATA Act requires OMB and Treasury to establish government-wide data standards that to the extent reasonable and practicable provide consistent, reliable, and searchable spending data for any federal funds made available to or expended by federal agencies. These standards specify the data elements to be reported under the DATA Act and define and describe what is to be included in each data element, with the aim of ensuring that data will be consistent and comparable. The DATA Act requires OMB and Treasury to ensure that the standards are applied to the data made available on USAspending.gov and also requires agencies’ OIGs and GAO to review these data and report on their completeness, timeliness, accuracy, and quality. Sources of Data on USAspending.gov USAspending.gov has many sources of data, including data that agencies submitted to Treasury through their financial management systems and other data extracted from government-wide award systems that collect data from federal agencies and external award recipients. Treasury’s DATA Act Broker (Broker) is a key component of the data collection and reporting framework. The Broker enables agencies to upload, validate, and certify financial data and create linkages between the financial and award data for publication on the USAspending.gov website. Agencies are expected to submit three data files with specific details and data elements to the Broker from their financial management systems in accordance with Treasury guidance documents. File A: Appropriations account includes summary data such as the fiscal year cumulative federal appropriations account balances and includes data elements such as the agency identifier, main account code, budget authority appropriated amount, gross outlay amount, and unobligated balance. File B: Object class and program activity includes summary data such as the names of specific activities or projects as listed in the program and financing schedules of the annual budget of the U.S. government. File C: Award financial includes award transaction data such as the obligation amounts for each federal financial award made or modified during the reporting quarter (e.g., January 1, 2017, through March 31, 2017). The Broker also extracts data from four government-wide award reporting systems: the Federal Procurement Data System–Next Generation (FPDS-NG), System for Award Management (SAM), Financial Assistance Broker Submission (FABS), and the FFATA Subaward Reporting System (FSRS). These systems supply award and sub-award data (e.g., federal grants, loans, and contracts) to USAspending.gov. The systems compile data that agencies and external federal award recipients submit to report procurement and financial assistance award data required under the Federal Funding Accountability and Transparency Act of 2006 (FFATA). The four files produced with data that the Broker extracts from the four systems are as follows: File D1: Procurement includes data on the attributes of the award and the awardee and the recipient of the award (extracted from FPDS-NG on a daily basis) for procurement awards (contracts), if any, and contains elements such as the total dollars obligated, current total value of award, potential total value of award, period of performance start date, and other data to identify the procurement award. File D2: Financial assistance includes award and awardee attribute data (extracted from FABS nightly) on financial assistance awards (grants and loans) and contains data elements such as the federal award identification number, the total funding amount, the amount of principal to be repaid for the direct loan or loan guarantee, the funding agency name, and other data to identify the financial assistance award. File E: Additional awardee attributes includes additional data (extracted from SAM) on the award recipients and contains elements such as the awardee or recipient unique identifier; the awardee or recipient legal entity name; and data on the award recipient’s five most highly compensated officers, managing partners, or other employees in management positions. File F: Subaward attributes includes data (extracted from FSRS) on awards made to subrecipients under a prime award, if any, and contains elements such as the subaward number, the subcontract award amount, total funding amount, the award description, and other data to facilitate the tracking of subawards. According to Treasury guidance, after agencies submit Files A, B, and C, the Broker runs a series of validations and produces warnings and error reports for agencies to review. After passing validations for these three files, the Broker generates Files D1 and D2 containing details on procurement and assistance awards and performs a cross-file validation of linkages between File C and Files D1 and D2, which generates error and warning reports, as appropriate. The Broker also generates Files E and F containing data on highly compensated officers and subawards associated with the prime awards. There are no field-level or cross-file validations for Files E and F. With their quarterly submission, agency senior accountable officials (SAO) are required to certify the data submissions and to provide assurance over the alignment of Files A through F and that the data are valid and reliable in accordance with OMB guidance. According to Treasury officials, once the certification is submitted, a sequence of computer program instructions or scripts is issued to transfer the data from the Broker to tables set up in a database used as a source for the data on the website. Data are then displayed on USAspending.gov along with certain historical data from other sources, including Monthly Treasury Statements. Federal Financial Management SSPs OMB and Treasury implementation guidance called for customer agencies to consider how best to leverage their SSPs to capture data for their submissions, engage with their SSPs throughout the implementation process, and document the SSP role in agency DATA Act submissions. According to the SSPs, 60 non–Chief Financial Officers Act of 1990 (CFO Act) agencies use a federal SSP for all or part of the data submissions out of the 82 reporting data under the DATA Act as of the fourth quarter in fiscal year 2018. In 2014, Treasury designated four federal financial management SSPs to provide financial management services to other federal agencies. Although the four Treasury-designated federal financial management SSPs have changed over the years, the four federal financial management SSPs, which performed DATA Act services for external customers as of December 2018, are as follows: The Administrative Resource Center (ARC) is a Treasury SSP that provided financial management services to 42 customer agencies external to Treasury. According to ARC, 21 of those agencies received DATA Act services from ARC. The Enterprise Services Center (ESC) is a Department of Transportation financial management SSP that provided services to seven external customer agencies. According to ESC, six of those customer agencies received DATA Act services from ESC. Pegasys Financial Services (PFS) is a Department of Agriculture financial management SSP that provided services to 37 external customer agencies. According to PFS, 24 of those customer agencies received DATA Act services from PFS. The Interior Business Center (IBC) is a Department of the Interior financial management SSP that provided services to 18 external customer agencies. According to IBC, nine of those customer agencies received DATA Act services from IBC. The DATA Act requires agencies’ OIGs to issue reports assessing the quality of the agencies’ spending data submissions and compliance with the DATA Act. In the OIGs’ reports covering their agencies’ second quarter fiscal year 2017 submissions, nine OIGs reported issues with their agencies’ use of an SSP for DATA Act submissions. Five of the nine OIGs issued recommendations related to these issues, and four agencies concurred with the recommendations. For example, one OIG recommended that its agency work closely with its SSP to address timing and coding errors that the SSP caused for future DATA Act submissions. Another OIG recommended that its agency work with its SSP to identify OMB requirements that the SSP is to perform and insert them into the service-level agreement, in order to address errors caused by confusion as to whether the SSP or the agency should submit certain types of data. Although our prior reports on the DATA Act included recommendations, our recommendations were not related to SSPs’ implementation of the DATA Act. The DATA Act requires OIGs and GAO to issue their second reports on data quality in November 2019. Federal SSPs Provide a Variety of DATA Act Services for Their Customer Agencies Customer Agencies Use Federal Financial Management SSPs for a Variety of Services The 27 customer agencies that responded to our survey reported that the four federal financial management SSPs provide a variety of services (see fig. 1). All 27 agencies reported using their federal financial management SSPs for DATA Act services, and almost all of the agencies used their SSPs for several other financial management services, such as general ledger accounting, financial reporting, and hosting the customer agencies’ financial systems. As such, the SSPs play a key role in helping to ensure that these customer agencies successfully carry out the requirements of the DATA Act and submit Files A, B, and C from their financial management systems. In addition, 17 agencies reported using their SSPs for payroll or budget execution services, while fewer reported using their SSPs for other financial management services, such as grant or loan processing. DATA Act services. All 27 customer agencies responding to our survey reported using an SSP for DATA Act services. As discussed in more detail below, these DATA Act services may include activities such as preparing DATA Act files from financial systems, consolidating DATA Act files from multiple agency component entities, reconciling DATA Act files to other source data, and uploading DATA Act files to the Broker for validation. General ledger accounting. Twenty-six agencies reported using SSPs for general ledger accounting, which may include activities such as general ledger setup and maintenance, posting transactions to the general ledger, accrual and liability processing, and period-end general ledger closing. Financial reporting. Twenty-six agencies also reported using SSPs for financial reporting, which may include activities such as Treasury reporting, financial statement preparation, cash forecasting and reporting, and financial performance and operational reporting. Financial system hosting. Twenty-five agencies reported using SSPs for financial system hosting, which may include services such as systems management and monitoring, disaster recovery, help desk administration, network security compliance and controls, and continuity of operations plans and testing. Invoice processing. Twenty-four agencies reported using SSPs for invoice processing, which may include services such as recording receiving and acceptance reports, recording invoices, matching invoices to receiving and acceptance reports, and routing invoices to obtain approval for payment. Budget execution. Seventeen agencies reported using their SSPs for financial management services related to budget execution, which may include activities such as budget setup and maintenance, fund allocation and control, and budgetary reporting. Payroll. Seventeen agencies reported using SSPs for payroll. SSP payroll services may include recording payroll and benefit payments; reconciling payroll service data with financial management data; and recording credits, payment adjustments, and employee receivable offsets. Procurements/contracts. Thirteen agencies reported using SSPs for procurement and contract services. SSP procurement and contract services may include recording credits and payment adjustments; auditing payments; processing payments for incurred expenses and payments in advance; and capturing award identifier data, such as the Procurement Instrument Identifier (PIID) and agency Unique Record Identifier (URI) to support DATA Act reporting. Grants processing. Seven agencies reported using SSPs for grants processing, which may include recording requests for grant payments, matching grant payment requests to obligating documents, routing grant payment requests for approval, and generating payment transactions. These processes also include payments for expenses and payments in advance as well as capturing award identifier data, such as Federal Award Identification Numbers (FAIN) and Catalog of Federal Domestic Assistance (CFDA) codes to support DATA Act reporting. Loans processing. Three agencies reported using SSPs for loan processing. Loan processing services may include recording requests for loan payments, matching loan payment requests to obligating documents, generating payment transactions, resolving payment issues, and recording credits and payment adjustments. Customer Agencies Rely on Their SSPs to Perform Various DATA Act Services All 27 agencies responding to our survey reported that their federal SSPs perform a variety of DATA Act services or activities, as shown in figure 2. Preparing data files A, B, or C and uploading them to the Broker are the most prevalent DATA Act services or activities that the federal SSPs perform, whereas fewer than half of the SSPs certify and publish the files for the agency after receiving agency approval. All 27 agencies reported that their SSPs prepare at least one of the Files A, B, or C using data from either SSP or customer agency financial systems. In addition, 15 of the 27 agencies reported that their SSPs consolidate DATA Act files from multiple agency components. Seventeen agencies reported that their SSPs reconcile Files A, B, or C to other source data. For example, a reconciliation of general ledger and subledgers may include verifying that (1) general ledger account balances can be traced to aggregated or discrete agency transactions and (2) aggregated or discrete agency transactions can be traced to the point of origination and source documents. Twenty-five of the 27 agencies reported that their SSPs upload Files A, B, or C to the Broker for validation. In turn, the Broker runs a series of data validations and produces warnings and error reports for agencies to review after the files are submitted. Twenty-one agencies reported that their SSPs address these warnings and errors on their behalf. After warnings have been reviewed and all errors have been addressed, Files A, B, and C have been uploaded and Files D1, D2, E, and F have been generated, the agency’s SAO is required to certify the validity and reliability of the data submissions in accordance with OMB guidance. Twenty-four agencies reported that their SSPs provide final Files A, B, or C for the customer agency to review and certify in the Broker, and 11 agencies reported that their SSPs finalize the files in the Broker and click the Certify and Publish button after receiving agency approval to certify. Most Customer Agencies and the Four Federal SSPs Reported DATA Act Challenges and Have Taken Steps to Address Them Customer Agencies and SSPs Reported Various Challenges Affecting Timeliness, Completeness, and Accuracy of Their DATA Act Submissions We asked customer agencies in our survey to specify the challenges associated with using an SSP that they experienced since their initial DATA Act submission; the SSP’s role in these challenges; and whether the challenges affected the timeliness, completeness, or accuracy of their submissions. Sixteen of the 27 customer agencies that responded to our survey identified one or more challenges associated with using an SSP (see fig. 3), many of which affected the timeliness, completeness, and accuracy of agency submissions. The survey questions and summarized results are shown in appendix II. In addition, officials from all four federal SSPs described various challenges they experienced in helping their agency customers with DATA Act submissions. The challenges reported by these 16 customer agencies and the federal SSPs are summarized below. Depending on the effectiveness of agencies’ and SSPs’ actions to address them (as discussed further below), these challenges may increase the risk that agencies will be unable to submit quality data in accordance with the DATA Act. Dependencies. Ten agencies reported that they have experienced challenges related to agency submission activities that depend on relationships with, or actions being taken by, the SSP before the agency can proceed. One agency reported that it must rely on its SSP to prepare, validate, and finalize all DATA Act files prior to agency certification and the files are often submitted close to the due date. Another agency reported that its SSP provided DATA Act submission files to the agency the day before or near the certification deadline. Relying on SSPs to prepare DATA Act files in a timely manner increases the risk that agencies may be unable to certify and publish their DATA Act submissions on time. Resources. Seven agencies said that they have experienced resource challenges related to a lack of funding or human resources at the customer agency or its SSP. One agency noted that its SSP has only a small group of people that assist with all of its SSP’s services, making it challenging in particularly busy seasons (such as the close of the fiscal year) for the SSP to meet internal deadlines and resolve data discrepancies affecting the timeliness, completeness, and accuracy of data submissions. Another agency reported challenges with funding resources, noting that the agency has been unable to use its SSP’s integrated financial and procurement system because of the costs associated with implementation, operation, and maintenance. The shortage of resources to bring on more staff or improve systems increases the risk that agencies may be unable to submit quality data and fully carry out DATA Act requirements. Competing priorities. Five agencies said that they have experienced challenges related to statutory, regulatory, policy, or other matters that have competing priorities or conflicting requirements that may affect an agency or its SSP’s DATA Act submission process. One agency reported that the fourth quarter DATA Act reporting deadline falls within fiscal year- end reporting time frames, requiring the agency to prioritize fiscal year- end reporting over some of the DATA Act reporting tasks. Similarly, officials from an SSP told us that they also experienced challenges with the short turnaround times required to incorporate system updates for DATA Act submissions. Data quality. Four agencies reported that they have experienced challenges related to meeting DATA Act requirements for data quality because they use an SSP, including completeness and accuracy of agency data to be reported as well as SAO certification and reporting of nonfinancial data elements. One agency reported that its SSP included extraneous transactions in its File C that were not required for DATA Act reporting. This created a high volume of warning messages when the Broker compared the data with file D2 during the validation process. Another agency reported that its SSP provided incomplete files for agency certification and that the data in the files did not reflect the data in the agency’s financial reports. These challenges not only increase the risk of lower-quality agency data submissions but may also require SSPs and customer agencies to expend additional resources to address warning messages that the Broker generated. Guidance. Four agencies reported experiencing challenges involving incomplete, unclear, missing, and evolving OMB and Treasury guidance related to SSP implementing requirements and Broker changes, including data elements, the technical schema, and other key policies. One agency noted that guidance on performing quarterly certifications is not readily available. Two agencies reported challenges involving a lack of guidance on how to communicate error corrections and desired changes to their SSPs. Lack of guidance could result in misunderstandings or miscommunications between the SSP and its customer agency, increasing the risk of delays or errors in the agency’s data submissions. Technology. Four agencies reported that they have experienced technology challenges with developing and submitting required files. These challenges include SSP infrastructure issues, such as integrating multiple existing and disparate management systems or their SSPs needing to modify existing systems to implement the DATA Act. Agencies reported that some systems are unable to include the required data elements for all reported transactions. Similarly, an SSP official told us prior to our survey of customer agencies that the SSP also experienced technical challenges with systems and data that have since been resolved. Another SSP experienced challenges with its financial systems not capturing award identification data elements, such as the PIID. Such limitations in customer agency and SSP technology may require the use of limited resources for error corrections and manual work-arounds, increasing the risk of reporting errors, and may hamper customer agencies’ and SSPs’ ability to submit quality data in accordance with the DATA Act. Project management. Two agencies reported that they have experienced challenges related to their SSPs’ project management, such as the lack of a designated project manager and inadequate documentation of progress made or key decisions. Specifically, both customer agencies said that their SSPs did not provide data in a timely manner for their review prior to submission. One agency reported that although this did not affect the timeliness of its submission, it affected data quality because the agency did not have sufficient time to test and implement sufficient internal controls and validation procedures prior to data being published on USAspending.gov. Additionally, the same agency reported that there is no senior project manager at the SSP who oversees the processes used to provide financial management services to the agency. This challenge may affect agencies’ ability to resolve errors, increasing the risk that they submit incorrect data. However, none of the four federal SSPs described any project management challenges when we asked them prior to our survey what challenges they faced in carrying out their roles and responsibilities for assisting their customer agencies with implementing the DATA Act. Agencies Reported Steps They Have Taken to Address Identified DATA Act Submission Challenges and Ensure Data Quality We asked customer agencies in our survey to describe the steps they and their SSP have taken to address reported challenges and help mitigate risks associated with them. Of the 16 agencies that identified challenges, 12 agencies reported that they had already taken steps to address them and five agencies said they were aware of steps their SSPs had taken. As discussed in more detail below, communication and coordination between the SSP and Treasury, as well as customer agency technological improvements and manual work-arounds were the steps most often reported by agencies to address identified challenges. Communication and coordination. Eight of the 12 agencies described communication efforts with their SSPs or Treasury to facilitate coordination and seek information needed to address their challenges associated with using an SSP. These efforts include requesting information from the SSP, Treasury, and other government resources to obtain additional knowledge regarding the DATA Act and to prepare internal guidance and procedures. One agency reported implementing a weekly meeting with its SSP on DATA Act reporting. Another agency reported that its SSP has been very proactive in sharing information (bulletins, updates, etc.) and assisting with submitting DATA Act information. According to the eight customer agencies, increased communication and coordination has helped to address several technology, dependency, and resource challenges. Technology improvements. To address technology challenges, four agencies discussed making improvements in technology at both the agency and the SSP. The improvements include implementing an integrated financial and procurement system platform and working with the software vendor to obtain access to FPDS-NG for anticipated 2019 procurement activity reporting. Another agency is currently implementing a technological solution to aid in consolidating and reconciling files. In addition to technological solutions, two agencies reported using manual work-arounds, such as developing and implementing internal manual processes to reconcile and correct data files. Some agencies also discussed actions their SSPs had taken to address technology issues, including two SSPs that are working with the developers to address software issues. One agency reported that in addition to addressing technology challenges, these improvements also provided substantial cost savings. We also asked the 27 customer agency survey respondents to specify the internal control processes and activities they use to assure the quality of data submitted to the Broker. Twenty-four of 27 agencies reported that they use various processes and activities to provide such assurance. Specifically, these 24 agencies reported that they reconcile data files to other agency data and sources (e.g., the Governmentwide Treasury Account Symbol Adjusted Trial Balance System). These reconciliations can help identify errors in data files and ensure that they are consistent with other agency data. In addition, 18 agencies reported that they review their SSPs’ Service Organization Control (SOC) reports to identify any internal control deficiencies, and nine agencies reported that they implemented controls to address control deficiencies identified in their SSPs’ SOC reports. Twenty agencies reported that they review or verify agency data displayed on USAspending.gov. By reviewing these data, agencies can confirm that the data that they uploaded to the Broker are presented accurately on the website. Nineteen agencies reported that they incorporate the results of OMB Circular No. A-123 reviews that affect their DATA Act submissions. OMB Circular No. A-123 provides a methodology for agency management’s reporting on internal controls over reporting, and it also establishes an assessment process based on our Standards for Internal Control in the Federal Government that management must implement in order to properly assess and improve internal controls over operations, reporting, and compliance. Agencies Described Useful Practices for Working with SSPs on DATA Act Submissions Twenty of the 27 agencies that responded to our survey described useful practices in working with an SSP on DATA Act submissions. These agencies reported most often that discussing issues with the SSP and performing data reconciliations or comparisons were helpful. For example, 12 agencies reported that working and communicating with the SSP was useful. They also reported that having a readily available point of contact for better communication and communicating early about the need to complete the DATA Act submission helps to resolve any concerns prior to the due date. One agency reported that it conducts weekly meetings with its SSP to discuss key topics, including implementation, data quality, and reporting processes and procedures. Eleven agencies reported that conducting data reconciliations or comparisons, and creating a standard operating procedure to ensure that their data are consistently reviewed, reconciled, corrected, and certified, was also useful. One agency noted that in addition to the quarterly files that require certification, the SSP also provides monthly files that the agency can review to provide additional time to correct any identified errors. These 20 agencies also suggested other practices for successfully working with an SSP on DATA Act submissions, such as automating reconciliations and other internal control processes to increase efficiency, implementing continuous training and monitoring, assigning an accountant as an agency contact, and conducting an analysis of agency risk as recommended in the Data Quality Playbook. One agency reported that it performs extensive comparisons of agency-generated data reports to SSP-prepared data files, and that it partially automated this process to help increase efficiency. Agencies Described the Need for Additional Steps, Tools, and Guidance Related to Using an SSP for DATA Act Submissions Nine of the 16 agencies that identified challenges associated with using an SSP reported that their agencies need to take additional steps to address their identified challenges. Some of these agencies reported that they still need to address issues such as correcting data and improving communication with their SSPs. These agencies also reported the need to negotiate annual service-level agreements with their SSPs to address resource and competing priority concerns. One of these agencies reported that it continues to work with its SSP to understand what is lacking in the process of correcting PIID information for obligations. A few agencies reported the need to develop internal guidance on topics such as data quality plans per OMB guidance and a reconciliation process to address their data quality challenges. Finally, one agency reported that it is in the process of hiring additional personnel to address its challenges with competing priorities. While customer agencies are primarily responsible for the quality of their DATA Act submissions, six of the 16 agencies that reported challenges reported that their SSPs also need to take certain steps to address identified challenges, such as communicating with the customer agency and making technology improvements. For example, one agency reported that its SSP does not provide the customer agency with updated data submission files after the agency has requested changes. The customer agency suggested that the SSP provide updated files more often to help the agency ensure that the changes are included in the final file it submits to the Broker. Another agency reported that its SSP has been experimenting with different methods to eliminate cross-file warnings and errors in File C that need to be addressed. Five of the 27 customer agencies we surveyed reported that additional tools or guidance from OMB, Treasury, or other entities (such as the SSP) could assist agencies with using an SSP for DATA Act submission. Specifically, three agencies reported that they would like to have guidance, including standard operating procedures, for communicating and working with their SSPs. One agency suggested additional OMB or Treasury training on compliance with the DATA Act, and one agency suggested improvements by Treasury to prevent Broker errors that result from normal business scenarios and require manual work-arounds to the agencies’ system-generated files. OMB staff told us that they are involved with the DATA Act Executive Steering Committee, working closely with Treasury to oversee all aspects of both policies and implementation related to federal spending transparency efforts. According to OMB staff, neither the SSPs nor their customer agencies have reported any current challenges with DATA Act submissions to OMB. OMB staff stated that effective implementation of OMB Memorandum M-18-16 guidance to agencies and SSPs, which discusses establishing entity-level controls related to using SSPs, would help to ensure that the SSPs provide quality services. In April 2019, OMB issued Memorandum M-19-16 on shared services, which among other things described the process and desired outcomes for shared services and established a governance and accountability model for achieving them. For example, as it relates to the DATA Act, the memorandum calls for the Shared Services Governance Board to leverage the DATA Act Executive Steering Committee’s work on DATA Act standards. Treasury officials told us prior to our survey that they held two workshops for SSPs in the early stages of implementation to address specific concerns and questions on DATA Act implementation. Treasury officials stated that the only challenge reported by SSPs to the department related to linking and certifying award data using the Broker when the awarding agency and the file C reporting agency were different. To address this concern, Treasury added clarification in guidance on files A, B, and C submissions and a new Broker feature allowing agencies to specify whether the award data submitted in Files D1 and D2 comes from the funding agency or the awarding agency. Agency Comments We provided a draft of this report to OMB; Treasury, including ARC; ESC; PFS; and IBC for comment. OMB, ESC, and IBC told us that they had no comments on the draft report. Treasury and PFS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Director of the Office of Management and Budget, the Secretary of the Treasury, the four federal financial management shared service providers, and interested congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-9816 or rasconap@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology The Digital Accountability and Transparency Act of 2014 (DATA Act) requires us to review Office of Inspector General (OIG) reports and issue reports of our own assessing and comparing the completeness, timeliness, accuracy, and quality of the data that federal agencies submit under the act and the implementation and use of data standards. We issued our first report on data quality in November 2017, as required. In July 2018, we issued a report on our review of OIG reports on agencies’ first DATA Act submissions and in the course of our review found that some OIGs reported challenges involving the use of federal shared service providers (SSP) that helped agencies implement the DATA Act. For this report, our objectives were to describe (1) the types and variations of services that the federal SSPs provide to their financial management customer agencies to assist them in implementing the DATA Act and meeting the act’s requirements and (2) any challenges that federal SSPs and their financial management customer agencies have encountered in their efforts to ensure the quality of data submissions consistent with the standards established under the DATA Act and the steps they have taken to address those challenges. To address our first objective, we interviewed four federal SSPs and surveyed their financial management customer agencies to identify the types and variations of services the SSPs provide related to DATA Act implementation and meeting the act’s requirements. We also obtained and reviewed selected service-level agreements executed between the four SSPs and their financial management customer agencies to determine the types and variations of DATA Act services that the SSPs provided to them. In December 2018, we emailed a survey questionnaire to 67 customer agencies that the four federal SSPs told us were external customers for DATA Act or other financial management services and that also submitted data under the DATA Act as of December 2018. During the survey, we determined that 60 of those 67 agencies actually received DATA Act services from a federal SSP and were eligible members of our study population. We received survey responses from 31 agencies by our January 2019 deadline and, based on our review, determined that 27 were eligible and sufficiently complete for our purposes. After excluding ineligible agencies from our population, the response rate was 45 percent. In developing, administering, and analyzing the survey, we took steps to minimize the five types of potential errors, described below, that may affect survey results. Because we surveyed all agencies in our population, there was no sampling error. To minimize the effects of coverage error—the exclusion of some eligible members of the population, or inclusion of ineligible members—we identified as ineligible and removed seven initially identified agencies because we determined that they did not use a federal SSP to provide DATA Act services. Measurement error may result from differences in how a question is interpreted and the sources of information available to respondents. To help prevent measurement error, we conducted pretests of the draft questionnaire with four customer agencies, each using a different SSP, and made revisions to improve the validity and minimize the burden of responding to our questions. Nonresponse error may result when a survey fails to capture information from all agencies selected in the survey, and it may introduce bias if those agencies that did not respond would have given materially different answers than those that did. To maximize survey response, we sent multiple email reminders to the surveyed agencies and extended the submission deadline. While we do not have evidence of material bias from those not responding, we limit our survey results in this report as representing only those 27 agencies responding. Finally, to limit the possibility of processing error, survey responses were checked for invalid or illogical answer patterns, and data edits were made as necessary to facilitate processing and analysis of the results. This analysis was verified by a separate data analyst. Table 1 lists the 27 customer agencies (by shared service provider) for which we obtained, reviewed, and included customer agency survey responses. The survey questions and summarized results are shown in appendix II. To meet our second objective, we interviewed the officials of the four federal SSPs prior to our survey to obtain information on the challenges the SSPs and their customer agencies encountered and steps taken to address them. We reviewed and analyzed the 27 customer agency survey responses to identify challenges responding agencies reported since their initial DATA Act submissions because they are working with an SSP and any steps SSPs and their financial management customers took to address challenges and to help ensure the quality of data submissions. We did not corroborate the customer agencies’ survey responses with the four federal SSPs, Office of Management and Budget (OMB), or Department of the Treasury (Treasury). To identify steps taken to address challenges, we also obtained and reviewed any reports related to DATA Act implementation that the SSPs or their respective OIGs produced. In addition, we interviewed OMB staff and Treasury officials about any guidance they have provided or actions they have taken to assist the four SSPs and their financial management customers with any challenges related to DATA Act compliance. We conducted this performance audit from July 2018 to July 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Results of Survey of Federal Financial Management Shared Service Provider Customer Agencies United States Government Accountability Office Survey of Customer Agencies’ Use of Shared Service Providers for Digital Accountability and Transparency Act (DATA Act) Submissions This questionnaire asks about your agency’s use of and relationship with your federal shared service provider (SSP). It should be completed by officials knowledgeable about the DATA Act services your federal SSP provides. Please submit only one survey response per agency, but consult with other officials as needed; when answering, please consider any agency component activity and experiences together, and answer at the agency level to the best of your ability. If your agency uses more than one federal SSP, please be sure to include information about both SSPs in your answers. This is a fillable PDF form. You can click buttons and type into highlighted boxes throughout the form; the boxes will accommodate more text than is immediately visible. Save this file to a drive now, and save your answers periodically as you go. When completed, save this file and email it to DATAActImplementation@gao.gov. If a “Submit” button appears in the upper right corner of your screen, you may also use that to automatically email your completed questionnaire (some viewers will not see this button depending on your system’s Javascript settings). If you have any questions, or feel this questionnaire was sent to your office in error, please contact 1. What is the name of the person completing this questionnaire, title, agency name, and contact information? (Please submit only one survey response per agency) Phone: 2. What is the name and title of the individual who reviews and certifies your agency’s DATA Act submission in the Treasury broker as ready for publishing? Title: a. Is this person also your agency’s DATA Act Senior Accountable Official (SAO)? 3. Which federal SSP(s) (if any) does your agency currently use for the financial management services listed below? (Select all that apply) 4. Which specific DATA Act services/activities does the federal SSP(s) identified in question 3 perform for your agency (in whole or in part)? (Select all that apply) Finalize the files in the Treasury broker by clicking the “Certify and Publish” button after receiving agency certification Other SSP services or activities (specify in the box below) 5. Which, if any, of the following activities does the federal SSP(s) you identified above initiate for your agency (in whole or in part) for the broker to perform? (Select one answer in each row) 6. What are the steps taken by your agency to certify the final DATA Act files before they are published (e.g., by whom and how are the data validated, reviewed, and comments (if any) provided on the files)? Summary included in report 7. Since your agency’s initial DATA Act submission, has your agency experienced any challenges in the following areas because it is working with an SSP, and did the challenge(s) in working with the SSP have an impact on the timeliness, completeness, and accuracy of any of your agency’s submissions? (Select all the area(s) with challenges and any impacts that apply) Technology issues Including challenges with developing and submitting required files, and SSP infrastructure issues such as integrating multiple existing and disparate financial and management systems, or the SSP needing to install new systems or modify existing systems to implement the DATA Act. Dependencies Agency submission activities depend on relationships with or actions being taken by the SSP before the agency can proceed. Guidance Incomplete, unclear, missing, and evolving guidance related to the SSP implementing requirements and broker changes, including data elements, the technical schema, and other key policies issued by OMB and Treasury. Resources Lack of funding or human resources by your agency or SSP. Project management Challenges related to the SSP’s project or program management, such as lack of a designated project manager and inadequate documentation of progress made or key decisions. Data quality Issues related to meeting DATA Act requirements for data quality because of the use of an SSP, including completeness and accuracy of agency data to be reported, as well as Senior Accountable Official certification and reporting of nonfinancial data elements. Competing priorities Statutory, regulatory, policy or other matters that have competing priorities or conflicting requirements that may affect an agency or their SSP’s DATA Act submission process. Challenge? Contract Management Challenges related to the management of the Service Level Agreement (SLA) and/or tasks and services that the SSP provides for the customer agency or the SSP should be providing but are not in the SLA. Other challenges (specify in box below) 8. What were the specific challenge(s) with your agency’s DATA Act submissions identified in question 7, and how did your SSP play a role? If your agency used multiple SSPs, please specify to which provider the challenge(s) was related. a. What steps, if any, has your agency taken to address these challenge(s)? b. What steps, if any, remain to be taken by your agency to address these challenge(s)? c. What steps, if any, are you aware of that your SSP has taken to address these challenge(s)? d. What steps, if any, remain to be taken by your SSP to address these challenge(s)? Summary included in report 9. What management or oversight practices has your agency found to be useful in working with your SSP on DATA Act submissions? 10. What internal control processes and activities does your agency use to provide assurance over the quality of data submitted to the Treasury broker and displayed on USAspending.gov? Internal control processes and activities: Reconcile data files to other agency data and sources (e.g., SF 133, GTAS) Review SSP’s Statement on Standards for Attestation Engagements No. 18/Service and Organization Controls (SOC) reports to identify any internal control deficiencies. (Describe internal control deficiencies related to DATA Act submissions, if any, in box below) Implement complementary controls to address SSP control deficiencies identified in the SOC report. (Describe controls implemented, if any, in box below) Review/verify agency data displayed on USAspending.gov Incorporate the results of A-123 reviews that have an impact on DATA Act Other internal control processes or activities (specify in box below) 11. What additional tools or guidance, if any, are needed from OMB, Treasury, or others to assist with your agency’s use of the SSP or DATA Act submission? 12. Please provide any additional comments or explanations not already discussed above. Please save and e-mail your responses to DATAActImplementation@gao.gov. Thank you for completing our questionnaire! Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Michael LaForge (Assistant Director), Laura Pacheco (Auditor in Charge), Umesh Basnet, Thomas Hackney, Roy Kilgore, and Diane Morris made major contributions to this report. Other key contributors include Dave Ballard, Jenny Chanley, Peter Del Toro, Patrick Frey, Ricky Harrison, Maxine Hattery, Jason Kelly, James Kernen, Christina Quattrociocchi, Carl Ramirez, Michelle Sager, and James Sweetman. Related GAO Products DATA Act: OMB Needs to Formalize Data Governance for Reporting Federal Spending. GAO-19-284. Washington, D.C.: March 22, 2019. Streamlining Government: OMB and GSA Could Strengthen Their Approach to Implementing a New Shared Services Plan. GAO-19-94. Washington, D.C.: March 7, 2019. Open Data: Treasury Could Better Align USAspending.gov with Key Practices and Search Requirements. GAO-19-72. Washington, D.C.: December 13, 2018. DATA Act: Reported Quality of Agencies’ Spending Data Reviewed by OIGs Varied Because of Government-wide and Agency Issues. GAO-18-546. Washington, D.C.: July 23, 2018. DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness and Accuracy of Spending Data and Disclose Limitations. GAO-18-138. Washington, D.C.: November 8, 2017. DATA Act: As Reporting Deadline Nears, Challenges Remain That Will Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017. DATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges. GAO-17-460. Washington, D.C.: April 26, 2017. DATA Act: Implementation Progresses but Challenges Remain. GAO-17-282T. Washington, D.C.: December 8, 2016. DATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain. GAO-17-156. Washington, D.C.: December 8, 2016. DATA Act: Initial Observations on Technical Implementation. GAO-16-824R. Washington, D.C.: August 3, 2016. DATA Act: Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29, 2016. DATA Act: Progress Made but Significant Challenges Must Be Addressed to Ensure Full and Effective Implementation. GAO-16-556T. Washington, D.C.: April 19, 2016. DATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation. GAO-16-261. Washington, D.C.: January 29, 2016. DATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015.

Over the past 2 decades, the federal government has undertaken efforts to save money and increase efficiencies by encouraging agencies to use administrative and operational services and processes that other federal and external parties provide, commonly referred to as shared services. The DATA Act was enacted to increase accountability and transparency and, among other things, establish government-wide data standards. Certain agencies have used shared services of federal SSPs to implement the act. The act also requires a series of oversight reports by agencies' Offices of Inspector General (OIG) and GAO. OIGs for five agencies have made recommendations related to agencies' use of SSPs for DATA Act services, and four agencies concurred with the recommendations. The objectives of this report are to describe (1) the types and variations of services that federal SSPs provide to their financial management customer agencies to assist them with implementing the DATA Act and meeting the act's requirements and (2) the challenges federal SSPs and their financial management customer agencies have encountered in their efforts to ensure the quality of data submissions consistent with DATA Act standards and steps they have taken to address those challenges. To address these objectives, GAO interviewed staff at four federal SSPs, OMB, and Treasury; reviewed selected agreements between the SSPs and their customer agencies; conducted a survey of customer agencies from December 2018 to January 2019; and analyzed the survey responses. GAO found that the 27 agencies that responded to its survey use federal shared service providers (SSP) for a variety of services, including financial system hosting, general ledger accounting, financial reporting, and various Digital Accountability and Transparency Act of 2014 (DATA Act) services. Sixteen of the 27 SSP customer agencies reported that they experienced challenges associated with using an SSP, many of which affected the timeliness, completeness, or accuracy of agency DATA Act submissions. Ten of these agencies experienced challenges with depending on an SSP to take actions before the agency could proceed. Agencies responding to GAO's survey also reported other challenges, such as a lack of guidance from the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury), limited customer agency and SSP resources, SSP errors affecting data quality, and inadequate SSP project management activities. Twelve of these 16 agencies stated that they are taking steps to address these challenges—such as increasing communication with their SSPs, making technology improvements, and performing manual work-arounds to reconcile and correct data files. Nine agencies reported remaining additional steps, for example, correcting data errors and developing a reconciliation process and internal guidance on topics such as data quality plans. While agencies are primarily responsible for the quality of DATA Act submissions, five agencies also reported that their SSPs had taken similar steps to address identified challenges. Twenty of the 27 agencies described useful practices for working with SSPs on DATA Act submissions, including the agency discussing issues with the SSP and obtaining data files from the SSP each month to provide additional time to correct any identified errors. Treasury officials stated prior to GAO's survey that they held workshops for SSPs in the early stages of DATA Act implementation and clarified guidance issued in June 2018 to specifically address their concerns and questions. After GAO's survey, in April 2019, OMB issued a memorandum on shared services that among other things described the process and desired outcomes for shared services and established a governance and accountability model for achieving them.

CRS_R46347

Introduction Since the novel coronavirus—designated Coronavirus Disease 2019, or COVID-19—first appeared in the United States in mid-January, it has contributed to substantial economic upheaval across the U.S. economy, including the agricultural sector. In response to the COVID-19 pandemic, Congress has passed and the President has signed four supplemental appropriations acts ( P.L. 116-123 , P.L. 116-127 , P.L. 116-136 , and P.L. 116-139 ) that have included both direct and indirect funding for the U.S. agricultural sector. Using funds from these acts and from other authorities, the U.S. Department of Agriculture (USDA) announced, on April 17, 2020, the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. USDA could provide additional financial assistance for the U.S. agricultural sector beyond CFAP later in the summer when a replenishment payment of $14 billion for the Commodity Credit Corporation becomes available. Congress is also considering providing additional support. This report describes some of the actions that USDA has taken in response to the COVID-19 emergency, including CFAP—in particular, how CFAP is funded and how USDA intends to use the funds. The description of USDA COVID-19 response efforts is preceded by: first, a brief review of food supply chain issues where the U.S. agricultural sector has experienced economic harm or is potentially vulnerable to the effects of the COVID-19 pandemic; and second, a review of current assessments of the economic harm to U.S. farm income, as well as to individual commodity sectors, resulting from COVID-19. The report then describes the emergency funds that have been allocated to address the U.S. agricultural sector, and how USDA plans on using those funds, including a detailed description of CFAP producer payments, and USDA's food purchase and distribution efforts. This is followed by a review of the announced positions for selected U.S. agricultural stakeholders in regard to how the COVID-19 pandemic has affected their industries, what their anticipated losses might be, and what their expectations are vis-à -vis congressional funding and USDA's announced program response. Finally, several issues related to CFAP and the U.S. agricultural sector in a post-COVID economy that could be of potential interest to Congress are presented at the end of this report. An appendix at the end of the report includes a table ( Table A-1 ) that summarizes estimates—from selected studies—of the economic damage to several major agricultural sectors of the United States due to the COVID-19 emergency. U.S. Agricultural Sector Vulnerability to COVID-19 As COVID-19 has spread throughout the United States, it has reduced domestic economic activity and disrupted domestic and international supply chains for goods and services, including food and agricultural products. These disruptions have produced an immediate and very strong demand shock on the U.S. food supply chain. In particular, the abrupt shutdown of much food service and institutional buying has affected commodity prices throughout the food supply chain. On the supply side, there is no food shortage in the United States. Supplies for most commodities remain relatively abundant; however, inflexibilities in the food supply chain (from food product specialization targeting food service and institutional markets that have closed, to pandemic outbreaks at processing plants) have resulted in bottlenecks that have left many farmers with unmarketable surpluses, while some retail outlets have experienced temporary shortages of various food and agricultural products. Temporarily Empty Grocery Store Shelves During the early weeks of shutdown in March and April, many grocery stores had empty shelves for basic staples such as pasta, rice, sugar, and flour, as well as frozen ready-to-eat foods, household cleaning products, and toilet paper. This was the result of a temporary surge in consumer food stockpiling—much of it in the form of panic buying and potential hoarding—that occurred in March when consumers worried that they might be locked down in their houses for weeks or months. This type of shortage is temporary. Eventually the existing supplies of foodstuffs and other household products work their way through the food supply chain and restock the grocery store shelves. The temporary shortage occurred due to two primary factors. First, consumers had been getting a significant share (54%) of their food from restaurants and other away-from-home venues. All of this demand was suddenly diverted to grocery stores and retail outlets almost overnight. This switch is not simply a matter of redirecting truckloads of products away from institutional buyers towards retail outlets, but also of transforming many products from bulk or vendor-ready forms to consumer-ready forms in smaller packages with new product labelling. Furthermore, truckers would now be making many stops for smaller deliveries to retail outlets along their routes, rather than a few stops to large buyers. All of this would require re-engineering of the food supply networks that ultimately may be temporary once the pandemic eases. Second, much of the food supply chain operates on a "just-in-time" principle to minimize costs associated with storage and waste of products. Under this principle, many processing plants and transportation routes are designed to operate near full capacity on a routine basis in expectation of slow, steady demand and to avoid the cost of idled resources—this is particularly true for food products and other items like toilet paper that normally do not experience large fluctuations in demand over time. Thus, not all production processes can ramp up on short notice to meet unexpected surges in demand for their products, or to suddenly alter the product form, packaging, labeling, and shipping methods. As a result, shortages due to consumer stockpiling create bulges in the supply chain that may take weeks or months to eliminate as the food supply chain re-engineers itself in response. The U.S. Food Supply Is Ample U.S. and global supplies of major agricultural commodities are in a state of relative abundance—thanks to large harvests over the past several years—which has kept market prices at relatively low levels for the past five years. The surplus supply situation has been compounded by the ongoing trade dispute between the United States and China, which disrupted traditional trade patterns and contributed to lower trade levels (and greater than expected U.S. stock levels) for several major commodities in the second half of 2018 and 2019. Globally, the Food and Agriculture Organization (FAO) of the United Nations reports that stocks for many major agricultural commodities—including wheat, rice, corn, barley, coffee, sugar, butter, cheese, palm oil, soybean oil, poultry, and pork—are at or near 20-year highs. A similar situation exists within the United States. On April 9, 2020, USDA reported that the major U.S. grain and oilseed crops, as well as upland cotton, all had relatively large end-of-year stocks levels last fall (2019) to carry into this year. On April 22, 2020, USDA reported abundant supplies of meat, dairy, fruit, vegetable, and tree nut products in cold storage. Similarly, USDA reports that hog and poultry populations in the United States are historically large, while the cattle population has rebounded from its low point in 2014. In addition, USDA reported that for 2020, U.S. farmers intended to increase corn and soybean planted acres by 8% and 10%, respectively, while adjusting wheat (1%) and cotton acres (<1%) down slightly from 2019. If such large planted acres are realized, under normal weather conditions, they could produce bumper crops and further expand domestic supplies. According to news reports, Secretary of Agriculture Sonny Perdue has said that consumers should not worry about a shortage of food, saying the supply chain is just mismatched. Although demand has surged at the retail level in response to the pandemic, demand from restaurants, cafeterias, sports venues, and tourism has plummeted. Disruption of Food Supply Chains Impact Commodity Prices The food supply chain refers to the path that raw agricultural commodities take from the farm where they are produced, through the food processing and distribution network to the consumer where they are used. The domestic food supply chain has the potential to break down at any of a number of different points: availability of inputs and labor for agriculture production; trucks and truck drivers for transporting raw and finished products; food processing plants, plant workers, and food safety inspectors; packaging, warehousing, and storage capacity; and wholesale and retail outlets and their workers. For exported products, the supply chain includes containers, ships, crew, and port workers. There is a finite supply of trucks, railcars, and shipping containers, and they may not be situated where they are needed when a temporary surge in demand occurs. Labor shortages at any point along the supply chain can lead to bottlenecks, delays, and regional shortages. Similarly, there is a finite supply of warehousing and cold storage (i.e., refrigerated and frozen) space, which may contribute to temporary regional shortages. With respect to COVID-19's impact, supply chain disruptions have been primarily due to two factors: widespread shutdowns of all but essential businesses; and uncertainty about the availability of labor for the food distribution network, from farms to retail outlets—whether from illness, fear of illness, or immigration status. Loss of Institutional Buyers The first effect of the COVID-19 pandemic on agricultural producers occurred when many states and municipalities closed schools and instituted economy-wide shutdowns of all but essential businesses. The wholesale and retail food distribution network has been deemed essential; however, many institutional purchasers of agricultural products (often referred to as the food services sector, including restaurants, hotels, schools, and entertainment venues) have been closed. According to USDA, U.S. consumers normally spend 54% of their food and drink dollars on away-from-home food purchases. Thus, a large share of U.S. food products traveling through the food supply chain was going to the food services sector, often in bulk or vendor-ready form, for away-from-home consumption. In order to redirect this food product flow towards retail outlets and at-home consumption, much of it would require processing into consumer-usable quantities and forms, requiring repackaging, and relabeling. This requires some level of retooling by food packagers and processors. As a result, the near total stoppage of institutional food purchases contributed to sharp declines in the prices of affected commodities ( Figure 1 ), and led to unanticipated conditions of oversupply from commodities that could no longer move through the food supply chain and were, instead, backing up to the farms that produced them. This left many agricultural producers with excess supplies of perishable products—including fruit, vegetables, milk, and market-ready livestock—that are not easily diverted to alternate uses or retail outlets. In the interim, the temporary glut of perishable products with nowhere to go has led to news reports of producers dumping fresh milk, burying truckloads of raw onions, plowing fields of ripe vegetables back into the ground, and more disturbingly, depopulating millions of market-ready hogs and poultry. The surplus of perishable, unsold commodities worsened starting in mid-April, when a surge in COVID-19 infections among workers in meat packing plants and other food processing plants led to multiple plant closures, and contributed to both animal surpluses on farms and public concerns about the reliability of the nation's food supply. Uncertainty over Labor Availability Agriculture has been classified by the federal government as a critical industry that must remain operating, even as much of the rest of the country shuts down to help contain the virus' spread. However, labor shortages at any stage of the supply chain can create temporary food product shortages in affected markets. If labor shortages become severe, they could lead to wider multi-state, and possibly national, food shortages of affected products. Many fruit and vegetable production activities are labor-intensive and require an adequate work force at key points in the products cycle—particularly at harvest—to successfully bring the crop to market. In addition, the U.S. agricultural sector relies on a large workforce to operate the production lines in food processing plants, including meat packing plants, as well as fruit and vegetable wholesale and distribution networks. This labor force performs supply chain activities including production, transportation, processing, warehousing, packaging, and retailing. Many of these supply chain activities cannot be automated or done remotely, but rely on workers being on site. For example, USDA reports that more than 1.5 million people worked in food processing in the United States in 2016. Meat processing, which tends to be more labor intensive than other parts of the food sector, accounted for 500,000 of those employees. Workers that are still planting and harvesting crops, or standing on an assembly line in a meat packing plant, during the coronavirus outbreak have a high risk of being infected with the disease given that they live, work, and travel in crowded conditions, and most do not have health care or paid sick leave. Another labor-intensive component of the food supply chain is federal safety inspection, which is undertaken by about 8,000 USDA safety inspectors stationed at every agricultural manufacturing facility throughout the country, as well as about 3,800 safety inspectors from the Food and Drug Administration (FDA). As the food distribution network shifts more food products away from institutional outlets to grocery stores, labor at the retail level has come under greater stress. Many grocery stores have begun implementing preventative measures, like reducing hours to give staff time to rest, clean, and stock shelves, while limiting exposure to customers. All of these COVID-19 related measures tend to slow the food supply chain's throughput rate and thus have prolonged the period of empty or partially filled grocery store shelves. Many Meat and Food Processing Plants Slow Operations or Close Starting in mid-April, a surge in infections among workers in meat packing plants and other food processing plants led to multiple plant closures and contributed to unexpected surpluses of ready-for-market hogs, cattle, and poultry at the farm level. As of May 1, news sources reported that at least 20 meatpacking and 5 food processing plants had been closed. Due to a high degree of consolidation in the meat processing industry, a shutdown of four or five big plants could impact retail supplies. On May 1, the Centers for Disease Control and Prevention (CDC) reported that 115 meat and poultry processing plants (with over 130,000 workers) had a combined 4,913 workers with confirmed cases of COVID-19, including 20 that had died from COVID-19. Meat processing plant closures have two opposing effects: on the one hand, demand for livestock in the surrounding region is reduced and this tends to depress cash and futures prices, lowering prices that producers receive and that packers pay for market-ready livestock; on the other hand, the supply of consumer-ready product is reduced, which tends to raise wholesale and retail prices for the affected products. As evidence of this, USDA has reported a widening price gap between farm and wholesale prices for beef. On April 22, news sources reported that, with the closure of Tyson's pork processing plant in Waterloo, IA, about 15% of total U.S. pork processing capacity was off line. According to an official with the Commodity Futures Trading Commission's (CFTC's) Livestock Marketing Task Force, most plants that were still open during this same period were operating at only 50% to 75% of normal production due to employee absenteeism. Furthermore, the CFTC official noted that U.S. pork processing plants normally handled about 2.5 million hogs per week, but that slower operating line speeds had reduced that number to 2.1 million hogs, implying that an additional 400,000 market-ready hogs had to stay on the farm each week. By May 1, weekly hog slaughter had fallen to 1.5 million, implying that nearly a million hogs per week were backing up to the farm. On April 28, President Trump signed an executive order using authority under the Defense Production Act (DPA) of 1950, as amended (50 U.S.C. 4501 et seq.), and Section 301 of title 3, United States Code, to order the Secretary of Agriculture to take all appropriate action to ensure that meat and poultry processors continue operations consistent with the guidance for their operations jointly issued by the CDC and Occupational Safety and Health Administration (OSHA). Two issues associated with the reopening of closed plants are the availability of personal protective equipment (PPE) for plant workers, and the liability associated with hospitalization costs and/or deaths of infected plant workers. On April 30, Secretary Perdue stated that USDA will ask meat processors to submit written plans to safely operate packing plants and review them in consultation with local officials. Perdue said that USDA will work collaboratively with companies and state and local officials to set safety standards based on guidelines for workers released by the CDC and OSHA, and that USDA was working to insure the availability of the necessary PPE for plants to operate safely. The Secretary also said that President Donald Trump's executive order to open the plants will not remove legal liability, but that the CDC protection guidelines will give meat plants "a defensible answer" should they be sued, as long as they follow the guidance. Commodity Prices Plummet Since mid-February, prices for many major agricultural commodities have plummeted ( Figure 1 ). Commodity market price declines have been led, in part, by a precipitous fall in the price of crude oil (down 67% between January 2 and April 15), which feeds back into the U.S. market for ethanol and corn, and subsequently through the expanded market for livestock feedstuffs. Prices for the livestock sector—cattle, hogs, poultry, and dairy—were hit particularly hard by the sudden economic shutdown and the associated dilemma of what to do with market-ready livestock, and because of the difficulty in diverting product from restaurants to retail outlets. During the January 2 to April 15 period, prices for lean hogs were down by 53.2%, live cattle 25.1%, and milk 20.6%. The cotton and textile industries were negatively impacted by the widespread shutdown of retail businesses. Demand for clothing and apparel dropped precipitously with the economic closure. This fed back into a collapse of demand that affects manufacturers, which affects cotton mills, and finally to contracts for cotton being canceled. U.S. cotton prices dropped by over 25% between January 2 and April 15 ( Figure 1 ). USDA's Foreign Agricultural Service (FAS) reduced its forecast for global cotton consumption for 2020 by 6.4%. According to FAS, spending on clothing is highly correlated to changes in GDP, and most economic forecasters are expecting strong declines in global GDP in the first half of 2020. Reduced travel, slowing economic activity, and petroleum-product demand suppression related to the COVID-19 outbreak, combined with announced plans to increase crude oil supplies by Saudi Arabia and Russia in mid-April, contributed to the severe decline in crude oil prices. Low oil prices contribute to lower agricultural prices via a strong biofuels link between the two sectors. Corn is both the world's foremost livestock feed grain and the principal feedstock in the production of the biofuel ethanol. Ethanol is blended with gasoline in the United States (at about a 10% share) for use in automobiles and light trucks. Thus, declining fuel demand contributes directly to falling prices for gasoline, ethanol, and corn. Ethanol prices fell by nearly 33% from January 2 to April 15 ( Figure 1 ). As of April 21, news sources report that nearly 30% of the nation's 204 biofuel plants have been idled since March 1, while many others have reduced their production volumes. By April 25, the Renewable Fuels Association reported that about 46% of ethanol production capacity was idled. Furthermore, the prices of nearly all feed grains and oilseeds produced in the United States move in tandem with corn prices since they all compete for the same feed markets in consumption and farmland in production. Thus, this combination of the COVID-induced sudden disruption of normal agricultural demand and use, slowing U.S. and global economic activity, and sharply lower oil prices have placed strong downward pressure on commodity prices in international markets since the start of 2020. International Market Export Restrictions On top of these domestic disruptive factors, international markets for some major food items, such as rice and wheat, have experienced trade disruptions due to threats or actual imposition of protectionist policies on exports of major food products in certain important producer countries—including Russia (the world's leading wheat exporter), Kazakhstan, and Vietnam. According to the World Trade Organization (WTO), 80 countries and customs territories so far have introduced export prohibitions or restrictions as a result of the COVID-19 pandemic. In response, the United States, China, the European Union, and other members of the WTO representing over 60% of world agricultural exports pledged to refrain from imposing restrictions on the free flow of food out of their countries. By threatening to limit supplies to international markets, these protective policies have actually been supportive of rice and wheat prices in international markets ( Figure 1 ). Since January, the nearby futures contract price for rough rice on the Chicago Board of Trade has actually risen by 7%, while the contract for wheat has fallen by 4%, unlike corn and soybean prices that have fallen 20% and 13%, respectively. Current Assessments of Economic Damage U.S. policymakers and business interests are concerned that the COVID-19 pandemic will inflict widespread economic harm on the U.S. and global economies. It is still too early to make any definitive statements about what the eventual economic impacts will be on the U.S. economy or the agricultural sector, since it is unknown how long the disease will persist and what shape the economic recovery might take. For example, will the overall impact be V-shaped with a quick outbreak followed by a quick recovery, or will it be L-shaped with an elongated tail representing a slow recovery and a gradual reopening of businesses and retail outlets? Or be W-shaped if the virus recycles and re-emerges later in the summer or fall in a more virulent form—as did the H1N1 pandemic in 2009, or the 1918 flu pandemic—thus, causing a new round of shutdowns and economic closures? U.S. and Global GDP Outlook Revised Downward As commerce slows, economic output is expected to follow with projections of a significant contraction in U.S. gross domestic product (GDP). On April 29, the Bureau of Economic Analysis (BEA) reported the U.S. GDP (adjusted for inflation) had decreased by 4.8% during the first quarter of 2020. Many major financial institutions have also issued preliminary assessments of the economic impact of the COVID-19 pandemic with dire predictions. For example, in March, JP Morgan predicted a 25% decline in 2 nd quarter U.S. GDP. The International Monetary Fund (IMF), in early April projected that the U.S. GDP would decline by 5% during 2020 (down 7.9 points from its January 2020 pre-COVID forecast of 2.9% growth). The IMF also forecast that global GDP would decline by 3% (-6.3 points from January), and major economies would also see strong declines in GDP including the Euro-zone (-7.5%, -8.8 point from January), and Japan (-5.2%, -4.8 points from January). On April 24, the Congressional Budget Office (CBO) released an update to its long-run baseline projection for the U.S. economic outlook that included a preliminary assessment of the economic impact of the COVID-19 pandemic. CBO projected that the U.S. economy will experience a sharp contraction in the 2 nd quarter of 2020—inflation-adjusted GDP is expected to decline by about 12% during the 2 nd quarter, equivalent to a decline at an annual rate of -40% for that quarter. CBO also projected a 2.8% increase in real GDP in 2021. In addition, the U.S. unemployment rate is expected to average 11.4% for 2020 and 10.1% for 2021, consistent with CBO's current projection for a slow economic recovery. Between March 14 and May 7, over 33 million American workers have filed first-time claims for unemployment benefits, according to the seasonally adjusted numbers of the U.S. Department of Labor. According to news sources, numbers at that level indicate that over 20% of the U.S. labor force is suffering from layoffs, furloughs, or reduced hours during the coronavirus pandemic. In addition to reflecting the strong likelihood for high unemployment and impactful declines in consumer incomes through 2020, these forecasts also have important implications for the rural, off-farm economy that so many farm households depend on (as described below). Major Agricultural Commodity Sectors Suffer Substantial Harm Several industry groups from the U.S. agricultural sector have released estimates of the economic damage experienced by producers and ranchers. Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production of crops or livestock remaining under farmers' control, and the unexpected marketing costs of unsold products due to the shutdown of most institutional buying of agricultural products. Several of these damage assessments are summarized in Table A-1 . The livestock sector appears to be the hardest hit, as hog and cattle prices have dropped by 53% and 25% from January into mid-April, thus generating large sectoral losses estimated at $13.6 billion to $14.6 billion for the cattle/beef sector, and $5 billion for the hog sector. Early estimates of dairy sector losses exceed $8 billion, while the fresh produce sector losses are estimated at $5 billion. Other major commodity sector losses include corn ($4.7 billion to $6 billion), soybeans ($2 billion), cotton ($610 million to $3.5 billion), and the sheep and wool sector ($300 million). The ethanol sector has not reported an overall dollar loss estimate, but reports that nearly 46% of its production capacity is offline (the United States produced 15.8 billion gallons of ethanol in 2019) and the price of ethanol has fallen by almost 33% ( Figure 1 ). Prices for several, but not all, of the affected commodities have turned upward slightly since mid-April when USDA's assistance program was announced. Corn prices are the most notable exception as they have continued their decline through the end of April. The corn price decline is partially driven by the catastrophic near collapse of the U.S. ethanol sector. Corn is the primary feedstock for U.S. ethanol production—nearly 38% of annual U.S. corn production is consumed by the ethanol sector. U.S. Farm Income Projections Revised Downward USDA's most recent U.S. farm economic outlook for 2020 (released on February 5, 2020) did not include the market effects of the COVID-19 pandemic. USDA is not expected to release its next U.S. farm income projections until September 2, 2020. However, the Food and Agricultural Policy Research Institute (FAPRI), at the University of Missouri, released a preliminary assessment of the impact of COVID-19 on the U.S. farm income outlook in April. FAPRI's preliminary projections assume a V-shaped recession where the market recovers quickly; market outcomes are driven largely by GDP and commodity price declines, and the supply chain disruptions described earlier in this report are not included in the analysis. Macro factors include an inflation-adjusted 5% decline in consumer expenditures from FAPRI's January pre-COVID baseline projections, and a 10% decline in gasoline use. Under these assumptions, FAPRI projects substantial price declines for all major grain, oilseed, and livestock commodities in 2019/20 and 2020/21, which result in large declines in farm revenue—including -$11.9 billion in crop and -$20.2 billion in livestock cash receipts ( Table A-1 ). The revenue declines are partially offset by declines in production expenses (-$11.3 billion) and an increase in farm program payments (+$2.3 billion) under the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. However, the sum of the projected changes is for a large decline in U.S. net farm income of -$20 billion for 2020 (down from FAPRI's January forecast of $99 billion in 2020 net farm income, and compared to $95.3 billion in 2019). FAPRI does not include any payments under USDA's proposed CFAP. Although preliminary, FAPRI's early projections are indicative of the potentially large impact that COVID-19 may have on the U.S. agricultural sector. Potential Impact on Farm Household Cash Flow The COVID-19's economic impact is expected to vary across commodity sectors and regions based on the extent of price declines across commodities, the seasonality of production cycles, and off-farm work opportunities, as well as each household's level of near-term debt, tenure status, asset valuations, and other economic factors. Thus, each farm household's situation may be unique. This section briefly describes where COVID-19's economic impact may be felt most immediately. The potential impact on the farm household credit situation is not discussed here. If the economic impact of COVID-19 persists into 2021, a broader range of economic factors are likely to be impacted, such as asset valuations and bankruptcies. On-Farm Revenue, Expenses, and Federal Payments All Impacted The principal market effects to date of COVID-19 have been the commodity price declines experienced in early 2020 ( Figure 1 ), as well as lost sales and the costs associated with unexpected surplus animals, grains, and oilseeds held by farmers. The price declines, in particular, can have several potential effects on farm household income, including the selling prices for 2019 crops still held in on-farm inventory; farm program payments for the 2019 crops under the marketing assistance loan (MAL), ARC, and PLC programs; prices and crop insurance payments for the 2020 crop; farm program payments for the 2020 crops under MAL, ARC, and PLC; and changes in input prices. The sharp drop in commodity prices is expected to result in reduced farm household revenue. Revenue losses are expected to be partially offset by both increases in government payments under traditional farm revenue support programs (which are available for about two dozen designated program crops) and crop insurance, and by reductions in input expenses. However, the net effect is expected to be an overall decline in farm revenue compared with 2019. For farm operations carrying above average levels of debt, the restricted cash flow can cause severe financial stress. The emergency-response payment and purchase program announced by USDA (described below) is intended to help address, at least partially, the revenue decline and tightening cash flow situation for a wider array of farm households than usually receive government payments. Off-Farm Income Impacted by Rural Economic Situation The drop in prices for major farm commodities in early 2020 ( Figure 1 ) suggests that farm revenues are likely to decline. However, of perhaps greater consequence to farm households has been the blow to off-farm income from the widespread economic shutdown and increases in unemployment. On average, 82% of farm household income comes from off-farm revenue sources. As a result, the cash flows of farm households have been diminished from both the on-farm and off-farm effects of the COVID-19 pandemic. Another blow to the rural economy is the strong decline in tax revenues, fees, and other sources of income, which hampers the ability of state and local governments to respond to the developing crisis through local programs and initiatives. Federal Response to COVID-19 for Agriculture This section reviews federal supplementary funding appropriated for assistance to the U.S. agricultural sector in response to the COVID emergency, and the USDA programs that were initiated with that supplementary funding. In addition to the supplementary funding, USDA announced that it was increasing certain flexibilities and extensions in several of USDA's farm programs—many authorized by the 2018 farm bill ( P.L. 115-334 )—as part of its effort to support the food supply chain. Also, USDA has established a "Coronavirus Disease (COVID-19)" web page that assembles information from a broad range of agriculture-related topics and issues, including the expanded program flexibilities. The website includes "Frequently Asked Questions (FAQs)" for several prominent issues and agencies, links to additional resources, and a USDA COVID-19 Federal Rural Resource Guide. Supplemental Agriculture Appropriations In March and April 2020, Congress passed and the President signed four supplemental appropriations acts in response to the COVID-19 pandemic: Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ); Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ); Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ); and Paycheck Protection Program and Health Care Enhancement Act ( P.L. 116-139 ). These acts provide over $36 billion of new appropriations and policy changes in the jurisdiction of the Agriculture appropriations subcommittees, including nearly $10 billion for agricultural assistance, about $26 billion for nutrition assistance programs, and $163 million for the Food and Drug Administration. Funds Directly Targeting Agriculture The CARES Act provides $9.5 billion for USDA to "support agricultural producers impacted by coronavirus, including producers of specialty crops, producers that supply local food systems, including farmers' markets, restaurants, and schools, and livestock producers, including dairy producers." This approach provides funding to the Secretary of Agriculture with general authority to respond to a crisis, and therefore is similar to emergency appropriations for wildfires and hurricanes in 2018 and 2019 in which USDA was tasked to develop a payment program from a general appropriation. The CARES Act also replenishes up to $14 billion of funding availability for the Commodity Credit Corporation (CCC). The CCC operates with a $30 billion line of credit with the U.S. Treasury. In April 2020, USDA said that the CCC's borrowing authority was becoming low and that about $6 billion remained after having paid regular farm bill obligations and the final tranche of the 2019 Market Facilitation Program. The $14 billion in the CARES Act is not new spending; rather, it would reimburse the CCC for past spending. After the funds are transferred, which requires waiting for a June 2020 financial statement, the CCC would have renewed access to more funding for future obligations. For flexibility in the regular farm commodity support programs, the CARES Act allows Marketing Assistance Loans in FY2020 to be repaid over 12 months (rather than the usual nine months) to provide producers with flexibility in responding to disruptions. Funds Indirectly Targeting Agriculture and the Rural Economy Access to food has been a concern during the pandemic, particularly in light of school closures. Rising unemployment may increase participation in the Supplemental Nutrition Assistance Program (SNAP) and other food assistance programs such as The Emergency Food Assistance Program (TEFAP), which provides aid to food banks and other emergency feeding organizations. Financial assistance through SNAP benefits or in-kind assistance through TEFAP may increase demand for agricultural products. The FFCRA and the CARES Act provide a total of $26 billion for various nutrition assistance programs and give USDA certain temporary flexibilities to increase program access and accommodate social distancing. This includes $850 million for TEFAP, which is to increase USDA commodity purchases for food distribution. The FFCRA has language that, "During fiscal year 2020, the Secretary of Agriculture may purchase commodities for emergency distribution in any area of the United States during a public health emergency designation" (§1101(g)). CBO did not score this provision. USDA is using this authority for a $3 billion commodity purchase and distribution ("Farmers to Families Food Box") program (described later in this report). CBO estimated that SNAP policies in the FFCRA will increase mandatory spending by more than $21 billion over FY2020-FY2021, which is subject to appropriation and for which the CARES Act provides some funding. For rural development, the CARES Act provides $146 million, including $100 million for rural broadband grants, $25 million for rural telemedicine and distance learning, and $20.5 million to support rural business loans. For USDA agency operations, the CARES Act provides $141 million to six USDA agencies or offices. This includes $55 million for the Animal and Plant Health Inspection Service (APHIS), $45 million for the Agricultural Marketing Service (AMS), $33 million Food Safety and Inspection Service (FSIS), $4 million for the Foreign Agricultural Service (FAS), $3 million for the Farm Service Agency (FSA), and $750,000 for the Office of the Inspector General (OIG). The APHIS and AMS amounts are to replace user fee revenues that are expected to decline due to reduced air passenger traffic (APHIS) and because of reduced grading, inspections and audit services (AMS). The amounts for FSIS and FSA are to support temporary employees and adjustments to respond to COVID-19 workload demands. FAS received funding to repatriate staff from foreign postings during the pandemic. Other provisions in the CARES Act outside the jurisdiction of agriculture appropriations may have provided loans and grants to certain agriculture-related businesses, such as through the Small Business Administration (SBA), or to individuals through stimulus checks. Prior to enactment of P.L. 116-139 , the SBA reported that agricultural, forestry, fishing, and hunting businesses received $4.37 billion of Paycheck Protection Loans. USDA's Coronavirus Food Assistance Program (CFAP) On April 17, 2020, Secretary of Agriculture Perdue announced the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. According to Secretary Perdue, CFAP will include $16 billion in direct payments to producers that have been impacted by the decline in commodity prices and the disruption in food supply chains related to COVID-19, and $3 billion in commodity purchases for distribution through food banks, faith-based organizations, and other nonprofit organizations. Direct payments are intended to partially offset the loss of market revenue from the price decline, and the unexpected carry-cost of unsold commodities for producers and ranchers of products that have been negatively affected by COVID-19. Commodity purchase and distribution programs serve the dual roles of supporting commodity market prices by temporarily increasing demand, and of expanding the availability of food to consumers who have lost their jobs or have limited resources. CFAP funding is from three primary sources: the FFCRA, the CARES Act, and existing USDA authorities under the Commodity Credit Corporation (CCC) Charter Act. In particular, Senator Hoeven, Chairman of the Senate Agriculture Appropriations Committee, stated that the $16 billion designated for the direct payments program derives from the $9.5 billion emergency program spending authorized by the CARES Act and an existing $6.5 billion balance in the CCC. The $3 billion for the commodity purchase portion of CFAP derives from the FFCRA (§1101(g)) that authorizes USDA to purchase commodities for emergency distribution in the United States. CFAP Direct Payment Program USDA has released limited information to date on the specifics of how CFAP will be implemented; however, information released by Senator Hoeven's office, coupled with news sources that have gleaned pieces of program information from USDA sources, could provide some context for understanding how CFAP's direct payments program may unfold. Senator Hoeven's press release says that the $16 billion is to be allocated across four different commodity groupings as follows: livestock ($9.6 billion or 60%); row crops ($3.9 billion, 24.4%); specialty crops ($2.1 billion, 13.1%); and "other" crops ($500 million, 3.1%) ( Figure 2 ). Direct payment spending under the livestock category would be further delineated as $5.1 billion for cattle, $2.9 billion for dairy, and $1.6 billion for hogs. To be eligible for CFAP direct payments, farmers and ranchers must produce commodities that have experienced at least a 5% price decrease between January and April of 2020. The specific prices and dates to be used for this calculation have not yet been announced, but using nearby futures contract prices as a guide would suggest that many commodities—including hogs, cattle, cotton, milk, corn, and soybeans—would relatively easily meet the 5%-decline threshold ( Figure 1 ). Also, the "other" category was not specifically defined, but is expected to include commodities such as horticulture, hemp, sheep and goats, or any other commodity where a producer can show a revenue loss associated with at least a 5% price drop since January. USDA has said the direct payments to producers will be based on estimated losses as measured by both: (a) market price declines, and (b) additional marketing costs associated with the unexpected oversupply of unsold production in calendar 2020. Under this structure, CFAP direct payments would be directly proportional, or "coupled," to actual production. Determination of the payment amounts and delivery mechanisms may develop similarly to the three tranches associated with payments under the Market Facilitation Programs (MFPs) in 2018 and 2019. The payments are to represent the summation of the two different loss measures described above: First, payments, according to Senator Hoeven's news release, are to cover the market price declines of greater than 5% that occurred between January 1, 2020, and April 15, 2020. The payment is to equal 85% of the loss—some policy analysts think that the loss could be calculated using some measure of the price decline times the normal volume of the commodity marketed during that period. Second, payments to cover future marketing losses from unsold product. This additional cost is valued as 30% of the expected losses from April 15 through the next two quarters (i.e., six months) or until mid-October. Again, the expected loss would most likely be calculated using some measure of the price decline times the normal volume of the commodity marketed during that period. For its part, USDA has not provided details on: which prices will be used in the formula (such as local elevator prices, regional wholesale prices, or nearby futures contract prices); how the price decline will be measured (that is, will two specific dates be used, or will representative averages of prices in January and April be used); or how the share of production, characterized as "routine marketing for the relevant period" and eligibility for payments, will be measured. Many of the program specifics are expected to be delineated in rulemaking. Since enforcement of social distancing remains in effect for the foreseeable future, producers may be asked to self-certify their losses. If so, producers will need to save records and paperwork to demonstrate losses, especially producers that have destroyed their product (e.g., dumping of milk or plowing under specialty crops). It is expected that producers will be compensated for "dumped" milk, but whether compensation may be provided for depopulated (i.e., euthanized) livestock and poultry is uncertain. Furthermore, CFAP direct payments are expected to be limited to cover producers who own the commodity or product, thus animals raised under contact are not expected to be covered. USDA is expediting the rulemaking process for the direct payment program and expects to begin sign-up for the new program in early May. CFAP direct payments are expected to be issued to producers by the end of May or early June. According to the Senator Hoeven press release, payment limits are expected at $125,000 per commodity grouping (livestock, row crops, and specialty crops), with an overall limit of $250,000 per individual or entity. Neither the CARES Act nor the underlying CCC authority requires payment limits. Applying payment limits at this point would be at USDA's discretion, as it chose to do when establishing the MFP and Wildfire and Hurricane Indemnity Program (WHIP) programs that were undertaken at the Secretary's discretion. The American Farm Bureau Federation expects that benefits received under traditional farm support programs such as ARC and PLC will not be added to CFAP payments when evaluating payment limits. In other words, payment limits for CFAP are expected to be independent of other farm program benefits received by a farm. CFAP Purchase and Distribution Program In the press release that announced the CFAP, USDA designated $3 billion for a commodity purchase and distribution program. In subsequent announcements, the program has been called the USDA Food Box Distribution Program, and the USDA Farmers to Families Food Box Program. The intention is to capture some of the supply chain and market disruption caused by the closure of restaurants, hotels, and other food service entities. Under the program, agricultural products are to be purchased from farmers and processors to support agricultural markets and reduce food waste. Products are to be distributed to food banks and other nonprofit organizations that serve those in need. This program is operated differently than, and separately from, existing USDA commodity purchase programs such as Section 32, TEFAP, and other Food and Nutrition Service (FNS) food distribution programs. However, food banks, school food authorities, and other nonprofits that participate in other FNS programs are to be eligible to receive food boxes through the USDA Farmers to Families Food Box Program. USDA plans to purchase about $100 million per month of fresh produce, $100 million per month of dairy products, and $100 million per month of meat products (chicken and pork). Because of the potential for food waste (lack of marketing options for ripe produce, dumping expressed milk, and euthanizing market-ready livestock) and high demand for food bank distribution during this pandemic discussed earlier in this report, USDA is expediting this purchase program relative to its usual commodity procurement and distribution timeline. Usually, the procurement-to-distribution timeline is two to five months, starting with product selection and identification and/or thorough analysis of market conditions for individual commodities, a solicitation period, review of applications, and manufacturing and delivery from producers to processors (vendors) and intermediaries that may reassemble or briefly store products for distribution and recipients. The current food box program shortens the procurement-to-delivery to as little as one month, with an expected one week interval for each of the bidding, approval, and delivery stages. Solicitation for bids began on April 24, with bids due to USDA on May 1. Contracts are expected to be awarded on May 8, and initial program delivery may be as early as May 15. The program is expected to operate through the end of 2020. Another significant change is the product format. Under normal circumstances, products are often delivered from vendors (who sell to USDA) to recipient organizations in bulk formats that may require re-packaging before distribution to households. The CFAP purchase program intends for vendors to deliver household-ready boxes of the previously mentioned produce, meat and dairy products, or combinations thereof—ready for more convenient and immediate distribution ("off the truck and into the trunk") in order to support social distancing. In addition to the $3 billion CFAP purchase and distribution program, USDA announced on May 4, 2020, a plan to purchase $470 million of commodities with Section 32 authority that is at the discretion of the department. USDA's initial press release for the CFAP had mentioned availability of $873 million in the Section 32 account. The plan for this initial tranche is to solicit bids from vendors in June 2020 and begin deliveries as soon as July. In this purchase, USDA intends to buy $170 million of produce, $120 million of dairy products, $80 million of poultry, $70 million of fish, and $30 million of pork. Next Steps In addition to the $9.5 billion in funding to assist U.S. agricultural producers and ranchers with COVID-related losses, the CARES Act also provided $14 billion to replenish the CCC—this additional CCC spending authority is expected to be available in July after CCC prepares its June financial statement. The CCC borrows from the U.S. Treasury to finance its programs consistent with its permanent, indefinite authority to borrow up to $30 billion. Congress usually replenishes the CCC borrowing authority by annually appropriating funding to cover the CCC's net realized losses. The supplemental reimbursement in the CARES Act could increase opportunities for USDA to use its executive authority in CCC to provide further direct support payments, as it did with trade aid payments in 2018 and 2019. The CCC's annual borrowing authority has been fixed at $30 billion since 1987. On April 21, 2020, the American Farm Bureau released a report showing that, if adjusted for inflation, the CCC's borrowing authority would be $67.5 billion in 2020. In Congress, Senator John Hoeven has called for increasing the CCC's borrowing authority to $50 billion, while H.R. 6728 would raise CCC's borrowing authority to $68 billion. Increases in CCC's borrowing authority could be permanent or temporary (for certain fiscal years, or the duration of the public health emergency). While farm bills designate CCC to make various types of congressionally directed payments, it is USDA's use of its discretionary authority in recent years that has put pressure on the CCC borrowing limit. More USDA Assistance At present, USDA appears to have used nearly all of its available borrowing authority in the CCC in composing the CFAP payments. By July, USDA may be expected to use some of the $14 billion in supplemental CCC funding in the CARES Act, and its general CCC authority, to provide additional support to the agriculture sector. However, the nature and timing of any further support has not yet been announced by USDA. After it completes the $470 million Section 32 purchase described above, USDA would be expected to have about $400 million remaining in the Section 32 account for the rest of the fiscal year, based on the $873 million that USDA mentioned in its initial CFAP announcement. USDA may also be directed by Congress to provide certain future support to agriculture. Representative Austin Scott has introduced a bill ( H.R. 6611 ) that would provide an additional $50 billion of funding (separate from the CCC, and similar to the $9.5 billion in the CARES Act) for COVID-related agricultural assistance programs. Rural COVID-19 Task Force Proposed Many Members of Congress have expressed concerns that rural America is not well prepared to handle the COVID-19 emergency, and that rural problems feed over into agriculture. For example, in April, Senate Democrats released a report warning that more isolated rural areas of the United States "face disproportional challenges that put them at high risk," and that laid out their own rural policy ideas. Several U.S. Representatives and Senators have asked USDA to establish a Rural COVID-19 Task Force to help identify rural needs and tailor the allocation of resources to address them. They suggest that the Task Force could consist of a diverse group of experts and representatives from all sectors of rural areas, including agriculture, health care including mental health, and the private sector. In particular, the Rural COVID-19 Task Force would help to identify rural challenges, develop strategies and policy recommendations, assemble a guide of available federal programs and resources, consult with the USDA and congressional committees, and provide oversight on the distribution of funding. In their letter, the Members noted that people living in rural America are more likely to be uninsured, advanced in age, and have pre-existing medical conditions. Rural hospitals and health systems often have fewer ICU beds and resources available to handle an increased demand on rural health care infrastructure during a pandemic. According to the letter, one in five Americans living in rural areas are people of color, who have been disproportionately affected by the current crisis. Many rural areas are without reliable internet access, which limits their ability to work or attend school remotely. U.S. Agricultural Stakeholders In March and early April, prior to USDA's announcement of CFAP, many industry groups from the U.S. agricultural sector had written public letters to Secretary Perdue and USDA detailing their concerns and the need for federal assistance in response to the economic damage that has hit their different industries as a result of the COVID-19-related emergency. Many of these letters included industry estimates of their sectoral economic losses due to COVID-19 (several of these estimates have been compiled by CRS and are presented in Table A-1 ). Following the announcement of CFAP, most industry groups that are targeted for CFAP assistance have expressed appreciation for the aid that USDA has announced. At the same time, several agriculture-related industries do not appear to be eligible for support under the CFAP—including ethanol, poultry, sheep and lamb, specialty livestock such as mink, or horticultural products. Also, agriculture industry groups almost universally note that CFAP can be only the first step in the federal response, as the amounts provided fall well short of industry loss estimates for most sectors. Another industry concern involves the announced payment limits associated with CFAP direct payments. Industry groups have stated that a $125,000 payment limit would severely restrict needed aid to individual producers. Some Senators and Representatives have followed up on industry concerns about payment limits by sending a letter to the Administration asking that the limits be removed for livestock, dairy, and specialty crop producers. The issue of payment limits may be addressed in the next round of USDA COVID-19 assistance or related bills (e.g., H.R. 6611 ). Issues for Congress Immediate congressional concerns involve how to channel assistance to those industries affected by COVID-19. This involves identifying affected industries, as well as measuring the extent of their losses, and providing some measure of compensation to help foster survival and recovery. Another immediate concern may be monitoring and oversight of the large sums of taxpayer money that will be flowing out through the CCC. Producer self-certification of losses may create a moral hazard and an incentive to over-report losses. Congress may consider using its investigative authority to better understand the nature and institutional rigidities inherent in the current food supply chain, and to ascertain whether there is a role for the federal government to help facilitate food supply chain management. Such considerations may include an evaluation of whether there is a need to facilitate less reliance by the private sector on low-cost, just-in-time supply chains. This model has proven to be inflexible in responding to the COVID-19 emergency, which requires rapid product transition from bulk institutional buyers to consumer-ready retail outlets, and greater regional storage capacity to hold temporary surges in unsold product. The potential costs to taxpayers of supporting a more flexible supply chain could include expanded regional warehousing, cold storage, food bank storage, etc. Expediting the food assistance supply chain is also being proposed through "farm-to-food bank" programs ( S. 3605 ). These actions could be coupled with new federal programs designed to increase demand by temporarily expanding SNAP benefits and/or federal food purchases when certain market or economic conditions are triggered. Congress may also want to consider whether the current farm safety net programs authorized by the farm bill's Title I—targeting of program crops—are sufficiently flexible and responsive when confronted with sudden, widespread price declines and an abrupt cessation of institutional purchases. For example, payments under the current ARC and PLC programs are delayed nearly 13 months after the program crop's harvest and reflect a 12-month average price that may not fully capture the potential short-term price drop related to the COVID outbreak. Program modifications—such as the inclusion of an early partial payment for ARC and PLC—could offer greater flexibility in responding to short-term cash flow problems for farm households. As one alternative, ARC and PLC could be supplemented or replaced by a new payment program that would be: short-term in nature; would better reflect local market conditions to capture disparities in regional economic harm; and would rely on market conditions both to trigger payments and to determine the size of those payments. The payment triggers could be set at catastrophic levels such that they would only be triggered under unique circumstances such as a major price plunge sparked by an event of the magnitude of COVID-19. The payment formula could be designed such that USDA could make payments under such a program before or shortly after harvest. In addition, Congress may also consider the long-term effects that might result from the COVID-19 emergency, particularly if the economic recovery is slow and lengthy. Such long-term effects may include heightened indebtedness and potential bankruptcies by farm households across the agricultural sector, as well as accelerated industry consolidation and altered consumption patterns. Without robust agricultural production to serve as the engine of growth, rural America might experience a slower recovery than the rest of the country. Prolonged depressed market conditions due to widespread layoffs, limited employment opportunities, and sustained reductions to rural wages and incomes would provide a weak background to foster agriculture's eventual recovery. Congress may also consider that rural banks tend to be smaller and less well-capitalized than banks catering to urban and suburban markets. Farm loan debt forgiveness (e.g., S. 3602 ) and loan repayment flexibilities are also in discussion. A slow rural economic recovery might reduce business and consumer confidence, leading to a reduction in spending and investment, and a tightening of financial conditions that could further slow the return to economic normalcy in rural areas. Appendix. Assessing the Economic Impact of COVID-19 on U.S. Agriculture Studies Project Deep Losses Across Major Commodity Sectors Several universities, think tanks, and commodity groups have released early assessments of COVID-19's potential impact on selected commodity sectors ( Table A-1 ). Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production remaining under farmers' control, and the unexpected surplus of unsold products due to the shutdown of most institutional buying of agricultural products.

As COVID-19 has spread throughout the United States, it has reduced domestic economic activity and disrupted domestic and international supply chains for goods and services, including food and agricultural products. These disruptions have produced an immediate and very strong demand shock on the U.S. food supply chain that has sent many commodity prices sharply lower. The food supply chain refers to the path that raw agricultural commodities take from the farm where they are produced, through the food processing and distribution network to the consumer where they are used. Supply chain disruptions have been primarily due to two factors: widespread shutdowns of all but essential businesses; and uncertainty about the availability of labor for the food distribution network—whether from illness, fear of illness, or immigration status. The food supply chain has been deemed essential; however, many institutional purchasers (including restaurants, hotels, schools, and entertainment venues) have been closed. According to the U.S. Department of Agriculture (USDA), U.S. consumers normally spend 54% of their food and drink dollars on away-from-home food purchases. Thus, prior to the COVID-19 pandemic a large share of U.S. food products traveling through the food supply chain was going to institutional buyers, often in bulk or vendor-ready form, for away-from-home consumption. In order to redirect this food product flow towards retail outlets and at-home consumption, much of this food would require processing into more consumer-usable forms, repackaging, and relabeling. This requires some level of retooling by food packagers and processors. In addition, several plants in the food processing industry, including meat processing plants, have experienced severe COVID infection outbreaks among workers and been forced to shut (at least temporarily). Several industry groups from the U.S. agricultural sector have released estimates of the economic damage experienced by producers and ranchers. Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production of crops or livestock remaining under farmer's control, and the unexpected marketing costs of unsold products due to the shutdown of most institutional buying of agricultural products. Cumulatively, industry estimates of COVID-related losses approach $40 billion (this would represent over 10% of annual cash receipts). The effect on farm net income is expected to be similarly negative. In response to the COVID-19 pandemic, Congress has passed and the President has signed four supplemental appropriations acts ( P.L. 116-123 , P.L. 116-127 , P.L. 116-136 , and P.L. 116-139 ) that have included both direct and indirect funding for the U.S. agricultural sector. On April 17, 2020, Secretary of Agriculture Sonny Perdue announced the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. According to Secretary Perdue, CFAP will include $16 billion in direct payments to producers that have been impacted by the sudden drop in commodity prices and the disruption in food supply chains that has occurred since the outbreak, and $3 billion in commodity purchases for distribution through food banks, faith-based organizations, and other nonprofit organizations. CFAP direct payments are intended to partially offset the loss of market revenue from the price decline, and the unexpected carry-cost of unsold commodities for producers and ranchers of products that have been negatively affected by COVID-19. USDA has released limited information on the specifics of how CFAP's direct payment program will be implemented. Many of the program specifics are expected to be delineated in an expedited rulemaking process. CFAP direct payments are expected to go out to producers by the end of May or early June. CFAP's commodity purchase and distribution program serves the dual roles of supporting commodity market prices by temporarily increasing demand, and of expanding the availability of food distribution to consumers that have lost their jobs or have limited resources. Expectations are that it will be operated differently than, and separate from, existing USDA commodity purchase programs such as Section 32 or Food and Nutrition Service (FNS) food distribution programs in two major ways. First, USDA plans to purchase about $100 million per month of fresh produce, $100 million per month of dairy products, and $100 million per month of meat products (chicken and pork). Second, the CFAP purchase program intends for vendors to deliver household-ready boxes—potentially a diversified mix of the previously mentioned produce, meat and dairy products—which are ready for more convenient and immediate distribution ("off the truck and into the trunk") that is consistent with social distancing. Initial program delivery may be as early as May 15. The program is expected to operate through the end of 2020. Potential congressional concerns include how to channel assistance to industries affected by COVID-19, long-term effects of the pandemic, and the capacity of rural banks to help with recovery. Several issues related to CFAP and the U.S. agricultural sector in a post-COVID economy that could be of potential interest to Congress are presented at the end of this report.

GAO_GAO-19-623T

SBA Has Not Fully Addressed Deficiencies in Oversight and Implementation for the WOSB Program SBA has not fully addressed deficiencies we have previously identified for the WOSB program, and these deficiencies are affected by SBA’s ongoing implementation of changes to the program authorized by the National Defense Authorization Act of 2015 (2015 NDAA). As of early June 2019, SBA had implemented one of the three changes to the program authorized in the 2015 NDAA. Specifically, in September 2015 SBA published a final rule to implement sole-source authority (to award contracts without competition), effective October 2015. The two other changes—authorizing SBA to implement its own certification process for WOSBs and requiring SBA to eliminate the option for firms to self-certify that they are eligible for the WOSB program—had not been implemented. On May 14, 2019, SBA published in the Federal Register a proposed rule that eliminates the self-certification option and describes a potential certification process to be administered by SBA. SBA officials have stated that the agency will not eliminate self-certification until the new certification process for the WOSB program is in place, which they expect to implement by June 2021. In addition, SBA has not fully addressed WOSB program oversight deficiencies described in our March 2019 report and first identified in our 2014 report. We reported that SBA did not have formal policies for reviewing the performance of its four approved third-party certifiers (private entities approved by SBA to certify the eligibility of WOSB firms), including their compliance with their agreements with SBA. Further, we found that SBA had not developed formal policies and procedures for, among other things, reviewing the monthly reports that certifiers submit to SBA. We recommended that the Administrator of SBA establish comprehensive procedures to monitor and assess the performance of the third-party certifiers in accordance with their agreements with SBA and program regulations. While SBA has taken some steps to address our recommendation, including conducting a compliance review of the certifiers in 2016, SBA officials said in June 2018 that SBA had no plans to conduct further compliance reviews until the final rule implementing the new certification process was completed. By waiting to improve its oversight of the WOSB program, SBA cannot provide reasonable assurance that certifiers are complying with program requirements and cannot improve its efforts to identify ineligible firms or potential fraud. In addition, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk. Consequently, we maintain that our recommendation should be addressed. SBA also has not fully addressed deficiencies related to eligibility examinations that we described in our March 2019 report and first identified in our October 2014 report. We found that SBA lacked formalized guidance for its eligibility examination processes and that the examinations identified high rates of potentially ineligible businesses. As a result, we recommended that SBA enhance its examination of businesses that register for the WOSB program to ensure that only eligible businesses obtain WOSB set-asides. Specifically, we suggested that SBA should take actions such as (1) completing the development of procedures to conduct annual eligibility examinations and implementing such procedures; (2) analyzing examination results and individual businesses found to be ineligible to better understand the cause of the high rate of ineligibility in annual reviews and determine what actions are needed to address the causes, and (3) implementing ongoing reviews of a sample of all businesses that have represented their eligibility to participate in the program. SBA has taken some steps to implement our recommendation, such as including written policies and procedures for WOSB program eligibility examinations in a standard operating procedure and a Desk Guide. However, SBA does not collect reliable information on the results of its annual eligibility examinations. In addition, SBA continues to have no mechanism to look across examinations for common eligibility issues to inform the WOSB program. As we noted in 2014, by not analyzing examination results broadly, the agency is missing opportunities to obtain meaningful insights into the program, such as the reasons many businesses are deemed ineligible. Further, SBA still conducts eligibility examinations only of firms that have already received a WOSB award. Restricting the samples in this way limits SBA’s ability to better understand the eligibility of businesses before they apply for and are awarded contracts, as well as its ability to detect and prevent potential fraud. We recognize that SBA has made some effort to address our recommendation by documenting procedures for conducting annual eligibility examinations of WOSB firms. However, without maintaining reliable information on the results of eligibility examinations, developing procedures for analyzing results, and expanding the sample of businesses to be examined to include those that did not receive contracts, SBA limits the value of its eligibility examinations and its ability to reduce ineligibility among businesses registered to participate in the WOSB program. Leading fraud risk management practices state that federal program managers should design control activities that focus on fraud prevention over detection and response, to the extent possible. The deficiencies in SBA’s oversight of the WOSB program limit SBA’s ability to identify potential fraud risks and develop any additional control activities needed to address these risks. As a result, the program may continue to be exposed to the risk of ineligible businesses receiving set- aside contracts. In addition, in light of these continued deficiencies, the implementation of sole-source authority without addressing the other changes made by the 2015 NDAA could increase program risk. For these reasons, we maintain that our previous recommendation that SBA enhance its WOSB eligibility examination procedures should be addressed. In addition, similar to previous findings from SBA’s Office of Inspector General, our March 2019 report found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018. At that time, SBA was not reviewing contracting data that could identify this problem and inform SBA which agencies making awards may need targeted outreach or training. As a result, we found that SBA could not provide reasonable assurance that WOSB program requirements were being met and that the program was meeting its goals. We recommended that SBA develop a process for periodically reviewing the extent to which WOSB program set-asides are awarded for ineligible goods or services and use the results to address identified issues, such as through targeted outreach or training to agencies making awards under the ineligible codes. In early May 2019, SBA said that it had initiated such efforts. SBA Has Not Yet Implemented Recommendations to Improve the HUBZone Certification Process In September 2018, we found that although SBA had adopted criteria and guidance for a risk-based approach to certifying and recertifying firms for the HUBZone program in March 2017, the extent to which it conducted a risk assessment to inform its approach was unclear. In 2015, we found that SBA lacked key controls for its recertification process and recommended that SBA assess the process. In 2009, SBA increased documentation requirements for certification but not recertification (which determines continued program eligibility every 3 years). In March 2017, SBA changed its recertification criteria and guidance to require firms with $1 million or more in HUBZone contract awards to provide documentation to support continuing eligibility. During our work for the September 2018 report, SBA officials stated they had completed a risk assessment of the HUBZone recertification process, but did not provide us with documentation on when they performed the risk assessment, which risks were identified and considered, or what analysis established the $1 million threshold. As of May 2019, SBA had not provided documentation showing that it had performed the risk assessment, but we maintain that an assessment of the recertification process would help inform a risk- based approach to reviewing and verifying information from firms that appear to pose the most risk to the program. In addition, SBA had not provided documentation showing that a technology-based solution designed to address some of the ongoing challenges with the recertification process had been implemented. SBA officials had previously estimated this solution would be available first in spring 2017 and then by the end of calendar year 2017. We also found in our September 2018 report that, based on our review of case files for a nongeneralizable sample of 12 firms in Puerto Rico that received HUBZone certification between March 2017 and March 2018, SBA did not consistently document or follow its policies and procedures for certification reviews: SBA did not have complete documentation in nine of 12 cases. SBA officials described alternative procedures they used to determine firms’ eligibility, but SBA had not updated its internal policy manuals to reflect these procedures, and analysts did not document use of such procedures in the files we reviewed. As a result, SBA did not have reasonable assurance that firms met HUBZone criteria. In four of 12 cases, SBA did not follow its policy to conduct three levels of review (by an analyst, a senior analyst, and the program director or deputy) when determining whether to approve or deny a firm. It was unclear to what extent SBA reviewed staff compliance with certification and recertification review procedures. SBA provided an assurance letter stating that it evaluated the Office of HUBZone’s internal controls and concluded the controls were effective, but the letter did not specify what steps SBA took for the evaluation. We recommended that SBA (1) update its internal policy manuals for certification and recertification reviews to reflect existing policies and procedures not currently in written guidance and (2) conduct and document reviews of staff compliance with procedures associated with HUBZone certification and recertification. In response to our report, SBA said that it planned to update its internal policies on certification and recertification by issuing a procedural notice and to begin reviewing and documenting staff compliance with the updated procedures outlined in the notice. However, as of May 2019, SBA had not provided documentation showing that it had completed these planned actions. SBA Has Taken Some Steps to Address Recommendations about the Procurement Scorecard In September 2018, we found that for fiscal year 2017, SBA revised the methodology for its Small Business Procurement Scorecard, which is used to assess federal agencies’ progress toward small business procurement goals. SBA made revisions to address requirements specified in the National Defense Authorization Act for Fiscal Year 2016. SBA (1) reduced the share of the total scorecard grade devoted to prime contracting achievement, which is the dollar amount of contracts awarded directly to small businesses, and (2) added an element calculating changes in the number of small businesses receiving prime contracts. SBA made two additional revisions—with input from other agencies’ representatives—to increase the share of subcontracting achievement results and the share of the peer review of required activities designed to facilitate small business procurement. In July 2018, officials said they had begun developing a plan to evaluate the effects of the revised scorecard methodology but did not provide a draft plan. Conducting a well-designed and comprehensive evaluation could aid SBA in determining whether the scorecard is an effective tool for helping to achieve the agency’s strategic goals. In our September 2018 report, we also found that the published fiscal year 2017 scorecards originally contained errors, including an incorrect grade and numeric score for one agency, and SBA does not have a process to ensure that scorecard results are published accurately. Although SBA later corrected the errors, it did not initially document that scorecards had been changed, which is inconsistent with SBA’s policy on information quality. SBA officials said that errors occurred in the process of formatting scorecards for publication. Errors in the published scorecards—and the initial lack of disclosure about corrections—weaken data reliability and may undermine confidence in scorecard data. We recommended that SBA (1) design and implement a comprehensive evaluation to assess scorecard revisions and (2) institute a process for reviewing scorecards for accuracy prior to publication and a mechanism for disclosing corrected information. Since our report, SBA has proposed a two-phase program evaluation of the scorecard. SBA officials said that they plan for phase one to include a report to Congress on the impact of the small business procurement goal program for Chief Financial Officers Act agencies and to provide a recommendation on continuing, modifying, expanding, or terminating the scorecard program. SBA plans to provide the phase one report in September 2019. In phase two, SBA plans to conduct a program evaluation that investigates the effectiveness of the small business contracting scorecard on federal agency small business contracting goal achievement. SBA has not provided a time frame for phase two. With respect to the second recommendation, SBA officials said that SBA has developed a procedure that includes a prepublication review process for procurement scorecards. The officials said the procedure identifies responsibilities, provides for an independent peer review, and includes supervisory review. Officials said the procedure also includes measures for post-publication review and corrections. We will review supporting documentation for this new procedure to assess whether this recommendation can be closed as implemented. Chairman Rubio, Ranking Member Cardin, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Acknowledgments If you or your staff have any questions about this testimony, please contact William Shear, Director, Financial Markets and Community Investment at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Andrew Pauline (Assistant Director), Paige Smith (Assistant Director), Winnie Tsen (Assistant Director), and Jennifer Schwartz. 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Federal agencies conduct a variety of procurements that are reserved for small business participation through small business set-asides. These set-asides can be for small businesses in general, or they can be specific to small businesses that meet additional eligibility requirements in programs such as those for WOSB or HUBZone. SBA administers both the WOSB and HUBZone programs. SBA also produces an annual Small Business Procurement Scorecard to measure how much contracted spending federal agencies allocate to small businesses and whether the federal government is meeting its goals for awarding contracts to small businesses. GAO issued three reports between September 2018 and March 2019 on SBA contracting programs (see GAO-18-666 , GAO-18-672 , and GAO-19-168). This testimony is primarily based on these three reports and discusses prior GAO findings and SBA's progress on implementing GAO's recommendations on (1) the WOSB program, (2) the HUBZone program, and (3) SBA's procurement scorecard. To update the status of prior recommendations, GAO reviewed updates from SBA and interviewed officials. The Small Business Administration (SBA) has not fully implemented GAO's prior recommendations to address oversight deficiencies in the Women-Owned Small Business (WOSB) and Historically Underutilized Business Zone (HUBZone) programs and to improve evaluation of its procurement scorecard. GAO maintains that its recommendations should be addressed. Women-Owned Small Business Program. In its March 2019 report, GAO found that SBA had not addressed WOSB program oversight deficiencies identified in GAO's 2014 report (GAO-15-54). For example, GAO had found that SBA did not have procedures related to reviewing the performance of the four third-party certifers—private entities approved by SBA to certify the eligibility of WOSB firms—as well as information the certifiiers submitted to SBA. GAO recommended that SBA establish procedures to assess the performance of the certifiers and the information they submitted. While SBA conducted a compliance review of the certifiers in 2016, SBA said in June 2018 that it had no plans to conduct further compliance reviews until a final rule implementing a new certification process was completed. SBA officials said that they expected the rule to be implemented by June 2021. By waiting to improve its oversight of the WOSB program, SBA cannot provide reasonable assurance that certifiers are complying with program requirements and cannot improve its efforts to identify ineligible firms or potential fraud. HUBZone Program. In September 2018, GAO reported that it had reviewed case files for a nongeneralizable sample of 12 firms in Puerto Rico that received HUBZone certification between March 2017 and March 2018 and found that SBA did not consistently document or follow its policies and procedures for certification reviews. For example, SBA did not have complete documentation in nine of 12 cases and did not follow its policy to conduct three levels of review when determining whether to approve or deny a firm in four of 12 cases. As a result, SBA did not have reasonable assurance that firms meet HUBZone criteria. SBA said that it planned to implement GAO's recommendations that SBA (1) update internal policy manuals for certification and recertification and (2) conduct and document reviews of staff compliance with relevant procedures. However, as of May 2019, SBA had not provided documentation showing that it had completed these planned actions. Small Business Procurement Scorecard. For fiscal year 2017, SBA revised the methodology for its Small Business Procurement Scorecard, which assesses the efforts of federal agencies to support contracting with small businesses. For example, one revision reduced the share of the total scorecard grade devoted to prime contracting achievement (the dollar amount of contracts awarded directly to small businesses). GAO recommended in September 2018 that SBA design and implement a comprehensive evaluation to assess the scorecard revisions. Since that report was issued, SBA has proposed but not yet implemented a two-phase evaluation of the scorecard to include an evaluation of the scorecard's effect on federal agencies achieving small business contracting goals. SBA said that it expects to complete phase one by September 2019 and has not provided a time frame for phase two.

GAO_GAO-19-376T

Background U.S.-CNMI Relations The United States took control of the Northern Mariana Islands from Japan during the latter part of World War II. After the war, the U.S. Congress approved a trusteeship agreement making the United States responsible to the United Nations for the administration of the islands. In 1976, the District of the Mariana Islands entered into a covenant with the United States establishing the island territory’s status as a self-governing commonwealth in political union with the United States. The covenant granted the CNMI the right of self-governance over internal affairs and granted the United States complete responsibility and authority for matters relating to foreign affairs and defense affecting the CNMI. The covenant also preserved the CNMI’s exemption from certain federal laws that had previously been inapplicable to the Trust Territory of the Pacific Islands, including certain federal minimum wage provisions and immigration laws, with certain limited exceptions. Application of Federal Immigration Law to the CNMI In 2008, the CNRA amended the joint resolution approving the U.S.– CNMI covenant to generally apply federal immigration law, including the INA, to the CNMI, with a transition period for foreign workers and investors. In addition, the INA provides DHS with discretionary authority to grant parole to certain noncitizens, on a case-by-case basis, allowing them to be temporarily present in the United States, including the CNMI. Foreign Worker Provisions To provide for an orderly transition from the CNMI immigration system to the U.S. federal immigration system under the immigration laws of the United States, DHS, through USCIS, established the CNMI-Only Transitional Worker program in 2011. Through the program, employers petition for nonimmigrant CW-1 permits that allow foreign workers who meet certain requirements to work temporarily in the CNMI. The CNRA limits the number of permits DHS may issue annually and reduces that number each year until the end of the transition period. Since 2008, Congress has amended the CNRA several times, with provisions that affected the length of the transition period, the number of CW-1 permits allocated, and the distribution of permits (see table 1). Figure 1 shows the past numerical limits on CW-1 permits established by DHS and the current and future numerical limits for permits specified in the Northern Mariana Islands U.S. Workforce Act of 2018, Pub. L. No. 115-218. The limits shown are the maximum number of permits available for each fiscal year through the end of the transition period and may not reflect the number of permits for which employers would petition and that DHS would approve. In addition, the INA provides authorization for several types of visas for nonimmigrant workers and their families—for example, H-2B visas for temporary nonagricultural workers—that became applicable to the CNMI with the passage of the CNRA. The CNRA allows CNMI employers to bring temporary workers to the CNMI under the H-2B program without counting against the numerical restriction for H-2B visas. Investor Provisions The CNRA and its implementing regulations established E-2 CNMI Investor (E-2C) status, a classification for certain foreign investors who previously had been lawfully admitted to the CNMI under the territory’s immigration system and who met certain eligibility requirements. Such investors could petition for E-2C status prior to January 18, 2013, according to USCIS. Eligibility criteria include, among others, providing evidence of maintaining financial investments in the CNMI of at least $50,000. DHS may grant E-2C status for up to 2 years, and such status can be renewed. Parole Provisions Under the INA, DHS has discretionary parole authority to allow certain noncitizens, on a case-by-case basis, to be temporarily present in the United States. DHS has used this authority to grant parole to individuals who may be inadmissible or otherwise ineligible for admission to allow them to remain in the CNMI, according to DHS. In 2017, the President issued Executive Order 13767, calling for, among other things, the Secretary of Homeland Security to take appropriate action to ensure that parole authority is exercised only on a case-by-case basis in accordance with the plain language of the statute and, in all circumstances, only when an individual demonstrates urgent humanitarian reasons or a significant public benefit derived from such parole. Proposed Legislative Changes Affecting the CNRA Proposed bill H.R. 560 includes several provisions, among others, that would provide CNMI resident status to eligible individuals. To be eligible for CNMI resident status under H.R. 560, an individual must have been lawfully present in the CNMI under U.S. immigration laws on the date of enactment or on December 31, 2018; be admissible as an immigrant to the United States under the INA, although no immigrant visa is required; have resided continuously and lawfully in the CNMI from November 28, 2009, through the date of enactment; and not be a citizen of the Federated States of Micronesia, Republic of the Marshall Islands, or Republic of Palau. Individuals who meet each of these four criteria would be eligible to apply for CNMI resident status if they fall into one of the categories shown in table 2. DHS Implementation of CNRA Foreign Worker and Investor Provisions Foreign Workers CW-1 Permits As figure 2 shows, the number of CW-1 permits approved by USCIS remained well under the annual numerical limits established by DHS for fiscal years 2012 through 2015 and exceeded or neared the annual limits for fiscal years 2016 and 2017. According to USCIS data, most individuals with approved CW-1 permits for fiscal years 2015 through 2018 were born in the Philippines or China. In addition, as table 3 shows, four times more CW-1 permits were issued to Chinese nationals for fiscal years 2016 and 2017 than for fiscal year 2015. As we reported in 2017, firms involved in building a new casino in Saipan have primarily employed Chinese workers. About one-third of fiscal year 2018 CW-1 permit holders had maintained continuous employment in the CNMI since 2015 and could be eligible for CNMI resident status under H.R. 560, if they had been admitted every year under CW-1 status and were otherwise eligible. USCIS CW-1 permit data for fiscal years 2015 through 2018 show that, of the 8,995 foreign workers with CW-1 permits approved by USCIS for fiscal year 2018, 2,875 workers (about 32 percent) had maintained continuous employment in the CNMI since fiscal year 2015. (Of this group, 2,287—80 percent—were born in the Philippines.) Under H.R. 560, a foreign national who meets additional eligibility requirements, including having resided continuously and lawfully in the CNMI from November 28, 2009, through the date of enactment, may be admitted to the CNMI under CNMI resident status if that individual was admitted to the CNMI as a CW-1 worker during fiscal year 2015 and during every subsequent fiscal year beginning before July 24, 2018. As a result, according to our analysis of USCIS data, 2,875 workers could be eligible under H.R. 560 to apply for CNMI resident status if they were admitted as CW-1 workers every fiscal year until 2018 and met all other eligibility conditions. Table 4 shows the numbers of foreign workers who received CW-1 permits for fiscal year 2018 and had maintained continuous employment in the CNMI since fiscal years 2012 through 2017. USCIS data show a reduction from fiscal year 2017 to fiscal year 2018 in the number of CW-1 permit holders and a significant increase in the number of H-2B beneficiaries. While the number of approved CW-1 permit holders declined from 12,889 in fiscal year 2017 to 8,995 in fiscal year 2018, the number of H-2B beneficiaries for those years increased from 0 to 3,058. In addition, our analysis of USCIS data found that the number of CW-1 permit holders for the construction trade declined from 2,981 to 545—by 82 percent—from fiscal year 2017 to fiscal year 2018. Meanwhile, the number of H-2B beneficiaries for the construction trade in the CNMI increased from 0 for fiscal year 2017 to 1,801 for fiscal year 2018. In August 2017, Congress amended the CNRA to, among other things, restrict CW-1 permits for workers in construction and extraction occupations (as defined in the U.S. Department of Labor’s Standard Occupational Classification system) by allowing only extensions of CW-1 permits first issued before October 1, 2015. The CNRA allows CNMI employers to petition for H-2 visas to bring temporary workers, such as construction workers, to the CNMI without counting against the numerical restriction for such visas. According to a senior USCIS official, the new casino employer in Saipan began petitioning in 2018 for foreign workers under the H-2B program instead of petitioning for CW-1 permits for its construction workers. The official noted that Pub. L. No. 115-53’s restriction on the use of CW-1 permits for construction trade workers may account for the decrease in petitions for CW-1 permit holders and increase in petitions for H-2B beneficiaries from fiscal year 2017 to fiscal year 2018. Table 5 shows the numbers of approved CW-1 permit holders and H-2B beneficiaries for the construction trade in fiscal years 2016 through 2018. In October 2016, DHS announced the list of countries whose citizens were eligible to participate in the H-2 program from January 18, 2017, to January 18, 2018. Asian countries on the list included the Philippines, South Korea, Taiwan, and Thailand, among others, but did not include China. In January 2019, because of concerns about overstays and human trafficking, DHS removed the Philippines from the list of countries eligible for the H-2B program. CNMI government and Chamber of Commerce officials have voiced concerns that the removal of the Philippines from the list will make it difficult to hire construction workers in the aftermath of two recent typhoons. Investors USCIS began approving 2-year E-2C status for eligible foreign long-term investors and their dependents in the territory in fiscal year 2011. According to USCIS, as of February 5, 2019, 56 investors who had previously resided in the CNMI as investors under CNMI immigration law were residing in the CNMI with E-2C status. Under H.R. 560, foreign nationals who otherwise meet additional eligibility requirements may be granted CNMI resident status if they resided in the CNMI as investors under CNMI immigration law and are presently resident under E-2C status. As a result, under H.R. 560, these 56 investors could be eligible to apply for CNMI resident status if they met all other eligibility conditions. DHS Implementation of Parole Authority under the INA According to USCIS testimony, after the CNRA was passed in 2008, USCIS implemented DHS’s discretionary parole authority by making parole available to groups of individuals residing in the CNMI who would not be covered by INA classifications and for whom the classifications established in the CNRA did not appear to be appropriate. These individuals previously had immigration status under CNMI immigration law that allowed them to potentially remain in the CNMI indefinitely, according to USCIS. Without USCIS action, these individuals would have been deemed unlawfully present in the United States, according to USCIS documents. To provide such individuals with a means to remain temporarily in the CNMI during the transition period, USCIS announced several discretionary parole policies to cover the following groups, among others, which were potentially eligible for parole: CNMI permanent residents, immediate relatives of CNMI permanent residents, spouses and children of deceased CNMI permanent residents, and immediate relatives of citizens of the freely associated states (November 2009) Certain in-home foreign national caregivers of CNMI residents (October 2011) Immediate relatives of U.S. citizens, especially parents of U.S. citizen children, and stateless individuals in the CNMI (November 2011) In response to Executive Order 13767, on December 27, 2018, USCIS announced the termination of parole for immediate relatives of U.S. citizens and certain stateless individuals; CNMI permanent residents, immediate relatives of CNMI permanent residents, and immediate relatives of citizens of the freely associated states; and certain in-home foreign worker caregivers of CNMI residents. To provide an opportunity for individuals in these categories to prepare to depart or seek a different lawful status, USCIS announced that the affected individuals were allowed to remain in the CNMI with a transitional parole status for up to 180 days, not to extend beyond June 29, 2019. According to a senior USCIS official, from December 2, 2016, through December 14, 2018, USCIS had granted parole until December 31, 2018, to 1,039 individuals in the terminated parole categories. Under H.R. 560, some of these individuals could be eligible to apply for CNMI resident status if they met all other eligibility conditions. Vice Chairman Sablan, Republican Leader Gonzalez-Colon, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time. GAO Contact and Staff Acknowledgements If you or your staff have any questions about this testimony, please contact David Gootnick, Director, International Affairs and Trade, at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Emil Friberg (Assistant Director), Julia Ann Roberts (Analyst in Charge), Sada Aksartova, Andrew Kurtzman, Reid Lowe, and Alexander Welsh. Technical support was provided by Kathryn Bernet, Justin Fisher, Christopher Keblitis, Mary Moutsos, and Moon Parks. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The 1976 covenant defining the political relationship between the CNMI and the United States exempted the CNMI—a U.S. territory north of Guam—from certain federal immigration laws. However, the covenant preserved the right of the U.S. government to apply federal law in these exempted areas. The CNRA, which amended a joint resolution approving the covenant, generally established federal control of CNMI immigration beginning in 2009. In 2009, DHS began implementing, among other things, a foreign worker permit program to address CNRA provisions specific to the CNMI. DHS also began using its discretionary authority under the INA to parole certain groups of individuals into the CNMI (i.e., allow them to be temporarily present). Congress has amended the CNRA several times with provisions that affected the total number of permits allocated and the distribution of permits. Proposed bill H.R. 560 would further modify the CNRA by establishing a CNMI resident status for certain individuals. Among its other provisions, the CNRA allows CNMI employers to petition for H-2 visas for temporary workers without counting the visas against a numerical restriction. Drawing from ongoing work, this testimony discusses DHS's implementation of (1) selected CNRA provisions regarding foreign workers, among others, in the CNMI and (2) its discretionary parole authority under the INA as applied in the CNMI. GAO updated information from May 2017 ( GAO-17-437 ) and February 2018 ( GAO-18-373T ), reviewed relevant legal documents, and analyzed DHS data. Under the Consolidated Natural Resources Act of 2008 (CNRA), the Department of Homeland Security (DHS) established the nonimmigrant Commonwealth of the Northern Mariana Islands (CNMI)–Only Transitional Worker program in 2011. Through the program, eligible foreign nationals can obtain CNMI-Only Transitional Worker (CW-1) permits to work temporarily in the CNMI. Under H.R. 560, foreign nationals who meet additional eligibility requirements could be eligible to receive CNMI resident status if they were admitted annually to the CNMI as a CW-1 worker in fiscal years 2015 through 2018. GAO's preliminary analysis of DHS data found that 2,875 (about 32 percent) of 8,995 workers with CW-1 permits for fiscal year 2018 had maintained continuous employment each fiscal year since 2015 (i.e., received a CW-1 permit annually). While DHS data show the number of approved CW-1 permit holders declined from fiscal year 2017 to fiscal year 2018 (see figure), the number of H-2B beneficiaries—who often fill construction jobs—increased from 0 to 3,058. In January 2019, DHS removed the Philippines from the list of countries eligible for the H-2B program. In 2009, DHS began granting discretionary parole that authorized temporary stays for certain CNMI residents, such as spouses and children of U.S. citizens. These individuals may have been inadmissible or otherwise ineligible for admission to the United States, according to DHS. However, in December 2018, DHS announced that it was terminating parole for certain categories of residents in response to Executive Order 13767, issued in 2017. The order called on DHS to take appropriate action to ensure that parole authority is exercised only on a case-by-case basis, among other things. According to DHS, 1,039 individuals in the terminated categories had been granted parole until December 31, 2018. Under H.R. 560, some of these individuals could be eligible to apply for CNMI resident status.

GAO_GAO-20-317T

The Federal Government Has Invested in Projects That May Convey Some Climate Resilience Benefits but Does Not Have a Strategic Investment Approach As we reported in October 2019, the federal government has invested in projects that may enhance climate resilience but does not have a strategic approach for investing in high-priority climate resilience projects. Some federal agencies have made individual efforts to manage climate change risk within existing programs and operations, and these efforts may convey climate resilience benefits. For example, the U.S. Army Corps of Engineers’ civil works program constructs flood control projects, such as sea walls, that could convey climate resilience benefits by protecting communities from storms that may be exacerbated by climate change. However, even with individual agency efforts, federal investment in projects specifically designed to enhance climate resilience to date has been limited. As we stated in our Disaster Resilience Framework, most of the federal government’s efforts to reduce disaster risk are reactive, and many revolve around disaster recovery. As a result, we reported in October 2019 that additional strategic federal investments may be needed to manage some of the nation’s most significant climate risks because climate change cuts across agency missions and presents fiscal exposures larger than any one agency can manage. Our analysis shows the federal government does not strategically identify and prioritize projects to ensure they address the nation’s most significant climate risks. In addition, our October 2019 report discusses our past work that shows an absence of government-wide strategic planning for climate change. For example, in our March 2019 update to our high-risk list, we reported that one area of government-wide action needed to reduce federal fiscal exposure is in the federal government’s role as the leader of a strategic plan that coordinates federal efforts and informs state, local, and private- sector action. For this 2019 update, we assessed the federal government’s progress since 2017 related to climate change strategic planning against five criteria and found that the federal government had not met any of the criteria for removal from the high-risk list. Specifically, since our 2017 high-risk update, four ratings regressed to “not met” and one remained unchanged as “not met.” Also, although we have made 17 recommendations that address improving federal climate change strategic planning, as of August 2019, no action had been taken toward implementing 14 of those recommendations—including one dating from 2003. Our enterprise risk management framework calls for reviewing risks and selecting the most appropriate strategy to manage them. However, no federal agency, interagency collaborative effort, or other organizational arrangement has been established to implement a strategic approach to climate resilience investment that includes periodically identifying and prioritizing projects. Such an approach could supplement individual agency climate resilience efforts and help target federal resources toward high-priority projects. Six Key Steps Provide an Opportunity for the Federal Government to Strategically Identify and Prioritize Climate Resilience Projects Six key steps provide an opportunity for the federal government to strategically identify and prioritize climate resilience projects for investment, based on our review of reports (including a National Academies report and the U.S. Global Change Research Program’s Fourth National Climate Assessment) that discuss adaptation as a risk management process, as well as on international standards, our past work (including our enterprise risk management criteria), and interviews with stakeholders. The six key steps are (1) defining the strategic goals of the climate resilience investment effort and how the effort will be carried out, (2) identifying and assessing high-risk areas for targeted resilience investment, (3) identifying potential project ideas, (4) prioritizing projects, (5) implementing high-priority projects, and (6) monitoring projects and climate risks. (See fig. 1.) In our October 2019 report, we used one domestic and one international example to illustrate these key steps: Louisiana’s Coastal Protection and Restoration Authority (CPRA) coastal master planning effort and Canada’s Disaster Mitigation and Adaptation Fund (DMAF). In the domestic example, to address the lack of strategic coordination, in 2005 the state of Louisiana consolidated coastal planning efforts previously carried out by multiple state entities into a single effort, led by CPRA. CPRA periodically identifies high-priority coastal resilience projects designed to address two primary risks: flooding and coastal land loss. To identify potential projects, CPRA sought project proposals from citizens, nongovernmental organizations, and others. To prioritize projects, CPRA used quantitative modeling to estimate project outcomes under multiple future scenarios of varied climate and other conditions and coordinated with stakeholders to understand potential project impacts. CPRA has published three coastal master plans in which it identified and evaluated potential projects. For example, in its 2017 Comprehensive Master Plan for a Sustainable Coast, CPRA identified $50 billion in high- priority projects to be implemented as funding becomes available. In the international example, in 2018 the Canadian government launched the DMAF, a financial assistance program, to provide $1.5 billion (in U.S. dollars) over 10 years for large-scale, nationally significant projects to manage natural hazard risks, including those triggered by climate change. Infrastructure Canada, the entity responsible for administering the DMAF, seeks project ideas from provinces and territories, municipal and regional governments, indigenous groups, and others. These entities apply directly to Infrastructure Canada for funding. According to Canadian officials, two committees of experts—one composed of experts from other federal departments and the other composed of nonfederal experts (e.g., urban planners and individuals with regional expertise)—provide feedback on potential projects. These projects are prioritized based on multiple criteria such as the extent to which they reduce the impacts of natural disasters. Options for Focusing Federal Funding on High-Priority Climate Resilience Projects Have Strengths and Limitations, and Opportunities Exist to Increase Funding Impact As we reported in October 2019, on the basis of our review of relevant reports and our past work, interviews with stakeholders, and illustrative examples, we identified two options—each with strengths and limitations—for focusing federal funding on high-priority climate resilience projects. The options are (1) coordinating funding provided through multiple existing programs with varied purposes and (2) creating a new federal funding source specifically for investment in climate resilience. In addition, our analysis of these sources identified opportunities to increase the climate resilience impact of these two funding options. A strength of coordinating funding from existing sources is access to multiple funding sources for a project. For example, one stakeholder we interviewed whose community used federal funding to implement large- scale resilience projects said that having multiple programs is advantageous because when funding from one program is not available— such as when the project does not match that program’s purpose or when there are insufficient funds—funds could be sought from another program. The state of Louisiana’s coastal master planning effort also uses multi-program coordination to fund projects. Specifically, funding for high-priority resilience projects identified in the master plan is provided via several federal and nonfederal programs designed for wetlands restoration, hurricane risk reduction, oil spill recovery, and community development, among other purposes. A limitation of that option, according to CPRA officials, is that coordinating funding from multiple sources could be administratively challenging and could require dedicated staff to identify programs, assess whether projects meet program funding criteria, apply for funds, and ensure program requirements are met. Alternatively, one strength of creating a new federal funding source, such as a federal financial assistance program that could provide loans or grants or a climate infrastructure bank, is that it could encourage cross- sector projects designed to achieve benefits in multiple sectors. For example, according to one stakeholder, such a funding source could allow experts from multiple sectors—such as infrastructure, housing, transportation, and health—to collaborate on projects, leading to more creative, comprehensive approaches to enhance community resilience. However, such a new funding source would have to be created, which would require congressional authorization. In addition, we identified opportunities to increase the climate resilience impact of federal funding options based on our review of our past work, related reports, an international standard, and the Louisiana and Canadian examples, as well as interviews with stakeholders: Using both existing and new funding options. Several stakeholders told us that using both funding options—multiple, existing federal programs with varied purposes and a new funding source for high-priority climate resilience projects—in a strategic, coordinated way could help increase the impact of federal investment. Two stakeholders told us that in practice, multiple, existing federal funding sources that are not specific to climate resilience could be coordinated to fund projects when their purposes and rules align and adequate funding is available. A funding source specifically for climate resilience could be used to fund proposed projects when no related program exists or when existing programs do not have sufficient funding available, according to these and other stakeholders. Helping ensure adequate and consistent funding. Several stakeholders we interviewed identified the need for adequate and consistent funding to implement high-priority climate resilience projects. For example, according to one stakeholder we interviewed, inconsistent, inadequate funding makes it difficult to complete large- scale projects and can lead to additional costs if significant delays occur during which existing work deteriorates. In addition to adequate and consistent funding, funding options should be designed to accommodate long-term projects since high-priority climate resilience projects can take multiple years to design and implement, according to two stakeholders we interviewed. Encouraging nonfederal investment. Several stakeholders we interviewed told us that the federal government could use a federal climate resilience investment effort to encourage nonfederal investment in high-priority climate resilience projects, thereby increasing the impact of federal investment. For example, several stakeholders identified the importance of a cost-share component so that funding recipients are invested in a project’s success. Canada’s DMAF encourages nonfederal investment by partially funding projects of national significance and requiring different levels of cost-share from funding recipients, ranging from 25 percent for indigenous recipients to 75 percent for private-sector and other for-profit recipients. Several stakeholders also identified potential funding mechanisms—for example, public-private partnerships and loan guarantees—that could leverage federal dollars to encourage additional investment in climate resilience projects by nonfederal entities, including the private sector. Encouraging complementary resilience activities. To increase the impact of federal investment in climate resilience, a federal investment effort presents an opportunity to encourage complementary resilience activities by nonfederal actors such as states, localities, and private- sector partners, based on interviews with several stakeholders, the Canadian example, and reports we reviewed. For example, this could include establishing conditions that funding recipients must meet in exchange for receiving federal funding. Alternatively, the federal government could use incentives (e.g., providing greater federal cost- share or giving additional preference in the project prioritization process) to encourage complementary resilience activities by nonfederal actors. Our Disaster Resilience Framework states that incentives can make long-term, forward-looking risk reduction investments more viable and attractive among competing priorities. The federal government could use these conditions and incentives to encourage several types of complementary resilience activities by nonfederal actors. For example, the federal government could encourage the use and enforcement of building codes that require stronger risk-reduction measures. In addition, a federal investment effort could provide an opportunity to encourage communities to limit or prohibit development in high-risk areas to minimize risks to people and assets exposed to future climate hazards. One example of this would be through zoning regulations. Another stakeholder suggested that communities receiving federal funding for resilience projects should be adequately insured against future climate risks so they have a potential source of funding for rebuilding in the event of a disaster. Allowing funds to be used at various stages of project development. Several stakeholders suggested that federal funds be used for multiple stages of project development—such as project design, implementation, or monitoring—to increase the impact of federal funds. For example, two stakeholders we interviewed told us that resilience projects can require significant amounts of design work to develop an implementable and effective project concept and that making funds available for project design could improve the quality of project proposals, thereby maximizing the impact of federal funds. In addition to providing federal funds for project design, one stakeholder suggested making federal funding available to measure project outcomes (e.g., how effectively projects increased resilience) to improve future decisions by both the federal government and others making resilience investments. Based on the findings of our October 2019 report, we recommended that Congress consider establishing a federal organizational arrangement to periodically identify and prioritize climate resilience projects for federal investment. Such an arrangement could be designed using the six key steps for prioritizing climate resilience investments and the opportunities to increase the climate resilience impact of federal funding options that we identified in our report. Chairwoman Castor, Ranking Member Graves, and Members of the Select Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this testimony, please contact Mark Gaffigan at (202) 512-3841 or gaffiganm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff members who made key contributions to this testimony and the underlying report are Joseph “Joe” Thompson (Assistant Director), Celia R. Mendive (Analyst in Charge),Taiyshawna Battle and Paige Gilbreath. Also contributing to this report were Alicia Puente Cackley, Colleen M. Candrl, Kendall Childers, Steven Cohen, Christopher Curry, Cindy Gilbert, Kathryn Godfrey, Holly Halifax, Carol Henn, Susan Irving, Richard Johnson, Gwendolyn Kirby, Joe Maher, Gregory Marchand, Diana Maurer, Kirk Menard, Tim Persons, Caroline N. Prado, William Reinsberg, Oliver Richard, Danny Royer, Jeanette Soares, Kiki Theodoropoulos, Sarah Veale, Patrick Ward, Jarrod West, Kristy Williams, Eugene Wisnoski, and Melissa Wolf. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Since 2005, federal funding for disaster assistance has totaled at least $450 billion, including a 2019 supplemental appropriation of $19.1 billion for recent disasters. In 2018 alone, 14 separate billion-dollar weather and climate disaster events occurred across the United States, with total costs of at least $91 billion, including the loss of public and private property, according to the National Oceanic and Atmospheric Administration. Disaster costs likely will increase as certain extreme weather events become more frequent and intense due to climate change, according to the U.S. Global Change Research Program, a global change research coordinating body that spans 13 federal agencies. In 2013, GAO included “Limiting the Federal Government’s Fiscal Exposure by Better Managing Climate Change Risks” on its high-risk list. The cost of recent weather disasters has illustrated the need to plan for climate change risks and invest in climate resilience, which can reduce the need for far more costly steps in the decades to come. This statement summarizes GAO’s findings from its October 2019 report on climate resilience and federal investment (GAO-20-127). Specifically, it focuses on (1) the extent to which the federal government has a strategic approach for investing in climate resilience projects; (2) key steps that provide an opportunity to strategically prioritize projects for investment; and (3) the strengths and limitations of options for focusing federal funding on these projects. To perform this work, GAO reviewed about 50 relevant reports and interviewed 35 stakeholders with expertise in climate resilience and related fields, including federal officials, researchers, and consultants. GAO also identified domestic and international examples of governments that invest in climate resilience and related projects. The federal government has invested in individual projects that may enhance climate resilience, but it does not have a strategic approach to guide its investments in high-priority climate resilience projects. In GAO’s March 2019 update to its list of federal programs at high risk for fraud, waste, abuse, and mismanagement, or most in need of transformation, GAO reported that one area of government-wide action needed to reduce federal fiscal exposure is in the federal government’s role as the leader of a strategic plan that coordinates federal efforts and informs state, local, and private-sector action. For this 2019 update, GAO assessed the federal government’s progress since 2017 related to climate change strategic planning against five criteria and found that the federal government had not met any of the criteria for removal from the high-risk list. Further, as of August 2019, no action had been taken to implement 14 of GAO’s 17 recommendations to improve federal climate change strategic planning. Additionally, no federal agency, interagency collaborative effort, or other organizational arrangement has been established to implement a strategic approach to climate resilience investment that includes periodically identifying and prioritizing projects. Such an approach could supplement individual agency climate resilience efforts and help target federal resources toward high-priority projects. Based on its review of prior GAO work, relevant reports, and stakeholder interviews, GAO found six key steps that provide an opportunity for the federal government to strategically identify and prioritize climate resilience projects for investment. These are (1) defining the strategic goals of the climate resilience investment effort and how the effort will be carried out, (2) identifying and assessing high-risk areas for targeted resilience investment, (3) identifying potential project ideas, (4) prioritizing projects, (5) implementing high-priority projects, and (6) monitoring projects and climate risks. GAO also identified two options—each with strengths and limitations—for focusing federal funding on high-priority climate resilience projects. The options are (1) coordinating funding provided through multiple existing programs with varied purposes and (2) creating a new federal funding source specifically for investment in climate resilience. In addition, GAO identified opportunities to increase the impact of federal funding options on climate resilience, including ensuring adequate and consistent funding and encouraging nonfederal investment in climate resilience.

GAO_GAO-20-278

Background Airport Public Areas Commercial airports in the United States (i.e., those regulated by TSA) can be generally described as having security-restricted areas and unsecured areas. Security-restricted areas include the area from which screened passengers may board aircraft, as well as areas where access is generally limited to appropriately vetted and credentialed personnel, such as airport and air carrier employees who require access to aircraft or to load and sort baggage. Unsecured areas, or airport public areas, are the areas of the airport that may be accessed by the general public without restrictions (i.e., without passing through security or some other controlled access point), such as ticketing areas, restaurants and shops, baggage claim areas, and areas extending outward from the airport facility to include pathways leading to an airport’s terminal and public parking areas. Airport public areas described by TSA officials, airport operators, airport law enforcement and aviation related associations we met with included airport access roads, curbside drop-off/pick-up areas, parking structures, rental car facilities, bus/transit lines leading to the airport, main entrances to and lobbies of terminal areas, and the security queue leading to security screening checkpoints. See figure 1 for a general illustration of the public areas of a commercial airport in the United States. According to aviation security stakeholders, such as airport operators, law enforcement officers, and industry representatives from trade associations, securing airport public areas presents inherent challenges for numerous reasons. They also stated that, in general, airports are designed to support the movement of large numbers of people through the airport’s public spaces to the security checkpoint and into the airport sterile area or to aircraft for boarding. TSA officials stated that given the large number of people that pass through airport public areas during peak hours, it can be difficult to monitor these areas for security threats. Additionally, the use of some enhanced security measures and reconfiguring terminals (e.g., metal detectors at entrance doors or the movement of security checkpoints closer to airport entrances or ticket counters) may create additional challenges because such measures could result in long lines and smaller congested spaces that would disrupt service. As a result, airport officials stated that any airport modernization projects, law enforcement actions or technologies introduced to potentially enhance security in the public areas of airports should not disrupt the efficiency of the airport’s business operations. In addition, airport officials and industry representatives stated that each airport is unique in its combination of layout and operations, which may determine the type of security approach and method the airport operator utilizes to enhance the security of the airport’s public areas. For example, an airport may have a number of separate terminals, each comprising separate entrances and public areas, creating a security challenge due to the vast area of detached public space. While another airport may have a single main terminal building that includes a hotel, restaurants and shops with two sections (A and B), each maintaining ticket counters and security checkpoints that may require a different security approach due to its unique set of challenges to securing their public areas, such as having large numbers of people congregating in one central location. TSA, the federal agency with primary responsibility for civil aviation security, implements security measures and imposes security requirements to ensure that access to those areas of the airport that could otherwise permit an individual with ill-intent access to cleared passengers and aircraft is controlled. Although TSA’s statutory authorities and responsibilities for the civil aviation system are not limited to this purpose, resource and other practical constraints, as well as TSA’s mission to secure civil aviation without unduly impeding the flow of commerce, have resulted in a regulatory structure largely focused on implementing measures that ensure the security of the aircraft and the traveling public. As a result, airport operators determine the boundaries for the security-restricted areas of their own airport based on the physical layout of the airport and in accordance with TSA requirements—generally documented through TSA-approved security programs. Roles and Responsibilities of Airport Stakeholders for Securing Public Areas Securing airport public areas requires a collaborative approach involving airport operators, law enforcement, and TSA officials, among others. A number of aviation stakeholders play an important role in recommending enhancements that impact the security of airport public areas. The roles and responsibilities for each of these aviation stakeholders vary, but together provide a collective approach to securing airport public spaces. Airport operators. Airport operators are the owners, administrators and managers of an airport with responsibilities to plan, organize, supervise and direct airport operations, and have direct responsibility for implementing security requirements in accordance with their TSA- approved airport security programs. In accordance with its security program, airport operators must, in general, provide for the availability of law enforcement personnel in the number and manner adequate to support its security program for public areas and TSA screening operations at the airport. Although TSA’s primary responsibility is to implement and oversee aviation security, incident response at commercial airports is essentially the responsibility of the airport operator in conjunction with state or local law enforcement agencies and TSA collaboratively working to respond to any security incidents. Law enforcement. Responding to security incidents such as an active shooter situation or any other criminal matter—whether in an airport public area or within a security-restricted area—is generally the responsibility of law enforcement personnel present at or available for response to the airport, in accordance with an airport’s security program. For example, officials providing the requisite law enforcement support may be federal, state or local officers, or special airport-authority officers. While some airport law enforcement officers are stationed at dedicated posts at or near passenger screening checkpoints, officers also routinely patrol areas around the checkpoints, such as ticketing areas, restaurants and shops, and baggage claim, among others. TSA. TSA assumed primary responsibility for implementing and overseeing the security of the nation’s civil aviation system following the terrorist attacks of September 11, 2001. As previously stated, TSA primarily fulfills its mission through a regulatory structure largely focused on implementing and enforcing measures that ensure the security of the aircraft and traveling public—such as by controlling access to the security-restricted areas of the airport through the screening of passengers, accessible property, checked baggage, air cargo and mail, or ensuring that controlled access points for use by credentialed aviation workers are in place. However, TSA is also responsible for ensuring that airport operators and other aviation stakeholders remain compliant with their TSA-approved airport security programs and other applicable requirements, which it accomplishes by conducting inspections of, for example, an airport operator’s perimeter, access control, and other security measures. As circumstances warrant, TSA also issues information circulars to notify regulated entities of security concerns and security directives to augment or supplement requirements implemented through security programs. Security directives and guidance issued by TSA related to airport public areas have covered such topics as law enforcement requirements to patrol public areas, law enforcement response times and improved communications systems, among others. Key TSA roles at airports include: Federal Security Directors (FSD). The ranking TSA authority at airports, the FSD, provides leadership and coordination of TSAs day- to-day security activities, including ensuring airport operator’s compliance with their airport security program. Assistant Federal Security Directors for Inspections (AFSD-I). Each AFSD-I manages a Compliance Hub staffed by Transportation Security Inspectors who ensure regulatory compliance, respond to incidents, and reduce vulnerabilities in collaboration with regulated and non-regulated entities. The area of responsibility of the Compliance Hub may cover one or more FSD areas. Visible Intermodal Prevention and Response (VIPR) Teams. TSA Law Enforcement Federal Air Marshal Service (LE/FAMS) conducts protection, response, detection and assessment activities in airports and other transportation systems. VIPR teams comprised of TSA and law enforcement, security inspectors, and screening personnel perform various functions that include randomly screening workers, property, and vehicles, as well as patrolling the public areas of airports. According to TSA officials, there are approximately 31 VIPR teams nation-wide providing enhancement to security in airports. Decisions on deployments of VIPR teams are determined by risk associated with the venue, which is either surface transportation venues like passenger rail or bus stations among others, or airports. TSOs. Although TSOs are uniformed security personnel that resemble law enforcement, they are not law enforcement officers. Therefore, TSA relies on the presence of law enforcement at the passenger screening checkpoints to mitigate actual or perceived threats they face and stated that they appreciate the prompt response provided during the LAX shooting incident. Other aviation stakeholders. Additional aviation stakeholders share responsibility in coordinating input and providing recommendations to strengthen security in airport public areas. Such stakeholders include federal, state and local government officials, airline industry partners, aviation associations, and government agencies such as CISA, Federal Bureau of Investigation (FBI), state and local law enforcement partners, emergency management and fire and rescue officials, airline officials, and association members from Airports Council International-North America, Airport Law Enforcement Agencies Network, and American Association of Airport Executives, among others. Airport Public Area Security Incidents, Subsequent Actions and Reports On November 1, 2013, Gerardo I. Hernandez, a TSO, was shot and killed at a podium located at the base of an escalator which led to the upstairs security checkpoint at LAX, which TSA deemed a part of the checkpoint area, as he checked passengers’ identification and travel documents. According to TSA officials, as passengers and TSOs located upstairs heard the sound of gunshots, they realized there was an active shooter situation and began to run and hide in shops and restaurants. The shooter proceeded upstairs into the security- restricted area and fired additional shots injuring two TSOs and a passenger. Airport police officers responded within 90 seconds and apprehended the shooter within 4 minutes, who, according to law enforcement officials, was specifically targeting TSA employees. As a result, TSA issued an after action report on March 26, 2014, and identified numerous recommendations to enhance the safety and security of TSOs and the screening checkpoint area, such as improving the visibility of law enforcement officers, active-shooter training, and communications systems. On September 24, 2015, the Gerardo Hernandez Act was enacted into law and directed TSA to, as appropriate, conduct outreach to all commercial airports in the United States to ensure they have plans in place to respond to, among other things, active shooter attacks and incidents targeting passenger screening checkpoints, and to report to Congress on the findings from its outreach. On March 22, 2016, suicide bombers using explosives in suitcases killed 16 people and injured more than 200 inside the main terminal area of the Brussels Zaventem International Airport in Belgium. The attack was followed by the June 28, 2016 Istanbul Ataturk International Airport attack in Turkey, where suicide attackers used guns and bombs to kill 46 and injured more than 230 people inside public areas of the airport, including the security checkpoint and parking areas. On January 6, 2017, a passenger obtained a handgun from his checked baggage upon landing at the airport and shot and killed five people and injured six others in the baggage claim area at FLL. Travelers rushed out of the terminal and also ran into security- restricted areas while law enforcement officers responded to the scene. The shooting event ended in less than 80 seconds when the shooter surrendered to law enforcement officers. Approximately 90 minutes after the shooting, speculation of additional gunshots in the airport caused panic and led to an uncontrolled self-evacuation of passengers, and others throughout the airport. Law enforcement and emergency personnel from surrounding areas quickly responded, causing traffic congestion and blocking all airport roadways. As a result, the Broward County Aviation Department (BCAD) issued an after action report on August 15, 2017, to identify coordination challenges airport officials and law enforcement personnel experienced in response to the active shooter incident, and recommended preparedness and response training and exercises among other things. Enacted on October 5, 2018, as part of the Federal Aviation Administration (FAA) Reauthorization Act of 2018, the TSA Modernization Act required, among other things, that TSA and CISA establish a public area security working group and identify and share best practices to secure aviation and other public areas of transportation facilities. On September 27, 2019 a man fired a gun outside of the baggage claim area of the Portland International Airport in Oregon and was injured in a struggle with police officers. See figure 2 for a timeline of these events and response efforts to enhance the security of public areas. TSA Took Various Actions to Enhance Public Area Security in Response to the 2013 LAX Shooting and Gerardo Hernandez Act In response to the November 2013 shooting at LAX, TSA took various actions to improve security in airport public areas. In March 2014, TSA issued an after-action report on the shooting. TSA officials at LAX stated that confusion about where to run, hide and respond; delayed and inaccurate communications; and the lack of law enforcement visibility were safety concerns that needed to be addressed. As a result, TSA identified short term actions and proposals for increasing airport public area security and enhancing the safety of TSA employees at airports. These include (1) strengthening and mandating active shooter training for TSA employees, (2) installing duress alarms at screening checkpoints, and (3) adopting recommended standards for law enforcement presence at checkpoints, as described below. Active shooter training. In its after-action report, TSA stated that although it provided optional active shooter training courses available online to employees prior to the 2013 shooting, employees were not required to complete the training and could have been unaware of steps to take during a shooting event. According to TSA officials, adequate training and preparation for how to best respond to security incidents, such as an active shooter situation, are important in order to minimize casualties. After its review of the 2013 LAX shooting, on December 19, 2013, TSA mandated that TSA employees complete the training. In addition, TSA later revised the active shooter training to include various training exercises and threat scenarios, according to LAX officials. TSA noted in its after-action report that the active shooter training scenarios and exercises are intended to allow law enforcement officers to practice reacting to a specific incident and immediately assess the appropriateness of their reactions. All of the six airport operators we interviewed stated that active shooter training and frequent drills are important because they instill instinctive reactions and standard communications and procedures in employees during a crisis situation. In addition, airport officials at all six of the airports we visited agreed with the importance of active shooter training to familiarize employees with the steps to take or escape routes to use during an attack. In its after-action report, TSA also noted actions taken to ensure active shooter tactical response plans to reinforce emergency procedures, and conducting emergency evacuation drills twice a year. Airport officials at all of the six airports we visited noted the importance of these drills and stated that they have incorporated the drills into their emergency plans and procedures. Duress alarms. TSA reported that installing duress alarms at screening checkpoint areas would improve communications from TSOs to law enforcement through use of a silent alarm. To enhance emergency response equipment and technology, TSA mandated regular testing of duress alarms, recommended linking closed circuit television (CCTV) cameras to duress alarms, and recommended enhanced use of local airport emergency alert notification systems. TSA also identified the need for FAMS notifications in the event of a security emergency, because previously FAMS did not receive automatic notification of an active shooter incident occurring. Duress alarms are installed at each checkpoint, and when pushed, provide TSOs with a method to notify law enforcement of dangerous situations at or around the checkpoint area. TSOs we met with at five of the six airports we visited discussed a number of situations where travelers have been unruly, threatening, and sometimes physical prior to undergoing or during security screening at the checkpoint. In instances of hostility or threats of attack, TSOs highlighted the importance of having operational duress alarms to help improve the safety and security of the public area and the checkpoint (see figure 3). After the LAX incident, TSA conducted an assessment of all existing alarms and found that some airport checkpoints lacked alarms and some alarms were not fully functional. As a corrective action, TSA issued an operational directive to mandate weekly testing of duress alarms at commercial airports nationwide. In addition, not all airports had duress alarms as a notification capability prior to the LAX incident. As such, TSA subsequently planned to take action to install duress alarms at all airports nationwide. Officials at all of the six airports we visited confirmed the use and weekly testing of duress alarms. Representatives of all four industry associations we contacted stated that the installation of duress alarms in all airports was a useful practice. TSA’s review also recommended linking duress alarms to CCTV cameras to focus camera footage on the area where the duress alarm is activated. All of the six airports we visited have completed or plan to complete linking the alarms to the cameras. Law enforcement presence. Following the LAX shooting, TSA officials, and TSO screeners, wanted to ensure adequate law enforcement presence at the checkpoints. In response to the review of the shooting incident, TSA recommended enhancing law enforcement presence by providing a visible deterrence and establishing quicker incident response times at security checkpoints. In an effort to address the concerns of visibility and responsiveness, TSA recommended standards for law enforcement presence at checkpoints and ticket counters during peak travel times and incorporation of a maximum allowable response time for law enforcement to arrive at an airport checkpoint when notified of a security incident. Prior to the LAX shooting, airport operators were required to comply with existing airport security program requirements to provide adequate law enforcement presence to ensure passenger safety, including responding to threats at security checkpoints. However, when TSA conducted a review of all airport security programs, they found that although most airports specified maximum response times to checkpoints, 71 airports that maintained flexible law enforcement coverage did not list a required response time in their security programs. As a result, TSA required all airports to clearly include a maximum allowable law enforcement response time in all security programs. Officials for the five airports we visited with the highest passenger volumes stated they comply with the response time requirement listed in their security program while officials from a smaller airport we met with told us they include a longer maximum response time as a requirement in their security program. While recommended standards for law enforcement presence and maximum response times are required in airport security programs, nearly all 50 TSOs and TSO supervisors at the six airports we visited expressed concerns for safety and security while conducting screening operations in the passenger checkpoint areas. Many of these TSOs and supervisors said they feel vulnerable to both physical and verbal attacks, and public misperceptions of their overall roles and responsibilities. The majority of TSOs also noted concerns about adequate law enforcement presence and attentiveness in the checkpoint areas and because they are sometimes harassed for conducting their screening duties. While many of the TSOs stated they sometimes feel their concerns are not always met with action, such as supervisors intervening or calling upon law enforcement for assistance, they said they appreciate law enforcement’s response to the LAX shootings and value building relationships with law enforcement present at the checkpoint. All TSOs we interviewed expressed interest in continuing to provide feedback to TSA headquarters and offering suggestions for improving their safety. In addition to actions taken in response to the after-action report for the LAX shooting, TSA took other actions consistent with the Gerardo Hernandez Act. As previously mentioned, the act directed TSA to, as appropriate, conduct outreach to all commercial airports in the United States to ensure they have plans in place to respond to, among other things, active shooter attacks and incidents targeting passenger screening checkpoints, and to report to Congress on the findings from its outreach. In response to the Gerardo Hernandez Act, TSA conducted outreach to all commercial airports and analysis of each airport’s preparedness to respond to security events. TSA determined that all of the airports had plans in place to respond to security incidents in the public areas of airports including active shooters, acts of terrorism, and incidents that target passenger screening checkpoints. TSA also determined that all commercial airports had met TSA regulatory requirements related to security incident response planning. After the LAX shooting and subsequent review, TSA issued an Operations Directive in August 2014, about one year before enactment of the Gerardo Hernandez Act, detailing specific guidance and TSA employee procedures for responding to an active shooter incident. Upon reviewing the act, TSA concluded that the procedures outlined in its directive were consistent with requirements and that no further action was required. For example, TSA had provided guidance for its personnel to mentally prepare themselves in advance for an active shooter incident by predetermining an escape route that offers concealment or cover. TSA guidance had also encouraged employees to use the mantra of “Run, Hide, Fight” during active shooter incidents. Furthermore, over the next few years, TSA released a new training video, issued revised operational guidance, and nation-wide update concerning security measures. In January 2015, TSA released a new active shooter training video, “Active Shooter Incident Response Training” for active shooter incidents specifically depicting an airport environment. The interactive training video was filmed at Indianapolis airport with support and participation from local airport officials, law enforcement officers, and TSA personnel. TSA released the training video with a required completion date of March 31, 2015, and mandated that this be completed as an annual training requirement for all TSA personnel. In July 2016, TSA also issued revised operational guidance for reporting aviation security incidents to the Transportation Security Operations Center, including security breaches and suspicious activities, among others. In November 2017, TSA issued a national update to airport security programs for law enforcement coverage of certain airport public areas under the National Terrorism Advisory System. These documents include guidance and procedures that align with requirements of the Gerardo Hernandez Act for verifying that plans exist, and for identifying and sharing best practices, across airports to respond to security incidents inside the airport perimeter, including active shooters, acts of terrorism, and incidents that target passenger screening checkpoints. More recent actions have also been taken that correspond with requirements of the Gerardo Hernandez Act to have plans to respond to active shooter attacks and incidents targeting passenger screening checkpoints. Specifically, in March 2018, TSA issued a revised security directive to enhance security of airport public areas by identifying responsibilities for local law enforcement coverage of airport public areas, including the passenger screening checkpoints and nearby public areas. Also, in August 2018, TSA issued an information circular describing best practices identified by airport operators to mitigate against insider threats, including practices related to conducting vulnerability assessments, and escort procedures, among others. TSA and Stakeholders Took Additional Actions to Enhance Airport Public Area Security, but TSA Does Not Have a Plan for Future Stakeholder Collaboration TSA Issued a National Framework in 2017, Among Other Actions, to Enhance Airport Public Area Security In response to other security incidents in airport public areas, TSA has taken additional actions to enhance security. Specifically, in 2017, TSA issued the Public Area Security National Framework (Public Area Framework). TSA developed the framework following a series of security summits that gathered stakeholders together to identify ways to mitigate threats against aviation and surface transportation public areas. Between September 2016 and April 2017, TSA and the DHS Office of Infrastructure Protection (now within CISA) co-hosted four public area security summits (see fig. 4). According to TSA officials, the summits leveraged an entire network of transportation and security officials— including industry, government, academic, international, and public stakeholders—to develop a set of best practices and recommendations that could help deter nefarious actors in the transportation environment. As a result of these summits, in May 2017, TSA published the Public Area Framework, which established best practices and recommendations for protecting public areas from harmful attacks. TSA officials described the summits as opportunities for stakeholders to generate meaningful dialogue and exchange ideas as opposed to developing a formal strategy or prescriptive action plan with an implementation time frame. Moreover, this official added that the framework was “intended to be a toolkit for stakeholders, designed by stakeholders.” Industry stakeholders and airport officials we interviewed reported that the security summits were beneficial for gathering key stakeholders together to determine a variety of measures to enhance security of airport public areas, some of which had already been implemented at certain airports. The Public Area Framework categorized 11 best practices across three key areas: sharing information, preventing attacks, and securing public infrastructure (see fig. 5). According to TSA officials, the report was intended to be a framework, which consisted of non-binding best practices developed by and used for aviation and surface transportation security stakeholders to implement public area security improvements in their respective operating environments. During our interviews with 10 sets of airport stakeholders—consisting of airport operators and law enforcement officials from six airports and industry representatives from four aviation trade associations—we found that all 10 stakeholder groups reported that the resulting best practices were useful in increasing their awareness of the various ways in which airports can enhance the security of their public areas. For example, airport operators at Los Angeles International Airport (LAX) and Hartsfield-Jackson International Airport (ATL) and law enforcement officials at Fort Lauderdale-Hollywood International Airport (FLL) stated that establishing an airport operations center, one of the best practices recommended in the framework, provides real-time monitoring capabilities of security-related events throughout the airport and the ability to communicate more effectively in the event of an emergency. Similarly, representatives of industry trade associations, such as Airports Council International-North America and American Association of Airport Executives, stated that enhanced law enforcement patrols throughout public areas provide a visible deterrent against potential attacks during peak travel times while also ensuring adequate resources are available to respond quickly to potential threats. As recommended in the framework, strategies to deploy law enforcement patrols are one of the most basic forms of deterring, detecting and defeating potential attacks and a part of coordinating response planning. Several stakeholders groups also added that while the framework was useful in formally documenting industry agreed upon best practices and recommendations, many of the practices, including the use of airport emergency operations centers and enhanced law enforcement patrols were already being implemented locally by various airport operators nationwide. In addition to issuing the Public Area Framework, TSA took additional actions in recent years in response to other security incidents in airport public areas led by TSA’s Policy, Plans, and Engagement (PPE) office, which was also responsible for engaging airport and surface transportation stakeholders in developing the 2017 Public Area Framework recommendations. Specifically, the TSA Modernization Act, enacted in October 2018, required TSA, in coordination with CISA, to establish a public area security working group to promote collaboration between TSA and public and private stakeholders to develop non-binding recommendations for enhancing security in public areas of transportation facilities. The act also requires TSA to periodically share best practices developed by TSA and transportation stakeholders related to protecting public spaces of transportation infrastructure from emerging threats with transportation security stakeholders. According to TSA officials we interviewed, PPE established the public area security working group in March 2019 to engage with stakeholders and update the original best practices that were developed in the 2017 Public Area Framework. TSA conducted two conference calls—March 2019 and June 2019—with the working group members to update, discuss, and validate the existing best practices. The working group consists of security stakeholders from both aviation and surface transportation modes and includes several of the same stakeholders who participated in the 2017 public area security summits to develop the 2017 Public Area Framework and associated recommended best practices. For the working group, TSA PPE officials reported that TSA selected a subset of stakeholders who were highly engaged and participatory during their prior security summits and who provided the most input during focus group discussions. According to TSA officials, many of the stakeholders previously involved in the development of the Public Area Framework—including several industry associations representing aviation and surface transportation stakeholders—are aware of ongoing issues and emerging threats. For example, while engaging with TSA during the March 2019 and June 2019 conference calls, industry stakeholders identified ways for enhancing the security of airport public areas by 1) utilizing various technologies, such as public address notification systems throughout airports, to better communicate instructions during and after security incidents occur in the public area, and 2) establishing clearer guidance and protocols for resuming business operations after a security incident, such as rescreening passengers and positively identifying lost baggage in the terminal area. Moreover, stakeholders cited the growing concerns about the emergence of unmanned aircraft systems, such as drones, which pose risks to securing airport public areas. In late October 2019, in accordance with the TSA Modernization Act, TSA issued a report listing best practices and recommendations to secure transportation public areas. This report summarizes the working group’s effort to review and update prior best practices cited in the 2017 Public Area Framework as well as identify current challenges. For example, the updated report provides specific tools and resources for enhancing situational awareness, such as resource guides providing informational materials, fact sheets, research reports, and online training videos. Specifically, one of the resource guides highlights security of soft targets and crowded places—sports venues, shopping areas, schools, and transportation systems—as locations that are easily accessible to large numbers of people that have limited security measures in place making them vulnerable to attack. For example, the guide describes how TSA focuses its effort on securing aviation and high-risk locations by deploying law enforcement and canine teams to serve as a visible deterrent. Other resources include a fact sheet regarding challenges posed by unmanned aircraft systems and a research report regarding mass attacks in public spaces, among others. Moreover, the updated report highlights the benefits of an airport operations center, including enhanced communication capabilities and situational awareness. TSA Does Not Have a Fully Developed Plan for Future Stakeholder Collaboration on Best Practices for Airport Public Area Security Although TSA and stakeholders have taken actions in response to other security incidents in airport public areas, TSA has not fully developed a plan for future engagement with stakeholders to update security best practices and ensure they are current, relevant, and reflective of any new transportation security advancements or new and emerging threats. According to the October 2019 updated report, TSA intends to engage with stakeholders on a periodic basis to affirm partnerships. However, TSA has not yet clearly defined roles and responsibilities for stakeholders or how frequently to engage with them, such as on a quarterly, semi- annual, or annual basis. The TSA Modernization Act requires TSA to periodically share best practices for protecting transportation public areas. Additionally, both the 2017 Public Area Framework and updated report from the working group emphasize the importance of continuing partnerships efforts and identifying solutions to improve public area security. For example, the working group’s updated report issued in October 2019, in accordance with the TSA Modernization Act, highlighted TSA’s role to build upon the work already accomplished in developing the Public Area Framework’s best practices and recommendations. Additionally, our prior work has identified leading practices that can help sustain collaboration, such as developing a plan identifying roles and responsibilities for parties included in the collaborative effort. Further, standards for project management call for developing a plan with specific actions and time frames. TSA officials stated that they expect to better determine future plans for stakeholder engagement sometime after TSA issues its mandated report on the public area security working group to Congress in March 2020. However, TSA officials told us they currently have no specific plans outlined regarding the process or frequency with which they will engage stakeholders in the future on public area security best practices. By developing a plan that outlines the roles and responsibilities of the working group members, the mechanisms through which the working group will collaborate, and the frequency of when the working group will meet, TSA would be better positioned to ensure the best practices cited by aviation and surface transportation stakeholders remain relevant and emerging threats are proactively identified. Aviation Stakeholders, Including Airport Operators, Have Taken Actions to Enhance Airport Public Area Security Aviation stakeholders—consisting of airport operators, law enforcement officials, airline representatives, among others—have taken a series of actions in response to security incidents that followed the 2013 LAX shooting, consistent with the best practices outlined in TSA’s Public Area Framework. On the basis of our observations and interviews at six airports, we found that aviation stakeholders have taken actions consistent with the best practices identified in the 2017 Public Area Framework—including those related to attack prevention and information sharing—and engaged with industry association representatives to better understand key efforts involved in securing airport public areas. Collectively, these efforts represent a series of actions taken by stakeholders in response to the 2013 LAX shooting, the 2017 FLL active shooter incident, or a combination of TSA requirements to enhance their security posture in securing airport public areas. Attack Prevention: Establish Airport Operations Center. One of the practices cited in the framework under preventing attacks in airport public areas is establishing an airport operations center, which calls for a unified command center to respond to airport security incidents. As cited in the Fort Lauderdale after action report, airport operators and law enforcement personnel experienced coordination challenges in responding to the active shooter incident because of inadequate communication capabilities, including interoperable communications and lack of a dedicated space to coordinate and deploy resources, among others things. Three of the airports we visited—Los Angeles, Atlanta, and Fort Lauderdale—had a dedicated airport operations center in place. During our site visit to Los Angeles, we toured the Airport Response Coordination Center which provides 24/7 response coordination capabilities between LAX airport operators and federal, state, and local law enforcement personnel (see fig. 6). LAX security officials told us that the coordination center provides real-time situational awareness of security-related incidents across the entire airport through monitoring closed-circuit television, as well as direct communications with federal and local law enforcement partners. Moreover, LAX security officials reported that the coordination center also houses the Incident Management Center which is activated as an emergency command center designed to integrate resources for all airport divisions and law enforcement agencies in response to a major security incident. Similarly, Atlanta and Fort Lauderdale had dedicated airport operations centers, including a comparable Incident Management Center, equipped with dedicated work stations, designated color-coded vests, secure video teleconference capabilities, and a mobile command center. Attack Prevention: Develop, Conduct, and Practice Exercises and Response Drills. The Public Area Framework also contained a recommendation that transportation stakeholders develop and conduct exercises and response drills to prepare for real-world incidents and identify potential obstacles to responding effectively. These collaborative engagements are intended to help develop strategies for incident management, such as resuming airport business operations—including evacuating civilians during a law enforcement response, securing and returning abandoned luggage, and rescreening passengers, among other tasks—and identify areas requiring additional coordination. For example, in August 2017, as a follow-up to the framework, the summit commissioned a new working group to specifically address incident response, recovery, and reconstitution. Specifically, the Intermodal Security Training and Exercise Program (I-STEP) developed and conducted a tabletop exercise focused on “Resumption of Trade” following an incident. The exercise was designed for aviation stakeholders—airport operators, law enforcement officials, and airline representatives, among others—to discuss, identify, and improve collective capabilities in responding to physical security incidents at airports and facilitating the orderly re-establishment of airport operations. The exercise assessed stakeholders’ ability to quickly and accurately 1) communicate critical information during and after a security incident in an airport public area, 2) evacuate passengers, employees, and vendors after a security incident, and 3) restore airport operations following a security incident. These training goals stemmed from the lessons learned from the 2017 FLL shooting as well as stakeholders’ discussions during the summits around developing best practices. According to airport operators at Ronald Reagan Washington National Airport (DCA), I-STEP was well received by airport security stakeholders because it was an event that incorporated several key stakeholders’ perspectives at one time and presented an opportunity for constructive viewpoints to be shared. As a result of the I-STEP training exercise, TSA issued an after action report identifying strengths and lessons learned in resuming airport operations, and highlighted areas for improvement including 1) better coordination to ensure all airport vendors and stakeholders receive standardized active shooter training and 2) consideration of the impacts and risks associated with plainclothes law enforcement and lawfully-armed individuals responding to an active shooter incident, among others. Airport stakeholders we met with at DCA also shared examples of locally sponsored training exercises. For example, airport officials stated that table top exercises—discussions amongst emergency response personnel regarding the various roles and responsibilities during an airport emergency response situation—are frequently held at DCA and most focus on the need for better communication. DCA officials added that quarterly training drills are hosted for nearby county law enforcement and fire department officials to better familiarize themselves with DCA airport operations, layout, and prestaging areas. Information Sharing: Enhance Situational Awareness. Airport operators we met with also shared their experiences with implementing best practices and recommendations cited in the Public Area Framework to enhance situational awareness and expand threat awareness education. For example, during our site visit to FLL, one senior airport security official shared examples of actions undertaken in response to the FLL after-action report to enhance workforce employee training and threat awareness education. This included the development of an active shooter training program required for all airport workers, such as airport concessionaires and rental car operators; and enhancing the airport’s credentialing program to better distinguish certain workers requiring access to the secure area, and validate that active shooter training has been completed. Similar to FLL, according to the Public Area Framework, Boston’s Logan International Airport and ATL have implemented vetting programs that include the issuance of identification cards for airport workers on the public side of airports. According to aviation stakeholders, issuing public side credentials allow the airport to have better awareness of who is working within their environment, thereby enhancing overall situational awareness within airport public areas, a practice recommended in the Public Area Framework. Airport Operators Deployed Enhanced Law Enforcement Patrols and Installed an Active Shooter Detection System, Among Other Efforts, to Enhance Airport Public Security Airports we met with have also taken actions that are generally consistent with its three main categories, including infrastructure and public protection. For example, in an effort to enhance the security of airport public areas, several airport operators and law enforcement officers we met told us that they regularly deployed enhanced law enforcement teams to patrol public spaces, including ticketing counters and baggage claim areas, among others. These specialized law enforcement teams— equipped with assault rifles, body armor, and canine teams—patrol airport public areas to provide a visible deterrent against criminal or terrorist activities and provide immediate law enforcement response capabilities. While these enhanced law enforcement teams were initially deployed in response to the LAX shooting, LAX security officials we met with stated that their continued presence in the public areas provides a strong deterrent. During a site visit to LAX, we observed two sets of tactical law enforcement teams patrol the Bradley International Terminal and American Airlines ticketing counter areas. One of the patrol teams included an explosives-detection canine and his handler (see fig. 7). These enhanced law enforcement teams also conduct training exercises to detect explosives that may be hidden throughout airport public areas, such as large atriums and baggage claim areas. These efforts are consistent with TSA airport security requirements and guidance provided in TSA’s Law Enforcement Reimbursement Program. For example, during the site visit to ATL, we observed Atlanta Police Department tactical law enforcement response teams patrol the large atrium meeting area—consisting of restaurants and shops—from an elevated position (see fig. 8). Similarly, during a site visit to FLL, we observed the Broward County Sherriff’s Office deploy an enhanced law enforcement team with an explosives-detection canine succeed in identifying hidden explosive materials inside a handbag during a training exercise in the baggage claim area, the exact location of the January 2017 active shooter attack (see fig. 9). In addition, Charleston International (CHS) airport deployed an active shooter detection system to enhance the security of airport public areas. The Shooter Detection System is a network of sensors placed throughout airport public areas that identify acoustic gunshot signatures and track the movements of a potential active shooter in real time through security camera footage (see fig. 10). According to senior CHS airport officials, the 2015 Emanuel African Methodist Episcopal Church shooting in Charleston that claimed the lives of nine area residents, significantly influenced the airport’s decision to search for active shooter technologies. Charleston County Aviation Authority and senior CHS airport officials reported that the detection system became operational in December 2018. Aviation industry stakeholders, such as those from Airports Council International-North America and American Association of Airport Executives, plan to further research technologies to enhance the security of airport public areas. While CHS is the first U.S. commercial airport to install an active shooter detection system in ticketing counter and baggage claim areas, aviation industry officials stated that several airports nationwide are considering installing similar systems. Conclusions Attacks in the public areas of both domestic and foreign airports— including Los Angeles, Fort Lauderdale, Brussels, and Istanbul—have prompted TSA and aviation security stakeholders’ efforts to enhance the security of airport public areas. In accordance with the October 2018 TSA Modernization Act, TSA established a public area security working group to build upon the best practices and recommendations previously cited by stakeholders in the 2017 Public Area Framework. The actions taken by TSA and aviation security stakeholders represent a collective effort to enhance the security of airport public areas. Similarly, airport security stakeholders we interviewed took actions consistent with the best practices identified in the 2017 Public Area Framework, such as establishing a unified airport operations center, deploying enhanced law enforcement teams, and using technologies to identify the whereabouts of an active shooter, among others. However, TSA has not fully developed a plan that outlines the roles and responsibilities of the working group members, collaboration mechanisms amongst the working group, and frequency in which the working group will meet. By developing such a plan, TSA would be better positioned to ensure that the working group is proactively meeting to identify and share emerging threats and best practices, instead of reconvening in the aftermath of another security incident involving an airport public area. Recommendation for Executive Action The Administrator of TSA should develop a plan outlining roles and responsibilities for members of the Public Area Security Working Group, the mechanisms for collaborating, and the frequency of the working group meetings. Agency Comments and Our Evaluation We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reproduced in appendix I. DHS concurred with our recommendation and described actions to address it, such as developing Public Area Security Working Group guidelines to include roles and responsibilities, mechanisms of collaboration, and frequency of working group meetings by June 30, 2020. These efforts, if fully implemented, should address the intent of the recommendation. DHS also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Acting Secretary of the Department of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or russellw@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II. Appendix I: Comments from the U.S. Department of Homeland Security Appendix II: GAO Contact and Staff Acknowledgments GAO Contact William Russell (202) 512-8777 or RussellW@gao.gov. Staff Acknowledgments In addition to the contact named above, Christopher Ferencik (Assistant Director), Katrina Taylor (Analyst-in-Charge), Pamela Davidson, Josh Diosomito, Eric Hauswirth, Thomas Lombardi, Herbert Tinsley, and Adam Vogt made significant contributions to this report.

Threats to public areas of airports have increased in recent years. TSA is responsible for civil aviation security, which includes ensuring the security and safety of aircraft and the traveling public. In November 2013, an armed individual entered the Los Angeles International Airport (LAX) and killed a Transportation Security Officer. Subsequent domestic and international attacks in airport public areas further emphasized the need to better secure these areas. In response, Congress has taken action—including passage of the 2015 Gerardo Hernandez Act and the 2018 TSA Modernization Act—to address incident planning and response at airports and the security of public areas of transportation facilities, including airports. GAO was asked to assess actions taken to secure the public areas of TSA- regulated airports. This report (1) describes actions TSA has taken in response to the LAX shooting and the Gerardo Hernandez Act, and (2) examines additional actions taken in response to subsequent security incidents and the TSA Modernization Act. GAO reviewed TSA reports issued after airport attacks; the Gerardo Hernandez Act and TSA Modernization Act; and other TSA documents related to securing public areas. GAO also conducted interviews with and obtained information from TSA and officials from a nongeneralizable sample of 6 TSA-regulated airports, selected based on factors such as size and location. The Transportation Security Administration (TSA) took several actions in response to the 2013 Los Angeles International Airport (LAX) shooting and the Gerardo Hernandez Airport Security Act of 2015. Specifically, TSA took several actions to better address airport security in public areas, including strengthening and mandating active shooter training drills and installing duress alarms at screening checkpoints, among other things. In response to the Act, TSA updated guidance for reporting suspicious behavior and revised directives identifying responsibilities for local law enforcement coverage of passenger screening checkpoints and nearby public areas, among other actions. In response to subsequent airport public area security incidents, such as those in Fort Lauderdale in 2017 and Brussels and Istanbul in 2016, TSA has taken additional actions. Specifically, TSA issued the Public Area Security National Framework in 2017, in coordination with various aviation security stakeholders. The framework categorized 11 best practices and non-binding recommendations for improving security of public areas, including sharing information and preventing attacks. Aviation security stakeholders have also implemented various actions consistent with these best practices, including establishing airport operations centers and deploying enhanced law enforcement teams to serve as a visible deterrent in airport public areas (see figure). In response to the TSA Modernization Act, TSA established a public area security working group in March 2019 to engage with stakeholders such as airport operators and industry associations and update and validate the best practices cited in the 2017 framework. This group met twice in 2019, but TSA has not outlined specific plans for engaging this group in the future. Developing a plan outlining the roles and responsibilities of the working group members, the mechanisms through which the working group will collaborate, and the frequency of when the working group will meet, would better position TSA to ensure the best practices cited by stakeholders remain relevant and emerging threats are proactively identified.

GAO_GAO-20-31

Background FFRDCs arose from partnerships between the federal government and academic researchers and scientists during World War II. Those partnerships were later restructured into federal research centers to retain scientists, and they became known as FFRDCs by the mid-1960s. Since that time, FFRDCs have continued to perform tasks including technical studies and analyses, research and development, and systems engineering on behalf of federal agencies, such as DOD. In sponsoring an FFRDC, agencies draw on academic and private sector resources that can contribute to an agency’s ability to accomplish tasks that are integral to the mission and operation of the sponsoring agency. FFRDCs may be operated, managed, and/or administered by a university or consortium of universities, other nonprofit organizations, or a private industry firm as an autonomous organization or as a separate unit of a parent organization. As of May 2019, federal agencies sponsored a total of 42 FFRDCs, 10 of which are sponsored by DOD. These 10 DOD-sponsored FFRDCs can be divided into three categories: S&A Centers: These centers deliver independent and objective analyses and advise in core areas important to their sponsors in support of policy development and decision-making, among other things. Research and Development Laboratories: These laboratories conduct research and development, focusing on the development and prototyping of new technologies and capabilities to meet DOD needs. For example, these laboratories engage in research programs that emphasize the evolution and demonstration of advanced concepts and technology, and transfer new technology to the private sector. Systems Engineering and Integration Centers: These centers meet long-term technical and engineering needs to ensure complex systems meet operational requirements. Among other things, Systems Engineering and Integration Centers assist with testing system performance, development and acquisition of system hardware and software, integration of new capabilities, and the continuous improvement of system operations and logistics. Table 1 lists the 10 DOD-sponsored FFRDCs. As shown in table 1, each of the 10 DOD-sponsored FFRDCs is managed by a specific military department or organization within DOD—referred to as the FFRDC primary sponsor. More broadly, the Office of the Under Secretary of Defense for Research and Engineering oversees and manages DOD’s FFRDC program. Sponsoring Agreements DOD’s relationships with FFRDCs are defined through sponsoring agreements between the primary sponsor (i.e., the DOD organization responsible for the overall use of the FFRDC) and the FFRDC parent organization. According to the FAR and DOD instruction, sponsoring agreements define the FFRDC’s purpose and mission and may not exceed 5 years in duration. DOD’s instruction also states that sponsoring agreements are to establish conditions under which DOD may award an FFRDC contract and describe the overarching requirements for operation of the FFRDC. For example, the DOD instruction states that sponsoring agreements are to describe constraints on the FFRDC parent organization that are necessary to preserve the integrity of the FFRDC, such as provisions to prevent the occurrence or appearance of organizational or personal conflicts of interest that may undermine the independence, objectivity, or credibility of the FFRDCs. The DOD instruction also states that sponsoring agreements will preclude FFRDCs from performing commercial work. In this regard, the FAR provides that sponsoring agreements are required to address whether or not the FFRDC may accept work from other entities and if so, the procedures to be followed and the limitations as to the work that can be accepted. Further, the DOD instruction and the FAR provide that sponsoring agreements will generally preclude FFRDCs from competing with any organization in response to a formal request for proposals other than the operation of the FFRDC. After the primary sponsor identifies the need for FFRDC work, and has defined FFRDC core competencies, roles, and responsibilities in the sponsoring agreement, the primary sponsor awards a noncompetitive contract to the FFRDC to support the sponsor’s research requirements, such as addressing national security issues and systems development. Comprehensive Reviews Prior to extending a contract or sponsoring agreement for an FFRDC, the FAR requires that the primary sponsor conduct a comprehensive review of the use and need for the FFRDC at least every 5 years. The FAR describes elements of what the comprehensive review should include, such as examination of the sponsor’s special technical needs and mission requirements performed by the FFRDC and assessment of the efficiency and effectiveness of the FFRDC in meeting the sponsor’s needs. The FAR further requires that the head of the sponsoring agency approve continuing or terminating sponsorship based on the results of the comprehensive review. Initiating Work at FFRDCs FFRDCs initiate work on specific projects at the request of “work sponsors,” or the entities that request the services of the FFRDC. Work sponsors can be the primary sponsor of the FFRDC or another entity. When initiating work at FFRDCs, the primary sponsor determines whether to approve research projects for the FFRDC before projects are placed on contract. Approval of research projects is based on the determination that work proposed is appropriate for the FFRDC and consistent with the FFRDC’s core competencies as documented in the sponsoring agreement. Additionally, the primary sponsor ensures FFRDC work efforts do not exceed available resources. Among other things, FFRDC work sponsors identify project requirements, propose an appropriate research design, confirm the work is appropriate and consistent with FFRDC core competencies, identify the source of project funding, and monitor the progress of the work to ensure FFRDC performance is satisfactory and meeting desired requirements. In some instances, S&A Centers serve only a specific military department or office, while in other cases an FFRDC may serve a range of DOD entities. For example, RAND Arroyo Center broadly supports the analytic requirements of the Army in order to provide timely advice to help senior Army leadership make informed policy choices. Accordingly, the RAND Arroyo Center sponsoring agreement with the Department of the Army provides that the scope of RAND Arroyo Center work is to support Army sponsors throughout the Army requiring comprehensive analytical support. In contrast, the Institute for Defense Analyses (IDA) and RAND National Defense Research Institute serve DOD more broadly on national security issues. For example, according to IDA’s sponsoring agreement with DOD’s Office of the Under Secretary of Defense for Acquisition and Sustainment, the primary mission of IDA is to assist the Office of the Secretary of Defense and other Defense organizations in addressing important national security issues, particularly those requiring scientific and technical expertise. Staff Years of Technical Effort DOD manages the overall level of FFRDC work using a metric known as staff years of technical effort (STE), which is roughly equal to the work of one employee working for 1 year. Congress typically sets an annual limitation on the STE that may be funded for DOD FFRDCs to support non-intelligence programs on behalf of the agency (hereafter, Defense STE). Between fiscal years 2013 to 2017, Congress established an annual ceiling of 5,750 Defense STE available to DOD, of which 1,125 could be allocated to S&A Centers. In fiscal year 2018, Congress raised the ceiling on Defense STE to 6,030; however, the limit on S&A Centers remained unchanged. In managing Defense STE, DOD: consolidates annual Defense STE requirements for each fiscal year based on projected primary sponsor requirements and submits STE requirements to Congress; establishes Defense STE allocations for each DOD-sponsored FFRDC and provides associated funding limitations to each primary sponsor; monitors Defense STE usage and associated obligations; and provides an annual report to Congress at the end of each fiscal year outlining the Defense STE funded and associated DOD funds obligated for each FFRDC. In addition to Defense STE, FFRDCs may support DOD intelligence activities under the Military Intelligence Program and the National Intelligence Program. Oversight for STE usage for these programs is provided by the Office of the Under Secretary of Defense for Intelligence and Office of the Director of National Intelligence, respectively. Military Intelligence Program and National Intelligence Program STE funding may not be used to support Defense STE requirements. In October 2008, we reported that Congress implemented the Defense STE ceiling during the 1990s in response to concerns that DOD was inefficiently using its FFRDCs. In addition, we found that STE ceilings aimed to ensure that FFRDC work was appropriate and that resources, which were limited, were being used on DOD’s highest priorities. In December 2018, we reported that officials in the Office of the Secretary of Defense’s Studies and FFRDC Management Office stated that the ceiling significantly constrains the use of DOD’s FFRDCs and that DOD customer demand for FFRDC services is significantly greater than the annual ceiling set by Congress. Further, officials indicated at that time that FFRDC-related work must be deferred to later years when the limits are reached, since there are no other legally compliant alternatives capable of fulfilling these requirements. We did not make any recommendations related to this issue. Reviewing FFRDC Performance Following the completion of FFRDC work, the primary sponsor, with assistance from the work sponsor, reviews FFRDC performance in written assessments via questionnaires. In addition, the primary sponsor assesses FFRDC performance annually, addressing the technical quality, responsiveness, value, and timeliness of the work performed. Some of the information from the annual reviews may be used in support of the comprehensive review, such as to demonstrate the efficiency and effectiveness of the FFRDC in meeting the primary sponsor’s needs. DOD Obligated about $3 Billion per Year to DOD-Sponsored FFRDCs from Fiscal Years 2013 through 2018 From fiscal years 2013 through 2018, total DOD obligations to the 10 DOD-sponsored FFRDCs generally increased annually from about $2.7 billion in fiscal year 2013 to approximately $3.2 billion in fiscal year 2018. Approximately 70 percent of total annual DOD obligations to DOD- sponsored FFRDCs between these fiscal years went to support non- intelligence programs and were comprised of DOD obligations associated with utilized Defense STE, or Defense STE obligations. Specifically, DOD Defense STE obligations ranged from about $1.9 billion in fiscal year 2013 to $2.2 billion in fiscal year 2018, with S&A Centers representing approximately 18 percent of these obligations. In addition to DOD Defense STE obligations, about 30 percent of total DOD obligations to DOD-sponsored FFRDCs between fiscal years 2013 through 2018 went towards other FFRDC-related activities and costs, such as intelligence program activities through the Military Intelligence Program and National Intelligence Program and capital equipment costs. Figure 1 shows DOD obligations by fiscal year to DOD-sponsored FFRDCs. For fiscal years 2013 to 2018, the FFRDCs we reviewed in-depth—DOD’s S&A Centers—collectively accounted for about 18 percent of DOD Defense STE obligations annually, whereas Research and Development Laboratory FFRDCs and Systems Engineering and Integration Centers accounted for 27 and 55 percent, respectively (see figure 2). DOD Defense STE obligations to S&A Centers rose from about $320 million in fiscal year 2013 to approximately $380 million in fiscal year 2018 totaling about $2.3 billion during this period. Within each S&A Center, obligations remained relatively constant over the 6 years, with obligations for some FFRDCs higher than obligations for others. For example, on average DOD obligated about $134 million annually to IDA between fiscal years 2013 through 2018, whereas DOD obligated approximately $39 million annually to RAND Arroyo Center during this timeframe. DOD Defense STE obligations to S&A Centers were almost entirely awarded to support research projects requested by DOD. In some cases, work was done in response to congressional direction. For example, RAND Project Air Force (PAF) initiated a fiscal year 2017 independent review and assessment of the Ready Aircrew Program to respond to requirements outlined in the National Defense Authorization Act of Fiscal Year 2017. Overall, according to information provided by DOD sponsors and FFRDC representatives, between fiscal years 2013 through 2017, S&A Centers began work on about 600 research projects annually on behalf of DOD, with about 93 percent of these projects initiated at the request of DOD. The dollar value of these S&A Center projects ranged from about $2,000 to $11 million between fiscal years 2013 through 2017. DOD Reported It Primarily Considered Strategic Relationships and FFRDC Core Competencies When Sponsoring S&A Centers and Initiating Projects Sponsoring agreements note and primary sponsors reported in comprehensive reviews that S&A Centers are utilized because of DOD’s strategic relationships with FFRDCs. As described in the FAR, FFRDCs meet special, long-term research or development needs of the sponsoring agencies. Sponsoring agreements with S&A Centers outline the importance of strategic relationships that have helped these FFRDCs to develop and maintain in-depth knowledge of their sponsors’ and users’ programs and operations. In our review of S&A Center sponsoring agreements and comprehensive reviews, we identified that strategic relationships between sponsors and S&A Centers are generally characterized by the stability of long-term capabilities in subject areas important to DOD, access to sensitive and proprietary data and information, and objectivity in the form of freedom from conflicts of interest. These documents also indicate that strategic relationships enable S&A Centers to maintain in-depth knowledge of work sponsor programs and operations. For example, in the 2015 sponsoring agreement between the Army and RAND Arroyo Center, the sponsoring agreement states that both the Army and RAND Arroyo Center share a strategic relationship, and that the RAND Arroyo Center is structured to maintain strong analytic expertise related to Army policy and operations. In addition, the sponsoring agreement outlines the importance of RAND Arroyo Center’s continuity of expertise to the Army, long-term research efforts, and high-quality staff. Office of the Under Secretary of Defense for Acquisition and Sustainment (OUSD(A&S)) officials told us that S&A Centers are oftentimes chosen to perform work for DOD due to unique long-term strategic relationships with sponsors for independent and knowledgeable expertise within core competencies to address sponsors’ specific analytic requirements. In some cases, these strategic relationships date back to World War II. Regarding these strategic relationships, OUSD(A&S) officials also told us the primary sponsor has a degree of control over an FFRDC’s business affairs that can limit the risks of organizational conflicts of interest at FFRDCs. DOD also cited strategic relationships between DOD and S&A Centers as a reason for using S&A Centers when initiating projects we reviewed. For example: Prior to initiating a 2016 assessment of the impact of long-term fiscal trends on Army capabilities, the Army determined RAND Arroyo Center was uniquely qualified to conduct the research because the project required knowledge of defense planning scenarios that would have given an industry contractor a competitive advantage, potentially leading to a conflict of interest. The Army also identified RAND Arroyo Center’s long-standing expertise on security cooperation when requesting a fiscal year 2013 study on assessing value in Army security cooperation as a reason RAND Arroyo Center was uniquely suited to complete the study. Navy primary sponsor officials identified the long-term relationship between CNA, the FFRDC, and the Navy, which has led to broad subject-matter expertise in naval matters, as a reason they used CNA for the fiscal year 2016 study on the assessment of the effects of possible policy changes to a career track program for military officers trained to work with other military services. CNA leadership chose two researchers to lead the effort, one of which had prior experience in this area. An OUSD(A&S) official cited RAND National Defense Research Institute’s (NDRI) longstanding portfolio on military workforce issues as a reason for using RAND NDRI for a fiscal year 2017 study on the military’s 40-year pay table. An official told us that RAND NDRI’s prior work in this area would allow for a quicker response and more in- depth analysis to respond to the work request. In addition to the strategic relationships, sponsoring agreements and comprehensive reviews cited FFRDC core competencies as key factors in establishing and continuing relationships with S&A Centers, which is consistent with provisions outlined in DOD Instruction 5000.77. The DOD instruction states that FFRDCs maintain long-term competencies and capabilities to meet DOD needs that cannot be met by government or other private sector resources as effectively, and these competencies derive from the sponsor’s analytical requirements. In general, core competencies include expertise in engineering, research and development, and analysis, and are further described in FFRDC sponsoring agreements and comprehensive reviews. For example: The Navy 2015 comprehensive review of CNA states that CNA satisfies the Navy’s need for highly specialized skills and competencies in Navy warfighting and warfighting support— particularly research staff from CNA’s studies and analyses division— to accomplish their operational missions. The 2019 sponsoring agreement between DOD’s OUSD(A&S) and IDA outlined the need for technical and analytical support, citing IDA’s four core competencies as the scope of work of the FFRDC: systems and capabilities evaluations, technology assessments, force and strategy assessments, and resource and support analyses. The Army 2010 and 2014 comprehensive reviews of RAND Arroyo Center stated that RAND Arroyo Center has currency in all requisite Army proficiencies, provides a multidisciplinary research process that integrates and applies competencies with an assurance of consistently high quality, and also has the ability to apply competencies with expedience when an Army request for analytic support requires a quick response. OUSD(A&S)’s sponsoring agreement with RAND NDRI defines RAND NDRI’s research capability and core competencies such as, but not limited to, global and national security, defense acquisition, intelligence, and system risk management as means to satisfy essential needs of the FFRDC’s work sponsors for policy research and analysis. Primary sponsor officials we spoke with also told us that FFRDC staff skills and knowledge related to FFRDC core competencies are important to DOD. For example: Navy officials said CNA is uniquely suited to perform work for the Navy due to CNA’s core competencies relating to maritime defense analysis and how those competencies align with Navy goals and requirements. Army officials told us that RAND Arroyo Center staff has extensive background knowledge and analytical skills relating to reserve affairs, manpower policy, and war game analysis, among other things, in providing work for the Army. Air Force officials told us that RAND PAF has robust knowledge of Air Force processes and maintains top staff and researchers in each core competency. OUSD(A&S) officials also told us that sponsors and FFRDCs have a relationship in which sponsors rely on FFRDCs for independent and knowledgeable expertise within their core competencies to address sponsors’ analytic requirements. As shown in figure 4, DOD’s S&A Center primary sponsors identified 3 to 15 core competencies in their sponsoring agreements with each S&A Center. DOD cited FFRDCs’ core competencies as factors that contributed to using S&A Centers when initiating projects we reviewed, as provided by DOD instruction. For example: When initiating a fiscal year 2016 CNA assessment on the effects of possible policy changes to a career track program for military officers who are trained to work with other military services, DOD’s Office of the Under Secretary of Defense for Personnel and Readiness cited CNA’s core competencies of analysis of maritime resources; maritime program planning; and maritime policies, strategies, and doctrines as justification for using CNA to perform the work, among other things. In initiating a fiscal year 2014 IDA analysis on satellite ground control, DOD’s Office of the Deputy Assistant Secretary of Defense for Space and Intelligence cited IDA’s core competencies related to technology, such as systems and capabilities evaluations, as justification for using IDA for the research. DOD Uses S&A Center Research in a Variety of Ways and Takes Some Steps to Assess the Value of Research and Centers DOD Uses S&A Center Research to Inform Decisions, Shape Guidance, and Identify Potential Efficiencies DOD reports that it uses studies and analyses to inform decision-making; shape guidance, policies, and training; and identify opportunities to save time and money. Inform decision-making. For example, a 2016 study conducted by the RAND Arroyo Center on linking Army cost and performance found that the Army needed an updated tool to inform more strategic allocation of its resources. Among other things, the study contributed to updated strategies to measure the Army’s performance regarding force structure and readiness as well as the cost implications for these activities. According to an Army official, the study contributed to the development of updated Army metrics for cost and other performance indicators. In another example, a 2013 research project conducted by RAND NDRI on effectiveness measures of a DOD program to reduce the threat from infectious diseases and biological weapons developed and recommended two sets of metrics to improve program evaluation efforts. According to OUSD(A&S) officials, DOD used the recommended metrics to develop program performance measures. Shape guidance, policies, and training. For example, a 2013 study conducted by RAND NDRI on the root causes related to DOD weapons programs cost overruns found, among other things, that DOD needed to re-examine its assumptions when estimating a program’s cost, schedule, and technical performance. OUSD(A&S) officials told us the study contributed to DOD’s decision to update its policy, processes, management practices, and training curriculum so as to improve estimates. In another example, a 2013 study conducted by RAND Arroyo Center on the value of security missions conducted by the Army’s geographically aligned forces found that the use of these forces improved the efficiency of security planning and preparation and recommended a range of process and planning improvements for the Army. According to an Army official, the Army used several of the recommendations to update guidance for preparation and planning for future missions involving regionally aligned forces. Identify opportunities to improve efficiency. For example, a 2013 study conducted by RAND Arroyo Center on marketing and resources needed for Army recruiting efforts identified strategies aimed at optimizing the Army’s annual spending, estimated at nearly $1 billion for recruiters, enlistment bonuses, and television advertising. An Army official said that the Army has used the recruiting tool developed by RAND Arroyo Center for this study to make decisions and the Army estimates the tool can reduce costs by potentially hundreds of millions of dollars annually. In another example, DOD reported in its 2015 comprehensive review of RAND PAF that a 2010 study conducted by RAND PAF on aircraft maintenance at centralized repair facilities found that these facilities should be consolidated. According to the Air Force primary sponsor, this study helped the Air Force make decisions that led to saving up to $300 million annually as well as saving time on aircraft inspections. DOD Has Taken Steps to Assess the Value of S&A Center Research and the Centers In terms of assessing the outcomes of research, we found that DOD primary sponsors took steps to assess the value of S&A Center research and the centers. The DOD instruction requires that primary sponsors assess the efficiency and effectiveness of the FFRDC in meeting DOD needs in comprehensive reviews, including a review and summary of FFRDC accomplishments and their effectiveness utilizing factors such as quality and timeliness of the work produced and value of projects assessed. Additionally, the DOD instruction provides that the factors of technical quality, responsiveness, value, and timeliness be addressed in annual performance reviews. DOD’s FFRDC Management Plan—which preceded the DOD instruction and was in effect until the DOD instruction became effective in January 2018—also required primary sponsors to annually assess the value of FFRDC performance, among other factors, and include summaries of these annual assessments in comprehensive reviews. Primary sponsors generally assess the value of S&A Center research through annual performance reviews (through performance evaluation questionnaires to solicit feedback from work sponsors) and comprehensive reviews. To monitor the execution of research projects, primary sponsors regularly solicit work sponsor input regarding S&A Centers’ performance, including the value, technical quality, responsiveness, and timeliness of the work performed. Time frames for soliciting this input vary by primary sponsor but most do this annually. These questionnaires include one or more sections for work sponsors to add comments about S&A Center work and allow work sponsors to rate S&A Center performance. Some of these questionnaires use a numerical scale. For example, the Air Force questionnaire sent to RAND PAF work sponsors asks respondents to rate project value using a scale from 1 through 10, with 1 indicating “very poor” and 10 “very good.” The OUSD(A&S) questionnaire sent to IDA work sponsors asks respondents to rate the value of IDA’s work and results using a scale from 1 through 5, where 1 symbolizes either “strongly agree” or “outstanding performance” and 5 symbolizes “strongly disagree” or “poor performance.” FFRDC primary sponsors conduct comprehensive reviews at least every 5 years to, among other things, identify the accomplishments made by each FFRDC. In August 2014, we reported that DOD officials described the comprehensive review process as an opportunity to take a broad assessment of the FFRDC and its key competencies beyond the annual assessments of FFRDCs. Included in these comprehensive reviews is a summary of FFRDC accomplishments and effectiveness in meeting work sponsors’ needs since the last comprehensive review. In our examination of the most recent comprehensive reviews for each of the five S&A Centers, we found that the comprehensive reviews summarize the results from the performance evaluation questionnaires and assessed the value of the research in varying ways. For example, the Army questionnaire to RAND Arroyo Center work sponsors assessed value in terms of whether a project was worth the investment monetarily. OUSD(A&S) questionnaires sent to work sponsors assessed the value of IDA work in relation to whether the results were useful, consistent with the level of effort, and if IDA brought competence, expertise, and helpful perspectives to the issues. The Army reported in the 2014 comprehensive review of RAND Arroyo Center that between fiscal years 2010 through 2013, work sponsors provided overwhelmingly positive results that RAND Arroyo Center performance was “worth the level of effort.” DOD’s Office of the Under Secretary of Defense for Acquisitions, Technology, and Logistics—RAND NDRI’s primary sponsor prior to the DOD reorganization in 2018—reported in the 2014 comprehensive review of RAND NDRI that in fiscal year 2013, work sponsors provided overwhelmingly positive results that RAND NDRI performance provided long-term value. We also found that comprehensive reviews included anecdotal examples of how DOD used S&A Center research. For example, the Army 2014 comprehensive review of RAND Arroyo Center highlighted 53 of 114 research projects completed between fiscal years 2010 through 2013 to demonstrate how RAND Arroyo Center work met Army research requirements. Likewise, the Air Force primary sponsor’s 2015 comprehensive review of RAND PAF highlighted 28 of 207 research projects completed between fiscal years 2010 and 2014 to demonstrate how the Air Force leveraged RAND PAF work to improve efficiency in the department. An Air Force official told us that RAND PAF, and not the Air Force, collected 28 project examples for the purposes of the comprehensive review. DOD Does Not Track Whether S&A Center Recommendations Have Been Implemented, but Recently Took Steps Intended to Improve Insights Another potential way to assess the outcomes of research is to track to what extent a research project’s recommendations were implemented, and how. Neither DOD nor primary sponsors currently track the implementation of S&A Center research project recommendations. While primary sponsors are not tracking recommendations, in 2015 one of the S&A Centers—RAND PAF—began tracking recommendations made to the Air Force. According to a RAND PAF representative, the tracking system captures the issue, approach, conclusions, opportunities, and outcomes for each completed project. A RAND PAF representative told us that tracking recommendations is useful for demonstrating the value that RAND PAF provides the Air Force. In April 2019, a Navy official told us that the Navy is working on a database to track CNA reports, including recommendations, report topic, work sponsor, and project funding, among other things, to prevent duplication of requests. The Navy official said this effort is expected to be completed in 2019. Both OUSD(A&S) and Army officials told us that while they do not currently track recommendations, they are considering doing so as part of their oversight efforts. Further, Army officials told us that it is important for the sponsor that implements the recommendations to track how and whether that information was used. While tracking recommendations is useful according to some primary sponsors, some DOD officials cautioned that tracking recommendations would not provide insights into the overall value across all S&A Center research. DOD officials told us that recommendations are only one potential outcome of S&A Center research and that the value of a study may not be specifically linked to a recommendation. For example, Navy officials said that CNA’s projects may present the Navy with options and associated courses of action rather than formal recommendations, and DOD officials also told us that S&A Center work can provide value to DOD that is not always represented by recommendations, such as presentations or research aimed at contributing to the understanding of a particular issue, but without specific recommendations. In February 2019, DOD’s Office of the Under Secretary of Defense for Personnel and Readiness issued a memorandum related to the oversight of the Personnel and Readiness Studies and Analysis program. The memorandum tasked the program director with developing a studies and analysis program framework that improves accountability for project results and the implementation of study recommendations. Personnel and Readiness also issued a template “action memo” providing for an executive summary of completed projects as well as implementation plans delineating recommendations made, implementation approach, and plan of action for each recommendation. According to a senior Personnel and Readiness official, work sponsors with reports that were completed or published since September 2018 are subject to these actions. This official noted that the purpose is to increase accountability of the Personnel and Readiness staff regarding the use of FFRDCs and to develop an overall picture of the value proposition of FFRDC research. It is too soon to tell to what extent these memorandums will affect DOD’s insights on its implementation of S&A Center recommendations. DOD and the S&A Centers We Reviewed Have Conflict of Interest Policies and Practices Regulation Requires FFRDCs to Operate Free from Conflicts of Interest What are Conflicts of Interest? A Personal Conflict of Interest exists when an individual employed by an organization is in a position that could materially influence research findings or recommendations and may lack objectivity due to their financial interests, personal activity, or relationships. An Organizational Conflict of Interest exists when, because of other interests or relationships, an entity is unable or potentially unable to render impartial assistance or advice to the government or the entity might have an unfair competitive advantage. The Federal Acquisition Regulation (FAR) requires an FFRDC to conduct its business in a manner befitting its special relationship with the government and to be free from conflicts of interest. To perform its responsibilities to the sponsoring agency, an FFRDC and its employees have access beyond that which is common in a normal contractual relationship, including access to sensitive and proprietary data and information, equipment, and property. To accomplish this, the FAR and DOD instruction state that an FFRDC must be free from conflicts of interest and fully disclose financial and outside interests to the sponsoring agency. Conflicts of interest can be personal or organizational. Personal conflicts of interest can be, but are not limited to, financial interests of the employee or close family members, other employment, gifts, consulting relationships, other forms of research funding or support, investment in the form of stock or bonds ownership, real estate, or business ownership. Additionally, the DOD instruction outlines steps FFRDC parent organizations should take to prevent and mitigate conflicts of interest. These steps include, but are not limited to, having procedures in place to screen employees for potential conflicts of interest; requiring disclosure of financial and other interests that might affect the employee’s objectivity; establishing policies and procedures to protect proprietary, privileged, and sensitive information from disclosure; and reporting any conflicts of interest to the applicable contracting officer or contracting officer’s representative and the primary sponsor as soon as it is identified. See figure 5 for DOD’s conflict of interest elements outlined in the DOD instruction that primary sponsors are to require from FFRDC parent organizations. All Five S&A Centers Have Conflict of Interest Policies and Practices Each of the five S&A Centers we reviewed has corporate-wide conflict of interest policies and practices which incorporate various key elements of the DOD instruction. For example, all S&A Center policies we reviewed have measures that require personnel to protect proprietary, privileged, and sensitive information. S&A Center representatives told us they undertake various approaches in practice that meet key elements in the DOD instruction in order to ensure they operate in the public interest with objectivity and independence. For example: Reviewing all personnel annually or on a task-by-task basis for conflicts of interest. Generally, representatives we spoke with from the five S&A Centers address conflicts of interest annually or task-by- task, which is an option outlined in the DOD instruction. For instance, RAND representatives said they perform task-by-task, instead of annual, conflict of interest reviews because staff do not know which projects they will be working on during the year. In addition, IDA and RAND representatives told us they screen employees upon hire as well as when an employee initiates a new project, and both IDA and RAND have automated their screening processes. IDA representatives explained that their automated tool screens personnel at the initiation of each project, by including, for example, a process to determine if staff assigned to a project have any affiliations with industry or companies and competitors in the particular field of study. If staff or members of their households do have affiliations, IDA may issue a waiver if the financial interest (such as but not limited to stocks, stock options, and bonds) in a single company is below $15,000, the threshold for disclosure outlined in the DOD instruction. IDA representatives also told us that IDA staff are required to self- report any changes to previous financial interest disclosures during the year. In another example, RAND representatives said their automated conflict of interest tool screens for conflicts of interest by comparing areas of work RAND performs to similar areas in the private sector. Additionally, the system will identify any staff that have not submitted a conflict of interest statement within a year. Providing initial and annual conflict of interest training for all personnel. S&A Center representatives told us that they perform training related to or specifically covering conflicts of interest in varying ways. IDA’s corporate-wide conflict of interest policy includes initial and annual conflict of interest training elements, as outlined in the DOD instruction. For example, IDA’s policy states that all employees are to participate in conflict of interest training upon initial hire, and in annual refresher training thereafter. The other four S&A Centers did not explicitly include annual conflict of interest training in corporate-wide policies, but representatives told us they provide annual ethics training, which includes training on conflicts of interest, to their employees. For example, CNA representatives told us they provide ethics and conflicts of interest training to staff, which is required by their contract with the Navy. CNA representatives told us that if CNA staff do not complete the required training, the staff will be blocked from accessing CNA’s time card system and will not receive pay until the training is complete. In another example, RAND representatives told us they have annual training that covers ethics, conflicts of interest, and culture and discrimination issues for newly hired staff. Representatives from each of the S&A Centers told us they attempt to mitigate potential conflicts of interest as soon as the potential conflicts become known and before they become a reportable conflict. For example, CNA representatives told us that in one instance, a CNA employee’s spouse worked for the Navy and CNA mitigated this potential conflict by transferring the employee to another project where the relationship did not pose a potential conflict. In another example, when a RAND employee inherited stock in the middle of a project, a potential conflict of interest was mitigated by the employee selling the inherited stock. In another instance, a RAND employee was initially staffed to a project related to an area of work a spouse worked on commercially, and RAND mitigated the potential conflict by recusing the employee from the project. Agency Comments We provided a draft of this report to DOD for review and comment. In its comments, DOD concurred with our findings. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Defense. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or LudwigsonJ@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Appendix I: Selected Study and Analysis Center Research Projects Table 2 provides detailed information on the 22 projects we selected for review. Appendix II: GAO Contact and Staff Acknowledgments GAO Contact: Staff Acknowledgments In addition to the contact named above, Janet McKelvey (Assistant Director), Andrew Burton (Analyst-in-Charge), Mallory Bryan, Lisa Fisher, and Jordan Kudrna made key contributions to this report. Additional assistance was provided by Marie Ahearn, Pete Anderson, Jenny Chanley, Joseph Cook, Julia Kennon, Tind Shepper Ryen, and Roxanna Sun.

For decades, the government has contracted and entered into agreements to sponsor academic, nonprofit, or private organizations to operate FFRDCs. DOD military departments and other DOD components sponsor 10 FFRDCs to help develop innovative solutions to diverse national security threats. Five FFRDCs—referred to as S&A Centers—aim to provide independent analyses to support DOD policy development. Federal regulation and DOD guidance specify sponsors' oversight activities, including the establishment, use, and review of FFRDCs. A Senate Armed Services Committee report included a provision that GAO review DOD's use of FFRDCs. This report describes, among other objectives: (1) DOD obligations (in dollars) to DOD's FFRDCs from fiscal years 2013 through 2018; (2) factors that led DOD to use S&A Centers for research; and (3) how DOD used this research. GAO analyzed obligation data for DOD's 10 FFRDCs. GAO focused further review on DOD's five S&A Centers that primarily provide studies and analysis. GAO analyzed sponsoring agreements, comprehensive reviews, and 22 S&A Center research projects selected based on factors such as obtaining a mix of project costs, and interviewed DOD and FFRDC representatives. From fiscal years 2013 through 2018, the Department of Defense (DOD) obligated about $2 billion annually to 10 DOD-sponsored Federally Funded Research and Development Centers (FFRDC), excluding obligations related to two intelligence programs and capital equipment costs (such as antenna or radar systems). Of these obligations, roughly $400 million annually went to a subset of five FFRDCs called Study and Analysis (S&A) Centers. Note: Obligation amounts were not adjusted for inflation and totals may be affected by rounding. a Numbers in parentheses refer to the number of FFRDCs within each category. DOD primarily cited strategic relationships between the sponsor (the agency responsible for the overall use of the FFRDC) and the FFRDC and the core competencies of the FFRDC as factors when sponsoring S&A Centers and initiating projects. For example: Strategic relationships. The Army determined that an S&A Center was uniquely qualified to conduct a research project that required knowledge of defense planning scenarios, noting that awarding the project to an industry contractor would have given that contractor a competitive advantage. Core competencies. The Center for Naval Analyses has core competencies in Navy policy, strategy, and doctrine, among other things. S&A Centers perform hundreds of research projects annually on behalf of DOD, and DOD reported using them to inform decisions, shape guidance, and identify opportunities to improve efficiency. For example, one S&A Center's study on the causes of weapons system cost overruns found DOD needed to re-examine its assumptions when estimating program cost, schedule, and performance. DOD officials told us the study contributed to policy, process, and training updates.

GAO_GAO-19-605T

Background While the core mission of protecting federal facilities has remained constant as FPS has moved from one agency to another, its responsibilities have changed. In the 1970s, GSA created FPS as part of its Public Buildings Service (PBS). While in GSA’s PBS, FPS was responsible for protecting GSA’s held or leased facilities, providing both physical security and law enforcement services. To protect buildings, FPS officers developed physical security risk assessments, installed security equipment, and oversaw contract guard services. As a part of its law enforcement services, among other duties, FPS officers enforced laws and regulations aimed at protecting federal facilities and the persons in such facilities and conducted criminal investigations. Following the attacks on September 11, 2001, the Homeland Security Act of 2002 was enacted. It created DHS and moved FPS from GSA to the new department, effective in March 2003. Within DHS, FPS was placed in U. S. Immigration and Customs Enforcement (ICE), where its responsibilities grew beyond solely protecting GSA buildings to include homeland security activities such as implementing homeland security directives and providing law-enforcement, security, and emergency- response services during natural disasters and special events. In 2009, DHS proposed transferring FPS from ICE to NPPD. In explaining this transfer in DHS’s fiscal year 2010 budget justification to Congress, DHS stated that having FPS and NPPD’s Office of Infrastructure Protection in the same organization would further solidify NPPD as DHS’s lead for critical infrastructure protection. FPS was placed in NPPD and continued to lead physical security and law enforcement services at GSA- held or GSA-leased facilities and continued its efforts in homeland security activities. In November 2018, legislation was enacted that reorganized NPPD to an organization that had a greater statutory focus on managing cyber risks and authorized the Secretary of Homeland Security to determine the appropriate placement for FPS within DHS and begin transfer of FPS to that entity. Throughout FPS’s organizational placements in DHS, we have reported on persistent challenges it faced in meeting its mission to protect facilities. In 2011, we reported on FPS’s challenges in transferring mission support functions from ICE to NPPD. While FPS was in NPPD, we reported on FPS’s challenges related to managing and overseeing contract guards and collaborating with GSA and the United States Marshals Service (Marshals) on facility security. We made recommendations to help address these challenges and FPS has made progress on some of these recommendations. For example, in September 2018, FPS and GSA established a formal agreement on roles and responsibilities related to facility protection, as we recommended. However, in our January 2019 report, we identified challenges related to other aspects of overseeing contract guards and collaboration with other agencies on physical security that had persisted. As of June of 2019, FPS continues to work on establishing a contract guard-management system. However, FPS is unable to assess its guards’ capabilities across its portfolio because the system is not fully implemented nor does it interact with its training system. As of 2019, federal physical security continues to be part of our federal real-property management’s high-risk area. Key Criteria for Evaluating Placement Options In 2002, we reported on organizational and accountability criteria for establishing DHS. From this prior work, we identified key criteria that are relevant to assessing potential placement options for FPS, as shown in table 1. Considerations for FPS’s Placement in DHS’s Management Directorate For our January 2019 report, we applied these key criteria for evaluating organizational placement to eight agencies that could be potential placement options for FPS. We found that none of the selected agencies met all the organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade- offs. In instances where placing FPS within DHS met our criteria (that is, instances where DHS was similar to FPS), FPS could experience benefits. In those instances where the criteria were not met, we reported it would be incumbent upon any agency to consider and address any potential trade-offs in order to ensure the decision was successful. We reviewed FPS as a “standalone” entity reporting directly to the Deputy Secretary of DHS and found this placement option met several key criteria. Table 2 below summarizes our analysis. For the first four criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—we determined that DHS met the criteria if the agency or its subcomponents had any similarities to FPS. For the last criterion— mission support—we determined that DHS met the criterion if the agency or its subcomponents had similarities to FPS or could provide FPS needed mission support. Mission, Goals, and Objectives. In January 2019, we reported that FPS’s mission focused on the protection of federal facilities and the people working in and visiting those facilities. DHS was similar to FPS in that its mission statement and goals as stated in its strategic plan include an explicit focus on the protection of infrastructure or specific facilities. Our prior work found that placing an agency into an organization that has a similar mission might help ensure that the agency’s mission receives adequate funding, attention, visibility, and support. Our January 2019 work reported that one of DHS’s goals—as noted in its strategic plan covering fiscal years 2014 to 2018—was to reduce risk to the nation’s critical infrastructure. DHS and FPS share objectives that focus on mitigating risks and responding to incidents. Responsibilities. In January 2019, we reported that FPS has facility- protection and physical-security responsibilities and law-enforcement, and contract-guard oversight responsibilities. DHS was similar to FPS as it had responsibilities for physical security and performed law enforcement functions. As a part of its physical security activities, FPS conducted facility security assessments, identified countermeasures (e.g., equipment and contract guards) best suited to secure a facility, and oversaw contract guards. As a part of its law enforcement activities, FPS proactively patrolled facilities, responded to incidents, and conducted criminal investigations. FPS also provided additional operational law enforcement support, at the direction of the Secretary of Homeland Security, to address emerging threats and homeland security incidents. One of FPS’s most critical activities was overseeing about 13,500 contract guards who were posted at federal facilities and were responsible for controlling access to facilities, responding to emergency situations involving facility safety and security, and performing other duties. FPS was responsible for ensuring, among other things, that these guards are performing their assigned duties and have the necessary training and certifications. DHS, however, only used a limited number of contract guards and therefore had less responsibility. At the time of our review, DHS officials told us they procured about 130 guards. Organizational Culture. In January 2019, we reported that while there are many areas relevant to organizational culture, law enforcement was a key aspect of FPS’s organizational culture, according to officials we interviewed from an association of security companies and a former, high- ranking official in NPPD. DHS had a similar culture in that it was a law enforcement agency. Information Sharing and Coordination. In January 2019, we reported that Component Intelligence Programs (CIP) were organizations in DHS that collected, gathered, processed, analyzed, produced, or disseminated information related to national homeland security. In 2016, DHS designated a division within FPS as a CIP, a move that allowed FPS more access to information on threats other DHS agencies have identified and actions they plan to take. While DHS, like FPS, had access to and could share information related to national homeland security, DHS did not have joint responsibility for coordinating facility protection with FPS. Rather, FPS shared this responsibility with GSA, and these two agencies and Marshals had joint responsibility for protecting courthouses. FPS has faced challenges with coordinating with these agencies in the past. For example, in September 2011, we reported that FPS, Marshals, and other agencies involved in protecting courthouses (i.e., GSA and the Administrative Office of the U.S. Courts) faced challenges related to coordination, such as in the implementation of roles and responsibilities and the use or participation in existing collaboration mechanisms. Mission Support. In January 2019, we reported that mission support was comprised of financial management, human capital, information technology systems for financial management, and law enforcement training. FPS owned and used many of the key operational and business- related information technology (IT) systems and applications it needs to carry out its mission. However, FPS received some mission support services from other agencies in DHS, such as human capital and some aspects of information technology. We found that if FPS changed its organizational placement it would need mission support in these areas. For example, FPS did not have delegated examining authority to allow it to fill competitive civil service jobs and relied on NPPD to provide this service. DHS had the authority to fill competitive service jobs that could support FPS needs. Further, FPS used a financial management IT system owned by ICE. DHS could provide FPS access to financial management systems that can support FPS. Finally, FPS offered its own training courses and would still need access to DHS’s Federal Law Enforcement Training Centers. In our January 2019 report, we did not assess FPS as a placement within DHS’s Management Directorate. Further, we recommended DHS (1) identify the specific goals of a change in FPS’s placement—that is, what DHS expects to achieve by moving FPS to another agency, and (2) fully evaluate placement options for FPS based on what DHS expects to achieve by changing FPS’s placement, an assessment of FPS’s current placement, and other best practices such as an analysis of alternatives assessing the benefits and trade-offs. DHS agreed with our recommendations. In May 2019, FPS officials told us that the Acting Secretary’s decision to place FPS within the Management Directorate was based upon an assessment of placement options within DHS using criteria and analyzing the trade-offs. GAO has not yet received DHS’s assessment of placement options. We will assess the actions DHS has taken in response to our recommendations when we receive DHS’s assessment. Steps to Transition FPS Our prior work offers valuable insights for agencies to consider when evaluating or implementing a reorganization or transformation, and can provide insights for making any transition regarding FPS. These include considering (1) key questions for consolidations and (2) leading practices when implementing an organizational change. Two sets of considerations for organizational transformations provide insights for making any FPS organizational placement. First, in May 2012, we reported on key questions for agency officials to consider when evaluating and implementing an organizational change that involves consolidation. Table 3 provides a summary of these key questions. Answering these questions would help provide FPS with assurance that important aspects of effective organizational change are addressed. Second, we reported in July 2003 on key practices and implementation steps for mergers and organizational transformations. The practices we noted are intended to help agencies transform their cultures so that they can be more results oriented, customer focused, and collaborative in nature (see table 4). In summary, the questions and practices for organizational change that we previously identified could provide insights to DHS and FPS for any transition. . Madam Chairwoman Torres Small, Ranking Member Crenshaw, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contacts and Staff Acknowledgments If you or your staff has any questions concerning this testimony, please contact Lori Rectanus at 202-512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contacts named above: Amelia Bates Shachoy (Assistant Director); Roshni Davé; George Depaoli (Analyst-in-Charge); Geoffrey Hamilton; Kelly Rubin; Sarah Veale; and Amelia Michelle Weathers made key contributions to the testimony. Other staff who made contributions to the reports cited in the testimony are identified in the source products. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

FPS conducts physical security and law enforcement activities for about 9,000 federal facilities and the millions of employees or visitors who work in or visit these facilities. Legislation enacted in November 2018 required DHS to determine the appropriate placement for FPS. The legislation also gave the Secretary of DHS authority to move FPS within DHS. In May 2019, DHS announced its decision to place FPS within the DHS Management Directorate as a direct report to the Under Secretary for Management. GAO has reported that FPS faces persistent challenges in meeting its mission to protect facilities, and, as of 2019, physical security continues to be part of GAO's federal real property management high-risk area. For example, FPS has not yet fully implemented its guard management system. Thus, FPS is unable to obtain information to assess its guards' capability to address physical security risks across its portfolio. This statement describes considerations for FPS's placement in DHS's Management Directorate based upon five key organizational placement criteria GAO identified, as well as steps to transition FPS based upon GAO's prior work on organizational change. This testimony is based on reports GAO issued from 2002 through 2019, particularly, GAO's January 2019 report on FPS's organizational placement. Detailed information on the scope and methodology for this work can be found in these published products, cited throughout this testimony. In its January 2019 report, GAO identified five key criteria relevant for evaluating placement options for the Federal Protective Service (FPS) within the Department of Homeland Security's (DHS) or other federal agencies. (See table.) Placing FPS, in the DHS Management Directorate was not an option GAO assessed in its January 2019 report. However, GAO did assess the option of making FPS a “standalone” entity reporting directly to the Deputy Secretary of DHS. GAO found that this placement met the first criteria ( mission, goals, and objectives ) and the third criteria ( organizational culture ) but did not completely meet the other criteria. For example, FPS had joint responsibility for coordinating facility protection with other federal agencies. DHS did not have joint responsibility for coordinating facility protection with FPS. GAO recommended DHS fully evaluate placement options for FPS. DHS concurred, and officials stated they conducted an assessment. GAO has not yet received DHS's assessment of placement options. GAO's prior work on implementing an organizational change provides valuable insights for making any transition regarding FPS. These insights include key questions to consider such as: “What are the goals of the consolidation?” “How have stakeholders been involved in the decision-making?” In addition, GAO has identified key practices for organizational transformation, practices that include ensuring that top leadership drives the transformation and establishing a communication strategy to create shared expectations, among others. These questions and practices could provide insights to DHS and FPS as they implement FPS's new placement.

CRS_R45990

Introduction The Social Security program, or Old-Age, Survivors, and Disability Insurance (OASDI), pays monthly benefits to retired or disabled workers and their families and to the family members of deceased workers. The OASDI program's ability to meet scheduled benefit payments rests upon sufficient revenues from payroll taxes, taxation on Social Security benefits, and interest earned on trust funds assets. The year 2020 marks the first since 1982 in which the OASDI program's total cost is projected to be greater than its total income. Because of annual cash surpluses amassed in the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund in the period spanning 1983 through 2019, the OASDI program is able to meet its benefit obligations by drawing on these assets to supplement annual revenues. The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds estimates that drawing down the trust funds can augment OASDI program revenues and allow it to pay full benefits until 2035. Should the trust funds be depleted in 2035, as the trustees project, the OASDI program would have tax revenues sufficient to pay about 80% of scheduled benefits. The OASDI program, and its financing, are affected by economic, program-specific, and demographic factors. Economic factors include issues such as productivity, price inflation, unemployment, and gross domestic product; program-specific factors include issues such as covered and taxable earnings, revenues from taxation of benefits, and average benefits indexed to growth in average national wages. Demographic factors include fertility, mortality, and immigration. This report focuses on two demographic factors—specifically fertility and mortality—and how they interact to affect the program's ability to pay full scheduled benefits. The trustees' 2019 Annual Report states the following: Projected OASDI cost increases more rapidly than projected non-interest income through 2040 primarily because the retirement of the baby-boom generation will increase the number of beneficiaries much faster than the number of covered workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. From 2040 to 2051, the cost rate (the ratio of program cost to taxable payroll) generally declines because the aging baby-boom generation is gradually replaced at retirement ages by subsequent lower-birth-rate generations. Thereafter, increases in life expectancy cause OASDI cost to increase generally relative to non-interest income, but more slowly than between 2010 and 2040. A remaining demographic factor—immigration—is not examined in this report because the Board of Trustees analysis shows that combined changes in fertility and mortality are the leading causes of financial pressure on the OASDI program. The Social Security population, both covered workers paying into the system and those collecting benefits, is experiencing shifts in age distribution. Decreased fertility rates for generations after the baby boomers (those born between 1946 and 1964) are contributing to an overall older population. In addition, increases in average life expectancy are also contributing to the aging of the U.S. population. The combination of decreasing fertility and longer life expectancies results in higher costs, as presented in Figure 1 , which shows OASDI costs increasing as a percentage of taxable payroll. As costs remain above income, the trust funds' assets are used to fulfill scheduled monthly benefit payments. The Board of Trustees projects this process will continue into 2034, after which the trust funds' assets are exhausted and reserves no longer exist. The OASDI program can pay scheduled benefits while operating with a cash flow deficit (i.e., costs exceed revenues) during periods of positive trust funds balances because assets held in the trust funds can be redeemed to augment continuing income. However, this process cannot last indefinitely. As shown in Figure 1 , a cash flow deficit is projected to persist throughout the 75-year projection period (2019-2093). This report presents data showing that the projected deficits are the result of rising costs associated with demographic changes, outlines how these demographic changes will impact the OASDI program's ability to fulfill benefit payments, and discusses some options policymakers have to address the program's financial shortfall. The Social Security Population Is Growing Older Driven by reduced fertility rates and increasing longevity, the Social Security population is aging. In other words, the percentage of the Social Security population at the older end of the age distribution is increasing. This point is underscored by considering three broad age subgroups: (1) those aged 65 and older ; (2) those aged 20 through 64 ; and (3) those under age 20 . Analyzing the population using these broad age groups highlights the concentration of those likely to be retired or close to retirement (i.e., aged 65 and older), those in ages commonly seen as prime working years (i.e., aged 20 through 64), and those generally considered not yet in the paid workforce (i.e., under age 20). Table 1 shows population growth rates for the 70-year period from 1945 to 2015, the first and the most recent years, respectively, for which the trustees publish historical data. It also shows the trustees' projections for growth in the population, and its subgroups, for the ensuing 70-year period of 2015 through 2085. From 1945 through 2015, the Social Security population more than doubled. Table 1 shows that, although the population grew by 120% over this period, growth in major age groups varied. On a percentage-change basis, the largest growth was observed in the 65 and over age group. From 1945 through 2015, this age group grew by 338%, indicating that the number of people in the United States aged 65 and older more than tripled. This demographic trend underscores the degree to which the United States is growing older; in 1945, those 65 and older accounted for 7% of the total population, whereas in 2015, those 65 and older accounted for about 15% of the total population. This trend has implications for the Social Security program's ability to meet all of its projected scheduled benefits as the younger and slower-growing age groups of working age (i.e., those aged 20 to 64) are paying into the system while the older and faster-growing age groups (i.e., those aged 65 and older) are likely to be collecting benefits. The right-hand column in Table 1 shows that the trustees projected future years will continue to see growth in the 65 and older age group outpace that of the overall population. By 2085, the 65 and older age group is projected to make up about 22% of the total population. As this trend persists, which it is projected to do under the trustees' intermediate assumptions, it will cause OASDI program costs to rise more rapidly than revenues, thereby degrading the program's ability to pay full scheduled benefits. Table 1 also shows how the working-age population is projected to be a smaller percentage of the overall population. This is an essential consequence of an aging population. That is, as the percentage of those aged 65 and older is increasing, the percentages in the other age group (i.e., working ages between 20 and 64) are decreasing. This point is reinforced by examining dependency ratios. Dependency Ratios The changes in the Social Security population's composition can also be expressed as dependency ratios. Dependency ratios indicate a dependent population's burden on the working-age population. Table 1 shows that in 1945, about 59% of the total population was working age, between the ages of 20 and 64. The next-largest age group was the under 20 age group, which accounted for about 33% of the population. In 1945, the United States could be described as youth dependent because the working-age population was supporting the next-larger, under 20 population. The same could be said for the United States in 2015, when the 20 to 64 age group was about 59% of the total population and those in the under 20 age group accounted for 26% of the total population ( Table 1 ). That is, from 1945 to 2015, the United States became less youth dependent. Over this time period, the percentage of the total population aged 65 and older increased from 7% to 15%, indicating that the United States was becoming more aged dependent . The United States is projected to age from a youth-dependent population to an aged-dependent population, where the working-age population will be supporting the next-larger, 65 and older population. The transition to a more aged-dependent population is important for Social Security purposes because the program's ability to continue to pay beneficiaries relies on taxes paid by current workers. As discussed, the dependency ratios have changed over time and are projected to continue to change. Figure 2 presents a more detailed look at the dependency ratios and shows how they have changed in a historical context and how they are projected to change throughout the trustees' 75-year projection period. Youth Dependency Figure 2 shows the youth dependency ratio, which is the ratio of the population under 20 to the population aged 20-64. It is an approximate measure of how many young persons are supported by those in working ages. For instance, in 1945 the youth dependency ratio was 56%, suggesting that every 100 people in working ages were supporting 56 youths. From 1945 to 1965, the youth population increased relative to the working-age population, resulting in an increasing youth dependency ratio. As the baby boom generation attained working ages (the oldest of the baby boom generation turned 20 in 1966), the working-age population increased relative to the youth population and this ratio began to decrease. By 1985, when all of the baby boom generation had reached working age (the youngest of the baby boom generation turned 20 in 1984), this ratio had decreased to 51%, a level comparable to that observed prior to the baby boomers (i.e., in 1945 the youth dependency ratio was 56%). Aged Dependency Figure 2 also shows the aged dependency ratio. The aged dependency ratio is the ratio of the population aged 65 and older to the population aged 20-64. Although the age at which a beneficiary can collect Social Security benefits varies by birth year, this ratio is an approximate indicator of the number of people likely to be collecting benefits relative to those still working. For instance, in 1945 the aged dependency ratio was 12%, suggesting that for every 100 working-age people there were 12 people collecting benefits. The increase in this ratio highlights the aging of the population. As shown, this ratio increased from 12% in 1945 to 25% in 2015. That is, the number of people collecting benefits versus the number of people still working doubled over this period. Throughout the trustees' 75-year projection period, this ratio will continue to increase under the intermediate projections, due in large part to the baby boomers' continued retirement from the work force, relative to the numbers in the working-age population. The trustees project the aged dependency ratio to exceed 35% by 2025 and 40% by 2065. This projected tripling of the aged dependency ratio reflects the aged population's faster growth compared with that of the working-age population. Total Dependency The total dependency ratio is the ratio of those aged 65 and above and those aged under 20 to those aged 20-64. Thus, the ratio is an approximate measure of the number of people not of working age to the number of working-age people. The beginning of the baby boom generation is indicated by the rising total dependency ratio as shown in Figure 2 . The total dependency ratio remained relatively stable from the mid-1980s to the early 2010s as the baby boomers remained in working ages. The oldest baby boomers reached full retirement age in 2012, making it the first year that a baby boomer could retire with full benefits. Thus, as the baby boom generation began to exit the paid labor force in the 2010s, the ratio can be seen to rise slightly. The ratio is projected to increase as more of that generation enters retirement age. Owing to the sustained decrease in total fertility rates since the 1970s, the aged dependency and total dependency ratios are projected to increase even after the last baby boomers have reached full retirement age in 2031. The demographic trends that created the baby boomers led to an imbalance between the number of people who have or will retire (i.e., present and potential beneficiaries) and the number of people in working ages (i.e., present and potential covered workers). Specifically, as the baby boom generation ages, those aged 65 and older will make up a larger portion of the total population. The transition from a youth-dependent population to an aged-dependent population means the number of beneficiaries will increase faster than the number of covered workers. As a result, the trustees project that OASDI costs will rise relative to revenues. Decreasing Fertility Rates The aging of the Social Security population is partially driven by a decline in the total fertility rate after 1965. The total fertility rate (TFR) is the average number of children that would be born to a woman throughout her lifetime if she were to experience, at each age of her life, the birth rate observed in that year. In 1920, the TFR was 3.26 children per woman. By 1940, the TFR was comparatively lower, at a rate of 2.23 children per woman; this was the lowest TFR that had been observed to date. This decrease was reversed within the decade when a period of high fertility created the baby boom generation, those born between 1946 and 1964 ( Appendix A ). This period of high fertility is shown in Figure 3 and is marked on either side by periods of low fertility. In fact, fertility rates after 1964 (i.e., immediately following the baby boomers) decreased to the lowest levels recorded in the United States. Much of what makes the baby boom generation so impactful is that the cohort was both preceded and followed by low fertility rates. Figure 3 shows the historical fertility rates as measured by the National Center for Health Statistics (Centers for Disease Control and Prevention) and the trustees, as well as the trustees' projected fertility rates under their intermediate assumptions. The U.S. TFR reached a minimum of 1.77 children per woman in 1975. The TFR has remained at relatively low levels in the years that followed, a trend that is projected to continue. The Board of Trustees projects that the TFR will remain close to 2.0 children per woman throughout the 75-year projection period. Causes for the Decrease in Fertility Rates Research suggests that there are many contributing factors for the decline in fertility rates. For instance, changes in fertility rates have been closely linked to changes in personal income and changes in the employment rate. This perhaps explains why a decrease in fertility coincided with the 2008-2009 financial crisis, before which the fertility rate was increasing. Additional research reinforces economic and financial uncertainty's effect on fertility and birth rates. Studies have shown that those who worried more frequently about future job prospects were more likely to have doubts about having children and expected to have them later in life. Research has also suggested that a mother's postponement of childbearing increases her children's socioeconomic opportunities. Costs associated with raising children may have effects as well. From 1960 to 2015, the average cost of raising a single child from birth to age 17 for a middle-income, married couple increased 16% in real terms. Over this period, the portions of costs attributable to housing, food, transportation, and clothing have decreased. However, costs associated with healthcare doubled as a percentage of total cost and costs associated with child care and education increased from 2% of total costs to 16%. To the degree parents contribute to the costs of higher education, the increasing trend in child care costs may be understated. The decision to have children later in life is reflected in historical data. Specifically, the decline in fertility among women has not been shared uniformly across age groups. In fact, since the mid-1970s fertility among women aged 30-34 and 34-39 has been increasing ( Figure B-1 ). These data suggest that although the desire to have children remains, the age at which it is done has increased. This postponement of childbearing results in a lower overall fertility rate. Decreasing Mortality and Longer Life Expectancy On average, the Social Security population is living longer. This demographic trend is observed in two complementary measures: a decreasing mortality rate and increasing life expectancy. More individuals within the Social Security population are surviving to retirement age, and once in retirement they are collecting benefits for a greater number of years than previous generations of beneficiaries. For instance, in 1945, one year before the baby boom began, a male at birth could expect to live on average for 62.9 years. In 1965, one year after the baby boom ended, a male at birth could expect to live 66.8 years on average, an increase of almost 4 years. During that same period, the average life expectancy for a female at birth increased by 5.4 years. Causes of Death The trustees cite several developments over the past century that contributed to the lower mortality rates, including access to primary medical care for the general population, discovery and general availability of antibiotics and immunizations, clean water supply and waste removal, and the rapid rate of growth in the general standard of living. Changes in the leading causes of death support the effectiveness of the developments cited by the trustees. In 1900, the leading cause of death in the United States was infectious diseases, such as influenza or tuberculosis (see Appendix C ). From 1900 to 1940, the decline in infectious disease as a major cause of death was largely attributed to nutritional improvements and public health measures; the subsequent development of medical treatments further reduced infectious disease as a leading cause of death. As deaths due to infectious diseases declined, deaths due to diseases of old age increased. From 1900 to 1940, diseases associated with old age—cardiovascular disease and cancer—became the two leading causes of death. By 1950, cardiovascular disease alone led to more deaths than the next four leading causes. However, owing to improvements in medical treatments and access to those treatments, the age-adjusted death rate for cardiovascular disease decreased by more than 70% by 2015. In addition, this time period overlaps with the 1965 creation of Medicare, which has provided older Americans with better access to health care. Decreasing Mortality Figure 4 shows how the developments cited by the trustees combined to decrease mortality rates in the Social Security population. From 1945 to 2015, the death rate declined from 1,716.6 persons per 100,000 to 815.8 persons per 100,000, an approximate decline of 52%. This trend underscores the aging of the Social Security population, that is, more and more people covered by Social Security are surviving to retirement age. The trustees project this trend of decreasing mortality rates will continue throughout the projection period. Figure 4 shows historical death rates as measured by the National Center for Health Statistics (Centers for Disease Control and Prevention) and the trustees, and the trustees' projected death rates under their intermediate assumptions. Longer Life Expectancy at Retirement The decrease in mortality rates from 1945 to 2015 translated into higher average life expectancies for Social Security-covered individuals, both those currently working and those collecting benefits. A main measure of life expectancy is period life expectancy: an individual's expected average remaining life at a selected age, assuming no future changes in death rates. In 1945, the period life expectancy at birth was 62.9 years for a male and 68.4 years for a female. This indicates that in 1945, shortly after Social Security began regular monthly payments, the average newborn male was not expected to reach full retirement age and the average female was not expected to live more than a few years beyond full retirement age (in 1945 the full retirement age was 65, see Table 2 ). In 2015, the period life expectancy at birth was 76.2 years for a male and 81.0 years for a female. Thus, males and females born in 2015 can expect at birth to live approximately 13 years longer than those born in 1945. Decreasing age-specific mortality rates at the older ages also translate into longer period life expectancy at age 65, an age commonly associated with retirement. In 1945, shortly after Social Security began regular monthly payments, a 65-year-old female could expect to live another 14.4 years on average and a 65-year-old male could expect to live another 12.6 years. In 2015, those life expectancies were 20.4 years and 17.8 years, respectively. In 2015, more of the population survived to the age at which they were eligible for Social Security benefits than in 1945. In addition, individuals reaching eligibility age in 2015 exhibited longer period life expectancies than in 1945. As shown in Figure 5 , the trustees project this trend to continue throughout the projection period, thereby contributing to the OASDI program's rising costs. Rising Costs and Program Financial Shortfalls Population aging has consequences for the Social Security system's financial sustainability. As a result of lower fertility rates and increased life expectancy, in 2035 the Social Security system is projected to experience aged dependency ratios ( Figure 2 ) not observed during the program's history. The aged dependency ratios are projected to trend higher as the baby boom generation retires. In 2018, approximately 10,200 baby boomers per day attained age 65; this figure is expected to reach 11,000 per day by 2029. This demographic trend suggests that the ratio of persons collecting benefits—or soon to be—to those paying into Social Security will increase. The more this ratio increases, the more strain is placed on the OASDI program's financial position. An Increasing Number of Beneficiaries per Covered Worker An alternative measure of OASDI program sustainability is the ratio of beneficiaries per 100 covered workers. For example, a ratio of 30 indicates that for every 30 beneficiaries (i.e., individuals collecting benefits) there are 100 workers in covered employment (i.e., individuals subject to the payroll tax). Increases in this ratio suggest that those in covered employment are supporting an increasing number of people collecting benefits. Figure 6 displays ratios of historical and projected beneficiaries per 100 covered workers. The ratio of beneficiaries per 100 covered workers through year 2031 will be largely influenced by the baby boom generation. The oldest of the baby boomers turned 20 in 1966 and started to enter the paid labor force, becoming covered employees. From 1970 to 2008, a period in which most baby boomers were working age, the ratio of beneficiaries per 100 covered workers remained around 30. In this period, the ratio never fell below 27 or rose above 31. From 2009 to 2017, the period in which the oldest of the baby boomers reached full retirement age, the number of beneficiaries per 100 covered workers increased from 31 to 35. The trustees project this ratio to rise steadily, reaching 44 in 2031, the year in which the youngest baby boomers will reach full retirement age. When the youngest baby boomers, those born in 1964, reach 70 years of age in 2035, the ratio of beneficiaries per 100 covered workers is projected to be 46. Previous research suggested that under the current tax rates and benefit schedule, the OASDI program requires a ratio of 35 beneficiaries to 100 covered workers to maintain itself as a pay-as-you-go program. Rising Costs and the Program's Funding Challenge The line representing the ratio of beneficiaries per 100 covered workers in Figure 6 corresponds to the OASDI cost as a percentage of taxable payroll line shown in Figure 1 . The trustees state the following: This similarity emphasizes the extent to which the cost rate [annual cost as a percentage of taxable payroll] is determined by the age distribution of the population. The cost rate is essentially the product of the number of beneficiaries and their average benefit, divided by the product of the number of covered workers and their average taxable earnings. When these lines are graphed together, this relationship becomes more evident. Figure 7 highlights how the rise in the number of beneficiaries per 100 covered workers closely mirrors that of OASDI annual costs. Both measures remained relatively stable from the 1970s through the 2000s, a period in which a majority of the baby boomers were considered to be of prime working ages. Both measures have increased in the 2010s, and they are projected to continue to do so as the baby boomers transition from prime working ages into retirement. The effects of aging on the Social Security program are already evident when considering only the Disability Insurance (DI) program. In a 2014 testimony before Congress, the Chief Actuary stated that the effects of aging had already contributed to rising costs in the DI program. As they entered young adulthood, more baby boomers entered the workforce than received disability benefits. This trend reversed as the baby boomers entered the disability-prone ages of 45 to 64. The trend is projected to continue as baby boomers approach retirement. As explained by the Board of Trustees, From 2019 to 2038, the OASI cost rate [annual cost as a percentage of taxable payroll] rises rapidly because the retirement of the baby-boom generation will continue to increase the number of beneficiaries much faster than the number of workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. Figure 1 graphs OASDI annual costs along with annual income, expressed as a percentage of taxable payroll. Figure 1 shows that costs are rising while incomes are relatively stable and that costs are projected to exceed income for the duration of the projection period. The persistence of this imbalance will strain the OASDI program's long-range financial position. As a primarily pay-as-you-go program, the OASDI is self-financing. It is funded primarily through a payroll tax on covered earnings up to an annual limit and by federal income taxes paid by some beneficiaries on a portion of their OASDI benefits. In addition, from 1984 through 2009, annual income from tax revenues exceeded annual costs. This resulted in annual cash surpluses that were invested in federal government securities held in the OASDI Trust Funds, where they earned interest, thus providing the system a third income source. A program with contingency reserves may experience periods of cash deficits, in which annual costs are greater than annual income. With sufficient reserves, such a program need not operate as a strict pay-as-you-go program. However, a pay-as-you-go program cannot operate with indefinite annual cash deficits. As shown in Figure 1 , annual costs are projected to exceed annual income throughout the 75-year projection period. Although the OASDI program can draw upon assets in the trust funds to fulfill scheduled payments temporarily, the program cannot do so indefinitely. The trustees project there to be sufficient trust funds reserves to augment tax revenues and pay all scheduled benefits through 2034. The trustees estimate that trust funds reserves will be exhausted sometime in 2035. Once the trust funds are exhausted, the program must operate as a strict pay-as-you-go system, meaning it will only be able to pay out in benefits what it receives in revenues. At the point of OASDI Trust Funds depletion, program revenues will provide the OASDI program funding to pay only 80% of scheduled benefits. Demographically Driven Policy Options to Address the Financial Shortfall Policy measures seeking to improve trust funds solvency can generally be categorized as reducing benefits or increasing revenues. For illustrative purposes, the trustees estimate changes to the current payroll tax rates and benefit schedule that would maintain trust funds solvency throughout the 75-year projection period. To give a sense of the funding shortfall's magnitude, if measures to maintain trust funds solvency were enacted in 2019, they would require a permanent increase in the payroll tax from its current rate of 12.40% to 15.10%, or a reduction in scheduled benefits of 17% for all current and future beneficiaries, or a combination of both. The increasing costs associated with the OASDI program indicate that more substantial measures are necessary as time elapses. If similar policies were enacted in 2035, the projected year of trust funds depletion, the permanent payroll tax rate needed to restore solvency would increase to 16.05%. Similarly, the necessary permanent reduction of scheduled benefits would increase to 23%. Lawmakers have a wide range of policy options at their disposal to address the projected funding shortfall. This section highlights several policy options that address the funding shortfall's demographic drivers. Extend Social Security Benefits for Childcare As discussed, research suggests that economic and financial uncertainty may be a large driver behind many people's decision to postpone childbearing, thus reducing fertility. Social Security is designed as a social insurance program that protects workers and their families against a loss in earnings due to old age, disability, and death. Understanding the large financial burden that childbearing requires, some proposals argue for Social Security benefits to be extended to cover childcare in times of birth or adoption. While not specifically intended to increase fertility, these proposals recognize the hardships that accompany childbearing and aim to reduce financial pressures around that decision. By seeking to reduce one of the larger impediments to fertility—financial stress—such proposals could result in increased fertility. Incorporate Childcare in the Social Security Benefit Formula The Social Security benefit formula is used to compute a worker's Primary Insurance Amount (PIA), which is the worker's basic monthly benefit amount payable at the full retirement age. To compute the PIA, the formula first indexes a worker's lifetime covered earnings to reflect changes in national wage levels, as measured by the Social Security Administration's average wage index (AWI). The indexing process ensures a worker's or family member's benefit will reflect increases in average wage growth observed over the worker's earning history. After indexing, the highest 35 years of earnings are summed, and the total is divided by 420 (the number of months in 35 years) to determine a worker's average indexed monthly earnings (AIME). Brackets of a worker's AIME are replaced at different rates, the sum of which is the PIA. Exiting the paid workforce to have children can impact a worker's future Social Security benefit. For instance, if a worker has fewer than 35 years of covered earnings, years of zero earnings are entered in the calculation. That is, if a worker forgoes covered earnings to have children, the worker's earnings record will reflect no income for that time. Recognizing the benefit formula's adverse effect for years of no earnings due to childcare, some proposals would reduce the number of computation years used in the benefit formula. Such a proposal would allow one parent per household to claim dropout years for years in which that parent had no earnings and provided care for a child under 6 years of age. For example, the benefit formula for a parent with no earnings for two years due to childcare would use the highest 33 years of earnings in the calculation. Childcare credits are another option that would incorporate childcare into the Social Security benefit formula. Proponents of this method argue that childcare is essentially unpaid work and seek to ensure parents with young children are credited for their caregiving. Under such a proposal, wage credits would be set at one-half the average wage index for that year (e.g., one-half of the AWI for 2018 is $25,947). Parents earning less than the childcare credit level would have their earnings records increased to that level. Parents earning more than the childcare credit level would not receive any credit. The effects of policy changes that may result in increased fertility are uncertain. As shown in Figure 3 , the projected fertility rate is expected to be stable around 2 children per woman. Under current law and the trustees' intermediate assumptions, each increase of 0.1 in the fertility rate decreases the projected funding shortfall by about 7.6%. This suggests a 65% increase in childbearing (i.e., to approximately 3.3 children per woman) would be needed, absent other changes, to avoid trust fund depletion. Increase the Full Retirement Age Some policymakers have proposed increasing the eligibility ages to address changing demographics and their effects on the OASDI program's solvency. For instance, a policy measure that increases the full retirement age (FRA) would be categorized as a provision that reduces benefits, as beneficiaries would then collect benefits for a shorter duration of time or accept a higher actuarial reduction in their monthly benefits by claiming at the age they originally intended. Previous Congresses have addressed increasing the FRA. Facing a funding shortfall, Congress gradually raised the FRA, from age 65 to age 67, as part of the Social Security Amendments of 1983 ( P.L. 98-21 ). Increasing the earliest eligibility age (EEA), a benefit-reducing mechanism, was one of many measures included in this legislation that sought to address previous solvency issues. The Social Security Amendments of 1983 also enacted measures that increased revenues, including provisions that increased the payroll tax and made a portion of Social Security benefits themselves subject to taxation. Table 2 shows the gradual increase in the FRA depending on year of birth. The Social Security program is once again facing projected long-range funding shortfalls. Similar to 1983, a common proposal is to increase the EEA or to further increase the FRA. On one hand, some argue that the average increases in life expectancies indicate that people work until older ages, and thus collect benefits at an older age. On the other hand, those opposed to raising the FRA argue that increases in average life expectancies are not shared equally among covered workers. The SSA's Office of the Chief Actuary (OCACT) publishes estimates for policy provisions that affect claiming ages and are routinely included in legislative proposals. These policy options include provisions that would affect the FRA and provisions that would affect both the FRA and the EEA. Each provision's efficacy can be assessed by its effect on the projected solvency date and its reduction in the long-range actuarial balance , shown for each option in its respective table. For illustrative purposes, a provision that would gradually increase the full retirement age to 68 is estimated to improve the long-range actuarial balance by 16% (compared to current law) and extend solvency to 2035, one year later than under current law. OCACT projects none of the numerous policy provisions raising eligibility ages to result in trust funds solvency throughout the projection period or to completely eliminate the long-range funding shortfall. A 2015 CBO report found similar results in its analysis of four policy measures: (1) an increase in the FRA of one year; (2) an increase in the FRA of three years; (3) an increase in the FRA by one month per birth year; and (4) an increase in the FRA and EEA by one month per birth year. CBO's findings largely mirror OCACT's in showing that an increase in either one or both of the FRA and EEA reduces Social Security program costs. However, a policy measure adjusting only the age at which benefits could be claimed would not be sufficient to offset the funding shortfall. This outcome suggests that policy measures only addressing demographic changes via eligibility ages are limited in their ability to resolve the effects of rising OASDI program costs. Research suggests that raising the FRA or EEA would negatively affect certain segments of the population. Although average life expectancy in the United States is increasing, the increases are not equally shared among the population. For instance, women have a longer life expectancy than men and whites have a longer life expectancy than blacks. Life expectancy is also stratified by income level. Numerous studies show that life expectancy is positively related to income and that the gap itself—the difference in life expectancies between high earners and low earners—is also increasing. Social Security benefits are based on the overall population's average life expectancies, suggesting that groups with longer average life expectancies (e.g., higher-income individuals) will collect more lifetime benefits than groups with shorter average life expectancies (e.g., lower-income individuals). Any provision to increase claiming ages may very well exacerbate this difference in lifetime benefits. A method of increasing the FRA could be to index the FRA for changes in life expectancies. One possible approach would be to index the FRA to maintain a constant ratio of expected retirement years (i.e., life expectancy at FRA) to potential work years (i.e., FRA less 20 years). Another policy option would be to simply adjust the FRA so as to hold the number of expected retirement years constant based on projected life expectancies. As discussed above, life expectancies across different segments of the population can differ by factors such as gender, race, and income. In pursuing options involving indexing the FRA, policymakers would need to address differences in projected life expectancies. Policy options that would index the FRA can be categorized as cost-reduction measures, because they would decrease total benefits as a means to account for longer life expectancies. Although both options discussed above would reduce the projected funding shortfall, neither would eliminate it completely. Similar to options that may address fertility or a straightforward increase in the FRA, the projected effects of indexing the FRA for changes in life expectancies alone would not eliminate the projected funding shortfall. Encourage Delayed Claiming A range of policy options exists that would address the increases in longevity by encouraging delayed claiming. One such option would be to increase the number of years used in the benefit formula. For instance, under current law, the benefit formula uses a worker's highest 35 years of earnings to compute the primary insurance amount (PIA). Including more years of earnings in the benefit formula (e.g., 40 years) would likely include years of low earnings from the start of a worker's earning history or years of no earnings. Under such a policy, a worker could choose to work for more years (i.e., to replace years of low earnings with years of high earnings) or take advantage of delayed retirement credits to attain a PIA that would have been earned had the benefit formula not changed. That is, to maintain the benefit scheduled under current law a person would need to work longer, delay claiming, or a combination of both. Under current law, workers can receive their full PIA once they reach FRA. However, a worker can elect to delay payment of benefits and, in doing so, collect delayed retirement credits. For those born in 1960 and later, a credit is worth 8% of a worker's PIA for each year of delayed claiming. For instance, a worker born in 1960 who reaches FRA at 67 is entitled to 100% of his or her PIA. That same worker could collect 124% of his or her PIA if claiming is delayed three years (at age 70). Any reduction in the benefit formula that would result in a decrease of benefits would then require some use of delayed claiming so as to collect the same PIA as under current law. A provision that would incentivize workers to delay claiming, perhaps through an increase in the number of computation years, could have a negative earnings impact on some workers. For instance, such a provision would favor those earning at high levels later in their careers (so as to replace years of low earnings with years of higher earnings). In addition to possibly favoring higher earners, such a provision could adversely affect certain types of labor. That is, such a policy proposal would essentially favor those who could still work. Workers with careers in more arduous work who were unable to continue working beyond the current FRA would receive a lower PIA under such a proposal. Conclusion On average, increases in life expectancy have allowed current Social Security beneficiaries to collect benefits for a longer period of time. However, the increase in life expectancies, when paired with low fertility rates, will negatively impact the program's long-range financial position and weaken its ability to pay all scheduled benefits as projected under current law. These demographic trends—increasing life expectancy and decreasing fertility—have resulted in an aging Social Security population. As the baby boom generation retires, the ratio of beneficiaries relative to people in covered employment will grow. As this ratio rises, Social Security costs rise as well. The rising ratio of beneficiaries to covered workers can exist so long as trust funds assets remain to supplement the program's annual tax revenues. Rising costs are projected to deplete trust funds reserves in 2035. After such time, Social Security program revenues will no longer be sufficient to pay full benefits. Under current law, the Social Security program's sustainability, and its ability to pay full benefits, is largely a demographic issue. Policy measures aimed at addressing the changing demographics, specifically those increasing retirement ages to reflect increasing life expectancy, improve the program's solvency and long-range financial status. Such policy measures are estimated to reduce program costs. However, the reduction in benefits implied by such measures would not be evenly distributed across all segments of the population. In addition, increasing eligibility ages (i.e., reducing costs) alone is not projected to restore solvency throughout the projection period. Given the magnitude of the OASDI program's projected long-range funding shortfall, policy measures that include both a revenue-increasing and a benefit-reducing mechanism to restore solvency increase the likelihood that full benefits will be maintained. Appendix A. The Baby Boomers in the United States The first baby boomers were born in 1946; the last baby boomers were born in 1964. The period of 1946-1964 is marked on either side by low birth rates. As a result of the low fertility rates that followed the baby boomers, they are being replaced in the workforce by cohorts resulting from lower fertility rates. The baby boom's births spanned nearly two decades, denoted with I in Figure A-1 . The older baby boomers started to enter the workforce as the youngest were just being born (II in the figure below). Time period III denotes the stage at which all baby boomers are at least 20 years of age, an age commonly associated with working age. In period IV, baby boomers are attaining full retirement age and beginning to exit the workforce. In period V, all baby boomers are eligible for retirement with full benefits. In 1945, a year before the first baby boomer was born, 7.3% of the Social Security population was aged 65 or older. In 2035, after all baby boomers are eligible for Social Security, 20.5% of the population will be aged 65 or older. The demographic forces that created an aging population evolved over decades. This is important to policymakers because demographic trends in the Social Security population are contributing to rising costs. These demographic trends result in an imbalance between costs and revenues and are projected to continue beyond the baby-boom generation. This imbalance can also be thought of as a persistent imbalance between those in covered employment and those collecting benefits. Appendix B. Birth Rates, by Age Group Appendix C. Causes of Death

The Social Security program pays monthly benefits to retired or disabled workers and their families and to the family members of deceased workers. Social Security, or Old-Age, Survivors, and Disability Insurance (OAS DI), is intended to operate primarily as a pay-as-you-go system, where program revenues cover program costs. The OASDI program's revenues and costs are largely determined by economic and demographic factors. The Social Security program is experiencing rising costs and relatively stable income, a trend that is projected to continue for several decades. Although economic and program-specific factors affect the balance between program revenues and costs, research has shown demographic factors to be one of the leading contributors to the increasing imbalance between costs and revenues. The U.S. population has been experiencing a shift in age structure toward older ages and an increase in the median age, termed demographic aging . Two demographic effects have contributed to this aging over time: decreasing fertility and increasing longevity. While aging reflects a society's shared advances in medical, social, and economic matters, it strains the very social insurance systems that provide social support to the aging population. The post-World War II baby boom generation's effect on OASDI highlights this point. Baby boomers, the relatively large cohort resulting from higher fertility rates from 1946 through 1964, have started to exit the paid labor force and collect Social Security benefits. They are being replaced in the workforce by relatively smaller cohorts resulting from lower fertility rates in subsequent generations. Program costs are also rising as an increasing number of retirees collects benefits for longer time periods. According to the Board of Trustees of the OASDI Trust Funds, costs are expected to rise throughout the 75-year projection period, 2019-2093. The Social Security population's changing age distribution is creating a situation in which fewer workers in covered employment are supporting a growing number of people collecting benefits. This relationship is temporarily sustainable, as the OASDI program can draw upon the $2.89 trillion in asset reserves held in the trust funds to augment annual program revenues and fulfill all scheduled benefit payments. However, the OASDI program's ability to pay 100% of scheduled benefits becomes unsustainable when these asset reserves are depleted. The Board of Trustees, which oversees the OASDI Trust Funds, projects the funds' assets to be depleted in 2035 due in part to the cumulative strain placed upon the system by an older age distribution. After this, the OASDI program would operate as a strict pay-as-you-go system that can only pay out in benefits what it receives in revenue. Under current laws and projections, the trustees estimate sufficient revenues to be able to pay about 80% of scheduled benefits after asset reserves are depleted. The Social Security program's ability to cover 100% of scheduled benefits depends upon a combination of increased revenues and decreased benefits. One set of policy options to address the funding shortfall includes increasing the full retirement age (the age at which a beneficiary is entitled to full benefits) or the earliest eligibility age (the age at which a beneficiary is first entitled to benefits). This set of policy options uses a demographic solution for a largely demographic issue: the projected imbalance between program costs and income. Measures that include increasing the retirement ages are estimated to improve the program's long-range financial status but not to prevent trust funds depletion by themselves. Although these adjustments help to reduce rising costs, those costs would still be projected to exceed revenues. This suggests that efforts to avoid depleting the OASDI Trust Funds throughout the trustees' projection period would also be improved by including a revenue-increasing mechanism. In addition, increases in life expectancy are not shared equally within the population; disparities exist when life expectancies are analyzed by sex, race, and income levels. A policy measure that increases Social Security eligibility ages may disproportionally help some beneficiaries and disadvantage others.

CRS_R45747

Introduction Motor vehicle electrification has emerged in the past decade as a potentially viable alternative to internal combustion engines. Although only a small proportion of the current motor vehicle fleet is electrified, interest in passenger vehicle electrification has accelerated in several major industrial countries, including the United States, parts of Europe, and China. Despite advances in technology, electric vehicles (EVs) continue to be significantly more expensive than similarly sized vehicles with internal combustion engines. For this reason, governments in many countries have adopted policies to promote development and sales of electric vehicles. This report discusses federal and state government policies in the United States to support electrification of light vehicles and transit buses, as well as proposals to reduce or eliminate such support. Background on Motor Vehicle Electrification More than 92 million light vehicles—passenger cars, pickup trucks, and SUVs—were sold worldwide in 2018. The three largest markets were China (27 million vehicles sold), Europe (20 million), and the United States (17 million). Most of these vehicles are powered by internal combustion engines. The global market for electrified vehicles is small but growing: In 2018, more than 2 million plug-in hybrid and battery electric vehicles were sold worldwide, a 64% increase over 2017. These account for about 2% of all passenger vehicle sales, both worldwide and in the United States. Demand for electric vehicles is expected to continue to grow, as some countries have called for a complete shift away from sales of new fossil-fuel vehicles by 2030. The market for urban transit buses is smaller than the passenger car and SUV markets, but electric vehicles make up a larger part of its footprint. China leads in this category, with 106,000 electric buses put in service in 2017, bringing its total electric bus fleet to 384,000. It has been forecast to remain the largest electric bus market going forward. In the European Union (EU) and the United States, the pace of electrification is slower: More than 200 electric buses were sold in the EU in 2017, bringing the total in service to 1,700; in the United States, approximately 100 electric buses were sold, bringing the total to 300. Two basic types of electric vehicles are now in use: Hybrid electric vehicles (HEVs) have both internal combustion engines and electric motors that store energy in batteries. They do not plug into external sources of electricity, but use regenerative braking and the internal combustion engine to recharge. Plug-in electric vehicles, of which there are two types: plug-in hybrid electric vehicles (PHEVs) use an electric motor and an internal combustion engine for power, and they use electricity from an external source to recharge the batteries. Battery electric vehicles (BEVs) use only batteries to power the motor and use electricity from an external source for recharging. In this report, electric vehicles refer to these two types of plug-in vehicles, unless otherwise noted. Electrification of vehicles has been limited by three factors: (1) the high cost of producing the lithium ion batteries (currently the preferred battery chemistry) that propel them; (2) their limited range; and (3) vehicle charging time and location. Not all motorists have easy access to charging stations at home or at work, and it can take several hours to fully charge the battery that powers the vehicle, depending on the type of charger used. U.S. Trends In 2018, more than 361,000 plug-in electric passenger vehicles (including PHEVs and BEVs) were sold in the United States, as well as more than 341,000 hybrid electric vehicles. This was the first year in which total sales of plug-in vehicles exceeded sales of hybrids ( Figure 1 ). Nearly all automakers offer electric vehicles for sale: 42 different models were sold in 2018, with Tesla and Toyota recording the largest number of vehicle sales. Sales of plug-in hybrid and battery electric vehicles in 2018 rose by over 80% from the previous year, bringing the total sales of plug-in vehicles since 2010 to just over 1 million. The plug-in hybrid and battery electric share of the U.S. light vehicle market in 2018 was 2.1%. The price of new electric vehicles is one factor inhibiting faster adoption. For example, the Leaf, a battery electric vehicle produced by Nissan, has a manufacturer's suggested retail price (MSRP) of $29,990, whereas the Nissan Sentra, a conventional vehicle similar in size and specifications to the Leaf, has an MSRP of $17,990. A smaller, less powerful vehicle with an internal combustion engine, the Nissan Versa, has an MSRP of $12,360; no electric counterpart is available in this price range. Electric vehicles are generally more expensive because of the high cost of producing the lithium-ion batteries that power them. The federal government has supported vehicle electrification in several ways. There have been tax incentives for the purchase of vehicles as well as for construction of vehicle infrastructure, such as charging stations. Federal research and development investments have sought to reduce battery costs, increase vehicle range, and decrease charging times. The federal government has also made other investments to build out EV infrastructure. Federal Tax Incentives for Electrification Two types of tax incentives have been used to promote electric vehicles: consumer incentives for the purchase of plug-in electric vehicles and individual and business incentives to install electric-vehicle charging stations to expand the charging network. Tax Credits for Vehicle Purchases The credit for plug-in electric vehicles (Internal Revenue Code [IRC] §30D) is the primary federal tax incentive for electric vehicles. The credit ranges from $2,500 to $7,500 per vehicle, depending on the vehicle's battery capacity. The tax credit is not a function of the vehicle's price. Therefore, the subsidy amount is larger (as a percentage of a vehicle's price) for less-expensive vehicles. Generally, taxpayers claim tax credits for vehicle purchases. If the purchaser or lessee is a tax-exempt organization, the seller of the vehicle may be able to claim the credit. The plug-in electric vehicle credit begins phasing out after a vehicle manufacturer has sold 200,000 qualifying vehicles for use in the United States. General Motors (GM) and Tesla have reached the 200,000-vehicle limit, and tax credits for their vehicles have begun to phase down. Empirical studies have found that tax incentives lead to increased EV purchases. However, particularly for higher-income taxpayers, the tax credit may be claimed for purchases that would have occurred absent a federal tax incentive. Some studies have also found that incentives given closer to the point of sale, such as a rebate given at the time of purchase, are more effective in stimulating vehicle sales than tax credits. The Joint Committee on Taxation (JCT) projects that the plug-in electric vehicle credit will reduce federal tax revenues by $7.5 billion between FY2018 and FY2022. Any extensions to or expansions of the credit could increase this amount. About half of the forgone revenue is from credits claimed on corporate tax returns. Additionally, the tax credits tend to be claimed by higher-income taxpayers. For 2016, 78% of the claimants filed returns with adjusted gross income (AGI) of $100,000 or more, and such returns accounted for 83% of the amount claimed. (By comparison, of all returns filed, about 17% have AGI above $100,000.) Legislation has been introduced in the 116 th Congress that would modify the plug-in electric vehicle tax credit. Some bills propose expanding the credit. For example, the Driving America Forward Act ( S. 1094 / H.R. 2256 ) would increase the per-manufacturer cap to 600,000 vehicles and modify the credit during the phase-out period. The Electric Credit Access Ready at Sale (Electric CARS) Act of 2019 ( S. 993 / H.R. 2042 ) would extend the credit through December 31, 2029, and would also allow the credit to be transferred to the financing entity. Other proposals would eliminate the credit. The Fairness for Every Driver Act ( S. 343 / H.R. 1027 ) would eliminate the credit and impose federal highway user fees on alternative fuel vehicles. Tax Incentives for Infrastructure The primary federal tax incentive for EV infrastructure has been the tax credit for alternative fuel vehicle refueling property (IRC §30C), which expired in 2017. The credit was generally 30% of the cost of qualified property, with the credit limited to $30,000 for businesses at each separate location and $1,000 for property installed at a taxpayer's primary residence. For property sold to a tax-exempt entity, such as a school or a hospital, the seller of the property may have been able to claim the credit. Qualifying property included electric charging infrastructure as well as other forms of clean-fuel refueling property. The credit for alternative fuel vehicle refueling property has been a temporary tax credit since first enacted in 2005. The credit has been extended six times, often retroactively. The credit most recently expired at the end of 2017, but could be extended again. The uncertainty surrounding temporary tax incentives that are often retroactively reinstated diminishes their effectiveness as an investment incentive. The Electric CARS Act of 2019 ( S. 993 / H.R. 2042 ) would extend the credit through 2029. Data are not available on how much of the revenue loss associated with this provision is for EV infrastructure. The most recent one-year extension of this incentive, for all types of alternative fuel refueling property, was estimated to reduce federal tax revenues by $67 million over the 10-year budget window. Making the credit permanent for all types of qualifying property would reduce federal revenue by an estimated $332 million between FY2018 and FY2027. The tax credits for EV charging infrastructure that expired at the end of 2017, if extended, could support additional investment in Level 2 charging infrastructure. Expanded access to Level 2 charging at homes and workplaces could be a cost-effective solution to building out EV infrastructure in the near term. However, if electric vehicles are to be widely used for long-distance trips, a network of direct-current fast charger (DCFC) infrastructure (Level 3) is likely necessary. The tax credit is relatively small compared to the cost of a DCFC charging station. The high cost of this infrastructure, even if tax credits are extended, may continue to pose a barrier, especially if utilization rates are low. Given the differences in the costs and benefits associated with Level 2 and DCFC chargers, tax incentives could be provided that reflect some of these differences. There are few DCFC public chargers, yet having access to such infrastructure may have strong network benefits. Broadly, access to charging infrastructure has been shown in some studies to be a driver of demand for EVs. If Congress wanted to encourage greater EV use, tax credits could be designed to provide a larger incentive for investments in public DCFC infrastructure, relative to Level 2 charging stations. Storage incentives are another policy option that could support investment in EV infrastructure. On-site battery storage systems can be installed to allow solar power to be used for EVs. Tax incentives for batteries that facilitate EV use could encourage more of this activity. The Energy Storage Tax Incentive and Deployment Act of 2019 ( S. 1142 / H.R. 2096 ) would provide an investment credit for business or home use of energy storage. Tax-preferred bond financing options could also be used to support EV infrastructure investment. State and local financing for infrastructure solely or partially dedicated to EV charging projects may use tax-exempt bonds so long as the project is classified as serving a "public purpose" as defined in the federal code (IRC §141). A federal infrastructure bank or "green bank" might also be used to support EV infrastructure investment. One option to capitalize this type of bank would be to issue tax-favored bonds. EVs and Federal Highway Taxes Since 1956, federal surface transportation programs have been funded largely by taxes on motor fuels that flow into the highway account of the Highway Trust Fund (HTF). A steady increase in the revenues flowing into the HTF due to increased motor vehicle use and occasional increases in fuel tax rates accommodated growth in surface transportation spending over several decades. In 2001, though, trust fund revenues stopped growing faster than spending. In 2008, Congress began providing Treasury general fund transfers to keep the highway account solvent. Electric vehicles do not burn motor fuels, and hence users do not pay motor fuels taxes. Several states have imposed some form of tax or fee on electric vehicles that is dedicated to transportation, such that EV drivers also contribute to paying for highway infrastructure. Legislation has been introduced in the 116 th Congress—the Fairness for Every Driver Act ( S. 343 / H.R. 1027 )—that would, in addition to repealing the existing tax credit for plug-in electric vehicles, impose an annual fee on alternative-technology vehicles that draw power from a source not subject to fuel excise taxes. This fee would be designed to compensate for plug-in electric vehicles not paying the gas tax (or other fuel excise tax). Imposing a fee on electric vehicles or other alternative vehicles would increase their cost of ownership, although as a share of the vehicle's total cost, the amount would likely be small. Exempting electric vehicles from taxes or fees imposed on other types of vehicles is one option for encouraging the purchase of electric vehicles. Research and Development Priorities Investment in transportation electrification R&D is one approach to reducing the overall cost of electric vehicle technologies. The Obama Administration made vehicle electrification a national goal—including increased spending on battery R&D, stimulus funding for construction of battery manufacturing plants in the United States, and development of DOE electric vehicle research and demonstration programs such as the "EV Everywhere Grand Challenge." The Trump Administration requested reductions in funding levels for vehicle technologies R&D for FY2018 and FY2019, but Congress instead increased the program's funding levels for those years. Federal R&D funding for electric vehicles and electric vehicle charging infrastructure is primarily administered through the DOE's Office of Energy Efficiency and Renewable Energy (EERE). Within EERE, the Office of Transportation oversees the sustainable transportation R&D portfolio, which includes R&D programs in vehicle technologies, bioenergy technologies, and hydrogen and fuel cell technologies. Activities related to electric vehicles and charging infrastructure are within the Vehicle Technologies Office. In the 116 th Congress, some legislative proposals would support R&D programs. The Vehicle Innovation Act of 2019 ( S. 1085 / H.R. 2170 ) would authorize R&D programs and other activities to develop innovative vehicle technologies (including electric vehicles and charging infrastructure). Appropriations for Electric Vehicle Research Congress provides funding for electric vehicle technologies R&D through annual appropriations to EERE in the Energy and Water Development appropriations bill. The Trump Administration's budget request for EERE was $343 million for FY2020, $2,036 million (86%) less than the FY2019 enacted level of $2,379 million ( Table 1 ). The budget request, which "focuses DOE resources toward early-stage R&D and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies," would provide $73.4 million to vehicle technologies for FY2020, $279.6 million (79%) less than the $344 million that was directed to vehicle technologies within the Joint Explanatory Statement of the FY2019 appropriations conferees. The FY2019 joint explanatory statement included support for various vehicle technologies to advance transportation electrification research: $163.2 million for the battery and electrification technologies subprogram ($38.1 million for electric drive research and development—including $7 million to enable extreme fast charging and advanced battery analytics); $10 million for continued funding of Section 131 of the 2007 Energy Independence and Security Act ( P.L. 110-140 ) for transportation electrification; and $37.8 million for the Clean Cities program, which provides competitive grants to support alternative fuel, infrastructure, and vehicle deployment activities. According to the FY2020 DOE budget request, the vehicle technologies program has set goals that "are necessary for new technology options to be more efficient and at least as affordable compared to [the] baseline while also accounting for consumer pay- back period expectations." To advance vehicle electrification, DOE established the following research priorities: identify new battery chemistry and cell technologies with the potential to reduce the cost of electric vehicle batteries by more than half, to less than $100 per kilowatt hour (kWh) (with an ultimate goal of $80/kWh); increase vehicle range to 300 miles; and decrease charge time to 15 minutes or less by 2028. The request for FY2020 would reduce funding and prioritize "early-stage activities," including the development of critical materials-free battery technologies. The request would eliminate funding for battery safety testing, battery thermal performance testing, and Clean Cities coalition support, training and technical assistance, and partnership activities. Clean Cities Program The DOE Clean Cities program supports local actions to reduce petroleum use in transportation. The program funds transportation projects nationwide through a competitive application process, and leverages these funds with additional public- and private-sector matching funds and in-kind contributions. While the program supports a variety of alternative fuels and vehicles in an effort to reduce petroleum use, funding opportunities by Clean Cities that directly support EVs include the EV Everywhere Plug‐In Electric Vehicle Local Showcases. EV Everywhere Plug‐In Electric Vehicle Local Showcases were selected in 2016 and are in progress. The three projects were selected to promote and demonstrate plug-in electric vehicle (PEV) use by "establishing local showcases that provide a hands-on consumer experience and in-depth education in a conveniently located, brand-neutral setting." The awardees plan to establish showcases in at least 14 states, including states in the Upper Midwest, California, the Pacific Northwest, and New England. In the FY2019 joint explanatory statement, Congress directed DOE "to continue to support the Clean Cities program, including competitive grants to support alternative fuel, infrastructure, and vehicle deployment activities." In the FY2020 budget request, the Trump Administration proposed eliminating funding for the Clean Cities program. In the 116 th Congress, two bills that pertain to electric vehicles would establish competitive grant programs within the Department of Transportation for electric vehicle charging infrastructure ( H.R. 2616 and S. 674 ). Alternative Fuel Corridors Purchases of electric vehicles in the near future will depend to some extent on the steps state and local governments and private entities take to build a reliable network of charging stations. Section 1413 of the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94 ) seeks to address that goal; it requires the Department of Transportation (DOT) to designate by 2020 national alternative fuel corridors (AFCs) to promote vehicle use of electricity, hydrogen, propane, and natural gas. The Federal Highway Administration (FHWA) has been working with other federal, state, and local officials and industry groups to plan AFC designations on interstate corridors ( Figure 2 ). FHWA has assigned designations to highways as either "corridor ready"—they have enough fueling stations to serve a corridor—or "corridor pending," where alternative fueling is insufficient. In the case of electric vehicles, a corridor-ready designation would apply if there were EV charging stations at 50-mile intervals, with a goal of establishing Level 3 DC Fast Charge infrastructure. Under this program, FHWA has developed standardized AFC signage and other forms of public education, and encouraged regional cooperation in planning new fueling networks. FHWA has undertaken three rounds of AFC nominations, the latest announced in April 2019. FHWA has identified building out alternative corridors on the most traveled Interstates, such as I-95 and I-80, as priorities for third-round funding. An additional goal is to secure nominations for areas targeted for EV investments by Electrify America in its Zero Emission Vehicle (ZEV) investment plan. Signage and installation of alternative fueling infrastructure along these corridors have been determined to be eligible expenses under FHWA's Congestion Mitigation and Air Quality Improvement (CMAQ) Program. In addition, the Department of Energy's Clean Cities program provides funding for fueling infrastructure, and some states have similar programs. Federal Support for Municipal Bus Electrification Until recently, the operation of battery electric buses in U.S. cities was seen as a long-term prospect because of their relatively high cost, range limits, and recharging infrastructure needs. But with technological improvements, public transportation agencies have begun to show interest in electric buses to replace vehicles powered by diesel and other fossil fuels. This interest is especially strong in metropolitan areas with air quality problems. The Federal Transit Administration (FTA) provides substantial support to transit agencies to purchase buses. Federal funds can be spent on most types of bus technology; the choice of technology is up to the transit agency concerned. Transit buses typically operate over short distances with fixed routes and frequent stops. In 1996, 95% of the buses in service were powered by diesel fuel ( Figure 3 ). More recently, transit agencies have integrated buses fueled by compressed natural gas (CNG), liquefied natural gas (LNG), and biodiesel into their fleets. Since the end of the last recession, the share of lower-emission hybrid buses—including diesel buses with electric motors—has also increased, rising from just under 5% of buses in use in 2009 to nearly 15% in 2016. Diesel-electric buses are powered by both an electric motor and a smaller-than-normal internal combustion engine; regenerative braking systems store energy from use of the bus's mechanical systems, giving the bus greater range. The purchase price of hybrids is less expensive than a fully electric bus, and hybrids reduce emissions compared to conventional diesel buses. There were 300 battery electric buses in operation domestically at the end of 2017, less than 0.5% of the 65,000 buses in public transit agencies' fleets. However, the two biggest transit bus systems in the United States, Los Angeles Metro and New York City Transit, have announced plans to move to zero-emission bus fleets, most likely using battery electric buses, by 2030 and 2040, respectively. Electric buses are typically expensive to purchase, costing as much as $300,000 more than conventional diesel buses, and require additional investment to build recharging infrastructure. On the other hand, electric buses are quieter than internal combustion engine vehicles, may have lower operating costs due to the absence of engines and transmissions requiring maintenance, and have low or zero direct emissions. The range an electric bus can travel on one charge has in the past been a limiting factor, but newer models can travel more than 200 miles, still short of the 600-mile or more range that conventional and other alternative fuel buses can travel. A study by Carnegie Mellon University found that when social costs, such as the health effects of diesel emissions, are taken into account, battery electric buses have lower total annualized costs than conventional diesel buses over the typical 12-year life cycle of a transit bus. Electric buses are generally eligible for FTA funding under several programs, including the Bus and Bus Facilities Program. One discretionary component of the FTA bus program is the Low or No Emission Vehicle (Low-No) program, which provides funding to state and local authorities for the purchase or lease of zero-emission and low-emission transit buses as well as acquisition, construction, and leasing of required supporting facilities. Electric buses are purchased through the Low-No bus program; mandatory spending of $55 million per year through FY2020 was authorized in the FAST Act. An additional $29.5 million was appropriated for FY2018. School buses generally have diesel engines, and they are primarily funded locally. FTA does not fund school buses, but the Environmental Protection Agency (EPA) administers the School Bus Rebate Program, which assists school districts in reducing diesel emissions. In 2017, nearly $9 million was provided to replace diesel buses with diesel-electric hybrids. In the 116 th Congress, some legislative proposals would support vehicle fleet electrification, including transit buses. The Green Bus Act of 2019 ( H.R. 2164 ) would require that any bus purchased or leased with funds provided by the Federal Transit Administration for public transportation purposes be a zero-emission bus. The Federal Leadership in Energy Efficient Transportation (FLEET) Act ( H.R. 2337 ) would authorize the U.S. Postal Service to enter into energy savings performance contracts to purchase or lease low-emission and fuel-efficient vehicles (including electric vehicles) and to construct or maintain infrastructure, including electric vehicle charging stations, among other provisions.  Other Federal Policies Affecting Electrification The following policies were generally established for purposes not directly related to vehicle electrification, but they have dimensions that may support that goal. Volkswagen Settlement In 2016, Volkswagen Group reached a number of legal settlements concerning violations of the Clean Air Act. As part of its settlement terms, Volkswagen pledged to invest $2 billion over a 10-year period in zero-emissions vehicle infrastructure and education in select U.S. cities through its Electrify America initiative. Of that amount, $800 million is to be spent in California. As an additional condition, Volkswagen was also required to fund a $2.7 billion national Environmental Mitigation Trust, funds from which are available to states and other beneficiaries for mitigating the negative impacts of the excess diesel emissions that were released by Volkswagen's noncompliant vehicles. States could choose to spend some of this special funding on bus electrification, including school buses. Federal Motor Vehicle Environmental Regulations The first motor vehicle fuel economy standards were enacted in 1975 in response to the oil embargo of 1973-1974 (Energy Policy and Conservation Act of 1975; P.L. 94-163 , as amended). The National Highway Traffic Safety Administration (NHTSA) sets and enforces the Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks, which were most recently legislatively set in the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) at 35 miles per gallon (mpg) by 2020. Because EPA has authority to regulate greenhouse gas (GHG) emissions, it joined with NHTSA during the Obama Administration to promulgate new, stricter combined CAFE/GHG standards for motor vehicles. These new standards established targets for reduced GHG emissions and rising CAFE fuel economy of nearly 50 mpg by model year (MY) 2025. Electrification was seen as one means of reaching the new CAFE/GHG targets. The Trump Administration has proposed to leave the current CAFE/GHG standards in place through model year 2026, based on its analysis that economic and technological factors have changed since the standards were put in place in 2010. EPA asserted in April 2018 that the goals established for MY2026 could be achieved only with more extensive vehicle electrification than now anticipated, and rejected previous EPA determinations that EV sales in future years would grow rapidly enough to enable automakers to comply with the MY2022-MY2025 standards: "Based on consideration of the information provided, the Administrator believes that it would not be practicable to meet the MY 2022–2025 emission standards without significant electrification and other advanced vehicle technologies that lack a requisite level of consumer acceptance." Prospects for Electrification of Autonomous Vehicles Fully autonomous passenger vehicles hold the potential for safer transportation and new mobility for the elderly, the disabled, and those who cannot afford to purchase a car. The projected timeline for emergence of fully autonomous vehicles varies from several years to several decades. It is often assumed that autonomous vehicles—including those providing ride-sharing services—will employ electric motors instead of internal combustion engines, but that assumption is based on the types of federal and state policies that are put in place. In the absence of policies favoring EVs, future autonomous vehicles could be powered by fossil fuels. There are several reasons why electrification may not be the ultimate choice for autonomous vehicles. Analyses by Ford and Volvo have for the following reasons led them to retain internal combustion engines for their ride-sharing ventures for the present: Expense and I nconvenience . Electric vehicles remain expensive compared to conventional vehicles, and many models have short driving ranges and long refueling times. Shared vehicles, which may be on the road for many hours a day, magnify these shortcomings. Battery L ife . Frequent use of battery fast charging is known to lead to faster degradation of the battery. Energy- I ntensity . Autonomous vehicles rely on energy-intensive technologies. It has been estimated that operation of an autonomous driving system for two hours in an electric vehicle could use as much as 10% of its stored energy before the vehicle moves, requiring even more frequent recharging. These drawbacks are countered by the following factors that could make electrification of autonomous vehicles the more attractive power source: Compatibility . The extensive use of computers and sensors in autonomous vehicles may be easier to embed in electric vehicles, which have fewer mechanical—and more electronic—parts than a conventional vehicle. Operability . Electricity is generally less expensive than gasoline or diesel, and maintenance costs for electric vehicles, with many fewer parts, may be considerably lower. Emissions . The power demands of autonomous vehicle equipment and computers will reduce the fuel economy of gasoline and diesel vehicles and increase emissions. It has been estimated that increased power requirements will increase emissions from combustion vehicles by over 60 grams of CO 2 equivalent per mile, equal to reducing fuel economy of a 35 mpg vehicle to 29 mpg. Switching to electricity would diminish the direct emissions. State Incentives and Utility Issues Acceptance of electric vehicles and related infrastructure is affected by legislation, regulations, and policies adopted by state agencies and electric utilities. State Incentives Incentives vary widely from state to state. The National Conference of State Legislatures tracks vehicle and charger incentives on a state-by-state basis. Forty-five states and the District of Columbia currently offer incentives for certain hybrid or electric vehicles, or both. Those incentives include permitting solo drivers of electric and hybrid vehicles to use high-occupancy (carpool) lanes, income tax credits and rebates for the purchase of an electric vehicle, reduced registration fees, parking fee exemptions, excise tax and emission test waivers, and income tax credits for installation of a home or business charger. These incentives have been found to vary in their effectiveness. Several analyses have shown that tax incentives for electric vehicles and infrastructure are the "dominant factors in driving PEV adoption." Rebates—which happen at the point of sale or within a short time after a vehicle purchase—have been identified as the most effective incentive because their value is clear to buyers at the time of a vehicle transaction. Zero Emission Vehicle Program The California Air Resources Board (CARB) adopted low-emission vehicle regulations in 1990, requiring automakers to sell light vehicles in that state that meet progressively cleaner emissions standards. As part of these emission regulations, CARB also established the Zero-Emission Vehicle (ZEV) program, which requires automakers to offer for sale the lowest-emission vehicles available, with a focus on battery electric, plug-in hybrid electric, and hydrogen fuel cell vehicles. The number of ZEVs each automaker is required to sell is based upon its total light-vehicle sales in California. CARB has set ZEV sales percentages through a vehicle credit system, increasing annually to 2025. Nine other states have adopted the California ZEV regulations. The states affected by the regulations represent over one-third of all U.S. new light vehicle sales. Utilities and EVs and EV Infrastructure: Tax and Regulatory Issues Electric utilities, which are regulated by the state in which they are located, are in a unique position as the primary providers of electricity to aid in integrating EVs into the grid. Utilities can provide incentives to consumers to charge EVs during off-peak hours when there is excess generation. Utilities may also be in the position to install public electric charging infrastructure, assuming that there are no limits on their owning these assets. Many of the barriers utilities face with respect to electrification infrastructure are regulatory, and the role of tax policy in addressing such barriers may be limited. Sluggish growth in energy demand has posed a challenge for the electric utility sector. The industry has recognized EVs as an opportunity for growth. For this reason, electric utilities may have their own market-based incentives (absent federal intervention) to invest in EV infrastructure and take measures to support consumer EV adoption. Further, electric utilities may support extending current-law vehicle and infrastructure tax credits. At the same time, preparing the grid for a surge in electric car ownership could require substantial capital investments, if peak demand is increased. Tax Incentives to Utilities for Electric Vehicle Infrastructure A number of challenges are associated with providing tax incentives to utilities that provide EV infrastructure. While 65% of electricity customers across the United States are customers of investor-owned utilities, most other users purchase electricity from cooperatives or municipal power providers. There are limited options for providing a direct federal tax benefit to cooperative or municipal utilities that do not pay federal income taxes. Further, in many states customers may purchase electricity from competing suppliers and pay the local electric utility for delivering it. A tax incentive to provide EV infrastructure might be made available only to utilities, to other electricity suppliers, or to both. Applicability of such an incentive would vary according to state policies or the type of utility. State regulatory commissions typically establish prices or rates that allow utilities to earn a rate of return that the regulator determines to be reasonable. This rate of return is fixed, such that additional tax incentives do not necessarily increase the return that a utility can realize. Federal taxes are an operating expense. In some states, tax incentives that reduce utilities' operating expenses result in lower rates for electricity customers (not higher returns for utilities). Hence, federal tax incentives may provide a limited near-term incentive for utilities to increase capital spending on EV infrastructure. State Regulatory Considerations In the United States, the sale of electricity is governed by many different federal, state, and local regulations. When it comes to the sale of electricity for the purpose of charging EVs, the states generally have regulatory jurisdiction over retail electricity transactions, though federal and municipal authorities may also play a role. State approaches to regulation vary considerably. Rules and regulations governing the retail sale of electricity generally originate with a state public utility commission. An electric utility is defined in federal law as any person, state, or federal agency "which sells electric energy." This definition could potentially be interpreted to mean that electric vehicle charging station operators are electric utilities by virtue of the fact that they sell electricity, and are therefore subject to all laws, requirements, and regulations pertaining to electric utilities. Should charging station operators be subject to regulation as electric utilities, or is regulatory reform necessary to accommodate this new class of electricity transactions? Faced with the question of whether or how to regulate the operators, states have taken a variety of approaches: Some states have issued new guidelines or regulations that define the requirements for regulated utilities to operate charging stations. For example, some states (e.g., Oregon) allow existing regulated utilities to invest in and operate EV charging stations as separate, nonregulated ventures. Others (e.g., Texas) have effectively limited the operation of charging stations to electric distribution utilities by requiring operators to meet high technical and financial standards. Still others (e.g., Kansas) have prevented electric utilities from owning and operating charging stations altogether. Other states (e.g., New York) have exempted charging station operators from public utility regulations. This leaves questions as to which regulatory agency, if any, is responsible for regulating the charging station operators, as well as whether additional regulation is needed in order to ensure fair market practices. Finally, some states have refrained from taking action altogether. Without regulatory changes, private charging station operators in these states may be subject to regulation as a utility by the state's public commission. Lack of clarity about how operators will be regulated is seen by some as an impediment to the spread of the technology in these states. In some cases, EV service providers have avoided regulation as a utility by providing charging services for free, or by charging customers by the minute rather than by the amount of electricity used. Whether public utilities or private companies may operate electric vehicle charging stations and whether station operators are subject to regulation as a utility may affect deployment of EV charging infrastructure. State jurisdiction over retail electricity transactions may limit the potential role of the federal government in regulating the provision of EV charging services. An additional consideration is the potential for electric vehicle batteries to be used for storage, referred to as vehicle-to-grid (V2G) storage. V2G storage would allow idle vehicle batteries to be used for grid services, such as demand response. The batteries could reduce vehicle owners' electricity demand during peak periods or provide electricity to the grid during peak periods in response to time-based rates or other financial incentives. In the United States, utilities are beginning to test V2G performance in demonstration projects. In addition to technology, other identified challenges include regulation, market, and end-user acceptance.

Most of the 270 million cars, trucks, and buses on U.S. highways are powered by internal combustion engines using gasoline or diesel fuel. However, improvements in technology have led to the emergence of vehicle electrification as a potentially viable alternative to internal combustion engines. Several bills pending in the 116 th Congress address issues and incentives related to electric vehicles and charging infrastructure. Experience with fully electric vehicles is relatively recent: While a few experimental vehicles were marketed in the United States in the 1990s, the first contemporary all-electric passenger vehicles were introduced in 2010. Since then, newer models have increased the range an electric vehicle can travel on a single charge, and charging stations have become more readily available. These developments have been spurred by a range of government incentives, both in the United States and abroad. Transit buses are the fastest-growing segment of vehicle electrification in China, while in the United States and the European Union, the pace of bus electrification is slower. In the United States, federal incentives for electric passenger vehicle purchases have remained largely unchanged for more than a decade and are based primarily on tax credits for electric vehicle purchases and recharging infrastructure investments, and spending on battery chemistry research to develop less-expensive technologies: The plug-in electric tax credit permits a taxpayer to take a credit of up to $7,500 for each vehicle that can be recharged from the electricity grid; it phases out after a manufacturer has sold 200,000 eligible vehicles, a threshold that has been met by Tesla and General Motors. A tax credit for installation of alternative fuel vehicle refueling property expired in 2017; it had allowed a tax credit of $1,000 for equipment installed at a residence and up to $30,000 for business installations. I nvestment in transportation electrification research and development (R&D) , which has led to the gradual reduction in the cost of producing lithium-ion batteries, is administered by the U.S. Department of Energy (DOE) in cooperation with private industry. Although the Trump Administration has recommended large reductions in these programs, Congress has maintained annual funding for sustainable transportation of nearly $700 million in the past two fiscal years. Other programs that directly influence the level of vehicle electrification include the DOE Clean Cities Program, which supports local efforts to reduce fossil fuel-powered transportation, and the Department of Transportation's Alternative Fuel Corridors, which are designated Interstate Highway corridors with a sufficient number of alternative fueling stations, including electric vehicle chargers, to allow alternative fuel vehicles to travel long distances. The federal government also funds municipal transit bus electrification through Federal Transit Administration grants, which may be used for the purchase of all-electric buses. The pace of electrification also may be affected by proposals for less stringent federal standards for Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions from vehicles. Beyond these federal programs, states and electric utilities provide a range of incentives for electrification. The National Conference of State Legislatures reports that 45 states and the District of Columbia offer incentives such as income tax credits for electric vehicle and charger purchases, reduced registration fees, and permitting solo drivers of electric vehicles to use carpool lanes. The California Zero Emission Vehicle program is spurring sales of electric vehicles in 10 states. Utilities can provide incentives to charge during off-peak hours, install public electric charging infrastructure, and utilize vehicle-to-grid (V2G) storage. V2G storage would allow idle vehicle batteries to supply electricity to the grid rather than drawing power from it during peak demand periods.

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Introduction In FY2019, an estimated 20 million veterans were living in the United States, of which 9.3 million were enrolled in care through the Department of Veterans Affairs (VA). Chapter 17 of Title 38, U.S.C. , requires the VA to provide health care services to eligible veterans through the Veterans Health Administration (VHA) of the VA, which is one of the largest integrated health care systems in the United States. The VHA is composed of nearly 1,700 VA medical facilities. VA care is not a health insurance program; it is primarily a direct provider of care. Meeting veterans' demand for care has been challenging for the VA. Some veteran patients who seek health care services from the VHA experience barriers to receiving in-person care; for example, by being unable to schedule VA medical appointments in a timely manner or having to travel long distances to reach health care facilities. In conjunction with the Veterans Choice Program (VCP), the recently enacted VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 ), and other measures that aim to expand veterans' access to care, the VA has attempted to address barriers to in-person care using telehealth in VA health care facilities. According to the VHA, telehealth refers to the use of health informatics, disease management and [t]elehealth technologies to enhance and extend care and case management to facilitate access to care and improve the health of designated individuals and populations with the specific intent of providing the right care in the right place at the right time. VA Telehealth Overview VA telehealth is a mode of health care delivery that extends outside of the "brick-and-mortar" health care facilities of the VHA. Telehealth, in contrast to in-person care, functions using information and communication technology (ICT) to transpire an episode of care to a veteran patient, without requiring the patient to visit a service provider in person. Although telehealth generally supplements in-person care, it does not replace VA in-person care. In this context, the use of ICT to deliver telehealth services does not disrupt a veteran patient's daily life activities, such as working and going to school. Veterans do not need to meet their VA provider in-person to receive VA health care services. This type of nondisruptive access to health care services is likely more convenient than the traditional in-person care services used by veteran patients and their civilian counterparts. Telehealth encourages veteran patients to be actively involved in their health care decisions, because it requires veterans to perform telehealth-related tasks such as downloading mobile applications (apps) to connect with VA providers and staff. A mobile app refers to a software program that runs on certain operating systems of mobile devices (e.g., smartphones and tablets) and computers that transmit data over the internet. (See the " VA Mobile Health (VA Mobile) " section in this report). Rural Veterans Legislation and regulations that aim to expand veterans' access to VA telehealth services generally focus on the U.S. population of rural veterans. Many of these veterans experience geographic barriers to accessing in-person VA care, such as having to travel long distances to reach their nearest health care facilities. Of the estimated 9.2 million veterans who were enrolled in the VA health care system in FY2019, approximately 33% of them were rural veterans. According to the VA, "[the U.S. population of rural veterans] is older (56% are over 65), poorer (52% earn less than $35,000 per year), and sicker (a greater number of co-morbidities) than their urban counterparts." In addition to having to travel long distances to reach their nearest health care facilities, rural veterans may experience access barriers to VA telehealth services because they lack access to broadband internet in their communities. Similarly, veterans who live in urban areas also experience access barriers to VA care such as having to wait more than 30 days to receive care through the VA. Integration with the Private Sector According to former Under Secretary of the VHA, David J. Shulkin, MD, who later became the VA Secretary, "[t]he fact is that demand for [v]eterans' health care is outpacing VA's ability to supply [the health care services] in-house." President Trump and the Congress have acknowledged the challenges the VA has faced in supplying VA care in-house by enacting measures such as the VA MISSION Act. The VA has since established new partnerships with private sector vendors, such as Philips Healthcare, T-Mobile USA, Inc. (T-Mobile), and Walmart Inc. (Walmart), under the VA's Advancing Telehealth through Local Access Stations program. The VA established these partnerships with the goal of reducing veterans' access barriers to VA in-person care by expanding their access to VA telehealth services. Report Roadmap To assist Congress as it considers measures on VA telehealth, this report provides an overview of VA telehealth programs and requirements including veteran eligibility and enrollment criteria and VA telehealth copayment requirements; discusses VA providers' authority to provide telehealth services anywhere; discusses the components of VA telehealth; provides an overview of VA teleconsultations; discusses three issues that Congress could choose to consider: (1) access barriers to in-person VA care, (2) lack of access to the internet, and (3) conflicting guidelines for prescribing controlled substances via telehealth across state lines; provides, in Appendix A , a summary table with all abbreviations used in the report; provides, in Appendix B , the history of VA telehealth and a high-level overview of at least one legislative provision that was enacted into law and aims to address VA telehealth, beginning with the 109 th Congress; provides, in Appendix C , a discussion on the VA providers' authority to provide telehealth services anywhere; and provides, in Appendix D , the total number of veterans who received VA telehealth services and the total number of telehealth encounters that transpired during each of the fiscal years FY2009-FY2018. VA Telehealth Programs and Requirements On July 12, 2016, the VA established the Office of Connected Care (OCC) within the VHA. The goal of OCC is to "deliver [information technology (IT)] health solutions that increase a [v]eteran's access to care and supports a [v]eteran's participation in their health care." OCC administers the following four VA telehealth programs: 1. According to the VA, VA Telehealth Services "[improve] convenience to [v]eterans by providing access to care from their homes or local communities when they need it." 2. My Health e Vet is the web-based electronic health record (EHR) for veteran patients through which veterans can view, and download electronic protected health information (ePHI); 3. VHA Innovation Program is an annual competitive program that allows VA staff and key stakeholders in the private sector to submit innovative ideas on enhancing VA care; and 4. VA Mobile Health (VA Mobile) develops mobile apps. For its telehealth programs, the VA has requested an appropriation of $1.1 billion for FY2020 and an advanced appropriation of $1.7 billion for FY2021. Veteran Eligibility, Enrollment, and Access Not all veterans are eligible to receive VA care, and not every veteran is automatically entitled to medical care from the VHA. Veterans' eligibility for enrollment in the VHA is based on veteran status (i.e., previous military service), service-connected disability, and income. Veterans enrolled in the VA health care system can receive a range of health care services, including primary care and specialty care via telehealth, as authorized under the VA's medical benefits package . The VA medical benefits package refers to a suite of health care services that are covered for eligible veterans, generally at no cost under certain circumstances. In a given year, however, not all enrolled veterans receive their care from the VA—either because they do not need services or because they have other forms of health coverage, such as Medicare, Medicaid, or private health insurance. In FY2018, more than 9.3 million veterans were enrolled in VA care. A veteran generally must be enrolled in the VA health care system to access VA telehealth services, which are typically provided on an outpatient basis. A veteran who is not enrolled in VA care can access VA telehealth services under certain circumstances. For example, a veteran who is not enrolled in VA care but who is "tentatively" eligible for VA care could access VA telehealth services on an outpatient basis. Of the 9.3 million veterans who were enrolled in VA care in FY2018, the VA provided 2.29 million telehealth episodes of care to 782,000 veteran patients. An episode of care generally refers to all of the health care services that a VA provider provides to a veteran patient, to treat the veteran's health condition/disability. The Faster Care for Veterans Act of 2016 ( P.L. 114-286 ) required the VA, among other things, to ensure that veterans could schedule their own telehealth appointments. A recent U.S. Government Accountability Office (GAO) report found that neither the Veteran Appointment Request System nor the On-line Patient Self-Scheduling System (OPSS) had the capability to allow veterans to schedule their own telehealth appointments. According to the VHA, access to VA telehealth services is a joint decision between the veteran and his or her care team of VA providers and clinical staff. The care team tells the veteran which clinically appropriate VA care services he or she can access through the VHA. There may be instances when it is clinically appropriate for a veteran to receive in-person care rather than a telehealth service. When the care team decides that it is clinically appropriate for a veteran to receive telehealth services, the veteran would need to opt into accessing VA telehealth services. The veteran patient would then be able to schedule his or her telehealth appointment. Telehealth Copayment Requirements A telehealth copayment refers to the out-of-pocket costs that a veteran patient pays for a telehealth encounter. A veteran patient generally pays $15 per primary care outpatient visit and $50 per specialty care visit at VA medical facilities. According to the VA, copay amounts for telehealth are usually less than for VA in-person care. The VHA does not require veterans to pay a copay for health care services to treat a service-connected disability/condition, nor is a copay required if a veteran meets at least one of the following four main criteria: 1. The veteran patient has a service-connected disability/condition that is rated at 50% percent or more. 2. The veteran patient is a former prisoner of war. 3. The veteran has an annual income that is below the income limit. 4. The veteran is a recipient of the Medal of Honor. Other veteran patients can receive free VA care when they receive care under certain circumstances, such as care for military sexual trauma, care that is part of a VA research project, and care that is provided for compensation and pension examinations. Veteran patients who are not exempt from paying VA copays incur the costs of their VA care. The VA determines a veteran patient's copay by evaluating the rendered telehealth encounter against two factors: (1) the location of the veteran patient when the telehealth encounter transpired and (2) the VA's internal business office protocols on copay amounts for VA care. The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ), among other things, allows the VA Secretary to waive veteran patients' copay requirements for telehealth. In March 2012, the VA Secretary began waiving copays for telehealth services provided to veteran patients in their homes. VA Provider Eligibility and Training on Telehealth The Department of Veterans Affairs Codification Act ( P.L. 102-83 ) requires the VA Secretary, among other things, to establish interrelationships and coordinate the delivery of VA health care services with the public and private sectors. Therefore, a health care provider who is either seeking a government position within the VA (referred to as a VA-employed provider ) or seeking to remain as a private sector provider while working with the VA under a contract (referred to as a VA-contracted provider ) is eligible to provide VA care to veterans. A VA provider, either VA-employed or VA-contracted, must hold at least one full, active, current, and unrestricted state license to be eligible to work for or with the VA. The provider can use his or her license to deliver in-person care and telehealth services through the VHA. Each VA provider can decide whether he or she wants to provide VA telehealth services to veteran patients across state lines. The VA MISSION Act, among other things, allows a VA-employed health care provider to provide telehealth services to veteran patients across state lines using only one state license, even in states where the provider is not licensed to practice. ( Appendix C provides an overview of the VA-employed providers' authority to provide telehealth services across state lines using one state license.) A VA-employed provider who chooses to use a single license in this manner must meet the following four statutory requirements of a covered health care professional: 1. the VA provider must be an employee of the VA; 2. the VA Secretary must have authorized the VA provider to provide telehealth services across state lines; 3. the VA provider must agree to adhere to all standards for quality relating to the provision of medicine that is consistent with VA policies; and 4. the VA provider must hold an active, current, full, and unrestricted license, registration, or certification in at least one state to practice in his or her field of medicine. This authority does not extend to VA-contracted providers. Current law does not allow a VA-contracted provider to provide VA health care services, including telehealth, to veteran patients across states lines using a single license in states where the VA-contracted provider is not licensed to practice. A VA-contracted provider, in contrast to a VA-employed provider, must hold a license in each state where the provider chooses to practice. Neither type of provider is required to obtain a specialty license, registration, or certification to practice his or her field of medicine via telehealth through the VHA. The VA encourages its providers to complete the Telehealth Master Preceptor Certification Program. This program offers an educational curriculum on the delivery of VA telehealth, including the VA telehealth modalities used to deliver telehealth services (see the " Telehealth Modalities " section below). The VHA Telehealth Services National Training Center, which is a nationally accredited training center, oversees the program and other telehealth trainings. In FY2018, according to the VA, more than 56,000 VA providers and staff completed at least one training session on telehealth. In that same fiscal year, the VA had provided more than 100,720 telehealth trainings. VA Telehealth Components VA telehealth encompasses four general components: (1) the internet and wireless data, (2) telehealth modalities, (3) VA Mobile Health, and (4) VA teleconsultations. Each of these components is discussed below. Health informatics and data visualizations are not discussed because they are beyond the scope of this report. The Internet and Wireless Data A veteran patient who chooses to access VA telehealth services must be willing to perform telehealth related tasks, such as accessing a health care service and obtaining his or her ePHI (electronic protected health information), using the internet—the vehicle for which a telehealth episode of care transpires. A veteran patient must have access to the internet to access VA telehealth services on mobile devices and computers. In 2017, according to a VA study of 43,600 veteran enrollees, 77% reported using the internet on an occasional or more frequent basis. Of those 77% of veteran enrollees who reported using the internet, the enrollees performed the following telehealth related tasks: 33% scheduled medical appointments, 45% accessed their EHRs (electronic health records), and 77% searched for information on health. The VA's findings reveal that veterans who are enrolled in the VA health care system are using the internet to perform telehealth-related tasks. However, veteran patients do not necessarily have to have their own internet service to perform telehealth related tasks and access VA telehealth services. For example, veteran patients can access the internet from a VA medical facility, a family member's home, or a local library (access to high-speed internet service typically yields the best internet performance). In addition, a veteran who chooses to access VA telehealth services via a mobile device (e.g., smartphones and tablets) must have adequate cellular data storage. The amount of wireless data storage on a mobile device determines whether the veteran will be able to download and use certain components of VA telehealth such as VA mobile apps. Potential Cybersecurity and Privacy Risks A veteran patient who chooses to perform telehealth-related tasks on a personal mobile device and computer must consider the potential cybersecurity and privacy risks associated with accessing VA telehealth services. During a telehealth encounter, for example, a veteran patient can view, download, and transmit their ePHI over the internet. According to the Federal Bureau of Investigation, mobile devices and internet connections can be compromised when accessed by an unauthorized party. The VHA cannot ensure that a veteran is accessing VA telehealth services on a trustworthy device via a trustworthy connection—that responsibility falls upon the user when the user is accessing the service on their personal device. According to the VA, it "will coordinate restoration activities" with internal and external key stakeholders when veteran patients experience cybersecurity and privacy threats. Certain veteran patients can access VA telehealth services on VA issued mobile devices. According to the Federal Communications Commission, the VA provided 6,000 tablets with 4G LTE connectivity to low-income and rural veterans with the goal of reducing the veterans' broadband infrastructure barriers to telehealth in their homes. These veterans are accessing telehealth services on trustworthy devices via trustworthy connections. The VA's Cybersecurity Program ensures that, among other things, ePHI and personally identifiable information that are transmitted via VA devices and systems are protected against cybersecurity and privacy threats. Of course, cybersecurity and privacy risks are not limited to the U.S. veteran patient population. Telehealth Modalities A telehealth modality refers to the mode in which a telehealth episode of care transpires. VA providers offer telehealth services to veteran patients via one of the following three telehealth modalities: (1) home telehealth, (2) store-and-forward telehealth, and (3) clinical video telehealth. The three VA telehealth modalities are described in more detail below. Note that the VHA does not consider VA Mobile Health as a telehealth modality, even though veterans can use this technology to access telehealth services. The VA considers VA Mobile Health as an "essential element of health care" delivery rather than an ICT tool used to deliver telehealth services. In FY2019, the VA is to begin measuring the VHA's performance in addressing the health care needs of eligible veterans who receive telehealth services via these three VA telehealth modalities. For example, one new measurement would analyze the ratio of "the number of unique [v]eterans served through telehealth services (numerator) and the number of unique [v]eterans that receive care through [the] VHA (denominator)." Using this measurement, the VA anticipates that at least 15% of eligible veteran patients will access VA telehealth services in FY2019. Home Telehealth (HT) The home telehealth (HT) modality allows a VA provider who is not located in the same location as a veteran patient to provide the patient with daily case management services for his or her chronic medical conditions, such as chronic heart disease or diabetes. The HT modality allows the VA provider to view medical data and information from a medical device, such as a heart monitor that the veteran patient wears. Telehealth episodes of care via the HT modality generally have no location restrictions unless the veteran patient is on bed rest. From FY2012 to FY2018, the VA provided 6.7 million telehealth encounters via the HT modality to 1.0 million veteran patients. In FY2018, the VA provided 872,705 telehealth episodes of care to 136,741 veteran patients through the HT modality. According to the VA, the case management service that VA providers most often provide to veteran patients via the HT modality is the management of hypertension (commonly known as high blood pressure). Figure 1 illustrates the distribution of services that transpired via the HT modality, for those veterans who received telehealth services for each of the fiscal years FY2012-FY2018. The number of veteran patients who have accessed telehealth services via the HT modality has increased, even though Figure 1 shows a downward trend for the percentage of veteran patients who accessed VA telehealth services via the HT modality. The total population of veteran patients accessing VA telehealth services via the HT modality increased by 142.1%, from 56,484 veteran patients in FY2009 to 136,741 veteran patients in FY2018. However, the number of telehealth encounters that transpired via the HT modality has fluctuated (see Figure 1 and Table D-2 ). The VA provided its financial obligations for the delivery of telehealth services via the HT modality in the agency's FY2020 funding and FY2021 advanced appropriations budget request to the Congress. In FY2019, the VA estimates that $270.6 million was obligated to the delivery of telehealth services via the HT modality. The VA has requested an appropriation of $279.8 million for FY2020 and an advance appropriation of $291 million for FY2021 to deliver telehealth services via the HT modality. Store-and-Forward Telehealth (SFT) The store-and-forward telehealth (SFT) modality facilitates the interpretation of patients' clinical information by allowing a VA provider who is not located in the same location as a veteran patient to assist another VA provider who is located in the same location and has provided in-person care to the veteran patient. Examples of the clinical information include data, images, sound, and video medical records from the veteran patient's radiology and dermatology examinations. The veteran patient does not have to be present during the electronic transfer of his or her clinical information. After receiving the clinical information, the VA provider interprets the clinical information for the other VA provider and provides follow-up care instructions for the veteran patient. From FY2009 to FY2018, the VA provided 2.7 million telehealth encounters via the SFT modality to 2.5 million veteran patients. In FY2018, the VA provided 344,853 telehealth episodes of care to 314,487 veteran patients through the SFT modality. According to the VA, it provides captures, stores, and forwards clinical information mostly for teleretinal i magining via the SFT modality to screen for diabetic eye disease in veteran patients. According to the VA, teleretinal imaging refers to a VA provider's use of a special camera to take a picture of a veteran patient's eye. The picture is electronically sent to an eye care specialist. After reviewing the picture, the specialist then reports his or her findings to the veteran patient's primary care provider. Figure 2 illustrates the distribution of services that transpired via the SFT modality, for those veterans who received telehealth services for each of the FY2009-FY2018. The increase in the number of telehealth encounters that have transpired via the SFT modality seems to indicate that VA providers are increasingly seeking the expertise of their peers. VA providers are presumably seeking additional expertise due to the lack of a given expertise in their respective geographic area and the VA's overall shortage of health care providers. Clinical Video Telehealth (CVT) The clinical video telehealth (CVT) modality allows a VA provider who is not located in the same location as a veteran patient to view, diagnose, monitor, and treat medical conditions of the veteran patient in real-time. The CVT modality functions by allowing the VA provider and the veteran patient to see each other via an interactive live video technology. Telehealth episodes of care via the CVT modality transpire between different VA sites of care, such as from a VA medical center (VAMC) to a veteran patient's home or from a veteran patient's home to a VA provider's home office. From FY2009 to FY2018, the VA has provided 5.7 million telehealth encounters via the CVT modality to 2.1 million veteran patients. In FY2018, the VA provided 1,074,422 telehealth episodes of care to 393,370 veteran patients through the CVT modality. According to the VA, the telehealth service that veteran patients accessed the most via the CVT modality is telemental health , which refers to the delivery of a mental health service via telehealth. Figure 3 illustrates the percentage of veterans who received telehealth services and the number of telehealth encounters that transpired via the CVT modality, for each of the fiscal years FY2009-FY2018. The upward trends in both the percentage of veterans who received telehealth services and the number of telehealth encounters that transpired via the CVT program seem to illustrate that veteran patients are increasingly interested in receiving VA telehealth services via this modality. Veteran patients' interest in the CVT program might stem from it being well established and publicized. The program is the VA's oldest method of telehealth delivery. Additionally, veterans have been able to access telemental health care services via the CVT modality since the VA started providing telehealth services. This report discusses the history of VA telehealth in Appendix B . VA Mobile Health (VA Mobile) VA Mobile allows veterans to access certain health services and ePHI via VA mobile apps on mobile devices (e.g. smartphones) and computers. According to the National Center for Veterans Analysis and Statistics (NCVAS), 97.9% of veterans who were enrolled in the VHA in 2016 owned a smartphone and 78.3% owned a computer (i.e., a laptop, desktop, or notebook computer). Veterans can access the VA mobile apps at any time, regardless of where the veteran is located. According to the VA, "VA Mobile Health aims to improve the health of [v]eterans by providing technologies that expand clinical care beyond the traditional office visit [via mobile apps]." VA Mobile has four overall functions: first, it allows veteran patients to connect and schedule medical appointments with VA providers; second, it provides veterans with access to health care information on topics such as mental health and weight management; third, it allows VA providers to provide case management of veteran patients' disabilities/illnesses from afar; and fourth, it allows VA providers to disseminate best practices among themselves, with the goal of improving the health outcomes of veteran patients. As a reminder, the VA does not consider VA Mobile to be one of the three modalities for the delivery of health diagnostics or health services. VA App Store VA mobile apps, such as those illustrated in Figure 4 , are located in the virtual VA App Store. The VA App Store is a public-facing web-based store that offers 47 mobile apps available to veterans, their caregivers, and VA providers. About two-thirds of the mobile apps in the virtual VA App Store are for veterans and their caregivers. The remainder of the apps are for VA providers. Veterans who are not enrolled in the VHA may access some of the VA mobile apps. Not all of the mobile apps are specific to health care. VA mobile apps provide veterans with access to a range of VA benefit services and information, such as conferring with a VA pharmacist, reviewing current disability benefits, and obtaining information on depression. Veterans who are not enrolled in the VHA, for example, can also access social apps, such as the VA-Department of Defense (DOD) Veteran Link app, which is a secure social networking app for veterans and current servicemembers. Required Login Credentials The public can view the different VA mobile apps in the VA App Store; however, only veterans, their caregivers, and VA providers with certain access accounts can download and use the apps. To download VA mobile apps, a veteran must have login credentials for at least one of the following three accounts: (1) a DOD Self-Service Logon (DS Logon) account, (2) a My Health e Vet account, or (3) an ID. me account. A general overview of each of the three accounts, which are all free to veterans, is provided below. DOD Self-Service L ogon (DS Logon) Account is a federal account that authenticates a veteran's affiliation with the VA and DOD. This secure self-service account allows the veteran to access multiple VA and DOD websites and apps. The veteran can request either a Level 1 (Basic) or a Level 2 (Premium) account, both of which are free. Level 1(Basic) Account allows a veteran to view general information located on a VA and DOD website. Level 2 (Premium) Account allows a veteran to view personal information on VA and DOD websites. The veteran must prove his or her identity to get a Premium Account by answering a set of questions. MyHealth e Vet Premium Account is a federal account that authenticates a veterans' enrollment in VA care. It authorizes a veteran patient to complete health care-related tasks, such as viewing his or her electronic health record, reordering medications, and contacting his or her health care provider via a secure messaging technology. ID. me Account is a private sector account that, in this context, authenticates a veterans' affiliation to the VA and DOD. This account "provides secure identity proofing, authentication, and group affiliation verification for government and businesses across sectors." It is also free to veterans. Required Operating Platforms The veteran's electronic device must operate using either a w eb-based platform , an iOS platform , or an Android platform for a VA mobile app to work on the device. A web-based platform refers to an operating system that has a web-browser such as Internet Explorer and Google Chrome. A VA web-based app such as MyHealth e Vet, which is the electronic health record (EHR) for veterans, is accessible over the internet. An iOS platform refers to the operating system installed on Apple, Inc. (Apple) electronic devices such as the iPhone and iPad. A VA iOS-app is available to veterans who use Apple devices. A veteran who has an Apple device can download VA iOS apps from the VA App Store and from the Apple App Store. A veteran who does not have an Apple electronic device will not be able to access a VA iOS app on a non-Apple device. An Android platform refers to the operating system installed on non-Apple electronic devices (e.g., companies such as Samsung and LG). A VA Android app is available to veterans with devices that do not have the iOS operating platform installed on them. A veteran who has an electronic device with an Android operating system can download VA Android apps from the VA App Store and the Google Play Store, which is a mobile app on an Android device. A veteran who does not have an Android device will not be able to access a VA Android app on a non-Android electronic device. VA Video Connect (VVC) The VA Video Connect (VVC) is a mobile app that veteran patients can download from the virtual VA App Store. The VVC app functions by allowing a veteran patient to connect via live video with a VA provider regardless of where the veteran or provider is located, through the CVT modality. The veteran patient can use the VVC app on a mobile device. To access the VVC app, the veteran patient's mobile device must contain a web camera, speakers, and microphone. In addition, the device must be able to connect to and have access to the Internet. According to the VA, the VVC "uses encryption to ensure privacy in each session." The VA launched the VVC app in August 2017 and has recorded 105,300 telehealth visits via the VVC app from October 2017 to September 2018. The VA's Partnerships with Philips Healthcare and T-Mobile The VA has partnered with private sector vendors Philips Healthcare and T-Mobile to expand veterans' access to the VVC app. Philips Healthcare currently partners with the VA by providing veterans with a "virtual connected care" through the company's Virtual Medical Center. This new partnership with Philips Healthcare aims to place telehealth information and communication technology equipment in 10 posts at the facilities of two veteran service organizations (VSOs) recognized by the President, Congress, and the VA Secretary for the representation of veterans: Veterans of Foreign Wars and the American Legion. The placement of the equipment in the VSO posts would expand VA telehealth services to veterans who are likely to be members of and who frequently visit those two VSOs. However, the program would not exclude non-VSO members from accessing VA telehealth services at the VSO sites. A positive outcome from this pilot program could encourage veterans who are not members of VSOs to visit VSO sites to access VA telehealth services. The VA's partnership with T-Mobile would allow veterans with this wireless service to access the VVC app via their mobile device without incurring additional charges or reducing plan data allotments. According to a VA press release, "veterans will be able to connect to appointments on their mobile devices for no extra charge, regardless of their current data plan." The VA did not provide in its press release the amount of the "extra charge" that veteran patients would have incurred from accessing the VVC app on their mobile devices. It is likely that other veterans who do not have T-Mobile as their wireless service provider would incur the unknown extra charge for accessing the VVC app. The VA has not yet announced any plans to partner with all wireless service providers to ensure that veteran patients who access the VVC app on their mobile devices will not incur additional charges. VA Telehealth Services The telehealth services that the VA provides to veteran patients align with their respective VA in-patient care services. A VA health care service does not change when a VA provider delivers the service via telehealth. For example, a veteran patient who chooses to access telemental health services via the VVC app on a mobile device would receive the same type of mental health services he or she would have received in-person. According to the VA Secretary, the VHA is the largest U.S. provider of telehealth services, having provided 2.29 million telehealth episodes of care to 782,000 veteran patients in FY2018. Of those 782,000 veteran patients, 9% of them were female and 45% of them live in rural areas. Veteran patients can access a range of telehealth services through the VHA. These telehealth services can be grouped into the following seven categories, in alphabetical order: 1. consultative and evaluative telehealth services, 2. disease and illness-specific telehealth services, 3. gender-specific telehealth services, 4. preventative telehealth services, 5. rehabilitative telehealth services, 6. rural-specific telehealth services, and 7. wellness telehealth services. According to the VA, the agency will provide general VA health care services to veteran patients and refer them to private health care providers for health care services that those providers provide "most effectively and efficiently." The VA's decision to refer such services to the private sector might stem from the agency's shortage of VA providers. A veteran can access VA telehealth services from various VA sites of care , such as VA medical facilities, mobile telehealth clinics, and non-VA sites of care such as the homes, work places, and schools of veterans. A veteran, who seeks VA care, including VA telehealth services at non-VA medical facilities and nonfederal facilities from non-VA providers, must receive prior authorization from the VA before accessing such services. The VA generally authorizes a veteran to seek VA care from a non-VA provider when [the existing] VA facilities or other government facilities are not capable of furnishing economical hospital care or medical services because of geographic inaccessibility or are not capable of furnishing care or services required. The VA continues to develop new telehealth services to meet the needs of veterans. According to the VA FY2019 funding and FY2020 advanced appropriations budget request to Congress, for example, the Comprehensive Opioid Management in Patient Aligned Care Teams (COMPACT) team is "testing a telehealth-based self-management training system to promote improved care for [v]eterans receiving chronic opioid therapy." The VA's Partnership with Walmart On December 6, 2018, the VA announced a new partnership with Walmart that aims to reduce access barriers to VA care that underserved veterans experience. Through this partnership, which is part of the VA's Advancing Telehealth through Local Access Stations program, the VA is establishing a pilot program whereby underserved veterans in certain locations would access VA telehealth services in donated spaces at Walmart retail stores. Walmart would provide the VA with operational support. According to Walmart, the prospective locations will be based on "the number of veterans and the health resources offered." The VA has stated that its decision to partner with Walmart is based on the fact that more Americans live near a Walmart store than a VA medical center (VAMC). According to the VA, [90%] of Americans live within ten miles of a Walmart. Ninety percent of veterans [do not] live within ten miles of a [VAMC]. The VA reported to Congress that there were an estimated 172 VAMCs in 2019. For that same calendar year, the VA also reported to Congress that there were other VA medical facilities within the VA health care system, including 23 health care centers, 300 vet centers, and 728 community-based outpatient clinics. The VA has not yet stated how many veterans live near other VA medical facilities in relation to Walmart stores. This information would be helpful to Congress as it considers measures relating to the use of existing VA spaces. This prospective pilot program has raised some concerns, however, because according to the Veterans Rural Health Advisory Committee (VRHAC), Walmart is encountering some of the same challenges that the VHA has met when expanding telehealth services to rural veterans, such as keeping pace with technology for virtual care and the expansion of bandwidth. However, such challenges could be location-specific and not representative of all Walmart retail store locations. VA Teleconsultations Current law (Chapter 17 of Title 38 of the U.S. Code ) refers to teleconsultation as "the use by a health care specialist of telecommunications to assist another health care provider in rendering a diagnosis or treatment." The law defines teleconsultation in relation to VA's delivery of mental health and traumatic brain injury assessments. The VA extends its use of teleconsultations in the delivery of VA care with the goal of improving veteran patients' health care outcomes, particularly those of rural veterans. For example, the VA has adopted and modified the Project Extension for Community Healthcare Outcomes (Project ECHO) learning model, which the Expanding Capacity for Health Outcomes Act ( P.L. 114-270 ) required the HHS Secretary to examine and report on, to create a Specialty Care Access Network-Extension for Community Healthcare Outcomes (SCAN-ECHO) learning model. , Project ECHO is a global, technology-enabled collaborative learning model, whereby medical educators and specialty care health care providers disseminate best practices to primary care and rural health care providers, with the goal of improving the health outcomes of rural and underserved patients. The best practices are disseminated through different modalities such as teleECHO , which is the delivery of medical education such as patient case-based learning through a virtual network. TeleECHO is delivered through a hub-and - spoke model , which refers to a structure whereby a central point (the "hub") disseminates information to different connecting points (the "spokes"). The VA launched SCAN-ECHO in 2011, with the goal of expanding VA care to rural veterans and veterans that live in medically underserved areas. According to the VA, SCAN-ECHO refers to an approach to provide specialty care consultation, clinical training, and clinical support from specialty care teams to rural primary care providers (PCPs) using video teleconferencing equipment. VA teleconsultations generally transpire under SCAN-ECHO using the hub-and-spoke model. The "hubs" are the specialty care providers who are on specialty care teams, and the "spokes" are the PCPs who are on patient aligned care teams (PACTs). According to the VA, SCAN-ECHO transpires when [PCPs] present a patient's case using multi-site videoteleconferencing equipment. Providers then take information back to the patient for discussion and collaborative decision making. The specialty care team collaborates, culminating in a recommended treatment plan. In addition to case presentations, formal clinical education is provided. The Expanding Capacity for Health Outcomes Act (ECHO Act; P.L. 114-270 ) required the HHS Secretary to examine technology-enabled collaborative learning and capacity-building models and report the findings to Congress no later than two years after enactment. In February 2019, the Office of the Assistant Secretary for Planning and Evaluation (ASPE), within HHS, submitted the required report to Congress. ASPE retrieved information about SCAN-ECHO from the VA and found that the VA has evaluated the use of SCAN-ECHO for medical conditions and health care services such as chronic liver disease, diabetes, and women's and transgender health care services. For example, ASPE found that the VA studied the difference in health outcomes of 62,750 veterans with chronic liver disease between 2011 and 2015. Of those 62,750 veteran patients, 513 of them had received virtual teleconsultations with VA providers who were participating in SCAN-ECHO. According to ASPE, "those receiving the intervention were much less likely to die than those who had no SCAN-ECHO consultation over the same time period." SCAN-ECHO is an example of the VA's efforts to expand the capability of VA telehealth to "underproductive providers to assist access-challenged providers." Issues for Congress The VA is leveraging the use of telehealth with the goal of expanding veterans' access to VA care. Based on its experience with telehealth to date, the VA has stated that increased access to telehealth could reduce the use of VA travel benefits by veterans and reduce hospital admissions. Telehealth is not a new form of health care delivery. It is a multibillion dollar industry in both the federal and private sectors, showing upward trends in telehealth access, utilization, innovation, and spending. Discussed below are three issues that Congress may choose to examine while considering additional topics related to veterans and telehealth services: (1) access barriers to in-person VA care continues to exist, (2) some veterans lack access to the internet, and (3) VA providers' guidelines for prescribing controlled substances via telehealth are different. Access Barriers to In-Person VA Care Continue to Exist According to the VA, the agency cannot meet veterans' demand for VA in-patient care. Congress and the VA have considered measures and initiatives to expand veterans' access to VA care using telehealth. The expansion of VA telehealth does not address the access barriers that veteran patients' face when seeking in-person VA care. Instead, telehealth provides veterans with an alternate way to access health care services through the VHA. The VA is predicting that the U.S. veteran population will decrease by 32%—from 20.0 million veterans in 2017 to 13.6 million veterans in 2037. This prediction does not equate to a lower number of veterans seeking, enrolling in, and accessing VA care in the future. For example, more than three-fourths of the 13.6 million veterans that the VA projects will be in the U.S. veteran population in 2037 might choose to enroll in and access care through the VA health care system. Congress may consider whether the VA should continue to expand veterans' access to VA in-person care in VA brick-and-mortar buildings and/or through VA telehealth services by assessing how such modes of delivery effect the cost and quality of care (in addition to timely access). Some Veterans Lack Access to the Internet The overarching goal of the MISSION Act and VA final rule on telemedicine is to expand veteran patients' access to care using telehealth. The use of telehealth services requires that veteran patients have access to the internet to connect to VA telehealth providers. Veteran patients who do not have readily accessible internet connections would likely have difficulty reaching their VA providers. According to the National Center for Veterans Analysis and Statistics (NCVAS), an estimated 20.1% of veterans did not have internet access in 2016. In April 2018, for example, the GAO found that some veterans who live on the U.S. Pacific Islands such as Guam and American Samoa, could not access the internet because of damaged cables and equipment failures that occurred during inclement weather. The VA is investigating ways to expand veteran patients' access to VA telehealth services to address veterans' lack of access to the i nternet . Specifically, t he agency is evaluating the feasibility of non-VA facilities (e.g., libraries, schools, and post offices) serving as i nternet /online hotspots, and retaining VA kiosks where veteran patients can access telehealth services. Congress and the President have responded to this divide by enacting measures such as the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 ( P.L. 115-141 ; RAY BAUM's Act of 2018). The RAY BAUM's Act of 2018 required, among other things, the Federal Communications Commission (FCC) to submit a report to Congress on promoting broadband internet access to veterans, particularly to rural veterans and veterans with low incomes. The FCC submitted the report to the Senate Committee on Commerce, Science, and Transportation and the House Committee on Energy and Commerce in May 2019. According to the FCC's report, the 2.2 million veteran households that do not have access to broadband internet experience barriers when adopting broadband such as the inability to pay for the service and the lack of broadband development in their geographic location. In future discussions regarding this issue, Congress may consider the costs associated with deploying broadband infrastructure in underserved geographic areas. According to the VA, some veteran patients are given tablets "that operate over 4G LTE mobile broadband to support VA Video Connect," where infrastructure is lacking. Conflicting Guidelines for Prescribing Controlled Substances via Telehealth across State Lines Congress continues to address concerns regarding the prescribing of controlled substances such as opioids. The VA MISSION Act and the VA's final rule do not address the prescribing of controlled substances to veteran patients who are not receiving services from within VA medical facilities, or who are not in the same state as the prescribing physician, as permitted under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (Ryan Haight Act; P.L. 110-425 ). Section 311(h)(1) of the Controlled Substance Act (CSA), which was added by Section 3 of the Ryan Haight Act, authorized the special registration for telemedicine with the goal of increasing patients' access to practitioners that can prescribe controlled substances via telemedicine in limited circumstances. Current law defines a practitioner as a physician, dentist, veterinarian, scientific investigator, pharmacy, hospital, or other person licensed, registered, or otherwise permitted, by the United States or the jurisdiction in which he practices or does research, to distribute, dispense, conduct research with respect to, administer, or use in teaching or chemical analysis, a controlled substance in the course of professional practice or research. The registration would enable a practitioner to deliver, distribute, dispense, or prescribe via telemedicine a controlled substance to a patient who has not been medically examined in person by the prescribing practitioner. While the CSA authorized the special registration for telemedicine, practitioners have not been able to apply for this special registration. The Drug Enforcement Administration (DEA) has yet to finalize a rule on the registration's application process and procedures and the limited circumstances that warrant it. The Ryan Haight Act expressly exempts VA providers and VA-contracted providers from needing to obtain a special registration in each state where the providers choose to practice, if they meet two conditions. First, the providers must prescribe the controlled substance within the scope of their employment at the VA. Second, the providers must either (1) hold at least one state registration to prescribe a controlled substance or (2) prescribe in a VA health care facility while using the registration of that facility. The special registration, though not implemented yet by the DEA, the MISSION Act, or the VA's final rule on telehealth, might confuse VA providers about whether they must hold a license in each state where they intend to prescribe controlled substances to veteran patients. The special registration would allow a VA provider to prescribe a controlled substance in a state where the provider is not licensed to practice. The MISSION Act and the VA's final rule on telehealth, in contrast to the special registration, do not preempt state laws regarding the prescribing of controlled substances. VA providers must be licensed in each state where the provider intends to prescribe a controlled substance. Congress could consider encouraging the VA to develop guidelines on how its providers would prescribe controlled substances to veteran patients who are not receiving telehealth services from within VA health care facilities. Appendix A. Abbreviations Used in This Report Appendix B. History of VA Telehealth For decades, the VA has provided telehealth services to veteran patients to improve health care access and to address delivery challenges, such as shortages of in-patient beds and health care providers skilled in the delivery of veteran-centric care. In the 1950s and 1960s, for example, the VA had difficulties in recruiting psychiatrists and neurologists. In FY1961, there were 18,722 eligible veterans on a waiting list to receive VA inpatient care for psychiatric and neurological health care conditions. That same year, the VA started testing the use of telehealth, with the goal of addressing the aforementioned challenges that veteran patients were experiencing when trying to access VA in-person care for psychiatry and neurology services. According to the VA's Annual Report for FY1961, the VA tested the use of telehealth by using the closed-circuit television ( CCTV) technology as a telehealth modality. The CCTV technology refers to a system that "links a camera to a video monitor using a direct transmission system." VA physicians and therapists at a VA medical facility in Oklahoma City, OK, had used the CCTV technology to disseminate best practices and trainings on therapy and psychiatry with the goal of improving veteran patients' health care outcomes. According to the VA, its use of telehealth using the CCTV technology was a success because [t]he results indicate that this form of communication can be a valuable tool in the treatment of psychiatric patients and in the training of personnel in psychiatric service. In addition, it shows the potential in a number of other medical applications, such as, for example, an education technique in surgical training. Since then, the VA has aimed to address veterans' access barriers to VA in-person care using updated telehealth technologies and equipment, which are discussed under the " VA Telehealth Components " heading in this report. Legislative History of VA Telehealth The Congress has passed several laws that address VA telehealth. Provided below is a high-level legislative history of VA telehealth, to help inform any future congressional discussion on this issue. For each Congress, beginning with the 109 th (January 3, 2005 to January 3, 2007) there is a brief narrative summarizing at least one legislative provision that aims to address VA telehealth. This list may not be comprehensive. Veterans Benefits, Health Care, and Information Technology Act of 2006 (109 th Congress) The Veterans Benefits, Health Care, and Information Technology Act of 2006 ( P.L. 109-461 ), among other things, required the VA Secretary to increase the number of VA medical facilities that are capable of providing readjustment counseling services via telehealth. Veterans' Mental Health and Other Care Improvements Act of 2008 (110 th Congress ) The Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ), among other things, required the VA Secretary to develop a pilot program to assess the feasibility and advisability of providing certain veterans with peer outreach, peer support, readjustment counseling and other mental health services, using telehealth to the extent practicable. Caregivers and Veterans Omnibus Health Services Act of 2010 (111 th Congress) The Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ), among other things, allows the VA Secretary to contract with community mental health centers and other qualified health entities with the goal of expanding veterans' access to VA telehealth services. Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 (112 th  Congress) The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ), among other things, allows the VA Secretary to waive veteran patients' copay requirements for telehealth. The Veterans Access, Choice, and Accountability Act of 2014 (113 th Congress ) The Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 ), among other things, requires the VA Secretary to improve veterans' access to VA telehealth via mobile vet centers and mobile medical facilities. The Faster Care for Veterans Act of 2016 (114 th Congress) The Faster Care for Veterans Act of 2016 ( P.L. 114-286 ), among other things, requires the VA Secretary to ensure that veteran patients can schedule their own medical appointments for VA telehealth services. John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (115 th Congress) The John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 ( P.L. 115-182 ; VA MISSION Act of 2018), among other things, removes all geographic barriers to VA telehealth and therefore allows veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. Appendix C. VA Provider Authority to Provide Telehealth Services Anywhere Veteran patients who cannot access telehealth because of provider shortage gaps may benefit from having access to out-of-state telehealth providers in non-VA health care facilities. Generally, states determine whether a health care provider can provide a health care service across state lines because states handle provider licensure. Each state has the authority to establish its own licensure requirements, and each state licensing board has its own eligibility requirements for health care providers. Due to state-specific licensing laws, a health care provider licensed and certified in one state may not be able to provide health care services to patients located in another state where the provider is not licensed. State licensing laws can cause some health care providers to experience geographical and licensing-related barriers to providing health care services across state lines to rural and underserved populations. On August 3, 2017, the White House and the VA announced the Anywhere to Anywhere initiative, which aims to remove the geographic barriers that veterans might experience when accessing VA care. Under this initiative, a veteran patient can access VA telehealth services anywhere from a VA provider located outside of a VA health care facility. The initiative is a joint effort between the VHA, the White House Office of American Innovation, and the Department of Justice. The VA's attempt to expand veterans' access to VA care via telehealth under this initiative was threatened by its providers' experiences of geographic and licensing barriers to delivering the services across state lines. On October 30, 2017, a House Committee on Veterans Affairs report found that the continued expansion of telemedicine across the VA health care system is constrained by restrictions on the ability of VA providers to practice telemedicine across state lines without jeopardizing their state licensure and facing potential penalties for the unauthorized practice of medicine. On May 11, 2018, the VA published a final rule in the Federal Register to exempt its providers who deliver care via telehealth from certain state licensing laws and regulations. Two major elements of the final rule changed the VHA's existing practice delivery: (1) VA providers may deliver telehealth services outside of VA health care facilities and (2) state licensing boards may no longer deny or revoke a VA provider's license if he or she provides a telehealth service in a state where the provider is not licensed to practice in non-VA health care facilities. According to the VA, the prohibition addresses the concerns of some VA providers that chose not to provide telehealth services across state lines in non-VA health care facilities because their state licensing boards might take action against their licenses for doing so. In March 2018, for example, the VA Pacific Island Health Care System reported to the GAO that it had concerns about delivering a telehealth service to a veteran patient in his or her home because a state could require VA providers to be licensed in the state where the patient resides. The final rule does not preempt state laws regarding the prescribing of controlled substances, nor does it extend beyond the telehealth provider's employment at the VA or extend to VA-contracted providers. A VA-contracted provider must continue to practice under the laws and regulations of his or her state of licensure. The rule became effective on June 11, 2018, five days after the enactment of the VA MISSION Act. The VA MISSION Act, among other things, removed all geographic barriers to VA telehealth and therefore, allowed veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. According to Chapter 17 of Title 38 of the U.S. Code , (d) Relation to State Law. (1) The provisions of this section shall supersede any provisions of the law of any State to the extent that such provision of State law are inconsistent with this section. (2) No State shall deny or revoke the license, registration, or certification of a covered health care professional who otherwise meets the qualifications of the State for holding the license, registration, or certification on the basis that the covered health care professional has engaged or intends to engage in activity covered by subsection (a). The VA MISSION Act codified the core principles of the above-mentioned final rule with the goal of protecting VA providers against possible liability issues stemming from state licensure laws. This authority is given only to VA providers that meet the statutory requirement of a "covered health care professional." According to the VA, nearly 10,000 VA providers gained the authority to provide out-of-state telehealth services to veteran patients in non-VA health care facilities in states where the provider is not licensed to practice. Appendix D. Total Number of Veteran Patients who Had Received VA Telehealth Services and Total Number of Telehealth Encounters that Transpired, FY2009-FY2018

The Veterans Health Administration (VHA), of the Department of Veterans Affairs (VA), is leveraging the use of telehealth with the goal of expanding veterans' access to VA care. Telehealth generally refers to the use of information and communication technology to deliver a health care service. It is a mode of health care delivery that extends beyond the "brick-and-mortar" health care facilities of the VHA. VA telehealth services are generally provided on an outpatient basis and supplement in-person care. Such services do not replace VA in-person care. The VA copay requirements for telehealth are the same as for VA in-person care, but in some cases may be lower than the copays for VA in-person outpatient health care services delivered through the VHA. President Trump and Congress have recently enacted measures such as the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks of 2018 (VA MISSION Act; P.L. 115-182 ) that aim to address the access barriers that veterans may experience when accessing VA telehealth services across states lines. The VA MISSION Act, among other things, removes all geographic and licensing barriers to VA telehealth, thereby allowing veterans to access VA telehealth services in their communities from any location in the United States, U.S. territories, District of Columbia, and Commonwealth of Puerto Rico. VA Telehealth Modalities In FY2018, more than 9.3 million veterans were enrolled in VA care. In that same fiscal year, the VA provided 2.29 million telehealth episodes of care to 782,000 veteran patients collectively using the following three VA telehealth modalities: (1) home telehealth, (2) store-and-forward telehealth, and (3) clinical video telehealth. The VA has developed VA mobile applications (apps), which refer to software programs that run on certain operating systems of mobile devices (e.g., smartphones and tablets) and computers that transmit data over the internet that veterans can access as telehealth applications. Veterans can access VA mobile apps on cellular and mobile devices that operate using either a web-based platform, an iOS platform, or an Android operating platform. VA Telehealth Partnerships and Access According to the VA, it cannot meet the health care demands of veteran patients in-house and therefore, it has established partnerships with private sector vendors to help address veterans' demand for VA care. For example, the VA's partnership with the wireless service provider T-Mobile would allow a veteran who has T-Mobile as a cellular wireless service provider to access the VA Video Connect app without incurring additional charges or reducing plan data allotments. VA Teleconsultations VA providers can use telehealth platforms and applications to consult with one another, which is referred to as a teleconsultation by section 1709A(b) of title 38 of the U.S. Code . The VA has adopted and modified the Project Extension for Community Healthcare Outcomes (Project ECHO) learning model, which the Expanding Capacity for Health Outcomes Act ( P.L. 114-270 ) required the Secretary of the Department of Health and Human Services to examine and report on, to create a Specialty Care Access Network-Extension for Community Healthcare Outcomes (SCAN-ECHO) learning model. The VA's SCAN-ECHO is a similar approach that aims to connect underproductive providers to assist access-challenged providers, using the hub-and- spoke model , which refers to a structure whereby a central point (referred to as the "hub") disseminates information to different connecting points (referred to as the "spokes"). Topics Covered in This Report This report provides background information on VA telehealth, including veteran eligibility and enrollment criteria, VA telehealth copayment requirements, and VA providers' authority to provide telehealth services anywhere. The report also discusses the components of VA telehealth. It also discusses three issues that Congress could choose to consider: (1) access barriers to in-person VA care, (2) lack of access to the internet, and (3) conflicting guidelines for prescribing controlled substances via telehealth across state lines.

GAO_GAO-19-410

Background Several bureaus within Interior are responsible for the leasing, permitting, and inspecting of mineral extraction activities on federal lands and waters. Interior’s Bureau of Land Management (BLM) is responsible for onshore activities and manages approximately 700 million acres of subsurface mineral rights throughout the country, including the acreage it leases to companies for oil and gas development. At the end of fiscal year 2016, about 41,000 oil and gas leases accounted for approximately 28.2 million acres in 32 states, according to BLM data. For offshore oil and gas activities, the Bureau of Ocean Energy Management is generally responsible for leasing and resource planning and evaluation, among other functions, and the Bureau of Safety and Environmental Enforcement is generally responsible for permitting and inspecting as well as verifying production volumes on offshore leases, among other functions. Under the Outer Continental Shelf Lands Act, as amended, Interior is responsible for leasing and managing approximately 1.71 billion offshore acres. To begin the leasing process, Interior holds auctions through which companies may secure the rights to federal leases that allow them to drill for oil and gas upon meeting certain conditions. Once a company obtains a lease, it may conduct further exploration and subsequently determine whether it would like to drill a well. If a company plans to drill, it must first secure a permit from Interior. To secure a permit to drill under an onshore lease, a company must submit an application for a drilling permit to the appropriate BLM field office. BLM officials then evaluate the company’s proposal to ensure that it conforms to the relevant BLM land use plan for the area as well as applicable laws and regulations, including those focused on protecting the environment. To secure a permit to drill on offshore leases, a company must submit an application for a drilling permit to the Bureau of Safety and Environmental Enforcement, where it is reviewed for completeness and whether all technical elements conform to applicable regulations. Once a company secures a permit and begins producing, oil and gas is transported to market and sold. As part of this process, companies may elect to process the natural gas into various products before its sale. Under ONRR regulations, companies may deduct certain costs associated with transportation and natural gas processing from the royalties due. Companies can continue to produce oil and gas until the lease is no longer capable of producing in paying quantities, regardless of the length of the lease. To ensure compliance with applicable laws, regulations, and other requirements, both BLM and the Bureau of Safety and Environmental Enforcement have inspection and enforcement programs that are designed to verify that companies comply with all requirements at the lease site, including those related to measuring oil and gas volumes. The authority for inspecting wells and leases for this purpose is derived from FOGRMA. The act requires the Secretary of the Interior to develop guidelines that specify the coverage and frequency of inspections. Interior has delegated responsibilities for implementing the act to BLM for onshore leases and to the Bureau of Safety and Environmental Enforcement for offshore leases. ONRR’s Role in Collecting, Disbursing, and Verifying Royalties ONRR’s oversight of federal royalties includes collecting company-paid royalties, disbursing these royalties to appropriate accounts, and verifying the company-paid royalties through its compliance activities. Collecting: Companies that obtain federal onshore or offshore oil and gas leases are typically obligated to pay royalties on any oil or gas they produce from the leases and then sell. As a condition of producing oil and gas under federal and Indian leases, companies are required to submit two key monthly reports to ONRR—one specifying the total production and disposition of oil and gas and the other stating the royalties due based on production. However, because of various leasing and development arrangements made by companies, these two reports are often submitted by different companies. The companies physically developing the lease, referred to as the operators, are responsible for reporting the production volumes to ONRR in monthly production reports. The companies with a financial interest in the lease, referred to as the payors, are responsible for reporting the cash royalty owed on the federal and Indian oil and gas production in their monthly royalty reports. Each month, payors are to calculate the royalty payment owed to the federal government using the four key variables illustrated in the following equation: Royalty payment = ((volume sold x sales price) less deductions) x royalty rate Companies are to submit monthly production and royalty reports via a web-based portal to ONRR’s royalty information technology (IT) system. In addition to filing the royalty report with ONRR, companies typically make the actual cash royalty payment via an electronic fund transfer to an account at the Department of the Treasury (Treasury). Disbursing: Once ONRR reconciles the self-reported royalty payment data from the monthly royalty reports with the payments to Treasury, ONRR is to disburse the royalties from the Treasury account to the appropriate federal, state, tribal, or Individual Indian Money (IIM) accounts. All these transactions are to be recorded and stored in ONRR’s IT system. Verifying: ONRR is responsible for verifying royalties through its compliance program, which includes ensuring that the royalty revenues generated from the sale of oil and gas extracted from leased federal lands are accurately reported and paid. In conducting its compliance activities, ONRR is to assess the elements of the royalty equation: commodity price, volume of oil and gas, transportation and processing allowances, and royalty rate. ONRR also is to ensure that all relevant laws, regulations, and lease terms have been followed. ONRR has two key statutory requirements for its compliance program: FOGRMA and the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA). FOGRMA requires that ONRR establish a comprehensive auditing system to provide the capability to accurately determine oil and gas royalties. RSFA directs ONRR not to conduct audit activities if it and the relevant state determine that the cost of conducting or requiring the audit exceeds the expected amount to be collected by the activity, based on the most current 12 months of activity. ONRR’s Work Planning Group identifies which companies or leases will be subject to compliance activities. The three primary levels of compliance activities ONRR conducts are audits, compliance reviews, and data mining—each of which provides a varying degree of assurance that royalties are accurately paid. Audits: According to ONRR documents, an audit involves detailed examinations of companies’ royalty payments and corresponding reporting to ONRR. As part of an audit, ONRR staff are to assess the accuracy and completeness of the companies’ self-reported production and royalty data compared to third-party documents, such as sales contracts and oil and gas sales receipts from pipeline companies. According to ONRR documents, it is to design its audits to ensure that royalty payments and other obligations to ONRR are in substantial compliance with applicable lease terms, federal laws and regulations, and other policies. Compliance reviews: ONRR describes compliance reviews as an analysis designed to determine the reasonableness of company- reported production and royalty data. In contrast to audits, compliance reviews are quicker, more limited checks on the accuracy and completeness of companies’ self-reported data and do not include systematically examining the underlying source documentation used to generate the self-reported data. Data mining: ONRR began its data mining program in 2011 and officially organized it within the compliance program beginning in fiscal year 2018. Data mining is a partially automated activity to identify and resolve data errors prior to audits and compliance reviews. According to ONRR officials, data mining examines large sets of company- reported data for certain common errors, such as irregularities in the volume of oil or gas extracted. Officials stated that data mining generally identifies obvious data errors that ONRR staff work with companies to correct. The process companies are to follow to produce oil and gas from federal leases, bring it to market, transmit required data to Interior, and pay royalties is outlined in figure 1. The State and Tribal Royalty Audit Committee FOGRMA authorizes the Secretary of the Interior to enter into cooperative agreements with states to share oil and gas royalty management information and carry out inspection, audit, investigation, and enforcement activities on federal and Indian lands. Currently, the nine states that are members of STRAC have delegated authority to conduct compliance activities for federal lands in their respective state. These agreements form the framework of ONRR’s relationship with states for mineral revenue compliance activities. A governor or other appropriate official with delegation authority may request that Interior enter into a cooperative agreement with a state by sending a letter to the Director of ONRR. States may also elect to end these agreements at their discretion with a 120-day notice. States have a vested interest in ensuring that all royalties are paid accurately because states receive a portion of the royalties that the federal government collects, including additional collections resulting from compliance activities identifying underpayment. ONRR also reimburses states for the costs of performing approved and eligible compliance activities, including compliance activities under the cooperative agreement. State audit offices that have entered into agreements with ONRR are to submit yearly work plans identifying the compliance activities they propose to conduct in the next fiscal year, which ONRR is to review and approve. Member states can conduct both audits and compliance reviews, and ONRR requires that the state auditors follow the procedures established in generally accepted government auditing standards and ONRR’s audit and compliance review manuals. To ensure that compliance activities are conducted in accordance with generally accepted government auditing standards and relevant ONRR manuals, states are to undergo an external peer review every 3 years, during which they are assessed on their adherence to the standards and manuals and whether they provided corrective actions to any identified problems. Performance Management Information and Controls A key practice in results-oriented management for federal agencies is establishing agency-wide, long-term strategic goals. The Government Performance and Results Act of 1993 (GPRA), which was significantly enhanced by the GPRA Modernization Act of 2010 (GPRAMA), requires federal agencies, among other things, to develop strategic plans with long-term, outcome-oriented goals; annual goals linked to achieving the long-term goals; and annual reports on the results achieved, as assessed through the use of performance measures and targets. Federal departments and agencies must comply with these requirements and are to follow associated Office of Management and Budget guidance when developing their agency-wide strategic plans. We have reported that these requirements also can serve as leading practices for strategic planning at lower levels within federal agencies, such as planning for individual divisions, programs, or initiatives. These leading practices include defining the mission and goals of an agency or a specific program and developing and using performance measures that allow an agency to track its progress toward its mission and goals. ONRR issued a fiscal year 2017 strategic priorities document that contains the agency’s mission statement: “to collect, account for, and verify natural resource and energy revenues due to states, American Indians, and the U.S. Treasury.” ONRR stated in the document that it planned to achieve Interior’s strategic goals to (1) timely disburse 98 percent of federal and Indian revenues, (2) close 85 percent of Interior’s OIG and GAO recommendations targeted for implementation in fiscal year 2017, and (3) report results of ONRR’s supporting performance measures for Interior’s strategic goals on total ONRR compliance collections and a 3-year average compliance return on investment. ONRR also stated that it planned to create an ONRR strategic plan. History of Oil and Gas Royalty Oversight Challenges In the 1970s and early 1980s, we and Interior’s OIG reported on Interior’s management of the oil and gas revenue collection system. Interior’s OIG issued five reports critical of the program from 1969 through 1977 that raised concerns about royalty collections. In 1981, we reported that Interior was not collecting potentially hundreds of millions in royalties due from federal oil and gas leases. In response, in 1981, the Secretary of the Interior established the Commission on Fiscal Accountability of the Nation’s Energy Resources, also known as the Linowes Commission, to investigate allegations of irregularities in royalty payments, among other issues. The Linowes Commission raised a number of concerns, and its 1982 report stated that management of royalties for the nation’s energy resources had been a failure for more than 20 years. The report found that because the federal government had not adequately managed this multibillion-dollar enterprise, the oil and gas industry was not paying all the royalties it rightly owed. The report cited a range of problems, including the failure to verify data that companies reported as well as late payments and underpayments. Following this report, Interior and Congress took actions aimed at improving revenue collection, including reorganizing oil and gas revenue collections under a new bureau within Interior, passing FOGRMA in 1982, and passing RSFA in 1996. In December 2006, Interior’s OIG analyzed ONRR’s compliance processes and issued a report that made several recommendations to improve these processes and the agency’s systems for tracking them. The report identified deficiencies with how ONRR maintained compliance-related information and recommended changes for how ONRR measures its compliance activities’ performance. In 2007, Interior’s Subcommittee on Royalty Management—a subcommittee of the Royalty Policy Committee—issued a report that reiterated several of the findings from Interior’s OIG report on ONRR and further stated that several aspects of royalty management activities required prompt and, in some cases, significant management attention. In particular, the report included over 100 recommendations for improving Interior’s management of oil and gas resources, including recommendations related to audit, compliance, and enforcement. Appendix I provides a list of the subcommittee’s recommendations and the status of their implementation, according to Interior documents and interviews with Interior officials. We identified several challenges with Interior’s management of federal oil and gas in the 2000s. In February 2011, in part because of the challenges identified in our past work, we added Interior’s management of federal oil and gas resources to our list of program areas at high risk for fraud, waste, abuse, and mismanagement. In the March 2019 update of our High-Risk List, we found that Interior had made progress improving its management of federal oil and gas resources. However, additional steps are needed to improve Interior’s royalty determination and collection. Recent ONRR Initiatives ONRR, according to officials, has begun implementing several initiatives that seek to make the agency operate more effectively. In March 2017, ONRR initiated Boldly Go, an effort to assess its organizational structure and identify and implement potential improvements. According to ONRR officials, this initiative was in response to March 2017 comments from the Secretary of the Interior, in which he said the department, in general, should undergo a “bold restructuring.” ONRR officials said that the Boldly Go organizational restructuring was implemented in October 2017 and included several changes to how ONRR conducts its compliance work. Before the reorganization, audits and compliance reviews were part of the same management group—referred to as the Audit and Compliance Management group. After the reorganization, audits and compliance reviews are managed separately. Audits now have their own management group, referred to as Audit Management. According to ONRR officials, the new Audit Management group conducts audits of multiple companies and properties and will attempt to identify more systemic misreporting issues common to those companies and properties. ONRR staff who conduct compliance reviews were moved into the same management group as the data mining staff in the new Compliance Management group. According to ONRR officials, the merger occurred because both groups use similar data sources to conduct less in-depth checks of the royalty data than audits. Additionally, officials stated that putting these activities under the same management could assist in better targeting companies for similar compliance issues. Prior to the reorganization, identifying and selecting cases for audits and compliance reviews was a function of the Audit and Compliance Management group. After the reorganization, this function was moved to a new Analytics and Risk Management group that is also tasked with using data analytics methods, such as computerized analysis of spatial and geographic data, to better identify noncompliant royalty payments. ONRR is also in the process of implementing a new electronic compliance case management and work paper tool referred to as the Operations and Management Tool (OMT). According to ONRR documents, OMT is to combine multiple systems into one and is intended to serve a variety of functions. ONRR documents state that OMT is designed to be a single standardized system that reduces manual data entry, creates a single system of record for ONRR case data, offers error checks to eliminate data entry errors, and provides greater transparency for outside auditors. One ONRR official stated that the agency plans to have ONRR’s data mining, compliance review, and audit teams all using OMT to manage their compliance work in 2019. According to some ONRR and state audit officials, ONRR piloted OMT’s electronic compliance case management system in North Dakota in 2018, and ONRR expects to offer OMT as an option to other STRAC partners for their audit and compliance review case management needs. Finally, the agency introduced a new auditor training curriculum in April 2018. Shortly after new auditors are hired, they are expected to begin ONRR’s training program, and according to ONRR’s training manual, they are expected to complete the training within 2 years of their hire dates. According to ONRR officials, courses will also be available to existing audit staff upon request. ONRR Reported Generally Meeting Annual Royalty Program Compliance Goals, but Its Goals May Not Align with the Agency’s Mission ONRR reported generally meeting its annual royalty compliance goals for fiscal years 2010 through 2017. To meet its compliance goals, ONNR used all three levels of compliance activities—audits, compliance reviews, and data mining—each of which provides a different level of assurance. However, ONRR’s compliance goals may not align with the agency’s mission to ensure the accuracy of royalty payments and other statutory requirements. ONRR Reported Generally Meeting Compliance Goals and Revised Its Goals Multiple Times ONRR reported generally meeting its annual compliance goals—those from Interior’s strategic plan and bureau-specific goals—for its royalty compliance program for fiscal years 2010 through 2017, and the agency made multiple revisions to its goals during this period. Our analysis of Interior’s annual budget justifications for fiscal years 2010 through 2017 found that ONRR reported meeting its compliance goals for 6 of the 8 fiscal years we reviewed (see table 1). According to ONRR officials we interviewed, the 2 years when the agency did not report meeting its compliance goals largely resulted from a shift in the focus of its goals that created a short-term misalignment of planned work and available resources. During fiscal years 2010 through 2017, ONRR revised its annual compliance goals multiple times. These included both compliance goals supporting Interior’s strategic plans covering fiscal years 2007 through 2018 and bureau-specific goals. In the revisions to its compliance goals, ONRR generally shifted from goals focused on the extent to which its compliance program was ensuring the accuracy of royalty payments to those focused on the efficiency of the program. ONRR’s accuracy goals, which included conducting compliance activities to cover a specific percentage of royalties, companies, or properties, helped it assess the extent to which it was ensuring the accuracy of royalty payments. That is, by measuring the portion of, for example, royalties subject to compliance activities, it was able to quantify the percentage of royalties that were reasonably correct or accurate. ONRR’s efficiency goals, which included conducting compliance activities to obtain a certain return on investment and additional amount of royalty collections, helped it assess whether resources spent on compliance activities were used cost effectively. According to ONRR officials, these revisions were made in an effort to continually improve its compliance performance. Table 2 identifies ONRR’s annual compliance goals for fiscal years 2010 through 2017 and establishes two categories for these goals corresponding to ONRR’s requirements under FOGRMA and the RSFA. Appendix II provides more detailed information on ONRR’s annual compliance goals and the agency’s reported compliance program performance. Conduct compliance activities on specified percentage of companies (coverage) X Conduct compliance activities on specified percentage of properties (coverage) X Conduct compliance activities on specified percentage of companies (coverage) X Conduct compliance activities on specified percentage of companies (coverage) X Conduct compliance activities on specified percentage of companies (coverage) X Conduct compliance activities on specified percentage of payors and operators (coverage) X Conduct compliance activities on specified percentage of payors and operators (coverage) Generate specified return on investment from compliance activities Generate specified return on investment from compliance activities Generate specified amount in total additional royalties Generate specified return on investment from compliance activities Generate specified amount in total additional royalties Legend: FOGRMA = Federal Oil and Gas Royalty Management Act of 1982, as amended; N/A = not applicable; RSFA = Federal Oil and Gas Royalty Simplification and Fairness Act of 1996; — = does not apply. While it is within ONRR’s purview to revise its compliance goals or targets, frequent changes may complicate management’s ability to assess performance over time because consistent goals are needed as a baseline from which to assess performance. For example, for the time period we reviewed, ONRR revised its compliance goals or goal targets nearly every year. This makes it difficult to assess, for example, how variations in resource allocations to and among its compliance activities may have affected the compliance program’s performance. The following are the types of compliance goals that ONRR used and revised for the period: Royalty coverage goal. Prior to fiscal year 2010, one of ONRR’s compliance goals was to conduct compliance activities on a specified percentage of royalties within 3 years of the date it received payment. In December 2006, Interior’s OIG issued an audit report that found, among other things, that the royalty compliance coverage goal had reduced the number of companies and properties subject to compliance work. The report stated that ONRR should consider modifying its compliance program strategy to ensure appropriate coverage of properties and companies within a reasonable time frame even if this resulted in a reduction in the overall percentage of dollars covered and recommended that ONRR develop separate performance measures for companies and properties subjected to compliance coverage. ONRR concurred with the recommendation and developed an implementation action plan. For fiscal year 2010, ONRR eliminated its royalty coverage goal in response to the OIG recommendation. Company/operator/payor and property coverage goals. For fiscal year 2010, ONRR revised its compliance goals to address company and property coverage, or conducting compliance activities—including audits and compliance reviews—on a certain percentage of companies and properties. ONRR’s fiscal year 2010 budget justification stated that the new compliance goals would reflect the cumulative percentage of unique companies and properties covered by audits, compliance reviews, or the royalty-in-kind compliance strategy. For fiscal year 2010, ONRR’s company coverage goal was to cumulatively conduct compliance activities on 57.6 percent of companies that paid royalties from fiscal years 2008 through 2012. ONRR’s property coverage goal was to cumulatively conduct compliance activities for 35 percent of properties where oil and gas had been extracted and sold from fiscal years 2008 through 2012. For fiscal year 2011, ONRR revised its compliance goals, eliminating the property coverage goal. ONRR also revised its company coverage goal to cumulatively conduct compliance activities on 66 percent of companies that paid royalties for fiscal years 2011 through 2016. ONRR further revised this goal for fiscal year 2014 to consider operators and payors instead of companies. In fiscal year 2014 ONRR established a compliance goal of conducting compliance activities on 90 percent of operators and payors but dropped the goal to 52 percent for fiscal year 2015. The goal for covering a percentage of operators and payors was eliminated beginning in fiscal year 2016, which left ONRR without a compliance goal addressing its coverage of royalty payments. Agency officials we interviewed told us that they eliminated ONRR’s company coverage goal because they concluded that the compliance program was reviewing too many companies and properties with smaller royalty payments, which officials deemed an inefficient use of limited compliance resources. ONRR officials added that budgetary constraints and the complexity of company bankruptcies and consolidation in the oil and gas industry also contributed to the goal’s elimination. Additionally, in 2008, ONRR established a data mining program to examine large sets of operator-reported data to identify royalty and reporting errors, such as when the production volumes that payors and operators reported for the same lease did not match. This work led to additional royalty collections, but ONRR did not consider these results when calculating its annual performance measure for company and property coverage. According to officials, data mining was the responsibility of ONRR’s Royalty Reporting group and was not considered compliance work. Return on investment goal. ONRR has had a goal for return on investment for fiscal years 2010 through 2017 that measured the efficiency of the compliance work that all of its program areas performed. However, Interior elevated this goal from a bureau-specific goal to a strategic plan goal for fiscal year 2017. This goal is a ratio of costs to collections for compliance activities—and is to assess whether ONRR collected additional royalties for every additional dollar the agency spends on compliance reviews, audits, and data mining. To account for variations in collections and oil and gas prices, ONRR is to calculate its performance on return on investment based on the royalties from the previous 3 years. For example, the return on investment the agency reported for fiscal year 2017 was based on revenues collected from fiscal years 2014, 2015, and 2016. According to ONRR officials, the goal for fiscal year 2017—to collect an additional $2 in royalties for every $1 spent on compliance activities—was developed based on trends from prior years. Achieving this return on investment would indicate that ONRR met its goal. Total additional royalty collections goal. In fiscal year 2016, ONRR developed a bureau-specific goal for total additional royalties collected from compliance reviews, audits, and data mining. The goal for fiscal year 2016 was to collect an additional $110 million from compliance activities. In the following fiscal year, 2017, ONRR elevated this goal to a strategic plan goal and kept the amount the same, at $110 million in additional royalties. ONRR Used All Levels of Compliance Activities to Generally Meet Goals To generally meet its compliance goals during fiscal years 2010 through 2017, ONRR used all levels of its compliance activities: audits, compliance reviews, and data mining. The number of audits completed annually generally remained the same for fiscal years 2010 through 2017, declining slightly from 162 in 2010 to 153 in 2017. During the same time period, the number of completed compliance reviews decreased, declining from 1,233 in 2010 to 683 in 2017 (see fig. 2). During this time frame, ONRR’s Data Mining group increased the number of exceptions resolved to address instances of incorrectly reported data from 4,323 in 2010 to over 26,000 in 2017. Our analysis of ONRR’s data on compliance activities showed that adding data mining financial results in 2011 was associated with a decrease in the return on investment for ONRR’s other compliance activities. Prior to including data mining, compliance reviews earned a 6 to1 return on investment, STRAC compliance work earned about a 4 to1 return on investment, and audits earned a 2 to1 return on investment. By the end of fiscal year 2017, data mining proved to be far more cost-effective for royalty compliance, with a return on investment of 9 to1. During the same time, return on investment declined for all compliance reviews (including STRAC compliance work) and all audits (see fig. 3). According to ONRR officials, the reason for this decline was that data mining was identifying royalties that might otherwise have been identified through audits or compliance reviews. Additionally, ONRR officials we interviewed stated that data mining has been more cost-effective than audits or compliance reviews in identifying additional royalties. Officials we interviewed stated that data mining often identifies more simple reporting errors. Return on investment is an indicator of the efficiency of ONRR’s compliance program. As long as ONRR is collecting more royalties through its compliance activities than it is spending on identifying those royalties, the federal government will obtain additional revenues. According to ONRR officials we interviewed, the agency does not calculate the potential additional royalty revenues that would be generated if it conducted additional compliance activities. However, ONRR officials said they do calculate the effect of reduced funding on compliance activities. For example, ONRR stated in its fiscal year 2018 budget justification document that reductions in its budget for compliance work would directly result in reductions to additional royalty collections. ONRR’s Goals May Not Align with Agency Mission and Statutory Requirements to Account for Royalty Payments ONRR’s fiscal year 2017 compliance goals, the most recent compliance goals we reviewed, may be useful for assessing certain aspects of ONRR’s performance but may not be effectively aligned with the agency’s stated mission or fulfill other statutory requirements. ONRR’s 2017 strategic priorities document states that the agency’s mission is to collect, account for, and verify energy revenues. Additionally, statutory requirements under RSFA direct ONRR not to conduct audit activities if it and the relevant state determine that the cost of conducting or requiring the audit exceeds the expected amount to be collected by the activity, based on the most current 12 months of activity. ONRR’s fiscal year 2017 return on investment compliance goal helps the agency comply with RSFA by assessing whether the agency’s compliance program is cost- effective. Moreover, ONRR’s statutory requirements under FOGRMA require that it establish a comprehensive auditing system to provide the capability to accurately determine oil and gas royalties, among other requirements. However, ONRR’s fiscal year 2017 compliance goals do not sufficiently address its mission or FOGRMA requirements, in part, because its goals do not address accuracy—or consider the extent to which its compliance work is covering, for example, royalty payments. While ONRR previously had coverage goals, agency officials told us that they eliminated their company and property coverage goals because they concluded the compliance program was reviewing too many companies and properties with smaller royalty payments. ONRR officials told us that this was deemed an inefficient use of limited compliance resources. However, it is difficult for ONRR to provide reasonable assurance that it is accurately collecting royalties when it does not have data on the extent to which, for example, royalties or companies were subject to compliance activities. According to agency officials we interviewed, ONNR stopped tracking these data when ONRR eliminated its coverage goals for fiscal year 2016. As a result, ONRR could be determining that it is meeting its current annual compliance goals but potentially doing so by examining a small percentage of royalties or companies. For example, ONRR may be able to achieve a 2 to 1 return on investment, but only conduct compliance activities on 10 percent of the approximately $5 billion in royalties paid in calendar year 2017. This raises questions about the extent to which ONRR can provide reasonable assurance that its compliance program is assessing the accuracy of oil and gas royalty payments because it does not have a goal for, or data on, the amount of royalties subject to compliance activities. Finally, because ONRR no longer has a coverage goal—which helps it assess the extent to which it has ensured the accuracy of royalty payments—it does not track the amount of royalties subject to its differing level of compliance activities. ONRR has established a compliance program with three activities—audits, compliance reviews, and data mining—each of which offers varying levels of assurance for determining the accuracy of royalty payments. However, the extent to which its compliance program allows ONRR to accurately determine and collect royalty payments is unclear because the agency does not track each compliance activity’s contribution toward a coverage goal. Interior’s OIG reported a similar finding in December 2006. In its report, the OIG found that ONRR’s compliance goal for coverage of royalties was misleading because it weighed audits and compliance reviews equally, although the two compliance activities provided differing levels of assurance about whether royalties were accurately paid. The OIG recommended that ONRR should revise the compliance goal to account for each compliance activity separately. While ONRR did not concur with establishing a goal for each of the compliance activities, it agreed to internally track separate measures for them. According to ONRR documentation, the agency took steps to identify what amount of royalties was covered by audits or compliance reviews but did not report this information. When ONRR eliminated its coverage goals for fiscal year 2016, it no longer tracked information on the extent to which royalty payments were subject to its different levels of compliance activities. By establishing a coverage goal (e.g., identifying the number of companies or percentage of royalties subject to compliance activities over a set period of time) that aligns with the agency’s mission and tracking the extent to which each of its compliance activities contributes toward this goal, ONRR would have greater assurance that its compliance program has the capability to accurately determine oil and gas royalties. ONRR’s Process to Select Compliance Cases Is Not Documented and May Not Align with Compliance Goals ONRR’s process to select compliance cases for audits and compliance reviews is not documented. Additionally, the agency does not have performance measures for determining whether its case selection process aligns with the agency’s compliance goals. Finally, while ONRR has a risk model to assist in selecting compliance cases, it has not analyzed the effect the risk model has had on its selection process. ONRR Does Not Have a Documented Case Selection Process for Audits and Compliance Reviews ONRR does not have a documented case selection process with procedures for how to select cases. According to ONRR officials, ONRR’s Work Planning Group reviews royalty information on federal oil and gas leases and selects leases from specific companies or properties to undergo either an audit or a compliance review. These officials also stated that while the process for selecting cases for audits and compliance reviews differs, the agency has no written procedures for either compliance activity on how cases should be selected. For audits, ONRR officials we interviewed told us that cases are generally selected based on research from ONRR’s recently established Analytics and Risk Management group, which includes the relocated Work Planning Group and other offices that analyze particular aspects of the oil and gas industry, such as pricing. According to these officials, the work planners or analytics staff review a variety of royalty payment and oil and gas production information to identify trends and outliers that may indicate potential royalty noncompliance. The officials told us that they also consider other factors in their selection decisions, such as whether a company was new—and therefore may be unfamiliar with how to correctly report royalties—or had undergone a change in ownership—which can lead to reporting errors. Additional factors that ONRR officials told us they considered were referrals by ONRR staff based on recently completed compliance activity on a specific company or property and the risk scores for the relevant companies and properties generated from the agency’s compliance risk model. For compliance reviews, ONRR officials we interviewed told us that the Work Planning Group includes information from a Go/No-go analysis, which they said allows ONRR to make a decision early in the process to cost effectively decide whether to initiate a compliance review. According to ONRR officials, the use of the Go/No-go analysis began in fiscal year 2015 as means to better ensure that the compliance activities they select will identify a finding of royalty noncompliance. According to the officials, the Work Planning Group then compares the list of companies and properties to other sources of information, such as the findings of recently completed work and ONRR’s royalty compliance risk model, to select cases based on the group’s professional judgment. Overall, ONRR officials we interviewed said that the Work Planning Group maintains a small pool of cases for either an audit or compliance review for when staff become available after completing other work. ONRR officials said that as there was no requirement that they develop documented procedures for case selection, they rely on the experience and training of members of the Work Planning Group to review the available information and select cases based on requests from the Audit Management and Compliance Management groups. Under federal standards for internal control, management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives, including the documentation of the internal control system. Documentation provides a means to retain organizational knowledge and mitigate the risk of consolidating that knowledge to a few personnel, as well as a means to communicate that knowledge as needed to external parties, such as external auditors. By developing a documented case selection process that includes procedures for how to select compliance cases, ONRR could better ensure that it retains the organizational knowledge needed to carry out the process effectively and can defend it to external parties. ONRR Does Not Have Performance Measures for Determining Whether the Way Such Cases Are Selected Contributes to Overall Compliance Goals ONRR does not have performance measures for determining the extent to which cases selected align with the agency’s compliance goals. ONNR’s Work Planning Group is responsible for selecting cases—that is, companies or properties—to undergo a compliance review or audit. As mentioned previously, ONRR’s fiscal year 2017 goals for its compliance program are to achieve a specified return on investment and total amount of additional royalties collected from the cases it selects to undergo compliance activities. However, according to ONRR officials we interviewed, these goals are not considered when selecting cases. Rather, these officials told us that the Work Planning Group attempts to select cases for compliance activities that are the most likely to result in a finding of royalty noncompliance. A finding of noncompliance for a company can result from a variety of circumstances, such as reporting an incorrect volume of oil or gas sold or claiming allowances for transportation and processing costs above established limits. ONRR officials stated that the agency’s IT system tracks whether a completed compliance case resulted in a finding, but the agency does not regularly assess the percentage of completed cases that produce findings. Prior to 2015, ONRR had performance measures for determining the extent to which cases selected aligned with its compliance goals but stopped using these measures after it made changes to the goals. Prior to fiscal year 2010, for example, ONRR had a goal for conducting compliance activities on a certain percentage of royalties within 3 years from the date it received payment. To support this goal, ONRR sought to select companies with relatively high royalty dollar amounts. ONRR then assessed its performance toward achieving this goal by reviewing all completed audits and compliance reviews over a 3-year period and calculating the percentage of total royalties paid over this period from completed compliance cases. For example, in fiscal year 2008, ONRR reported that compliance cases covered 69 percent of royalties received in calendar year 2004. However, as we noted previously, the 2006 OIG report found that the focus on coverage of royalties resulted in ONRR providing limited coverage of its universe of companies and properties. Additionally, ONRR officials we interviewed confirmed that selecting cases with higher royalty amounts to achieve the royalty coverage goal resulted in more limited coverage of companies because the goal directed ONRR toward repeatedly selecting many of the same large companies each year for compliance activities. In response to the recommendations in the OIG’s report as well as ONRR’s own recognition of the reduced company coverage resulting from its selection of companies that pay high royalties, ONRR transitioned to a new performance measure for case selection along with a new compliance goal in fiscal year 2010. ONRR’s new performance measure assessed the number of unique companies and properties for selected compliance activities. This new performance measure, according to ONRR officials, was driven by ONRR’s new compliance goal for cumulatively covering a certain percentage of unique companies and properties over a 3-year period. According to ONRR officials, after the company and property coverage goal was in place for approximately 5 years, officials determined that this goal and corresponding performance measure was driving the compliance case selection process to select too many companies and properties with smaller royalty payments, which they deemed an inefficient use of limited compliance resources. As a result, ONRR officials told us that the agency decided to change its compliance goal in fiscal year 2015 to focus on return on investment and total additional dollars collected. However, ONRR did not establish a corresponding performance measure for its compliance case selection process that would determine the extent to which cases selected contributed to ONRR’s compliance goals. As stated previously, we have reported that the requirements in GPRA and GRPAMA for establishing performance metrics serve as leading practices for divisions, programs, and initiatives. Performance measures help agencies make resource decisions, provide managers information on which to base their organizational and management decisions, and create powerful incentives to influence organizational and individual behavior. Furthermore, successful performance measures are aligned with division and agency-wide goals and missions. According to ONRR officials we interviewed, they have not established performance measures for determining whether the way such cases are selected aligns with the agency’s compliance goals because there is no specific requirement to do so. By developing performance measures (e.g., establishing a specified percentage of compliance cases that identify findings of royalty noncompliance or total additional royalties) that assess whether the agency is selecting cases that are helping it achieve its compliance goals, ONRR would be able to better monitor its performance in achieving its goals and whether changes to its selection process affect its performance. ONRR Has Not Analyzed the Effectiveness of Its Risk Model on Case Selection ONRR has developed a model that assesses the risk of noncompliance for companies and properties. Officials from the Work Planning Group use this model to inform their compliance case selections. However, it is unclear whether use of the model has improved case selection because ONRR has not analyzed the model’s effect on such selections. ONRR began a pilot program in 2006 to analyze the risk factors for royalty noncompliance, which included developing a quantitative risk model. In December 2006, Interior’s OIG recommended that ONRR consider additional factors that may indicate a risk of noncompliant royalty payments when making case selection decisions. In addition to the factors that ONRR was using to select cases to help achieve its compliance goals, such as cases with high royalty dollars, the OIG recommended that ONRR incorporate other risk factors, including companies or properties having a history of underreported royalties and falsely reported information to other federal agencies, such as the Environmental Protection Agency. In December 2007, Interior’s Subcommittee on Royalty Management reiterated the importance of using a risk-based process for compliance and made a number of related recommendations to ONRR. Among these were that ONRR should fully implement the quantitative model it was developing as part of its pilot program. Additionally, the subcommittee recommended that ONRR evaluate its risk model’s performance and then establish a process to continually validate and update the model to ensure that it remains effective. In response to these recommendations, ONRR worked with a contractor from 2006 through 2012 to develop an initial risk model. This model evaluated the risk of royalty noncompliance for each lease based on four characteristics: the type of lease, the specific location of the lease, the region of the country the lease was in, and the type of commodity extracted. The model looked at a number of indicators of risk, which were grouped into four overall risk drivers: complexity of the oil and gas market, complexity of regulations, commodity-specific practices, and transparency of the market. According to officials from the Work Planning Group we interviewed, they used the risk scores generated from this model to help inform the list of compliance cases to be reviewed the following year. These officials told us that they stopped using the scores from this model around 2012 for two reasons. First, the model allowed for the scores to be manually weighted based on the judgment of those selecting the compliance cases, and this weighting process was believed to have eventually hurt the accuracy of the risk scores. Second, agency officials determined that the risk scores the model was producing did not correlate closely with cases resulting in significant findings. In 2013, ONRR tasked a different contractor with developing a new set of risk models. According to an initial development document, ONRR requested separate risk models for companies and properties that would determine the propensity for a company to submit an incorrect royalty payment using historical royalty compliance data that ONRR and third- party sources provided. The contractor produced two risk models, one that assigned a risk score to companies and one to properties. The risk scores—which ranged from 0 to 100—attempted to quantify the risk of royalty noncompliance. The initial models were completed in 2014, and ONRR began including the risk scores from these models in the data that the Work Planning Group reviewed during the case selection process. Documents from the contractor show that the models then went through an initial validation process using the results of cases that the contractor selected when the models were instituted in 2014 and completed cases from 2012 onward. According to documents summarizing the contractor’s efforts, the validation showed a correlation between higher risk scores on the company model and cases that resulted in findings and additional royalty revenues. However, the contractor reported that higher risk scores on the property model did not correlate with either findings or additional royalty revenues. The documents we reviewed also included a number of recommendations to ONRR to improve its risk modeling, including adding third-party and commercial data sources, adding data sources from within ONRR and other oil and gas bureaus within Interior, and attempting to redefine property risk and building a new property risk model. However, according to officials we interviewed, they have not yet acted on any of these recommendations. ONRR requested that the contractor update the models with data from recent royalty reporting and completed compliance cases, which it did in both 2015 and 2018 but does not do either regularly or periodically. According to ONRR officials, the Work Planning Group currently considers the risk scores based on the company model when selecting cases but does not consider the risk scores based on the property model, as the group considers those scores less reliable. ONRR officials told us that they do not believe that their current risk approach is entirely effective and are considering having staff from the Analytics and Risk Management group develop a risk model for the agency. To date, ONRR has not analyzed how the use of the risk scores has affected case selection or findings of royalty noncompliance and is therefore unable to identify whether its risk model is effective. As a result, the agency does not have sufficient information to make a decision on whether to continue using the model as it exists today, consider potential improvements, or discontinue the model in favor of another approach. Federal standards for internal control state that management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to planned or expected results and analyzing significant differences. By periodically analyzing whether the risk model is effectively identifying potential royalty noncompliance and whether the model’s results are being effectively used to assist in case selection, and making changes to the model (e.g., updating it) or developing a new model based on this analysis, ONRR would be better able to determine how to proceed with using risk analysis to inform its case selections. STRAC Members Reported They Are Satisfied with ONRR Coordination but Do Not Have Documented Processes, and Compliance Activities in Their Work Plans Do Not Align with ONRR Goals STRAC Officials Expressed Satisfaction with ONRR’s Coordination on Royalty Compliance STRAC officials we interviewed from the nine member states that had agreements with ONRR for conducting royalty compliance generally expressed satisfaction with ONRR’s coordination of compliance activities, including both the frequency of interaction as well as support for budget and training. STRAC officials from all nine member states generally expressed satisfaction with the frequency of interaction between STRAC and ONRR. STRAC officials stated that this interaction occurred primarily through three mechanisms. First, ONRR and STRAC hold semiannual in-person meetings. At these meetings, STRAC officials said that attendees discuss a range of topics. For example, at the March 2018 STRAC meeting in Sacramento, California, which we attended, there were two training sessions as well as a session on updates to ONRR’s IT systems. Second, ONRR and STRAC hold quarterly teleconferences. These teleconferences, according to STRAC officials, are opportunities for both ONRR and STRAC to highlight any significant or systematic issues that they may be identifying in their compliance activities. Third, ONRR assigned agency points of contact to each STRAC member state for technical questions. The STRAC officials stated that ONRR has been responsive when they have reached out with questions or concerns. Overall, STRAC officials from seven of the nine member states said that coordination with ONRR had improved over the past approximately 10 years. STRAC officials from two of the member states attributed this improvement to ONRR leadership’s concerted effort to work more effectively with STRAC. Additionally, STRAC officials from the majority of member states generally expressed satisfaction with the support ONRR has provided STRAC member states with respect to resources and training. STRAC officials from seven of nine member states told us that the current contracted budget was sufficient to conduct oversight of their states’ federal oil and gas royalties. STRAC officials from two member states stated that the budget was insufficient. One official stated that the budget did not allow the state to review all of the federal properties for which it was responsible. The officials from the other state indicated that a larger budget would allow the state to hire additional auditors. According to these officials, additional auditors could help the state conduct compliance activities on more royalty payors and in particular small royalty payors that may not be as familiar with the requirements for federal royalty payments. STRAC officials from several member states said that the flat budget that ONRR provided over the past several years may lead to changes in their federal royalty compliance activities. For example, one official stated that without additional funding in the future, the state may have to move more experienced and higher paid auditors to state royalty compliance activities, thus leaving less experienced and lower paid auditors to conduct federal royalty compliance activities. Another official stated that the state had offered less training and reduced the amount of funds for travel to address potential budget shortfalls. Additionally, another official stated that flat budgets could make it difficult to offer staff merit pay increases. Finally, officials from seven of the nine STRAC member states said ONRR provided sufficient training on policies, procedures, and IT systems used to conduct compliance activities on federal oil and gas royalties. A STRAC official from one member state said that ONRR’s training had improved recently, while another official said that support had improved. However, STRAC officials from three member states expressed uncertainty about ONRR’s training for companies. These officials stated that they would like to understand the content of the training so they would better understand how ONRR is training companies to report royalties. STRAC Members’ Processes for Selecting Compliance Cases Are Not Documented None of the nine STRAC member states had documented case selection processes. Specifically, officials from all nine STRAC member states we interviewed said that either they did not have, or were unable to provide, documented procedures for the processes they used to select federal oil and gas compliance cases. Rather, STRAC officials stated that they relied on a variety of factors to select cases for compliance reviews. Staff expertise about companies and properties was the factor that all nine STRAC officials identified as key for case selection. For example, one official stated that she had over 10 years of experience and therefore knew what companies or properties to review. Another official stated that because staff also work on state tax audits, they can use knowledge from that work to help identify compliance cases. Another factor officials identified as assisting in the case selection process was ONRR’s company and property risk scores, though they were given varying degrees of consideration. Other factors officials identified included referrals from BLM or ONRR, and risk scores generated from their own models. Under federal standards for internal control, management should establish an organization structure, assign responsibility, and delegate authority to achieve the entity’s objectives, including the documentation of the internal control system. Documentation provides a means to retain organizational knowledge and mitigate the risk of consolidating that knowledge to a few personnel, as well as a means to communicate that knowledge as needed to external parties, such as external auditors. Because STRAC members do not have a documented process, ONRR cannot, for example, assess whether STRAC members are selecting compliance cases in a manner that aligns with ONRR’s compliance goals or that future STRAC members will know how to select compliance cases. In the agreements between the nine STRAC members and ONRR, the agency includes terms and conditions that the members agree to, but ONRR does not require STRAC members to have documented procedures for compliance case selection. By including in ONRR’s future agreements with STRAC members requirements to develop a documented case selection process, including procedures for how to select compliance cases and how to document which factors were considered in selection decisions, ONRR could better assess whether members select cases that align with the agency’s compliance goals. STRAC Compliance Activities Described in Work Plans Do Not Align with ONRR Goals We reviewed STRAC members’ annual work plans to determine whether the compliance activities discussed aligned with ONRR compliance goals. STRAC member agreements from eight of the nine STRAC members included language that the “state will contribute to ONRR’s GPRA goals and thereby the performance goals of this Agreement by performing audits, compliance reviews and other investigations in coordination with ONRR. The yearly performance goals are listed on the state’s annual work plan.” However, when we reviewed the STRAC members’ corresponding annual work plans, we found no information on how the members’ compliance activities contributed to ONRR’s goals. For example, several of the STRAC members’ work plans included information on the leases and properties selected for compliance activities but did not include information on how those selections would contribute to ONRR’s compliance goals. In addition, the majority of STRAC officials from member states said they did not consider ONRR’s compliance goals for return on investment or total additional royalty collections when selecting compliance cases. When we asked STRAC members about their goals, three of nine STRAC member states noted that they had compliance program goals. For example, one STRAC member’s goal was to “maximize revenue to the state” and “implement on behalf of ONRR and the state, a constantly improving and efficient royalty audit program.” Another member’s goal was to “protect the US Citizens’ Federal Mineral Interest within the boundaries of the state by ensuring that a fair value, as established by the federal regulations, is received.” Officials from the other six STRAC members told us that their states do not have goals for federal oil and gas royalty compliance activities because ONRR does not require that they do so. For STRAC members that did not have compliance goals, officials provided examples of informal goals—or goals that were not documented. For example, one STRAC official reported that the state’s goal was to try to audit 50 percent of royalties paid to the state every 2 years. Another STRAC official stated the state tries to review major market areas in the state once every 7 years. When we compared STRAC officials’ responses on their goals to ONRR’s broader compliance goals for return on investment and total additional royalty collections, we found that the majority of states’ compliance goals did not align with ONRR’s goals. Federal standards for internal control state that management should define objectives clearly to enable the identification of risk and define risk tolerances, such as by defining objectives in alignment with the organization’s mission, strategic plan, and performance goals. In requiring eight of the nine STRAC members to conduct compliance activities consistent with the agency’s compliance goals, ONRR was following these standards. However, ONRR approved the STRAC members’ work plans, although those work plans did not specify how the described members’ compliance activities would contribute to ONRR’s goals as the agency stated they would in the agreements between the seven of the nine STRAC members and ONRR. By requiring STRAC members to describe in their annual work plans how their compliance activities would align with ONRR’s current compliance goals, ONRR would have better assurance that activities were aligned with its compliance goals. Finally, ONRR does not track STRAC member states’ contributions against its annual compliance goals. ONRR has the data available to track these contributions because the results of STRAC members’ compliance activities are retained in ONRR’s IT system. For example, we obtained reports on the aggregate overall return on investment of STRAC members and reviewed individual data entries from STRAC members’ work that included a data field for revenue collections. According to regulations, if a state accepts delegated authority, it is to assist ONRR in meeting the requirements of GPRA as well as in developing and endeavoring to comply with ONRR’s Strategic Plan and Performance Measurements. Because ONRR does not track STRAC member states’ contributions toward its annual compliance goals, the agency has limited information for assessing whether the funding they are providing to STRAC members is achieving its goals. ONRR officials we interviewed stated that they do not track states’ contributions to ONRR’s overall compliance goals as there is no requirement to do so. However, by tracking the performance of each state and its contribution toward ONRR’s compliance goals, ONRR could better assess the effectiveness of states’ performance in supporting the agency’s mission of ensuring accurate royalty payments. Conclusions ONRR is taking steps intended to improve its royalty compliance program and better verify that all royalties paid on the sale of oil and gas extracted from leased federal lands are accurate. These steps include reorganizing the management structure of its compliance program, implementing new systems for managing compliance cases electronically, and instituting a training curriculum for newly hired auditors. However, although ONRR reported generally meeting its compliance goals for fiscal years 2010 through 2017, its current goals may not align with the agency’s mission or other statutory requirements. For example, ONRR’s fiscal year 2017 compliance goals do not sufficiently address its mission to collect, account for, and verify revenues, in part, because its goals do not address accuracy, such as through a coverage goal. Establishing a coverage goal (e.g., identifying the number of companies or percentage of royalties subject to compliance activities over a set period) that aligns with the agency’s mission, and tracking the extent to which each of its compliance activities contributes to this goal, would provide ONRR more reasonable assurance that its compliance program is assessing the extent to which oil and gas royalty payments are accurate. Furthermore, ONRR’s audits, compliance reviews, and data mining efforts each provide a different level of assurance that royalties are accurately paid, but the agency does not measure how each of the compliance activities contributes to the FOGRMA requirement to establish a system with the capability to accurately determine and collect royalties in a timely manner. By tracking the extent to which each of its compliance activities contributed to any future coverage goal, ONRR would have greater assurance that its compliance program has the capability to accurately determine oil and gas royalties. In addition, ONRR’s compliance program relies on its Work Planning Group, which is responsible for reviewing information on companies and properties to select cases for audits or compliance reviews. The Work Planning Group, however, does not have a documented case selection process. By developing a documented case selection process that includes procedures for how to select compliance cases, ONRR could better ensure that it retains the organizational knowledge needed to effectively select compliance cases and defend the process in external reviews. In addition, ONRR does not have performance measures to determine the extent to which cases selected align with ONRR’s compliance goals. By developing performance measures (e.g., establishing a specified percentage of compliance cases that identify findings of royalty noncompliance or total additional royalties) that assess whether the agency is selecting cases that are helping it achieve its compliance goals, ONRR would be able to better monitor its performance in achieving its goals and whether changes to its selection process affect performance. Moreover, since 2006, ONRR has worked to develop a model to assess the risk of royalty noncompliance for use in its compliance case selection process. After several iterations with two contractors, ONRR began using the risk scores from its model to assist with case selection in 2014. However, according to ONRR officials, the agency is considering discontinuing the use of its current model in favor of one that is internally developed. ONRR has not analyzed how the use of the risk scores has affected case selection or findings of royalty noncompliance and is therefore unable to identify whether its risk model is effective. By periodically analyzing whether the risk model is effectively identifying potential royalty noncompliance and whether the model’s results are being effectively used to assist in case selection and making changes to the model (e.g., updating it) or developing a new model based on this analysis, ONRR would be better able to determine how to proceed with using risk analysis to inform its case selections. Furthermore, none of the nine STRAC members had documented case selection processes. In the agreements between the nine STRAC members and ONRR, the agency includes terms and conditions that the members agree to, but ONRR does not require STRAC members to have documented procedures for compliance case selection. By including requirements in ONRR’s agreements with STRAC members to develop a documented case selection process, including procedures for how to select compliance cases and how to document which factors were considered in selection decisions, ONRR could better assess whether members select cases that align with the agency’s compliance goals. Additionally, ONRR does not require that STRAC members specify how their compliance activities included in annual work plans contribute to ONRR’s compliance goals, although those goals appear on the work plans. ONRR approved the work plans but did not specify how the members’ compliance activities would contribute to its goals as the agency stated they would in the agreements between eight of the nine STRAC members and ONRR. By requiring STRAC members to describe in their annual work plans how their compliance activities would align with ONRR’s current compliance goals, the agency would have better assurance that activities were aligned with its performance goals. Lastly, ONRR does not track STRAC members’ contributions toward its annual compliance goals though it has the data to do so. By tracking the performance of each state and its contribution toward ONRR’s compliance goals, ONRR could better assess the effectiveness of states’ performance in supporting its mission of ensuring accurately royalty payments. Recommendations for Executive Action We are making a total of seven recommendations to ONRR. Specifically: The Director of ONRR should establish an accuracy goal (e.g., identifying the number of companies or percentage of royalties subject to compliance activities over a set period of time) that aligns with the agency’s mission of collecting, accounting for, and verifying royalty payments. In doing so, ONRR should track the extent to which each compliance activity (audits, compliance reviews, and data mining) contributes toward achieving this goal. (Recommendation 1) The Director of ONRR should develop a documented case selection process that includes procedures for how to select all compliance cases. (Recommendation 2) The Director of ONRR should develop performance measures (e.g., having a specified percentage of compliance cases identify findings of royalty noncompliance or total additional royalties) that assess whether the cases the agency is selecting are helping it achieve its compliance goals. (Recommendation 3) The Director of ONRR should periodically analyze whether the risk model is effectively identifying potential royalty noncompliance and whether the model’s results are being effectively used to assist in case selection, and should use this analysis to make changes to the model (e.g., updating it) or develop a new model. (Recommendation 4) The Director of ONRR should include requirements in ONRR’s agreements with STRAC members to develop a documented case selection process, including procedures for how to select compliance cases and how to document which factors were considered in selection decisions. (Recommendation 5) The Director of ONRR should require STRAC members to describe in their annual work plans how their compliance activities would align with ONRR’s current compliance goals. (Recommendation 6) The Director of ONRR should track the performance of the compliance work of each state STRAC member and the contribution that each state makes to ONRR’s compliance goals. (Recommendation 7) Agency Comments We provided a draft of this report to Interior for review and comment. Interior concurred with all seven recommendations. Agency comments are reproduced in appendix III. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix IV. Appendix I: Status of Royalty Policy Committee’s Subcommittee on Royalty Management We reviewed and summarized recommendation closure documentation that the Department of the Interior (Interior) provided for royalty compliance recommendations made to the department by the Royalty Policy Committee’s Subcommittee on Royalty Management in 2007 and Interior’s Office of Inspector General (OIG) in 2006. For the subcommittee recommendations, Interior officials told us that the subcommittee did not assess the implementation of its recommendations. As a result, we present information that Interior provided on its decision about the status of the recommendations and a summary of actions taken. (See table 3.) For the OIG recommendations, we present the status of recommendations according to the OIG and a summary of the actions according to Interior. (See table 4.) We did not independently assess the implementation of the recommendations. Appendix II: ONRR’s Annual Compliance Goals and Performance See table 5 for detailed information on the Office of Natural Resources Revenue’s (ONRR) performance goals, including goal type, goal, fiscal year goal, fiscal year performance, and long-term target for performance goal. Appendix III: Comments from the Department of the Interior Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Christine Kehr (Assistant Director), Glenn C. Fischer (Analyst-in-Charge), Tim Bober, John Delicath, Sarah Detweiler, Wil Gerard, Cindy Gilbert, Michael Kendix, Eli Lewine, Ben Licht, Anne Stevens, and Sara Sullivan made important contributions to this report.

Royalties paid on the sale of oil and gas extracted from leased federal lands and waters are a significant source of revenue for the federal government. However, Interior has faced challenges verifying the accuracy of royalty payments. In the 2000s, GAO issued reports highlighting weaknesses in Interior's royalty compliance program. In 2011, GAO added Interior's management of federal oil and gas resources to its High-Risk List, in part because its work showed Interior did not have assurance that it was collecting its share of revenue from oil and gas produced on federal leases. Interior has taken steps to operate more effectively. GAO was asked to examine ONRR's federal oil and gas royalty compliance efforts. This report examines, among other objectives, the extent to which ONRR reported meeting its compliance goals for fiscal years 2010 through 2017, the most recent data available. GAO reviewed relevant laws, regulations, agency guidance, and Interior's annual performance plan and report and annual budget justifications for the period; analyzed ONRR compliance data for the period; and interviewed ONRR officials and state auditors who conducted work in coordination with ONRR. The Department of the Interior's (Interior) Office of Natural Resources Revenue (ONRR) reported that it met its annual performance goals for its royalty compliance program in 6 of the 8 years from fiscal years 2010 through 2017. Under this program, ONRR conducts three levels of compliance activities—audits, compliance reviews, and data mining—to help ensure that oil and gas royalty payments submitted by companies that produce oil and gas from federal leases are accurate and comply with federal laws and regulations (see figure). Specifically, GAO's analysis of Interior's annual budget justifications for fiscal years 2010 through 2017 found that ONRR reported meeting its compliance goals for 6 of the 8 fiscal years. According to ONRR officials, ONRR did not report meeting its compliance goals for 2 years because of a shift in the agency's goals that created a short-term misalignment of planned work and available resources. ONRR's fiscal year 2017 goals for its compliance program were (1) to obtain a return of $2 of additional royalties for every dollar spent on compliance activities and (2) to collect a defined amount of additional royalties. ONRR's compliance goals generally aligned with the agency's requirement that resources should not be expended without an expected return. However, these goals may not align with the agency's mission to collect, account for, and verify royalty payments and other statutory requirements because the goals do not address accuracy—or the extent to which its compliance work is covering, for example, royalty payments. By establishing a goal that addresses accuracy, for example, by covering a portion of royalty payments with its compliance activities, ONRR could increase the extent to which it had reasonable assurance that its compliance program is fully accounting for federal oil and gas royalty payments.

CRS_R45792

Introduction Both legislators and regulators have expressed concern about the safety and effectiveness of prescription drugs prescribed for "off-label uses"—purposes other than those for which the Food and Drug Administration (FDA) has approved their sale. Two recent incidents illustrate the bases for those concerns. The first involves a drug already on the market. Safety experts raised concerns about ketamine, a drug available as an injectable anesthetic. They noted that physicians have created outpatient clinics to administer intravenous ketamine in an off-label use to treat depression and migraines. FDA has not reviewed clinical data that could support the clinics' promotional claims of safety and effectiveness. In August 2018, a second incident occurred in a Texas courtroom. Astra Zeneca settled a case concerning its alleged promotion of Seroquel for uses other than those for which it had sought and obtained FDA approval for sale in the United States. The core of the complaint by the state of Texas was that the company promoted the drug's use in children, although the FDA-approved labeling of the drug was for adult use. It was one of a number of settlements since 2000 resulting in payments by drug companies for the promotion of off-label uses. To help understand the issues involving off-label use, and how these issues might concern Congress, this report addresses five questions: What is drug labeling? What is off-label use? How are off-label prescriptions used in medicine today? What are the risks and benefits associated with off-label prescriptions? What concerns, if any, does Congress have about such prescriptions? If Congress wanted to do something about off-label prescriptions, what would be some of the options? Drug Labeling and Off-Label Use To market a prescription drug in the United States, a manufacturer needs FDA approval. To obtain that approval, the manufacturer must demonstrate the drug's safety and effectiveness according to criteria specified in law and agency regulations. It must also ensure that its manufacturing plant passes FDA inspection. Finally, it must obtain FDA approval for the drug's labeling—a term that covers all written material about the drug, including, for example, packaging, prescribing information for physicians, and patient brochures. FDA, thus, approves the drug and its labeling for a specific use. That use specifies the disease or condition, the population, and the way the drug is packaged and administered. When a physician prescribes a drug for reasons other than those specified in the FDA approval and labeling, the medical profession considers this to be off-label use . FDA regulates the drug and the manufacturer. Each state regulates clinicians and pharmacies. A licensed physician may—except in highly restricted circumstances —prescribe the approved drug without limitation. A prescription to an individual whose demographic or medical characteristics differ from those indicated in a drug's FDA-approved labeling is accepted medical practice. In a 2006 study of drug prescribing by office-based physicians, 21% of prescriptions were written for off-label uses. Of those off-label prescriptions, the study's authors found that 27% were backed by strong scientific support. A 2016 Canadian study of primary care clinics found an overall rate of 12% of prescriptions for off-label uses. The percentage varied, however, by therapeutic class, ranging from 5% for ear, nose, and throat medications to 25% for central nervous system medications. An econometric model from the National Ambulatory Medical Care Survey estimated a 38% rate of off-label use. Research has shown that more than half of oncology drug use is off-label. A 2018 study examined 43 FDA-approved cancer drugs and compared their 99 labeled uses with the acceptable uses published by a national compendium Medicare relies on to make coverage decisions. Of the 451 compendium-accepted uses, 56% were off-label. Of the off-label uses, the authors deemed 91% as "well-accepted off-label use." Labeling: History, Requirements, and Value History. Drug labeling has been central to FDA's role as a protector of the public's health since 1906. That year, Congress (1) required that sellers state on a drug's label the "quantity or proportion of any alcohol [or] opium" contained, and (2) considered as "misbranded" any drug whose label was "false or misleading." Requirements that drugs be safe were not established until 1938. Congress did not require they be effective until 1962. Requirements. Today, a drug's labeling is more than the sticker the pharmacy places on the amber vial it dispenses to a customer. The Federal Food, Drug, and Cosmetics Act (FFDCA) and associated FDA regulations require and describe a product's labeling as "a compilation of information about the product, approved by FDA, based on the agency's thorough analysis of the new drug application (NDA) or biologics license application (BLA) submitted by the applicant. This labeling contains information necessary for safe and effective use." FDA requires that labeling begin with a highlights section that includes, if appropriate, black-box warnings, so called because their black borders signify importance. The regulations list the required elements of labeling: Value. Labeling plays a major role in the presentation of safety and effectiveness information. For clinicians, it is a primary source of prescribing information. The manufacturer submits the approved labeling for publication in the widely used Physician's Desk Reference . That labeling also serves as the basis for several patient-focused information sheets that manufacturers, pharmacy vendors, and many web-based drug information sites produce. Off-Label Use: Description and Examples Off-label prescribing can reflect cutting-edge clinical expertise. It can also be a response to price: a physician may choose to prescribe a lower-priced drug instead of a specifically labeled higher-priced one. Or a physician may prescribe off-label in an attempt to try a different treatment approach when other options have failed. Sometimes an off-label use becomes so widespread that it becomes accepted practice. However, without the backing of carefully designed clinical trials and expert analysis, it remains unknown whether the drug is, in fact, safe and effective for the off-label use. Also unknown are dosing details and systematically evaluated associated adverse events. Examples of off-label use include a drug tested for the treatment of one disease prescribed in an attempt to prevent or treat another; a drug tested at one dose used at higher or lower doses; a drug tested in adults prescribed to children; and a drug tested in an eight-week trial prescribed for long-term use. Table 1 lists several examples of FDA-approved drugs widely prescribed for off-label uses. Although FDA materials do not list off-label uses, several drug compendia include both labeled and off-label uses. For Medicare coverage, for example, the Social Security Act defines "medically accepted indication" as those, in addition to uses approved by FDA, that have been evaluated and supported and listed in one of several compendia, or for which there is "supportive clinical evidence in peer reviewed medical literature." Benefits and Risks of Off-Label Use Why has Congress given FDA the authority to regulate whether a drug may be on the U.S. market? Two key reasons: to protect patients and to encourage research in a competitive pharmaceutical industry. By statute and regulation, FDA now approves a drug for a specific use once its sponsor (usually the manufacturer) has provided sufficient evidence that the drug is safe and effective for that use. FDA has developed procedures for the review of that evidence. The FDA-approved labeling, which informs the clinician about dosing and likely and unlikely adverse events, helps protect the individuals for whom the drug is prescribed. Labeling also helps protect the interests of the manufacturers who invest in the clinical trials that demonstrate safety and effectiveness. For new drugs and new uses of already approved drugs, the sponsor receives a period of market protection, in the form of regulatory exclusivity for the sale of the drug for those uses. Payors—such as private health insurers or Medicare—benefit from FDA-approved labeling in their evaluation of whether to pay for a drug's use. But use of a drug evolves as clinicians (and the manufacturer) share their experiences regarding off-label uses, which, by definition, were not part of the premarket clinical studies used to obtain FDA approval. Off-label use can benefit patients. In some instances, such as in the treatment of rare diseases, clinical practice may use drugs approved for other indications. A manufacturer may choose not to invest in trials for such a small patient group. A patient whose physician is already prescribing the drug off-label may not want to enroll in a clinical trial where there is a chance he or she may be assigned to the placebo group. Once drugs are well-established in off-label uses, manufacturers rarely design studies to determine or verify the safety and effectiveness of such uses. Individuals and groups wanting to conduct such studies may find it hard to obtain funding. Examples of adverse events (AEs) associated with the use of drugs for specific off-label uses include heart valve damage from the use of fenfluramine and phentermine (fen-phen) for weight loss, and seizures from the use of tiagabine hydrochloride for depression. Using a Canadian primary care database that captured all prescriptions, the reason for each prescription, and adverse events, researchers looked at the rate of AEs for on-label use, off-label use associated with "strong scientific evidence," and off-label use without such evidence. They found more AEs for off-label prescriptions than for on-label prescriptions. However, off-label use associated with strong scientific evidence had similar rates of AEs as did on-label uses. The increased risk of AEs for off-label use was concentrated in those uses without strong scientific evidence. Manufacturers benefit from sales for off-label uses. However, they risk losing that market should a competitor complete studies to obtain FDA approval and labeling for those uses. Researchers who are not supported by the manufacturer who try to assess the safety and effectiveness of off-label uses are hampered by the inexact nature of secondary data sources: the standard clinical trial data collection in preparation for an FDA application is not available for off-label uses. What may begin as hopeful and intermittent off-label use may gain momentum and offer opportunities for planned studies. Drug and device companies argue that current regulations prevent them from distributing important information to physicians and payors about unapproved, off-label uses of their products. In November 2016, FDA held a two-day public meeting to hear from various groups regarding off-label uses of approved or cleared medical products. In June 2018, FDA issued final guidances explaining the agency's policy about medical product communications that include data and information not contained in FDA-approved labeling. One FDA guidance document, in particular, described the types of information that a manufacturer could provide payors and formulary committees about unapproved uses of approved products. FDA made two points especially relevant to off-label uses. First, FDA differentiates among its audiences in its presentation of information. The material it allows in product labeling is directed to a clinical audience. FDA staff have reviewed the information and require that it be presented in a way that is understandable by individual clinicians, who often do not have the statistical sophistication or data analysis skills or resources to fully evaluate the claims of manufacturers. This guidance notes, though, that payors and formulary committees do have such expertise and resources. FDA also acknowledges that it is useful for payors to have information in their decisions on coverage, but it wants to ensure that the information manufacturers provide is not misleading. Second, the FDA guidance describes what harm could come from allowing more sharing of information about off-label use. Some firm communications regarding unapproved products or unapproved uses of approved/cleared/licensed medical products may potentially undermine substantial government interests related to health and safety. These interests include motivating the development of robust scientific data on safety and efficacy; maintaining the premarket review process for safety and efficacy of each intended use in order to prevent harm, to protect against fraud, misrepresentation, and bias, and to develop appropriate instructions for use for medical products; protecting the integrity and reliability of promotional information regarding medical product uses; and preventing the diversion of health care resources toward ineffective treatments. The concerns FDA raised in the June 2018 final guidance documents might explain why Congress may be interested in exploring the issue of off-label use further. History of Congressional Interest and Action Congress has developed a system to protect the public by ensuring that drugs sold in the United States have met clinical and manufacturing standards of safety and effectiveness. Labeling is the mechanism that bridges the regulated drug and the use of that drug in clinical practice. The labeling establishes the uses for which the manufacturer has demonstrated safety and effectiveness to FDA's satisfaction. Congress and the FDA have tried several approaches, using labeling as a tool, to reduce the risk to patients. Table A-1 includes examples of congressional and FDA actions to expand the information provided in a drug's labeling. The actions have addressed topics such as content labeling, directions for use, permissible and prohibited advertising, research incentives to support labeling specific to population subgroups (e.g., children), criteria for Medicare coverage, required and permissible labeling changes, and balance of benefit and risk information in labeling and advertising. Manufacturers, meanwhile, want to be able to provide information to insurers and other entities (such as the Centers for Medicare and Medicaid Services [CMS] and hospital pharmacy and therapeutics committees) that decide whether to cover a drug in a policy and whether to limit reimbursement for specific uses. Congress has provided some leeway relative to its earlier prohibition on promotional activities. For example, in 2016, it broadened the types of health care economic information drug and device manufacturers could provide to payors (e.g., insurance companies). Although the underlying FFDCA section continues to exclude information related only to an off-label use, it now requires "a conspicuous and prominent statement describing any material differences between the health care economic information and the labeling approved for the drug." Several bills concerning off-label use have been introduced that would have expanded the information that manufacturers could provide about off-label uses. For example, the Subcommittee on Health of the House Committee on Energy and Commerce marked up H.R. 2026 (115 th Congress), the Pharmaceutical Information Exchange Act, in January 2018, which would have allowed the provision of scientific information to payors, in addition to health care economic information. Then-Subcommittee Chair Michael Burgess, in commenting on the bill's effort to clarify how manufacturers can share "if it is based on competent and reliable evidence," expressed strong support for the bill. He noted "the importance of cutting edge information in medicine and science to optimize patient care and outcomes … and [how the bill] could have the potential to save patients' lives." Then-Ranking Member (now, Chair) Frank Pallone, Jr., though, argued that the ability to communicate about off-label use "had great potential to undermine" FDA's approval process and to "hamstring" its enforcement efforts. H.R. 2026 passed the subcommittee, although it did not reach the floor in the 115 th Congress. Possible Avenues of Future Congressional Interest Off-label use presents both opportunities and risks to clinicians, patients, manufacturers, and researchers. At times, those interests clash. Academics, public health organizations, and journals have suggested what actions Congress might take based on their particular concerns regarding off-label prescriptions. These actions include both direct legislation and oversight activities to encourage action by other entities. The 116 th Congress might consider some of these varied approaches, summarized in the issues described below. Disclosure to patients. Most individuals, unaware of the nuances of FDA regulation, may not know that physicians may prescribe drugs for uses that FDA has not reviewed for safety and effectiveness. Several potential opportunities for providing this information exist. Congress could require or work with the states to require that the prescriber inform the patient about the off-label use and describe the meaning of off-label use; the prescriber note in the prescription why the drug is being prescribed; or the pharmacist inform the patient that the use is off-label. Data collection and availability. FDA, under federal law, determines whether a drug requires a prescription. The states, under their individual laws, determine what information the prescription order contains. Because clinicians do not need to note on the prescription order why they are prescribing a drug (e.g., simvastatin for high cholesterol or citalopram for depression), the information in pharmacy, administrative, and clinical databases often cannot directly identify off-label uses. Therefore, as Congress and other public policy groups consider whether and how to address off-label drug prescribing, they do not have adequate information on the scope and details of the practice. Congress could require or work with the states to encourage clinicians to note on prescriptions the reason for medication use (e.g., the specific condition, disease, or symptom), thereby allowing that information to appear in pharmacy databases, which would enable focused analysis of off-label uses; the establishment of confidential registries of off-label prescribing and follow-up information that FDA (or other designated scientifically appropriate agencies) could use in its electronic surveillance systems to identify associated adverse events and other drug use problems; or FDA to increase its surveillance of available data sources, such as registries and administrative and clinical databases, to identify patterns of off-label use and evidence suggesting effectiveness and associated adverse events. Dissemination. Because some information may be valuable to clinicians and entities that influence prescribing decisions (such as insurers and pharmacy and therapeutics committees), Congress could allow manufacturers to disseminate information about off-label uses that they have developed or of which they are aware, perhaps subject to certain limitations or accompanying reporting requirements. Possibilities include broader sharing of clinical analyses of off-label use with coverage deciders (e.g., CMS, insurers, pharmacy and therapeutics committees) to support requests that they cover a particular use of the drug; and dissemination of clinical analyses of off-label use at clinical and pharmaceutical conferences. Oversight. With an estimated 12% to 38% of all prescriptions' (and 56% of oncology prescriptions') being written for uses not listed on FDA-approved labeling, valid information on the extent of off-label use and the effect of such use on manufacturer, insurer, and clinician behavior could potentially better inform debate on how to best protect the public's health. Congress could direct the Government Accountability Office (GAO) to study the extent of off-label use in government-provided care (e.g., Department of Veterans Affairs, Bureau of Prisons, and Indian Health Service) and in government-funded care (e.g., Medicare and Medicaid); the Secretary of Health and Human Services (HHS) to contract with the National Academy of Medicine or a similar organization to assemble management or industrial policy experts to study the costs and rewards to industry of off-label prescriptions; or FDA and the Federal Trade Commission to investigate drugs whose off-label prescriptions account for a particularly high percentage of all prescriptions or that generate a particularly high percentage or high dollar value of sales. Pricing. The decision to use a drug off-label based solely or primarily on price introduces a new element to study. For example, the pricing difference between Avastin and Lucentis, both made by the same manufacturer with the same active ingredient, is so large that many ophthalmologists use the lower priced Avastin in their treatment of macular degeneration, despite its being an off-label use. The manufacturer included the treatment of macular degeneration in its application to FDA for Lucentis. To explore the ramifications of a traditionally nonclinical element in prescribing decisions, Congress could require the HHS Secretary to study the relationship among pricing, access, and prescribing and its effect on patient safety. Reimbursement. Although FDA approval of a drug—not for each use of a drug—is a requirement for sale in the United States, the decision to reimburse a physician or patient for a drug is made by entities such as the CMS and private insurers. Such decisions, therefore, influence what drugs are prescribed and, in part, for what uses drugs are prescribed. Congress could direct the HHS Secretary to study such coverage decisions or to contract with the National Academy of Medicine or a similarly equipped entity to do so; or HHS to form a task force to include CMS and FDA, along with private insurers and others involved in coverage decisions, and patient and clinician groups representing those affected by coverage decisions, to identify areas in need of action and to recommend steps in those directions. Congress also could encourage payors to require safety and effectiveness evidence before covering off-label uses. Research. The traditional path toward adding an indication (reason for use) to the labeling of a drug already approved for other uses has been for the sponsor of the drug to conduct clinical trials and submit a supplemental new drug application (NDA) to FDA. The widespread extent of off-label use suggests that relying on that model is not helping prescribers get better information. Congress could consider assigning responsibility (and funding) to the National Institutes of Health and the Patient-Centered Outcomes Research Institute for safety and effectiveness evaluations of off-label uses; or requiring, for a drug that has substantial (to be defined) off-label sales, that the manufacturer fund studies, such as clinical trials, to assess the safety and effectiveness of the drug for the off-label use and submit evidence to the HHS Secretary. Depending on the Secretary's assessment of the evidence, the Secretary could request that the manufacturer amend the drug's labeling either to add the off-label use to the label as an approved use or to add a statement that clinical evidence does not support the safety and effectiveness of the drug for the off-label use. Research transparency. FDA regulations describe standards for the design and analysis of clinical trials that a sponsor uses in an NDA. Studies done by or for the manufacturer or by other groups or individuals are not always made public, in which case their findings cannot be reviewed and evaluated. Because the results of such studies may be used in support of off-label uses, by providing positive and negative incentives, Congress could consider requiring or encouraging prospective posting of the designs and statistical plans of studies of off-label uses; or public reporting of studies of off-label use. Clinical guidance. Professional societies and other clinical groups often supplement the information available to prescribers from FDA-approved labeling, medical journals, and information from manufacturers. They can issue guidelines and recommend best practices. Congress could engage such groups and encourage professional societies to develop evidence-based clinical guidelines and training regarding off-label use. Precedents from other countries. The United States is not alone in facing the health care and economic implications of off-label use. For example, the member countries of the European Union have addressed measures involving reimbursement, guidance for prescribers, professional standards, and informed consent. Congress could require HHS to contract with the National Academy of Medicine or a similarly equipped entity to review measures taken by the European Union and other regulatory bodies and recommend legislative or administrative actions as appropriate. Concluding Comments Concerns over off-label use overlap with questions raised by some legislators and regulators in other contexts. In addition to clearly related issues such as what is allowable information in direct-to-consumer advertising, promotion to clinicians, and material shared with payors and insurers, off-label use also affects the entire basis of FDA regulation of drugs through its authority to approve drugs. That means it directly or indirectly affects research, clinical innovation, transparency, patents and exclusivities, pricing, and access. Changes in law or regulation in any one area may have benefits in some areas and drawbacks in others. For example, FDA's initiative to encourage research in drugs used traditionally but never reviewed and approved by FDA—so-called legacy drugs—stems from its desire for evidence of safety and effectiveness. Such evidence helps protect patients from possible use of ineffective, unsafe, or misdosed drugs. That initiative, in turn, helps enable sponsors to conduct the clinical trials, submit new drug applications, obtain regulatory exclusivity with the new drug approval—and then raise the price of the new branded product while expecting FDA to honor the exclusivity and block the sale of the drug by others. For example, clinicians had been prescribing a compounded version of progestin for use in preventing preterm delivery. Such use had never been adequately tested in clinical trials. One company conducted those trials, and FDA approved its new drug application. The initial price for the new drug, Makena, was $30,000 for a 20-week course; patients had been paying pharmacists $200-$400 for the same course. Unanticipated price increases can also arise from the apparent following of FDA procedures. For example, a new owner of the FDA-approval of an old antiparasitic generic drug raised the price from $14 per tablet to $750, Daraprim's initial price. Such sudden and large price increases become a barrier to patient access and, therefore, a potential threat to health. In the case of off-label prescribing, actions in any direction—whether by Congress, FDA, or the courts—could have both intended and unanticipated effects. Actions to limit off-label prescribing could have the intended effects of reducing safety risks and the economic cost of using drugs ineffective for their prescribed purposes. Such limits, however, could also stifle informed clinical exploration. Similarly, incentives to mount clinical trials needed to add an indication to the label could help identify and disseminate information on dosing and contradictions. Such incentives, however, could also hurt. For example, a brand drug that added a new indication to its labeling could prevent, through exclusivities, generics from similarly modifying their labeling. Patients could need to pay more. The recent debates over the right-to-try movement regarding use of investigational drugs by terminally ill patients may preview discussion about any proposed restrictions on off-label use. The Goldwater Institute, considered a key impetus to development and passage of the 2018 enactment of a right-to-try act, looks to diminish government's role in an individual's choice and has supported dissemination of off-label information. Congress has built a process in which a robust FDA can regulate drugs to protect the public's health. Is there cause for concern that perhaps a third of prescriptions are for off-label uses and that, in at least one study, three-quarters of those had minimal or no accepted scientific evidence to support their use? Policy tension exists over the line between wanting to ensure individuals' freedom to take drugs for off-label uses and wanting to protect the public from the risk of unsafe or ineffective drugs. Where to draw that line—and how to know when it may be time to move the line—is of continuing interest to regulators and legislators. Appendix. Selected Actions to Expand Information in Drug Labeling

When the Food and Drug Administration (FDA) approves a drug for sale in the United States, the approval includes a section entitled "Indications for Use." This section lists the one or more diseases, conditions, or symptoms for which the drug's sponsor (usually the manufacturer) has provided, to FDA's satisfaction, evidence in support of the drug's safety and effectiveness. FDA approval is also based on its review of the drug's dosage, packaging, manufacturing plan, and labeling. Before changing any of those elements, the sponsor must inform, and usually receive permission from, FDA. In essence, FDA regulates all approval and post-approval aspects of a drug product. But FDA traditionally has not regulated the practice of medicine. Physicians, therefore, may prescribe an FDA-approved drug for indications that FDA has not reviewed for safety and effectiveness. Those uses, furthermore, are not addressed in the labeling information regarding, among other things, dosing, warnings about interactions with other drugs, and possible adverse events. How Are Off-Label Prescription Drugs Used? Prescribing for so-called off-label uses can be accepted medical practice, often reflecting cutting-edge clinical expertise. For example, this is the case with oncology drug use, more than half of which is off-label. Off-label prescribing can be a reasonable choice when labeling overlooks certain populations—for example, when a drug tested in adults is prescribed to children. A drug may be used off-label when it was tested for the treatment of one disease and prescribed in an attempt to prevent or treat another, when it was tested at one dose and used at higher or lower doses, or when it was tested in an eight-week trial and prescribed for long-term use. Estimates for how common off-label prescriptions are in the United States are hardly precise. Credible researchers have estimated they make up as little as 12% and as much as 38% of doctor-office prescriptions. What Are the Risks of Off-Label Prescriptions? Prescriptions for off-label uses of FDA-approved drugs are made without the benefit of an FDA-reviewed analysis of safety and effectiveness data. Physicians may resort to such prescribing to take advantage of new ideas and treatment approaches when available information to support them is inadequate. However, despite the potential risks associated with off-label uses, efforts to prohibit such uses might hurt the public. Some off-label prescribing may result because manufacturers have chosen not to invest the resources needed to have FDA add indications to the drug's approval and labeling. A worst-case scenario for the nation's health would be the widespread acceptance of a drug for an off-label use that sufficient research would have revealed to be ineffective, unsafe, or both. Aside from the drug's direct harm, the time spent waiting to see whether it worked would have been time not spent exploring other treatment options. Unchecked off-label prescribing may also threaten the FDA gold standard of drug approval. If clinicians had already accepted a new use into practice through off-label prescribing, a manufacturer may choose to not invest resources to go through clinical trials and the FDA process to win approval. Although manufacturers do share information on off-label uses, courts have sometimes found they had overstepped allowable bounds. Congress has given permission for limited sharing. Are there other ways to share clinical information that do not put the public's health or FDA's authority at risk? What Role Can Congress Play in the Use of Off-Label Prescriptions? How might Congress, in its legislative or oversight roles, consider the use of off-label drugs to protect the public's health? Legislators and health analysts have suggested both restrictive and permissive actions regarding off-label use. Ideas—some of which conflict with others—include disclosure to patients; data collection, availability, and analysis; dissemination of clinical data; linking reimbursement and coverage to evidence of safety and effectiveness; clinical research and research transparency; clinical guidance; congressional oversight through the Government Accountability Office, the Federal Trade Commission, and the Department of Health and Human Services; and consideration of other countries' approaches to off-label use. Some actions would require federal legislation. Other proposals would involve actions by other entities, such as state authorities and professional organizations, which Congress could urge.

CRS_R46147

C ompanies that provide cable television service (cable operators) are subject to regulation at the federal, state, and local levels. Under the Communications Act of 1934 (Communications Act), as amended, the Federal Communications Commission (FCC or Commission) exercises regulatory authority over various operational aspects of cable service—such as technical standards governing signal quality, ownership restrictions, and requirements for carrying local broadcast stations. At the same time, a cable operator must obtain a "franchise" from the relevant state or local franchising authorities for the region in which it seeks to provide cable services. Franchising authorities often require cable operators to meet certain requirements, provide certain services, and pay fees as a condition of their franchise. As a result, the franchising process is an important component of cable regulation. In the early history of cable regulation, the FCC did not interfere with franchising authority operations, opting instead for a system of "deliberately structured dualism." The Cable Communications Policy Act of 1984 (Cable Act) codified this dualist structure by adding Title VI to the Communications Act. Title VI requires cable operators to obtain franchises from state or local franchising authorities and permits these authorities to continue to condition the award of franchises on an operator's agreement to satisfy various requirements. However, Title VI also subjects franchising authorities to a number of important statutory limitations. For instance, franchising authorities may not charge franchise fees greater than 5% of a cable operator's gross annual revenue and may not "unreasonably refuse" to award a franchise. As explained below, the FCC issued a series of orders restricting the requirements and costs that franchising authorities may impose on cable operators. The FCC issued its first such order in 2007 (First Order) after gathering evidence suggesting that some franchising authorities were imposing burdensome requirements on new entrants to the cable market. The First Order clarified when practices by franchising authorities, such as failing to make a final decision on franchise applications within time frames specified in the order, amount to an "unreasonabl[e] refus[al]" to award a franchise in violation of the Cable Act. The First Order also provided guidance on which costs count toward the 5% franchise fee cap, and it maintained that franchising authorities could not refuse to grant a franchise based on issues related to non-cable services or facilities. The U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) upheld the First Order in its 2008 decision in Alliance for Community Media v. FCC . Shortly after issuing the First Order, the FCC adopted another order (Second Order), extending the First Order's rulings to incumbent cable operators as well as new entrants. In a later order responding to petitions for reconsideration (Reconsideration Order), the FCC affirmed the Second Order's findings and further clarified that "in-kind" (i.e., noncash) payments exacted by franchising authorities, even if related to the provision of cable service, generally count toward the maximum 5% franchise fee. In 2017, the Sixth Circuit reviewed aspects of the Second Order and Reconsideration Order in its decision in Montgomery County v. FCC , upholding some rules and vacating others. In response, the FCC adopted a new order on August 1, 2019 (Third Order). The Third Order seeks to address the defects identified by the Sixth Circuit by clarifying the Commission's reasoning for counting cable-related, in-kind payments toward the 5% franchise fee cap and for applying the First Order's rulings to incumbent cable operators. The Third Order also explicitly asserts the Cable Act's preemption of state and local laws to the extent they impose fees or other requirements on cable operators who provide non-cable service, such as broadband internet, over public rights-of-way. Some municipalities have criticized this order for, among other things, hampering their ability to control public rights-of-way and reducing their ability to ensure the availability of public, educational, and government (PEG) programming in their communities. Several cities have filed legal challenges to the order that are currently before the Sixth Circuit. As an aid to understanding the complex and evolving nature of the law in this area, this report provides a basic overview of the federal legal framework governing the cable franchising process. The report begins with a historical overview of the law's evolution, from the Communications Act through the Cable Act and its later amendments, to the FCC's various orders interpreting the act. Next, the report details several key issues that have arisen from the FCC's orders, specifically (1) the circumstances under which a franchising authority might be found to have unreasonably refused to award a franchise; (2) the types of expenditures that count toward the 5% cap on franchise fees; and (3) the extent to which Title VI allows franchising authorities to regulate "mixed-use" networks, that is, networks through which a cable operator provides cable service and another service such as telephone or broadband internet. The report concludes with a discussion of other legal issues that may arise from pending challenges to the FCC's Third Order and offers some considerations for Congress. A summary of federal restrictions on local authority to regulate cable operators and a glossary of some terms used frequently in this report are found in the Appendix . Historical Evolution of the Federal Legal Framework for Cable Regulation Regulation of Cable Services Prior to 1984 The FCC's earliest attempts to regulate cable television relied on authority granted by the Communications Act, a legal framework that predated cable television's existence. The Communications Act brought all wire and radio communications under a unified federal regulatory scheme. The act also created the FCC to oversee the regulatory programs prescribed by the Communications Act. Title II of the act gave the FCC authority over "common carriers," which principally were telephone service providers. Title III governed the activities of radio transmission providers. The FCC's Title III jurisdiction encompasses broadcast television transmitted via radio signals. For the first half of the 20 th Century, when virtually all commercial television broadcast in this manner, Title III thus gave the FCC regulatory authority over this industry. In the late 1940s and early 1950s, however, municipalities with poor broadcast reception began experimenting with precursors to modern cable systems. These areas erected large "community antennas" to pick up broadcast television signals, and the antenna operators routed the signals to residential customers by wire, or "cable." Through the 1950s, the FCC declined to regulate these systems, initially known as "Community Antenna Television" systems and later simply as "cable television." The FCC reasoned that cable television was neither a common carrier service subject to Title II regulation nor a broadcasting service subject to Title III regulation. The FCC changed course in a 1966 order in which it first asserted jurisdiction over cable television. The Commission acknowledged that it lacked express statutory authority to regulate cable systems. Even so, the agency concluded that it had jurisdiction because of cable television's "uniquely close relationship" to the FCC's then-existing regulatory scheme. The Supreme Court affirmed the FCC's authority to regulate cable television in a 1968 decision, relying on the FCC's argument that regulatory authority over cable television was necessary for the FCC's performance of its statutory responsibility to "provid[e] a widely dispersed radio and television service, with a fair, efficient and equitable distribution of service among the several States and communities." Following this reasoning, the Court construed the Communications Act as enabling the FCC to regulate what was "reasonably ancillary" to its responsibilities for regulating broadcast television under Title III. The FCC thereafter maintained regulatory authority over operational aspects of cable television, such as technical standards and signal carriage requirements. However, state and local "franchising authorities" continued to regulate cable operators through the negotiation and grant of franchises. The Commission recognized that cable television regulation ha d an inherent ly local character, insofar as local regulators were better situated to manage rights-of- way and to determine how to divide large urban areas into smaller service areas . As part of the ir franchising process, f ranchising authorities often imposed fees and other conditions on cable operators in exchange for allowing them to use public rights-of- way to construct their cable systems. Federal courts at the time tolerated this local regulation, noting that because cable systems significantly affect public rights-of-way, "government must have some authority . . . to see to it that optimum use is made of the cable medium in the public interest." The Cable Act and Its Amendments The Cable Communications Policy Act of 1984 (Cable Act) was the first federal statutory scheme to regulate expressly cable television. The act's purposes, as defined by Congress, included "assur[ing] that cable systems are responsive to the needs and interests of the local community," providing the "widest possible diversity of information sources," promoting competition, and minimizing unnecessary regulation in the cable industry. The House Energy and Commerce Committee report accompanying the legislation explained that the act was intended to preserve the "critical role" of municipal governments in the franchising process, while still making that power subject to some "uniform federal standards." To these ends, the Cable Act added Title VI to the Communications Act to govern cable systems. Specifically, Section 621of Title VI preserved the franchising authorities' power to award franchises and required cable operators to secure franchises as a precondition to providing services. Title VI also permits franchising authorities to require that cable operators designate "channel capacity" for PEG use or provide "institutional networks" ("I-Nets"). But the power of franchising authorities is limited to regulating "the services, facilities, and equipment provided by a cable operator," such as by prohibiting franchising authorities from regulating "video programming or other information services." Section 622 of Title VI allows franchising authorities to charge fees to cable operators as a condition of granting the franchise, but it caps those fees at 5% of the operator's gross annual revenue from providing cable services. Section 622 defines "franchise fee" to include "any tax, fee, or assessment of any kind imposed by a franchising authority . . . on a cable operator or a cable subscriber, or both, solely because of their status as such[.]" Franchise fees do not include taxes or fees of "general applicability," capital costs incurred by the cable operator for PEG access facilities (PEG capital costs exemption), and any "requirements or charges incidental to the awarding or enforcing of the franchise" (incidental costs exemption). Congress amended Title VI in the Cable Television Consumer Protection and Competition Act of 1992, with a stated goal of increasing competition in the cable market. Specifically, Congress amended Section 621 to prohibit the grant of exclusive franchises and to prevent franchising authorities from "unreasonably refus[ing] to award an additional competitive franchise." Congress also granted potential cable operators the right to sue a franchising authority for refusing to award a franchise. Congress amended the Cable Act again in 1996 to further promote competition in the cable television marketplace by enabling telecommunications providers regulated under Title II of the Communications Act (i.e., telephone companies) to offer video programming services. Congress repealed a provision banning telecommunications providers from offering video programming to customers in their service area and added a provision governing the operation of "open video systems," a proposed competitor to cable systems. These amendments also added provisions barring franchising authorities from conditioning the grant of a franchise on a cable operator's provision of telecommunications services or otherwise requiring cable operators to obtain a franchise to operate a telecommunications service. FCC Orders In the decades following the passage of the Cable Act and its amendments, many phone companies upgraded their networks to enter the cable market. To streamline the process for these new entrants, the FCC issued orders interpreting the franchising provisions of Title VI. The four orders discussed in this section—the First, Second, Reconsideration, and Third Orders—each address a range of topics and in some cases retread topics covered by an earlier order. Table 1 summarizes the orders. In 2007, after gathering evidence suggesting that some local and municipal governments were imposing burdensome demands on new entrants, the FCC adopted the First Order. The Commission observed that the franchising process had prevented or delayed the entry of telephone companies into the cable market. The First Order thus sought to reduce entry barriers by clarifying when Title VI prohibits franchising authorities from imposing certain franchise conditions on new entrants. The FCC gave examples of practices by franchising authorities that constitute an "unreasonable refusal" to award a franchise, such as 1. a delay in making a final decision on franchise applications beyond the time frames set forth in the order; 2. requiring cable operators to "build out" their cable systems to provide service to certain areas or customers as a condition of granting the franchise; 3. imposing PEG and I-Net Requirements beyond those imposed on incumbents; and 4. requiring that new cable operators agree to franchise terms that are substantially similar to those agreed to by incumbent cable operators (called "level-playing-field requirements"). The First Order further clarified when certain costs counted toward the 5% franchise fee cap and maintained that franchising authorities could not refuse to grant a franchise based on issues related to non-cable services or facilities. Several franchising authorities and their representative organizations challenged the legality of the Order in the Sixth Circuit. But the Sixth Circuit denied those challenges in Alliance for Community Media v. FCC , upholding both the FCC's authority to issue rules construing Title VI and the specific rules in the First Order itself. Although the First Order applied only to new entrants to the cable market, the FCC shortly thereafter adopted the Second Order, extending many of the First Order's rulings to incumbent cable television service providers. Following the release of the Second Order, the Commission received three petitions for reconsideration, to which it responded in the Reconsideration Order in 2015. In the Reconsideration Order, the FCC affirmed its conclusions from the Second Order applying its earlier rulings to incumbent cable operators. The Reconsideration Order also clarified that "in-kind" (i.e., noncash) payments exacted by franchising authorities, even if unrelated to the provision of cable service, may count toward the maximum 5% franchise fee allowable under Section 622. In 2017, in Montgomery County v. FCC , the Sixth Circuit vacated the FCC's determinations in the Second Order and Reconsideration Order on both issues. Following the ruling in Montgomery County, the Commission started a new round of rulemaking and, on August 1, 2019, adopted another order, the Third Order, addressing the issues raised by the Sixth Circuit. In the Third Order, the FCC clarified its basis for counting in-kind payments toward the 5% franchise fee cap, provided additional reasoning for applying the First Order's rulings to incumbent cable operators, and preempted state and local regulation inconsistent with Title VI. While prior orders applied only to local franchising authorities, the Third Order extended the Commission's rules in all three orders to state-level franchising authorities, concluding that there was "no statutory basis for distinguishing between state- and local-level franchising actions." This report addresses issues raised in these various orders in greater detail below. Key Legal Issues in Cable Franchising As the foregoing discussion reflects, the FCC's post-2007 orders have focused on several key issues within Title VI's framework. Most notably, the Commission has addressed (1) when certain franchise requirements amount to an "unreasonable refusal" to award the franchise under Section 621; (2) the types of costs that are subject to the 5% franchise fee cap under Section 622; and (3) the extent to which franchising authorities may regulate "mixed-use" networks operated by cable operators. This section first reviews the relevant statutory provisions from which each of these three issues arise and then discusses the FCC's interpretations of those provisions. Unreasonable Refusal to Award a Franchise Title VI prohibits franchising authorities from "unreasonably refus[ing]" to grant a franchise to a cable operator. In the First Order, the FCC identified specific types of franchising conditions or practices that violate the unreasonable refusal standard, such as failing to process an application within certain time periods. The Sixth Circuit reviewed and upheld the First Order's interpretation of this standard, which remains in effect. Statutory Provisions Governing the "Unreasonable Refusal" Standard Title VI allows franchising authorities to condition a franchise on the cable operator performing or meeting certain requirements. Sections 621(a)(4)(B) and 621(b)(3)(D) explicitly allow franchising authorities to require cable operators to provide PEG channel "capacity, facilities, or financial support" and to provide I-Net "services or facilities." Section 621(a)(1), however, imposes a significant limitation on franchising authorities' ability to impose such conditions. Under that provision, franchising authorities may not "grant an exclusive franchise" or "unreasonably refuse to award an additional competitive franchise." FCC Interpretations of the "Unreasonable Refusal" Standard In the First Order, the FCC clarified when certain practices or requirements amount to an unreasonable refusal of a new franchise under Section 621(a)(1) of Title VI. The FCC gave four specific examples of unreasonable refusals: (1) delaying a final decision on franchise applications; (2) requiring cable operators to "build out" their cable systems to provide service to certain areas or customers as a condition of granting the franchise; (3) imposing PEG and I-Net requirements that are duplicative of, or are more burdensome than, those imposed on incumbents; and (4) requiring that new cable operators agree to franchise terms that are substantially similar to those agreed to by incumbent cable operators (the "level-playing-field requirements"). As for delays in acting on a franchise application, the FCC stated that a franchising authority unreasonably refuses a franchise when it subjects applicants to protracted negotiations, mandatory waiting periods, or simply a slow-moving franchising process. To prevent such delays, the FCC set decision deadlines of 90 days for applications by entities with existing access to rights-of-way and six months for applications by entities without such access. Once these time periods expire, franchise applications are deemed granted until the franchising authority takes final action on the application. As for build-out requirements, the FCC stated that requiring new franchise applicants to build out their cable systems to cover certain areas may constitute an unreasonable refusal of a franchise. The Commission explained that what constitutes an "unreasonable" build-out requirement may vary depending on the applicant's existing facilities or market penetration, but it clarified that certain build-out requirements are per se unreasonable refusals under Section 621. The FCC also determined that certain PEG and I-Net terms and conditions constitute an unreasonable refusal. Specifically, the Commission determined that PEG and I-Net requirements that are "completely duplicative" (i.e., a requirement for capacity or facilities that would not provide "additional capability or functionality, beyond that provided by existing I-Net facilities") are unreasonable unless redundancy serves a public safety purpose. The FCC also viewed PEG requirements as unreasonable when such requirements exceeded those placed on incumbent cable operators. Lastly, the FCC determined that level-playing-field requirements in local laws or franchise agreements amount to an unreasonable refusal of a franchise. The Commission explained that such requirements are unreasonable because new cable entrants are in a "fundamentally different situation" from incumbent operators. The FCC therefore concluded that these mandates "unreasonably impede competitive entry" into the cable market and are unreasonable refusals. As discussed above, several franchising authorities and their representative organizations unsuccessfully challenged the FCC's interpretation of the unreasonable refusal standard in Alliance for Community Media v. FCC , in which the Sixth Circuit upheld the First Order in its entirety. Applying the framework set forth in Chevron USA , Inc. v. Natural Resources Defense Council, Inc. —which guides courts when reviewing agency regulations that interpret the agency's governing statute—the court reasoned that the phrase "unreasonably refuse" is inherently ambiguous because the word "unreasonably" is subject to multiple interpretations. The court then held that the First Order's interpretation of this phrase was entitled to deference because it was reasonable and not unambiguously foreclosed by Title VI. As a result, the First Order's rules on what constitutes an unreasonable refusal remain binding on franchising authorities. Accordingly, if a franchising authority denies a cable operator's franchise request for a reason the FCC's has deemed unreasonable—such as the cable operator's refusal to accept build-out or level-playing-field requirements—the cable operator may sue the franchising authority for "appropriate relief" as determined by the court. Alternatively, if the franchising authority fails to make a final decision within the allotted time, the franchise will be deemed granted until the franchising authority makes a final decision. Franchise Fees Title VI limits franchising authorities to charging cable operators "franchise fees" of up to 5% of the cable operator's revenue, subject to specific exceptions. However, the types of obligations limited by the 5% cap have been a point of contention. The FCC, in its various orders, has clarified the scope of the exceptions to the 5% cap (in particular, the PEG capital costs and incidental costs exemptions); it has further explained that, unless they fall under one of the express exceptions, non-monetary (or "in-kind") contributions are subject to the 5% cap even if they are related to the provision of cable service. Litigation over the Commission's current interpretations of what constitutes a "franchise fee" is ongoing. Statutory Provisions Governing Franchise Fees Section 622 allows franchising authorities to charge franchise fees to cable providers, but it subjects such fees to a cap. For any "twelve-month period," franchise fees may not exceed 5% of the cable operator's gross annual revenues derived "from the operation of the cable system to provide cable service." Section 622 broadly defines "franchise fees" to include "any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such." However, Section 622 exempts certain costs from this definition, including 1. "any tax, fee, or assessment of general applicability"; 2. "capital costs which are required by the franchise to be incurred by the cable operator for public, educational, or governmental access facilities" (PEG capital costs exemption) ; and 3. "requirements or charges incidental to the awarding or enforcing of the franchise, including payments for bonds, security funds, letters of credit, insurance, indemnification, penalties, or liquidated damages" (incidental costs exemption). FCC Interpretations of the Statutory Franchise Fee Provisions The FCC has provided guidance on the types of expenses subject to the 5% cap. In particular, it has clarified (1) when non-monetary (or "in-kind") contributions must be included in the calculation of franchise fees subject to the 5% cap; (2) the scope of the PEG capital costs exemption; and (3) the scope of the incidental costs exemption. In-Kind Contributions The FCC has elaborated on the types of in-kind contributions that are subject to the 5% cap. In the First Order, the Commission maintained that in-kind fees unrelated to provision of cable service—such as requests that the cable operator provide traffic light control systems—are subject to the 5% cap because they are not specifically exempt from the "franchise fee" definition. In the Reconsideration Order, the agency further clarified that the First Order's conclusions were not limited to in-kind exactions unrelated to cable service and that cable-related in-kind contributions (such as providing free or discounted cable services to the franchising authority) could also count toward the 5% cap. The Sixth Circuit vacated this conclusion, however, in Montgomery County v. FCC . The Sixth Circuit recognized that Section 622's definition of "franchise fee" is broad enough to encompass "noncash exactions." But the court explained that just because the term "can include noncash exactions, of course, does not mean that it necessarily does include every one of them." The court faulted the FCC for giving "scarcely any explanation at all" for its decision to expand its interpretation of "franchise fee" to include cable-related exactions, and held that this defect rendered the Commission's interpretation "arbitrary and capricious" in violation of the Administrative Procedure Act (APA). Following the Sixth Circuit's decision in Montgomery County , the Commission issued the Third Order, in which it detailed its reasons for including cable-related in-kind contributions in the 5% cap. The FCC first explained that, as recognized by the court in Montgomery County , the definition of "franchise fee" is broad enough to encompass in-kind contributions as well as monetary fees. The Commission also acknowledged the Sixth Circuit's observation that just because the definition is broad enough to include in-kind fees "does not mean that it necessarily does include everyone one of them." Nevertheless, the FCC maintained that cable-related in-kind contributions should be included in the fee calculation because there is nothing in the definition that "limits in-kind contributions included in the franchise fee." The Commission further reasoned that Section 622's specific exceptions do not categorically exclude such expenses, as there is no "general exemption for cable-related, in-kind contributions." Along with its construction of Section 622, the FCC rejected arguments that "other Title VI provisions should be read to exclude costs that are clearly included by the franchise fee definition," such as the provision that allows franchising authorities to require that cable operators designate channel capacity for PEG use. According to the Commission, "the fact that the Act authorizes [franchising authorities] to impose such obligations does not mean that the value of these obligations should be excluded from the five percent cap on franchise fees." While the Third Order concluded that cable-related, in-kind contributions are not categorically exempt from the 5% cap, it recognized that certain types of cable-related in-kind contributions might be excluded. For instance, the FCC concluded that franchise terms requiring a cable operator to build out its system to cover certain localities or to meet certain customer service obligations are not franchise fees. The Commission reasoned that these requirements are "simply part of the provision of cable service" and are not, consequently, a "tax, fee, or assessment." Furthermore, the FCC noted that the PEG capital costs exemption, which exempts costs associated with the construction of public, educational, or governmental access facilities, covers certain cable-related, in-kind expenses, and, as discussed below, the PEG capital costs exemption provides guidance on the types of costs to which it applies. On the other hand, the agency also identified specific cable-related, in-kind expenses that are subject to the 5% cap, such as franchise terms requiring cable operators to provide free or discounted cable service to public buildings or requiring operators to construct or maintain I-Nets. Lastly, the Third Order concluded that, for purposes of the 5% cap, cable-related in-kind services should be measured by their "fair market value" rather than the cost of providing the services. The FCC reasoned that fair market value is "easy to ascertain" and "reflects the fact that, if a franchising authority did not require an in-kind assessment as part of its franchise, it would have no choice but to pay the market rate for services it needs from the cable operator or another provider." In sum, despite the setback for the Commission in Montgomery County , the FCC has maintained its position that in-kind contributions—even if related to cable service—are not categorically exempt from the 5% cap. The issue is not settled, however. As discussed later, the Third Order is being challenged in court, and it remains to be seen whether the FCC's position will ultimately be upheld. PEG Capital Costs Exemption The FCC's interpretation of the PEG capital costs exemption has evolved. In the First Order, the Commission interpreted this exemption as applying to the costs "incurred in or associated with" constructing the facilities used to provide PEG access. However, the FCC broadened its interpretation in the Third Order. In the Third Order, the Commission conceded that its earlier statements were "overly narrow" because the plain meaning of the term "capital costs" can include equipment costs as well as construction costs. Consistent with this analysis, the FCC concluded that the term "capital costs" is not limited to construction-related costs, but can also include equipment purchased for the use of PEG access facilities, "such as a van or a camera." The Third Order noted that capital costs "are distinct from operating costs"—that is, the "costs incurred in using" PEG access facilities—and that operating costs are not exempt from inclusion in the franchise fee calculation. While the Third Order provided additional clarification on the PEG capital costs exemption, it left at least one issue unresolved. Specifically, the FCC determined there was an insufficient record before it to conclude whether "the costs associated with the provision of PEG channel capacity" fall within the exclusion. Consequently, it deferred consideration of this issue and stated that, in the meantime, channel capacity cost "should not be offset against the franchise fee cap." Ultimately, the scope of the PEG capital costs exemption remains in flux. The FCC's Third Order is being challenged in court, and it is possible the agency's interpretation of the PEG capital costs exemption could be vacated. Even if the Third Order is upheld, it left unresolved whether the costs of providing PEG channel capacity fall under the capital costs exclusion; thus, while franchise authorities are not required to offset such costs against the 5% cap in the interim, it is unclear whether these costs will count toward the franchise fee cap in the long run. Incidental Costs Exemption While the FCC has articulated its position on in-kind contributions and the PEG capital costs exemption over the course of several orders, the Commission largely addressed its interpretation of the "incidental costs" exemption in the First Order. There, the FCC read the exemption narrowly to include only those expenses specifically listed in Section 622(g)(2)(D)—namely, "bonds, security funds, letters of credit, insurance, indemnification, penalties, or liquidated damages." The Commission explained that it did not interpret unlisted costs—including, among other things, attorney fees, consultant fees, and in-kind payments—to be "incidental" costs, based on the text of the exemption and the legislative history of Section 622. The FCC noted, however, that certain "minor expenses" beyond those listed in the statute may be included as "incidental costs," such as application or processing fees that are not unreasonably high relative to the cost of processing the application. In Alliance for Community Media v. FCC , the Sixth Circuit denied petitions challenging the First Order's interpretation of the "incidental costs" exemption. Petitioners argued that the plain meaning of the phrase "incidental to" meant that the fee had to be "related to the awarding or enforcing of the franchise." According to petitioners, the FCC's per se listing of non-incidental fees—such as attorney and consultants' fees—contradicted this plain meaning. The court, however, upheld the FCC's interpretation. The court reasoned that the phrase "incidental to" lent itself to multiple interpretations, including both the FCC's and the petitioners' readings. Consequently, it concluded under Chevron that the "FCC's rules regarding fees" qualified as "reasonable constructions" of Sections 622(b) and 622(g)(2)(D) that are entitled to deference. In sum, unlike in-kind contributions and the PEG capital costs exemption, the FCC's interpretation of the incidental costs exemption is not subject to any ongoing legal challenge. Consequently, with the exception of the "minor expenses" mentioned in the First Order, only those expenses listed in Section 622(g)(2)(D) (bonds, security funds, etc.) are exempt from the 5% cap under the incidental costs exemption. Franchising Authority over Mixed-Use Networks A continuing area of disagreement between the FCC and franchising authorities has been the extent to which franchising authorities can regulate non- cable services that a cable operator provides over the same network used for its cable service (e.g., a "mixed-use network"). From the First Order onward, the Commission has maintained that, based on its interpretation of various Title VI provisions, franchising authorities may not regulate the non-cable services aspects of mixed-use networks. While the First Order applied this rule only to new entrants to the cable market, the Second Order extended it to incumbent cable operators. The Sixth Circuit upheld this rule as applied to new entrants into the cable market, but vacated the FCC's application of it to incumbent cable operators. The Commission sought to cure this defect in the Third Order, and it further clarified that any efforts by state and local governments to regulate non-cable services provided by cable operators, even if done outside the cable franchising process and relying on the state's inherent police powers, are preempted by Title VI. However, given the ongoing legal challenge to the Third Order, this issue, too, remains unsettled. Statutory Provisions Governing Mixed-Use Networks Several Title VI provisions arguably prohibit franchising authorities from regulating non-cable services (such as telephone or broadband internet access service) provided over mixed-use networks, or networks over which an operator provides both cable and non-cable services. Section 602's definition of "cable system" explicitly excludes the "facility of a common carrier" except "to the extent such facility is used in the transmission of video programming directly to subscribers." Further, with respect to broadband internet access service, Section 624(b)(1) states that franchising authorities "may not . . . establish requirements for video programming or other information services." Lastly, Section 624(a) states that "[a] franchising authority may not regulate the services, facilities, and equipment provided by a cable operator except to the extent consistent with [Title VI]." FCC Interpretations of Statutory Provisions Governing Mixed-Use Networks Beginning with the First Order, the FCC has relied on these statutory provisions to clarify the bounds of franchising authority jurisdiction over mixed-use networks. The Commission asserted that a franchising authority's "jurisdiction applies only to the provision of cable services over cable systems." To support its view, the FCC cited Section 602's definition of "cable system," which explicitly excludes common carrier facilities except to the extent they are "used in the transmission of video programming directly to subscribers." The Commission did not address whether video services provided over the internet might are "cable services." The First Order applied only to new entrants to the cable market. However, in the Second Order, the FCC determined that the First Order's conclusions regarding mixed-use networks should apply to incumbent providers because those conclusions "depended upon [the Commission's] statutory interpretation of Section 602, which does not distinguish between incumbent providers and new entrants." The FCC reaffirmed this position in the Reconsideration Order, stating that franchising authorities "cannot . . . regulate non-cable services provided by an incumbent." In Montgomery County v. FCC , however, the Sixth Circuit vacated the FCC's extension of its mixed-use network rule to incumbent cable providers on the ground that this interpretation was arbitrary and capricious. The court explained that the Commission could not simply rely on the reasoning in its First Order because Section 602 did not support an extension of the mixed-use rule to incumbent cable providers. The court observed that the FCC correctly applied its mixed-use rule to new entrants—who were generally common carriers—because Section 602's definition of "cable system" expressly excludes common carrier facilities. But most incumbents, by contrast, are not common carriers. Consequently, because the Commission did not identify any other "valid basis—statutory or otherwise—" for its extension of its mixed-use rule to non-common carrier cable providers, the court vacated that decision as arbitrary and capricious. Responding to Montgomery County , the FCC's Third Order provides additional support for extending the mixed-use rule to incumbent cable operators. The Order first reiterates that Section 602's definition of "cable system" provides the basis for barring franchising authorities from regulating incumbent cable operators when acting as common carriers, because the definition explicitly excludes common carrier facilities except to the extent they are "used in the transmission of video programming directly to subscribers." Similarly, the Commission concluded that franchising authorities cannot regulate non -common carriers to the extent they provide other services along with cable, in particular, broadband internet access. The Third Order supports that conclusion by reference to Section 624(b)(1)'s command that franchising authorities may not "establish requirements for video programming or other information services ." While "information services" is not defined in Title VI, the FCC concluded that, based on Title VI's legislative history, the term should have the same meaning it has in Title I of the Communications Act. The Commission has interpreted "information service" under Title I of the Communications Act to include broadband internet access service, and the D.C. Circuit has upheld that interpretation. The Third Order also notes that "it would conflict with Congress's goals in the Act" to treat cable operators that are not common carriers differently from those that are common carriers, as allowing franchising authorities to regulate non-common carrier operators more strictly "could place them at a competitive disadvantage." Beyond clarifying that franchising authorities cannot use their Title VI authority to regulate the non-cable aspects of a mixed-use cable system, the Third Order also explicitly preempts state and local laws that "impose[] fees or restrictions" on cable operators for the "provision of non-cable services in connection with access to [public] rights-of-way, except as expressly authorized in [Title VI]." Prior to the Third Order's issuance, for example, the Oregon Supreme Court in City of Eugene v. Comcast upheld the City of Eugene's imposition of a 7% fee on the revenue a cable operator generated from its provision of broadband internet services. Rather than impose the fee as part of the cable franchising process, the city cited as its authority an ordinance imposing a "license-fee" requirement on the delivery of "telecommunications services" over the city's public rights-of-way. The court held that Title VI did not prohibit the city from imposing the fee, as it was not a "franchise fee" subject to the 5% cap because the ordinance applied to both cable operators and non-cable operators. Thus, the court reasoned, the city did not require Comcast to pay the fee "solely because of" its status as a cable operator and the franchise fee definition was not met. In the aftermath of the Oregon Supreme Court's decision, other state and local governments relied on sources of authority outside of Title VI, such as their police power under state law, to regulate the non-cable aspects of mixed-use networks. The Third Order rejects City of Eugene 's reading of Title VI. The FCC reasoned that Title VI establishes the "basic terms of a bargain" by which a cable operator may "access and operate facilities in the local rights-of-way, and in exchange, a franchising authority may impose fees and other requirements as set forth and circumscribed in the Act." Although Congress was "well aware" that cable systems would carry non-cable services as well as cable, it nevertheless "sharply circumscribed" the authority of state and local governments to "regulate the terms of this exchange." Consequently, the Commission concluded, the Third Order "expressly preempt[s] any state or local requirement, whether or not imposed by a franchising authority, that would impose obligations on franchised cable operators beyond what Title VI allows." The Third Order also concluded that the FCC has authority to preempt such laws because, among other things, Section 636(c) of Title VI expressly preempts any state or local law" that is "inconsistent with this chapter." Thus, in the FCC's view, wherever such express preemption provisions are present, the "Commission has [been] delegated authority to identify the scope of the subject matter expressly preempted." In sum, while franchising authorities may not use the cable franchising process to regulate non-cable services provided over mixed-use networks by new entrants to the cable market, the FCC's extension of this rule to incumbents has not yet been upheld in court. Furthermore, the Third Order's broad preemption of any state and local law regulating cable operators' use of public rights-of-way beyond what Title VI allows raises even more uncertainty. As discussed further below, the Third Order's preemption raises difficult questions about the extent to which the Commission may rely on Title VI to preempt not only state and local cable franchising requirements but also generally applicable state regulations and ordinances that regulate non-cable services provided by cable operators. Legal Challenges Several cities, franchising authorities, and advocacy organizations have filed petitions for review of the Third Order in various courts of appeals, and these petitions have been consolidated and transferred to the Sixth Circuit. In their petitions, the petitioners generally allege that the Third Order violates the Communications Act and the U.S. Constitution and is arbitrary and capricious under the APA. The same parties filed a motion with the FCC to stay the Third Order, which the Commission recently denied. While the petitions challenging the order state their legal theories in general terms, this case will likely raise complex issues of statutory interpretation, as well as administrative and constitutional law. For instance, petitioners could argue, as commenters did during the rulemaking process for the Third Order, that the text and structure of Title VI contradicts the FCC's broad interpretation that a franchise fee should include most cable-related, in-kind expenses. Pointing to provisions such as Section 611(b), which authorizes franchising authorities to impose PEG and I-Net requirements without any reference to the franchise fee provision, some commenters argued that Title VI treats the cost of complying with franchise requirements as distinct from the franchise fee. A reviewing court would likely apply the Chevron framework to resolve such statutory arguments. While it is difficult to predict how a reviewing court would decide any given issue, the Sixth Circuit's decision in Montgomery County indicates that the court might uphold the Third Order's legal interpretation of the franchise fee provision under the Chevron doctrine. Specifically, as discussed above, the Sixth Circuit held that Section 622's definition of franchise fee is broad enough to include "noncash exactions." Given this decision, the Sixth Circuit could potentially hold that the franchise fee definition is broad enough to accommodate the FCC's interpretation and that the FCC's interpretation is reasonable and entitled to deference. Even were the Sixth Circuit to reach that conclusion, however, that is not the end of the analysis. As the Sixth Circuit's decision in Montgomery County also demonstrates, the FCC's rulings may be vacated regardless of whether the Commission's statutory interpretation enjoys Chevron deference if the court concludes that the FCC's interpretation is arbitrary and capricious under the APA. A federal agency's determination is arbitrary and capricious if the agency "has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." In Montgomery County , the Sixth Circuit held that the FCC had acted arbitrarily and capriciously by failing to give "scarcely any explanation at all" for expanding its franchise fee interpretation to cable-related in-kind expenses and for failing to identify a statutory basis for extending its mixed-use rule to incumbents. While the Commission took pains to address these concerns in the Third Order, it remains to be seen whether a court would find those efforts sufficient or accept other arguments as to why the FCCs interpretations should be held arbitrary and capricious. For instance, those challenging the Third Order might argue that the Commission failed to address evidence that "runs counter" to its rules or failed to consider important counterarguments. One such area of focus for petitioners in their motion to stay the Third Order was the FCC's alleged failure to address potential public safety effects of the Third Order's treatment of cable-related in-kind contributions. In addition, the Third Order's assertion of preemption may come under scrutiny from state or local challengers who seek to regulate mixed-use networks. A recent D.C. Circuit decision struck down the FCC's attempt to preempt "any state or local requirements that are inconsistent with [the FCC's] deregulatory approach" to broadband internet regulation. Additionally, in a recent opinion concurring in the U.S. Supreme Court's denial of a petition for certiorari in a case involving a state's effort to regulate Voice over Internet Protocol service, Justice Thomas, joined by Justice Gorsuch, voiced concerns about allowing the FCC's deregulatory policy to preempt state regulatory efforts. Both the D.C. Circuit and Justices Thomas and Gorsuch expressed skepticism that the FCC has statutory authority to preempt state and local regulation in areas where the FCC itself has no statutory authority to regulate. Cities and local franchising authorities may seize on the reasoning in these opinions to argue that Title VI's preemption provision cannot extend to non-cable services that fall outside Title VI's purview. Lastly, along with statutory interpretation and administrative law issues, challengers to the Third Order may assert constitutional arguments. As mentioned, the Third Order prevents state and local governments from relying on state law to regulate non-cable services provided by cable operators. However, some commenters have argued that the Third Order violates the anti-commandeering doctrine, a constitutional rule that prohibits the federal government from compelling states to administer federal regulations. The Supreme Court recently clarified the anti-commandeering doctrine in Murphy v. NCAA . In Murphy , the Court struck down the Professional and Amateur Sports Protection Act of 1992, which prohibited states from legalizing sports gambling. Justice Alito, writing for the Court, reasoned that the anti-commandeering doctrine prohibits Congress from "issu[ing] direct orders to state legislatures," compelling them to either enact certain legislation or to restrict them from enacting certain legislation. The Court explained that the anti-commandeering doctrine promotes accountability, because, when states regulate at Congress's command, "responsibility is blurred." Justice Alito further explained that the doctrine "prevents Congress from shifting the costs of regulation to the States." The Court contrasted unlawful commandeering with permissible "cooperative federalism" regimes. Under such regimes, Congress allows, but does not require, states to implement a regulatory program according to federal standards, and a federal body implements the program when a state refrains from doing so. According to some commenters, the FCC's Third Order violates the anti-commandeering doctrine because it "effectively command[s] local government[s] to grant right-of-way access on the terms the Commission, not local government or the states set." Further, some commenters, including the National Association of Telecommunications Officers and Advisors and National League of Cities, argue that the Third Order would violate the accountability and cost-shifting principles animating the anti-commandeering doctrine, as explained in Murphy . According to these commenters, the FCC's "mixed-use rule unquestionably blurs responsibility" because residents unhappy with cable operators' use of the right-of-way for non-cable purposes would "blame their local elected officials," and the mixed-use rule would shift cost to local governments by "usurp[ing]" the "compensation local governments may be entitled to for use of the [rights-of-way] for non-cable services." Ultimately, this issue may turn on whether Title VI, as interpreted by the FCC's rules, is a permissible "cooperative federalism" program under Murphy . In its Third Order, the Commission argued Title VI was such a program because it "simply establishes limitations on the scope of [states' authorities to "award franchises" to cable operators] when and if exercised." The FCC further maintained that, rather than "requir[ing] that state or local governments take or decline any particular action," its rules were "simply requiring that, should state and local governments decide to open their rights-of-way to providers of interstate communication services within the Commission's jurisdiction, they do so in accordance with federal standards." It remains to be seen, however, how broadly lower courts will apply Murphy 's cooperative federalism distinction. Considerations for Congress Beyond the various legal arguments discussed above, there are notable disagreements over the practical impact of the FCC's rules. On the one hand, localities and their representative organizations have claimed that the Commission's Third Order will "gut[] local budgets" and that, by subjecting in-kind franchise requirements such as PEG and I-Net requirements to the 5% cap, it will force franchising authorities to "choose between local PEG access and I-Nets, and the important other public services supported by franchise fees." Similarly, the two FCC commissioners who dissented from the Third Order—Jessica Rosenworcel and Geoffrey Starks—maintained in their dissents that the Third Order was part of a broader trend at the Commission of "cutting local authorities out of the picture" and that it would, among other things, diminish the "value of local public rights-of-way." In response, the FCC's chairman, Ajit Pai, and other Commissioners in the majority contended that the rule would benefit consumers because the costs imposed by franchising authorities through in-kind contributions and fees get "passed on to consumers" and discourage the deployment of new services like "faster home broadband or better Wi-Fi or Internet of Things networks." Given the competing arguments relating to the FCC's interpretation of Title VI's scope, Congress may be interested in addressing the issues raised by the Third Order. For instance, Congress might address the extent to which Section 622's definition of "franchise fee" includes cable-related, in-kind expenses such as PEG and I-Net services. It might also address whether Title VI preempts state and local governments from relying on their police powers or other authorities under state law to regulate non-cable services provided by cable operators. However, Congress also might consider federalism issues implicated by any attempt to prohibit state and local authorities from regulating such services. As discussed in the previous section, the anti-commandeering principle prohibits direct orders to states that command or prohibit them from enacting certain laws, but permits lawful "cooperative federalism" regimes where Congress gives states a choice of either refraining from regulating a particular area or regulating according to federal standards. Thus, Congress may avoid anti-commandeering issues by setting federal standards for regulation of ancillary non-cable services rather than prohibiting states from regulating these services. Appendix. Supplemental Information Federal Standards and Restrictions on Franchising Authority Power The following table summarizes functions and areas traditionally regulated by franchising authorities that are subject to federal standards or federal restrictions. This table is not a summary of all federal requirements and regulations cable operators face under the act, only those that implicate the powers of franchising authorities. Glossary Build-Out Requirement: A requirement placed on a cable operator to provide cable service to particular areas or residential customers. Cable Operator: From the Cable Act, 47 U.S.C. § 522, "[a]ny person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system." Cable Service: One-way transmission of video programming to customers, and any customer interaction required for the selection or use of such video programming. Cable System: A facility designed to provide video programming to multiple subscribers within a community, with limited exceptions. See note 39 , supra , for the precise exceptions. Common Carrier: A person or entity who provides interstate telecommunications service. Franchise: A right to operate a cable system in a given area. Franchise Fee: From the Cable Act, 47 U.S.C. § 542, "any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such," with several exceptions. See the " Franchise Fees " section, supra , for a discussion of some of these exceptions. Franchising Authority: A state or local governmental body responsible for awarding franchises. I-Net: Abbreviation for "institutional network"; a communication network constructed or operated by a cable operator for use exclusively by institutional (non-residential) customers. In-Kind : Non-monetary. Mixed-Use Network: A communication network over which a person or entity provides both cable service and other service(s), such as telecommunications service. PEG: Abbreviation for "Public, Educational, or Governmental." See note 41 , supra , for more discussion of this term. Telecommunications : From the Communications Act, 47 U.S.C. § 153, "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." Telecommunications Service: The offering of telecommunications directly to the public for a fee. Title VI: The collected provisions of the Cable Act, as amended.

Companies that provide cable television service (cable operators) are subject to regulation at the federal, state, and local levels. Under the Communications Act of 1934, the Federal Communications Commission (FCC or Commission) exercises regulatory authority over various operational aspects of cable service. At the same time, a cable operator must obtain a franchise from the state or local franchising authority for the area in which it wishes to provide cable service. The franchising authority often negotiates various obligations as a condition of granting the franchise. Under the Cable Communications Policy Act of 1984 (Cable Act), cable operators must obtain franchises from state or local franchising authorities, and these authorities may continue to condition franchises on various requirements. Nevertheless, the Cable Act subjects franchising authorities to important limitations. For instance, the Cable Act prohibits franchising authorities from charging franchise fees greater than 5% of a cable operator's gross annual revenue and from "unreasonably" refusing to award a franchise. In a series of orders since 2007, the FCC has interpreted the Cable Act to authorize an expanding series of restrictions on the powers of state and local franchising authorities to regulate cable operators. In particular, these orders clarify (1) when practices or policies by a franchising authority amount to an unreasonable refusal to award a franchise; (2) the types of expenditures that count toward the 5% franchise fee cap; and (3) the extent to which franchising authorities may regulate non-cable services provided by cable operators. Franchising authorities, in turn, have successfully challenged some of the FCC's administrative actions in federal court. The U.S. Court of Appeals for the Sixth Circuit upheld many rules in the FCC's orders, but it also vacated some of the FCC's rules in the 2017 decision in Montgomery County v. FCC . In response to the Montgomery County decision, the FCC adopted a new order on August 1, 2019, which clarifies its interpretations of the Cable Act. Among other things, the order reiterates the FCC's position that in-kind (i.e., non-monetary) expenses, even if related to cable service, may count toward the 5% franchise fee cap and preempts any attempt by state and local governments to regulate non-cable services provided by cable operators. Some localities have criticized the order for hampering their ability to control public rights-of-way and for reducing their ability to ensure availability of public, educational, and government (PEG) programming in their communities. Several cities have filed legal challenges to the order, which will likely involve many complex issues of statutory interpretation and administrative law, along with constitutional questions regarding the FCC's ability to impose its deregulatory policy on states. This report first outlines the FCC's role in regulating cable operators and franchising authorities, beginning with the Commission's approach under the Communications Act through the passage of the Cable Act and its amendments. The report then turns to a discussion of recurring legal issues over the FCC's power over franchising authorities. The report concludes with a discussion of possible legal issues that may arise in current legal challenges to FCC regulations and offers considerations for Congress.

CRS_R45818

Purpose and Scope The purpose of this report is to provide information and analysis for Congress on Afghanistan and the nearly two-decade U.S. project there. Topics covered include U.S. military engagement and security dynamics; the regional context; reconciliation efforts; Afghan politics and governance; foreign assistance; and social and economic development. Supplementary materials, including a historical timeline and background on the Soviet war in Afghanistan, are included as appendices. This information is meant to provide background and context for lawmakers as they consider administration budget requests, oversee U.S. military operations and aid programs, and examine the U.S. role in South Asia and the world. For a more frequently updated treatment of current events in Afghanistan and developments in U.S. policy, refer to CRS Report R45122, Afghanistan: Background and U.S. Policy In Brief , by Clayton Thomas. Overview The U.S. and Afghan governments, along with partner countries, remain engaged in combat with a robust Taliban-led insurgency. While U.S. military officials maintain that Afghan forces are "resilient" against the Taliban, by some measures insurgents are in control of or contesting more territory today than at any time since 2001. The conflict also involves an array of other armed groups, including active affiliates of both Al Qaeda (AQ) and the Islamic State (IS, also known as ISIS, ISIL, or by the Arabic acronym Da'esh ). Since early 2015, the North Atlantic Treaty Organization (NATO)-led mission in Afghanistan, known as "Resolute Support Mission" (RSM), has focused on training, advising, and assisting Afghan government forces. Combat operations by U.S. counterterrorism forces, along with some partner forces, have increased since 2017. These two "complementary missions" make up Operation Freedom's Sentinel (OFS). Simultaneously, the United States is engaged in a diplomatic effort to end the war, most notably through direct talks with Taliban representatives (a reversal of previous U.S. policy). In January 2019, U.S. and Taliban negotiators reached a draft framework, in which the Taliban would prohibit terrorist groups from operating on Afghan soil in return for the eventual withdrawal of U.S. forces, though lead U.S. envoy Zalmay Khalilzad insists that "nothing is agreed until everything is agreed." As of July 2019, negotiations do not directly involve representatives of the Afghan government, leading some Afghans to worry that the United States will prioritize a military withdrawal over a complex political settlement that preserves some of the social, political, and humanitarian gains made since 2001. A major complicating factor underlying the negotiations is the unsettled state of Afghan politics; Afghanistan held inconclusive parliamentary elections in October 2018 and the presidential election, originally scheduled for April 2019, has been postponed until September 2019. The Afghan government has made some notable progress in reducing corruption and implementing its budgetary commitments, but faces domestic criticism for its failure to guarantee security and prevent insurgent gains. The United States has spent more than $132 billion in various forms of reconstruction aid to Afghanistan over the past decade and a half, from building up and sustaining the Afghan National Defense and Security Forces (ANDSF) to economic development. This assistance has increased Afghan government capacity, but prospects for stability in Afghanistan still appear distant. Some U.S. policymakers hope that the country's largely underdeveloped natural resources and geographic position at the crossroads of future global trade routes might improve the economic life of the country, and, by extension, its social and political dynamics. Nevertheless, in light of the ongoing hostilities Afghanistan's economic and political prospects remain uncertain at best. U.S. Military Operations September 11 and Start of Operation Enduring Freedom (2001-2009) On September 11, 2001, the United States suffered a series of coordinated terrorist attacks executed by the Islamist terrorist group Al Qaeda. Al Qaeda leadership was based in Afghanistan and protected by the Taliban government that ruled most of that country (see textbox below). U.S. President George W. Bush articulated a policy that equated those who harbor terrorists with terrorists themselves, and asserted that a friendly regime in Kabul was needed to enable U.S. forces to search for Al Qaeda members there. On September 14, 2001, in Congress, S.J.Res. 23 ( P.L. 107-40 ), passed 98-0 in the Senate and with no objections in the House, authorized the use of military force, stating that: [t]he President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001 or harbored such organizations or persons in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons. The Administration also sought United Nations (U.N.) backing for military action. On September 12, 2001, the U.N. passed Security Council Resolution 1368, expressing the Council's "readiness to take all necessary steps to respond to the September 11 attacks." When the Taliban refused the Bush Administration's demand to extradite Al Qaeda leader Osama bin Laden, the Administration launched military operations against the Taliban to "disrupt the use of Afghanistan as a terrorist base of operations, and to attack the military capability of the Taliban regime." Combat operations in Afghanistan began on October 7, 2001, with the launch of Operation Enduring Freedom (OEF). Initial military operations initially consisted primarily of U.S. air strikes on Taliban and Al Qaeda forces, facilitated by the cooperation between reported small numbers (about 1,000) of U.S. special operations forces and Central Intelligence Agency operatives. The purpose of these operations was to help Afghan forces opposed to the Taliban (led by an armed coalition known as the Northern Alliance) advance by directing U.S. air strikes on Taliban positions. In October 2001, about 1,300 Marines were deployed to pressure the Taliban in the southern province of Kandahar, but there were few pitched U.S.-Taliban battles. Northern Alliance forces—despite promises that they would not enter Kabul—did so on November 12, 2001, to widespread popular approval. The Taliban subsequently lost the south and east to U.S.-supported Pashtun leaders, including Hamid Karzai. The Taliban regime ended on December 9, 2001, when Taliban head Mullah Omar and other leaders fled Kandahar, leaving it under tribal law. A provisional government was set up (see " Constitution and Political System ," below) and on May 1, 2003, U.S. officials declared an end to "major combat." From 2003 to mid-2006, U.S. and international troops (as part of the U.N.-mandated and NATO-led International Security Assistance Force, ISAF) trained nascent Afghan forces and fought relatively low levels of insurgent violence with focused combat operations mainly in the south and east. By late 2005, U.S. and partner commanders considered the insurgency mostly defeated and NATO assumed lead responsibility for security in all of Afghanistan during 2005-2006. Those optimistic assessments proved misplaced when violence increased in mid-2006. NATO-led operations during 2006-2008 cleared Taliban fighters from some areas but did not prevent subsequent reinfiltration by the Taliban, nor did preemptive combat and increased development work produce durable success. Taking into account the deterioration of the security situation, the United States and its partners decided to increase force levels. Obama Administration: "Surge" and Drawdown (2009-2014) Upon taking office, the Obama Administration declared that the Afghanistan mission was a high priority, but that the U.S. level of effort there would eventually need to be reduced. The Administration convened a 60-day inter-agency "strategy review," chaired by former CIA analyst Bruce Riedel and co-chaired by then-Special Representative for Afghanistan and Pakistan Richard Holbrooke and then-Under Secretary of Defense for Policy Michele Flournoy. In response to that review, President Barack Obama announced a "comprehensive" strategy on March 27, 2009, that would require the deployment of an additional 21,000 U.S. forces. In June 2009, U.S. Army General Stanley McChrystal, who headed U.S. Special Operations forces from 2003 to 2008, became the top U.S. and NATO commander in Afghanistan. In August 2009, General McChrystal delivered a strategy assessment recommending that the goal of the U.S. military should be to protect the population rather than to search out and combat concentrations of Taliban fighters, warning of the potential for "mission failure" in the absence of a fully resourced, comprehensive counterinsurgency strategy. His assessment stated that about 44,000 additional U.S. combat troops would be needed to provide the greatest chance for success. The assessment set off debate within the Administration and launched another policy review. Some senior U.S. officials argued that adding many more U.S. forces could produce a potentially counterproductive sense of U.S. occupation. President Obama announced the following at West Point on December 1, 2009: 30,000 additional U.S. forces (a "surge") would be sent to "reverse the Taliban's momentum" and strengthen the Afghan National Defense and Security Forces (ANDSF); and beginning in July 2011, there would be a transition to Afghan security leadership and a corresponding drawdown of U.S. forces. The troop surge brought U.S. force levels to 100,000, with most of the additional forces deployed to the south. When the surge was announced, the Afghan Interior Ministry estimated that insurgents controlled 13 of the country's 356 districts and posed a "high-risk" to another 133. The Taliban had named "shadow governors" in 33 out of 34 of Afghanistan's provinces, although some were merely symbolic. Operations by U.S., NATO, and Afghan forces throughout 2010 and 2011 reduced areas under Taliban control substantially and the transition to Afghan security leadership began on schedule in July 2011. In concert with the transition, and asserting that the killing of Osama bin Laden represented a key accomplishment of the core U.S. mission, President Obama announced on June 22, 2011 that: U.S. force levels would fall to 90,000 (from 100,000) by the end of 2011. U.S. force levels would drop to 68,000 by September 2012. In his February 2013 State of the Union message, President Obama announced that the U.S. force level would drop to 34,000 by February 2014, which subsequently occurred. Most partner countries drew down their forces at roughly the same rate and proportion as the U.S. drawdown, despite public pressure in some European countries to more rapidly reduce or end military involvement in Afghanistan. During 2010-2012, the Netherlands, Canada, and France ended their combat missions, but they continued to train the ANDSF until the end of 2014. On June 18, 2013, NATO and Afghanistan announced that Afghan forces were now taking the lead on security throughout all of Afghanistan. As international forces were reduced in 2014, Afghan and international officials expressed uncertainty about U.S. and partner plans for the post-2014 period. On May 27, 2014, President Obama clarified Administration plans by announcing the size of the post-2014 U.S. force and plan for a U.S. military exit according to the following timeline: The U.S. military contingent in Afghanistan would be 9,800 in 2015, deployed in various parts of Afghanistan, consisting mostly of trainers in the NATO-led "Resolute Support Mission" (RSM). The U.S. force would decline to about 5,000 by the end of 2016 and consolidate in Kabul and at Bagram Airfield. After 2016, the U.S. military presence would be consistent with normal security relations with Afghanistan (about 1,000 military personnel) under U.S. Embassy authority (without a separate military chain of command in country). Their mission would be to protect U.S. installations, process Foreign Military Sales (FMS) of weaponry to Afghanistan, and train the Afghans on that weaponry. During 2014, the United States and its partners prepared for the end of the ISAF mission. U.S. airpower in country was reduced, ISAF turned over the vast majority of about 800 bases to the ANDSF, and the provincial reconstruction teams (PRTs) were turned over to Afghan institutions. Bilateral Accords: Strategic Partnership Agreement (SPA) and Bilateral Security Agreement (BSA) On May 1, 2012, President Obama and then-President Hamid Karzai signed an Enduring Strategic Partnership Agreemen t (SPA) between Afghanistan and the United States. The signing followed a long negotiation that focused on resolving Afghan insistence on control over detention centers and a halt to or control over nighttime raids on insurgents by U.S. forces. In addition to provisions designating Afghanistan as a Major Non-NATO Ally, the agreement committed the two countries to negotiating a Bilateral Security Agreement (BSA ) that would detail the terms of U.S. engagement in Afghanistan. The BSA was approved by a loya jirga (consultative assembly) called by then-President Karzai in November 2013, though he then refused to sign; the agreement was eventually signed by President Ashraf Ghani as one of his first acts after taking office in September 2014. The BSA was considered as an executive agreement was not submitted for congressional approval. The BSA governs the United States' post-2014 presence in Afghanistan through the end of 2024 "and beyond" unless terminated by mutual written agreement or by either country with two years' written notice. The agreement does not set (or otherwise refer to) U.S. and partner force levels, but lays out the parameters and goals of the U.S. military mission and provides for U.S. access to Afghan bases. The BSA also stipulates that "the United States shall have the exclusive right to exercise jurisdiction over such [U.S.] persons in respect of any criminal or civil offenses committed in the territory of Afghanistan." The BSA does not commit the United States to defend Afghanistan from attack from another country, but states that "the United States shall regard with grave concern any external aggression or threat" thereof. Some Afghan figures, including Karzai (who remains active in Afghan politics), advocate revising the BSA, but such efforts do not appear to have the support of the current Afghan government. Resolute Support Mission (2015-Present) The NATO-led ISAF ended at the close of 2014, and was replaced by Resolute Support Mission (RSM) on January 1, 2015. The legal framework for NATO's presence is based on a Status of Forces Agreement signed between the Afghan government and NATO in September 2014 and ratified by the Afghan parliament in November 2014. That agreement defines RSM as a "non-combat training, advising and assistance mission," though combat operations by some U.S. forces, in support of Afghan forces, continue. Alterations to the Drawdown Schedule and Rules of Engagement Concerns about Taliban gains after 2015 led to several changes to the U.S. mission in the final two years of the Obama Administration. On March 24, 2015, in concert with the visit to Washington, DC of President Ghani and Chief Executive Officer Abdullah Abdullah, President Obama announced that U.S. forces would remain at a level of about 9,800 for all of 2015, rather than being reduced to 5,500 by the end of the year, as originally announced. In January 2016, the Obama Administration authorized U.S. commanders in Afghanistan to attack the local Islamic State affiliate, Islamic State-Khorasan Province (ISKP, more below) forces. In June 2016, President Obama authorized U.S. forces to conduct preemptive combat. According to then-Secretary of Defense Ashton Carter on July 12, 2016, U.S. forces were enabled to "anticipate battlefield dynamics and ... deploy and employ their forces together [with the ANDSF] in a way that stops a situation from deteriorating [or] interrupts an enemy in the early stages of planning and formulating an attack." On July 6, 2016, President Obama again adjusted planned U.S. force levels, stating that the level would drop to 8,400 at the end of 2016, rather than to the 5,500 that was previously announced. The communique of the NATO summit in Warsaw, Poland (July 8-9, 2016), announced that other NATO countries would continue to support RSM beyond 2016, both with force contributions and donations to the ANDSF (the latter until 2020). No force or budget levels were specified in the declaration. Developments during the Trump Administration In a national address on August 21, 2017, President Donald Trump announced a "new strategy" for Afghanistan and South Asia. Despite expectations that he would describe specific elements of his new strategy, particularly the prospects for additional troops, President Trump declared "we will not talk about numbers of troops or our plans for further military activities." Some policymakers characterized the strategy as "short on details" and serving "only to perpetuate a dangerous status quo." Others welcomed the decision, contrasting it favorably with proposed alternatives such as a full withdrawal of U.S. forces (which President Trump conceded was his "original instinct") or heavy reliance on contractors. Beyond additional troops, the strategy also gave broader authority for U.S. forces to operate independently of Afghan forces and "attack the enemy across the breadth and depth of the battle space," expanding the list of targets to include those related to "revenue streams, support infrastructure, training bases, [and] infiltration lanes." This was exercised in a series of operations, beginning in fall 2017, against Taliban drug labs. These operations, often highlighted by U.S. officials, sought to degrade what is widely viewed as one of the Taliban's most important sources of revenue, namely the cultivation, production, and trafficking of narcotics. Some analysts have questioned the impact of these strikes, which ended in late 2018. Security Dynamics: The Taliban and Other Armed Groups Decades of instability, civil war, and weak central government control have contributed to the existence of a complex web of militant groups in Afghanistan. While the Taliban are by far the largest and best-organized, they operate alongside (and sometimes in competition with) other armed groups, including regional affiliates of both the Islamic State and Al Qaeda. Taliban Insurgency While U.S. commanders have asserted that the ANDSF performs well despite taking heavy casualties, Taliban forces have retained, and by some measures are increasing, their ability to contest and hold territory and to launch high-profile attacks. U.S. officials often have emphasized the Taliban's failure to capture a provincial capital since their week-long seizure of Kunduz city in northern Afghanistan in September 2015, but Taliban militants briefly overran two capitals, Farah and Ghazni, in May and August 2018, respectively. Then-Secretary of Defense James Mattis described the Taliban assault on Ghazni, which left hundreds dead, as a failure for the Taliban, saying "every time they take [a city] ... they're unable to hold it." Since at least early 2017, U.S. military officials have stated that the conflict is "largely stalemated." Arguably complicating that assessment, the extent of territory controlled or contested by the Taliban has generally grown since 2016 by most measures (see Figure 3 ). In November 2015, the Special Inspector General for Afghanistan Reconstruction (SIGAR) began publishing in its quarterly reports a district-level assessment of stability in Afghanistan produced by the U.S. military. This assessment estimated the extent of Taliban control and influence in terms of both territory and population, and was typically accompanied by charts portraying those trends over time as well as a color-coded map of control/influence by district (see Figure 4 ). That data showed a gradual increase in the share of Afghan districts controlled, influenced, or contested by insurgents (46% as of October 2018, the last month such data was evidently collected, compared to 28% in November 2015). According to SIGAR's April 30, 2019 quarterly report, the U.S. military is "no longer producing its district-level stability assessments of Afghan government and insurgent control and influence." SIGAR reports that it was told by the U.S. military that the assessment is no longer being produced because it "was of limited decision-making value to the [U.S.] Commander." The Taliban have demonstrated considerable, and some observers would argue growing, tactical capabilities. Due to the high levels of casualties inflicted by the Taliban, the Trump Administration has reportedly urged Afghan forces to pull out of some isolated outposts and rural areas. Reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani confirmed in November 2018 that Afghan forces had suffered more than 28,000 fatalities since 2015. So-called "green on blue" attacks (insider attacks on U.S. and coalition forces by Afghan nationals) are a sporadic, but persistent, problem—several U.S. servicemen died in such attacks in 2018, as did 85 Afghan soldiers. In October 2018, General Miller was present at an attack inside the Kandahar governor's compound by a Taliban infiltrator who killed a number of provincial officials, including the powerful police chief Abdul Raziq; Miller was unhurt but another U.S. general was wounded. The May 2016 death of then-Taliban head Mullah Mansour in a U.S. drone strike demonstrated Taliban vulnerabilities to U.S. intelligence and combat capabilities, although his death did not appear to have a measurable effect on Taliban effectiveness; it is unclear to what extent current leader Haibatullah Akhundzada exercises effective control over the group and how he is viewed within its ranks. Haqqani Network Founded by Jalaluddin Haqqani, a mujahideen commander and U.S. ally during the war against the Soviet occupation, the Haqqani Network is a semiautonomous wing of the Afghan Taliban. As such, it has been cited by U.S. officials as a potent threat to U.S. and allied forces and interests, as well as a "critical enabler of Al Qaeda." Jalaluddin Haqqani served as a minister in the Taliban regime, and after 2001 reestablished a presence in the Pakistani tribal territory of North Waziristan. By 2006, he was credited as "the architect of the Taliban's current attacks on U.S. and coalition forces in Afghanistan." Within a few years, Jalaluddin's son Sirajuddin took over the group's operations, becoming increasingly influential in setting overall insurgency strategy, and was selected as deputy leader of the Taliban in 2015. The Taliban announced the death of Jalaluddin, who reportedly had been ill for years, in September 2018. The Haqqani network is blamed for a number of major attacks, including a devastating May 2017 bombing in Kabul's diplomatic district that left over 150 dead and sparked violent protests against the government. The Haqqani network has historically targeted Indian interests in Afghanistan, reinforcing perceptions by some observers and officials that the group often acts as a tool of Pakistani foreign policy. In September 2011, then-Chairman of the Joint Chiefs of Staff Michael Mullen testified in front of the Senate Armed Services Committee that the Haqqani network acts "as a veritable arm" of Pakistan's main intelligence agency, the Inter-Services Intelligence Directorate (ISI). Additionally, it reportedly holds captive two professors (Timothy Weeks, an Australian, and American citizen Kevin King, who is reportedly seriously ill) kidnapped from the American University of Afghanistan in August 2016; and a journalist (Paul Overby) seized in 2014 after crossing into Afghanistan to try to interview the Haqqani leadership. The faction's participation in a political settlement potentially could be complicated by its designation as a Foreign Terrorist Organization (FTO) under the Immigration and Naturalization Act. That designation was made on September 9, 2012, after the 112 th Congress enacted S. 1959 (Haqqani Network Terrorist Designation Act of 2012, P.L. 112-168 ), requiring an Administration report on whether the group met the criteria for FTO designation. Islamic State-Khorasan Province Beyond the Taliban, a significant share of U.S. operations are aimed at the local Islamic State affiliate, known as Islamic State-Khorasan Province (ISKP, also known as ISIS-K), although experts debate the degree of threat the group poses. ISKP (also referred to as ISIS-K) has been active in Afghanistan since mid-2014. ISKP was named as an FTO by the State Department on January 14, 2016. The group's presence in Afghanistan crystallized from several small Afghan Taliban and other militant factions that announced affiliation with the organization in 2013; ISKP presence grew further as additional Taliban factions defected to the group and captured some small areas primarily in eastern Afghanistan. ISKP has reportedly received financial assistance from the core organization formerly located in the self-declared "caliphate" in parts of Iraq and Syria. Estimates of the number of ISKP fighters generally range from 1,000 to 3,000. To address the ISKP threat, U.S. commanders have had authorization since December 2015 to combat ISKP fighters by virtue of their affiliation with the Islamic State, whether or not these fighters pose an immediate threat to U.S. and allied forces. U.S. operations have repeatedly targeted the group's leaders, with three killed in less than a year: Hafiz Saeed Khan died in a July 2016 U.S. airstrike and successors Abdul Hasib and Abu Sayed were killed in April and July 2017, respectively. ISKP has survived these leadership losses and appears to be a growing factor in U.S. and Afghan strategic planning. ISKP was the target of the much publicized April 2017 use of a GBU-43 (also known as a Massive Ordnance Air Blast, or MOAB), reportedly the first such use of the weapon in combat. A number of U.S. military, as well as CIA personnel, have been killed in anti-ISKP operations. ISKP and Taliban forces have sometimes fought over control of territory or because of political or other differences. In April 2018, a U.S. air strike killed the ISKP leader (himself a former Taliban commander) in northern Afghanistan, Qari Hekmatullah. NATO described neighboring Jowzjan province as "the main conduit for external support and foreign fighters from Central Asian states into Afghanistan." ISKP also has claimed responsibility for a number of large-scale attacks, many targeting Afghanistan's Shia minority. ISKP is also reported to have ambitions beyond Afghanistan; an unnamed U.S. intelligence officials was quoted in June 2019 as saying that, absent sustained counterterrorism pressure, "Afghanistan's IS affiliate will be able to carry out a large-scale attack in the U.S. or Europe within the next year." Al Qaeda63 While the Al Qaeda attacks of September 11 precipitated U.S. military operations in Afghanistan, the group has been a relatively minor player on the Afghan battlefield since. However, the relationship between Al Qaeda and the Taliban has important implications for U.S.-Taliban negotiations and a potential settlement. From 2001 until 2015, Al Qaeda was considered by U.S. officials to have only a minimal presence (fewer than 100 members) within Afghanistan, operating mostly as a facilitator for insurgent groups and mainly in the northeast. However, in late 2015 U.S. Special Operations forces and their ANDSF partners discovered and destroyed a large Al Qaeda training camp in Kandahar Province—a discovery suggesting a stronger Al Qaeda presence in Afghanistan than had been generally understood. In April 2016, U.S. commanders publicly raised their estimates of Al Qaeda fighters in Afghanistan to 100-300, and said that relations between Al Qaeda and the Taliban had become increasingly close; Afghan estimates are generally higher. The United Nations reports that Al Qaeda, while degraded in Afghanistan and facing competition from ISKP, "remains a longer-term threat." U.S. efforts to find remaining senior Al Qaeda leaders reportedly focus on bin Laden's successor Ayman al-Zawahiri, who is presumed to be on the Pakistani side of the border. While most successful U.S. strikes on high-ranking Al Qaeda operatives have taken place in Pakistan, several have been killed in Afghanistan in recent years, including operative Abu Bara Al Kuwaiti (October 2014, in Nangarhar Province); and Al Qaeda's commander for northeastern Afghanistan, Faruq Qahtani (October 2016). Al Qaeda is allied with the Taliban; bin Laden pledged allegiance to Taliban founder Mullah Omar and bin Laden successor Ayman al Zawahiri has done the same with Omar's two successors, in turn. According to a January 2019 U.N. report, Al Qaeda "continues to see Afghanistan as a safe haven for its leadership, based on its long-standing, strong ties with the Taliban." Some observers have noted operational cooperation between Al Qaeda and the Taliban, particularly in the east, in recent years. The AQ-Taliban alliance may complicate U.S. demands that the Taliban foreswear support for terrorism as part of a potential U.S. troop withdrawal deal; some analysts have recommended that "as part of any final deal, the Taliban should be required to state, in no uncertain terms, its official position" on Al Qaeda. Al Qaeda in the Indian Subcontinent (AQIS) is an affiliate of Al Qaeda based in and including members from various terrorist groups in South and Central Asia. Zawahiri announced the group's formation in 2014. In June 2016, the State Department designated the group as an FTO and its leader, Asim Umar, as a specially designated global terrorist. The large terrorist training camp found in Kandahar in 2015 was attributed by U.S. military officials to AQIS. Afghan National Defense and Security Forces (ANDSF) The primary objective of the post-2015 NATO-led Resolute Support Mission in Afghanistan is training, advising, and assisting the Afghan National Defense and Security Forces (ANDSF) in their struggle against the Taliban and other armed groups. Funding the ANDSF costs an estimated $6 billion per year, of which the U.S. has provided about $4.5 billion in recent years. At the NATO summit in Warsaw in July 2016, U.S. partners pledged $1 billion annually for the ANDSF during 2017-2020. U.S. officials assess that Afghanistan is contributing its pledged funds—$500 million (as calculated in Afghan currency)—despite budgetary difficulties. At the 2012 NATO summit in Chicago, Afghanistan agreed to assume full financial responsibility for the ANDSF by 2024, though current security dynamics and economic trends make that unlikely. The Department of Defense (DOD), SIGAR, and others have reported on deficiencies of the ANDSF, citing challenges such as absenteeism, high casualties, illiteracy, inconsistent leadership, and a deficit of logistical capabilities, such as airlift, medical evacuation, resupply, and other associated functions. ANDSF units and personnel also have been associated with credible allegations of child sexual abuse and other potential human rights abuses. A number of metrics related to ANDSF performance have been classified in recent years. In October 2017, SIGAR reported that "in a significant development," U.S. officials "classified or otherwise restricted information" SIGAR had previously reported, such as casualty rates, personnel strength, and attrition within the ANDSF. U.S. officials have cited a request from the Afghan government as justification for the decision. Personnel figures and attrition rates for some ANDSF components have since been made available in SIGAR reports. Other public information about ANDSF capabilities is also generally not encouraging. Media reports indicate that ANDSF fatalities have averaged 30-40 a day in recent months, and President Ghani stated in January 2019 that more than 45,000 security personnel had paid "the ultimate sacrifice" since he took office in September 2014. Partly in response to those casualty rates, Afghan forces are reportedly shuttering small checkpoints (where the majority of successful Taliban attacks take place) in favor of larger bases in more secure territory. U.S. advisors have long advocated for such moves, although critics claim that these steps effectively cede swaths of the country to the Taliban. The major components of the ANDSF are: Afghan National Army (ANA). The Afghan National Army has been built from scratch since 2002—it is not a direct continuation of the national army that existed from the nineteenth century until the Taliban era. That army disintegrated during the 1992-1996 mujah i d ee n civil war and the 1996-2001 Taliban period. Of its authorized size of 195,000, the ANA (all components) had about 190,000 personnel as of January 2019. Its special operations component, known as the Afghan Special Security Forces (ASSF) numbers nearly 21,000. The ASSF is trained by U.S. Special Operations Forces, and U.S. commanders say it might be one of the most proficient special forces in the region. Afghan special forces are utilized extensively to reverse Taliban gains, and their efforts reportedly have reportedly made up 70% to 80% of the fighting in recent years. A December 2018 DOD report assessed that ASSF "misuse increased to unsustainable levels" in late 2018, saying that the ASSF's deployment for such missions as static defense operations (in lieu of the conventional ANA) undermines anti-Taliban efforts. Afghan Air Force (AAF) . Afghanistan's Air Force is emerging as a key component of the ANDSF's efforts to combat the insurgency. The AAF has been mostly a support force but, since 2014, has increased its bombing operations in support of coalition ground forces, mainly using the Brazil-made A-29 Super Tucano. The force is a carryover from the Afghan Air Force that existed prior to the Soviet invasion, though its equipment was virtually eliminated in the 2001-2002 U.S. combat against the Taliban regime. Since FY2010, the United States has appropriated about $8.4 billion for the AAF, including $1.7 billion in FY2019. Still, equipment, maintenance, logistical difficulties, and defections continue to plague the Afghan Air Force, which has about 104 aircraft including four C-130 transport planes and 46 Mi-17 (Russian-made) helicopters. DOD plans to purchase up to 159 UH-160 Black Hawk helicopters for the AAF have been complicated by shortages of Afghan engineers and pilots. Afghan National Police (ANP) . U.S. and Afghan officials believe that a credible and capable national police force is critical to combating the insurgency. DOD reports on Afghanistan assess that "significant strides have been made in professionalizing the ANP." However, many outside assessments of the ANP are negative, asserting that there is rampant corruption to the point where citizens mistrust and fear the ANP. According to SIGAR, as of 2019, the U.S. has obligated $21.4 billion (in Afghanistan Security Forces Funds, ASFF) to support the ANP since FY2005. The force is largely supported by the U.N.-managed Law and Order Trust Fund for Afghanistan (LOTFA). The U.S. police training effort was first led by State Department/Bureau of International Narcotics and Law Enforcement (INL), but DOD took over the lead role in April 2005. Police training has been highlighted by SIGAR and others as a potentially problematic area where greater interagency cooperation is needed. The target size of the ANP, including all forces under the ANP umbrella (except the Afghan Local Police, which are now under the command of the Ministry of the Interior), is 124,000; as of December 2018, it has 116,000 personnel. According to a December 2018 DOD assessment, women reportedly have a higher presence in the ANP than they do in the ANA. Afghan Local Police (ALP) . In 2008, the failure of several police training efforts led the Afghan government, with U.S. assistance, to support local forces in protecting their communities, despite some reluctance to create local militias, which previously had been responsible for human rights abuses in Afghanistan. The ALP concept grew out of earlier programs to organize and arm local civilians to provide security in their home districts; fighters are generally selected by local elders. The current number of ALP members (known as "guardians") is around 28,000. The ALP have the authority to detain criminals or insurgents temporarily, and transfer them to the ANP or ANA, but have been cited by Human Rights Watch and other human rights groups, as well as by DOD investigations, for killings, rapes, arbitrary detentions, land grabs, and sexual abuse of young boys. Others criticize the ALP as incompatible with the goal of creating nationalized defense and security forces and characterize ALP forces as unaccountable militias serving the interests of local strongmen. There have been discussions around incorporating ALP elements into the ANDSF. The ALP are funded by the United States at approximately $60 million a year (ASFF funds disbursed by CSTC-A). Regional Dimension Regional developments and relationships have long influenced events inside Afghanistan. The Trump Administration has linked U.S. policy in Afghanistan to broader regional dynamics, particularly as they relate to South Asia. Key states include Afghanistan's most important neighbors, Pakistan and Iran; the larger regional players India, Russia, and China; and the politically influential Gulf States. Pakistan The neighbor that is considered most crucial to Afghanistan's security is Pakistan, which has played an active and, by many accounts, negative role in Afghan affairs for decades. Experts and officials debate the extent of Pakistan's commitment to Afghan stability in light of its attempts to exert control over events in Afghanistan through ties to insurgent groups. DOD reports on Afghanistan's stability repeatedly have identified Afghan militant safe havens in Pakistan as a key threat to Afghan stability. Afghanistan-Pakistan Relations. Many Afghans approved of Pakistan's backing the mujahideen that forced the Soviet withdrawal in 1988-1989, but later came to resent Pakistan as one of three countries to formally recognize the Taliban as the legitimate government. (Saudi Arabia and the United Arab Emirates are the others.) Relations improved after Pakistani President Pervez Musharraf left office in 2008 but remain troubled as Afghan leaders continue to accuse Pakistan of supporting the Taliban and meddling in Afghan affairs. On several occasions, President Ghani has accused Pakistan of waging an "undeclared war" on Afghanistan. Some analysts argue that Pakistan sees Afghanistan as potentially providing it with "strategic depth" against India. Pakistan has long asserted that India uses its diplomatic facilities in Afghanistan to recruit anti-Pakistan insurgents, and that India is using its aid programs to build anti-Pakistan influence there. Long-standing Pakistani concerns over Indian activities in Afghanistan are being exacerbated by President Trump's pledge to further develop the United States' strategic partnership with India as part of the new U.S. approach to Afghanistan and South Asia. About 2 million Afghan refugees have returned from Pakistan since the Taliban fell, but 1.4 million registered refugees remain in Pakistan, according to the United Nations, along with perhaps as many as 1 million unregistered refugees. Many of these refugees are Pashtuns, the ethnic group that makes up about 40% of Afghanistan's 35 million people and 15% of Pakistan's 215 million; Pashtuns thus represent a plurality in Afghanistan but are a relatively small minority among many others in Pakistan, though Pakistan's Pashtun population is considerably larger than Afghanistan's. Pakistan condemns as interference statements by President Ghani (who is Pashtun) and other Afghan leaders about an ongoing protest campaign by Pakistani Pashtuns for greater civil and political rights. Afghanistan-Pakistan relations are also complicated by the two countries' long-running dispute over their shared 1,600-mile border, the "Durand Line." Pakistan, the United Nations, and others recognize the Durand Line as an international boundary, but Afghanistan does not. Afghanistan contends that the Durand Line, a border agreement reached between the British Empire and Afghanistan in 1893, was drawn unfairly to separate Pashtun tribes and should be renegotiated. Tensions between the two neighbors have erupted several times in recent years, most recently in 2017, when clashes at the Chaman border crossing (which sits on the Durand Line) reportedly led to civilian and military casualties on both sides. Previous agreements led to efforts to deconflict the situation, but such bilateral mechanisms evidently have proven insufficient. Pakistan claims to have established nearly 1,000 border posts along the Durand Line, nearly five times as many as operated by Afghanistan. Pakistan and U.S. Policy in Afghanistan. For several years after the September 11, 2001 attacks, Pakistani cooperation with the United States against Al Qaeda was, arguably, relatively effective. Pakistan arrested more than 700 Al Qaeda figures after the September 11 attacks and allowed U.S. access to Pakistani airspace, some ports, and some airfields for the major combat phase of OEF. However, traditional support for the Taliban by elements of the Pakistani government and security establishment caused strains with the U.S. that were compounded by the May 1, 2011, U.S. raid that killed Osama bin Laden in Pakistan. Relations worsened further after a November 26, 2011, incident in which a U.S. airstrike killed 24 Pakistani soldiers, and Pakistan responded by closing border crossings, suspending participation in the border coordination centers, and boycotting the December 2011 Bonn Conference. Relations improved from the 2011 low in subsequent years but have remained tense. President Trump, in announcing a new Afghanistan strategy in August 2017, declared that "we can no longer be silent about Pakistan's safe haven for terrorist organizations," and that while "in the past, Pakistan has been a valued partner ... it is time for Pakistan to demonstrate its commitment to civilization, order, and to peace." Despite that praise for Pakistan as a "valued partner," and U.S. other officials hailing successful Pakistani efforts to secure the release of several Americans held by the Haqqanis in Afghanistan in October 2017, the Trump Administration announced plans in January 2018 to suspend security assistance to Pakistan. That decision has impacted hundreds of millions of dollars of aid. Beyond the issue of aid (which had been withheld in the past, to little apparent effect), observers have speculated about such measures as reexamining Pakistan's status as a major non-NATO ally, increasing U.S. drone strikes on targets within Pakistan, and imposing sanctions on Pakistani officials. Pakistani officials and others warn that such measures could be counterproductive, highlighting the potential geopolitical costs of increasing pressure on Pakistan, especially as they relate to U.S. counterterrorism efforts and Pakistan's critical role in facilitating U.S. ground and air lines of communication to landlocked Afghanistan. Iran Iran has long sought to exert its historic influence over western Afghanistan and to protect Afghanistan's Shia minority. Tensions between Iran and the U.S., whose presence in Afghanistan has long concerned Tehran, may be driving Iran's reported attempts to support the Taliban, its erstwhile foe. Iran historically opposed the Taliban, which Iran saw as a threat to its interests in Afghanistan, especially after Taliban forces captured the western city of Herat in September 1995, and Iran supported the anti-Taliban Northern Alliance with fuel, funds, and ammunition. In September 1998, Iranian and Taliban forces nearly came into direct conflict when Taliban forces killed several Iranian diplomats in the course of the Taliban's offensive in northern Afghanistan. Iran massed forces at the border and threatened military action, but the crisis cooled without a major clash. Iran offered search and rescue assistance in Afghanistan during the U.S.-led war to topple the Taliban, and it also allowed U.S. humanitarian aid to the Afghan people to transit Iran. Iran helped broker Afghanistan's first post-Taliban government, in cooperation with the United States, at the December 2001 Bonn Conference. At the same time, Iran has had diplomatic contacts with the Taliban since at least 2012, when Iran allowed a Taliban office to open in Iran, and high-level Taliban figures have visited Iran. While some analysts see the contacts as Iranian support of the insurgency, others see them as an effort to exert some influence over reconciliation efforts. Iran likely seeks to ensure that U.S. forces cannot use Afghanistan as a base from which to pressure or attack Iran. Since at least early 2017, however, U.S. officials have reported more active Iranian backing for Taliban elements, particularly in western Afghanistan. In November 2018, Trump Administration officials displayed a number of Iranian-origin rockets that they alleged had been provided to the Taliban. Iran's support of Taliban fighters, many of whom are Pashtun, is in contrast with Iran's traditional support of non-Pashtun Persian-speaking and Shia factions in Afghanistan. For example, Iran has funded pro-Iranian armed groups in the west and has supported Hazara Shias in Kabul and in Hazara-inhabited central Afghanistan, in part by providing scholarships and funding for technical institutes as well as mosques. There are consistent allegations that Iran has funded Afghan provincial council and parliamentary candidates in areas dominated by the Persian-speaking and Shia minorities. Even as it funds anti-government groups as a means of pressuring the United States, Iran has built ties to the Afghan government. President Ghani generally has endorsed his predecessor's approach on Iran; Karzai called Iran a "friend" of Afghanistan and said that Afghanistan must not become an arena for disputes between the United States and Iran. At other times, Afghanistan and Iran have had disputes over Iran's efforts to expel Afghan refugees. There are approximately 1 million registered Afghan refugees in Iran, with as many as 2 million more unregistered. Iran's ties to the Shia community in Afghanistan have facilitated its recruitment of Afghan Shias to fight on behalf of the Asad regime in Syria, though there is some evidence that Shia Afghan refugees have been coerced into joining the war effort (see textbox). India India's past involvement in Afghanistan reflects its long-standing concerns about potential Pakistani influence and Islamic extremism emanating from Afghanistan, though its current role is focused on development. India also views Afghanistan as a trade and transit gateway to Central Asia, but Pakistan blocks a direct route, so India has sought to develop Iran's Chabahar Port. India supported the Northern Alliance against the Taliban in the mid-1990s and retains ties to Alliance figures. India saw the Afghan Taliban's hosting of Al Qaeda during 1996-2001 as a major threat because of Al Qaeda's association with radical Islamic organizations in Pakistan that seek to end India's control of part of the disputed territories of the former princely state of Jammu and Kashmir. Some of these groups have committed major acts of terrorism in India, including the attacks in Mumbai in November 2008 and in July 2011. Afghanistan has sought to strengthen its ties to India—in large part to access India's large and rapidly growing economy—but has sought to do so without causing a backlash from Pakistan. In October 2011, Afghanistan and India signed a "Strategic Partnership." The pact affirmed Pakistani fears by giving India, for the first time, a formal role in Afghan security; it provided for India to train ANDSF personnel, of whom thousands have been trained since 2011. However, India has resisted playing a greater role in Afghan security, probably to avoid becoming ever more directly involved in the conflict in Afghanistan or inviting Pakistani reprisals. India's involvement in Afghanistan is dominated by development issues. India is the fifth-largest single country donor to Afghan reconstruction, funding projects worth over $3 billion. Indian officials assert that their projects are focused on civilian, not military, development and are in line with the development priorities set by the Afghan government. As part of the new U.S. strategy for Afghanistan, President Trump called in August 2017 for India to "help us more with Afghanistan, especially in the area of economic assistance and development," though he also derided Indian aid to Afghanistan in January 2019. Prime Minister Modi visited Afghanistan in December 2015 and June 2016 to inaugurate major India-sponsored projects, including the new parliament complex in Kabul and the Afghan-India Friendship Dam in Herat province. In May 2016, India, Iran and Afghanistan signed the Chahbahar Agreement, under which India is to invest $500 million to develop Iran's Chahbahar port on the Arabian Sea. That port is designed to facilitate increased trade between India and Afghanistan, bypassing Pakistan. The Trump Administration is providing India with a waiver under applicable Iran sanctions laws to be able to continue to develop the port. Russia For years Russia tacitly accepted the U.S. presence in Afghanistan as furthering the battle against radical Islamists in the region. Recently, however, in the context of renewed U.S.-Russian rivalry, Russia has taken a more active role both in the conflict (including providing some political and perhaps material support for the Taliban) and in efforts to bring it to a negotiated end. During the 1990s, after the Soviet Union's 1989 withdrawal from Afghanistan and subsequent breakup (see Appendix B ), Russia supported the Northern Alliance against the Taliban with some military equipment and technical assistance in order to blunt Islamic militancy emanating from Afghanistan. After 2001, Russia agreed not to hinder U.S. military operations, later cooperating with the United States in developing the Northern Distribution Network supply line to Afghanistan. About half of all ground cargo for U.S. forces in Afghanistan flowed through the Northern Distribution Network from 2011 to 2014, despite the extra costs as compared to the route through Pakistan. Nevertheless, Russian-U.S. collaboration in Afghanistan, a relative bright spot in the two countries' relationship, has suffered in light of a more general deterioration of bilateral ties. Moscow has taken a markedly more assertive role in Afghanistan since at least late 2015. U.S. officials have differed in how they characterize both the nature of and motivation for Russia's actions, but there appears to be widespread agreement that they represent a challenge to U.S. goals. Former Secretary Mattis said that Russia was "choosing to be strategic competitors" with the United States in Afghanistan, while former U.S. commander General Nicholson said the Russians were motivated by a desire to "undermine the United States and NATO." Other analysts have noted Russian anxieties about a potential long-term U.S. military presence in Central Asia, a region that has been in Moscow's sphere of influence since the 19 th century. The Russian government frames its renewed interest in Afghanistan as a reaction to the growth of ISKP, for which Russia faults the United States. However, Russian descriptions of ISKP strength and geographic location generally surpass estimates by the United States and others, perhaps overstating the threat to justify supporting the Taliban, which Russia may see as less of a direct danger. The Washington Post, citing unnamed U.S. defense officials, reported in 2017 that Russia had provided weapons (including heavy machine guns) to the Taliban ostensibly to be used against the Islamic State affiliated fighters, but that the weapons had surfaced in places far from ISKP strongholds, like Helmand province. Russia had previously condemned such claims as "groundless" and "absurd fabrications;" a Taliban spokesman also denied the reports, saying "our contacts with Russia are for political and diplomatic purposes only." General Nicholson echoed such reports in a March 2018 interview, saying, "We've had weapons brought to this headquarters and given to us by Afghan leaders and said, this was given by the Russians to the Taliban." Russia also has sought to establish itself as a player in Afghanistan by its efforts to bring about a negotiated settlement. In December 2016, Moscow hosted Chinese and Pakistani officials in a meeting that excluded Afghan representatives, drawing harsh condemnation from the Afghan government. Significantly, Russia has also hosted Taliban officials for talks in Moscow, in February and May 2019—meetings in which Afghan government representatives did not participate. China China's involvement in Afghanistan, with which it shares a small, remote border, is motivated by several interests, of which reducing what China perceives as a threat from Islamist militants in Afghanistan and securing access to Afghan minerals and other resources are considered the most important. Since 2012, China has deepened its involvement in Afghan security issues and has taken on a more prominent role as a potential mediator in Afghan reconciliation, though its role in both is still relatively modest. In 2012, China signed a series of agreements with Afghanistan, one of which reportedly promised Chinese training and funding for Afghan forces, though some reports, citing participants, question how beneficial that training is.  In October 2014, China hosted Ghani for his first working trip abroad as president, during which China agreed to provide $330 million in bilateral aid over the coming three years, in addition to other forms of support. As a consequence of that visit, some Taliban figures reportedly visited China, apparently accompanied by Pakistani security officials, as part of an effort to promote an Afghan political settlement. In 2018, Chinese officials denied reports of plans to build a military base in the Wakhan Corridor, a sparsely inhabited sliver of Afghanistan with which China has a 47-mile border, saying, "no Chinese military personnel of any kind on Afghan soil at any time." China did agree to help Afghanistan stand up a "mountain brigade" in the Wakhan Corridor to take on any Islamist fighters who return to the country from the Middle East. China fears that some of the returned fighters may be Chinese nationals who may be planning attacks in China's northwestern region of Xinjiang, across the border from Afghanistan. In a September 2018 interview with Reuters, Afghanistan's ambassador to Beijing said China will be doing "some training" of Afghan troops as part of that effort, but in China, rather than in Afghanistan, as some reports had suggested. Looking ahead, China may be seeking to play a larger role in reconciliation efforts in Afghanistan; China has considerable influence with its ally Pakistan, which is generally considered the most important regional player in the Afghan conflict. China participates in various multilateral fora dedicated to fostering Afghan peace talks, such as the Quadrilateral Coordination Group (comprising representatives from Afghanistan, China, Pakistan, and the United States). Chinese officials reportedly have met with Taliban representatives several times in the past year as well. Many experts see China's activities in Afghanistan as primarily economically driven. Chinese delegations continue to assess the potential for new investments in such sectors as mining and energy. The cornerstone of China's investment to date has been the development of the Aynak copper mine south of Kabul, but that project has stalled over contractual disputes, logistical problems, and some security issues. Additionally, prospective transportation and trade routes through Afghanistan comport with China's Belt and Road Initiative and previous U.S. efforts to establish a similar New Silk Road. Some experts argue that shared U.S. and Chinese interests in a stable Afghanistan represent a potential area for Sino-American cooperation. Persian Gulf States At times the Gulf States have been considered a key part of the effort to stabilize Afghanistan, though donations by Gulf residents have been a major source of Taliban funding. Gulf States have also contributed development funds and have influence with some Afghan clerics and factions. Saudi Arabia has a long history of involvement in Afghanistan; it channeled hundreds of millions of dollars to the mujahideen in the 1980s during the war against the Soviet occupation, and was one of three countries to formally recognize the Taliban government. Saudi Arabia later brokered some of the negotiations between the Afghan government and "moderate" Taliban figures. More recently, however, Saudi officials have described the Taliban as "armed terrorists," though some critics allege that the kingdom has not taken measures to stop private donors in the Kingdom from giving financial support to the Taliban. The United Arab Emirate s (UAE) , another country that recognized the Taliban regime, deployed a limited number of troops and aircraft to support NATO security missions in southern Afghanistan. The UAE has donated over $250 million to Afghanistan since 2002 for housing, health care, and education projects. UAE officials were reportedly discussing the UAE aid program for southern Afghanistan at the time of the January 10, 2017 bombing at the Kandahar governor's guest house that killed at least six UAE diplomats, including the UAE's Ambassador to Afghanistan. Qatar did not recognize the Taliban and was not regarded as a significant player on the Afghanistan issue until 2011. Senior Taliban figures opened an informal "political office" in Doha, with U.S. acquiescence, as part of efforts to establish talks with the Taliban in 2013. Qatar also has played host to most of the substantive U.S.-Taliban talks being overseen by Special Representative Khalilzad. Multilateral Fora The United States has encouraged Afghanistan's neighbors to support a stable and economically viable Afghanistan and to include Afghanistan in regional security and economic organizations and platforms. Afghanistan has sought to increase its integration with neighboring states through participation in other international fora, including the Shanghai Cooperation Organization (SCO), a security coordination body that includes Russia, China, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan, to which Afghanistan was granted full observer status in 2012. In addition, several regional meetings series have been established between the leaders of Afghanistan and neighboring countries. These include summit meetings between Afghanistan, Pakistan, the U.S., and China (the Quadrilateral Coordination Group, or QCG). The Quadrilateral Coordination Group met for the sixth time in October 2017. Russia convened a meeting with Pakistan and China to discuss Afghanistan in December 2016 (more below), drawing condemnation from the Afghan government, which was not invited to participate; Afghanistan was invited to, and attended, the second (February 2017) and third (April 2017) meetings, though the United States declined to attend. Economically, the U.S. has emphasized the development of a Central Asia-South Asia trading corridor in an effort to keep Afghanistan stable and economically vibrant as donors wind down their involvement. Reconciliation Efforts For years, the Afghan government, the United States, and various neighboring states have engaged in efforts to bring about a political settlement with insurgents. As of July 2019, U.S. officials, led by Special Representative for Afghanistan Reconciliation Zalmay Khalilzad, are currently engaged in direct talks with the Taliban in the most serious discussions to end the U.S. military effort there since it began. However, the Taliban still refuse to negotiate with representatives of the Afghan government , which they seek to delegitimize. Afghan Government Initiatives The Afghan government has overseen several initiatives aimed at bringing the war to an end, including a February 2018 offer from President Ghani to negotiate with the Taliban without preconditions, but there does not appear to have been any substantive engagement between Taliban and Afghan leaders to date. On September 5, 2010, an "Afghan High Peace Council" (HPC) was formed to oversee the settlement and reintegration process. Then-President Karzai appointed former president Burhanuddin Rabbani to head it, in part to gain crucial support for negotiations with the Taliban; Rabbani was assassinated in September 2011. The HPC was significantly reorganized and effectively relaunched in 2016; at the time, one prominent Afghanistan analyst described it as a "side-show in the peace process," a position that seemed to be confirmed in 2018 when that same analyst assessed that "there will be no HPC role in the negotiations" the Afghan government is attempting to start with the Taliban. The 2016 reconciliation with the government of one insurgent faction, Hizb-e-Islami-Gulbuddin (HIG), led by former mujah ideen party leader Gulbuddin Hekmatyar, was seen as a possible template for further work toward a political settlement. A former muja hideen commander who is accused of committing human rights abuses during the Afghan civil war of the 1990s, Hekmatyar allied his fighters with the Taliban after 2001, although HIG was not a major factor on the Afghanistan battlefield. In 2010, Hekmatyar signaled his openness to reconciliation with Kabul, and Hekmatyar instructed followers to vote in the 2014 presidential elections. On September 22, 2016, after months of negotiations, Afghan officials and Hekmatyar representatives signed a 25-point reconciliation agreement; U.N. sanctions against Hekmatyar were dropped in February 2017. In May 2017, Hekmatyar returned to Kabul, rallying thousands of supporters at a speech in which he criticized the Afghan government. Hekmatyar declared his candidacy for the 2019 presidential election in January 2019. The Taliban have maintained their long-standing refusal to negotiate with representatives of the Afghan government, which they characterize as a corrupt and illegitimate puppet of foreign powers, and Kabul is not directly involved in the ongoing U.S.-Taliban negotiations (more below). Some observers have criticized that arrangement; former U.S. Ambassador to Afghanistan Ryan Crocker argued that by not insisting on the inclusion of the Afghan government in these negotiations "we have ourselves delegitimized the government we claim to support," and advocated that the U.S. halt talks until the Taliban agree to include the Afghan government. A planned meeting between as many as 200 Afghan delegates, including some Afghan officials (in their personal capacity), and the Taliban in Doha collapsed in April 2019 when Taliban representatives objected at the last minute to the size and makeup of the group; that meeting has been postponed indefinitely. A meeting between 50 Afghans and 17 Taliban representatives took place in July 2019; the Afghan delegation included some government officials, who participated in a personal capacity. The two-day "Intra-Afghan Conference for Peace" concluded with a joint statement that stressed the importance of an intra-Afghan settlement, and was hailed by Khalilzad as a "big success." Afghan President Ashraf Ghani has promised that his government will not accept any settlement that limits Afghans' rights. In a January 2019 televised address, he further warned that any agreement to withdraw U.S. forces that did not include Kabul's participation could lead to "catastrophe," pointing to the 1990s-era civil strife following the fall of the Soviet-backed government that led to the rise of the Taliban (see textbox above). President Ghani's concern about being excluded from the talks surfaced in mid-March when his national security advisor accused Khalilzad of "delegitimizing the Afghan government and weakening it," and harboring political ambitions within Afghanistan, leading to a sharp rebuke from the State Department. According to a former State Department official, "The real issue is not the personality of an American diplomat; the real issue is a policy divergence," namely, Afghans' concerns about the potential U.S. withdrawal. U.S.-Taliban Talks The first direct meetings between U.S. and Taliban representatives began in 2010, centered largely on the issues of a prisoner exchange and the opening of a Taliban political office in Doha, Qatar. Multiple factors, including opposition from the Afghan government led by then-President Hamid Karzai, caused the collapse of talks in March 2012. Qatari and Pakistani mediation led to a 2013 agreement to allow the Taliban to open the Doha office, but because the Taliban opened that office in June 2013 with the trappings of an official embassy, in direct violation of the terms of the agreement, the Qatari government shuttered the office less than a month later. In June 2014, Qatar coordinated the release of U.S. prisoner Bowe Bergdahl in exchange for five high-ranking Taliban officials imprisoned at Guantanamo Bay–individuals who are now part of the Taliban team negotiating with the United States in Doha. No further talks between U.S. and Taliban officials occurred under the Obama Administration. Developments under the Trump Administration In President Trump's August 2017 speech laying out the new strategy for Afghanistan, he referred to a "political settlement" as an outcome of an "effective military effort," but did not elaborate on what U.S. goals or conditions might be as part of this putative political process. In remarks the next day, then-Secretary of State Rex Tillerson rejected the idea of preconditioning talks on the Taliban's acceptance of certain arrangements, saying "the Government of Afghanistan and the Taliban representatives need to sit down and sort this out. It's not for the U.S. to tell them it must be this particular model, it must be under these conditions." The Trump Administration decided in July 2018 to enter into direct negotiations with the Taliban, without Afghan government representatives. This came almost a year after the President announced a new strategy for South Asia that many interpreted as a sign of renewed American commitment to Afghanistan. With no progress on the battlefield, the Trump Administration reversed the long-standing U.S. position that any peace process would have to be "Afghan owned and Afghan led," and the first high-level, direct U.S.-Taliban talks occurred in Doha in July 2018. The September 2018 appointment by Secretary of State Mike Pompeo of Ambassador Zalmay Khalilzad, the Afghan-born former U.S. Ambassador to Afghanistan under President George W. Bush, as Special Representative for Afghanistan Reconciliation added more momentum to this effort. Since his appointment, Khalilzad has held a near-continuous series of meetings with the Afghan, Pakistani, and other regional governments, as well as with Taliban representatives. After six days of negotiations in Doha in January 2019, Khalilzad stated that, "The Taliban have committed, to our satisfaction, to do what is necessary that would prevent Afghanistan from ever becoming a platform for international terrorist groups or individuals," in return for which U.S. forces would eventually fully withdraw from the country. Khalilzad later cautioned that "we made significant progress on two vital issues: counter terrorism and troop withdrawal. That doesn't mean we're done. We're not even finished with these issues yet, and there is still work to be done on other vital issues like intra-Afghan dialogue and a complete ceasefire." After a longer series of talks that ended on March 12, 2019, Khalilzad announced that an agreement "in draft" had been reached on counterterrorism assurances and U.S. troop withdrawal. He noted that after the agreement is finalized, "the Taliban and other Afghans, including the government, will begin intra-Afghan negotiations on a political settlement and comprehensive ceasefire." It remains unclear what kind of political arrangement could satisfy both Kabul and the Taliban to the extent that the latter fully abandons its armed struggle. The Taliban have given contradictory signs, with one spokesman saying in January 2019 that the group is "not seeking a monopoly on power" and another in May speaking of the group's "determination to re-establish the Islamic Emirate in Afghanistan." Still, many Afghans, especially women, who remember Taliban rule and oppose the group's policies and beliefs, remain wary. Afghan Governance and Politics Political contention among Afghans can be seen as both a sign of the country's U.S.- and internationally supported democratic development as well as a troubling reminder of the country's fractured past and a potential impediment to peace. Constitution and Political System During Taliban rule (1996-2001), Afghanistan was run by a small group of mostly Pashtun clerics loyal to Mullah Mohammad Omar, who remained based in Kandahar. No representative body was functioning, and government offices were minimally staffed and lacked modern equipment. The ouster of that government by U.S. forces and their Afghan partners in late 2001 paved the way for the success of a long-stalled U.N. effort to form a broad-based Afghan government. In November 2001, after the Taliban government collapsed, the United Nations invited major Afghan factions, most prominently the Northern Alliance and allies of former King Zahir Shah—but, notably, not the Taliban—to an international conference in Bonn, Germany. There, on December 5, 2001, the factions signed the "Bonn Agreement" which authorized an international peacekeeping force and called for a loya jirga (consultative assembly) to establish a Transitional Authority to administer the country until a new constitution could be drafted. That loya jirga elected Afghan Interim Administration chairman Hamid Karzai as president in June 2002, and a subsequent jirga approved a new constitution, establishing the Islamic Republic of Afghanistan, in January 2004. The Afghan constitution sets up a presidential system, with an elected president and bicameral national legislature, the 259-seat lower house of which ( Wolesi Jirga ) is popularly elected. The president serves a five-year term, with a two-term limit, and there are two vice presidents. The president has broad powers. Under article 64, he has the power to appoint all "high-ranking officials," which includes not only cabinet ministers but also members of the Supreme Court, judges, provincial governors and district governors, local security chiefs, and members of supposedly independent commissions such as the Independent Election Commission and the Afghan Independent Human Rights Commission (AIHRC). These appointments are constitutionally subject to confirmation by the National Assembly. To some extent, the National Assembly can check the powers of the president, although many observers assert that it has been unable to limit presidential authority. Both the upper and lower houses are required to pass laws and the national budget. The National Assembly has often tried to assert its institutional strength, such as by holding a March 2006 vote to require the cabinet to be approved individually, rather than en bloc , increasing opposition leverage. Votes of no-confidence against ministers, which under Article 92 of the Afghan constitution can be proposed by 20% of lower house members, have often affirmed these powers, with several of Karzai's and Ghani's ministers blocked or removed from office. Because it tends to be composed of more established, notable Afghans who are traditionalist in their political outlook, the upper house has tended to be more politically conservative than the lower house, and more supportive of the president (who appoints a third of its members under the constitution). Politics of Ethnicity and Elections Afghanistan's active political scene is often viewed through the prism of the country's complex ethnic makeup, itself a sensitive political issue. The Afghan constitution references 14 ethnicities as well as "other tribes," (Article 4) and designates six languages (Uzbek, Turkmen, Pachaie, Nuristani, Baluchi, and Pamiri) as possible third official languages (Article 16) after the two official national languages, Pashto and Dari (the Afghan variant of Persian). Reliable figures for the ethnic breakdown of Afghanistan are difficult to come by and, as in many other parts of the world, are heavily freighted with political ramifications. For example, the CIA World Factbook does not provide any estimates at all, stating that "current statistical data on the sensitive subject of ethnicity in Afghanistan are not available." There is generally widespread agreement that four ethnic groups are most dominant in Afghanistan. In descending order of size, they are Pashtuns, Tajiks, Hazaras, and Uzbeks. One representative estimate gives their size as 42%, 27%, 9%, and 9% of the Afghan population, respectively. Pashtuns are generally acknowledged to be the largest ethnic group in Afghanistan, and have traditionally dominated Afghan governance; Presidents Hamid Karzai (2003-2014) and Ashraf Ghani (2014-present) are both ethnic Pashtuns. Pashtuns are concentrated in the south and east of the country, along the border with Pakistan, which has a sizeable Pashtun minority of its own. The Taliban is largely, though not exclusively, Pashtun. Tajiks , who generally speak Dari, are thought to be the second largest group in Afghanistan. The Northern Alliance that opposed the Taliban was led by Tajiks like Ahmad Shah Massoud, and today's Tajik-dominated Jamiat-e-Islami party features significant figures like Foreign Minister Salahuddin Rabbani, former Balkh governor Atta Mohammad Noor, and national Chief Executive Officer (CEO) Abdullah (who is of mixed Tajik-Pashtun ancestry). The Persian-speaking Hazara people live mostly in central Afghanistan and represent most of Afghanistan's Shia minority. They have periodically suffered discrimination, persecution, and violence. Deputy CEO Mohammad Mohaqiq is an ethnic Hazara. They are generally considered to be the most socially liberal ethnic group in Afghanistan. Uzbeks represent Afghanistan's largest Turkic minority population (other Turkic groups in Afghanistan include Turkmen and Kyrgyz), concentrated mostly in the country's north, where they have sometimes come into conflict with Tajiks and other groups. Vice President Abdul Rashid Dostum is generally considered the leader of Afghanistan's Uzbek community. Hamid Karzai won the first nationwide presidential election in October 2004, and reelection in 2009; the latter election, the first to be administered by the Afghan government, was clouded by widespread fraud allegations. The election system (a runoff between the top two candidates if no majority is achieved in the first round) favors the likelihood the president will be an ethnic Pashtun. This was seemingly confirmed in 2014, when Abdullah Abdullah (of mixed ancestry, but associated with the Tajik community) won a plurality of votes with 45% in the first round and then lost with 44% in the second round to now-President Ghani, an ethnic Pashtun. The 2014 presidential election was seen as a major test for Afghanistan as the U.S. and international partners drew down in advance of a planned transfer of responsibility for security to Afghan forces. In the first round, held in April 2014, violence was relatively low and there were fewer fraud complaints and deducted votes than in the 2009 election. The second round of voting, in June 2014, was extremely contentious and Abdullah alleged that fraud was responsible for preliminary results that showed him losing to Ghani, with Abdullah supporters reportedly threatening to seize power by force. Intense U.S. involvement, including calls from President Barack Obama and negotiations mediated by Secretary of State John Kerry, eventually led to a September 2014 power sharing agreement between the two men. As part of that accord, Ghani was inaugurated as president and appointed Abdullah as Chief Executive Officer (CEO), a new, extraconstitutional position with powers approximating those of a prime minister. This arrangement, known as the national unity government, remains intact but has encountered extensive difficulties. Abdullah publicly accused Ghani in August 2016 of acting unilaterally and refusing to meet regularly with him. Outward signs of friction seem to have receded since 2017, though tensions clearly remain. A trend in Afghan society and governance that worries some observers is the increasing fragmentation along ethnic and ideological lines. Such fractures have long existed in Afghanistan but were largely contained during Hamid Karzai's presidency. These divisions are sometimes seen as a driving force behind some of the contentious episodes that have challenged Ghani. Vice President Abdul Rashid Dostum, who has criticized Ghani's government for favoring Pashtuns at the expense of the Uzbek minority he is seen to represent, left Afghanistan for Turkey in May 2017. Dostum's departure came in the wake of accusations that he engineered the kidnapping and assault of a political rival, prompting speculation that his departure was an attempt to avoid facing justice in Afghanistan. Dostum returned to Afghanistan in July 2018, quelling protests by his supporters; he remains under indictment but no legal proceedings against him have taken place.  Ghani's December 2017 dismissal of Atta Mohammad Noor, the powerful governor of the northern province of Balkh who defied Ghani by remaining in office for several months before resigning in March 2018, was another sign of serious political divisions, possibly along ethnic lines. Noor is one of the most prominent members of the Jamiat-e-Islami party, which is seen to represent the country's Tajik minority. After multiple delays, elections for the 249-seat Wolesi Jirga (the lower house of Afghanistan's bicameral legislature) were held in October 2018. District council elections, originally scheduled to take place at the same time, were delayed due to a lack of candidates. The elections were preceded by contention among electoral commissioners and an ethnically charged dispute over electronic identity cards. Various technical and logistical challenges have exposed the Independent Election Commission (IEC) to widespread criticism, with one observer describing the process as a "triumph of administrative chaos." Instability marred the election results as well: elections were held a week late in Kandahar and indefinitely postponed in Ghazni, and hundreds of polling stations in areas outside of the government's control were closed. Additionally, ten candidates were assassinated during the campaign and dozens of civilians were killed and hundreds wounded in election-day violence. Still, most reports indicated at least some measure of voter enthusiasm, especially in urban areas; turnout was estimated at around 4 million of 9 million registered voters. Afghanistan scholar Barnett Rubin observed, "The main obstacle to democracy in Afghanistan is not the willingness of the people to participate, but the capacity of the state to make their participation meaningful." Final nationwide results (except for Ghazni, parliamentary elections for which are supposed to be run alongside the 2019 presidential election) were released in May 2019. President Ghani and CEO Abdullah, along with over a dozen other candidates, are running in the presidential election now scheduled, after two postponements, for September 2019. President Ghani's mandate expired on May 22, 2019. Many of his chief rivals have said that his government is no longer legitimate and have called for him to step down in favor of an alternate political arrangement. On April 20, 2019, the Afghan Supreme Court reportedly issued a ruling extending the president's term until the election (along with those of his vice presidents; it is unclear what the CEO's status will be), citing a similar 2009 ruling that extended then-President Karzai's term to cover a postponement of the 2009 presidential election. It is unclear whether delays to the presidential election are related to ongoing U.S.-Taliban talks. U.S. officials have denied that the establishment of an interim government is part of their negotiations with the Taliban, but some observers speculate that such an arrangement (which Ghani has rejected) might be necessary to accommodate the reentry of Taliban figures into public life. An interim government, or some other broad national political arrangement, might also facilitate the establishment of a new political system, which a putative settlement might require. The Taliban have stated their intention to replace the 2004 Afghan constitution, which they characterize as "invalid" and "imported from the West," with an Islamic system. President Ghani has responded by pointing out that Afghanistan is an Islamic republic and that the constitution prohibits any laws that "contravene the tenets and provisions" of Islam, though he has stated his openness to reviewing and amending it within legal processes. Some analysts have argued that the Afghan constitution breeds ethnic conflict by investing the president with considerable powers (including the ability to appoint all provincial governors) and that a more decentralized system is necessary. Aid, Economic Development, and Human Rights Since the United States and its partners intervened in 2001, the international community has contributed tens of billions of dollars in economic and development assistance to Afghanistan. At the height of this effort, donor aid accounted for more than 75% of Afghanistan's GDP. As of early 2018, donor aid still accounts for about 60% of total Afghan government expenditures (both operating budget and development budget), with domestic revenues making up the rest. Experts and policymakers have debated many aspects of aid to Afghanistan, including amounts, mechanisms for delivery, donor coordination, and distribution within Afghanistan. U.S. Assistance to Afghanistan Between 1985 and 1994, the United States had a cross-border aid program for Afghanistan, implemented by USAID personnel based in Pakistan. Citing the difficulty of administering this program, there was no USAID mission for Afghanistan from the end of FY1994 until the reopening of the U.S. Embassy in Afghanistan in late 2001. During the 1990s, the United States was the largest single provider of assistance to the Afghan people even though no U.S. aid went directly to the Taliban government when it was in power during 1996-2001; monies were provided through relief organizations. Since 2001, the United States has been by far the largest international donor to Afghanistan, spending over $132 billion for development assistance since FY2001 according to SIGAR. U.S. aid has been primarily focused on security assistance, accounting for nearly 63% of those funds (see Figure 6 ). Appendix C at the end of this report portrays U.S. assistance to Afghanistan by year since the fall of the Taliban. The cited figures do not include costs for U.S. combat operations. The United States and other donors have been working to transition assistance away from off-budget (internationally managed, excluded from the Afghan national budget) expenditures to on-budget (managed by the Afghan government, also referred to as "direct contributions"). About $14.5 billion of U.S. assistance provided to Afghanistan has been directly to the Afghan government ($9.2 billion directly to the Afghan government, $5.3 billion through international trust funds). Since 2010, donors have aimed to increase to half the portion of development assistance delivered on-budget. SIGAR has expressed misgivings about this goal, arguing that "the Afghan government often lacks both the will and the necessary internal controls to ensure that those funds are spent on what the donor intended" and that "should U.S. military and civilian personnel levels decrease, the ability to track on-budget assistance will inevitably suffer." Aid Conditionality and Oversight Some laws have required the withholding of U.S. aid subject to Administration certification of Afghan compliance on a variety of issues, including counternarcotics efforts, corruption, vetting of the Afghan security forces, human rights practices, protection of women's rights, and other issues. Successive measures included in annual appropriations measures and National Defense Authorization Acts have conditioned Economic Support Funds (ESF) and International Narcotics Control and Law Enforcement (INCLE) funding to Afghanistan on various requirements, including the submission of various reports, and the certification that the Afghan government is meeting certain benchmarks related to metrics including corruption, democratic development, and women's rights. All the required certifications have been made, and virtually no U.S. funds have been withheld from Afghanistan. The FY2008 defense authorization bill ( P.L. 110-181 ) established a "Special Inspector General for Afghanistan Reconstruction" modeled on a similar outside auditor for Iraq. The SIGAR issues quarterly reports and specific audits of aspects of Afghan governance and security, with particular attention to how U.S.-provided funds have been used. The SIGAR, as of July 2019, is John Sopko. Some executive branch agencies have periodically criticized SIGAR audits as inaccurate or as highlighting problems that the agencies are already correcting. For example, DOD took strong exception to a December 4, 2013, audit by the SIGAR that asserted that the U.S. military had failed to adequately manage risk accounting for $3 billion in DOD funds for the ANDSF. SIGAR's annual operations are funded at around $55 million. H.Rept. 116-78 , accompanying the House Appropriations Committee-reported FY2020 State, Foreign Operations, and Related Programs Appropriations bill, directs that "Not later than 180 days after enactment of this Act, the SIGAR shall submit to the Committees on Appropriations a detailed plan, including funding requirements and personnel data, for the complete drawdown of operations in Afghanistan by the end of fiscal year 2021." Other International Donors and Multilateral Trust Funds Non-U.S. donors, including such institutions as the EU and the Asian Development Bank, have provided substantial funds for Afghanistan's development. According to SIGAR, most of those funds are through three major international funds: the World Bank-managed Afghanistan Reconstruction Trust Fund (ARTF), the UNDP-managed Law and Order Trust Fund for Afghanistan, and the NATO-managed Afghan National Army Trust Fund (ANATF). As of late 2018, the largest donors to these funds, after the U.S., are the UK, Japan, Germany, the EU, and Canada (see Figure 7 ). Major pledges have been made primarily at donor conferences such as Tokyo (January 2002), Berlin (April 2004), Kabul (April 2005), London (February 2006), Paris (June 2008), London (January 2010), Tokyo (July 2012), and Brussels (October 2016). At the 2012 Tokyo conference, the United States and its partners pledged a total of $16 billion in aid to Afghanistan through 2015 ($4 billion per year for 2012-2015) and agreed to sustain support through 2017 at levels at or near the past decade. Among other major pledges, Japan pledged $3 billion through 2016, and Germany pledged $550 million over four years. The Tokyo Mutual Accountability Framework (TMAF) that resulted from the conference stipulated requirements of the Afghan government in governance, anti-corruption, holding free and fair elections, and human rights practices. As an incentive, if Afghanistan meets the benchmarks, the TMAF increases (to 20% by 2024) the percentage of aid provided through the ARTF and other mechanisms that give Kabul discretion in the use of donated funds. Donors met to assess progress on the TMAF benchmarks and pledged more funds for Afghanistan at a donors meeting in Brussels in October 2016. The conference welcomed Afghanistan's new "National Peace and Development Framework" and its efforts to fight corruption. At the conclusion of the meeting, donors announced pledges of $15.2 billion for the period of 2017-2020 (and support at lower levels thereafter through 2024). In November 2018, 61 countries and 35 international organizations met in Geneva to measure progress on development and reform in light of the Brussels pledges. At the conference, donor nations reaffirmed their commitment to continue support through 2020 and praised some successes (such as "bold and important steps" on the peace process taken by the Afghan government) but left some key issues unaddressed, according to one analyst. Economic and Human Development Economic development is pivotal to Afghanistan's long-term stability. Some economic sectors in Afghanistan have been developed largely with private investment, including by well-connected Afghan officials or former officials who founded companies. Promoting economic growth has been a major goal of U.S. development assistance, mostly by USAID, but also by other departments. For example, the DOD Task Force for Business and Stability Operations (TFBSO) sought to facilitate additional private investment in Afghanistan. However, A SIGAR report of November 2014 assessed that the Task Force's efforts yielded very little result, and the TFBSO concluded its operations in March 2015. Decades of war have stunted the development of most domestic industries. More recently, the economy also has been hurt by a decrease in aid provided by international donors since 2014. Afghanistan's Gross Domestic Product (GDP) has grown an average of 7% per year since 2003, but growth slowed to 2% in 2013 due to aid cutbacks and political uncertainty about the post-2014 security situation. Since 2015, Afghanistan has experienced a "slight recovery" with growth of between 2% and 3% in 2016 and 2017, though the increase in the poverty rate (55% living below the national poverty line in 2016-2017 compared to 38% in 2012-2013) complicates that picture. On the other hand, the Afghan government has made progress in increasing revenue (though as mentioned above, the percentage of total budgetary expenditures funded by donor grants is still above 60%). In any event, "for the foreseeable future, and barring a breakthrough in reconciliation and an end to or at least a substantial reduction in the level of conflict, Afghanistan will remain highly aid dependent." Efforts by the U.S. and others to build the legitimate economy are showing some results, by some accounts, and are outlined by sector below. Infrastructure U.S. aid has been key to a number of infrastructure initiatives, most notably in constructing roads, improving the electric grid, and developing the telecommunications sector. Roads. Road building in Afghanistan, which reportedly had less than 50 miles of paved roads in 2001, was a major development priority; as former commander of U.S. forces in Afghanistan General Eikenberry (later Ambassador) has said, "where the roads end, the Taliban begin." USAID has spent about $2.1 billion on road construction and maintenance projects, with DOD funding an additional $850 million in such work, according to an October 2016 SIGAR audit report. The major road, the Ring Road (which links the country's five major cities), has been completely repaved using funds from various donors, including substantial funds from the Asian Development Bank, at a total expense of about $4 billion (all donors). Some observers warn that the Afghan government lacks the resources to adequately maintain the roads built with international funds. Many of the roads built have fallen into disrepair and are marked with major potholes, as discussed in detail in the October 2016 SIGAR audit report. As of July 2019, USAID does not appear to have any ongoing roadbuilding projects. Electricity. Considerable U.S. efforts in the energy sector since 2001 arguably have yielded mixed results. According to the January 2019 SIGAR report, total U.S. disbursements for power projects total over $2 billion, including $1.5 billion in USAID Economic Support Funds (ESF) since FY2002 (with $626 million in active power-infrastructure programs) and about $565 million in DOD Afghanistan Infrastructure Funds. While the percentage of Afghans with access to electricity has increased due to these and other development efforts, by most estimates a majority remains without grid-connected power. Afghanistan has a complex power system, operating in nine separate, unconnected grids, and is still largely dependent on the sale of surplus power from its neighbors, importing 80% of its energy. The vast majority (95%) of Afghanistan's domestically generated electricity is provided by hydropower. The United States has worked to create a more independent and cohesive system by assisting in the development of indigenous power production and management capabilities and by connecting Afghanistan's disparate power grids. Telecommunications. Several Afghan telecommunications firms (e.g., Roshan, MTN, and Afghan Wireless) have formed since 2002 and more than $2 billion in private investment has flowed into this sector, according to a 2016 SIGAR report. Cellular networks now reach approximately 90% of Afghans, and the Asia Foundation found in 2018 that over 89% of respondents reported that their household owned at least one mobile phone, up from 52% in 2009. This rapid development, aided by tens of millions of dollars in support from DOD, State, and USAID, has made telecommunications a key driver of the Afghan economy. Various observers have assessed in recent years that the sector contributes millions in tax revenues to the Afghan government, and provides employment to tens of thousands of Afghans, though doubts about its sustainability exist. Agriculture Agriculture has always been key to Afghanistan's economy and stability; even though only about 12% of Afghanistan's land is arable, about 70% of Afghans live in rural areas. Non-opium agriculture contributes about 25% of Afghanistan's GDP (down from around 70% as late as the mid-1990s). Because most GDP gains since 2001 have come from other sectors, experts have identified agriculture as a key potential growth area. Agriculture continues to employ around 40% of Afghanistan's labor force, but policies to encourage the growth of such subindustries as intensive livestock production and horticultural crops could double agriculture GDP and add more than a million jobs in that sector over the next decade, according to the World Bank. U.S. policy to boost Afghanistan's agriculture sector is aimed not only at reducing drug production but also at contributing to economic growth. Prior to the turmoil that engulfed Afghanistan in the late 1970s, Afghanistan was a major exporter of agricultural products. Since 2002, USAID has disbursed more than $2 billion on almost 60 agriculture programs for such goals as increasing access to markets and providing alternatives to poppy growing, according to July 2018 SIGAR audit. According to a 2019 factsheet, USAID programs have facilitated over $845 million in increased sales of agriculture products, supporting the equivalent of 647,000 full time equivalent jobs. Mining and Gems Afghanistan's mining sector has been largely dormant since the Soviet invasion. Some Afghan leaders complain that not enough has been done to support the potentially lucrative mining sector. The issue became more prominent in June 2010 when the DOD Task Force for Business and Stability Operations announced, based on surveys, that Afghanistan may have untapped minerals, including copper, iron, lithium, gold, and precious gems, worth over $1 trillion. Some experts assert that U.S. hopes for this sector as a driver of long-term economic sustenance for Afghanistan are misplaced. Instability and poor infrastructure are the most important impediments to the development of this sector, but questions about the legality of some projects, and the overall legal framework, have led some to question whether profits will actually support the Afghan people. Oil, Gas, and Related Pipelines Years of war have stunted development of a hydrocarbons energy sector in Afghanistan. The country has no hydrocarbons export industry, only a small refining sector that provides some of Afghanistan's needs for gasoline or other fuels. Nevertheless, Afghanistan's prospects in this sector appeared to brighten by the 2006 announcement of an estimated 3.6 billion barrels of oil and 36.5 trillion cubic feet of gas reserves, amounts that could make Afghanistan self-sufficient in energy or even able to export. USAID has funded test projects to develop gas resources in northern Afghanistan, including a $120 million contribution to the $580 million Sheberghan Gas Development Project, which consisted of a number of gas wells and, in partnership with the private sector, building a 200 megawatt gas-fired thermal plant and associated transmission lines in northern Afghanistan. Afghanistan's geographic location could also let it become a transit hub for Central Asian natural gas. The most important current gas project is the Turkmenistan-Afghanistan-Pakistan-India, or TAPI, pipeline. In 2002, the leaders of Turkmenistan, Afghanistan, and Pakistan signed preliminary agreements on a gas pipeline that would originate in southern Turkmenistan and pass through Afghanistan to Pakistan, with possible extensions into India. The leaders of the four countries involved formally "broke ground" on the pipeline at a ceremony in Turkmenistan in 2015, and work on the Afghan section began in February 2018. Afghanistan stands to gain access to gas, as well as earn hundreds of millions annually in transit fees, but some describe claims of progress on the project as "dubious," and point to security concerns along the pipeline's intended route through Afghanistan, among other potential issues, as causes for skepticism. Education With more than 60% of Afghans under the age of 24, strengthening the education system is recognized as key to Afghanistan's future but, as in other areas, prospects depend largely on security dynamics. While most sources (including USAID and others) give a figure of 9 million children enrolled in school, the January 2017 SIGAR report relays a December 18, 2016 interview with the Afghan Minister of Education, who said that "after adjusting numbers for more than 3 million permanently absent registered students from school records, only 6 million students were actually attending classes in Afghanistan." Continuing Taliban attacks on schools have caused some ("over 1,000" according to a January 2017 address by the acting Minister of Education) to close and hindered efforts to enroll Afghan students. Attacks tripled in 2018, according to a UNICEF report (though at least some of that rise is attributable to violence surrounding the 2018 parliamentary elections, during which many schools were used as polling centers). Trade U.S. policy has been to encourage Afghanistan's trade relationships, particularly those with its neighbors. Afghanistan took a major step forward on building its trade relationships with its accession to the World Trade Organization (WTO) in July 2016, over a decade after it first applied. USAID has funded a number of projects to increase the competitiveness of Afghan products in international markets, which have shown some results; the value of Afghan exports rose from $600 million in 2016 to an estimated $1 billion in 2018. In September 2004, the United States and Afghanistan signed a bilateral trade and investment framework agreement (TIFA), and most of Afghanistan's exports are eligible for duty free treatment under the enhanced Generalized System of Preferences (GSP) program. Still, Afghanistan is a relatively minor trading partner of the United States, with U.S. exports totaling $1.2 billion in 2018 and imports from Afghanistan totaling just $29 million. General Human Rights Issues U.S. assistance has also been used to promote the broader U.S. policy of enhancing and protecting human rights in Afghanistan and promoting the government's adherence to international standards of human rights practices. Like previous years' State Department human rights reports on Afghanistan, the report for 2018 attributes most of Afghanistan's human rights deficiencies to overall lack of security, loose control over the actions of Afghan security forces, corruption, and cultural norms such as the preclusion of male-female interactions. Successive State Department reports cite torture, rape, and other abuses by officials, security forces, detention center authorities, and police. Afghanistan has a free press, and Afghans freely express a variety of views, including criticism of the central government, in Afghanistan's numerous independent media outlets (though local media may be more constrained by local powerbrokers). Journalists have been targeted by insurgent groups, including in an April 30, 2018, suicide attack that killed nine reporters and photographers in Kabul. Numerous peaceful protests, marches, and sit-ins over the past year are a testament to the government's general respect for freedom of assembly. Several other issues related to the status of human rights in Afghanistan are outlined below. Status of Women Freedoms for women have expanded since the fall of the Taliban. The advancement of Afghan women has been a stated U.S. policy interest and goal of U.S. assistance efforts, though it is unclear how sustainable these gains are, particularly given ongoing U.S.-Taliban negotiations. Despite these gains, and an expenditure by the U.S. government of roughly $1 billion on programs for which the advancement of women was a component, the U.N. still ranks Afghanistan 163 rd of 164 countries on its 2017 gender development index. Potential changes to the status of women in Afghanistan under a prospective political settlement have drawn scrutiny and speculation from Afghans and outside observers alike. Selected Metrics Female literacy: 6% (2001) vs. 16% (2017). Girls in school: 3.5 million enrolled, 2.2 million out-of-school. The Taliban claim to have lifted the ban on educating girls, and in Taliban-controlled areas some girls are attending primary school. Civil service: 22% female (30% target level set in the Tokyo Mutual Accountability Framework). Women in parliament: Article 83 of the Afghan constitution directs that on average at least two women be elected to the lower house of parliament from each of Afghanistan's 34 provinces, creating a quota of 68 women out of 250 seats (about 27%). One third of the upper house of parliament (34 of 102 seats) is selected by the president, and Article 84 directs that half of these seats (17) be filled by women. As of November 2018, 4,735 women serve in the Afghanistan National Defense and Security Forces (ANDSF), making up slightly less than 2% of the force. Afghan Government E fforts The Afghan government pursues a policy of promoting equality for women under its National Action Plan for Women of Afghanistan (NAPWA) as required by the Tokyo Mutual Accountability Framework. Afghanistan has a Ministry of Women's Affairs, the primary function of which is to promote public awareness of relevant laws and regulations concerning women's rights. It plays a key role in trying to protect women from domestic abuse by overseeing the operation of as many as 29 women's shelters across Afghanistan. Despite gains since 2001, numerous abuses, such as denial of educational and employment opportunities, forced marriage, and honor killings, continue primarily because of conservative traditions. On August 6, 2009, then-President Karzai issued, as a decree, the "Elimination of Violence Against Women" (EVAW) law that makes many of the practices mentioned above unlawful. Efforts by the National Assembly to enact the EVAW in 2010 and in 2013 failed due to opposition from religious conservatives. While prosecutions of abuses against women are increasingly obtaining convictions, a relatively small percentage of reports of violence against women are registered with the judicial system; about one-third of those proceed to trial. President Ghani has signaled his support for women's rights by publicly highlighting the support he receives from his wife, despite the Afghan cultural taboo about mentioning wives and female family members in public. Ghani nominated a woman to Afghanistan's Supreme Court, but the National Assembly rejected her nomination in July 2015. He has also appointed two female governors—one more than during Karzai's presidency— and three (of 25) cabinet ministers. In February 2018, hundreds of Afghan women gathered at a conference in Kabul to urge Ghani's government to reject any potential peace deal that does not safeguard women's rights. While women are not included in the current U.S.-Taliban negotiations, they comprise 26% of Afghan High Peace Council, and 20% of provincial peace councils, which lead local peacebuilding efforts. A number of women participated in July 2019 talks between Taliban and Afghan representatives (including some government officials who attended in a personal capacity). U . S . Policy Successive SIGAR audits and reports have identified issues with U.S.-funded programs to support Afghan women. According to SIGAR, Congress appropriated $627 million to address the needs of Afghan women and girls from FY2003 through FY2010; SIGAR reported at least $64.8 million in the three subsequent fiscal years but stated that the "full extent of [DOD, State, and USAID] efforts was unclear." In late 2018, SIGAR assessed that the most prominent and highly funded initiative in this area, USAID's Promoting Gender Equity in National Priority Programs (Promote), is hindered by insufficient evaluation efforts and noted that it was "unclear whether the Afghan government has the institutional capacity to continue Promote's activities once the program ends." Religious Freedoms and Minorities For several successive years, including in its 2018 annual report, the U.S. Commission on International Religious Freedom (USCIRF) has identified Afghanistan as a "Tier 2" country, meaning that the government "engaged in or tolerated…serious" violations that are "characterized by at least one of the elements of the 'systematic, ongoing, and egregious'" standard. According to USCIRF, "aspects of the country's constitution and other laws are contrary to international standards for freedom of religion." Members of minority religions, including Christians, Sikhs, Hindus, and Baha'i's, often face discrimination, but members of these communities also sometimes serve at high levels of government. According to USCIRF, the number of Hindus and Sikhs in Afghanistan has dwindled from nearly 200,000 in 1992 to between 3,000 and 7,000 today. These groups were targeted in a July 2018 ISKP attack against a campaign rally in Jalalabad that killed more than 20, including a Sikh candidate for parliament. ISKP has also aggressively targeted Afghanistan's Shia minority (10-20% of the population), most of which are ethnic Hazaras. Afghan Shia leaders appreciated the July 2009 enactment of a "Shia Personal Status Law" that gave Afghan Shias the same degree of recognition as the Sunni majority, and provided a legal framework for Shia family law issues. Some rights groups characterized the law as formalizing discrimination against Shia women. Human Trafficking Afghanistan was ranked as "Tier 2" in the State Department Trafficking in Persons Report for 2018, a continuation of its 2017 ranking and an improvement from 2016 when Afghanistan was ranked as "Tier 2: Watch List" on the grounds that the Afghan government was not complying with minimum standards for eliminating trafficking and had not demonstrated increased efforts against trafficking since the prior reporting period. As part of the government's significant efforts to combat trafficking, the 2018 report cites a revision to the penal code that increases penalties for human trafficking and a new training manual for combating trafficking. Nevertheless, the report says that the government did not report any new prosecutions or convictions of officials involved in trafficking, despite credible allegations. The report asserts that Afghanistan is a source, transit, and destination country for trafficked persons, though trafficking within Afghanistan is more common than trafficking across its borders. Related abuses prevalent in Afghanistan include forced or bonded labor; sex trafficking, including for bacha bazi , a practice in which wealthy men use groups of young boys for social and sexual entertainment (see textbox below); and the recruitment and use of children in combat. Outlook Insurgents and terrorist groups have demonstrated considerable capabilities in 2018 and 2019, throwing into sharp relief the daunting security challenges that the Afghan government and its U.S. and international partners face. At the same time, prospects for a negotiated settlement have risen, driven by direct U.S.-Taliban talks, though the prospects for such negotiations to deliver a settlement are uncertain. Those talks currently are centered on the U.S. and Taliban priorities, namely counterterrorism and the withdrawal of foreign troops, respectively. Special Representative for Afghan Reconciliation Khalilzad and other U.S. officials maintain that facilitating an intra-Afghan settlement is also a U.S. objective, but the means by which the U.S. could force the Taliban into dialogue with the Afghan government (let alone guarantee the Taliban's adherence to certain political or other conditions) is unclear, especially after a U.S. withdrawal from the country. Observers differ on whether or not the Taliban pose an existential threat to the Afghan government, given the current military balance, but generally agree that alterations to U.S. troop deployments or, perhaps more importantly, U.S. funding for the ANDSF, would pose a challenge to the Afghan government. As President Ghani said in 2018, "[W]e will not be able to support our army for six months without U.S. [financial] support." Increased political instability, fueled by questions about the central government's authority and competence and rising ethnic tensions, may pose as serious a threat to Afghanistan's future as the Taliban does. A potential collapse of the Afghan military and/or the government that commands it could have significant implications for the United States, particularly given the nature of negotiated security arrangements. Regardless of how likely the Taliban would be to gain full control over all, or even most, of the country, the breakdown of social order and the fracturing of the country into fiefdoms controlled by paramilitary commanders and their respective militias may be plausible, even probable; Afghanistan experienced a similar situation nearly thirty years ago during its post-Soviet civil war. Under a more unstable future scenario, alliances and relationships among extremist groups could evolve, as could security conditions, offering new opportunities to transnational terrorist groups, whether directly or by default. Human rights would be likely to suffer as well. In light of these uncertainties, Members of Congress and other U.S. policymakers may reassess notions of what success in Afghanistan looks like, examining how potential outcomes might harm or benefit U.S. interests, and the relative levels of U.S. engagement and investment required to attain them. The present condition, which is essentially a stalemate that has endured for several years, could persist; some argue that the United States "has the capacity to sustain its commitment to Afghanistan for some time to come" at current levels. In May 2019, former National Security Advisor H.R. McMaster compared the U.S. effort in Afghanistan to an "insurance policy" against the negative consequences of the government's collapse. Other analysts counter that "the threat in Afghanistan doesn't warrant a continued U.S. military presence and the associated costs—which are not inconsequential." The Trump Administration has described U.S. policy in Afghanistan as "grounded in the fundamental objective of preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan." For years, some analysts have challenged that line of reasoning, describing it as a strategic "myth" and arguing that "the safe haven fallacy is an argument for endless war based on unwarranted worst-case scenario assumptions." Some of these analysts and others dismiss what they see as a disproportionate focus on the military effort, citing evidence that "the terror threat to Americans remains low" to argue that "a strategy that emphasizes military power will continue to fail." Core issues for Congress in Afghanistan include Congress's role in authorizing, appropriating funds for, and overseeing U.S. military activities, aid, and regional policy implementation. Additionally, Members of Congress may examine how the United States can leverage its assets, influence, and experience in Afghanistan, as well as those of Afghanistan's neighbors and international organizations, to encourage more equal, inclusive, and effective governance. Congress also could seek to help shape the U.S. approach to talks with the Taliban, or to potential negotiations aimed at altering the Afghan political system, through oversight, legislation, and public statements. How Afghanistan fits into broader U.S. strategy is another issue on which Members might engage, especially given the Administration's focus on strategic competition with other great powers. Some recognize fatigue over "endless wars" like that in Afghanistan but argue against a potential U.S. retrenchment that could create a vacuum Russia or China might fill. Others describe the U.S. military effort in Afghanistan as a "peripheral war," and suggest that "the billions being spent on overseas contingency operation funding would be better spend on force modernization and training for future contingencies." Appendix A. Historical Timeline, 1747-2001 This timeline briefly describes the major political and military events that have shaped Afghanistan's modern trajectory from the Durrani Empire to the U.S. invasion in 2001. Appendix B. Soviet War in Afghanistan The Soviet Union's invasion of, and withdrawal from, Afghanistan has emerged as a frequently referenced possible historical analogue for the U.S. experience there. While there are clear and dramatic differences between the U.S. and Soviet experiences in Afghanistan, they also share some similarities that are of potential value in assessing various U.S. policy options. The Soviet Union deployed troops into Afghanistan in December 1979 to buttress the communist People's Democratic Party of Afghanistan (PDPA) government, which had been established after the 1978 Saur (April) Revolution. Growing instability in Afghanistan, including a nascent grassroots popular uprising against the PDPA's reform program and factional fighting within the PDPA, led Soviet leaders to order the initial invasion of about 80,000 Soviet troops, which quickly took control of urban centers, major lines of communication, and other strategic points. Soviet troops, which numbered over 100,000 at their peak, partnered with Afghan government forces and various paramilitaries but generally bore the brunt of fighting against armed opposition groups, collectively known as the mujahideen . Mujahideen groups, supported by Pakistan, the United States, Saudi Arabia, and others, led a guerilla campaign against Soviet and Afghan government forces characterized by sabotage operations, attacks against military and government sites, and attacks against some civilian targets. The Soviet effort was not just military in nature. The USSR also "sent thousands of technical specialists and political advisors" to Afghanistan to "help stabilize the government and broaden its base of support," though these missions were often undermined by "infighting and lack of coordination among advisers and other Soviet officials." By 1985, newly installed Soviet leader Mikhail Gorbachev had decided to seek a withdrawal from Afghanistan. Soviet military losses were substantial (around 13,000 Soviet troops killed and 40,000 wounded over the course of the decade-long intervention), but experts disagree about the extent to which these casualties motivated the decision to withdraw. Other reasons cited include international isolation, the economic cost of the war effort, the potential for political unrest within the USSR, and the greater importance Gorbachev placed on his reform program. Increasingly, Soviet attention turned to both pressuring squabbling Afghan leaders to unify and building up the Afghan military, which suffered from high rates of desertion, attrition, and casualties. U.N.-mediated talks in Geneva between delegations from the governments of Afghanistan (supported by the USSR) and Pakistan (supported by the U.S.) began in March 1982 and continued fitfully until the signing of the Geneva Accords in April 1988. The Soviet withdrawal began in May, per the Accords, and finished on February 15, 1989, when the last Soviet soldier crossed back into the Soviet Union (now Uzbekistan) from Afghanistan. In late 1988, some Soviet officials advocated maintaining a residual force in Afghanistan, citing violations of the Geneva Accords by Pakistan, and the withdrawal was briefly paused. However, the United States and Pakistan, perceiving that the Soviet impulse to pull out would trump concerns about the post-withdrawal political situation, maintained aid to the mujahideen and "the bluff failed to work." Mujahideen forces, as a nonstate movement, were excluded from U.N. negotiations and continued to receive support from the United States, Pakistan, and other backers after the Soviet withdrawal, as the Afghan government continued to receive military and financial support from Moscow. With this support, the Afghan government (led by Najibullah Ahmadzai, commonly known by his first name) defied expectations among some in the U.S. that it would quickly collapse after the Soviet pullout and maintained its position for several years. In September 1991, as the Soviet Union was being engulfed in a major political crisis that would eventually lead to its dissolution in December 1991, Soviet and U.S. officials announced a final cutoff in their countries' support to their respective clients, effective January 1992. With the help of key defections including current Vice President Abdul Rashid Dostum, m ujah i deen and other Afghan groups displaced Najibullah in April 1992, and the country sank into a civil war from which the Taliban would emerge and eventually take control of most of the country. Upon their entry to Kabul in September 1996, one of the Taliban's first acts was to torture and publicly hang Najibullah. Appendix C. U.S. Reconstruction Assistance to Afghanistan (SIGAR)

Afghanistan has been a significant U.S. foreign policy concern since 2001, when the United States, in response to the terrorist attacks of September 11, 2001, led a military campaign against Al Qaeda and the Taliban government that harbored and supported it. In the intervening 18 years, the United States has suffered approximately 2,400 military fatalities in Afghanistan, with the cost of military operations reaching nearly $750 billion. Congress has appropriated approximately $133 billion for reconstruction. In that time, an elected Afghan government has replaced the Taliban, and most measures of human development have improved, although Afghanistan's future prospects remain mixed in light of the country's ongoing violent conflict and political contention. Topics covered in this report include: Security dynamics . U.S. and Afghan forces, along with international partners, combat a Taliban insurgency that is, by many measures, in a stronger military position now than at any point since 2001. Many observers assess that a full-scale U.S. withdrawal would lead to the collapse of the Afghan government and perhaps even the reestablishment of Taliban control over most of the country. Taliban insurgents operate alongside, and in periodic competition with, an array of other armed groups, including regional affiliates of Al Qaeda (a longtime Taliban ally) and the Islamic State (a Taliban foe and increasing focus of U.S. policy). U.S. military engagement . The size and goals of U.S. military operations in Afghanistan have evolved over the course of the 18-year war, the longest in American history. Various factors, including changes in the security situation and competing U.S. priorities, have necessitated adjustments. While some press reports indicate that the Trump Administration may be considering at least a partial withdrawal, U.S. officials maintain that no decision has been made to reduce U.S. force levels. Regional context . Afghanistan has long been an arena for, and victim of, regional and great power competition. Pakistan's long-standing, if generally covert, support for the Taliban makes it the neighbor whose influence is considered the most important. Other actors include Russia and Iran (both former Taliban foes now providing some measure of support to the group); India (Pakistan's main rival); and China. Reconciliation efforts. U.S. officials have long contended that there is no military solution to the war in Afghanistan. Direct U.S.-Taliban negotiations, ongoing since mid-2018, on the issues of counterterrorism and the presence of U.S. troops could offer greater progress than past efforts. However, U.S. negotiators caution that the Taliban's continued refusal to negotiate with the Afghan government could preclude the stated U.S. goal of a comprehensive settlement. Afghan governance and politics. Afghanistan's democratic system has achieved some success since its post-2001 establishment, but corruption, an evident failure to provide sufficient security and services, and infighting between political elites has undermined it. The unsettled state of Afghan politics complicates ongoing efforts to negotiate a settlement: the presidential election has been postponed twice and is now scheduled for September 2019. U.S. and foreign assistance. Military operations have been complemented by large amounts of development assistance; since 2001, Afghanistan has been the largest single recipient of U.S. aid. Most of that assistance has been for the Afghan military (a trend particularly pronounced in recent years), but aid has also supported efforts to build Afghan government capacity, develop the Afghan economy, and promote human rights.

GAO_GAO-19-664

Background The 22 TCS programs covered by our review varied widely in total donations and number of scholarships awarded. For example, total donations during 2017 ranged from $854,326 in New Hampshire’s program to approximately $623 million in Florida’s largest program (see fig. 1 and app. I). Of the 17 states operating these programs, Arizona, Florida, and Pennsylvania operate the largest programs in terms of both dollars donated and number of scholarships awarded. These are also the only three states that operate multiple programs per state. Decisions about whether to develop and operate a TCS program—as well as how to structure requirements—are at the discretion of each state; there is no federal role in establishing these programs. For example, states sometimes choose to establish requirements that SGOs and schools must follow as a minimum condition for participation. Since scholarships are funded through donations rather than state appropriations, the financial impact to states from TCS programs primarily occurs through forgone revenue resulting from the associated tax credits. Various state agencies, SGOs, and participating private schools generally all play a role in administering state TCS programs, with the specific division of responsibilities varying by program. State agencies that are responsible for tax administration, education, or both, generally administer these programs. For example, in some programs, state agencies disseminate information to donors, scholarship students, or the public, and approve SGOs or private schools to participate in the program. SGOs are tax-exempt organizations that are generally responsible for managing some aspects of the donation process—such as collecting donations—as well as awarding scholarships to students. Participating private schools educate students receiving tax credit scholarships. They sometimes also facilitate donations or inform parents about TCS scholarship awards. Participating schools can vary in terms of characteristics such as their size, religious affiliation, and whether they focus on specific student populations, such as students with disabilities. In September 2018, we issued a report that described state TCS program requirements related to donations and student eligibility for programs operating at the beginning of 2018. In that report, we found that these programs offered tax credits to individuals, businesses, or both that ranged from 50 percent to 100 percent of the donation amount. We also found that most programs set limits on the amount of TCS program donations that could be made per year. In terms of eligibility, we found that TCS programs commonly determined student eligibility based on their household income, with income limits varying widely across programs. TCS Programs Generally Require Financial Audits or Reviews for Participating SGOs and Prohibit Them from Awarding Scholarships to Only One School States have established requirements that SGOs must follow as a condition of participation in their TCS programs. See figure 2 for key requirements that some states have chosen to put in place for SGOs. Financial Requirements All TCS programs have financial requirements that limit the percentage of donations that SGOs are permitted to use for non-scholarship expenses—such as staff salaries—and most also require SGOs to undergo annual financial audits or reviews. (See fig. 3.) The limit on the percentage of donated funds that SGOs are permitted to use on non-scholarship expenses ranges from 2 percent to 10 percent for 20 of the 22 programs. The other 2 programs—both in Pennsylvania— have a limit of 20 percent. About half (12) of programs also require SGOs to follow rules about how donated funds or related interest are managed and spent. For instance, South Dakota requires SGOs to spend all revenue from interest or investments on TCS scholarships. Most (19) programs require SGOs to undergo either an annual financial audit or review. Some of these programs require more extensive audits for SGOs that receive donations over a certain dollar threshold (e.g., over $1 million). Three programs require at least some SGOs to submit proof of fiscal soundness, such as a surety bond or letter of credit. For example, to insure against potential financial loss, Florida requires SGOs to submit a surety bond equal to the SGO’s unspent donations. Some programs require SGOs to take steps to guard against conflicts of interest. For example, four programs require SGOs to have a conflict of interest policy or a policy designed to prevent individual financial gain among SGO personnel. For instance, New Hampshire prohibits SGOs from awarding scholarships to children of any SGO employee or to children of any business owner whose business donates to the SGO. About a third (8) of programs prohibit SGOs and participating schools from sharing resources or personnel, while other programs do not include such prohibitions. For example, in Pennsylvania, schools are permitted to operate as SGOs and award scholarships directly to their students. In addition, TCS programs require SGOs to be recognized as tax-exempt organizations by the Internal Revenue Service (IRS), so they generally are also subject to applicable federal requirements for tax-exempt organizations, such as filing an annual information return or notice with the IRS. In addition, SGOs may be subject to applicable state laws for tax-exempt or non-profit organizations. Administrative Requirements Figure 4 shows the number of state TCS programs that had selected administrative requirements for SGOs. All programs require SGOs to register or receive state approval by, for example, submitting an application to the state or providing documentation showing the SGO is a tax-exempt organization. Slightly fewer than half (10) of programs require SGOs to follow rules about the qualifications of SGO leadership personnel. For instance, Nevada requires the SGO’s top board member to sign an affidavit stating that no member of the board of directors or SGO employee has ever been convicted of a felony, among other requirements. Nine of the programs have requirements related to marketing and fundraising practices. For instance, Louisiana requires SGOs to send the state any advertisements so state officials can review the materials. Almost all (21) programs require SGOs to report to the state the number or total dollar amount of scholarships they awarded. Also, 19 programs require SGOs to report information about the characteristics of scholarship students, such as household income or geographic location. These programs sometimes choose to require SGOs to report individual student-level information or aggregated information for all of their scholarship students combined. For example, Alabama requires SGOs to report identifying information and scholarship amounts for each student to the state. Alternatively, Georgia requires SGOs to report the number of families of scholarship recipients by income group. Scholarship Award Requirements Figure 5 shows how many programs had key requirements for SGOs related to scholarship awards. Almost all (20) programs prohibit SGOs from awarding scholarships to only one school. Some of these 20 programs require SGOs to allow students to use their scholarships at any qualified school whereas others allow SGOs to work with a subset of two or more schools. The majority of programs prohibit donors from recommending that scholarships go to specific students while fewer programs prohibit donors from directing funds to specific schools. More than half (16) of programs prohibit SGOs from allowing donors to recommend that scholarships go to specific individuals, such as students they know personally. About one-third (8) of programs prohibit SGOs from allowing donors to recommend that scholarship funds be used at a specific school. Most States with TCS Programs Require Schools to Teach Core Subjects and Meet Minimum Attendance Standards; Few Require Financial Audits or Reviews of Schools In addition to requirements for SGOs, states with TCS programs also have requirements for private schools. See figure 6 for key requirements that some states with TCS programs have chosen to put in place for schools. Some requirements were specific to schools participating in the TCS program and some requirements were for all private schools, regardless of TCS program participation. We counted programs as having a particular requirement as long as the requirement applied to at least some of the participating private schools. Academic Requirements Programs generally have one or more academic requirements for participating private schools. (See fig. 7.) About half (9) of the programs require private schools to register or be approved by the state TCS program before their students can receive TCS scholarships. For example, in Nevada private schools must register with the state by completing a form acknowledging that they will follow program requirements. Other programs, such as Georgia’s, require SGOs to determine if private schools meet program participation requirements. Separate from any requirements to register with the TCS program itself, over half (14) of the programs require participating private schools to be accredited by the state or another organization, such as a regional accreditation organization. For example, Pennsylvania requires participating private schools to be 1) licensed by the state, 2) accredited by an association approved by the state, or 3) operated by a religious institution. Private schools participating in most TCS programs are subject to requirements regarding minimum instructional time or student attendance and requirements related to curriculum content or core subjects, such as reading, mathematics, social studies, and science. These requirements may or may not be the same as requirements for all private schools in a state. For example, Nevada requires all private schools, including those participating in its TCS programs, to provide 180 days of academic instruction per year. South Carolina’s TCS program generally requires participating private schools to offer the courses required to receive a high school diploma in the state. Eleven programs require schools to give academic tests to TCS students. Of these programs, three require participating schools to administer the same test required of public school students and eight allow schools to select among multiple tests. For example, Louisiana requires participating private schools to give TCS students the same state tests in English and math that are used in public schools, whereas Florida allows participating private schools to choose from a state approved list of norm-referenced tests. These 11 programs also require schools to report TCS students’ test results to the state, parents, or other entities. For instance, one of Florida’s programs requires schools to report test results to a university selected by the state to analyze TCS students’ test scores. Administrative Requirements Participating schools are often required to ensure their teachers undergo background checks or meet minimum qualifications, and less frequently required to undergo site visits. (See fig. 8.) Most (18) programs require participating private schools to conduct background checks or fingerprinting of employees with direct, unsupervised contact with children. Additionally, 12 programs require schools to ensure teachers meet certain qualifications, such as holding a state-issued certificate or a college degree. For example, Alabama requires all private school teachers to hold teaching certificates issued by the state. Nine of the programs require private schools to permit state or other officials to conduct site visits. In the majority of these programs, site visits are a general requirement for private schools in the state or a component of state accreditation that some or all schools are required to obtain before participating in the TCS program. Across these programs, the frequency of the site visit varies. For instance, Indiana state officials are required to make random site visits to at least five percent of participating private schools each year, while Iowa requires a site visit for all private schools operating in the state at least once every five years. Financial Requirements Among the 22 programs, financial requirements for participating private schools are generally less common than academic and administrative requirements. (See fig. 9.) Most (19) programs have requirements related to student withdrawals, such as requiring schools to report or repay the scholarship when students withdraw from the school for which the scholarship was originally awarded. For example, Illinois requires schools and SGOs to prorate scholarships for students who transfer to another private school during the school year, while Louisiana requires schools to immediately notify the SGO and state if a scholarship student is no longer enrolled. Few (4) programs require schools to complete an annual financial audit or review. Among programs with such requirements, Florida requires schools that receive more than $250,000 in scholarship funds to submit the results of a financial audit to the SGO that awarded the majority of those funds. South Carolina requires all schools to include a copy of an audit or other financial review when they initially apply to participate in the program and annually afterwards. About one-fourth (5) of programs require schools to provide surety bonds or other evidence to demonstrate financial viability. For example, Louisiana requires schools that have operated for fewer than five years and will receive more than $50,000 in TCS funds to either provide a SGO with a surety bond equal to the amount of TCS funds they expect to receive during the school year or other information showing financial viability. Florida requires schools operating for fewer than three years to provide the state with a surety bond equal to the amount of scholarship funds for any quarter. States with the Largest TCS Programs Have SGOs Manage Key Program Features SGOs Manage Donations and Award Scholarships while State Agencies Administer Tax Credits in the Three States Donations and Tax Credits In the three states with the largest TCS programs—Arizona, Florida, and Pennsylvania—SGOs are generally responsible for recruiting donors while state agencies administer tax credits. (See fig. 10). SGOs generally recruit potential donors and sometimes help them apply for tax credits. SGO officials in all three states described ways they solicit donations, such as meeting with representatives from corporations to promote TCS programs or providing banners and pamphlets for private schools to display. In Arizona—where SGOs are permitted to allow donor recommendations for specific schools or students in certain programs— SGO and school officials described roles for schools or students and their families in soliciting donations. For example, family members of prospective scholarship students may encourage members of their community to donate and recommend their child or child’s school, according to officials from a SGO and a school we visited in Arizona. In addition, SGO officials we spoke with in all three states noted that they help donors navigate the process of obtaining tax credits. For example, officials from a SGO in Pennsylvania described how they can fill out the application for tax credit pre-approval as the donor’s delegate or review completed applications for errors before donors submit them to the state. State agencies administer state tax credits based on the rules of each TCS program. Specifically, five of the eight programs in the three states have a maximum total dollar limit on the amount of all scholarship tax credits that can be awarded in a year. In those five programs, the state requires donors to apply for pre-approval of the tax credits to ensure the limit has not been reached and tax credits are still available. In the Florida and Arizona programs that have such limits, state agencies consider all donor applications for tax credit pre-approval on a first come, first served basis. Pennsylvania considers returning donors for pre-approval before considering new donors (while tax credits remain). State officials in Pennsylvania and Florida described different methods for reviewing donors’ tax compliance before and after they file their taxes and claim the TCS tax credit. Specifically, the Pennsylvania Department of Revenue checks for any outstanding tax liability before approving tax credits for the TCS programs and reviews all tax returns that claim TCS credits to ensure the amount of tax credits claimed does not exceed the amount that was pre-approved. The Florida Department of Revenue reviews tax returns that claim a TCS credit to ensure the amount of tax credits used matches the approved amount that was allocated for the donor. Officials from the Arizona Department of Revenue said it does not have a separate tax compliance review process for its TCS credits. Scholarship Awards All three states established scholarship requirements while SGOs managed the scholarship awards process by determining which students are eligible for TCS scholarships, which eligible applicants will receive scholarships, and how much to allocate to scholarship recipients within program limits. In contrast, state agencies have a limited role—or no role at all—in determining the allocation of scholarships among eligible students, according to state and SGO officials in all three states. However, states may provide guidance documents to help SGOs navigate the state’s general policies for the awards process. The number of SGOs awarding scholarships varied across the three states, as did program policies for how those SGOs determine which eligible students receive scholarships. In fall 2017, Florida had two SGOs—one of which awarded 99 percent of scholarships. Meanwhile, Arizona’s four TCS programs had between 14 and 60 SGOs each and Pennsylvania’s two programs had approximately 190 and 260 SGOs each. In addition, as described in table 1, states varied in their requirements for how SGOs prioritize eligible students, the degree to which SGOs may work exclusively with a subset of schools, and whether SGOs may consider donors’ recommendations when deciding which students receive scholarships. Further, because each SGO is responsible for establishing its own procedures for awarding scholarships within program requirements, a TCS program with many SGOs could have substantial variation in how scholarships are awarded. Prioritizing eligible students: The three states provide varying levels of discretion to SGOs in how they prioritize eligible students when awarding scholarships. For example, Florida’s largest program requires SGOs to award scholarships on a first-come, first-served basis with first priority to students who previously received a scholarship, and then to students from lower-income households or who are in foster care; its other program requires SGOs to award scholarships to students on a first- come, first-served basis. Two programs in Arizona and one in Pennsylvania outline requirements for how SGOs must prioritize among eligible students, while the remaining programs do not. Further, in all four Arizona programs and both Pennsylvania programs, SGOs are permitted to set additional criteria for selecting scholarship recipients beyond requirements set by the state, as long as those criteria align with program rules and existing laws. For example, officials we spoke with at one SGO in Arizona noted that their selection committee considers written narratives from students and their parents about the student’s character and academic achievement when prioritizing eligible students, among other factors. Working with a subset of schools: State policies about partnerships between SGOs and schools can affect which students receive scholarship awards and where students can use those awards. SGOs in Florida award scholarships to students who can then use their scholarship award at any private school that qualifies to participate in the TCS program. In contrast, Arizona and Pennsylvania allow SGOs to partner with subsets of participating schools and award scholarships exclusively to students at those schools. For example, in Arizona and Pennsylvania, some SGO officials noted that the scholarships awarded through their SGO may only be used at partner schools that shared a religious affiliation with the SGO. Allowing donor recommendations: The TCS programs in the three states also had different rules on whether donors may recommend that scholarships be awarded to particular schools or students. Florida prohibits donors from making scholarship recommendations or designations for specific schools or students. In all Pennsylvania and Arizona programs, donors can recommend or designate donations for specific schools, but SGOs can take different approaches to distributing any such recommended funds. For example, one SGO in Pennsylvania sends recommended donation funds directly to the designated schools and the school decides how to distribute the scholarship funds among eligible students. In Arizona, one SGO tracks the amount of donations donors recommend for each of its partner schools and awards those funds to eligible students enrolled at those schools. Further, Arizona’s two TCS programs designed for individual donors (rather than businesses), allow donors to recommend that the funds they donate go to specific students. An official at one SGO we visited in Arizona said they provided its external scholarship award committee with information about students’ applications, including any student-specific recommendations, to inform the selection process. Pennsylvania programs do not expressly prohibit donor recommendations for specific students. In Pennsylvania, officials from one school that was also a SGO told us that they did not accept student-specific recommendations, while officials in a different SGO described how donors may not make student- specific recommendations, but may designate certain groups of students, such as children of first responders. In addition to establishing program policies regarding how eligible students are selected, the three states also have requirements regarding the amount of scholarship money that can be awarded per student, and SGO officials described different methods for determining the amount and frequency of scholarship awards for each student. Among the schools we visited the proportion of students who received TCS scholarships compared to students who did not receive TCS scholarships varied. For example, in one school in Florida, less than one percent of students received TCS scholarships and in a school in Arizona, school officials told us that about 80 percent of students receive TCS program scholarships. When awarding scholarships, officials at some SGOs we visited chose to issue a limited number of awards at the maximum allowable scholarship amount while others chose to issue scholarships to more students in smaller amounts—sometimes for shorter periods. In addition, students in Arizona and Pennsylvania may receive multiple concurrent scholarships from different SGOs, different TCS programs in the state, or both. This approach potentially increases the amount of funding students receive; however, it can also present logistical difficulties for the schools and families of scholarship recipients, according to SGO and school officials. For instance, officials at one school described wanting students to receive as much TCS funding as possible, but said it was also challenging to track the different SGO award cycles, incoming funds, and the projected impact on tuition balances for each student. As part of the scholarship award process, some SGOs we visited told us they collected information about tuition and fees at schools to ensure scholarship award amounts do not exceed school tuition, per program requirements. Costs for tuition ranged from approximately $6,000 per year to approximately $37,000 per year among the schools we visited. All Three States Require SGOs to Attest That They Will Follow Program Requirements, Submit Information on Their Operations, and Complete an Annual Financial Audit or Review To participate in TCS programs, all three states require SGOs to provide a description of some of their operating procedures and regularly report donation and scholarship information. The type of information states collect and how they determine whether SGOs are following applicable TCS program requirements varies. (See table 2.) All three states require SGOs to complete an application to participate in TCS programs, which involves signing a form attesting that the SGO will follow program requirements and providing other types of documentation. This documentation includes evidence that the SGO is recognized as tax- exempt by the IRS, descriptions of the SGO’s procedures for awarding scholarships, and other information, depending on the program. When reviewing SGO applications, state officials in all three states described how they check that all required information is included in accordance with program rules, but generally do not evaluate the content. For example, in Pennsylvania, a program official noted that the state agency checks that SGOs submit all required documents and relies on attestation statements signed by SGO officials as an essential step for certifying that SGOs will follow program requirements. In addition, state agencies also generally provide SGOs with some guidance on how to interpret program requirements in all three states. State agencies in both Arizona and Pennsylvania have developed guidance manuals for SGOs. Florida collaborates closely with SGOs to interpret program rules and develop guidance, according to SGO and state officials. In addition to application materials, all three states require SGOs to regularly submit information about donations received, scholarships awarded, and the results of financial audits or reviews. The extent to which these audits or reviews include an assessment of SGO compliance with program requirements varies. For example, in addition to financial audits, Florida also requires the state Auditor General to review SGO operations for compliance annually. According to SGO officials, the Florida Auditor General conducts file reviews and on-site visits during these compliance reviews. In Arizona, the SGO manual includes optional procedures financial auditors may use to determine if SGOs are following certain program requirements as part of their review. Pennsylvania does not require an assessment of SGOs’ compliance with program requirements as part of its annual financial audit. According to officials, states typically work with SGOs to resolve any compliance issues and state agencies rarely permanently revoke SGOs’ approval to participate in TCS programs. According to officials in Florida, no SGOs have been removed from the programs due to noncompliance. The officials said that once a SGO has been approved through the states’ initial application process it is very likely that they will be renewed each year unless a large compliance issue arises. Officials in Pennsylvania noted that they contact SGOs to clarify discrepancies in documentation and have temporarily revoked approval from a small proportion of SGOs that failed to submit required information. Officials in Arizona described one instance where a SGO was decertified due to noncompliance; officials stated that the SGO would be recertified if it resolved the compliance issues and reapplied to be a SGO. State and SGO Responsibilities for Monitoring Private Schools Varied in the Three States State officials in the three states described different approaches to overseeing participating private schools’ compliance with program requirements. Florida state officials described using a variety of monitoring activities to oversee participating private schools, while Arizona and Pennsylvania state agency officials said they do not conduct ongoing monitoring activities due to the parameters of their statutory authority. (See table 3.) Florida state officials described conducting site visits to schools during the initial application process and when they determine schools are at risk of noncompliance. They also noted their monitoring practices have led them to identify multiple issues of noncompliance at certain schools and, as a result, they have temporarily or permanently suspended those schools from receiving TCS program funds. They said the state also delegates certain monitoring activities to SGOs, such as reviewing financial audit results, following up with schools to resolve any issues resulting from those audits, and reporting those issues to the state. State and SGO officials said that SGOs in Florida may also be responsible for implementing any penalties to schools, such as adjusting scholarship payments to schools that do not meet certain reporting requirements. For all Arizona programs and one of two Pennsylvania programs, officials told us that they generally rely on SGOs to verify that schools receiving scholarship funds meet program requirements. For example, in Arizona, SGOs are responsible for determining if a school qualifies to participate in the state’s TCS programs. SGO officials we spoke to in Arizona noted they require schools to sign documents attesting that the school meets the requirements to be a qualified school. In Pennsylvania’s Educational Improvement Tax Credit Program, SGOs determine whether schools are qualified to participate and each SGO may approach this differently, according to state officials. For example, in addition to meeting the state’s criteria for participation in the program, one SGO we spoke with in Pennsylvania also required schools to be tax-exempt, have a board and budget, and share its religious affiliation. Another SGO we spoke with in Pennsylvania required that a school attest that it meets program requirements. In Pennsylvania’s other TCS program (the Opportunity Scholarship Tax Credit Program) state officials told us that they determine whether schools are qualified to participate and do not conduct subsequent monitoring activities. Agency Comments We provided a draft of this report to the Department of Education for review and comment. Education’s comments are reproduced in appendix III. Education also provided technical comments, which we incorporated as appropriate. We also provided relevant excerpts from the report to the appropriate state agencies in each state we reviewed and incorporated their technical changes as appropriate. Education did not comment on the report’s findings. Instead, it provided information about the administration’s tax credit proposal and made observations about how the scope of TCS programs covered in our report was both similar and different from educational programs that are addressed in the administration’s proposal. In its comments, Education further stated that given these scope differences, the GAO report may not fully inform the debate around the administration’s proposal. As stated in the draft report, promoting school choice options—both private and public—through a variety of spending and tax expenditure programs continues to be a topic of national debate. The purpose of this report was to examine state TCS programs that are used to fund scholarships that students can use to attend private elementary and secondary schools by describing: (1) key requirements state TCS programs have chosen to establish for SGOs, (2) key requirements for private schools participating in state TCS programs, and (3) how selected states implement TCS programs and how they assess whether SGOs and participating private schools are following key state requirements. Education stated that the draft report does not note that several TCS programs allow scholarships to be used for educational expenses beyond tuition. As stated in the draft report, some states use tax credit scholarship programs to fund preschool, career and technical education, or public school initiatives; the draft report further noted that these programs are outside the scope of this review. This report is the second of two GAO reports examining K-12 TCS programs. The prior report (GAO-18-679) discussed various ways students can use state K-12 TCS scholarships. Specifically, we reported that, as of SY 2017-2018, more than half of the programs (13 of 22) allowed students to use their scholarship money for costs like transportation and books in addition to tuition, whereas the remaining programs (9 of 22) required scholarship funds to be used for tuition only. Education asserted positive fiscal effects associated with state TCS programs and cited several studies to this end. As stated in the draft report, tax credits are a form of forgone revenue. Assessing the fiscal impact of these programs was not among the purposes of this report. Thus, we did not assess the reliability of these studies or the validity of their results. Education also commented on our decision to exclude Montana’s TCS program from the scope of this report. As noted in our report, we did not include Montana’s program because it was the subject of pending litigation at the time of our review. Finally, Education noted, as also stated in the draft report, that states and school districts have obligations under the Elementary and Secondary Education Act and the Individuals with Disabilities Education Act to make equitable services available to eligible private school students, including those who participate in TCS programs. We agree and have reported extensively on equitable services in the context of private schools in GAO-16-712 and GAO-18-94. In GAO-18-94, we recommended that Education review information provided by states related to changes in federal special education rights when a parent places a student with a disability in private school and work with the states to correct inaccurate or incorrect information. In that report, we identified some private school choice programs that were providing information that Education confirmed inaccurately described rights under the Individuals with Disabilities Education Act when a student with a disability is moved from a public to a private school. Education agreed with this recommendation – a recommendation GAO considers to be among the highest priority of recommendations we have made to the Department. However, Education has not yet fully implemented this recommendation and, as of September 2019, we found that some information Education confirmed to be inaccurate remains in several states’ private school choice program documents. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix IV. Appendix I: State Tax Credit Scholarship Program Scholarship and Donation Information of donors: businesses, individuals, or both) 1,957b (both) 15 (business) 795 (business) $1,856 88,109b (individual) $1,450 47,895b (individual) ——- (both) 286d (business) 23,411b (both) ——- (both) 6,768b,d (both) 3,054 (both) 153 (both) 79 (both) 69d (business) 71 (business) Number of students receiving of donors: businesses, individuals, or both) Average donation amount per donor ——- (both) 1,671 (business) 662 (business) 40 (business) 788d (both) ——- (business) 1,428 (both) Appendix II: Key Features of Largest Tax Credit Scholarship Programs in Arizona, Florida, and Pennsylvania The profiles in this appendix describe key features of the largest tax credit scholarship programs in Arizona, Florida, and Pennsylvania, as measured in terms of the scholarships awarded in 2017. Information in these profiles was obtained from interviews with state agency and selected scholarship granting organization (SGO) officials and state program documents, and was verified by state officials. GAO did not independently review state laws or regulations. Unless otherwise specified, program requirements are as of school year 2018-2019. Key Requirements for SGOs Financial • Limit non-scholarship spending to 10 percent of donations. Undergo annual audit or financial review depending on amount of donations received. donations. Administrative Receive state approval to operate. Ensure all promotional materials include required language. scholarship awards. Academic Follow guidelines for school curriculum or core subjects. Follow guidelines for minimum instructional time or attendance. Donations: Donors contributed over $68 million during calendar year 2017. The program is open to individual donors only (business donors may fingerprinting for staff. donate through other Arizona programs.) Financial Follow requirements if students withdraw (e.g., report or repay). Donations are eligible for 100 percent tax credits. The program does not limit annual program-wide donations. Individual donors (filing as single) were limited to $569 in tax credits during tax year 2019. Scholarship awards: 34,632 scholarships were awarded between July 1, 2017 and June 30, 2018. All K-12 students who live in Arizona and attend a private school are eligible for the program. SGOs are expected to consider financial need when prioritizing among eligible applicants. Students may receive more than one scholarship from this program and concurrently receive scholarships from other tax credit scholarship programs in the state, up to the full cost of tuition. SGOs may partner with a subset of qualified schools, such as schools with shared religious views or teaching methods. Donors may recommend that their donation fund scholarships at specific schools or be awarded to specific students (within certain parameters). 0 percent of donations in first 3 years and 3 percent afterwards. Provide a surety bond or line of credit. Maintain separate accounts for scholarship funds. Not share resources or personnel with private schools. Have a conflict of interest policy. Undergo annual financial audit. Report information about donations. Administrative Receive state approval to operate. Not have an owner or operator who recently filed for bankruptcy. Limit funds used for marketing. Report on scholarship awards. Academic Register with state. Follow guidelines for minimum instructional time or attendance. Donations: Donors contributed about $623 million during tax year 2017. The program is open to businesses (not individuals). Donations are eligible for 100 percent tax credits. Maximum allowable credit amounts per donor vary from 50 percent to Administer an approved academic test (not necessarily the test used in public schools). 100 percent of tax liability, depending on the type of business tax to which the tax credit is applied. Program-wide limit on tax credits was $698 million in state fiscal year 2017-2018. Administrative Hire teachers who meet minimum qualifications. Ensure background checks or fingerprinting for staff. Undergo state site visits. Scholarship awards: 108,098 scholarships were awarded during school year 2017-2018. Students are eligible for full scholarships if their household income level does not exceed 200 percent of the federal poverty level or if they are in foster care. Financial Undergo annual audit if receive a Students may only receive one tax credit scholarship at a time, up to $7,208 for tuition and fees, as of school year 2017-2018. given amount of scholarships. SGOs must allow students to use scholarships at any private school Provide a surety bond or line of participating in the program. credit if in operation for less than 3 years. Donors are prohibited from recommending that their donation fund scholarships at specific schools or for specific students. Follow requirements if students withdraw (e.g., report or repay). 20 percent of donations. Undergo annual audit or financial review. donations. Administrative Receive state approval to operate. Report information about scholarship awards. Academic Be accredited, licensed by the state, or a religious institution. Follow guidelines for minimum instructional time or attendance. Follow guidelines for core curriculum or academic subjects. Administrative Hire teachers who meet minimum qualifications. Ensure background checks or fingerprinting for staff. Donations: Donors contributed about $87 million during tax year 2017. The program is open to businesses, including “special purpose entities” Financial Follow requirements if students withdraw (e.g., report or repay). which allow individuals to donate to the program through the entity. Donors are eligible to receive tax credits for 75 percent of their donations if they donate for one year and tax credits for 90 percent of their donations if they donate for two consecutive years. The maximum allowable tax credit amount per donor is $750,000. The program-wide limit on tax credits was $135 million in fiscal year 2017. Donors must apply for pre-approval before claiming tax credits. Past donors may apply for credits before potential new donors apply for any remaining tax credits. Scholarship awards: 37,725 students received scholarships during school year 2017-2018. Students are eligible for scholarships if their household income level does not exceed $85,000, plus $15,608 per dependent in the household (higher for students with disabilities). Students may receive multiple tax credit scholarship at a time. Total scholarship award amount may not exceed the cost of tuition and fees. SGOs may partner with a subset of qualified schools, such as schools with shared religious views or teaching methods. Donors may recommend that their donation fund scholarships at specific schools. Donors are not prohibited from recommending scholarships to specific students. Appendix III: Comments from the Department of Education Appendix IV: Staff Acknowledgments GAO Contact: Staff Acknowledgments: In addition to the individual named above, Nagla’a El-Hodiri (Assistant Director), Barbara Steel (Analyst-in-Charge), Andrew Emmons, and Jessica L. Yutzy made key contributions to this report. Also contributing to this report were Isabella Anderson, Jeff Arkin, Deborah Bland, Lilia Chaidez, Sarah Cornetto, Caitlin Cusati, Charles Ford, Monika Gomez, Alison Grantham, Kirsten Lauber, Sheila R. McCoy, Mimi Nguyen, Corinna Nicolaou, and Michelle Philpott.

All TCS programs are state programs. States develop program policies and requirements, including establishing the roles and responsibilities of SGOs and participating private schools. The President's fiscal year 2020 budget request included a proposal for federal tax credits for donations to state-authorized SGOs. GAO was asked to review key characteristics related to accountability in state TCS programs that can fund K-12 educational expenses. This report examines (1) key requirements state TCS programs have chosen to establish for SGOs, (2) key requirements for private schools participating in state TCS programs, and (3) how selected states implement TCS programs and assess whether SGOs and participating private schools are following key state requirements. GAO identified key requirements states may choose to establish related to accountability for SGOs and schools based on relevant research and prior work. GAO also reviewed program documents from all 22 TCS programs to identify whether they had these key requirements as of school year 2018-2019 and then verified this information with state program officials. GAO did not conduct an independent review of state laws and regulations. GAO visited Arizona, Florida, and Pennsylvania, which have the largest TCS programs. In each of these states, GAO reviewed program documents and interviewed officials at state agencies and staff at selected SGOs and private schools (selected to provide variation in size and other characteristics). State tax credit scholarship (TCS) programs—programs that offer state tax credits for donations that can fund scholarships for students to attend private elementary and secondary schools—have established various key requirements for the scholarship granting organizations (SGO) that collect donations and distribute awards. For example, all 22 TCS programs in operation as of January 2019 require SGOs to register with or be approved by the state and limit the percentage of donations they can use for non-scholarship expenses. In addition, almost all of these programs—which received over $1.1 billion in donations and awarded approximately 300,000 scholarships in 2017—also require SGOs to undergo annual financial audits or reviews (19 programs). Fewer programs have requirements about SGO fundraising practices (9 programs) or the qualifications of SGO leadership personnel (10 programs), such as restrictions on officials having previous bankruptcies. States also have various key requirements that apply to private schools that enroll students with TCS scholarships. For example, private schools in most of the 22 programs must follow certain academic guidelines related to curriculum content (18 programs) and instructional time (19 programs), and have staff undergo background checks (18 programs). Schools in fewer programs are required to conduct academic testing (11 programs), ensure their teachers have specified qualifications (12 programs), or undergo an annual audit or financial review (4 programs). The three states with the largest TCS programs—Arizona, Florida, and Pennsylvania—implement and oversee their programs in different ways. In all three states, state agencies administer the tax credits while SGOs are generally responsible for managing donations and awarding scholarships; the details of these processes varied based on the requirements of each program. For example, Arizona and Pennsylvania's programs allow donors to recommend that funds go to specific schools, which can affect how SGOs solicit donations and award scholarships. Florida does not permit recommendations. All three states require SGOs to report on operations and undergo annual financial audits or reviews, while the states differ in how participating private schools are overseen. Florida's TCS programs use multiple monitoring methods, while all Arizona programs and one of two Pennsylvania programs generally rely on SGOs to confirm that schools comply with program requirements.

GAO_GAO-20-470

Background Each year more than a dozen federal agencies and state and local jurisdictions were involved in the Fourth of July events on the National Mall. Some were involved in the overall planning, production, and execution of the events as a whole, while others played specific roles in only one event. Figure 1 shows the overall geographic layout of each event that occurred on the National Mall. Overall Event Organization, Security, and Attendee and Participant Health For 2016 through 2019, the National Park Service (NPS) was responsible for the overall organization and execution of Fourth of July events on the National Mall, including the National Independence Day Parade; A Capitol Fourth Concert; Independence Day Fireworks Display; and in 2019, A Salute to America. Successful completion of these events depended on NPS, including United States Park Police (Park Police), coordinating with federal agencies and state and local jurisdictions to ensure that attendees could safely and securely attend each event. In addition, during the 2019 events, because of the addition of the Salute to America event and attendance by the President of the United States, additional federal agencies were involved with the planning, production, and execution of the events. Overall event security for the 2016 though 2019 events on the National Mall was coordinated among several federal agencies and state and local jurisdictions. Specifically, the following organizations provided security personnel and assets for the events overall: Park Police provided overall coordination with federal, state, and local law enforcement agencies and assisted with event security. State and local law enforcement agencies assisted with security, traffic, and crowd control. The District of Columbia Government (DC Government) provided a comprehensive command, control, and coordination system, in conjunction with federal partners, to ensure seamless event activities and the safety and security of all attendees. The DC Government tasked multiple offices in its organization to help with ensuring event security, including the Metropolitan Police Department, which deployed uniformed officers in areas surrounding the National Mall and provided traffic control and road closures. The National Guard deployed hundreds of personnel who provided security, movement of supplies, and crowd management at road intersections and metro stations. The Washington Metropolitan Area Transit Authority provided buses to barricade road closures for 2016 through 2018. The Federal Bureau of Investigation; Bureau of Alcohol, Tobacco, Firearms and Explosives; and Department of Energy deployed specialized law enforcement and security support units during all of the Fourth of July events on the National Mall. Given the large crowds and potential for high temperatures in July in Washington, D.C., it was important that organizers ensured that adequate medical resources were available to attendees and participants for the 2016 through 2019 events. This was accomplished by coordination between the following federal agencies and state and local jurisdictions: The Department of Health and Human Services (HHS) provided medical aid stations for attendees and participants and veterinarian services for NPS working animals at various locations on the National Mall. In 2019, HHS provided additional efforts, including a larger medical aid station at the end of the parade route to assist with heat casualties and a command and control team to coordinate and support HHS personnel on the National Mall. The Federal Emergency Management Agency participated in the public safety planning for the Fourth of July events on the National Mall in 2016 through 2018. Because of increased security levels in 2019, the agency coordinated the support of federal agencies and state and local jurisdictions, and deployed an emergency response team. The DC Government deployed numerous personnel from its offices, including Fire and Emergency Medical Services and the Department of Health to respond to health emergencies at the events. The Smithsonian Institution (SI) and the Federal Protective Service (FPS) assisted by providing their facilities as safe havens for citizens to seek shelter in the event of severe weather or other emergency. Each year, SI staffed its facilities near the National Mall with security protection officers, grounds cleanup crews, and emergency medical technician support as part of its assistance. In addition, FPS personnel staffed federal buildings near the National Mall and operated safe haven locations. National Independence Day Parade For 2016 through 2019, the National Independence Day Parade ran along Constitution Avenue NW from 7th Street NW to 17th Street NW. A private entity produced the parade, and obtained a Public Gathering Permit from NPS. The entity managed the parade, its participants, and associated costs, with funding from nonfederal sponsors. NPS participated in the parade by coordinating with an additional private entity, which fully funded the creation and operation of a parade float for NPS. In addition, several military bands regularly participated in the parade. To ensure security for the parade, the Park Police requested assistance annually from the DC Government, National Guard, and FPS. The DC Government assisted by ensuring roads were closed to vehicle traffic on the parade route, the National Guard assisted by providing personnel and assets for road closure, and FPS provided personnel to ensure parade- route safety. A Capitol Fourth Concert For 2016 through 2019, the Capitol Fourth Concert was broadcast live from the West Lawn of the U.S. Capitol by the Public Broadcasting Service. As we have previously reported, a private entity in the District of Columbia has produced the annual concert for many years. The private entity received federal funding from NPS through a cooperative agreement that provided funding from NPS and the Department of the Army and sponsorships from other private entities. The private entity was responsible for producing the concert, including the selection of musical acts and coordination with DOD for military band attendees. Because of its jurisdiction over the Capitol grounds, the United States Capitol Police (Capitol Police) provided perimeter security and security screening of concert attendees, in coordination with multiple federal agencies and local jurisdictions. In addition, the Architect of the Capitol provided security barriers, fencing, ground protection, turf restoration, trash removal, and setup and teardown of the security elements on the Capitol grounds. Independence Day Fireworks Display For 2016 through 2019, annually, NPS entered into a contract with a private entity that was responsible for producing and executing the fireworks display. For 2016 through 2018, the fireworks were launched from the Reflecting Pool between the Lincoln Memorial and the Washington Monument, with that area being restricted to visitors for safety and security. However, in 2019, the launch site was relocated to the West Potomac Park. The Park Police provided security over the fireworks and coordinated with federal law enforcement agencies, which provided security and conducted a sweep of the fireworks launch area. Many attendees of the fireworks display viewed the show from their personal watercraft on the Potomac River. The United States Coast Guard (Coast Guard) provided security on Potomac River waterways to ensure attendee safety and to establish a secured perimeter for the launch site. Salute to America In 2019, the Salute to America event was held for the first time in front of the Lincoln Memorial. The event included military band performances, a military display, a speech by the President of the United States, military aircraft flyovers, and a fireworks display. The planning of the event began after a meeting at the White House where the Secretaries of the Interior and Defense were tasked with event planning, production, and execution. The Executive Office of the President (EOP) coordinated the content of the event and contracted with a private entity, which was responsible for general event production. NPS and EOP entered into a reimbursable agreement whereby EOP, and the private entity with which it contracted, coordinated and produced the event, paid for with NPS appropriations. The EOP determined the guest list and distributed tickets for the event. According to EOP, it distributed tickets in a manner similar to that for other White House events. The Secretary of the Interior tasked NPS with permitting for the event, coordinating with the United States Secret Service (Secret Service) on security and with the DC Government on movement of DOD assets, relocating the existing contracted fireworks display from the Reflecting Pool to the West Potomac Park and coordinating the acceptance of an additional donated fireworks display. The DC Government had additional responsibilities in 2019 compared to prior years because of the vehicles that the Department of the Army provided for the Salute to America event. For example, DC Government personnel consulted with engineers to verify that affected roads, sewer pipes, and bridges could withstand the weight of bringing in the M2 Bradley Infantry Fighting Vehicles and conducted damage assessments after the event, during which no damage was identified. The DOD Joint Staff received orders from the Secretary of Defense directing United States Northern Command (NORTHCOM) to organize a flyover and provide support to the Salute to America event. NORTHCOM tasked the Coast Guard, Department of the Army, Department of the Navy, United States Marine Corps, and United States Air Force to ensure that various DOD assets were in attendance. The Department of the Army stood up a Joint Operations Center within its Joint Force Headquarters Branch, National Capital Region, to coordinate the various DOD assets involved. Prior to the President’s speech, several military bands performed for the audience in front of the Lincoln Memorial. Displayed on both sides of the performing bands were two M2 Bradley Infantry Fighting Vehicles provided by the Department of the Army. At designated times during the President’s speech, DOD aircraft participated in flyovers, including Air Force B-2 Stealth Bombers, Air Force One, F-22 Raptors, and F- Navy F/A 18 Hornet Blue Angels and F-35 Lightning IIs; Marine Corps MV22 Osprey helicopters and Marine One; Army AH-64 Apache and CH-47 Chinook helicopters; and Coast Guard H-65 Dolphin and H-60 Jayhawk helicopters and HC- 144 Medium Range Surveillance Aircraft. Following the President’s speech and associated flyovers, a fireworks display, donated by two private entities through a donation agreement with NPS, was presented from the Lincoln Memorial. Because the President, Vice President, and other government officials attended the event, the Secret Service had primary responsibility for security of the event and surrounding areas, in coordination with the Park Police. The Secret Service requested the assistance of the Transportation Security Administration, which provided security screening for the event. The Coast Guard provided additional support on the Potomac River during the event, because of the additional firework display, and requested the assistance of the United States Customs and Border Protection, which provided additional waterway security. The Federal Aviation Administration provided an air traffic controller that shut down the airspace around the National Mall and assisted with the Salute to America flyovers. Because of the additional fireworks, the Park Police provided additional security at the storage site of the fireworks and additional road closures. The Park Police coordinated with state and local law enforcement to provide escorts for the M2 Bradley Infantry Fighting Vehicles. Fourth of July Events on the National Mall Costs Estimated at Millions of Dollars Annually According to estimates we obtained, federal agencies and state and local jurisdictions combined spent millions of dollars annually for the Fourth of July events on the National Mall during 2016 through 2019. Not all costs were tracked separately by the organizations for each of the Fourth of July events. Therefore, in order to develop a comprehensive estimate of the costs, we grouped costs into five categories, which include general event costs as well as costs for each of the specific events held on the National Mall. Table 1 summarizes the event costs we obtained, by year and event. In addition to costs that could be directly attributed to Fourth of July events on the National Mall, there were other costs incurred associated with federal personnel and assets that we did not capture as event costs because they would have been incurred regardless of whether the Fourth of July events had occurred. For example, costs such as salaries of federal civilian, military, and law enforcement personnel who worked during the events were not included in cost estimates because those salaried personnel would have been paid even if the Fourth of July events did not occur. General Event Costs We categorized costs attributable to more than one specific event, or to agencies that did not track costs by event, as general event costs. According to documents we reviewed and interviews with agency officials, more than $2 million was spent annually on general event costs. Table 2 contains general event cost by federal agency and state or local jurisdiction, and by year. General event costs consisted primarily of the personnel and supplies costs for HHS medical aid stations, Department of the Interior overtime, holiday pay and supply costs, and costs for DC Government personnel payroll. Specifically, federal and local law enforcement agencies provided security, screening of attendees, traffic control, road blockades, and escorts for participants at all the events. These agencies incurred salaries, overtime, and overtime with differential pay for civilian and law enforcement personnel. Other costs included providing personnel and supplies for fire and emergency medical services, crowd control, information and directions for attendees, cleaning of the grounds, and safe haven areas in case of an emergency. National Independence Day Parade Event Costs According to documents we reviewed and agency officials we interviewed, no federal agency recorded costs specifically attributable to the National Independence Day Parade for 2016 through 2019. A private entity produced the parade and managed its participants and associated costs, which was funded through nonfederal sponsors. The security during the event, provided by the National Guard and FPS, was not included in cost estimates because those salaried personnel would have been paid regardless of the parade. The majority of federal participants in the parade were local ceremonial military personnel, including military bands, marching platoons, color guards, Army Old Guard fife and drum corps, an Army anthem vocalist, and other ceremonial military participants who would have received their salaries and benefits on the Fourth of July even if the parade did not occur. A Capitol Fourth Concert Event Costs According to documents we reviewed and agency officials we interviewed, the concert cost the federal government an estimated $4 million annually from 2016 through 2019. The concert takes place on the grounds of the Capitol and the costs are primarily for the contractor that plans and executes the concert. NPS provided minimal operations support to the entity that produced the concert but was responsible for funding the concert from its annual appropriations and with additional funding that the Department of the Army provides each year. Table 3 contains the concert cost by agency for 2016 through 2019. The Capitol Police is the primary law enforcement agency responsible for security and screening the attendees on the Capitol grounds. The Capitol Police estimated that it incurred several hundred thousand dollars annually in overtime and holiday pay costs that would not have been incurred had the concert not taken place. The Architect of the Capitol incurred other concert costs for its involvement. Additionally, DOD had bus rental costs for movement of ceremonial military personnel in 2017. Other costs not considered directly attributable to the concert included salaries and benefits of federal military participants. The salary costs for these personnel would have been incurred regardless of their participation in the Fourth of July events. Independence Day Fireworks Display Event Costs Independence Day Fireworks Display event costs were estimated from $253,000 to $409,000 annually from 2016 through 2019 (see table 4). Each year, NPS contracted with a private entity, which produced and executed the fireworks display. The cost associated with this contract was the majority of the cost of the event. In addition to the contract costs, other fireworks display event costs included paying overtime for security personnel during the event, conducting security sweeps prior to the event, securing areas for storage of fireworks, closing roads, and performing cleanup after the fireworks. In addition, the Coast Guard had personnel travel costs in 2019. Other event costs not considered directly attributable to the fireworks display were for Coast Guard personnel and boats that patrolled a security perimeter around the event area. The Coast Guard stated that these boats and personnel would have been operating on the Fourth of July regardless of whether the fireworks display event occurred. Salute to America Event Costs The 2019 Salute to America Event cost an estimated $4.3 million, primarily related to the EOP contract with a private entity to plan and execute the event (see table 5). The cost of that contract was approximately $2.45 million and was funded with NPS appropriations through a Memorandum of Agreement with EOP. The movement of DOD ground assets to the Washington, D.C., area was also a cost for the event. Specifically, DOD used a contractor to transport vehicles and other military equipment to the event area at a cost of more than $1.12 million. The Secret Service had significant involvement with events on the National Mall, and specifically with the Salute to America event, because the President, Vice President, and other government officials attended. In order to prepare for and execute security, the Secret Service used numerous special agents from its Washington, D.C., Field Office, and incurred overtime pay and cost for materials. In addition, the airspace in the area was shut down for this event, which included a fireworks display. Various federal agencies incurred overtime costs for storing the donated fireworks and for keeping additional roads closed. While DOD and the Coast Guard provided military flyovers during the Salute to America event, most of the costs associated with the flyovers, such as crew salaries, fuel, and asset depreciation, were not attributable to the event. According to DOD and the Coast Guard, flying hours associated with the event were used to satisfy annual training requirements for their pilots. However, some travel costs were incurred for pilots and crew, which we included in the cost estimates in table 5. Finally, the estimate includes salaries for a small number of DOD civilian personnel who were paid holiday or overtime pay. Fourth of July Events’ Funding Sources, Reimbursements to State and Local Jurisdictions, and Effects on Other Federal Activities We found that the majority of the agencies funded costs of the Fourth of July events with annual appropriations and did not receive any other funding. NPS used amounts from multiple appropriation accounts to pay for costs of the Fourth of July events for 2016 through 2019. For the Salute to America event in 2019, NPS used the Operation of the National Park System, Centennial Challenge, and Federal Lands Recreation Enhancement Act (FLREA) accounts to cover costs. NPS obligated $2.45 million of the FLREA amounts to pay for the private entity with which the EOP contracted to plan and execute the event. NPS also used the Centennial Challenge appropriation account to pay for certain costs attributable to the Salute to America event. NPS used the Operation of the National Park System account to fund the other Fourth of July events during 2016 through 2019. The Department of the Army transferred funds from its annual appropriations for fiscal years 2016 through 2019 to NPS to support the Capitol Fourth and Memorial Day concerts. The Army entered into an agreement with NPS each fiscal year and transferred a lump sum to NPS. NPS allocated the funding for the two concerts each fiscal year. The DC Government received an appropriation each fiscal year from the federal government for emergency planning and security costs in the District of Columbia that remains available until expended. This appropriation is for the costs of providing public safety at events related to the presence of the National Capital in the District of Columbia. According to DC Government officials, DC Government obligated the entire amount appropriated in fiscal year 2019 for the various events in the District of Columbia, including the Fourth of July events on the National Mall. DC Government officials stated that they did not request additional appropriations from Congress because they used funds from other appropriations to cover the cost of events exceeding the fiscal year 2019 appropriation. Park Police reimbursed local law enforcement outside of the District of Columbia for assistance with security, traffic, and crowd control, costs which were estimated from $85,000 to $132,000 annually from 2016 through 2019. These costs are included as regular operations. Finally, according to the officials at agencies we contacted, none of them delayed, deferred, or canceled any programs or activities as a result of resources being used for the Fourth of July events for 2016 through 2019. Agency Comments We provided a draft of this report to the EOP, DOD, Department of the Interior, Department of Homeland Security, Capitol Police, Architect of the Capitol, DC Government, SI, American Red Cross, Department of Energy, HHS, Washington Metropolitan Area Transit Authority, Department of Transportation, and Department of Justice for review and comment. The EOP, DOD, Department of the Interior, DC Government, Washington Metropolitan Area Transit Authority, and Department of Justice provided technical comments, which we incorporated as appropriate. The Department of Homeland Security, Capitol Police, Architect of the Capitol, SI, Department of Energy, HHS, and Department of Transportation informed us that they had no comments on the draft report and the American Red Cross did not provide comments. As agreed with your offices, unless you publically announce the contents of this report earlier, we plan no further distribution until 8 days from the report date. At that time, we will send copies to the Executive Office of the President, the Secretary of the Interior, the Acting Secretary of Homeland Security, the Secretary of Defense, the Secretary of Health and Human Services, and other interested parties. In addition, the report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2989 or kociolekk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology Our objectives were to describe for the Fourth of July events on the National Mall for 2016 through 2019 (1) the total costs that federal agencies and state and local jurisdictions are estimated to have incurred and (2) the appropriations that were used to pay for the estimated federal costs; the extent, if any, to which the federal government has reimbursed costs incurred by state and local jurisdictions; and the extent, if any, to which federal agencies delayed, deferred, or canceled other programs or activities as a result of resources being used for Fourth of July events. To accomplish these objectives, we obtained and reviewed documentation, such as financial data, contracts, and relevant agreements, from federal agencies and state and local jurisdictions that contributed resources to the events. Agencies we contacted were the Executive Office of the President, Department of Defense (DOD), Department of the Interior, Department of Homeland Security, United States Capitol Police, Architect of the Capitol, District of Columbia Government, Smithsonian Institution, American Red Cross, Department of Energy, Department of Health and Human Services, Washington Metropolitan Area Transit Authority, Department of Transportation, and Department of Justice. In addition, we reviewed cost documents and other agency records to gain an understanding of the assets, including financial, physical, and human capital that each agency devoted to the events. In addition, we interviewed officials about estimated costs; any reimbursed costs; and any delayed, deferred, or canceled programs or activities. The scope of our review consisted of estimated costs of the events and associated appropriations incurred by federal agencies and state and local jurisdictions. For the purposes of this engagement, we defined estimated costs as the costs that are directly traceable to the planning, production, and execution of the specific Fourth of July events on the National Mall. For example, we included the transportation costs of moving material, equipment, and supplies to the National Mall for Fourth of July events as well as personnel overtime and holiday pay expenses for federal employees. The costs also included contracts that various federal agencies awarded to private entities that were specifically attributable to the events. We excluded costs that are not directly attributable to the planning, production, and execution of the specific Fourth of July events on the National Mall, such as salary costs for civilian federal employees and military personnel who performed duties during the events that would have been incurred regardless of whether the events took place. Also, we excluded the costs to operate and maintain DOD aircraft that were used in the Salute to America event. According to DOD, the aircraft were existing DOD assets, and the flying hours associated with the event were used by DOD to meet annual pilot training requirements that were required regardless of the events on the Fourth of July. In addition, we excluded the cost associated with private entity parade participation and firework donations. Finally, cost estimates were provided by and attributable to each agency and department, and we did not independently verify the data during this audit. We conducted this performance audit from July 2019 through June 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments Kristen Kociolek, (202) 512-2989 or kociolekk@gao.gov In addition to the contact named above, Jonathan Meyer (Assistant Director), Kevin Scott (Auditor in Charge), and John Ledford made major contributions to this report. Other key contributors include Carl Barden, Anthony Clark, Marcia Carlsen, Elizabeth Erdmann, Pat Frey, Richard Geiger, Jason Kelly, Jason Kirwan, Quang Nguyen and Shahrzad Nikoo.

The Second Continental Congress formally adopted the Declaration of Independence on July 4, 1776. Since that day, Americans have celebrated this holiday through events held in towns and cities across the country. In the nation's capital, Washington, D.C., visitors have celebrated on the National Mall by attending federally sponsored events such as the National Independence Day Parade; A Capitol Fourth Concert; Independence Day Fireworks Display; and in 2019, A Salute to America. GAO was asked to review the impacts and estimated costs associated with the Fourth of July events on the National Mall. Specifically, this report describes the following for the Fourth of July events on the National Mall for 2016 through 2019: (1) the total costs federal agencies and state and local jurisdictions are estimated to have incurred and (2) the appropriations that were used to pay for the estimated federal costs; the extent, if any, to which the federal government reimbursed costs incurred by state and local jurisdictions; and the extent, if any, to which federal agencies delayed, deferred, or canceled other programs or activities as a result of resources being used for Fourth of July events. To perform this work, GAO reviewed documentation and interviewed personnel from federal agencies and state and local jurisdictions about their estimated costs and resources used for the events. From 2016 through 2019, hundreds of personnel from numerous federal agencies, state and local jurisdictions, and private entities planned, produced, and executed events on the National Mall that celebrated Independence Day of the United States. The National Park Service (NPS) was responsible for the overall execution of Fourth of July events on the National Mall. In addition, various federal agencies—including the Department of Homeland Security, United States Capitol Police, United States Coast Guard, and Department of Justice—helped to ensure safety. Beyond the federal effort, the District of Columbia Government (DC Government) and local law enforcement played a role in the overall events. Further, given the crowds and potential for high temperatures in July in Washington, D.C., it was important that organizers—including the Department of Health and Human Services—ensured adequate medical resources were available to attendees and participants. The estimated costs for the events held in 2016, 2017, and 2018 ranged from $6 million to $7 million annually, and included contract costs with private entities tasked with producing and executing the concert and fireworks. They also included the costs for overtime and holiday pay for federal employees working at the events. In 2019, with the addition of the Salute to America event, the Department of Defense (DOD) and Executive Office of the President undertook additional efforts. Estimated costs for the 2019 events on the National Mall increased to more than $13 million. This increase was attributable to the cost for DOD to transport several vehicles to the National Mall, the production and execution of the Salute to America event, and the additional security involved because the President attended the event. In addition, there were costs not directly attributable to the events, including salaries of some federal employees who performed duties during the events, as well as costs for fuel and depreciation on DOD assets. These costs were classified as not directly attributable to the Fourth of July events because they would have been incurred regardless of whether the events occurred. For example, according to DOD, the flight time related to the military flyovers for the Salute to America event were required training hours that pilots must complete annually, and therefore the related expenses, such as pilot salaries and fuel costs, were not included in event cost estimates. Finally, federal agencies and the DC Government primarily used annual federal appropriations to pay for the event costs. The DC Government received an appropriation each year to provide for public safety at certain events within the District of Columbia. According to DC Government officials, DC Government obligated the entire amount appropriated in fiscal year 2019 for the various events in the District of Columbia, including the Fourth of July events on the National Mall. DC Government officials stated that they did not request additional appropriations from Congress because they used funds from other appropriations to cover the cost of events exceeding the fiscal year 2019 appropriation. Agency officials did not identify any federal activities that were delayed, deferred, or canceled because of the resources used for the Fourth of July events on the National Mall in 2016, 2017, 2018, and 2019.

GAO_GAO-20-221

Background On September 6, 2017, the eye of Hurricane Irma traveled about 50 nautical miles to the north of the northern shore of Puerto Rico as a category 5 hurricane. Less than two weeks later, Hurricane Maria made landfall as a category 4 hurricane on the main island of Puerto Rico on the morning of September 20, 2017, with wind speeds up to 155 miles per hour. The center of the hurricane moved through southeastern Puerto Rico to the northwest part of the island, as shown in figure 1 below. In response to the request of the governor of Puerto Rico, the president declared a major disaster the day after each hurricane impacted Puerto Rico. Major disaster declarations can trigger a variety of federal response and recovery programs, including assistance through FEMA’s Public Assistance program. Under the National Response Framework, DHS is the federal department with primary responsibility for coordinating disaster response, and within DHS, FEMA has lead responsibility. FEMA’s Public Assistance Program FEMA’s Public Assistance program provides grant funding to state, territorial, local, and tribal governments, as well as certain types of private nonprofit organizations, to assist them in responding to and recovering from major disasters or emergencies. As shown in figure 2, Public Assistance program funds are categorized broadly as either “emergency work” or “permanent work.” Within those two broad categories are separate sub-categories. In addition to the emergency work and permanent work categories, FEMA’s Public Assistance program includes Category Z, which represents any indirect costs, any direct administrative costs, and any other administrative expense associated with a specific project. Entities Involved in Puerto Rico’s Recovery Given the immense scale and scope of devastation, disaster recovery in Puerto Rico is a complex and dynamic process involving a large number of entities. As shown in figure 3, implementing the Public Assistance program involves recovery partners from the federal government; the Commonwealth of Puerto Rico; and Puerto Rico government agencies, public corporations, municipalities, and eligible nonprofits in Puerto Rico. These recovery partners play a role in implementing the Public Assistance program by developing projects and providing or receiving grants and sub-grants (subawards). FEMA. FEMA administers the Public Assistance program in partnership with Puerto Rico and makes Public Assistance grant funding available to Puerto Rico. Puerto Rico Central Office of Recovery, Reconstruction and Resilience. Puerto Rico was required, as a condition to receiving Public Assistance grant funding, to establish an oversight authority supported by third-party experts and provide centralized oversight over recovery funds. In October 2017, the governor of Puerto Rico established the Central Office of Recovery, Reconstruction, and Resilience (central recovery office) to be the recipient for all Public Assistance funding consistent with the conditions provided in Amendment 5 to the President’s disaster declaration. The central recovery office is a non-federal entity that provides a subaward to an applicant to carry out part of the federal program. As a recipient of federal funds, the central recovery office must oversee subrecipients to ensure that they are aware of and comply with federal regulations. According to central recovery office officials, the office was also established to ensure coordination with FEMA across the numerous partners in recovery. Commonwealth agencies, local entities, and private non-profits. Puerto Rico’s agencies, such as the Department of Housing, and public corporations, such as the Puerto Rico Electric Power Authority, act as subrecipients. Specifically, they work with FEMA and the central recovery office to identify, develop, and implement Public Assistance projects. Local entities, including Puerto Rico’s 78 municipalities and eligible private non-profits that provide critical services, are also subrecipients of FEMA Public Assistance funding. As subrecipients, these entities receive subawards from the central recovery office to carry out work under the Public Assistance program. Alternative Procedures for Public Assistance Funds According to a November 2017 amendment to Puerto Rico’s major disaster declaration, FEMA must obligate all large project funding for Public Assistance permanent work through alternative procedures due to the extraordinary level of infrastructure damage caused by Hurricane Maria, as well as Puerto Rico’s difficult financial position. To develop projects under the Public Assistance program, FEMA and Puerto Rico officials are to collaborate to identify and document the damage caused by a disaster to a particular facility. These officials are to then use the damage description to formulate the scope of work—or activities required to fix the identified damage—as well as the estimated cost of these activities. Under the standard Public Assistance program, FEMA will fund the actual cost of a large project, and will increase or reduce the amount of funding based on the cost of completed eligible work. In contrast, in Puerto Rico, the alternative procedures require that the central recovery office and subrecipients work collaboratively with FEMA to develop a fixed cost estimate. According to FEMA officials, once this fixed cost estimate is agreed to and obligated, subrecipients have flexibility within that fixed cost estimate to rebuild in the manner that they find most appropriate. Subrecipients could do the actual work used to develop the fixed cost estimate, or they could put funds towards another FEMA approved project. Unlike the standard Public Assistance program, the subrecipient is responsible for actual costs that exceed the fixed cost estimate. If actual costs are less than the fixed cost estimate, the subrecipient may use all or part of excess funds for other eligible purposes, such as for additional cost-effective hazard mitigation measures to increase the resiliency of public infrastructure, as detailed in figure 4 below. The Bipartisan Budget Act of 2018 Section 20601 of the Bipartisan Budget Act of 2018 authorized FEMA, when using the alternative procedures, to provide assistance to fund the replacement or restoration of disaster-damaged infrastructure that provides critical services—such as medical and educational facilities—to an industry standard without regard to pre-disaster condition. It also allows for restoration of components not damaged by the disaster when necessary to fully effectuate restoration of the disaster-damaged components to restore the function of the facility or system to industry standards. For example, through the Act, FEMA may fund the restoration of a disaster-damaged school building—which provides a critical service—to accepted industry standards applicable to the construction of education facilities. Therefore, according to FEMA policy, if the school building was not up to industry standards, or in poor condition prior to the 2017 hurricanes, the Act allows FEMA to fund the restoration of this building to a better condition than it was in prior to the storms. Further, the Additional Supplemental Appropriations for Disaster Relief Act of 2019 (Supplemental Relief Act), which was signed into law on June 6, 2019, provides additional direction to FEMA in the implementation of section 20601. Following the Supplemental Relief Act, FEMA issued additional guidance in September 2019 that includes information on eligibility and applicable industry standards. FEMA Obligated Nearly $6 Billion for Public Assistance in Puerto Rico as of September 2019, but FEMA and Puerto Rico Face Significant Challenges in Developing Projects Status of FEMA Public Assistance Funding in Puerto Rico Since the 2017 hurricanes, FEMA has obligated nearly $6 billion in Public Assistance program funding for 1,558 projects across Puerto Rico, according to our analysis of FEMA’s data as of September 30, 2019 (see fig. 5). Specifically, FEMA had obligated approximately $5.1 billion for emergency work projects (categories A and B), $487 million for permanent work projects (categories C through G), and $315 million for management costs (Category Z). Of the nearly $6 billion FEMA has obligated, Puerto Rico has expended approximately $3.9 billion as of September 30, 2019—about 65 percent of total Public Assistance program obligations to Puerto Rico—to reimburse subrecipients for completed work. As shown in table 1, Puerto Rico has expended about $3.7 billion for emergency work projects, $39 million for permanent work projects, and $104 million for management costs. The majority of FEMA’s obligations and the funding Puerto Rico expended as of September 30, 2019, are for emergency work because these projects began soon after the disasters struck and focused on debris removal and providing assistance to address immediate threats to life and property. In contrast, permanent work projects take time to identify, develop, and ultimately complete as they represent the longer- term repair and restoration of public infrastructure, such as a sports center in Caguas, Puerto Rico, as shown in figure 6 below. FEMA and Puerto Rico Face Significant Challenges in Developing Public Assistance Projects FEMA and Puerto Rico officials identified challenges in developing Public Assistance projects in Puerto Rico. Specifically, they cited: (1) delays in establishing a cost estimating guidance for projects in Puerto Rico, (2) the large number of damaged sites that require finalized fixed cost estimates, and (3) challenges with the implementation of the flexibilities authorized by section 20601 of the Bipartisan Budget Act. Delays in establishing cost estimating guidance. Given the importance of reaching mutual agreement on fixed cost estimates for alternative procedures projects, FEMA and Puerto Rico have taken a deliberative approach to establishing the data and procedures that will be used to develop these fixed cost estimates. This includes, among other things, adapting the way FEMA estimates costs to the specific post- disaster economic conditions in the territory, including developing exceptions to FEMA’s cost estimating guidance. According to FEMA, these exceptions were developed to account for risk, including higher anticipated costs due to increased demand for labor, equipment, and materials in Puerto Rico’s post-disaster economy. To develop these exceptions, FEMA and the central recovery office established a Center of Excellence staffed with mutually agreed upon representatives. FEMA used cost estimators from RAND Corporation (RAND) as their chosen representatives, while the central recovery office hired separate contractors as their representatives. According to FEMA officials, the Center of Excellence was established, among other things, to involve Puerto Rico in developing cost estimating guidance and to ensure that the exceptions made to FEMA’s Cost Estimating Format were agreeable to both parties. However, this approach has been beset by delays. For example, it took nearly one year for Puerto Rico to hire its chosen representatives to the Center of Excellence. According to FEMA, the central recovery office did not select members for the Center of Excellence until February 2019, which delayed progress on the development of finalized fixed cost estimates for permanent work. In July 2019, FEMA leadership signed an agreement establishing the exceptions to FEMA’s cost estimating guidance based on an assessment conducted by a panel of FEMA engineers. These exceptions are intended to address certain costs specific to post-disaster conditions in Puerto Rico, for example adjustments to account for increased labor and material costs. Large number of damaged sites requiring a fixed cost estimate. In addition, FEMA and Puerto Rico officials have cited the large number of sites requiring damage assessments, project development, and mutually agreed-upon fixed cost estimates as a challenge. As of September 30, 2019, FEMA identified a total of 9,344 damaged sites in various stages of development. According to FEMA, 6,304 sites (67.5 percent of total sites identified) have completed damage assessments; 3,021 sites (32.3 percent of total sites identified) are pending the completion of damage assessments to begin project development; and 19 projects (0.2 percent of total sites identified) have finalized fixed cost estimates. According to FEMA guidance, October 11, 2019, was the deadline for completing fixed cost estimates for Public Assistance alternative procedures projects. However, on October 8, 2019, officials from the central recovery office requested an extension to the deadline, which FEMA granted. FEMA officials acknowledged that significant work remains on the part of Puerto Rico, subrecipients, and FEMA towards developing fixed cost estimates for all Public Assistance alternative procedures projects in Puerto Rico. According to FEMA officials, as of October 2019, FEMA and Puerto Rico are working together to establish specific time frames for the completion of fixed cost estimates. Implementation challenges with Section 20601 of the Bipartisan Budget Act of 2018. Puerto Rican government and FEMA officials identified challenges with the implementation of the flexibilities authorized by section 20601 of the Bipartisan Budget Act. As previously discussed, this section of the Act allows for the provision of assistance under the Public Assistance alternative procedures to restore disaster-damaged facilities or systems that provide critical services—such as medical and educational facilities to an industry standard without regard to pre-disaster condition. Officials from Puerto Rico’s central government stated that they disagreed with FEMA’s interpretation of the types of damages covered by section 20601 of the Bipartisan Budget Act of 2018. In response, FEMA officials in Puerto Rico stated they held several briefings with Puerto Rico’s central recovery office to explain FEMA’s interpretation of the section, and released new guidance in September of 2019. It is too soon to assess the impact this guidance may have on current and future projects, but we will continue to examine this in future work. We will continue to monitor the status of FEMA’s cost estimating process, the development of the remaining fixed cost estimates for permanent work and the impact of FEMA’s new guidance on the implementation of section 20601 of the Bipartisan Budget Act. FEMA Has Adapted Cost Estimating Guidance to Specific Conditions in Puerto Rico, but Could Take Further Action to Fully Align the Guidance with Best Practices FEMA Has Adapted Its Guidance to Estimate Public Assistance Costs to Address Post-Disaster Conditions in Puerto Rico As Puerto Rico is responsible for any costs that exceed fixed cost estimates for large infrastructure projects under the alternative procedures, FEMA has adapted its guidance for estimating costs to ensure that these estimates accurately reflect the total costs of Public Assistance projects. As previously mentioned, FEMA and Puerto Rico established a Center of Excellence to develop proposed exceptions to adapt FEMA’s Cost Estimating Format—the agency’s standard guidance used for Public Assistance cost estimating nationwide—to more accurately estimate costs in Puerto Rico. After consideration of these proposals, FEMA approved two exceptions: (1) a cost factor to account for local labor, equipment, and material costs in Puerto Rico, and (2) a future price factor and price curve to account for anticipated rises in construction costs over time due to the massive influx of disaster recovery funds, coupled with limited material and labor resources in Puerto Rico. Cost Factor: According to FEMA officials, during the development of a cost factor by the Center of Excellence, FEMA learned that Gordian, a company that provides local cost indices called RSMeans which FEMA uses as part of their standard Cost Estimating Format, was developing four localized cost indices to apply to San Juan, urban areas, rural areas, and remote island (the islands of Vieques and Culebra) areas of Puerto Rico. FEMA officials told us that these cost indices compile location-specific construction costs for each of the four areas. In 2019, a panel of FEMA engineers assessed the methodologies proposed by RAND, the Center of Excellence, and the RSMeans localized indices for Puerto Rico. On July 12, 2019, in agreement with the panel’s assessment, FEMA decided to use RSMeans’s localized cost indices to act as the cost factor for fixed cost estimates in Puerto Rico beginning on September 27, 2019. For fixed cost estimates developed before this date, FEMA used a different cost index that RSMeans had previously developed for San Juan. According to FEMA, cost estimates signed before September 27, 2019 using RSMeans’s San Juan cost index as the cost factor are considered final. Future Price Factor and Curve: According to FEMA officials, FEMA began using a future price factor—an economic model based on expected construction conditions to estimate construction costs across ten years—in July 2019 to estimate costs in Puerto Rico. FEMA is using this future price factor along with the cost factor. FEMA has also asked RAND to develop a future price curve, an analysis that will adjust as time goes on to account for changing economic conditions, to eventually replace the future price factor. FEMA estimates that RAND will take until November 2019 to develop the future price curve, and that the future price factor is being used in the meantime. FEMA officials stated that cost estimates produced using the future price factor are considered final and will not be eligible for revisions in the future once FEMA implements the future price curve. According to FEMA officials, the use of the cost factor combined with the future price factor and curve are intended to adapt FEMA’s cost estimating guidance to the specific post-disaster economic conditions in Puerto Rico. FEMA Cost Estimating Guidance Met Most Cost Estimating Best Practices, but FEMA Could Take Further Action to Fully Align with Best Practices FEMA’s cost estimating guidance for Public Assistance fully or substantially met nine of the 12 steps from GAO’s Cost Estimating and Assessment Guide (GAO Cost Guide). However, the guidance partially met two and minimally met one of the remaining cost estimating steps, as shown in figure 7 below. The GAO Cost Guide outlines best practices for cost estimating and presents 12 steps that, when incorporated into an agency’s cost estimating guidance, should result in reliable and valid cost estimates that management can use to make informed decisions. A reliable cost estimate is critical to the success of any construction program. Such an estimate provides the basis for informed decision making, realistic budget formulation and program resourcing, and accountability for results. For example, FEMA, Puerto Rico and subrecipients rely on cost estimates to help ensure that funding is sufficient for the costs of the Public Assistance projects carried out under the fixed cost estimate. Accurate and reliable cost estimating is especially important in Puerto Rico where all large permanent Public Assistance projects are being developed under the alternative procedures, which require a fixed cost estimate that cannot be revised once the award is made. Given Puerto Rico’s financial situation, accurate cost estimates are necessary so that Puerto Rico has adequate funds to complete Public Assistance projects. For example, on the basis of our analysis, we determined that FEMA’s guidance fully met the step to “define the estimate’s purpose” because it describes the estimate’s purpose, level of detail required, and overall scope. In addition, the guidance provides a time frame for which the estimates must be developed and reach agreement. FEMA’s guidance substantially met another step, “identify the ground rules and assumptions”, because it provides measures to ensure assumptions are not arbitrary, are founded on expert judgments, and are documented. However, we rated this step as substantially met instead of fully met because FEMA’s guidance does not address all of GAO’s best practices for ground rules and assumptions. For example, it does not discuss the risk of an assumption being incorrect and the resultant effect on the cost estimate. Additionally, FEMA guidance substantially met the step to “document the estimate” because it contains, among other things, basic information about the project and the estimate; a description of the scope of work; the basis for the estimate; and supporting backup information. However, we assessed this step as substantially met instead of fully met because FEMA policy does not require documentation to include a discussion of high risk areas. Further, we found that FEMA’s guidance for cost estimating does not fully or substantially meet three steps: (1) conduct a sensitivity analysis; (2) obtain the data; and (3) conduct a risk and uncertainty analysis. Sensitivity analysis (Minimally met): We found that FEMA’s cost estimating guidance only minimally met the best practice regarding sensitivity analysis. A sensitivity analysis addresses some of the uncertainty in a cost estimate by testing assumptions and other factors that could change cost. By examining each assumption or factor independently, while holding all others constant, the cost estimator can evaluate the results to discover which assumptions or factors most influence the estimate. A sensitivity analysis also requires estimating the high and low uncertainty ranges for significant cost driver input factors. According to the GAO Cost Guide, when an agency does not identify the effect of uncertainties associated with different assumptions, this increases the chance that decisions will be made without a clear understanding of these impacts on costs. According to FEMA officials, FEMA’s cost estimating guidance accounts for construction, cost, and market risks over time which allows FEMA to plan and estimate costs for unknown or unforeseen circumstances such as cost escalation or overhead. In addition, FEMA officials stated that their use of RSMeans unit costs, a benchmark industry standard based on ongoing iterative analysis of construction costs nationwide, allows FEMA to account for fluctuations and uncertainties in the market. However, we rated this step as minimally met because FEMA guidance does not indicate that cost estimators are to conduct a sensitivity analysis as part of FEMA’s cost estimating process. Specifically, the guidance does not require that an estimator examine the effect of changing assumptions and the effect these changes could have on a cost estimate. Since the guidance does not direct estimators to conduct a sensitivity analysis, estimators may not fully understand which variable most affects the cost estimate and FEMA risks making decisions without a clear understanding of the impact of costs. Obtaining the data (Partially met): We found that FEMA’s cost estimating guidance only partially met the best practice for obtaining data—assembling information to serve as the foundation of a cost estimate. The quality of the data obtained affects a cost estimate’s overall credibility. Depending on the data quality, an estimate can range from a mere guess to a highly defensive cost position. We found that FEMA did not meet some of the best practices for obtaining data. Specifically, FEMA’s guidance did not outline procedures for making sure data was validated using historical data as a benchmark for reasonableness. In addition, FEMA’s guidance did not stipulate that data be normalized to remove the effects of inflation or analyzed with a scatter plot to determine trends and outliers. As mentioned previously, FEMA used a city cost index based on San Juan as an interim measure to estimate costs throughout Puerto Rico until September, 2019 when FEMA began using additional cost indices to target costs in particular regions of Puerto Rico. Similarly, FEMA has been using a static future price factor as an interim measure until a more dynamic and iterative future price curve is finalized. FEMA does not plan to adjust cost estimates developed using these interim measures. Without adjusting these costs when better data becomes available consistent with the obtaining the data step, FEMA risks creating estimates that may not be based on accurate data. According to FEMA, estimates are developed based on historical costs or nationally available industry standard data. In addition, FEMA officials stated that FEMA does not revisit cost estimates to reflect updated market conditions or newly available cost information because FEMA uses an industry standard cost database that is updated quarterly. FEMA officials stated that the interim measures used to estimate costs are intended to enable work to continue and cost estimates to be developed while the future cost curve is being developed. However, we rated the step relating to obtaining data as partially met because without finalizing the future cost curve, and updating estimates to reflect this information, estimates may not be based on accurate data. Additionally, while the use of industry standard cost estimating resources addresses some best practices for this step such as data normalization and data validation, industry data is only one of many sources referenced in FEMA’s guidance. For other data sources identified, FEMA guidance does not describe a process to analyze the data for cost drivers or to adequately document the data. Risk and uncertainty analysis (Partially met): We found that FEMA’s cost estimating guidance does not include best practices consistent with performing a statistical analysis of risk to determine a range of possible costs and the level of confidence in achieving the estimate. By conducting a risk and uncertainty analysis, a cost estimator can model the effect of schedules slipping and missions changing, allowing for a known range of potential costs. Having a range of costs around a point estimate is useful to decision makers because it conveys the level of confidence in achieving the most likely cost and informs estimators about potential risks. We found that FEMA’s cost estimating guidance does not require a statistical analysis of risks to be performed to determine a range of possible costs. While contingencies are accounted for within the guidance, they are not derived from a statistical analysis, nor do they reflect a level of confidence in the estimate. According to FEMA, risks associated with changing costs and conditions over the life of a Public Assistance alternative procedures construction project is not a risk that the federal government takes on. Rather, the risk is transferred to the recipient and subrecipients responsible for executing work using Public Assistance alternative procedures funding. In addition, FEMA officials told us that alternative procedures funding is not always used to restore facilities to pre-disaster condition, and therefore may not represent the final cost of work completed. In addition, the procedures are designed to incentivize subrecipients to manage grants and use excess funds for eligible work, as described earlier. However, GAO’s Cost Guide states that point estimates alone are insufficient for good decision- making. For management to make good decisions, the program estimate must reflect the degree of uncertainty, so that a level of confidence can be given about the estimate regardless of the entity holding the risk. In the case of alternative procedures projects in Puerto Rico, where actual costs that exceed the estimate are borne by the recipient or subrecipient, estimates that accurately reflect the degree of uncertainty are important in establishing a level of confidence about the estimate. While FEMA fully or substantially met nine of the 12 steps in the GAO Cost Guide, FEMA could improve its cost estimating guidance to ensure that all best practices in the 12 steps in the GAO Cost Guide are fully met. In doing so, FEMA could further enhance the reliability of its cost estimating guidance. FEMA Has Developed Public Assistance Program Policies and Guidance over Time for Puerto Rico, but Recovery Partners Reported Challenges FEMA Public Assistance Program Policies and Guidance for Puerto Rico In response to the complexity of the recovery, as well as the nature of change in a recovery environment, FEMA has developed and issued guidance that is specific to the implementation of the Public Assistance program in Puerto Rico. As previously discussed, disaster recovery in Puerto Rico is a complex and dynamic process that requires the coordination of many entities, including FEMA, the government of Puerto Rico, and numerous subrecipients. Recovery in Puerto Rico also involves the use of Public Assistance structures including alternative procedures and new flexibilities afforded to FEMA under the Bipartisan Budget Act of 2018. FEMA officials told us that many elements of the Public Assistance process in Puerto Rico are the same as in other declared disasters across the United States. Therefore, according to FEMA officials, the standard guidance for the Public Assistance program, Public Assistance Policy and Procedures Guide (Policies and Procedures Guide), generally applies in Puerto Rico. FEMA has also developed policies and guidance to address the specific recovery circumstances in Puerto Rico. For example, in April of 2018 and September of 2019, FEMA published the Public Assistance Alternative Procedures Guide for Permanent Work to clarify how FEMA would implement the program in Puerto Rico. This guidance describes the scope and limitations of the alternative procedures; highlights changes to aspects of the Public Assistance program to which these procedures apply; identifies responsibilities for certain activities; and documents timelines for key actions and decisions. FEMA also issued a policy on the agency’s implementation of section 20601 of the Bipartisan Budget Act as it applies in Puerto Rico in September of 2018, detailing the applicability of the section to specific critical services and outlining eligible industry standards for purposes of authorized projects, among other things. Following the Supplemental Relief Act, FEMA issued guidance in September 2019 that includes additional information on eligibility and applicable industry standards. According to FEMA officials, FEMA has also developed and implemented training specific to recovery in Puerto Rico. This training has included presentations to the central recovery office and subrecipients on the flexibilities of the Bipartisan Budget Act and alternative procedures, among other things. Recovery Partners in Puerto Rico Identified Challenges with the Accessibility of FEMA Public Assistance Policies and Guidance FEMA has iteratively developed, refined, and clarified Public Assistance guidance in Puerto Rico to respond and adapt to changing recovery conditions since the 2017 hurricanes. While iterative and responsive guidance is necessary in a complex and changing recovery, the pace of change necessitates that all involved recovery entities have real-time accessibility to current applicable FEMA guidance. Officials from the central recovery office and four Puerto Rico government agencies we spoke with stated that they did not consistently have the guidance they needed to implement the Public Assistance program. For example, an official from one Puerto Rico agency said that they delayed starting on any large Public Assistance projects through alternative procedures because they were waiting for FEMA to issue additional guidance. Similarly, we reported in March 2019 that four municipal officials stated that they were waiting on additional instruction from FEMA to establish more clear and consistent guidance to begin projects in Puerto Rico. According to FEMA officials, the agency works with Puerto Rico government officials and subrecipients to provide relevant guidance and technical assistance throughout the Public Assistance project development process. However, we found that pertinent guidance may not be shared with key recovery partners. For example, FEMA officials told us that the Standard Operating Procedure for Alternative Procedures (SOP) was available as of March 2019, but remains in draft form as of October 2019, pending finalized information about cost estimating procedures. This SOP provides instruction on specific procedures to implement the Public Assistance alternative procedures guide. In April 2019, FEMA officials described the SOP as a “living document”; they also stated that the draft SOP is in effect and has been sent to the central recovery office for further dissemination to subrecipients. While the SOP document is still in draft, according to FEMA officials, it is operative guidance that FEMA expects the central recovery office to disseminate to subrecipients. However, in June 2019, central recovery office personnel told us they did not view the SOP as being in effect as it was still in draft form. As such, central recovery office officials stated they had not distributed the SOP to subrecipients. FEMA officials stated that they rely on the central recovery office to disseminate at least some FEMA guidance and policy to subrecipients in Puerto Rico, including municipalities and government agencies. As the recipient for all Public Assistance funding in Puerto Rico, the central recovery office is responsible for monitoring and providing technical assistance to subrecipients to ensure that federal funding is used in accordance with federal statutes, regulations, and the requirements of the grant. FEMA officials also stated that subrecipients have an assigned FEMA point of contact to assist them through the project development process, including communicating policy information and updates. However, municipal and Puerto Rico agency officials we spoke to said that confusion persisted in part due to changing points of contact. FEMA’s reliance on the central recovery office or individual FEMA staff to deliver and distribute FEMA guidance poses a risk that the guidance is not made accessible to all partners involved in recovery, including subrecipients. While FEMA officials told us that FEMA assigns a point of contact to subrecipients to provide guidance and other necessary information throughout the project development process, Puerto Rico officials described a significant amount of “back and forth” with FEMA regarding requests for clarification, guidance, or instruction. FEMA officials acknowledge that FEMA has faced difficulties in disseminating information in Puerto Rico. According to FEMA officials, FEMA does not maintain a repository of Public Assistance policies and guidance available to all relevant recovery partners. The accessibility of FEMA guidance is especially important because FEMA releases iterative guidance to respond and adapt to changing recovery circumstances, such as updated legislation, among other things. Misunderstandings across recovery partners about guidance applicability raise concerns that subrecipients do not understand which guidance is currently in effect or how they should proceed in accordance with FEMA policy. Without real-time access to the totality of FEMA’s current applicable guidance, recovery partners risk using guidance that has been revised or replaced. According to FEMA’s National Disaster Recovery Framework, the federal government has the role of ensuring that information is distributed in an accessible manner such that all partners are informed of and aware of the recovery process. Developing a repository of current applicable policy and guidance and making it available to all relevant recovery partners in Puerto Rico, including subrecipients, would improve the accessibility of the information and provide greater assurance that recovery partners are aware of current applicable guidance. Puerto Rico and FEMA Have Structures in Place to Manage and Oversee Public Assistance Funding and FEMA Has Instituted Additional Controls to Mitigate Risk Puerto Rico Established an Office to Manage and Oversee Public Assistance Funding and Help Ensure Compliance with FEMA Policy Following the 2017 hurricanes, Puerto Rico took several steps to provide management and oversight of the Public Assistance program to ensure the program is implemented in compliance with applicable laws and regulations, as well as FEMA policies and guidance. Specifically, Puerto Rico (1) established a central recovery office to provide management and oversight of recovery funds; (2) developed an administrative plan, as required by FEMA policy; (3) developed an internal controls and recovery management plan; and (4) created a system to oversee and assess subrecipient risk. First, in accordance with Amendment 5 to the President’s disaster declaration, the central recovery office has been supported by third-party experts to help it establish its structure and carry out its management and oversight mission. Specifically, the central recovery office has hired contractors to help perform the following functions: Design a management guide and assess subrecipient risk. According to central recovery office officials, the office hired contractors to develop management protocols and guidance to ensure compliance with federal and state law, regulation, and guidance. The office also tasked these contractors with developing a system to oversee subrecipients using risk-based oversight. Provide technical assistance. Central recovery office officials also hired contractors to provide technical assistance and advise Puerto Rico’s government agencies and municipalities regarding recovery processes. This includes helping subrecipients define the scope of damages, and providing technical assistance to develop Public Assistance projects, among other things. The recovery office also tasked these contractors with overseeing grant accounting and reviewing reimbursement requests from subrecipients for eligible Public Assistance work performed. Develop data systems to track the central recovery office’s work. The central recovery office launched an online transparency portal, with the assistance of contractors, that is intended to provide a breakdown of FEMA Public Assistance and other federal funding made available for disaster recovery in Puerto Rico. According to central recovery office officials, in addition to the development of the online transparency portal, contractor personnel also developed systems to track internal recovery data. Second, to meet FEMA reporting requirements, the central recovery office developed an administrative plan—or FEMA State Agreement—in 2019 for the Public Assistance program following the 2017 hurricanes. This plan outlines the central recovery office’s management and oversight activities as well as the procedures that Puerto Rico must follow in implementing the programs. Puerto Rico is responsible, as required in the FEMA State Agreement, to ensure that subrecipients are in compliance with the conditions of the disaster grant award. For example, the plan emphasizes FEMA’s requirement that Puerto Rico submit quarterly progress and financial reports on the status of projects. Further, the plan describes Puerto Rico’s specific roles and responsibilities for managing and overseeing the program. For example, according to the Puerto Rico 2019 Public Assistance Administrative Plan, the central recovery office is responsible for, among other things, processing requests for time extensions to complete projects and conducting quarterly reviews, site inspections, and audits to ensure program compliance. Third, in addition to the administrative plan, in March 2019, the central recovery office released the Disaster Recovery Federal Funds Management Guide (management guide) that includes an internal controls plan and other policies and procedures for managing recovery funds. The management guide’s 14 chapters outline roles, responsibilities, policies and procedures on various recovery functions including procurement, payment and cash management, and subrecipient management and oversight, among other things. FEMA officials told us that they reviewed portions of the management guide, including sections on the central recovery office’s payment and cash management plan and subrecipient oversight. Further, FEMA worked with the central recovery office to make revisions to the plan, which included, adding clarifying information and correcting instances of duplication in the guidance, among other things. In addition, the central recovery office, with the help of contractors, is taking steps to assist subrecipients in meeting compliance requirements and supplementing their management capacity. FEMA and Puerto Rico government agency officials cited varying levels of capacity to manage federal grant funds, including Public Assistance funding. For example, agency officials at one government agency we spoke with stated that they were performing their own federal grants management and had prior experience managing large federal funds. Other Puerto Rico government officials we interviewed reported that central recovery office contractors have helped augment capacity to oversee federal funds. For example, officials from one subrecipient, a Puerto Rico public corporation, said that their agency did not have prior experience managing federal funds on such a large scale. The official told us that in order to bolster the capacity of the agency to oversee these grant funds, central recovery office contractors work closely with the agency to help them manage Public Assistance funding. Similarly, officials at one Puerto Rico government agency stated that the central recovery office offered help on uploading and validating grant data. Fourth, as detailed in its management guide, the central recovery office has also developed criteria to evaluate subrecipients’ risk of noncompliance with federal laws and regulations, as well as FEMA policy. According to the procedures outlined in the central recovery office’s management guide, each subrecipient is to be assessed annually to determine whether they are at a low, moderate, or high risk for noncompliance. The central recovery office is to place additional award conditions on subrecipients with risk factors identified through the risk assessment process. These may include additional oversight and more frequent on-site visits from the central recovery office. Additionally, central recovery office guidance states that corrective actions are to be taken in cases when deficiencies are found during audits. FEMA Has Instituted Additional Controls to Protect the Federal Investment in Puerto Rico’s Recovery In March 2019, we reported that FEMA instituted a manual reimbursement process in November 2017 for subrecipients in Puerto Rico for federal funds, including Public Assistance funds, to mitigate fiduciary risk and decrease the risk of misuse of funds. Specifically, FEMA officials stated that they decided to institute this process because the government of Puerto Rico had expended funds prior to submitting complete documentation of work performed. According to FEMA officials, they also decided to institute the manual reimbursement process due to Puerto Rico’s financial situation, weaknesses in internal controls, and the large amount of recovery funds, among other things. The manual reimbursement process required that FEMA review each reimbursement request before providing Public Assistance funds to mitigate risk and help ensure financial accountability. In Puerto Rico, the manual reimbursement process requires that the central recovery office fill out the Office of Management and Budget’s Standard Form 270 and submit supporting documentation to FEMA before obligated funds can be withdrawn by Puerto Rico through the central recovery office and reimbursed to subrecipients. Subsequently, FEMA must review the submitted Standard Form 270 and all project documentation for completeness, compliance, and accuracy before disbursing funds to the recipient. In cases where FEMA requires additional documentation to process a Standard Form 270 request, FEMA will submit requests for information asking the central recovery office to supply the information needed for FEMA to complete the review. On March 25, 2019, FEMA and the government of Puerto Rico, through the central recovery office, signed an agreement allowing the central recovery office to directly access federal grant funds and reimburse subrecipients for Public Assistance work they perform. During FEMA’s review of the central recovery office’s management guide, FEMA asked for revisions to sections, including chapters related to payment and cash management and subrecipient management and monitoring. According to the March 2019 agreement, these policies and procedures were developed in collaboration with FEMA, and comments and concerns provided by FEMA were addressed. FEMA officials also told us that they sampled Public Assistance grant documentation for completeness to ensure that the reimbursement requested was eligible for payment. According to FEMA officials, FEMA communicated minor discrepancies with the central recovery office for resolution, but said that they did not find any significant discrepancies during their completeness review. On April 1, 2019, FEMA removed the manual reimbursement process and began a transition to allow the central recovery office to make direct payments to subrecipients. In July 2019, FEMA announced that it would reinstate the manual reimbursement process due to, “ongoing leadership changes within the Puerto Rican government, combined with continued concern over Puerto Rico’s history of fiscal irregularities and mismanagement.” FEMA said that these additional steps are being taken in order to protect the federal investment in Puerto Rico’s recovery. We previously reported that FEMA and central recovery office officials told us that the manual reimbursement process caused delays in reimbursements, but once FEMA increased the number of personnel devoted to reimbursement reviews, delays decreased. In September 2019, FEMA once again lifted the manual reimbursement process following a meeting between FEMA and Governor Vásquez’s senior leadership. According to FEMA, the agreement to remove the manual reimbursement process is contingent on Puerto Rico’s continued ability to implement the mutually-acceptable internal controls plan. FEMA officials also stated that they are selecting samples from fiscal year 2019 to test Puerto Rico’s internal controls, and plan to move to a quarterly testing routine after testing for fiscal year 2019 is complete. As part of our ongoing review, we will continue to monitor the central recovery office’s management and oversight of Public Assistance funding, as well as of FEMA’s oversight of the federal investment in Puerto Rico’s recovery. Conclusions After the devastation of the catastrophic 2017 hurricane season, FEMA and Puerto Rico face a recovery of enormous scope. Puerto Rico estimates that $132 billion in funding will be needed to repair and reconstruct the infrastructure damaged by the hurricanes through 2028, and FEMA has identified nearly ten thousand damaged sites in need of Public Assistance funding. FEMA has taken steps to adapt its guidance to estimate costs to post-disaster conditions in Puerto Rico, but strengthening its cost estimating guidance could help FEMA provide greater assurance that its cost estimating guidance for Public Assistance projects is reliable. In addition, given the large number of individuals and entities involved in Puerto Rico’s complex recovery, ensuring that all recovery partners have easy access to the most current applicable policy and guidance could help clarify which FEMA guidance and policies are in effect. Recommendations for Executive Action We are making the following two recommendations to FEMA: The FEMA administrator should revise FEMA’s cost-estimating guidance for Public Assistance projects to fully align with all 12 steps in the GAO Cost Estimating and Assessment Guide. (Recommendation 1) The FEMA administrator should develop a repository for all current applicable Public Assistance policies and guidance for Puerto Rico and make it available to all recovery partners, including subrecipients. (Recommendation 2) Agency Comments and Our Evaluation We provided a draft of this product to FEMA, DHS and Puerto Rico’s Central Office of Recovery, Reconstruction, and Resilience (central recovery office) for comment. In its comments, reproduced in appendix III, DHS concurred with our recommendations. FEMA also provided technical comments, which we incorporated as appropriate. DHS concurred with our first recommendation that FEMA revise its cost- estimating guidance for Public Assistance projects to fully align with all 12 steps in the GAO Cost Estimating and Assessment Guide. DHS stated that FEMA will create a quality assurance checklist as an addendum to FEMA’s Cost Estimating Format (CEF) to ensure that cost estimates reflect best practices from the GAO Cost Estimating and Assessment Guide. This action is a positive step to addressing our recommendation and we will monitor FEMA’s efforts to complete this work. In DHS’s concurrence to our second recommendation that FEMA develop a repository for all current applicable Public Assistance policies and guidance for Puerto Rico to be made available to all recovery partners, DHS requested that GAO consider this recommendation resolved and closed as implemented. DHS stated that FEMA maintains Public Assistance policy and guidance documents, including those specific to Puerto Rico, on the agency’s public web site, which FEMA stated it will continue to update. DHS also stated that FEMA maintains non-publicly available reference documents on the agency’s internal web site through the Grants Manager and Grants Portal systems. As we noted in our report, Puerto Rico’s recovery is a complex and dynamic process that requires the coordination of many recovery partners, including numerous municipalities and commonwealth agencies. For this reason, ensuring that information is distributed in an accessible manner would provide greater assurance that all recovery partners are aware of the most current and applicable Public Assistance policies and guidance. We will monitor FEMA’s public and internal web sites, including policy and guidance updates, to assess whether the actions outlined by FEMA meet the intent of our recommendation. COR3 also provided comments to our draft report, which we reproduced in appendix IV. In its comments, COR3 stated that it works with Public Assistance applicants to, among other things, provide technical assistance and training, and to monitor projects. COR3 also stated that it has established joint efforts with FEMA to improve COR3’s technical assistance, as well as compliance and monitoring efforts. We are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Administrator of FEMA, the Puerto Rico government, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you and your staff have any questions, please contact me at (404) 679- 1875 or curriec@gao.gov. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: The Status of Public Assistance Program Funding in Puerto Rico Since September 2017, the Federal Emergency Management Agency (FEMA) obligated nearly $6 billion in Public Assistance grant funding for 1,558 projects across Puerto Rico as of September 30, 2019. Specifically, FEMA had obligated $5.13 billion for emergency work projects (categories A and B), about $487 million for permanent work projects (categories C through G), and $315 million for management costs, (category Z). As of that date, Puerto Rico expended nearly $3.9 billion—about 65 percent of total Public Assistance obligations to Puerto Rico—to reimburse subrecipients for completed work. Of this, Puerto Rico expended about $3.7 billion (96 percent of all expended funds) for emergency work projects, $38.6 million (1 percent) for permanent work projects, and $104 million (3 percent) for management costs. The majority of FEMA’s obligations and the funding Puerto Rico expended as of September 30, 2019 are for emergency work projects because these projects began soon after hurricanes Irma and Maria struck and focused on debris removal and providing assistance to address immediate threats to life and property. In contrast, permanent work projects take time to identify, develop, and ultimately complete as they represent the longer-term repair and restoration of public infrastructure. While the data in this appendix represent the status of Public Assistance funding as of September, 2019, the amount of grant funding FEMA obligates and Puerto Rico expends will likely increase over time as additional projects are finalized and approved. Emergency Work. As of September 30, 2019, FEMA obligated a total of $5.13 billion for approximately 1,200 emergency work projects across Puerto Rico. These projects focus on debris removal activities and providing assistance to address immediate threats to life and property. Category A: Debris Removal. FEMA obligated $637.0 million and Puerto Rico expended $427.1 million for 331 projects focused on debris removal activities in Puerto Rico under category A. Category B: Emergency Protective Measures. FEMA obligated nearly $4.5 billion for 871 projects under Category B. Of this, Puerto Rico has expended $3.29 billion. For example, FEMA has obligated more than $140 million to the Puerto Rico Aqueducts and Sewer Authority under category B to fund emergency protective measures, including using back-up generators to supply water to the island after Hurricane Maria, among other things. Permanent Work. As of September 30, 2019, FEMA has obligated about $487.3 million for 159 permanent work (Categories C through G) projects in Puerto Rico. These projects focus on the restoration of disaster- damaged infrastructure or systems. Category C: Roads and Bridges. FEMA obligated $140.5 million and Puerto Rico has expended $32.8 million for 20 projects focused on the permanent repair of roads and bridges in Puerto Rico, such as the damage illustrated in figure 8 below. Category D: Water Control Facilities. As of September 30, 2019, FEMA has obligated $435,493 for three projects, of which approximately $150,000 has been expended. This includes work on heavy water control infrastructure, such as berms or levees. Category E: Buildings and Equipment. FEMA obligated $43.5 million and Puerto Rico expended nearly $4 million for 87 projects focused on repairing and rebuilding damaged public buildings and equipment, such as the school shown in figure 9 below. Category F: Utilities. Of the $487 million FEMA obligated for permanent work projects, the largest share, $282 million was obligated for nine projects related to utilities, such as architectural and engineering design services for design work for electricity grid recovery projects. For example, in June 2019, FEMA obligated $111 million for architectural and engineering design services for design work for electricity grid recovery projects. Puerto Rico has expended just over $1 million of the funding obligated for projects related to repairing utilities. Category G: Parks, Recreational and Other Facilities. FEMA obligated approximately $20.9 million and Puerto Rico has expended just over $600,000 across 40 projects focused on repairing parks, playgrounds, and other facilities. Appendix II: Summary of GAO’s Assessment of the Federal Emergency Management Agency’s (FEMA) Cost Estimating Policies and Guidance GAO’s Cost Estimating and Assessment Guide (GAO Cost Guide) outlines best practices pertaining to cost estimating principles, presenting 12 steps to create high-quality estimates. These steps are generally applicable in a variety of circumstances and range from defining the purpose of the estimate to obtaining data to presenting the estimate to management for approval. Application of these principles should result in reliable and valid cost estimates that management can use to make informed decisions. To assess the extent to which FEMA’s cost estimating policy aligns with these best practices, we compared FEMA’s information to the GAO Cost Guide. Specifically, we reviewed FEMA documents containing cost estimating information pertinent to Public Assistance projects including FEMA’s Public Assistance Alternative Procedures Guide for Permanent Work FEMA-4339-DR-PR (Alternative Procedures Guide) and FEMA’s Cost Estimating Format (CEF) for Large Projects Instructional Guide V2.1 (dated September 2009). We compared FEMA’s guidance for developing cost estimates outlined in these documents against the 12 best practices described in the GAO Cost Guide. We assessed the extent to which these documents aligned with the best practices on a five point scale. Fully met. FEMA provided complete evidence that satisfies the elements of the step. Substantially met. FEMA provided evidence that satisfies a large portion of the elements of the step. Partially met. FEMA provided evidence that satisfies about half of the elements of the step. Minimally met. FEMA provided evidence that satisfies a small portion of the elements of the step. Not met. FEMA provided no evidence that satisfies any of the elements of the step. Taken together, FEMA’s documents provided cost estimating information that either substantially or fully meets nine of the 12 cost estimating steps. Furthermore, the information partially met two of the 12 steps, and minimally met one of the 12 steps. Table 1 summarizes GAO’s assessment of the extent to which FEMA’s information aligns with the 12 steps identified in the GAO cost guide. Appendix III: Comments from the Department of Homeland Security Appendix IV: Comments from the Commonwealth of Puerto Rico Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Chris Currie, (404) 679-1875 or curriec@gao.gov. Staff Acknowledgments In addition to the contact named above, Joel Aldape (Assistant Director), Taylor Hadfield (Analyst in Charge), Michelle Bacon, Brian Bothwell, Lorraine Ettaro, Eric Hauswirth, Heidi Nielson, Danielle Pakdaman, Amanda Prichard, Kevin Reeves, and Mary Weiland made key contributions to this report. GAO Related Products U.S. Virgin Islands Recovery: Additional Actions Could Strengthen FEMA’s Key Disaster Recovery Efforts. GAO-20-54. Washington, D.C.: November 19, 2019. Disaster Resilience Framework: Principles for Analyzing Federal Efforts to Facilitate and Promote Resilience to Natural Disasters. GAO-20-100SP. Washington, D.C.: October 23, 2019. Disaster Recovery: Recent Disasters Highlight Progress and Challenges. GAO-20-183T. Washington, D.C.: October 22, 2019. Wildfire Disasters: FEMA Could Take Additional Actions to Address Unique Response and Recovery Challenges. GAO-20-5. Washington, D.C.: October 9, 2019. Puerto Rico Electricity Grid Recovery: Better Information and Enhanced Coordination Is Needed to Address Challenges. GAO-20-141. Washington, D.C.: October 8, 2019. Emergency Management: FEMA’s Disaster Recovery Efforts in Puerto Rico and the U.S. Virgin Islands. GAO-19-662T. Washington, D.C.: July 11, 2019. 2017 Disaster Relief Oversight: Strategy Needed to Ensure Agencies’ Internal Control Plans Provide Sufficient Information. GAO-19-479. Washington, D.C.: June 28, 2019. Emergency Management: FEMA Has Made Progress, but Challenges and Future Risks Highlight Imperative for Further Improvements. GAO-19-617T . Washington, D.C.: June 25, 2019. Emergency Management: FEMA Has Made Progress, but Challenges and Future Risks Highlight the Imperative for Further Improvements. GAO-19-594T. Washington, D.C.: June 12, 2019. Disaster Assistance: FEMA Action Needed to Better Support Individuals Who Are Older or Have Disabilities. GAO-19-318. Washington, D.C.: May 14, 2019. Disaster Contracting: Actions Needed to Improve the Use of Post- Disaster Contracts to Support Response and Recovery, GAO-19-281. Washington, D.C.: April 24, 2019. 2017 Hurricane Season: Federal Support for Electricity Grid Restoration in the U.S. Virgin Islands and Puerto Rico. GAO-19-296. Washington, D.C.: April 18, 2019. FEMA Grants Modernization: Improvements Needed to Strengthen Program Management and Cybersecurity. GAO-19-164. Washington, D.C.: April 9, 2019. Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed. GAO-19-232. Washington, D.C.: March 25, 2019. Puerto Rico Hurricanes: Status of FEMA Funding, Oversight, and Recovery Challenges. GAO-19-256. Washington, D.C.: March 14, 2019. Huracanes de Puerto Rico: Estado de Financiamiento de FEMA, Supervisión y Desafíos de Recuperación. GAO-19-331. Washington, D.C.: March 14, 2019. High-Risk Series: Substantial Efforts Needed to Achieve Greater Progress on High-Risk Areas. GAO-19-157SP. Washington, D.C.: March 6, 2019. U.S. Virgin Islands Recovery: Status of FEMA Public Assistance Funding and Implementation. GAO-19-253. Washington, D.C.: February 25, 2019. 2017 Disaster Contracting: Action Needed to Better Ensure More Effective Use and Management of Advance Contracts. GAO-19-93. Washington, D.C.: December 6, 2018. Continuity of Operations: Actions Needed to Strengthen FEMA’s Oversight and Coordination of Executive Branch Readiness. GAO-19-18SU. Washington, D.C.: November 26, 2018. Homeland Security Grant Program: Additional Actions Could Further Enhance FEMA’s Risk-Based Grant Assessment Model. GAO-18-354. Washington, D.C.: September 6, 2018. 2017 Hurricanes and Wildfires: Initial Observations on the Federal Response and Key Recovery Challenges. GAO-18-472. Washington, D.C.: September 4, 2018. Federal Disaster Assistance: Individual Assistance Requests Often Granted but FEMA Could Better Document Factors Considered. GAO-18-366. Washington, D.C.: May 31, 2018. 2017 Disaster Contracting: Observations on Federal Contracting for Response and Recovery Efforts. GAO-18-335. Washington, D.C.: February 28, 2018. Disaster Recovery: Additional Actions Would Improve Data Quality and Timeliness of FEMA’s Public Assistance Appeals Processing. GAO-18-143. Washington, D.C.: December 15, 2017. Disaster Assistance: Opportunities to Enhance Implementation of the Redesigned Public Assistance Grant Program. GAO-18-30. Washington, D.C.: November 8, 2017. Climate Change: Information on Potential Economic Effects Could Help Guide Federal Efforts to Reduce Fiscal Exposure. GAO-17-720. Washington, D.C.: September 28, 2017. Federal Disaster Assistance: Federal Departments and Agencies Obligated at Least $277.6 Billion during Fiscal Years 2005 through 2014. GAO-16-797. Washington, D.C.: September 22, 2016. Disaster Recovery: FEMA Needs to Assess Its Effectiveness in Implementing the National Disaster Recovery Framework. GAO-16-476. Washington, D.C.: May 26, 2016. Disaster Response: FEMA Has Made Progress Implementing Key Programs, but Opportunities for Improvement Exist. GAO-16-87. Washington, D.C.: February 5, 2016. Hurricane Sandy: An Investment Strategy Could Help the Federal Government Enhance National Resilience for Future Disasters. GAO-15-515. Washington, D.C.: July 30, 2015. Budgeting for Disasters: Approaches to Budgeting for Disasters in Selected States. GAO-15-424. Washington, D.C.: March 26, 2015. High-Risk Series: An Update. GAO-15-290. Washington, D.C.: February 11, 2015. Emergency Preparedness: Opportunities Exist to Strengthen Interagency Assessments and Accountability for Closing Capability Gaps. GAO-15-20. Washington, D.C.: December 4, 2014. Fiscal Exposures: Improving Cost Recognition in the Federal Budget. GAO-14-28. Washington, D.C.: October 29, 2013. Federal Disaster Assistance: Improved Criteria Needed to Assess a Jurisdiction’s Capability to Respond and Recover on Its Own. GAO-12-838. Washington, D.C.: September 12, 2012.

In September 2017, two major hurricanes—Irma and Maria—struck Puerto Rico, destroying roads and buildings among other things. Puerto Rico estimates that $132 billion will be needed to repair and reconstruct infrastructure and services through 2028. FEMA is the lead federal agency responsible for assisting Puerto Rico to recover from these disasters. FEMA administers the Public Assistance program in partnership with Puerto Rico to provide funds to rebuild damaged infrastructure and restore services. GAO was asked to review federal recovery efforts in Puerto Rico. In this report, GAO examines, among other things, (1) the status of FEMA Public Assistance program funding and any challenges in implementing the program, (2) the extent to which Public Assistance cost estimating guidance addresses conditions in Puerto Rico and aligns with best practices, and (3) the extent to which FEMA has developed policies and guidance for the program and any challenges with these policies and guidance. GAO reviewed FEMA's cost estimation guidance as well as documentation and data on the Public Assistance program through September 2019. GAO conducted site visits to Puerto Rico and interviewed FEMA and Puerto Rico government officials regarding the status of recovery efforts. As of September 30, 2019, the Federal Emeregency Management Agency (FEMA) had obligated nearly $6 billion in Public Assistance grants to Puerto Rico for 1,558 projects since the September 2017 hurricanes. Of this $6 billion, $5.1 billion was obligated for emergency work projects such as debris removal and temporary power restoration. However, FEMA and Puerto Rico faced challenges in developing long-term, permanent work projects under the Public Assistance program. The large number of damaged sites and delays in establishing cost estimation guidance specific to Puerto Rico have also presented challenges to developing projects, according to FEMA and Puerto Rico officials. Both parties must agree to fixed cost estimates for these projects before work can begin. FEMA and Puerto Rico had approved fixed cost estimates for 19 projects as of September 2019, out of 9,344 damaged sites in Puerto Rico, such as schools, hospitals, and roads. FEMA and Puerto Rico have recently taken actions, including extending the deadline for fixed cost estimates, to address these challenges. However, it is too soon to assess the impact of these actions. FEMA has adapted its Public Assistance cost estimating guidance to accurately reflect costs in Puerto Rico but could improve the guidance to further enhance its reliability. GAO found that FEMA's guidance substantially or fully met best practices for nine of 12 steps included in the GAO Cost Estimating and Assessment Guide , such as documenting and defining the purpose of the estimate. However, FEMA could improve the guidance in three areas, including analyzing risks and future uncertainties that could affect these estimates. FEMA has developed Public Assistance policies and guidance to respond to complex recovery conditions in Puerto Rico. However, Puerto Rico government officials GAO spoke with stated that they were not always certain about how to proceed in accordance with FEMA policy because they did not consistently understand what guidance was in effect. Further, FEMA does not maintain a repository of Public Assistance guidance available to all recovery partners that includes current applicable guidance. Without real time access to current applicable guidance, recovery partners risk using guidance that has been revised or replaced.

CRS_R46336

Introduction Some observers argue the COVID-19 pandemic could be a world-changing event with potentially profound and long-lasting implications for the international security environment and the U.S. role in the world. Other observers are more skeptical that the COVID-19 pandemic will have such effects. This report provides a brief overview of some potential implications the COVID-19 pandemic might have for the international security environment and the U.S. role in the world, and a bibliography of CRS reports and other writings for further reading. Issues for Congress may include whether and how the COVID-19 pandemic could change the international security environment, whether the Trump Administration's actions for responding to such change are appropriate and sufficient, and what implications such change could have for the role of Congress in setting and overseeing the execution of U.S. foreign and defense policy. Congress's decisions regarding these issues could have significant and even profound implications for U.S. foreign and defense policy, and for the status of Congress as a co-equal branch relative to the executive branch in setting and overseeing the implementation of U.S. foreign and defense policy. Appendix A presents a list of CRS reports that provide more in-depth discussions of issues presented in this report. Appendix B presents a list of additional writings reflecting various perspectives on these issues. A separate CRS report discusses the question of whether the U.S. role in the world is changing as a result of factors other than the C OVID-19 pandemic. Overview of Potential Implications Areas of potential change reflected in writings from observers who view the COVID-19 pandemic as a potentially world-changing event include but are not limited to those discussed below. Although these areas of potential change are presented separately, they overlap in some cases and can interact with one another. World Order, International Institutions, and Global Governance Some observers have focused on the possibility that the COVID-19 pandemic could cause or accelerate a decline or erosion in the U.S.-led liberal international order that has operated since World War II, in the international institutions and norms that contribute to it, and consequently in global governance. A decline or erosion in the U.S.-led liberal order or the international institutions form part of it could set the stage for its replacement by a new or modified world order reflecting changed rules, norms, and practices, or by a more disorderly world. U.S. Global Leadership and Role in the World Some observers have focused on how, in their view, the COVID-19 pandemic is demonstrating that the United States is maintaining or reasserting its role as global leader, while other observers suggest that, in their view, the COVID-19 pandemic is demonstrating that the United States has chosen to withdraw from or is no longer capable of performing that role. The COVID-19 pandemic could influence discussions over the costs and benefits to the United States of acting as a global leader, not only with respect to global health but across a range of issues. Related to this, some observers have focused on how the COVID-19 pandemic may be illustrating the strengths or weaknesses of the Trump Administration's "America First" approach to the U.S. role in the world, or the merits of the U.S. system of government and economic model as potential examples for other countries to emulate. China's Potential Role as a Global Leader Some observers have focused on how the COVID-19 pandemic may be providing insight into whether China desires and is working to become a global leader on par with (or in the place of) the United States, whether China has a capacity for doing so, and how other countries might view China acting in such a role. China's transparency, particularly regarding its actions in the early days of its COVID-19 outbreak in Wuhan, as well as China's so-called donation diplomacy or mask diplomacy—meaning China's actions to send medical supplies and personnel to other countries, and the highlighting of these actions in statements from China's government and state-controlled media—have become new elements of an ongoing discussion regarding China's capacity or suitability for acting as a global leader. This ongoing discussion includes consideration of a range of other issues, including China's actions for implementing its Belt and Road Initiative, China's territorial disputes with other countries, its participation in international organizations, and its technology-development and international lending activities. U.S. Relations and Great Power Competition with China and Russia Some observers have focused on how the COVID-19 pandemic has become a significant element in U.S-China relations, and in U.S. great power competition with China and Russia, which the Trump Administration has placed at the center of its national security construct. For some observers, the COVID-19 pandemic presents an opportunity for U.S.-China cooperation on an important international issue of common interest. For other observers, the COVID-19 pandemic is a major new source of dispute and arena of competition between the two countries, and is causing U.S.-China relations to harden more fully into a Cold War-like adversarial situation. Some observers have focused on how the COVID-19 pandemic provides a prominent new factor in the discussion of whether the United States should decouple its economy from China's and reduce its dependence on China for key materials and products, including hospital supplies and pharmaceuticals. Some observers have focused on whether the U.S. and Chinse responses to the COVID-19 pandemic will affect views around the world regarding the relative merits of the U.S. and Chinese forms of government and economic models as potential examples to emulate. Democracy, Authoritarianism, and Autocracy Related to the point above about forms of government, some observers have focused on how the COVID-19 pandemic appears to be challenging democratic systems in various countries and providing national leaders with an opportunity or rationale for taking actions to seize greater power and move their countries away from democracy and toward authoritarianism or autocracy, or strengthen or consolidate their already-existing authoritarian or autocratic forms of government. As discussed in another CRS report, a key element of the traditional U.S. role in the world since World War II has been to defend and promote freedom, democracy, and human rights as universal values, while criticizing and resisting authoritarian and illiberal forms of government where and when possible. Societal Tension, Reform, and Transformation, and Governmental Stability Beyond the specific point above about potential movement toward greater authoritarianism and autocracy, some observers have focused on the possibility that the COVID-19 pandemic more generally could cause increased social tensions in certain countries, could lead to (or present opportunities for) societal reforms and transformations, and could destabilize and perhaps cause the downfall of governments, akin to the effects of certain past world-changing events, such as World War I. Such changes could alter the political orientations, national strategies, foreign policies, and defense policies of the countries in which they occur, potentially inducing follow-on effects among governments and other global actors that interact with those countries. World Economy, Globalization, and U.S. Trade Policy Some observers have focused on the possibility that the COVID-19 pandemic could lead to significant and potentially long-lasting changes to the world economy that in turn could reshape the international security environment. Among other things, observers have focused on the possibility that the COVID-19 situation could be leading the world economy into a significant recession—an effect that could contribute to the societal tensions mentioned in the previous point. Noting that the COVID-19 pandemic has reduced world trade volumes and disrupted global supply chains, they have focused on the question of whether economic globalization will as a result be slowed, halted, or reversed. Observers are monitoring how such effects could influence or be influenced by U.S. trade policy. Allied Defense Spending and U.S. Alliances The so-called burden-sharing issue—that is, the question of whether U.S. allies are shouldering a sufficient share of the collective allied defense burden—has long been a point of contention between the United States and its allies around the globe, and it has been a matter of particular emphasis for the Trump Administration. Some observers have focused on the possibility that the costs that U.S. allies are incurring to support their economies during stay-at-home/lockdown periods will lead to offsetting reductions in their defense expenditures. Some observers argue that the NATO allies in Europe in particular may experience contractions in their defense budgets for this reason. More generally, some observers argue that if the COVID-19 pandemic causes a global recession, allied defense budgets could be further reduced—a potential impact that could affect not only NATO allies in Europe, but those in Asia as well. European Union Some observers have additionally focused on the question of whether the COVID-19 pandemic is creating tensions among the European Union member states, particularly in connection with actions they are taking to close their national borders, and what impact the COVID-19 pandemic might ultimately have on the cohesion of the European Union. Definition of, and Budgeting for, U.S. National Security Some observers have focused on the question of whether the COVID-19 situation will (or should) lead to a revised definition of U.S. national security, particularly one that is less military-centric and more focused on what are sometimes called human-security-oriented challenges or global issues, such as climate change, that are currently more at the periphery of U.S. national security policy and plans. Such a change in definition could lead to a changed allocation of funding between the Department of Defense (DOD) and other government agencies that perform national-security-related tasks, a realignment of resources within DOD between combat-oriented programs and other programs (such as those related to DOD's mission of providing defense support of civil authorities), and perhaps a changed allocation of funding among the agencies other than DOD that perform national-security-related tasks. U.S. Defense Strategy, Defense Budget, and Military Operations Some observers have focused on the question of whether the large federal expenditures being made in response to the domestic U.S. economic effects of the COVID-19 pandemic, and the impact these expenditures will have on the federal budget deficit and federal debt, could lead to greater constraints in coming years on U.S. defense spending levels. As a follow-on matter, these observers are additionally focusing on the question of whether responding to such increased constraints will (or should) lead to revisions in U.S. defense strategy, changes in U.S. defense programs, and a reduction or termination of certain overseas U.S. military operations. U.S. Foreign Assistance and International Debt Relief Some observers have focused on the question of whether the COVID-19 pandemic is providing a new lens through which to measure the value of U.S. foreign assistance and international debt relief in promoting U.S. interests, particularly in connection with the previously mentioned issue of whether to revise the definition of U.S. national security to make it less military-centric. Non-state Actors Some observers have focused on how non-state actors such as international terrorist and criminal organizations are reacting to the COVID-19 pandemic, and on how much priority should be given to countering such actors in the future, particularly in a context of a changed definition of U.S. national security. U.S. Attention to International Issues Other than COVID-19 Some observers have focused on whether responding to the COVID-19 pandemic is affecting the time and resources that U.S. leaders and agencies can devote to addressing other international issues of concern to the United States that predate but continue to exist in parallel with the COVID-19 pandemic. Administration officials have warned other countries to not take actions during the COVID-19 pandemic to challenge U.S. interests around the world or otherwise test U.S. resolve or responsiveness on the thinking that the COVID-19 pandemic is distracting U.S. officials from other concerns or reducing U.S. capacity for responding to any such challenges. Role of Congress At least one observer has focused on the issue of how the COVID-19 pandemic has affected the ability of Congress to conduct oversight of the Administration's foreign policy actions. Further Reading For further reading on the issues outlined above, see the CRS reports presented in Appendix A and the additional writings presented in Appendix B . Potential Issues for Congress Potential issues for Congress regarding implications of the COVID-19 pandemic for the international security environment and the U.S. role in the world include but are not limited to the following: Will the COVID-19 pandemic change the international security environment, and if so, in what ways? How clearly can potential changes be anticipated? How should the United States respond to potential changes in the international security environment arising from the COVID-19 pandemic and its effects, particularly in light of uncertainty regarding the precise nature and likelihood of these changes? How might U.S. action or inaction influence or accelerate these changes? What actions is the Administration developing to respond to potential changes in the international security environment arising from the COVID-19 pandemic? Does Congress have sufficient visibility into these actions? Are these actions appropriate and sufficient? What metrics should Congress use to assess them? What implications do potential changes in the international security environment arising from the COVID-19 pandemic have for the role of Congress in setting and overseeing the execution of U.S. foreign and defense policy? Is Congress appropriately organized for maintaining Congress as a co-equal branch of government relative to the executive branch in addressing these potential changes? If the COVID-19 pandemic becomes a world-changing event for the international security environment and the U.S. role in the world, what implications, if any, might that have for congressional organization and operations? Appendix A. Related CRS Reports CRS reports that provide more in-depth discussions of specific issues discussed in this report include the following, which are presented in alphabetical order of their titles: CRS In Focus IF11496, COVID-19 and Foreign Assistance: Issues for Congress , by Nick M. Brown, Marian L. Lawson, and Emily M. Morgenstern. CRS Insight IN11288, COVID-19 and the Defense Industrial Base: DOD Response and Legislative Considerations , by Heidi M. Peters. CRS Insight IN11279, COVID-19 and U.S. Iran Policy , by Kenneth Katzman. CRS Legal Sidebar LSB10424, COVID-19: An Overview of Trade-Related Measures to Address Access to Medical Goods , by Nina M. Hart. CRS Report R46304, COVID-19: China Medical Supply Chains and Broader Trade Issues , coordinated by Karen M. Sutter. CRS Insight IN11305, COVID-19: Defense Support of Civil Authorities , by Lawrence Kapp and Alan Ott. CRS In Focus IF11421, COVID-19: Global Implications and Responses , by Sara M. Tharakan et al. CRS Insight IN11280, COVID-19: Industrial Mobilization and Defense Production Act (DPA) Implementation , by Michael H. Cecire and Heidi M. Peters. CRS Legal Sidebar LSB10436, COVID-19: International Trade and Access to Pharmaceutical Products , by Nina M. Hart. CRS In Focus IF11434, COVID-19: U.S.-China Economic Considerations , by Karen M. Sutter and Michael D. Sutherland. CRS Report R46270, Global Economic Effects of COVID-19 , coordinated by James K. Jackson. CRS In Focus IF11480, Overview: The Department of Defense and COVID-19 , coordinated by Kathleen J. McInnis. CRS Insight IN11231, The Defense Production Act (DPA) and COVID-19: Key Authorities and Policy Considerations , by Michael H. Cecire and Heidi M. Peters. CRS Insight IN11337, The Defense Production Act (DPA) and the COVID-19 Pandemic: Recent Developments and Policy Considerations , by Michael H. Cecire and Heidi M. Peters. CRS Insight IN11325, U.S. Travel and Tourism and COVID-19 , by Michaela D. Platzer. Appendix B. Additional Writings In presenting sources of additional reading, this appendix includes some examples of writings reflecting various perspectives on the potential implications of the COVID-19 pandemic on the international security environment and the U.S. role in the world, organized by specific themes or topics. Within each section, the items are presented in chronological order, with the most recent on top. General/Multitopic Edith M. Lederer, "UN Chief Says Pandemic Is Unleashing a 'Tsunami of Hate,'" Associated Press , May 8, 2020. Nikolas K. Gvosdev, "Why the Coronavirus Won't Transform International Affairs Like 9/11 Did," National Interest , May 5, 2020. Deepanshu Mohan, "The Geopolitical Contours of a Post-COVID-19 World," East Asia Forum , May 2, 2020. Andrew Ehrhardt, "Disease and Diplomacy in the 19th Century," War on the Rocks , April 30, 2019. Dmitri K. Simes, "The Perfect Storm," National Interest , April 24, 2020. Fred Kaplan, "What Happens if Oil Doesn't Recover? If Demand Doesn't Pick Up This Summer, We Could See Major Shifts in Global Power," Slate , April 23, 2020. Barry R. Posen, "Do Pandemics Promote Peace? Why Sickness Slows the March to War," Foreign Affairs , April 23, 2020. Joseph Cirincione, "How to Prevent War During the Coronavirus Pandemic, How Will the Coronavirus Threaten Global Peace?" National Interest , April 22, 2020. Frank Hoffman, "An American Perspective on Post-Pandemic Geopolitics," RUSI, April 20, 2020. Gordon Bardos, "Will the Coronavirus Crisis Force America to Look in the Mirror and Reform?" National Interest , April 18, 2020. Nicholas Eberstadt, "The "New Normal": Thoughts about the Shape of Things to Come in the Post-Pandemic World," National Bureau of Asian Research, April 18, 2020. Steve Coll, "Woodrow Wilson's Case of the Flu, and How Pandemics Change History," New Yorker , April 17, 2020. Jackson Diehl, "The Pandemic Is Killing Truth, Too," Washington Post , April 12, 2020. Edith M. Lederer, "UN Chief Warns COVID-19 Threatens Global Peace and Security," Associated Press , April 10, 2020. Stratfor Worldview, "How the Coronavirus Pandemic Is Changing the World—and the Future," National Interest , April 4, 2020. Daniel W. Drezner, "The Most Counterintuitive Prediction about World Politics and the Coronavirus, What If Nothing Changes?" Washington Post , March 30, 2020. Ali Demirdas, "Western Values May Not Survive the Coronavirus. European Unity and American Military Power Just Haven't Held Up," National Interest , March 28, 2020. John Allen et al., "How the World Will Look after the Coronavirus Pandemic," Foreign Policy , March 20, 2020. (Includes short contributions from 12 authors.) Maxine Whittaker, "How Infectious Diseases Have Shaped Our Culture, Habits and Language," The Conversation , July 12, 2017. World Order, International Institutions, and Global Governance Edward Fishman, "The World Order Is Dead. Here's How to Build a New One for a Post-Coronavirus Era," Politic o, May 3, 2020. Rebecca Wolfe and Hilary Matfess Sunday, "COVID and Cooperation: The Latest Canary in the Coal Mine," Lawfare , May 3, 2020. Joshua Keating, "The Decline of the Nation-State, Trump's War with the Governors Hints at a New Political Order," Foreign Policy , April 29, 2020. Yukon Huang and Jeremy Smith, "Pandemic Response Reflects Unlearned Lessons of U.S.-China Trade War," Carnegie Endowment for International Peace, April 27, 2020. Mihir Sharma, "Diplomacy Is Another Victim of the Virus," Bloomberg , April 26, 2020. Brahma Chellaney, "The WHO Has Failed the World in its Pandemic Response," Strategist (Australian Strategic Policy Institute) , April 23, 2020. William C. Danvers, "The World Bank steps up its role in fighting for the future," The Hill , April 22, 2020. Eric A. Posner, "The Limits of the World Health Organization," Lawfare , April 21, 2020. Amitav Acharya, "How Coronavirus May Reshape the World Order," National Interest , April 18, 2020. Joseph S. Nye Jr., "No, the Coronavirus Will Not Change the Global Order," Foreign Policy , April 16, 2020. Karen DeYoung and Liz Sly, "Global Institutions Are Flailing in the Face of the Pandemic," Washington Post , April 15, 2020. Colin H. Kahl and Ariana Berengaut, "Aftershocks: The Coronavirus Pandemic and the New World Disorder," War on the Rocks , April 10, 2020. Lanhee J. Chen, "Lost in Beijing: The Story of the WHO, China Broke the World Health Organization. The U.S. Has to Fix It or Leave and Start Its Own Group," Wall Street Journal , April 8, 2020. Colum Lynch, "Can the United Nations Survive the Coronavirus? In the Absence of U.S. Leadership, the U.N. Is Struggling to Carve Out a Role in the Face of What May Be the Greatest Threat Since Its Founding," Foreign Policy , April 8, 2020. Timofey V. Bordachev, "Visions Of The Post-Coronavirus World: Russian Expert On Europe Bordachev: The Liberal World Order Will Not Survive," MEMRI, April 6, 2020. Matthew Lee and Edith M. Lederer, "Global Diplomacy Under the Gun in The Time of Ccoronavirus," Associated Press , April 4, 2020. Thomas Wright, "Stretching the International Order to Its Breaking Point, The Greatest Error That Geopolitical Analysts Can Make May Be Believing That the Crisis Will Be Over in Three to Four Months," Atlantic , April 4, 2020. Henry A. Kissinger, "The Coronavirus Pandemic Will Forever Alter the World Order," Wall Street Journal , April 3, 2020. Ryan Broderick, "After The Coronavirus Passes, Your World Will Not Go Back To Normal, Before the Pandemic Began, the Systems That Govern Our World Were Brittle. Today, They Are Broken. When We Emerge, the World Will Be Different, and So Will We," Buzzfeed News , April 2, 2020. Rick Gladstone, "U.N. Security Council 'Missing In Action' in Coronavirus Fight," New York Times , April 2, 2020. Ian Goldin and Robert Muggah, "End of International Cooperation? How Coronavirus Has Changed the World Permanently," National Interest , March 31, 2020. U.S. Global Leadership and Role in World Jose W. Fernandez, "In the Coronavirus Era, Trump's 'America First' Means 'Latin America Alone,'" Foreign Policy, May 7, 2020. Drew Hinshaw and Lukas I. Alpert, "U.S. Makes Diplomatic Push for Taiwan to Attend WHO Summit," Wall Street Journal , May 7, 2020. Fred Kaplan, "Trump's Medical Nationalism Will Make It Harder to Defeat COVID-19," Slate , May 7, 2020. William Booth, Carolyn Y. Johnson, and Carol Morello, "The World Came Together for a Virtual Vaccine Summit. The U.S. Was Conspicuously Absent," Washington Post , May 4, 2020. Matthew Petti, "Trump Administration Defends No-Show At Global Coronavirus Conference," National Interest , May 4, 2020. Anne Applebaum, "The Rest of the World Is Laughing at Trump, The President Created a Leadership Vacuum. China Intends to Fill It," Atlantic , May 3, 2020. Charlotte Klein, "Trump's 'America First' Mentality May Hamper Global Race For Coronavirus Vaccine," Vanity Fair , May 3, 2020. Nahal Toosi and Natasha Bertrand, "Fears Rise that Trump Will Incite a Global Vaccine Brawl, The President's 'America First' Philosophy Courts Disaster for Entire Regions of the World, Diplomats Warn," Politico , May 3, 2020. Kori Schake, "America's Built-in Protection Against Bad Leadership, For All Its Failures, the U.S. Has Structural Advantages Over Rival Powers—and Will Come Out of the Pandemic Even Stronger," Atlantic , May 1, 2020. Colum Lynch, "WHO Becomes Battleground as Trump Chooses Pandemic Confrontation Over Cooperation," Foreign Policy , April 29, 2020. J. Stephen Morrison and Anna Carroll, "WHO and President Trump on the Ledge," Center for Strategic and International Studies (CSIS), April 28, 2020. Jeffrey Becker, "COVID-19 Offers a Golden Opportunity to Reengage with the Indo-Pacific," Defense One , April 27, 2020. Joseph S. Nye, "How COVID-19 Is Testing American Leadership," East Asia Forum , April 26, 2020. By John Hudson, Josh Dawsey, and Souad Mekhennet, "Trump Expands Battle with WHO Far Beyond Aid Suspension," Washington Post , April 25, 2020. Katrin Bennhold, "'Sadness' and Disbelief From a World Missing American Leadership," New York Times , April 23, 2020. David Brunnstrom and Humeyra Pamuk, "Pompeo Says U.S. May Never Restore WHO Funds after Cutoff over Pandemic," Reuters , April 23, 2020. Julianne Smith and Garima Mohan, "In a Crisis, a Fumbling America Confirms Europe's Worst Fears," War on the Rocks , April 23, 2020. Luke Allen, "Why Trump Defunded the WHO," National Interest , April 20, 2020. Yu-Jie Chen and Jerome A. Cohen, "Trump Is Right That the WHO Has a China Problem. Cutting Funding Isn't the Answer," Diplomat , April 20, 2020. Jeffrey Cimmino, "Trump Should Be Tough On the WHO – And Recommit to Strengthening Global Health Security," National Interest , April 19, 2020. Brett D. Schaefer, "The World Health Organization Messed Up—But Don't Defund Them," National Interest , April 16, 2020. Salvatore Babones, "Donald Trump Is Right To Dump the WHO," National Interest , April 15, 2020. Kevin Baron, "Don't Be Fooled. Trump's Cuts to WHO Aren't About the Coronavirus," Defense One , April 15, 2020. Bonnie Kristian, "The Coronavirus Shows How US 'Diplomacy' Is Anything But, Absolutist, America-First Approaches Isolate Us and Make Us Less Safe," Defense One , April 15, 2020. Eli Lake, "Trump Is Punishing the WHO for China's Deceptions," Bloomberg , April 15, 2020. Thomas R. Pickering and Atman Trivedi, "America First? The Coronavirus Couldn't Care Less," Foreign Policy , April 15, 2020. Emily Rauhala, "Trump's Critique of WHO May Be a Diversion, But It Resonates Beyond the White House," Washington Post , April 15, 2020. Steve Holland, "Trump to Convene G7 Leaders in Video Call to Discuss Pandemic," Reuters , April 14, 2020. Fred Kaplan, "The End of American Leadership, The Coronavirus Pandemic May Mark the Final Shift of Global Power Away from the United States," Slate , April 13, 2020. Michael Shoebridge, "Why America Will Emerge Stronger From the Coronavirus Crisis," National Interest , April 12, 2020. Bill Ong Hing, "Trump Has Achieved His Goal of Abolishing Asylum, The Pandemic Has Added One More Insurmountable Hurdle for Asylum Seekers," Slate , April 10, 2020. Michèle A. Flournoy and Lisa O. Monaco, "Now's Not the Time for Isolationism, Countries Need to Work Together to Fight Coronavirus, and the U.S. Should Step Up to Lead Those Efforts, Not Back Off From Them," Politico , April 8, 2020. Todd Prince, "Pompeo Touts U.S. Foreign Help Against Pandemic As Trump Threatens WHO Funding," Radio Free Europe/Radio Liberty , April 8, 2020. Joe Buccino, "The US Must Lead the World Out of This, If the Coronavirus Pandemic Only Causes Us to Look Inward, China Wins," Defense One , April 7, 2020. Helle C. Dale, "Even in Pandemic, America Still the Global Leader," Heritage Foundation , April 7, 2020. John Pomfret, "Does the Future Still Belong to the U.S. and China?" Washington Post , April 7, 2020. Robert B. Zoellick, "The World Is Watching How America Handles Coronavirus, The Trump Administration Has Failed to Convey An Impression of Strong International Leadership," Wall Street Journal, April 7, 2020. Ted Anthony, "After Virus, How Will Americans' View of the World Change?" Washington Post , April 6, 2020. William J. Burns, "A Make-or-Break Test for American Diplomacy, The Post-Pandemic World Will Pose a Massive Test for U.S. Statecraft, the Biggest Since the End of the Cold War," Atlantic , April 6, 2020. Victor Davis Hanson, "Don't Be Fooled: Trump Is Leading the World Against Coronavirus," National Interest , April 5, 2020. Lara Jakes, "When the Face of America Falls Ill: A Virus's Toll on Diplomats," New York Times , April 4, 2020. Nahal Toosi, "'Lord of the Flies: PPE Edition': U.S. Cast As Culprit in Global Scrum Over Coronavirus Supplies," Politico , April 3, 2020. Stephen M. Walt, "The United States Can Still Win the Coronavirus Pandemic," Foreign Policy , April 3, 2020. Susan B. Glasser, "The Coronavirus Is the World's Only Superpower, Trump's America? Not so Much," New Yorker , April 2, 2020. Robbie Gramer and Colum Lynch, "In Global Leadership Void on Pandemic, Critics Ask: Where's Pompeo?" Foreign Policy , April 2, 2020. Ash Jain, "Trump Just Missed a Perfect Opportunity to Reassert American Leadership, The G-20 helped beat Ebola. Why can't it do the same for the coronavirus?" Foreign Policy , April 2, 2020. Adam Tooze, "America Is Ailing—and Leading the World, The Coronavirus Pandemic Has Been a Humiliation for the United States—and Confirmation of Its Unmatched International Power," Foreign Policy , April 1, 2020. Robert C. Rubel, "Canary In The Coal Mine: The US Navy's Dilemmas As An Indication Of A Culminating Point In National Grand Strategy," Journal of Political Risk , April 2020. Doug Bandow, "Donald Trump Needs to Focus on Coronavirus (Not Fighting with China and the EU)," National Interest , March 30, 2020. Walter Russell Mead, "U.S. Leadership Will Survive Coronavirus," Wall Street Journal , March 30, 2020. Michael Rubin, " Washington Post's Broadside against Mike Pompeo Is Wildly Unfair," Washington Examiner , March 30, 2020. (Responds to the March 29, 2020, writing below by Jackson Diehl.) Jeff M. Smith, "How America Is Leading the 'Quad Plus' Group of Seven Countries in Fighting the Coronavirus," National Interest , March 30, 2020. Jackson Diehl, "Pompeo's Pandemic Performance Ensures His Place Among the Worst Secretaries of State Ever," Washington Post , March 29, 2020. (For a response, see the March 30, 2020, writing above by Michael Rubin.) Brett McGurk, "America Should Build an International Coalition Now; The United States Has an Urgent Interest in Filling the Global Leadership Void During This Stateless Scourge," Atlantic , March 29, 2020. Ted Galen Carpenter, "Donald Trump Offered to Help North Korea on Coronavirus. Why Not Iran?" National Interest , March 27, 2020. Paul R. Pillar, "Donald Trump's Nationalist Response to the Coronavirus," National Interest , March 26, 2020. Kevin Baron, "Trump Could Have Led the World Against the Coronavirus," Defense One , March 25, 2020. Editorial Board, "The Coronavirus Pandemic May Mark a Decline in U.S. Leadership," Washington Post , March 23, 2020. Stephen M. Walt, "The Death of American Competence, Washington's Reputation for Expertise Has Been One of the Greatest Sources of Its Power. The Coronavirus Pandemic May End It for Good," Foreign Policy , March 23, 2020. Ronald E. Neumann and Marc Grossman, "More US Diplomats Need to Be Overseas to Best Serve America," The Hill , March 22, 2020. Steven Erlanger, "Another Virus Victim: The U.S. as a Global Leader in a Time of Crisis," New York Times , March 20 (updated March 22), 2020. Kori Schake, "The Damage That 'America First' Has Done," Atlantic , March 20, 2020. Daniel B. Baer, "The Virus Has Exposed the Recklessness of Trump's 'America First,'" Foreign Policy , March 18, 2020. China's Potential Role as a Global Leader David M. Weinberg, "Know Comment: Hold China culpable for COVID-19, Don't Let Beijing Exploit the Coronavirus Chaos to Position Itself at the Center of a New Global Order," Jerusalem Post , May 8, 2020. Andreas Kluth, "How China Is Losing Europe," Bloomberg , May 7, 2020. Josh Rogin, "The Pandemic Shows Why Taiwan Is a Far Better Partner than the People's Republic," Washington Post , May 7, 2020. Eva Dou, "Fearing Political Dangers, China Spent Years Preparing for This Economic Crash," Washington Post , May 5, 2020. Diana Fu, "China Has a Playbook for Managing Coronavirus Chaos," Foreign Policy , May 5, 2020. William A. Stanton, "Wuhan Virus Finally Alters Global Perceptions of the PRC: William Stanton," Taiwan News , May 5, 2020. Shashank Bengali and Alice Su, "'Put On a Mask and Shut Up': China's New 'Wolf Warriors' Spread Hoaxes and Attack a World of Critics," Los Angeles Times , May 4, 2020. "Exclusive: Internal Chinese Report Warns Beijing Faces Tiananmen-like Global Backlash Over Virus," Reuters , May 4, 2020. (This article does not list an author.) Steven Erlanger, "Global Backlash Builds Against China Over Coronavirus," New York Times , May 3, 2020. Lara Marlowe, "Europe's Relationship with China Is Now One of Mistrust and Hostility," Irish Times , May 2, 2020. Joel Gehrke, "US Allies Move Toward Trump, Demanding Coronavirus Investigation Despite Chinese Threats," Washington Examiner , May 1, 2020. Stuart Lau, "Coronavirus: European Union Ratchets Up Pressure on China with Call to Cooperate with inquiry," South China Morning Post , May 1 (updated May 2), 2020. Minxin Pei, "China's Expensive Bet on Africa Has Failed, Coronavirus Crash in Commodity Prices Has Wasted $200 Billion in Investment and Loans," Nikkei Asian Review , May 1, 2020. Matt Apuzzo, "Top E.U. Diplomat Says Disinformation Report Was Not Watered Down for China," New York Times , April 30, 2020. Niall Gray, "COVID-19: A 'Reckoning' for UK-China Relations?" Diplomat , April 29, 2020 James Griffiths, "China's Model of Control Has Been Blamed for the Coronavirus Crisis, But for Some It's Looking Increasingly Attractive," CNN , April 29, 2020. Tanvi Madan et al., "China's Neighbors Face a Belligerent Post-Pandemic Beijing, Experts Discuss the Regional Fallout of the Coronavirus Crisis," Foreign Policy , April 29, 2020. William Brent, "Generosity Is an Easy Win for China After the Coronavirus Pandemic," Foreign Policy , April 28, 2020. Damien Cave and Amy Qin, "China Mounts Aggressive Defense to Calls for Coronavirus Compensation," New York Times , April 28, 2020. Mark Magnier, "China Is Overreaching in Bid for Greater Global Influence Amid Coronavirus Pandemic, US Advisers Say," South China Morning Post , April 28, 2020. Eleanor Albert, "African Countries Respond to Guangzhou's 'Anti-Epidemic Measures,' Widespread Reports of Racism Against Africans Put China into Damage Control Mode," Diplomat , April 27, 2020 Shi Jiangtao, "Coronavirus: They're Only Answering Xi Jinping's Call but Are China's 'Wolf Warrior' Diplomats Doing More Harm than Good?" South China Morning Post , April 27, 2020. Richard Javad Heydarian, "The Coming China Backlash, There Is a Pent-up Volcano of Rage Against the Chinese Regime for Its Reckless Coverup of a Devouring Pandemic," National Interest , April 25, 2020. Keith B. Richburg, "After Coronavirus, China's Relations With the World Will Never Be the Same," National Interest , April 25, 2020. Jerry Dunleavy, "'Xi Jinping's Chernobyl': Experts Say Chinese Disinformation Aims to Distract World from Coronavirus Failures," Washington Examiner , April 23, 2020. David Ignatius, "The World Will Demand Answers on COVID-19 Until China Explains What Happened," Washington Post , April 23, 2020. Veerle Nouwens, "China and the Coronavirus Pandemic: Internal Doubts, External Mistakes," RUSI, April 23, 2020. Austin Bay, "On Point: The COVID-19 Debacle Previews the Chinese Communist Party's Imperial World Order," Strategy Page , April 22, 2020. 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But He Seems on the Sidelines Amid Coronavirus Crisis," Washington Post , May 7, 2020. Ann M. Simmons, "In Russia, Putin Wrestles With Economic Impact of Coronavirus," Wall Street Journal , May 6, 2020. Nathan Hodge, "As Coronavirus Hits Record Numbers in Russia, This Is a Dangerous Moment for Putin," CNN , May 4, 2020. Clara Ferreira Marques, "Coronavirus Has Exposed Putin's Brittle Regime," Bloomberg , May 4, 2020. Henry Foy, "Russia: Pandemic Tests Putin's Grip on Power," Financial Times , May 4, 2020. Cary Huang, "Coronavirus: China Faces an Economic Reckoning as Covid-19 Turns World Against Globalisation," South China Morning Post , May 3, 2020. Andrew Higgins, "Putin, Russia's Man of Action, Is Passive, Even Bored, in the Coronavirus Era," New York Times , April 30, 2020. Nael M. Shama, "In Egypt, the Coronavirus Poses a Political Threat," Foreign Policy , April 30, 2020. Don Weinland, "China Slowdown Puts Xi in Political Bind, Coronavirus Threatens Communist Party's Aim of Widespread Prosperity by End of 2020," Financial Times , April 28, 2020. Editorial Board, "Russia's Economic Woes Will Clip Vladimir Putin's Wings, Pandemic Combined with Collapsing Oil Prices Spells Real Hardship," Financial Times , April 27, 2020. Lance Kokonos, "Coronavirus Is Making Russia's Demographic Disaster Even Worse," National Interest , April 25, 2020. Leon Aron, "The Coronavirus Could Imperil Putin's Presidency," Wall Street Journal , April 23, 2020. Holly Ellyatt, "Coronavirus Is a 'Challenge' for Putin and 'Huge Danger' for the World, Kremlin Warns," CNBC , April 22, 2020. Rick Gladstone, "Oil Collapse and Covid-19 Create Toxic Geopolitical Stew," New York Times , April 22, 2020. Sarah Rainsford, "Coronavirus Crisis Tests Putin's Grip on Power in Russia," BBC , April 22, 2020. Armand Gosu, "Russia Needs an OPEC+ 2.0 Accord to Avoid a Crisis," Middle East Institute, April 21, 2020. Patrick Tucker, "Putin Is Projecting Strength In the Face of Coronavirus. But the Image is Cracked," Defense One , April 21, 2020. Brian Whitmore, "The Desanctification of Putin, The Political Costs of COVID-19 Are Beginning to Mount," Center for European Policy Analysis (CEPA), April 21, 2020. Steven Erlanger, "Coronavirus Has Lifted Leaders Everywhere. Don't Expect That to Last," New York Times , April 15, 2020. James Traub, "After the Coronavirus, the Era of Small Government Will Be Over," Foreign Policy , April 15, 2020. Frances Z. Brown and Jarrett Blanc, "Coronavirus in Conflict Zones: A Sobering Landscape," Carnegie Endowment for International Peace, April 14, 2020. (Includes links to 12 additional writings by various authors focusing on situations in specific countries and regions.) Michael Albertus, "The Coronavirus Will Cause New Crises in Latin America," Foreign Policy , April 16, 2020. Samuel Brannen, "Will Covid-19 End the Age of Mass Protests?" Center for Strategic and International Studies (CSIS), April 7, 2020. Kyle Harper, "The Coronavirus Is Accelerating History Past the Breaking Point, Every Era Gets the Infectious Diseases—and the Resulting Political Upheaval—It Has Coming," Foreign Policy , April 6, 2020. Anthony Faiola, Lindzi Wessel, and Shibani Mahtani, "Coronavirus Chills Protests from Chile to Hong Kong to Iraq, Forcing Activists to Innovate," Washington Post , April 4, 2020. James Jay Carafano, "Coronavirus and Regime Change—Will This Plague Topple Nations Great and Small?" Heritage Foundation , April 1, 2020. Nic Cheeseman, "The Coronavirus Could Topple Governments Around the World," Foreign Policy , March 31, 2020. Carolyn Whitzman, "Could Coronavirus Lead To a Fairer World?" National Interest , March 31, 2020. Elizabeth Kolbert, "Pandemics and the Shape of Human History, Outbreaks Have Sparked Riots and Propelled Public-Health Innovations, Prefigured Revolutions and Redrawn Maps," New Yorker , March 20, 2020. Simon Mair, "Why Coronavirus May Change the World (For Better or Worse)," National Interest , March 30, 2020. Nicholas Mulder, "The Coronavirus War Economy Will Change the World," Foreign Policy , March 26, 2020. World Economy, Globalization, and U.S. Trade Policy Ana Quintana, James Roberts, and Anthony Kim, "A U.S.–Mexico-Canada (USMCA) Economic Partnership Recovery Plan," Heritage Foundation, May 7, 2020. Desmond Lachman, "Could Italy Default on Its Debt Due to the Coronavirus?" National Interest , May 7, 2020. Ruchir Sharma, "The Pandemic Isn't Changing Everything, It Is Just Speeding Up Trends That Were Already Underway," New York Times , May 3, 2020. James Crabtree, "The End of Emerging Markets? Economies such as Brazil, Indonesia, India, Russia, and Turkey face a daunting new reality," Foreign Policy , May 3, 2020. Kevin Sieff, "The U.S. Wants Mexico to Keep Its Defense and Health-Care Factories Open. Mexican Workers Are Getting Sick and Dying," Washington Post , May 1, 2020. Ariel E. Levite and Lyu Jinghua, "Travails of an Interconnected World: From Pandemics to the Digital Economy," Lawfare , April 30, 2020. Nathaniel Taplin, "Trump's Trade Deal With China Is Another Coronavirus Victim, The Pandemic Is Exposing the Perils of Agreements Based on Numerical Targets Rather Than Tariff Reductions or Policy Concessions," Wall Street Journal , April 30, 2020. Trevor Jackson, "Terminal Deflation Is Coming, Central Banks' Interventions in the Pandemic Economy Are Unprecedentedly Vast—and Not Nearly Enough," Foreign Policy, April 29, 2020. Greg Ip, "Globalization Is Down but Not Out Yet," Wall Street Journal , April 28, 2020. Zhou Xin, "Coronavirus: How Will China's Role in the Global Economy Change When Faced with Pandemic Backlash?" South China Morning Post , April 28, 2020. Nicholas Mulder and Adam Tooze, "The Coronavirus Oil Shock Is Just Getting Started," Foreign Policy , April 23, 2020. Jack Detsch and Robbie Gramer, "The Coronavirus Could Upend Trump's China Trade Deal," Foreign Policy , April 21, 2020. Richard Fontaine, "Globalization Will Look Very Different After the Coronavirus Pandemic," Foreign Policy , April 17, 2020. Neil Irwin, "It's the End of the World Economy as We Know It, Experts Suggest There Will Be 'A Rethink of How Much Any Country Wants to Be Reliant on Any Other Country,'" New York Times , April 16, 2020. Robert Delaney, "Economic Havoc Wreaked by Coronavirus Has Likely Throttled US-China Trade Deal, Experts Say," South China Morning Post , April 15, 2020. Joseph E. Stiglitz et al., "How the Economy Will Look After the Coronavirus Pandemic, The Pandemic Will Change the Economic and Financial Order Forever. We Asked Nine Leading Global Thinkers for Their Predictions," Foreign Policy , April 15, 2020. Martin Wolf, "The World Economy Is Now Collapsing, A Microbe Has Overthrown Our Arrogance and Sent Global Output into a Tailspin," Financial Times , April 14, 2020. Josh Zumbrun, "Coronavirus-Afflicted Global Economy Is Almost Certainly in Recession," Wall Street Journal , April 14, 2020. By Raphael S. Cohen Sunday, "The Coronavirus Will Not Stop Globalization," Lawfare , April 12, 2020. Dalia Marin, "How COVID-19 Is Transforming Manufacturing," Project Syndicate , April 3, 2020. Daniel J. Ikenson, "The Coronavirus Crisis Is the Worst Time For Trump To Put Up Trade Barriers," National Interest , March 30, 2020. Simon Lester, "The Coronavirus Crisis Is the Right Time For Free Trade," National Interest , March 30, 2020. David Frum, "The Coronavirus Is Demonstrating the Value of Globalization," Atlantic , March 27, 2020. Mie Oba, "Coronavirus and the Future of Globalization," Diplomat , March 18, 2020. Henry Farrell and Abraham Newman, "Will the Coronavirus End Globalization as We Know It?" Foreign Affairs , March 16, 2020. Philippe Legrain Marc, "The Coronavirus Is Killing Globalization as We Know It," Foreign Policy , March 12, 2020. Allied Defense Spending and U.S. Alliances Ben Doherty, "The Indispensable Nation? Covid-19 Tests the US-Australian Alliance," Guardian , May 5, 2020. Wallace C. Gregson, "The Coronavirus Creates New National Security Problems for America," National Defense , May 3, 2020. Marcus Weisgerber, "Global Defense Spending Decline Expected As Nations Deal with Coronavirus," Defense One , April 28, 2020. Tom Kington, "Back Hard-Hit Businesses? Experts Press EU to Instead Boost Defense Spending," Defense News , April 27, 2020. Clementine Starling, "Europe Was Just Getting Better at Moving Militaries," Defense One , April 22, 2020. Brooks Tigner, Brussels, "Covid-19: NATO to Review Military Resilience for Post-pandemic World," Jane' s, April 17, 2020. Richard Fontaine, "We Need an Atlantic Charter for the Post-coronavirus Era," Atlantic , April 16, 2020. Deborah Haynes, "Coronavirus: NATO Chief Denies Alliance Has Responded Too Slowly to Pandemic," Sky News , April 15, 2020. Stéphanie Fillion, "In Canada, Patience Wearing Thin Over Trump's Antics, A Threat to Militarize the Border and Attempts to Hold Up Lifesaving Medical Supplies Have Roiled the Calmest of Countries," Foreign Policy , April 14, 2020. Sebastian Sprenger, "NATO Defense Ministers to Weigh Coronavirus Fallout," Defense News , April 14, 2020. James Jay Carafano, "After Coronavirus—We Still Need Europe and They Need Us. Here's What Has to Happen," Heritage Foundation , April 13, 2020. Derek Chollet, Michał Baranowski, and Steven Keil, "Where is NATO? And Where is Trump? The Virus Is Destroying Economies and Paralyzing Societies in Ways Russian Military Planners Could Only Dream," Defense One , April 13, 2020. Philip H. Gordon and Jeremy Shapiro, "The Atlantic Alliance Had Preexisting Conditions. The Pandemic Will Worsen Them," War on the Rocks , April 13, 2020. Quentin Lopinot, "Europe Is at War with the Coronavirus. Where Does That Leave European Defense?" Center for Strategic and International Studies (CSIS), April 13, 2020. Janusz Bugajski, "Mind the Gap, And Don't Succumb to Transatlantic Fever," Center for European Policy Analysis (CEPA), April 10, 2020. Sophia Becker, Christian Mölling, and Torben Schütz, "The Coronavirus Threatens NATO. Let's Move to Protect the Alliance," Defense News , April 9, 2020. Matthew Karnitschnig and Judith Mischke, "Berlin Lets Mask Slip on Feelings for Trump's America, The Crisis Has Convinced Germans That Trump Puts Other Countries at Risk," Politico , April 6 (updated April 7), 2020. Andy Blatchford, "Trump's Moves to Hold Medical Supplies Tip Trudeau to China," Politico , April 4 (updated April 5), 2020. Dov S. Zakheim, "NATO's Budget Virus: How the Pandemic Could Slash Military Spending," The Hill , March 16, 2020. European Union Michael Birnbaum, "E.U. Defends Handling of China Relations After Beijing Censors Op-ed Written by Bloc's Ambassadors," Washington Post , May 7, 2020. Heather A. Conley, "Covid-19 May Encourage a No-Deal Brexit," Center for Strategic and International Studies (CSIS), May 7, 2020. Lorne Cook and Llazar Semini, "EU Aims to Reassure Balkans with Virus Aid, Economic Support," Associated Press , May 6, 2020. Christopher Caldwell, "Can the European Union Survive a Pandemic? The Coronavirus Crisis Has Turned Its Member Nations Against Each Other," New Republic , May 5, 2020. Rick Noack, "The Coronavirus Has Brought Back Border Barriers in Europe, Dividing Couples, Families and Communities," Washington Post , May 1, 2020. Sinan Ulgen, "The Coronavirus Is Creating a Crisis on Europe's Borders," Foreign Policy , May 1, 2020. Spencer Wong, "Is the Coronavirus Ushering in an Era of Eurosceptic Leaders? The Pandemic Could Very Well Be a Watershed Moment in European Politics," National Interest , April 29, 2020. Elisabeth Braw, "Forget Washington and Beijing. These Days Global Leadership Comes From Berlin," Foreign Policy , April 28, 2020. Rikard Jozwiak, "EU Monitors See Coordinated COVID-19 Disinformation Effort By Iran, Russia, China," Radio Farda , April 23, 2020. Jennifer Rankin, "How Covid-19 Poured Cold Water on Netherlands' EU Romance," Guardian (UK) , April 23, 2020. Peter Rough, "The European Union Needs More National Flexibility," National Review , April 22, 2020. Donatienne Ruy, "Fault Lines and Prospects for European Solidarity," Center for Strategic and Budgetary Assessments (CSIS), April 22, 2020. Bashkim Smakaj, "COVID-19 and the Need for Deep EU Reform," Euractiv , April 22, 2020. HJ Mai, "The Coronavirus Could Tear the EU Apart," Vox , April 21, 2020. Stephania Taladrid, "What the Coronavirus Means for Europe's Future," New Yorker , April 21, 2020. Sam Fleming, "EU Coronavirus Recovery Fund Plans Face Political Bear Traps," Financial Times, April 20, 2020. Andrea Dudik and Flavia Krause-Jackson, "Albania's European Dream Is Just Out of Reach, As the Coronavirus Widens Fractures in the EU, Hopes of a Larger Europe Fade," Bloomberg Business w eek , April 17, 2020. Dalibor Rohac, "Europe Needs an Alexander Hamilton, Not More Budget Hawks," Foreign Policy , April 16, 2020. Simon Clark and Ben Dummett, "Coronavirus Accelerates European Efforts to Block Foreign Takeovers," Wall Street Journal , April 10, 2020. Luke McGee, "The EU Has Bungled Its Response to Coronavirus and It Might Never Fully Recover," CNN , April 10, 2020. by Tom Rogan, "Coronavirus Bailout Lays Bare European Union Nationalist Divisions," Washington Examiner , April 10, 2020. Samuel Volkin, "Covid-19 and a Splintered European Union," Hub (Johns Hopkins University) , April 10, 2020. Oliver Wiseman, "Will We Meet Again? The Covid-19 Crisis Is Testing European Unity to the Breaking Point," City Journal , April 8, 2020. Heather A. Conley, "An Eroding European Union," Center for Strategic and International Studies (CSIS), April 6, 2020. Katya Adler, "Coronavirus Outbreak Eats Into EU Unity," BBC , April 3, 2020. Katharina Konarek, "COVID-19—A Make-It or Break-It Moment for the European Union," The Hill , April 3, 2020. Kevin Allison, "A COVID-19 test for the European Union," Gzero Media , March 31, 2020. Definition of, and Budgeting for, U.S. National Security Joseph Marks, "The Cybersecurity 202: Security Pros Form Alliance to Help Hospitals Facing Hacking Threats During Pandemic," Washington Post , May 4, 2020. Greg Barbaccia, "The Coronavirus Pandemic Will Force a Paradigm Shift in the U.S. Intelligence Community," National Interest , April 23, 2020. Kori Schake, "A New Org Chart Won't Stop the Next Pandemic," Bloomberg , April 22, 2020. Rachel Olney, "How Will the Pandemic Affect National Security Innovation?" War on the Rocks , April 21, 2020. Christopher Woody, "After Coronavirus, the US Needs to Worry about a '7 th domain' of Warfare, Top Navy Commander in Europe Says," Business Insider , April 17, 2020. David E. Sanger, "Analysis: Will Pandemic Make Trump Rethink National Security?" New York Times , April 15, 2020. Benjamin Jensen, "When Systems Fail: What Pandemics and Cyberspace Tell Us About the Future of National Security," War on the Rocks , April 9, 2020. Christopher Preble, "How will COVID-19 Change US National Security Strategy?" Responsible Statecraft , April 8, 2020. Glenn S. Gerstell and Michael Morell, "Four Ways U.S. Intelligence Efforts Should Change in the Wake of the Coronavirus Pandemic," Washington Post , April 7, 2020. Oona A. Hathaway, "After COVID-19, We Need to Redefine 'National Security,' The Post-9/11 Era Is Over," Slate , April 7, 2020. Zachery Tyson Brown, "America's National Security Software Needs an Upgrade, The Outdated U.S. Security Apparatus Was Completely Unprepared for the Coronavirus Pandemic," Foreign Policy , April 6, 2020. Ben Rhodes, "The 9/11 Era Is Over, The Coronavirus Pandemic and a Chapter of History That Should Have Expired Long Ago," Atlantic , April 6, 2020. Gregory D. Koblentz and Michael Hunzeker, "National Security in the Age of Pandemics," Defense One , April 3, 2020. Nahal Toosi, "Coronavirus Rattles America's National Security Priesthood," Politico Pro , March 29, 2020. Joseph S. Nye, Jr., "COVID-19's Painful Lesson about Strategy and Power," War on the Rocks , March 26, 2020. Gary J. Schmitt, "National Security and the Pandemic of 2020," American Interest , March 20, 2020. U.S. Defense Strategy, Defense Budget, and Military Operations Susan Montoya Bryan (Associated Press), "US Must Move Ahead with Work on Nukes, Says Nuclear Security Boss," Defense New s, May 6, 2020. Leo Shane III, "No Extra Money for Defense Amid Coronavirus Crisis, Think Tank Argues," Military Times , May 6, 2020. Hal Brands, "Can a Broke America Fight a Cold War With China? The Coronavirus Has United Americans Against Beijing's Aggressions, But It Will Also Devastate the Pentagon Budget," Bloomberg , May 5, 2020. Rebeccah L. Heinrichs, "Expand Missile Defenses During the Pandemic, Don't Cut Them," Defense News , May 5, 2020. Fred Kaplan, "Now Is the Time to Cut the Defense Budget," Slate , May 5, 2020. Paul McLeary, "Old Weapons Under Fire As COVID Debt Rises," Breaking Defense , May 5, 2020. Aaron Mehta, "Esper: Flat Budget Could Speed Cutting of Legacy Programs," Defense News , May 5, 2020. John M. Donnelly, "US military poised for post-pandemic shift," CQ (Congressional Quarterly) , May 4, 2020. Ben Werner, "SECDEF Esper Preparing For Future Defense Spending Cuts," USNI News , May 4, 2020. Rebecca Kheel, "Defense Budget Brawl Looms After Pandemic," The Hill , May 3, 2020. Anrea Howard, "The Pandemic and America's Response to Future Bioweapons," War on the Rocks , May 1, 2020. Paul McLeary, "Pentagon Wary Of Adversaries Buying Defense Firms Amid Economic Crisis," Breaking Defense , April 30, 2020. Ben Wolfgang, "U.S. Military Ramps Up Counterterrorism Operations in Africa Amid Pandemic," Washington Times , April 29, 2020. David Barno and Nora Bensahel, "Five Ways the U.S. Military Will Change After the Pandemic," War on the Rocks , April 28, 2020. Theresa Hitchens, "DoD Budget Cuts Likely As $4 Trillion Deficit Looms," Breaking Defense , April 27, 2020. Walter Russell Mead, "The Century of Bioweapons," Wall Street Journal , April 27, 2020. Connor O'Brien, "Defense Boosters Fire Warning Shots over Budget Cuts Due to Pandemic," Politico Pro , April 24, 2020. Natasha Bertrand, Daniel Lippman, and Lara Seligman, "Officials Probe the Threat of a Coronavirus Bioweapon," Politico Pro , April 23, 2020. William D. Hartung, "Now Isn't the Time to Push for Nuclear Modernization," Defense News , April 21, 2020. Loren Thompson, "How Coronavirus Could Permanently Transform The U.S. Military," Forbes , April 20, 2020. Todd Harrison, "DoD Must Identify Its 'Crown Jewels' in Preparation for Fiscal Uncertainty," Defense News , April 15, 2020. Michael J. Mazarr, "Toward a New Theory of Power Projection," War on the Rock s, April 15, 2020. Robert Burns, "Military Sees No Quick Exit From 'New World' of Coronavirus," Associated Press , April 14, 2020. Tony Bertuca, "Global Pandemic Threatens to Hobble National Defense Strategy," Inside Defense , April 13, 2020. David Ignatius, "The Coronavirus Is Already Reshaping Defense Strategies," Washington Post , April 9, 2020. Daniel L. Davis, "Coronavirus Means No More Money for Forever Wars," National Interest , April 7, 2020. Harrison Schramm, Kevin A. Chlan, Peter Kouretsos, COVID-19, Analysis and Policy Implications , Center for Strategic and Budgetary Assessments, 2020 (released April 7, 2020), 31 pp. Jason Sherman, "Analyst: Pandemic Will Squeeze Defense Spending As Nation's Focus Shifts to Health Care," Inside Defense , April 6, 2020. Stratfor Worldview, "Will the Coronavirus Ruin Countries' Ability to Wage War?" National Interest , April 5, 2020. James G. Foggo III, "Germs: The Seventh Domain of Warfare," U.S. Naval Institute Proceedings , April 2020. David Barno and Nora Bensahel, "After the Pandemic: America and National Security in a Changed World," War on the Rocks , March 31, 2020. Max Boot, "Covid-19 is Killing Off Our Traditional Notions of National Defense," Washington Post , March 31, 2020. Jim Thomas, "A Blueprint for Rebuilding America's Military After the Coronavirus," National Interest , March 28, 2020. Doug Bandow, "Now's The Time To Become A Truly 'America First' Military, With Coronavirus Killing the Economy, We Can No Longer Afford to Project Power Everywhere," American Conservative , March 26, 2020. Doug Bandow, "How the Coronavirus Shows North Korea Doesn't Matter That Much to America," National Interest , March 25, 2020. Doug Bandow, "Coronavirus Means America Is Really Broke. Trump Should Get the Hell Out of Syria," National Interest , March 22, 2020. U.S. Foreign Assistance and International Debt Relief Michael H. Fuchs, Alexandra Schmitt, and Haneul Lee, "Foreign Aid is Critical to Stopping the Coronavirus," National Interest , May 3, 2020. Daniel F. Runde, Conor M. Savoy, and Shannon McKeown, "Covid-19 Has Consequences for U.S. Foreign Aid and Global Leadership," Center for Strategic and International Studies (CSIS), May 1, 2020. James Kynge and Sun Yu, "China Faces Wave of Calls for Debt Relief on 'Belt and Road' Projects," Financial Times , April 30, 2020. Charles Holmes, Anthony Lake, and Witney Schneidman, "It's Time to Help Africa Fight the Virus, The Continent Is Ripe for a Public Health Disaster, and Western Powers Must Step in to Prevent Another Global Catastrophe," Foreign Policy, April 29, 2020. Matthew Lee, "Virus Pandemic Collides with Trump's Disdain for Foreign Aid," Associated Press , April 17, 2020. Adam Tooze, "A Global Pandemic Bailout Was Coming—Until America Stopped It," Foreign Policy , April 17, 2020. Editorial Board, "Even as Rich Countries Reel, It's Imperative to Help Emerging Markets," Washington Post , April 16, 2020. Dayo Israel, "Unless Canceled, Africa's Debt Burden Will Cause COVID-19 to Kill Millions," Washington Examiner , April 16, 2020. Cara Anna and Aya Batrawy, "Richest Countries Agree to Freeze Poorer Nations' Debt," Associated Press , April 15, 2020. Nahal Toosi, "Trump Hobbles Foreign Aid as Coronavirus Rips Around the World, Confusion at the Top Has Crippled USAID at a Critical Time for the Global Battle Against the Pandemic," Politico , April 15, 2020. Josh Zumbrun, "G-7 Countries Support Debt Relief for Poorest Countries If Joined by Full G-20," Wall Street Journal , April 14, 2020. Robbie Gramer, "Outgoing USAID Chief Says Pandemic Underscores Importance of Foreign Aid," Foreign Policy , April 13, 2020. Josh Rogin, "The Pandemic Means the Trump Administration Must Stop Mistreating USAID," Washington Post , April 9, 2020. Josh Rogin, "America's $2 Trillion Coronavirus Stimulus Package Ignores the Rest of the World," Washington Post , March 26, 2020. Non-state Actors Ryan Browne, "ISIS Seeks to Exploit Pandemic to Mount Resurgence in Iraq and Syria," CNN , May 8, 2020. Robert Muggah, "The Pandemic Has Triggered Dramatic Shifts in the Global Criminal Underworld," Foreign Policy, May 8, 2020. Ashley Jackson, "For the Taliban, the Pandemic Is a Ladder," Foreign Policy , May 6, 2020. Brandon Prins, "Why Coronavirus May Lead to More Piracy," National Interest , May 6, 2020. Lydia Khalil, "COVID-19 and America's Counter-Terrorism Response," War on the Rocks , May 1, 2020. Luke Baker, "Militants, Fringe Groups Exploiting COVID-19, Warns EU Anti-Terrorism Chief," Reuters , April 30, 2020. Joseph Hincks, "With the World Busy Fighting COVID-19, Could ISIS Mount a Resurgence?" Time , April 29, 2020. Luis Fajardo, "Coronavirus: Latin American Crime Gangs Adapt to Pandemic," BBC , April 22, 2020. Raffaello Pantucci, "After the Coronavirus, Terrorism Won't Be the Same," Foreign Policy , April 22, 2020. Valentina Di Donato and Tim Lister, "The Mafia Is Poised to Exploit Coronavirus, and Not Just in Italy," CNN , April 19, 2020. Jim Mustian and Jake Bleiberg, "'Cartels Are Scrambling': Virus Snarls Global Drug Trade," Associated Press , April 19, 2020. Colum Lynch, "How Trump and Putin Weakened U.N. Bid for a Global Cease-Fire, U.S. Officials Worry That Counterterrorism Operations Will Be Constrained," Foreign Policy , April 17, 2020. Seth J. Frantzman, "Iran Regime, ISIS and Other Extremists Exploit Coronavirus to Wreak Havoc," Jerusalem Post , April 16, 2020. Kevin Sieff, Susannah George, and Kareem Fahim, "Now Joining the Fight Against Coronavirus: The World's Armed Rebels, Drug Cartels and Gangs," Washington Post , April 14, 2020. Souad Mekhennet, "Far-Right and Radical Islamist Groups Are Exploiting Coronavirus Turmoil," Washington Post , April 10, 2020. Yonah Jeremy Bob, "Coronavirus Economic Impact Could Block Iran from Funding Terror—INSS," Jerusalem Post , April 7, 2020. Vanda Felbab-Brown, "What Coronavirus Means for Online Fraud, Forced Sex, Drug Smuggling and Wildlife Trafficking," Lawfare , April 3, 2020. Cara Anna, "Extremists See Global Chaos from Virus As An Opportunity," Associated Press , April 2, 2020. Stratfor Worldview, "Coronavirus Could Lead To Lots of This in the Near Future," National Interest , March 22, 2020. (The article discusses potential actions by non-state actors.) U.S. Attention to International Issues Other than COVID-19 Arjun Kapur, "Scotland Launched an Invasion During the Black Death. Does History Tell China to Attack Taiwan?" National Interest , May 2, 2020. Con Coughlin, "China Exploiting the Coronavirus Pandemic to Expand in Asia," Gatestone Institute , April 30, 2020. Corinne Redfern, "The Pandemic's Hidden Human Trafficking Crisis, The Coronavirus Has Created More People Vulnerable to Exploitation by Traffickers—and Revealed the World's Unpreparedness to Protect Them," Foreign Policy , April 30, 2020. Paul Haenle, "Security Concerns in Asia-Pacific Escalate Amid Coronavirus Scramble, While the Trump Administration Is Consumed with the Coronavirus, China and North Korea Are Seizing the Moment for Strategic Advantage," Carnegie Endowment for International Peace, April 29, 2020. Bertil Lintner, "Time May Be Ripe for China to Invade Taiwan, Pandemic Has Left a US Security Vacuum Around the Self-Governing Island China Has Oft-Vowed to 'Reincorporate' with the Mainland," Asia Times , April 28, 2020. Victor Davis Hanson, "Pandemic Only 1 of America's Security Concerns," Daily Signal , April 23, 2020. Gordon Lubold and Dion Nissenbaum, "With Trump Facing Virus Crisis, U.S. Warns Rivals Not to Seek Advantage," Wall Street Journal , April 20, 2020. Ellen Mitchell, "Foreign Powers Test US Defenses Amid Coronavirus Pandemic," The Hill , April 19, 2020. Karen DeYoung, "Foreign Policy Challenges Persist for a Distracted U.S. in the Midst of Pandemic," Washington Post , April 10, 2020. Sylvie Lanteaume (Agence France-Presse), "Hit by Virus, Pentagon Warns Enemies: Don't Test Us," Yahoo News , April 10, 2020. "With the world distracted, China intimidates Taiwan," Economist , April 8, 2020. (This article does not list an author.) Fred Kaplan, "The Coronavirus Hasn't Stopped Trump From Undermining Our National Security," Slat e, March 26, 2020. Role of Congress Robbie Gramer and Jack Detsch, "Pandemic Stymies Congressional Check on Trump's Foreign Policy," Foreign Policy , April 8, 2020.

Some observers argue the COVID-19 pandemic could be a world-changing event with potentially profound and long-lasting implications for the international security environment and the U.S. role in the world. Other observers are more skeptical that the COVID-19 pandemic will have such effects. Observers who argue the COVID-19 pandemic could be world-changing for the international security environment and the U.S. role in the world have focused on several areas of potential change, including the following, which are listed here separately but overlap in some cases and can interact with one another: world order, international institutions, and global governance; U.S. global leadership and the U.S. role in the world; China's potential role as a global leader; U.S. relations and great power competition with China and Russia, including the use of the COVID-19 pandemic as a theme or tool for conducting ideological competition; the relative prevalence of democratic and authoritarian or autocratic forms of government; societal tension, reform, transformation, and governmental stability in various countries; the world economy, globalization, and U.S. trade policy; the characteristics and conduct of conflict; allied defense budgets and U.S. alliances; the cohesion of the European Union; the definition of, and budgeting for, U.S. national security; U.S. defense strategy, defense budgets, and military operations; U.S. foreign assistance programs and international debt relief; activities of non-state actors; the amount of U.S. attention devoted to ongoing international issues other than the COVID-19 pandemic; and the role of Congress in setting and overseeing the execution of U.S. foreign and defense policy. Issues for Congress may include whether and how the COVID-19 pandemic could change the international security environment, whether the Trump Administration's actions for responding to such change are appropriate and sufficient, and what implications such change could have for the role of Congress in setting and overseeing the execution of U.S. foreign and defense policy. Congress's decisions regarding these issues could have significant and even profound implications for U.S. foreign and defense policy, and for the status of Congress as a co-equal branch relative to the executive branch in setting and overseeing the implementation of U.S. foreign and defense policy.

CRS_R40638

The Congressional Role Over the years, the federal intergovernmental system of governance has been characterized by many scholars as becoming increasingly centralized and coercive, with the federal government using federal grants, federal mandates, and federal preemption of state authority to expand its influence in many policy areas previously viewed as being the traditional responsibility of state and local governments. In FY2019, the federal government is expected to provide state and local governments about $750 billion in federal grants encompassing a wide range of public policy areas, such as health care, transp ortation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for just under one-third of total state government funding, and more than half of state government funding for health care and public assistance. Congress has a central role in determining the scope and nature of federal grant programs. In its legislative capacity, Congress first determines what it wants to accomplish and then decides whether a grant-in-aid program is the best means to achieve it. Congress then selects which of the six grant mechanisms to use (project categorical grant, formula categorical grant, formula-project categorical grant, open-end reimbursement categorical grant, block grant, or general revenue sharing), and crafts legislation to accomplish its purpose, incorporating the chosen grant instrument. As with all legislation generally, Congress oversees the grant's implementation to ensure that the federal administrating agency is held accountable for making certain that congressional expectations concerning program performance are met. Federalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members (especially those of party leaders and committee and subcommittee chairs and ranking minority Members); and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups (especially the National Governors Association, the National League of Cities, U.S. Conference of Mayors, and the National Association of Counties), the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning federal grant-in-aid programs. Overarching all of these factors is the evolving nature of cultural norms and expectations concerning government's role in American society. Over time, although the American public has become increasingly skeptical of government performance, they have also become increasingly accepting of government activism in domestic affairs generally, and of federal government activism in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society; technological innovations in communications, which have raised awareness of societal problems; and exponential growth in economic interdependencies brought about by an increasingly global economy. This report provides a historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system's scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system's development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system. Federal Grants to State and Local Governments Different federal departments and agencies, including the U.S. Census Bureau, the Government Accountability Office (GAO), and the U.S. Office of Management and Budget (OMB), use different definitions to determine what counts as a federal grant-in-aid program. However, there is agreement on the general characteristics associated with each grant type. The three general types of federal grants to state and local governments are categorical grants, block grants, and general revenue sharing (see Table 1 ). Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities. Block grants can be used only for a specifically aided set of programs and usually are not limited to narrowly defined activities. General revenue sharing can be used for any purpose not expressly prohibited by federal or state law and is not limited to narrowly defined activities. The four types of categorical grants are project categorical grants, formula categorical grants, formula-project categorical grants, and open-end reimbursement categorical grants. Project categorical grants are awarded on a competitive basis through an application process specified by the federal agency making the grant. Formula categorical grants are allocated among recipients according to factors specified within enabling legislation or administrative regulations (e.g., population, median household income, per capita income, poverty, and number of miles driven). Formula-project categorical grants use a mixture of fund allocation means, typically involving the use of a formula specified within enabling legislation or administrative regulations to allocate available funds among the states, followed by an application process specified by each recipient state to allocate available funds on a competitive basis among local governments or other eligible applicants. Open-end reimbursement categorical grants, often regarded as the equivalent of formula categorical grants, provide a reimbursement of a specified proportion of recipient program costs, eliminating competition among recipients as well as the need for an allocation formula. A Continuum of Federal Grant Administrative Conditions Of the six grant types, project categorical grants typically impose the most restraint on recipients (see Table 1 ). Federal administrators have a high degree of control over who receives project categorical grants (recipients must apply to the appropriate federal agency for funding and compete against other potential recipients who also meet the program's specified eligibility criteria); recipients have relatively little discretion concerning aided activities (funds must be used for narrowly specified purposes); and there is a relatively high degree of federal administrative conditions attached to the grant, typically involving the imposition of federal standards for planning, project selection, fiscal management, administrative organization, and performance. General revenue sharing imposes the least restraint on recipients. Federal administrators have a low degree of discretion over who receives general revenue sharing (funding is allocated automatically to recipients by a formula or formulas specified in legislation); recipients have broad discretion concerning aided activities; and there is a relatively low degree of federal administrative conditions attached to the grant, typically involving periodic reporting criteria and the application of standard government accounting procedures. Block grants are at the midpoint in the continuum of recipient discretion. Federal administrators have a low degree of discretion over who receives block grants (after setting aside funding for administration and other specified activities, the remaining funds are typically allocated automatically to recipients by a formula or formulas specified in legislation); recipients have some discretion concerning aided activities (typically, funds can be used for a specified range of activities within a single functional area); and there is a moderate degree of federal administrative conditions attached to the grant, typically involving more than periodic reporting criteria and the application of standard government accounting procedures, but with fewer conditions attached to the grant than project categorical grants. Outlays for Federal Grants to State and Local Governments As indicated in Table 2 , outlays for federal grants to state and local governments have generally increased over the years, with a relatively rapid increase from FY2008 through FY2010 due primarily to the enactment of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provided state and local governments $274.7 billion in grants, contracts, and loans combined. State and local governments received $52.9 billion in ARRA grants, contracts, and loans in FY2009, $111.9 billion in FY2010, $68.8 billion in FY2011, $25.6 billion in FY2012, 11.8 billion in FY2013, and $1.6 billion in FY2014 to assist their recovery from the "Great Recession" (December 2007-June 2009). As expected, after reaching $608.4 billion in FY2010, outlays for federal grants to state and local governments declined somewhat in FY2011 as ARRA funding began to unwind, and then declined further to $544.6 billion in FY2012 and to $546.2 billion in FY2013 as most of ARRA's funding expired. Outlays for federal grants to state and local governments have increased since then, primarily due to increased outlays for Medicaid. As indicated in Table 2 and Figure 1 , in FY2019 health care is anticipated to account for more than half of total outlays for federal grants to state and local governments (an estimated $453.9 billion in FY2019, or 60.6% of the total), followed by income security ($114.2 billion, or 15.2%), education, training, employment, and social services ($67.5 billion, or 9.0%), transportation ($67.2 billion, or 9.0%), community and regional development ($21.9 billion, or 2.9%), and all other ($24.9 billion, or 3.3%). Medicaid, with $418.7 billion in expected federal outlays in FY2019, has, by far, the largest budget of any federal grant-in-aid program. Ten other federal grants to state and local governments are expected to have federal outlays in excess of $10 billion in FY2019: Federal-Aid Highways ($43.9 billion), Child Nutrition ($23.9 billion), Tenant Based Rental Assistance—Section 8 vouchers ($22.3 billion), the Children's Health Insurance Fund ($18.4 billion), Accelerating Achievement and Ensuring Equity (Education for the Disadvantaged—$17.4 billion), Temporary Assistance for Needy Families ($16.5 billion), Special Education ($13.2 billion), State Children and Families Services Programs ($10.9 billion), Urban Mass Transportation Grants ($10.3 billion), and the Disaster Relief Fund ($10.2 billion). Table 3 provides data on outlays for federal grants to state and local governments in nominal and constant (inflation-adjusted) dollars, as a percentage of total federal outlays and as a percentage of national gross domestic product (GDP) for selected fiscal years since FY1960. It also indicates the percentage of these outlays that are payments for individuals, as opposed to payments for capital improvements and government operations. As indicated in Table 3 , total outlays for federal grants to state and local governments have generally increased since the 1960s. However, the magnitude of those increases has varied over the years. For example, outlays for federal grants to state and local governments increased, in nominal dollars, 187.3% during the 1960s, 246.4% during the 1970s, 33.4% during the 1980s, 98.0% during the 1990s, and 98.6% during the first decade of the 2000s. Outlay growth for federal grants to state and local governments has, in most years, exceeded inflation. However, as indicated in Table 3 , those outlays, expressed in constant (FY2012) dollars, did not keep pace with inflation during the early 1980s and during the early 2010s. Federalism scholars have noted that since the 1980s, the focus of federal grants to state and local governments has shifted from providing assistance to places (e.g., to build public highways, support public education, criminal justice systems, economic development endeavors, and government administration) to people (e.g., providing health care benefits, social welfare income, housing assistance, and social services). Much of this shift is attributed to Medicaid, which has experienced relatively large outlay growth over the past several decades. As shown in Table 3 , during the 1960s and 1970s about one-third of total outlays for federal grants to state and local governments were for individuals, compared with more than 75% in FY2018. Number of Federal Grants to State and Local Governments In the past, the now-defunct U.S. Advisory Commission on Intergovernmental Relations (ACIR) and OMB used information contained in the Catalog of Federal Domestic Assistance (CFDA) to count the number of federal grants to state and local governments. The CFDA "is a government-wide compendium of Federal programs, projects, services, and activities that provide assistance or benefits to the American public." It lists 15 categories of federal grants: formula grants (including formula categorical grants, formula-project categorical grants, and block grants); project grants; direct payments for specified uses to individuals and private firms; direct payments with unrestricted use to beneficiaries who meet federal eligibility requirements; direct loans; guaranteed/insured loans; insurance; sale, exchange, or donation of property and goods; use of property, facilities, and equipment; provision of specialized services; advisory services and counseling; dissemination of technical information; training; investigation of complaints; and federal employment. It lists all authorized federal grant programs, including grants that have not received an appropriation. Because the CFDA focuses on the needs of applicants, if a program uses a separate application or other delivery mechanism, the CFDA considers it a separate program. This complicates efforts to count federal grants to state and local governments. ACIR periodically published counts of funded federal grants to state and local governments during the 1960s and then for Fiscal Years 1975, 1978, 1981, 1984, 1987, 1989, 1991, 1993, and 1995. OMB provided counts of funded grants to state and local governments for FY1980-FY2003. Because they used a different methodology to determine which grant programs to include in their count, their results differed. OMB consistently identified fewer federal grants to state and local governments than ACIR. For example, in FY1995, OMB identified 608 funded federal grants to state and local governments compared to ACIR's count of 633. No authoritative count of funded federal grants to state and local governments is known to have been issued in recent years. ACIR included in its counts all direct cash grants to state or local governmental units, other public bodies established under state or local law, or their designee; payments for grants-in-kind, such as purchases of commodities distributed to state or local governmental institutions; payments to nongovernmental entities when such payments result in cash or in-kind services or products that are passed on to state or local governments; payments to state and local governments for research and development that is an integral part of their provision of services; and payments to regional commissions and organizations that are redistributed at the state or local level to provide public services. OMB counted only grants for traditional governmental operations, as defined in OMB Circular A-11. The definition covered only grants that "support State or local programs of government operations or provision of services to the public." It excluded federal grants that went directly to individuals, fellowships, most grants to nongovernmental entities, and technical research grants. A search of the CFDA's 2018 print edition and electronic version indicated that state governments, local governments, U.S. territories, and federally recognized tribal governments are eligible to apply for 1,616 federal grants (defined as authorized project grants, formula grants, cooperative agreements, direct payments for specified uses, and direct payments for unrestricted uses). Of these grants, 141 were not currently funded, 160 were research or fellowship programs that were not targeted solely at either public institutions of higher education or other public agencies, and 41 had broad eligibility extending beyond state and local governments. Removing them from the list left 1,274 funded federal grants to state and local governments (see Table 4 ). Because there is no consensus on the methodology used to count federal grants to state and local governments, the 1,274 count of federal grants to state and local governments listed in Table 4 should be viewed as illustrative, as opposed to definitive, of the current number of federal grants to state and local governments. As the data in the table suggest, the number of federal grants to state and local governments increased slowly from 1902 to 1930. Then, partly in reaction to the Great Depression, Congress doubled the number of federal grants to state and local governments during the 1930s, and continued to increase the number of federal grants to state and local governments during the 1940s and 1950s. During the mid-1960s, Congress increased the number of federal grants to state and local governments exponentially, primarily in response to national social movements concerning poverty and civil rights. Nine federal grants to state and local governments were added in 1961, 17 in 1962, 20 in 1963, 40 in 1964, 109 in 1965, 53 in 1966, 3 in 1967, and 4 in 1968. Congress continued to increase the number of federal grants to state and local governments during the 1970s, but at a relatively slow pace as it addressed budgetary constraints presented by "guns versus butter" issues associated with the Vietnam conflict. Then, at the urging of President Ronald Reagan in 1981, Congress approved the largest reduction in the number of federal grants to state and local governments in American history by creating 9 new block grants which consolidated 77 categorical grants and revised two earlier block grants. The Reagan Administration also eliminated funding for 62 categorical grants in 1981, mainly through authority provided under P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981. The number of federal grants to state and local governments increased relatively slowly during the remainder of the 1980s, as Congress faced budgetary constraints presented by demographic changes in American society that led to escalating costs for several federal entitlement programs, especially for Social Security, Medicare and Medicaid, and by the Reagan Administration's general opposition to the expansion of the federal grants-in-aid system. As the data in Table 4 indicate, the number of federal grants to state and local governments continued to increase during the 1990s, and has continued to do so, but more slowly in recent years. Land Grants and "Dual Federalism": 1776-1860 The relative influence of internal versus external factors on congressional decisions affecting the federal grants-in-aid system has varied, both over time and in each specific policy area. Prior to the Civil War, external factors, especially cultural norms and expectations concerning government's role in American society, restricted congressional options concerning enactment of federal grant-in-aid programs for state and local governments. During this time period, America was primarily a rural nation of farmers. Travel conditions were, compared with today's standards, primitive. Many Americans rarely left their home state, and many others never set foot in another state. Government as we know it today, with regulations and spending programs affecting many aspects of American life, did not exist. Although ratification of the Articles of Confederation and Perpetual Union on March 1, 1781, formally established the United States of America, personal allegiance was still directed more toward the individual's home state than to the nation. It was an era of what federalism scholars have called "dual federalism," where states were expected to be the primary instrument of governance in domestic affairs. However, even before the Constitution's ratification, the federal government found ways to provide state and local governments with assistance to encourage them to pursue national policy objectives. For example, under the Articles of Confederation and Perpetual Union, Congress did not have the power to lay and collect taxes and relied heavily on state donations to fund the government. This lack of revenue, and expenses related to national defense, limited congressional spending options in domestic affairs. The Congress of the Confederation addressed that issue by adopting the Land Ordinance of 1785. The Ordinance generated revenue for the government by authorizing the sale of land acquired from Great Britain at the conclusion of the American Revolutionary War. The Ordinance also required every new township incorporated in those lands, called the Ohio Country, to be subdivided into 36 lots (or sections), each 1 mile square. Lots 8, 11, 26, and 29 were reserved for the United States. The new townships were required to use Lot 16 "for the maintenance of public schools, within the said township. " Some schools are still located in lot 16 of their respective townships, although many of the school lots were sold to raise money for public education. These land grants for public education were reauthorized by Congress in the Northwest Ordinance of 1787. Congress subsequently adopted similar legislation for all states admitted to the union from 1802 to 1910, with exceptions for Texas, which retained all of its public land, and Maine and West Virginia, which were formed from other states. From 1802 to 1848, one lot in each township was to be used for education, from 1848 to 1890 two lots, and from 1894 to 1910, with one exception, four lots. When the Framers met in Philadelphia in 1787 to rework the Articles of Confederation and Perpetual Union, the national economy was in recession, state governments were saddled with large debts left over from the Revolutionary War, the continental dollar was unstable and destined to be a national joke ("not worth a continental"), the navy could not protect international shipping, and the army proved unable to protect its own arsenal during Shay's rebellion in 1786. To address these issues, Congress was provided 17 specific powers in Article 1, Section 8 of the U.S. Constitution, ratified in 1789, including the power to coin money, establish post offices, regulate copyright laws, declare war, regulate the Armed Forces, borrow money, and, importantly, lay and collect taxes. The power to lay and collect taxes provided Congress the means to expand the federal government's role in domestic affairs. Moreover, the Supreme Court issued several rulings under Chief Justice John Marshall concerning congressional authority to regulate interstate commerce that effectively cleared the way for congressional activism in domestic policy. However, the prevailing view in Congress at this time was that any power not explicitly provided to Congress in the Constitution was excluded purposively, suggesting that in the absence of specific, supporting constitutional language the exercise of governmental police powers (the regulation of private interests for the protection of public safety, health, and morals; the prevention of fraud and oppression; and the promotion of the general welfare) was either meant to be a state or local government responsibility, or outside the scope of governmental authority altogether. Nevertheless, during the 1800s there were congressional efforts, primarily from representatives from western states, to adopt legislation to provide federal cash assistance for various types of internal improvement projects to encourage western migration and promote interstate commerce. Most of these efforts failed, primarily due to sectional divisions within Congress which, at that time, made it difficult to build coalitions large enough to adopt programs that targeted most of their assistance to western states. Some opposition came from Members of Congress who viewed reducing the national debt from the American Revolutionary War as a higher priority. Other Members opposed federal interventions as a matter of political philosophy. They viewed the provision of cash assistance for internal improvements, other than for post roads, which were specifically mentioned in the Constitution as a federal responsibility, a violation of states' rights, as articulated in the Tenth Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Given the prevailing views concerning the limited nature of the federal government's role in domestic affairs, Congress typically authorized federal land grants to states instead of authorizing direct cash assistance to states for internal improvements. For example, in 1823 Ohio received a federal land grant of 60,000 acres along the Maumee Road to raise revenue to improve that road. In 1827, Ohio received another federal land grant of 31,596 acres to raise revenue for the Columbus and Sandusky Turnpike. In 1841, nine states (Ohio, Indiana, Illinois, Alabama, Missouri, Mississippi, Louisiana, Arkansas, and Michigan) ̶ and, with three exceptions, all subsequent newly admitted states ̶ were designated land grant states and guaranteed at least 500,000 acres of federal land to be auctioned to support transportation projects, including roads, railroads, bridges, canals, and improvement of water courses, that expedited the transportation of United States mail, military personnel, and military munitions. By 1900, over 3.2 million acres of federal land were donated to these states to support wagon road construction. Congress also authorized the donation of another 4.5 million acres of federal land to Illinois, Indiana, Michigan, Ohio, and Wisconsin to raise revenue for canal construction and 2.225 million acres to Alabama, Iowa, and Wisconsin to improve river navigation. In addition, states were provided 37.8 million acres for railroad improvements and 64 million acres for flood control. States were provided wide latitude in project selection, and federal oversight and administrative regulations were minimal. Although land grants were prevalent throughout the 1800s, given prevailing views concerning states' rights, land grants, as well as cash grants, were subject to opposition on constitutional grounds. For example, in 1854, Congress adopted legislation authorizing the donation of 10 million acres of federal land to states to be sold to provide for the indigent insane. President Franklin Pierce vetoed the legislation, claiming that I cannot find any authority in the Constitution making the federal government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution, and subversive of the whole theory upon which the union of these States is founded.... I respectfully submit that, in a constitutional point of view, it is wholly immaterial whether the appropriation be in money, or in land.... should this bill become a law, ... the several States instead of bestowing their own means on the social wants of their own people, may themselves ... become humble supplicants for the bounty of the Federal Government, reversing the state's true relation to this Union. One notable exception to the federal reluctance to provide cash grants to states occurred in 1837. The federal government used proceeds from western land sales to retire the federal debt in 1836. The Deposit Act of 1836 directed that, after reserving $5 million, any money in the federal Treasury on January 1, 1837, shall be distributed to states in proportion to their respective representation in the House and Senate. There were no restrictions placed on how states were to use the funds. About $30 million was distributed to states in three quarterly payments in 1837 before the banking crisis of 1837 led to a recession and payments were stopped. To avoid a promised veto from President Andrew Jackson, the legislation indicated that the funds were a deposit subject to recall, rather than an outright grant of cash. Overall, domestic policy in the United States prior to the Civil War was dominated by states. As a federalism scholar put it: With respect to the classic trinity of sovereign powers–taxation, the police power, and eminent domain–the states enjoyed broad autonomous authority, which they exercised vigorously. Indeed, property law, commercial law, corporation law, and many other aspects of law vital to the economy were left almost exclusively to the states.... Federalism thus provided a receptive structure for expressions of state autonomy and pursuit of state-oriented economic objectives, not only as a matter of constitutional theory and the distribution of formal authority but also as a matter of real power. The Origins of the Modern Grants-In-Aid System: 1860-1932 The Union's victory in the Civil War marked the beginning of a second evolutionary era in American federalism. It effectively put to an end to the doctrine that the Constitution was a compact among sovereign states, each with the right to nullify an act of Congress that the state deemed unconstitutional, and each with the legal right to secede from the Union. It also signaled the triumph of the northern states' commercialism over the southern states' agrarianism: Unimpeded by the political opposition of the southern slavocracy, the Republican coalition of north and west carried through a program of comprehensive changes that insured the expansion of industry, commerce, and free farming.... Instead of the policies of economic laissez faire that the slavocracy had demanded ... the Republicans substituted the doctrine that the federal government would provide assistance for business, industry, and farming; the protective tariff, homestead, land subsidies for agricultural colleges, transcontinental railroads and other internal improvements, national banks. When the defeated south came back into the Union, it had to accept the comprehensive alternation in government policy and economic institutions that historian Charles A. Beard was later to name the Second American Revolution. Following the war, three constitutional amendments—the Thirteenth adopted in 1865, the Fourteenth adopted in 1868, and the Fifteenth Amendment adopted in 1870—abolished slavery, prohibited states from denying due process or equal protection to any of their citizens, and banned racial restrictions on voting, respectively. In addition, Congress enacted the Reconstruction Acts of 1867 and 1868, which imposed military government on the formally secessionist states and required universal manhood suffrage. Despite this active federal presence in domestic policy in the South following the Civil War, the concept of dual federalism and deference to states in domestic affairs remained a part of American culture. For example, several Supreme Court rulings during this time period limited congressional efforts to override state laws on civil rights, in effect leaving civil and voting rights matters to states until the 1950s and 1960s. The Supreme Court also limited congressional efforts to regulate interstate commerce by limiting the Interstate Commerce Commission's authority. Reflecting prevailing views concerning dual federalism, and limited federal fiscal resources, the first on-going, federal cash grant to states, other than for the support of the National Guard, was not adopted until 1879. P.L. 45-186, the Federal Act to Promote the Education of the Blind, appropriated $250,000 to create a perpetual source of income for the purchase of teaching materials for the blind. It marked the beginning of the modern federal grants-in-aid system. The funds were used to purchase interest bearing bonds. The interest was used to purchase teaching materials for the blind. These teaching materials were then distributed among the states (and the District of Columbia) annually, with each state applying for assistance receiving a share of the available teaching materials based on the state's share of the total number of pupils enrolled in public schools of education for the blind. The second federal cash grant to states was authorized by the Hatch Act of 1887. It provided each state an annual cash grant of $15,000 to establish agricultural experiment stations. In 1888, an annual grant of $25,000 was appropriated for the care of disabled veterans in state hospitals. States were provided $100 per disabled veteran. In 1890, funding was provided to subsidize resident instruction in the land grant colleges made possible by the Morrill Act of 1862, which provided each existing and future state with 60,000 acres of federal land, plus an additional 30,000 acres for each of its congressional representatives, to be sold for the endowment, support, and maintenance of at least one college where the leading subject was agriculture and the mechanic arts. In 1902, there were five federal grants to states and local governments (in addition to funding for the National Guard): teaching materials for the blind, agricultural experiment stations, the care of disabled veterans, resident instruction in the land grant colleges, and funding to the District of Columbia. Outlays for these grants were about $7 million in FY1902, or about 1% of total federal outlays. State and local government total outlays at that time were slightly over $1 billion, evidence of the relatively limited nature of federal involvement in domestic policy at that time. An important difference between land grants and cash grants had emerged, even at this early date. Because federal grants were funded from the federal treasury, many in Congress felt that they had an obligation to ensure that the funds were spent by states in an appropriate manner. As a result, Congress began to attach an increasing number of administrative requirements to these grant programs. For example, in 1889, states were required to match federal funding for the care of disabled veterans or lose it. The Morrill Act of 1890 authorized the Secretary of the Interior to withhold payments, pending an appeal to Congress, from states that failed to meet conditions specified in the act. In 1895, expenditures authorized by the Hatch Act for agricultural experiment stations were conditioned by annual audits. In 1911, funding authorized by the Weeks Act to support state efforts to prevent forest fires was conditioned by advance approval of state plans for the funds' use, annual audits and inspections, and a state matching requirement. The Sixteenth Amendment's ratification in 1913 provided Congress the authority to lay and collect taxes on income. Although the federal income tax initially generated only modest amounts, it provided Congress an opportunity to shift from land grants to cash grants to encourage state and local governments to provide additional attention to policy areas Congress considered of national interest. Between 1913 and 1923, Congress adopted new federal grant-in-aid programs for highway construction, vocational education, public health, and maternity care. Outlays for federal grants to state and local governments increased from $12 million in FY1913 to $118 million in FY1922. In 1923, Massachusetts brought suit against the Secretary of the Treasury, Andrew Mellon, claiming that the maternal care grants authorized by the Sheppard-Towner Act of 1921 were unconstitutional infringements on states' rights. The Supreme Court dismissed the case on the grounds that it lacked jurisdiction. Nonetheless, Justice George Sutherland, writing on behalf of the unanimous Court, indicated that, in his view, this form of congressional spending was not unconstitutional because federal grants to state and local governments were optional and, as such, were not coercive instruments. As a result, although few new federal grants to state and local governments were adopted during the remainder of the 1920s, those grants were now accepted as a legal means for Congress to encourage state and local governments to pursue national goals. The New Deal and the Rise of "Cooperative Federalism": 1932-1960 Political scientists contend that about once in every generation partisan affiliations realign across the nation, typically taking a few years to materialize but often becoming apparent during a "critical" presidential election. Critical elections typically result in relatively dramatic and lasting changes in the partisan composition within Congress and state governments. They also usually signal the coming to power of a new partisan coalition that dominates congressional decisionmaking for a relatively long period of time. For example, the election of 1896 ended the political stalemate between the Democratic and Republican parties and solidified the Republican Party's position as the majority party for the next 36 years. The election of 1932 signaled a new period of Democratic Party dominance, particularly in the "Solid South," that lasted until the 1970s, when partisan attachments began to weaken, southern states became increasingly Republican, and the two major political parties became increasingly competitive, each seemingly on the verge of achieving majority party status at various times, but unable to retain that status permanently. The 1932-1960 period also saw the emergence of the "congressional conservative coalition," the unofficial title given to the shifting political alliances of southern, conservative Democrats and Republican Members. The conservative coalition became an increasingly important counter-balance to large Democratic majorities in both houses of Congress. Members of the conservative coalition generally advocated balanced budgets and states' rights, especially in civil rights legislation. They used congressional procedures, such as the filibuster or threat of a filibuster, to win concessions from the Democratic majority, and, in some instances, to prevent legislation they opposed from becoming law. They also benefitted from the congressional seniority system, which, during this time period, allocated committee chairmanships according to seniority. Because many of the congressional districts in the "solid south" were noncompetitive seats, southern representatives held a disproportionate number of committee chairmanships in the House, further strengthening the conservative coalition's influence on congressional policymaking. The conservative coalition prevented civil rights legislation from being enacted during this time period, but it could not prevent Democratic majorities in the House and Senate from expanding the federal government's presence in domestic policy. However, throughout this time period, the conservative coalition actively sought concessions to ensure that any new federal programs, including any new grants to state and local governments, respected state rights. As a result, the grant-in-aid programs adopted during this time period tended to be in policy areas where state and local governments were already active, such as in education, health care, and highway construction, or where additional federal assistance was welcomed, such as job creation. Also, federal administrative conditions attached to these grants during this era focused on the prevention of corruption and fraudulent expenditures as opposed to encouraging states to move in new policy directions. As a result, federalism scholars have labeled this time period as an era of "cooperative federalism," where intergovernmental tensions were relatively minor and state and local governments were provided flexibility in project selection. Faced with unprecedented national unemployment and economic hardship, President Franklin Delano Roosevelt advocated a dramatic expansion of the federal government's role in domestic affairs during his presidency, including an expansion of federal grant-in-aid programs as a means to help state and local governments combat poverty and create jobs. Congress approved 16 new, continuing federal grants to state and local governments from 1933 to 1938, and increased funding for federal grants to states and local governments from $214 million in FY1932 to $790 million in FY1938. Congress also enacted several temporary, emergency relief grant-in-aid programs that distributed federal funds to states according to the state's fiscal capacity. Congress devised mathematical formulas, based on a variety of economic and business measures, to allocate funding to each state, resulting in the share of relief funds varying among states based on the formula's assessment of need. At their peak, in 1935, emergency relief measures provided states nearly $1.9 billion to create jobs and provide emergency assistance for the unemployed. The emergency relief programs were terminated during the 1940s, but they established a precedent for extensive federal involvement with state and local governments in areas of national concern and for the use of mathematical formulas for distributing federal assistance. The Social Security Act of 1935 (SSA) was, arguably, the most significant legislative enactment of the New Deal period. It established a federal presence in social welfare policy. New federal grant-in-aid programs were established for old age assistance, aid to the blind, aid to dependent children, unemployment compensation, maternal and child health, crippled children, and child welfare. The act also enhanced federal oversight of grants to state and local governments as auditing requirements were now required in almost all grant programs. In addition, in 1939, state employees administering SSA programs were required to be selected by merit system procedures, a major advancement for the development of professional state and local government administration and a signal of the declining influence of state and local party bosses in American society. In 1940, the Hatch Act restricted the political activities of state and local government employees paid with federal funds. Legally, New Deal legislation was based on an expanded interpretation of congressional authority to spend through grant-in-aid programs to promote the nation's welfare under Article 1, Section 8, clause 1 of the Constitution, often referred to as the congressional "spending power." Federal expenditures through grant-in-aid programs during the New Deal were made in several functional areas, including some, such as social welfare, that were traditionally viewed as state responsibilities. Opponents of an expanded role for the federal government in domestic policy argued that New Deal grant programs precluded state action in these traditionally state functional areas and, as such, violated the Constitution's Tenth Amendment. Advocates of an expansion of federal involvement in domestic affairs argued that the power of Congress to spend is more extensive than, rather than concurrent with, enumerated or even implied law-making powers. This disagreement led to a number of Supreme Court cases, a full discussion of which is beyond the scope of this report. The Supreme Court rejected the New Deal's expansion of federal authority in 8 of the first 10 cases that it decided. Then, after President Roosevelt's failed legislative proposal to "pack the Court" in 1937, the Supreme Court upheld the constitutionality of several New Deal laws, including the Social Security Act. As a federalism scholar noted, A new era of judicial construction had been launched. The commerce power was given broad interpretation in cases upholding the Labor Relations Act. The older distinction between direct and indirect effects of commercial activity was abandoned and the more realistic "stream-of-commerce" concept adopted. The scope of Federal taxing power was also broadened expansively. In sanctioning the Social Security Act, the unemployment excise tax on employers was upheld as a legitimate use of the tax power, and the grants to the states were viewed as examples of Federal-state collaboration, not Federal coercion. The act's old-age and benefit provisions were deemed to be proper because "Congress may spend money in aid of general welfare." When combined, these decisions obviously amounted to last rites for judicial dual federalism. Although the Supreme Court was no longer viewed as a major obstacle for the expansion of the federal grants-in-aid system, external factors led to a reduction in outlays for federal grants to state and local governments from FY1939 to FY1946 as Congress focused on defense-related issues during World War II. For example, outlays for federal grants to state and local governments averaged $947 million from FY1939 through FY1946, less than half of the New Deal's peak. Following the war, the number of federal grants to state and local governments began to increase at a somewhat accelerated pace, reaching 68 grants in 1950 and 132 grants in 1960. Outlays for federal grants to state and local governments also accelerated, from $859 million in FY1945, to $2.3 billion in FY1950, to $3.2 billion in FY1955, and to $7 billion in 1960. A new development was increased outlays targeted at urban areas, such as grants for airport construction (1946), urban renewal (1949), and urban planning (1954). The most significant federal grant-in-aid program enacted during the 1950s was the $25 billion, 13-year Federal-Aid Highway Act of 1956, which authorized the construction of the then-41,000 mile National System of Interstate and Defense Highways, with a 1972 target completion date. For the next 35 years, federal surface transportation policy focused on the completion of the interstate system. The Great Society and the Rise of "Coercive Federalism": 1960-1980 The 1960s was a turbulent decade, marked by both political and social upheaval of historic proportions. Three leading public figures were assassinated: President John F. Kennedy in 1963, civil rights leader the Reverend Martin Luther King Jr. in 1968, and President Kennedy's brother, presidential candidate and Senator Robert Kennedy, in 1968. The civil rights movement, led by the Reverend King, was often met with violent resistance, with bombings of black churches, murders of civil rights workers, and televised police beatings of civil rights demonstrators. One of the defining moments of the civil rights movement was the march on Washington, DC, in August 1963, where the Reverend King made his famous "I Have A Dream" speech. Congress responded to the social turmoil by adopting the Civil Rights Act of 1964, which superseded state civil rights laws by prohibiting discrimination based on race, color, religion, or national origin; the Voting Rights Act of 1965, which superseded state election laws by outlawing literacy tests, poll taxes, and other means to discourage minority voting; and the Civil Rights Act of 1968, which superseded state civil rights laws by prohibiting discrimination in the sale, rental, and financing of housing. Nonetheless, race riots took place in several urban areas in 1965 and in 1967. During the latter half of the decade, the civil rights movement was joined by what has been called the hippie movement, where young people rebelled against the conservative norms of the time and disassociated themselves from mainstream liberalism and materialism. This "counterculture" movement began in the United States and sparked a social revolution throughout much of the Western world. It began as a reaction against the conservatism and social conformity of the 1950s, and the U.S. government's military intervention in Vietnam. These groups questioned authority and government, and demanded more freedom and rights for women, gays, and minorities, as well as greater awareness of the need to protect the environment and address poverty. The social movements and social unrest that swept across the nation during the 1960s had a strong impact on Congress. Reflecting the growing public demand for congressional action to address civil rights, poverty, and the environment, in 1961 the House approved, 217-212, a proposal by Speaker Sam Rayburn to enlarge the House Rules Committee from 12 to 15 Members. Prior to the change, the House Rules Committee was divided, 6 to 6, along ideological lines. Because a majority vote is necessary for the issuance of a legislative rule, the House Rules Committee served as an institutional barrier to the passage of legislation that the committee's more conservative Members believed infringed on states' rights, including civil rights legislation. The enlargement of the House Rules Committee in 1961 signaled the weakening of the conservative coalition's influence within Congress and enabled the large Democratic majorities elected during the early 1960s in the House and Senate to adopt a succession of civil rights laws, highlighted by the previously mentioned Civil Rights Act of 1964. It also enabled Congress to expand the federal grants-in-aid system, focusing on grants designed to protect the environment and address poverty, both directly through public assistance and job training programs and indirectly through education, housing, nutrition, and health care programs. These legislative efforts were both supported and encouraged by President Lyndon Baines Johnson. For example, during his commencement address at the University of Michigan on May 22, 1964, President Johnson announced that he would establish working groups to prepare a series of White House conferences and meetings to develop legislative proposals to revitalize urban America, address environmental problems, and improve educational opportunities "to begin to set our course toward the Great Society" which "demands an end to poverty and racial injustice, to which we are totally committed." The term "The Great Society" came to symbolize legislative efforts during the 1960s to address poverty and racial injustice. In concert with President Johnson's Great Society initiatives, Congress nearly tripled the number of federal grants to state and local governments during the 1960s, from 132 in 1960 to 387 in 1968. In 1965 alone, 109 federal grants to state and local governments were adopted, including Medicaid, which now has, by far, the largest budget of any federal grant-in-aid program. Outlays for federal grants to state and local governments also increased, from $7 billion in FY1960 to $20 billion in FY1969. Functionally, federal grants for health care increased from $214 million in FY1960 to $3.8 billion in FY1970, for income security from $2.6 billion to $5.7 billion, for education, training, employment, and social services from $525 million to $6.4 billion, for transportation from $3 billion to $4.6 billion, and for community and regional development from $109 million to $1.7 billion. For the most part, these legislative efforts were not opposed by state and local government officials and their affiliated public interest groups (e.g., National Governors Association, National League of Cities, U.S. Conference of Mayors, and National Association of Counties), primarily because federal grants are voluntary and, in many instances, provided funding for activities that had broad public support. However, the new grants had a number of innovative features that distinguished them from their predecessors. Previously, most federal grants to state and local governments supplemented existing state efforts and, generally, did not intrude on state and local government prerogatives. Most of the federal grants created during the 1960s, on the other hand, were designed purposively by Congress to encourage state and local governments to move into new policy areas, or to expand efforts in areas identified by Congress as national priorities, especially in environmental protection and water treatment, education, public assistance, and urban renewal. In addition, there was an increased emphasis on narrowly focused project, categorical grants to ensure that state and local governments were addressing national needs. Most of the new grants had relatively low, or no, matching requirements, to encourage state and local government participation. New incentive grants encouraged states to move into new policy areas and to diversify eligible grant recipients, including individuals, nonprofit organizations, and specialized public institutions, such as universities. A greater emphasis also was on grants to urban areas. For example, outlays for federal grants targeted at metropolitan areas more than tripled during the 1960s, and grew to include about 70% of total federal grant-in-aid funding, up from about 55% at the beginning of the decade. There was also a greater emphasis on mandated planning requirements. Although most of the federal grants adopted during the 1960s were narrowly focused project, categorical grants, the first two block grants were enacted during this time period. P.L. 89-749, the Comprehensive Health Planning and Public Health Services Amendments of 1966, later known as the Partnership for Public Health Act, created a block grant for comprehensive health care services (now the Preventive Health and Health Services Block Grant). It replaced nine formula categorical grants. Two years later, Congress created the second block grant, the Law Enforcement Assistance Administration's Grants for Law Enforcement program (sometimes referred to as the "Crime Control" or "Safe Streets" block grant) in the Omnibus Crime Control and Safe Streets Act of 1968. Unlike the health care services block grant, it was created de novo , and did not consolidate any existing categorical grants. The rapid expansion of federal grants to state and local governments during the 1960s led to a growing concern that the intergovernmental grant-in-aid system had become dysfunctional and needed to be reformed. For example, ACIR argued that along with the expansion of the federal grant system came "a rising chorus of complaints from state and local government officials" concerning the inflexibility of fiscal and administrative requirements attached to the grants. It suggested that state and local government officials were subjected to an information gap because they found it difficult to keep up with the host of new programs and administrative requirements. It also cited the need for improved coordination among programs, noting that many state and local government officials were reporting administrative difficulties dealing with federal agencies and those agencies' regional offices: Between 1962 and 1965 four new systems of regional offices were established as a consequence of grants-in-aid legislation. Adding these bodies to the separate, already existing regional structures brought the total number of regional systems to 12. Regional boundaries and field office locations varied widely. Kentucky, to cite the most extreme case, had to deal with federal agencies in ten different cities. This confusion imposed burdens on the recipients of grants and also made the task of coordinating operations by federal agencies in pursuit of national objectives more difficult. During the 1970s, President Richard Nixon and his successor, President Gerald R. Ford, argued that the intergovernmental grant-in-aid system was dysfunctional and advocated the sorting out of governmental responsibilities, with the federal government taking the lead in some functional areas and states in others. They also advocated a shift from narrowly focused categorical grants, especially project categorical grants, toward block grants and revenue sharing. They argued that block grants and general revenue sharing provided state and local governments additional flexibility in project selection and promoted program efficiency by reducing administrative costs. They, and others, believed that state and local governments should be provided additional flexibility in project selection and relief from federal administrative requirements because greater reliance on state and local governments promotes a sense of state and local community responsibility and self-reliance; state and local government officials are closer to the people than federal administrators and, as a result, are better positioned to discern and adapt public programs to state and local needs and conditions; state and local governments encourage participation and civic responsibility by allowing more people to become involved in public questions; active state and local governments encourage experimentation and innovation in public policy design and implementation; active state and local governments reduce administrative workload on the federal government, which creates program efficiencies; and active state and local governments reduce the political turmoil that sometimes results from single policies that govern the entire nation. Opponents of a shift from categorical grants to block grants and revenue sharing presented several arguments, including because funding comes from the federal Treasury, Congress has both the right and an obligation to determine how that money is spent; many state and local governments lack the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services, such as education and health care, which are essential to economic success. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; state and local governments that have the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services essential to economic success are often unable to do so because they compete with other state and local governments for business and taxpaying residents. As a result, state and local governments tend to focus available resources on programs designed to attract business investment and taxpaying residents to their communities and states rather than on programs assisting the poor and disadvantaged. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; Congress has both the right and the obligation to ensure through the carrot of grant-in-aid programs and the stick of federal requirements that certain national goals, such as civil rights, equal employment opportunities, protection for the environment, and care for the poor and aged, are met because it is difficult to achieve change when reform-minded citizens must deal with 50 state governments and more than 79,000 local governments; and some governmental services have either costs or benefits that spill over onto other localities or states. Water and air pollution controls, for example, benefit not only the local community that pays for the air or water pollution controls, but all of the communities that are located downwind or downstream from that community. Because state and local taxpayers are generally reluctant to pay for programs whose benefits go to others, state and local governments often underfund programs with significant spillover effects. Therefore, Congress must act to ensure that these programs are funded at logical levels. Opponents also asserted that the arguments presented by advocates for a shift in emphasis to block grants and revenue sharing were actually a "smoke screen" masking their true intent which, allegedly, was to shift federal resources to their core constituencies. As mentioned previously, most federal grant-in-aid funding during the 1960s and 1970s was targeted to metropolitan areas, which, at that time, were considered Democratic Party strongholds. Many observers believed that shifting from project categorical grants to block grants or general revenue sharing would result in less money for metropolitan areas and more money for suburban and rural areas, areas that were more likely to be populated by Republicans than Democrats. This shift would occur because project categorical grants are awarded on a competitive basis by federal administrators while block grant and revenue sharing funding is allocated according to pre-determined formula, often with minimum funding guarantees for each state and with a portion of the funding determined by either population or per capita income. Because block grant and revenue sharing funding tends to be more geographically dispersed than project categorical grants, congressional debates over which grant mechanism was best had partisan overtones that often transcended discussions over which grant mechanism would improve grant performance. Some federalism scholars have also suggested that Congress tends to prefer categorical grants over block grants and revenue sharing because Members take pride in the authorship of sponsored programs. They argue that categorical grants provide more opportunities for sponsorship, and more opportunities for receiving political credit for that sponsorship, than block grants or revenue sharing. In their view, constituents are more interested in a Member's ability to serve in a material way than in their competence in broad policymaking or in "the rightness of positions on issues of principle, form or structure." As a result, they argue that Members are more likely to be recognized for sponsoring or supporting specific, narrowly focused categorical grants than by championing a more general block grant or revenue sharing approach. For example, they assert that Members are more likely to receive recognition and political credit from constituents for sponsoring and supporting legislation to prevent lead-based paint poisoning among children than for legislation covering the broad area of preventive health services. Presidents Nixon's and Ford's efforts to gain congressional approval for a shift in emphasis from categorical grants to block grants and revenue sharing were only partially successful. For example, in his 1971 State of the Union speech, President Nixon announced a plan to consolidate 129 federal grant programs in six functional areas—33 in education, 26 in transportation, 12 in urban community development, 17 in manpower training, 39 in rural community development, and 2 in law enforcement—into what he called six "special revenue sharing" programs. Unlike the categorical grants they would replace, the proposed special revenue sharing programs had no state matching requirements and relatively few auditing or oversight requirements, and the funds were distributed automatically by formula without prior federal approval of plans for their use. The education, transportation, rural community development, and law enforcement proposals failed to gain congressional approval, primarily because they generated opposition from interest groups affiliated with the programs who worried that the programs' future funding would be compromised. However, three block grants, the first signed by President Nixon and the remaining two signed by President Ford, were approved. The Comprehensive Employment and Training Assistance Block Grant program, created by the Comprehensive Employment and Training Act of 1973, merged 17 existing manpower training categorical grant programs. The Community Development Block Grant program (CDBG), created by the Housing and Community Development Act of 1974, consolidated six existing community and economic development categorical grant programs. Title XX social services, later renamed the Social Services Block Grant program, was created de novo and, therefore, did not consolidate any existing categorical grant programs. It was authorized by the 1974 amendments of the Social Security Act, which was signed into law on January 4, 1975. Also, in 1972, general revenue sharing was approved by Congress. General revenue sharing distributed funds to states from 1972 to 1981 and to localities from 1972 to 1986. Nevertheless, Congress retained an emphasis on the use of categorical grants. On December 31, 1980, there were 534 categorical grant programs, 5 block grant programs, and 1 general revenue sharing program. Of the categorical grant programs, 361 were project categorical grants, 42 were project, formula categorical grants, 111 were formula categorical grants, and 20 were open-ended reimbursement categorical grants. Overall, categorical grants accounted for 79.3% of the $91.3 billion in outlays for federal grants to state and local governments that year, block grants accounted for 11.3%, and general revenue sharing 9.4%. Efforts to sort out governmental responsibilities were also met with resistance in Congress. For example, President Nixon's six special revenue sharing proposals would have provided state and local governments the leading role in decisionmaking in those six functional areas. Also, his proposed Family Assistance Plan would have replaced several public assistance categorical grant programs with a national public assistance system covering all low-income families with children. Although his Family Assistance Plan was not adopted, Congress did nationalize several adult-age public assistance grant-in-aid programs in 1972, including old-age assistance, aid to the blind, and aid to the permanently and totally disabled. Another Related Development: Federal Mandates Another related, new development during the 1960s and 1970s was the imposition by Congress of numerous federal mandates on state and local government officials. The concept of mandates covers a broad range of policy actions with centralizing effects on the intergovernmental system, including statutory direct-order mandates, both total and partial statutory preemption of state and local government law, federal tax policies affecting state and local tax bases, and regulatory action taken by federal courts and agencies. Many federalism scholars also consider program-specific and crosscutting federal grant administrative conditions mandates, even though the grants themselves are voluntary. Crosscutting requirements are, perhaps, the most widely recognized mandate. They are a condition of federal assistance that applies across-the-board to all, or most, federal grants to advance a national social or economic goal. Title VI of the Civil Rights Act of 1964 was the first post-World War II statute to use a crosscutting requirement. It specifies that No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program receiving Federal financial assistance. In 1980, OMB counted 59 crosscutting requirements intended to further national social or economic goals in a variety of functional areas, including education and the environment. Some of the statutory direct-order mandates adopted during this era included the Equal Employment Opportunity Act of 1972, which extended the prohibitions against discrimination in employment contained in the Civil Rights Act of 1964 to state and local government employment; the Fair Labor Standards Act Amendments of 1974, which extended the prohibitions against age discrimination in the Age Discrimination in Employment Act of 1967 to state and local government employment; and the Public Utilities Regulatory Policy Act of 1978, which established federal requirements concerning the pricing of electricity and natural gas. ACIR suggested that the expansion of federal intergovernmental regulatory activity during the 1960s and 1970s fundamentally changed the nature of intergovernmental relations in the United States: During the 1960s and 1970s, state and local governments for the first time were brought under extensive federal regulatory controls.... Over this period, national controls have been adopted affecting public functions and services ranging from automobile inspection, animal preservation and college athletics to waste treatment and waste disposal. In field after field the power to set standards and determine methods of compliance has shifted from the states and localities to Washington. The continued emphasis on categorical grants, the increased emphasis on provisions encouraging states to move in new policy directions, and, especially, the increased imposition of federal mandates on state and local governments during the 1960s and 1970s led some federalism scholars to label the 1960s and 1970s as the beginnings of a shift toward "coercive federalism." Cooperative features were still present, but congressional deference to state and local government prerogatives seen in previous eras was no longer in force. Instead of focusing primarily on the "carrot" of federal assistance to encourage state and local governments to pursue policies that aligned with national goals, Congress increasingly relied on the "stick" of federal mandates. Congress Asserts Its Authority: The Devolution Revolution That Wasn't, 1980-2000 By the end of the 1970s, the social turmoil that marked the previous two decades had receded. Into the 1980s, the United States and most of the Western world experienced a revival of conservative politics, the advancement of free market solutions to improve government efficiency and solve social problems, and a renewed emphasis on materialism and the possession of consumer goods. Yet, at the same time, social change continued to affect American lifestyles, as women became fixtures in the workplace, the gay rights movement become more active, environmental concerns intensified, and rock concerts featuring the leading rock bands and performers of the era were televised to millions of viewers across the nation and the world to raise money for various social causes, such as famine relief, support for family farms, and AIDS prevention and treatment. The seemingly contradictory societal trends of self-promotion and altruism that swept across American society during the 1980s and 1990s were reflected in responses to national public opinion polls concerning politics and government. These polls evidenced a growing public hostility toward government intrusion and government performance, especially the federal government's performance, despite growing support for specific programs and regulations that represented the polar opposite of these attitudes. Perhaps reflecting these seemingly contradictory trends, during this era the public tended to elect a President of one political party and a Congress of another. Moreover, nationally, the two-party political system became more competitive as the once solid Democratic South turned increasing Republican. The Republican Party's resurgence was evidenced by its winning the presidency from 1981 to 1993, and its achieving majority status in the Senate from 1981 to 1987, and in both houses of Congress from 1995 to 2001. President Ronald Reagan's election in 1980, coupled with the Republican Party's resurgence, especially its winning majority party status in the Senate that year, signaled for some the potential for a "devolution revolution" in American federalism, where unfunded federal mandates would be rescinded, "burdensome" administrative federal grant-in-aid conditions removed, and the cooperative features of the federal grants-in-aid system enhanced. This belief was based on President Reagan's commitment to reducing the federal budget deficit. Because he was convinced that it was necessary to increase defense spending, President Reagan concluded that the only way to reduce the federal budget deficit was to increase revenue by encouraging economic growth through tax reduction and regulatory relief, and limiting the growth of federal domestic expenditures. As a former governor, he trusted state and local governments' ability to provide essential government services. As a result, he advocated a sorting out of governmental responsibilities that would reduce the federal government's role in domestic affairs, increase the emphasis on block grants to provide state and local government officials greater flexibility in determining how the program's funds are spent, and impose fiscal restraint on all federal grant-in-aid programs. For example, on February 18, 1981, President Reagan addressed a joint session of Congress and proposed the consolidation of 84 existing categorical grants into 6 new block grants and requested significant funding reductions for a number of income maintenance categorical grants, including housing (rental) assistance, food stamps (now Supplemental Nutrition Assistance Program), Medicaid, and job training. Congress subsequently approved P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981, which consolidated 77 categorical grants and two earlier block grants into the following nine new block grants: Elementary and Secondary Education (37 categorical grants), Alcohol, Drug Abuse, and Mental Health Services (10 categorical grants), Maternal and Child Health Services (9 categorical grants), Preventive Health and Human Services Block Grant (merged 6 categorical grants with the Health Incentive Grants for Comprehensive Health Services Block Grant), Primary Care (2 categorical grants), Community Services (7 categorical grants), Social Services (one categorical grant and the Social Services for Low Income and Public Assistance Recipients Block Grant), Low-Income Home Energy Assistance (1 categorical grant), and a revised Community Development Block Grant program (adding an existing discretionary grant and 3 categorical grants). Overall, funding for the categorical grants bundled into these block grants was reduced 12%, about $1 billion, from their combined funding level the previous year. President Reagan argued that the funding reductions would not result in the loss of services for recipients because the reductions would be offset by administrative efficiencies. In addition, the Reagan Administration eliminated funding for 62 categorical grants in 1981, mainly through authority provided under the Omnibus Budget Reconciliation Act of 1981. Some observers were convinced that the adoption of the Omnibus Budget Reconciliation Act of 1981 was proof of the coming devolution revolution. The number of federal grants to state and local governments was reduced and outlays for federal grants to state and local governments fell for the first time since World War II, from $94.7 billion in FY1981 to $88.1 billion in FY1982. However, in retrospect, federalism scholars now consider the 1981 block grants as more "historical accidents than carefully conceived restructurings of categorical programs" because they were contained in a lengthy bill that was primarily designed to reduce the budget deficit, not to reform federalism relationships. The bill was adopted under special parliamentary rules requiring a straight up or down vote without the possibility of amendment, and it was not considered and approved by authorizing committees of jurisdiction. Nonetheless, largely due to the Omnibus Budget and Reconciliation Act of 1981, in 1984 there were 12 block grants in operation (compared to 392 categorical grants), accounting for about 15% of total grants-in-aid funding. During the remainder of his presidency, President Ronald Reagan submitted 26 block grant proposals to Congress, with only one, the Federal Transit Capital and Operating Assistance Block Grant, added in 1982. In addition, Congress approved the Job Training Partnership Act of 1982, which created a new block grant for job training to replace the block grant contained in the Comprehensive Employment and Training Act of 1973. Federalism scholars generally agree that President Reagan had unprecedented success in achieving congressional approval for block grants in 1981. However, they also note that most of President Reagan's subsequent block grant proposals failed to gain congressional approval, primarily because they were opposed by organizations that feared, if enacted, the block grants would result in less funding for the affected programs. For example, in 1982, President Reagan proposed, but could not get congressional approval for, a $20 billion "swap" in which the federal government would return to states full responsibility for funding Aid to Families With Dependent Children (AFDC) (now Temporary Assistance for Needy Families) and food stamps (now Supplemental Nutrition Assistance Program) in exchange for federal assumption of state contributions for Medicaid. As part of the deal, he also proposed a temporary $28 billion trust fund or "super revenue sharing program" to replace 43 other federal grant programs, including 19 social, health, and nutrition services programs, 11 transportation programs, 6 community development and facilities programs, 5 education and training programs, Low Income Home Energy Assistance, and general revenue sharing. The trust fund, and federal taxes supporting it, would begin phasing out after four years, leaving states the option of replacing federal tax support with their own funds to continue the programs or allowing the programs to expire. Both the swap proposal and the proposed devolution of 43 federal grants failed to gain congressional approval, primarily because they were opposed by organizations and Members who feared that, if enacted, the proposals would result in less funding for the affected programs. For example, the National Governors Association supported the federal takeover of Medicaid, but objected to assuming the costs for AFDC and food stamps. The economy was weakening at that time and governors worried that they would not have the fiscal capacity necessary to support the programs without continued federal assistance. Evidence of a coming devolution revolution proved elusive as the upward trend in outlays for federal grants to state and local programs resumed in FY1983, although at a somewhat lower rate of increase than during the previous two decades. As shown in Table 2 , outlays for federal grants to state and local governments increased from $91.4 billion in FY1980 to $135.3 billion in FY1990 and $285.9 billion in FY2000. Medicaid accounted for much of that revenue growth, increasing from $13.9 billion in FY1980 to $41.1 billion in FY1990 and $117.9 billion in FY2000. Functionally, as shown in Table 2 , outlays for federal grants to state and local governments for health care increased from $15.8 billion in FY1980 to $124.8 billion in FY2000. Also, outlays for federal grants to state and local governments for income security increased from $18.5 billion in FY1980 to $68.7 billion in FY2000; for education, training, employment, and social services from $21.9 billion to $36.7 billion; for transportation from $13.0 billion to $32.2 billion; and for community and regional development from $6.5 billion to $8.7 billion. The number of federal grants to state and local governments fell at the beginning of this era, from 541 in 1981 to an era low of 405 in 1984, but then resumed an upward trend. As indicated in Table 4 , there were 541 grants to state and local governments in 1981, 405 in 1984, 435 in 1987, 492 in 1989, 557 in 1991, 593 in 1993, 633 in 1995, and 664 in 1998. Moreover, the number of intergovernmental mandates continued to increase throughout the era. ACIR, for example, identified 36 significant federal mandates affecting state and local governments in 1980. In 1990, it identified 63. ACIR concluded that "despite efforts to constrain the growth of intergovernmental regulation, the 1980s remained an era of regulatory expansion rather than contraction." It offered the following explanation for the increased number of federal mandates during the 1980s: The causes of this continued regulatory growth are complex and varied. Many regulations address important and well documented problems from pollution to health care to civil rights. The goals associated with these programs are popular not only with the general public but with state and local government officials as well. But, whereas the Congress in the past might have responded to emerging needs with a new federal aid program, the scarcity of federal funds during a decade of historic deficits has made the alternative of federal mandates look increasingly attractive to federal policymakers. Some observers believed that the anticipated devolution revolution might be realized following the 1994 congressional elections, which resulted in the Republican Party gaining majority status in both the House and Senate. As evidence of the potential for a devolution revolution they pointed to the Unfunded Mandate Reform Act of 1995 (UMRA). Its intent was to limit the federal government's ability to impose costs on state and local governments or on the private sector through unfunded mandates. Providing relief from unfunded mandates was one of the stated goals of the Republican Party's 1994 Contract With America. Under UMRA, congressional committees have the initial responsibility to identify certain federal mandates in measures under consideration. If the measure contains a federal mandate, the authorizing committee must provide the measure to the Congressional Budget Office (CBO). It reports back to the committee an estimate of the mandate's costs. The office must prepare full quantitative estimates for each reported measure with mandate costs over pre-determined thresholds in any of the first five fiscal years the legislation would be in effect. CBO's cost estimates include the direct costs of the federal mandates contained in the measure, or in any necessary implementing regulations; and the amount of new or existing federal funding the legislation authorizes to pay these costs. The thresholds triggering a full CBO cost estimate are adjusted annually for inflation. They were originally $50 million for intergovernmental mandates and $100 million for private sector mandates. The thresholds in 2019 are $82 million for intergovernmental mandates and $164 million for private sector mandates. CBO must prepare brief statements of cost estimates for those mandates that have estimated costs below these thresholds. Members can raise a point of order if the measure containing the mandate lacks a CBO cost estimate, either because the committee failed to publish the CBO's cost estimate in its report or in the Congressional Record , or CBO determined that no reasonable estimate of the mandate's cost was feasible. Members can also raise a point of order if the measure has an intergovernmental cost estimate that exceeds the annually adjusted cost threshold in any of the first five fiscal years the mandate would be in effect. UMRA's impact on unfunded mandates has been relatively limited. For example, from 1996 to May 2019, 62 points of order were raised in the House and 4 in the Senate. One point of order, concerning a 1996 minimum wage bill, was sustained in the House and two points of order, concerning amendments relating to an increase in the minimum wage in 2005, were sustained in the Senate. In addition, UMRA covers only certain types of unfunded federal mandates. As a federalism scholar argued, UMRA primarily covers only statutory direct orders, excluding most grant conditions and preemptions whose fiscal effects fall below the threshold. Statutory direct orders dealing with constitutional rights, prohibition of discrimination, national security, and Social Security are among those excluded from coverage. Moreover, analytic and procedure requirements do not apply to appropriations bills, floor amendments or conference reports–those tools of "unorthodox lawmaking" that have become increasingly prevalent in the Congress. Moreover, another federalism scholar noted that the overall record of the 104 th Congress, expected by some to decentralize and devolve federalism relationships, was more status quo than devolutionary: Shifting back to the overall record of the 104 th Congress, it is appropriate here to note the various proposed devolutionary bills that were defeated. Chief among these was the proposed Medicaid block grant with a $163 billion cut in funding over five years. Both a public housing blocking proposal and the big regulatory reform measure that would have seriously limited the Federal government's power to issue rules affecting health, safety, and the environment were scuttled. Extension of the Clean Water Act, enactment of a consolidation of eighty-odd manpower training programs, and passage of a revised Endangered Species Act, which eliminated the Federal authority to restrict threatening activities, were all successfully resisted. A rollback of affirmative action, a conservative shift in the Superfund's program and rules, and the proposed Product Liability Legal Reform Act of 1996 were also scuttled. Of the nine here, two died because of Senate rejection; three, because of a presidential veto or the threat of one; two others failed because neither chamber dared take either one up; and the last two died because of a deadlocked Conference Committee and a lack of time to consider a Conference Report. The devolution revolution never fully materialized during this era, despite growing public hostility toward the federal government. The emphasis on categorical grants and the issuance of federal mandates continued. Yet, some decentralization of decisionmaking authority did take place during the era. For example, in 1980, there were four block grants in operation. In 2000, there were 24 block grants, including the Surface Transportation Program (1991) and the Temporary Assistance for Needy Families (TANF) program (1996). Funded at $16.7 billion annually, TANF rivaled the Surface Transportation Program during this era for the largest budget of all the block grants. In addition, Congress authorized state waivers for Medicaid starting in 1981, and for child welfare assistance programs starting in 1994. The seemingly contradictory trends of centralization and decentralization that took place in the federal intergovernmental system during the 1980s and 1990s perhaps reflected the contradictory societal trends that swept across America at the time. As mentioned previously, national public opinion polls indicated that the public was increasingly dissatisfied with the performance of government, especially the federal government's performance, and expressed a growing hostility toward government (and Congress) as a whole. It could be argued that these views suggest that the public wanted Congress to devolve federal grant-in-aid programs to state and local governments or, at least, provide state and local governments greater flexibility in determining how the grants' funding should be spent. Yet, at the same time, the public also expressed relatively strong support for individual federal government programs (and individual Members of Congress). It could be argued that these views suggest that the public wanted Congress to maintain federal government control over these programs, and expressed approval of their individual Members for doing so. Another possible explanation for the continued focus on categorical grants and the imposition of federal mandates during this era is that federalism issues tend to be a second order priority for many federal policymakers. For example, it could be argued that President Reagan's commitment to strengthening federalism through program decentralization and devolution was unrivaled in the modern era. Yet, in an analysis of the Reagan Administration's federalism policies, a leading federalism scholar concluded that "devolutionary policies consistent with the president's definition of federalism reform ... consistently lost out in the Reagan Administration when they ... conflicted with the sometimes competing goals of reducing the federal deficit, deregulating the private sector, and advancing the conservative social agenda." For example, this scholar noted that President Reagan opposed the expansion of General Revenue Sharing, advocated the elimination of the deductibility of state and local taxes, supported the preemption of state laws regulating double-trailer trucks and establishing minimum drinking ages, overrode state objections to increased off-shore oil drilling and increased use of nuclear power, and supported efforts to require states to establish workfare programs for public assistance recipients and suing localities which sought to retain aggressive affirmative action hiring policies. Federal Grants to State and Local Governments in the 21st Century Some observers thought that the number of federal grants to state and local governments and outlays for federal grants to state and local governments might fall during George W. Bush's presidency (2001-2009), given federal budgetary pressures created by what many called the "war on terror" following 9/11, President Bush's commitment to reducing the annual federal budget deficit and addressing the federal debt, and the Republican Party's winning majority status in the House of Representatives from 2001 to 2007 and in the Senate for portions of 2001 and 2002, and from 2003 to 2007. Yet, outlays for federal grants to state and local governments increased during his presidency, from $285.8 billion in FY2000 to $461.3 billion in FY2008. Others thought that the "the ascendancy of George W. Bush to the presidency, in concert with a remarkably unified Republican control of the Congress, presaged a period of unified government … [that would lead to] the arrest and even reversal of federal policy centralization." For example, President Bush used his authority to grant state waivers to increase state flexibility in the use of Medicaid funds and, in his second term, in complying with No Child Left Behind requirements. He also proposed grant consolidations of community development programs, state control of the Head Start program, and waivers of regulations in many low-income programs (called superwaivers). However, despite these efforts, federalism scholars argue that the federal government continued to further centralize its authority in many policy areas during his presidency, often with President Bush's approval. For example, President Bush supported the extension of "federal goals and standards to such areas as education testing, sales tax collection, emergency management, infrastructure, and elections administration" and the imposition of restrictions on partial-birth abortions, new work requirements for TANF recipients, and new standards for issuing secure driver's licenses. President Bush also supported legislative efforts to prohibit same-sex marriage. The expansion and centralization of the federal grants-in-aid system continued under President Barack Obama and has continued, albeit counter to his recommendations, under President Trump. As shown in Table 2 , outlays for federal grants to state and local governments has continued to increase in recent years (from $660.8 billion in FY2016 to $674.7 billion in FY2017, and to an anticipated $728.0 billion in FY2018), largely due to increased outlays for Medicaid (increasing from $368.3 billion in FY2016 to $374.7 billion in FY2017, and to an anticipated $400.4 billion in FY2018). However, outlays for federal grants to state and local governments has increased in other policy areas as well. As shown in Table 4 , the number of federal grants to state and local governments has also increased, from 664 in 1998, to 953 in 2009, 996 in 2012, 1,188 in 2015, and 1,274 in 2018. In addition, the emphasis on categorical grants has been retained, as 1,253 of the 1,274 funded federal grants to state and local governments in 2018 were categorical grants, and 21 were block grants. Also, despite UMRA, unfunded federal mandates have continued to be issued in many policy areas. For example, CBO reports that from January 1, 2006, to December 31, 2018, 217 laws were enacted with at least one intergovernmental mandate as defined under UMRA. These laws imposed 443 mandates on state and local governments, with 16 of these mandates exceeding UMRA's threshold, 14 with estimated costs that could not be determined, and 413 with estimated costs below the threshold. CBO reported that hundreds of other laws had an effect on state and local government budgets, but those laws did not meet UMRA's definition of a federal mandate. Grant conditions, historically the predominant means used to impose federal control over state and local government actions, have also continued to be used to promote national goals. For example, many observers consider the adoption of the No Child Left Behind Act of 2001, signed into law on January 8, 2002, to be President George W. Bush's signature federalism achievement. Although the act allows states to define the standards used for testing, it imposed federal testing, teaching, and accountability standards on states and school districts that, overall, significantly increased federal influence on public elementary and secondary education throughout the nation. In addition, during his presidency, the Help America Vote Act of 2002 instituted "sweeping new federal standards, along with new funding, that regulated significant features of state and local election processes." President Obama did not issue a formal federalism plan and did not formally advocate a major shift in funding priorities within functional categories. Instead, the Obama Administration attempted to cultivate a place-based approach, customizing support for communities based on their specific assets and challenges. This new approach seeks out communities' plans or vision for addressing a set of challenges and then works across agency and program silos to support those communities in implementing their plans. However, the expansion of Medicaid eligibility under P.L. 111-148 , the Patient Protection and Affordable Care Act (ACA), which President Obama strongly endorsed, increased health care's position as the leading category of federal assistance to state and local governments. The ACA also either authorized or amended 71 federal categorical grants to state and local governments, further enhancing the role of categorical grants in the intergovernmental grant-in-aid system. The Obama Administration did not formally advocate a major shift in funding priorities from categorical grants to block grants, or from block grants to categorical grants. However, the number of funded block grants declined somewhat during the Obama Administration, from 24 in 2009 to 20 in 2016. Also, although the Obama Administration did support ARRA's funding for two relatively significant temporary block grants (the $53.6 billion Government Services State Fiscal Stabilization Fund for public education; and the $3.2 billion Energy Efficiency and Conservation Block Grant for energy efficiency and conservation programs) and ARRA's provision of additional, temporary funding to TANF ($5 billion), the Child Care and Development Block Grant ($2 billion), the Community Development Block Grant ($1 billion), the Community Services Block Grant ($1 billion), and the Native American Housing Block Grant ($510 million) programs, the Obama Administration generally advocated enactment of new competitive categorical grant programs (e.g., TIGER surface transportation grants and Race to the Top education grants) rather than the expansion of existing block grants or the creation of new ones. However, the Obama Administration did advocate the consolidation of categorical grant programs in several functional areas as a means to reduce duplication and promote program efficiency. For example, the Obama Administration supported the consolidation of dozens of surface transportation categorical grant programs into other surface transportation categorical grant programs in P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act of 2012 (MAP-21). The Obama Administration also advocated the merging of categorical grant programs in the Department of Homeland Security as a means to "better target these funds." The Trump Administration indicated in its FY2018 budget request that it intended to refocus federal grants on "the highest priority areas," provide "a greater role for state and local governments," "slow the growth of grant spending over the 10-year budget window," and "rein in the growth of Medicaid." This budget proposes to cap federal funding for the Medicaid program, to establish a state matching requirement for the Supplemental Nutrition Assistance Program, to eliminate the Community Development Block Grant and Social Services Block Grant programs, and to make other reductions that reestablish an appropriate federal-state fiscal relationship and contribute to achieve a balanced federal budget by 2027. Among other grant initiatives, the budget proposes to establish a 25% non-federal cost match for FEMA [Federal Emergency Management Agency] preparedness grant awards that currently require no cost match … authorizes a new Federal Emergency Response Fund to rapidly respond to public health outbreaks … reforms the Centers for Disease Control and Prevention through a new $500 million block grant to increase state flexibility and focus on the leading public health challenges specific to each state … [and] includes $200 billion in budget authority related to the [Trump Administration's] infrastructure initiative. The Trump Administration continued to advocate for these objectives in its FY2019 and FY2020 budget requests. For example, the Administration indicated in its FY2019 budget request that Over many decades, the increasing number of grants and size of grants has created overlap between programs, and complexity for grantees, and has made it difficult to compare program performance and conduct oversight. The multiple layers of grants administration can increase the cost of administration and create inefficiencies and duplication. Less Federal control gives State and local recipients more flexibility to use their knowledge of local conditions and need to administer programs and projects more efficiently. The 2019 Budget takes steps toward limiting the Federal role, and reducing spending. This budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid ... The Budget provides $749 billion in outlays for aid to State and local governments in 2019, an increase of 3% from 2018. The increase is entirely due to spending for the Administration's infrastructure initiative; all grant spending other than Medicaid and the infrastructure initiative will decline by 11% in 2019. The Trump Administration repeated its intent to slow the growth of federal aid to state and local governments in its FY2020 budget request: This budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid, which accounts for 56 percent of total grant spending to State and local governments. The Budget provides $751 billion in outlays for aid to State and local governments in 2020, an increase of less than one percent from spending in 2019. Among its proposals to slow the growth of federal aid to state and local governments and improve federal grant performance, the Administration recommended that Medicaid be converted to a block grant or be subject to a per capita spending cap indexed to the Consumer Price Index "to support States as they transition to more sustainable health care programs and encourage them to pursue innovative ideas to that aim to curb costs moving forward." states be provided "maximum flexibility over their Medicaid programs" to place the program "on a sound fiscal path." funding be eliminated for "lower priority grant programs," such as the Sea Grant, Coastal Zone Management Grants, and the Pacific Coastal Salmon Recovery Fund. funding be eliminated for Community Development Block Grants and the Economic Development Administration. In addition, the Trump Administration noted that its President's Management Agenda, released in March 2018, included a cross-agency priority goal of achieving results-oriented accountability for federal grants funding. The Administration's goal is to ensure that federal grants to state and local governments are "delivered to intended recipients as efficiently as possible" by standardizing the grants management process and data, building shared IT infrastructure, managing risk, and achieving program goals and objectives. The Administration also included proposals "to require able-bodied adults participating in the Supplemental Nutrition Assistance Program (SNAP) enter and re-enter the job market and work toward self-sufficiency." Congressional Issues As the data in Table 2 , Table 3 , and Table 4 attest, outlays for federal grants to state and local governments, in both nominal and constant dollars, and the number of federal grants to state and local governments have continued to increase since the mid-1980s. Given its increased size and cost, providing effective congressional oversight of federal grants to state and local governments can be a daunting task. Given the decentralized nature of the congressional committee system, Congress is well positioned to provide effective oversight of individual federal grants to state and local governments. However, it could be argued that the decentralized nature of the congressional committee system is not optimally conducive to providing effective oversight of the interactive effects of multiple federal grants to state and local governments, or of the potential interactive effects of federal grants to state and local governments and federal tax policy. In the past, the independent, bipartisan ACIR, which operated from 1959 to 1996, provided Congress and others a series of authoritative reports on the status and operation of intergovernmental grants, both as individual programs and as a collective system. GAO has published several reports over the years on federal grants that have helped to fill the informational and analytic void left by ACIR's demise. However, it could be argued that Congress may wish to examine whether a reconstituted ACIR, perhaps one that focuses on the structure and operation of the intergovernmental system as a whole, might prove useful as an additional source of information and analysis as it conducts oversight of the federal grants to state and local governments. For example, such an organization could provide an accepted methodology for counting federal grants to state and local governments, and provide Congress periodic assessments of the intergovernmental grant system's overall performance. Concluding Remarks It could be argued that the recent upward trend in outlays for federal grants to state and local governments is about to end because there is a general consensus that anticipated growth in federal discretionary spending, which includes outlays for federal grants to state and local governments, may be targeted for reductions as part of an effort to address the federal deficit and debt. However, Congress's historical tendency to use federal grants to state and local governments as a means to create jobs and promote national economic growth suggests that the upward trend in federal grant outlays and federal grant numbers that has been experienced over the past several decades may continue, although at a slower pace. President Trump's FY2020 budget request estimates that total outlays for federal grants to state and local governments will increase from $696.5 billion in FY2018 to an anticipated $749.5 billion in FY2019 and $750.7 billion in FY2020. In retrospect, with the exception of the early 1980s, federal grant funding, the number of federal grants, and the issuance of federal mandates have increased under both Democratic and Republican Congresses and Presidents. Historically, there have been notable differences between the two parties' approaches toward federalism. Although both parties have generally opposed unfunded federal mandates, the Republican Party has done so more aggressively, as evidenced by its 1994 Contract With America, sponsorship of UMRA, and recent legislative efforts to broaden UMRA's coverage to include, when requested by the chair or ranking Member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. The Republican Party has also advocated the devolution of certain federal grant-in-aid programs to state and local governments while the Democratic Party has generally opposed devolution. The Republican Party has also been more aggressive in its support of the decentralization of grants-in-aid decisionmaking to state and local governments through the consolidation of categorical grants into block grants, for revenue sharing, and administrative relief from various grant conditions. But, overall, the historical record suggests that for most Members of both political parties, regardless of their personal ideological preferences, federalism principles are often subordinated to other policy goals, such as reducing the federal budget deficit, promoting social values or environmental protection, and guaranteeing equal treatment and opportunity for the disadvantaged. As long at this continues to be the case, and the public continues to express support for specific government programs ̶ even if they generally oppose "big" government as a whole ̶ there is little evidence to suggest that the general historical trends of increasing numbers of federal grants to state and local governments, increasing outlays for those grants, an emphasis on categorical grants, and continued enactment of federal mandates, both funded and unfunded, are likely to change.

The federal government is expected to provide state and local governments about $750 billion in federal grants in FY2019, funding a wide range of public policies, such as health care, transportation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for about one-third of total state government funding, and more than half of state government funding for health care and public assistance. Congressional interest in federal grants to state and local governments has always been high given the central role Congress has in determining the scope and nature of the federal grant-in-aid system, the amount of funding involved, and disagreements over the appropriate role of the federal government in domestic policy generally and in its relationship with state and local governments. Federalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members; and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups, the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning the federal grants-in-aid system. Overarching all of these factors is the evolving nature of cultural norms and expectations concerning government's role in American society. Over time, the American public has become increasingly accepting of government activism in domestic affairs generally, and of federal government intervention in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society; technological innovations in communications, which have raised awareness of societal problems; and exponential growth in economic interdependencies brought about by an increasingly global economy. This report provides a historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system's scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system's development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system.

GAO_GAO-19-688

Background Organizational Payees Types of Organizations Different types of organizations can serve as representative payees, from residential facilities where beneficiaries live, to organizations that only manage individuals’ Social Security retirement, disability, or other benefits. SSA’s organizational payees include social service agencies, mental institutions (federal, state or local, non-profit, private), non-mental institutions (federal, state or local, non-profit, private), financial organizations, and entities represented by public officials (such as public guardians, officers of the court, and other similar positions). For certain oversight purposes, such as periodic reviews, SSA categorizes organizational payees into several groups, including: (1) fee- for-service organizations, which charge beneficiaries a monthly fee for expenses incurred in providing services; (2) organizations that serve 50 or more beneficiaries and do not charge a fee for their services, referred to in this report as “high-volume”; (3) organizations that serve fewer than 50 beneficiaries and do not charge a fee for their services, referred to in this report as “low-volume”, and (4) state mental institutions participating in the State Onsite review program. SSA data from fiscal year 2018 indicate that the vast majority (86 percent) of organizational payees are low-volume payees, which serve 34 percent of beneficiaries (see fig. 1). Organizational payees decide how to spend beneficiaries’ funds, but must do so for the beneficiary’s use and benefit in a manner the payee determines to be in the beneficiary’s best interest. SSA considers it acceptable if the funds are used for the beneficiary’s current maintenance, which includes the costs of food, shelter, clothing, and medical care. After the representative payee has used the funds consistent with these guidelines, any remaining amounts must be conserved or invested on behalf of the beneficiary. Organizational payees are responsible for keeping records of SSA payments made to them on behalf of each beneficiary and the expenditures for each beneficiary. All organizational payees participate in onsite reviews and—except for state mental institutions participating in State Onsite reviews—are also required to file an annual accounting form to show how benefit payments were used and any amounts that were saved. Organizational payees also are required to notify SSA of certain changes or situations, including: changes that may affect the beneficiary’s eligibility for benefits or the benefit amounts, such as when the beneficiary, or the beneficiary’s spouse, dies; and when the beneficiary moves or is unable to be contacted or located, starts or stops working, or no longer needs a payee; when organizational payees learn that one or more of their employees has stolen a beneficiary’s funds or determines they can no longer serve as the payee for any reason; and when payees establish an account that mingles funds from multiple beneficiaries in one account—referred to as collective accounts— because these accounts must be approved before use. The process for administering the representative payee program is guided largely by requirements in statute and SSA regulations, which SSA communicates through its Program Operations Manual System (POMS). Recent changes to the program—including the new onsite review process—reflect requirements established by the Strengthening Protections for Social Security Beneficiaries Act of 2018. For example, the Commissioner of SSA must now: (1) reassess representative payee selection and replacement policies, (2) award annual grants (totaling at least $25 million nationwide) to each state’s protection and advocacy system to conduct onsite reviews of representative payees, and (3) award annual grants to a national association that can provide state protection and advocacy systems with training, technical assistance, and administrative oversight. In addition, the Act requires SSA to present the results of reviews—including information on representative payees’ misuse of benefits—in an annual report to Congress. SSA administers and manages the representative payee program through three dedicated data systems: The Electronic Representative Payee System (eRPS) is the system used to process payee applications; record poor payee performance; process changes (such as new addresses); and document misuse allegations, significant information about the payee, and why applications were approved or denied. The Electronic Representative Payee Accounting (eRPA) system is used to capture and review annual accounting forms that all organizational payees except state mental institutions participating in SSA’s State Onsite review program, are required to submit for each beneficiary they represent. Field office staff also use this system to track progress in resolving problems identified during reviews of the form, such as representative payees failing to submit complete information. The newly created Representative Payee Monitoring Tool, which is used to track and oversee the updated onsite review process. SSA operates the representative payee program primarily through its network of field offices. Field offices review and approve organizations’ applications to become representative payees, serve as the point of contact when organizations report changes to beneficiary or organization information, and play a role in monitoring and overseeing representative payees. SSA policy describes the required process for designating a representative payee for a beneficiary whom SSA staff have determined to be incapable of managing his or her benefits. First, organizations apply to serve as a payee for specific individuals. Second, SSA staff review applications to assess if the organization is qualified to serve as a payee and is the most suitable payee for the individual beneficiary. Additional qualifications are assessed when organizations apply to collect fees for their payee services. For example, SSA requires that all fee-for- service applicants have already served at least five beneficiaries for a full calendar month or more, and that non-governmental agencies be licensed and bonded. Once approved, organizational payees are subject to ongoing SSA oversight. SSA reviews annual accounting forms from organizational payees on each of the beneficiaries they represent. The accounting forms are used to monitor how the payee spent or saved benefits on behalf of the beneficiary; identify situations where payment to a payee may no longer be appropriate; or determine if the payee is no longer suitable. In addition to reviewing accounting forms annually, every 3 years SSA must review collective accounts established by organizational payees. Whether or not additional oversight in the form of an onsite review is provided, and the frequency of that oversight, generally depends on the organizations’ characteristics (see table 1). Certain types of organizational payees—such as high-volume, fee-for-service, and some state mental institutions—receive onsite reviews every 3 or 4 years. Low- volume organizational payees do not receive periodic reviews; rather SSA selects some of these payees for onsite reviews based on their likelihood of misusing beneficiaries’ funds and may target additional organizational payees because of an event that raises a question about the payee’s performance or suitability or because a protection and advocacy grantee thinks that a review is warranted. SSA’s purpose in conducting onsite reviews is to: (1) ensure organizational payees perform their duties satisfactorily, (2) deter misuse, (3) keep lines of communication open between the organizational payee and the servicing field office, (4) reinforce to the organizational payee their duties and responsibilities, and (5) proactively address the needs of organizational payees. Gaps in the Organizational Payee Approval Process Introduce Risks We identified several gaps in SSA’s process for approving organizational payees, including insufficient detail in SSA’s policies, insufficient documentation of suitability decisions, and absence of background or credit checks on most organizational payees—gaps that may increase the risk of approving an unsuitable payee. We also identified challenges that field offices may face when approving replacement representative payees, such as a lack of local organizational payees and difficulty locating some beneficiaries. Some SSA Policies for Approving Organizational Payees Lack Detail, and SSA Lacks a Process to Ensure that Supplemental Guidance Is Compliant with Policy When an organization applies to serve as a payee, SSA’s policy stipulates that field office staff evaluate whether the organization is suitable. All payee applicants—individuals and organizations—are subject to the same general suitability factors, and organizations are evaluated on an additional set of suitability factors. Organizations are generally evaluated on the same suitability factors, whether they are a first-time applicant, or applying to serve an additional beneficiary. Additional requirements apply to organizations applying to collect fees (see appendix II). Two factors used to determine the suitability of organizations that are applying to be representative payees are straight-forward: (1) whether the payee agrees to receive benefits via direct deposit and (2) whether the payee uses protected accounts for beneficiary funds. However, other suitability factors are more complex, such as whether the applicant: demonstrates sound financial management policies (i.e., has a history of being current in its own financial obligations), demonstrates effective internal communication (i.e., good communication between case management and financial management components), has adequate recordkeeping systems to ensure that the client’s needs are met and benefits are properly administered. We found that SSA’s policies on how to evaluate more complex issues do not provide sufficient detail to ensure staff can fully assess an organization’s suitability. Staff at one of the eight field offices we visited told us the policies can leave room for interpretation, and staff at three field offices use additional guidance developed by field and regional offices that elaborates on how to assess some of the more complex issues in SSA’s policies. For example, SSA’s policy on what constitutes sound financial management states that an organization should have a history of being current in its own financial obligations. However, it generally does not provide direction on how to verify that an organization meets that requirement. Moreover, the policy lacks details on what staff should do to conduct a deeper assessment of an organization’s financial management practices if they think further assessment is warranted. Similarly, SSA policy directs staff to consider whether an organization has effective internal communication, which it defines as good communication between the organization’s case management and financial management components. However, SSA’s policy does not specify what actions constitute effective communication, such as the frequency and method of communication, type of information to be shared, and time frames for transmitting information. According to federal internal control standards, agencies should establish policies to document responsibilities for a process’s objectives and related risks and communicate these policies to personnel so they can fulfill their assigned responsibilities. Although SSA officials were able to point us to sections of agency policy that went into more detail about some of these complex topics, these policies pertain only to the few organizations that are applying to collect fees. In the absence of specific guidance on how to consider factors when assessing the suitability of all organizational payee applicants, SSA staff may be approving some of them without a complete picture of their financial health and ability to be good stewards of vulnerable beneficiaries’ money. According to central office officials, regions are generally given leeway to create their own supplemental guidance documents based on SSA policy to assist with training—documents that may also serve as resources to help staff interpret SSA policy. Officials in field and area offices told us this supplemental guidance is generally made available to staff on internal websites maintained by area or regional offices. Staff in three field offices told us they use supplemental guidance to evaluate organizations. For example, staff in one field office told us they use a supplemental list of questions to interview organizational payee applicants. These supplemental interview questions address some suitability factors in greater detail than SSA policy. For example: SSA policy directs staff to consider whether the organization “has adequate staff and resources to serve its clients.” The supplemental guidance from a regional office includes five questions on the number, type, relationships, and responsibilities of the staff; training and skills of staff dealing with finances; and documentation. SSA policy directs staff to consider whether the organization “has adequate recordkeeping systems to ensure that the client’s needs are met and benefits are properly administered.” The supplemental guidance from a regional office includes nine questions on the systems, records, procedures, and safeguards related to recordkeeping. Staff in another field office told us they created a desk guide on a range of topics related to individual and organizational payees that includes supplemental guidance documents and excerpts from SSA policy. The desk guide is a reference for all employees that work on payee issues and is also used to train new employees. However, SSA lacks a process to ensure that supplemental guidance is reviewed for compliance at the national level and that such guidance is updated by the regional office in a timely manner. Officials told us that because all regions are expected to follow SSA policy, central office staff only review supplemental guidance when the regions request it. Furthermore, SSA central office officials told us that although there is a protocol for communicating policy updates to regional, area, and field office staff, it is up to regions to refresh their own guidance. These officials did not know how long it takes regions to incorporate policy changes into regional guidance documents. As a result, field offices may be using supplemental guidance that has not been updated to reflect policy changes. For example, in a desk guide we reviewed, we identified a policy excerpt that was not the most recent version of that policy. Federal internal control standards stipulate that management should periodically review policies and procedures for continued relevance and effectiveness. Without processes to ensure that supplemental guidance documents are reviewed for compliance or updated in a timely manner when policy changes, decisions to approve organizational payees may be made inconsistently across different regions and field offices. SSA officials told us in May 2019 that they are currently reevaluating the agency’s representative payee approval policies and procedures based on feedback gathered through a forum hosted in September 2018 by the Social Security Advisory Board and in response to a Federal Register notice published in December 2018. However, SSA did not provide additional information on the nature, scope, or timeframes of this effort. Field Offices Do Not Always Fully Document Their Decisions to Approve Organizational Payees SSA policy requires field office staff to document their assessment of an applicant’s suitability as a payee and the rationale for deciding to approve or deny an application. In addition, before approving a payee in eRPS, the system SSA uses to manage representative payee information, field office staff are to enter notes in accordance with the eRPS user guide. Specifically, staff are directed to document their determination regarding the beneficiary’s capability to manage their own finances and the organization’s suitability as a payee for the beneficiary. In certain situations, SSA policy directs staff to enter an additional note to document the relationship between the beneficiary and the payee. However, we found that staff in field offices we visited did not always fully document their decisions before approving organizational payees for the first time. Specifically, of the 21 first-time application files we reviewed, 16 did not contain a note about the organization’s suitability. Of the five files that did contain such notes, three provided limited detail. For example, two of the approved applications contained a note documenting that the beneficiary currently lived in the facility applying to serve as payee. However, notes in these two approved applications did not include any details regarding the prospective payee’s suitability, such as information about the facility or organization itself. Moreover, in two cases where the payee was a creditor for the beneficiary, we found that SSA staff had not documented why they approved these payees even though they were creditors for the beneficiary. Applicants who are creditors for beneficiaries are generally prohibited from serving as payees. Although exceptions are allowed in certain situations—such as when the organization is a care facility licensed or certified by the state, poses no risk to the beneficiary, and whose financial relationship with the beneficiary presents no substantial conflict of interest—staff are required to document why a creditor was selected as the payee. Although being a creditor could affect a payee’s suitability, we found that field office staff had not recorded information about why they selected these two creditors as the beneficiaries’ payees. We found that SSA staff might not fully document their decisions to approve organizational payees in part because eRPS, the system SSA uses to process payee applications, lacks safeguards for certain information entered into the system. As previously noted, staff use eRPS notes to document their assessment of: the beneficiary’s capability, the payee applicant’s suitability, and, in some cases, the beneficiary- payee relationship. However, while eRPS prevents field office staff from approving a payee without first documenting their assessment of a beneficiary’s capability in a note, this automated safeguard does not extend to the other note type. According to federal internal control standards, agencies should clearly document significant events so that that they are available for examination, and design their information systems to obtain and process information that responds to the agency’s objectives and risks. Because eRPS allows SSA staff to approve a payee without fully documenting the decision, SSA staff may not be able to reference that information to inform future decisions about the organizational payee. Specifically, SSA staff will not be as well-prepared to make fully informed decisions about an organizational payee’s continuing eligibility, or whether the organizational payee should be approved to manage benefits for additional vulnerable beneficiaries. This creates a risk that SSA staff may unwittingly approve an inappropriate organizational payee to serve other beneficiaries. Without Screening Checks, SSA Lacks Additional Insight into the Suitability of Most Organizational Payee Applicants SSA uses two types of external screening—background and credit checks—to identify potential concerns regarding the suitability of certain payee applicants. Whether such checks are required depends on the type of applicant, but most organizational payees do not receive either check. Background checks for individual representative payee applicants: According to law and SSA policy, staff should conduct background checks on individual payee applicants to determine if they have a criminal history that would disqualify them from serving as a payee. As part of the background check, policy directs staff to use applicant interviews and tools embedded in eRPS to gather information about the individual payee applicant’s criminal history, including prison time or unsatisfied felony warrants. Unless the payee is exempted by SSA policy, SSA staff will request the payee’s permission to conduct a background check and, if permission is granted, will then obtain a criminal report from eRPS.32, Credit checks for some fee-for-service applicants: According to SSA policy, staff are directed to obtain and review a credit report from Dun & Bradstreet for all non-governmental organizational payees that are applying to collect fees for payee services. These credit reports include information on bankruptcies, pending or completed legal judgments, liens, payment history and risk, credit use, and how the applicant compares to other organizations in its industry. According to POMS GN 00502.113, certain family members with custody of the beneficiary are exempt from the background check. For non-exempt individual representative payee applicants, field office staff must obtain the applicant’s permission before conducting part of the background check. SSA policy provides additional detail about the specific steps staff are directed to take to obtain information on individual representative payee applicants’ past criminal history. If the applicant does not give permission for a background check, their application to serve as payee will be denied. For more information, see POMS GN 00502.113, “Interviewing the Payee Applicant.” potential risk factors that create payee business losses due to fraud, failure, or severe delinquency, and (2) may provide an indication of any risk involved in the organization’s current or future performance as a payee. However, SSA does not assess these risk factors for most organizational applicants because SSA policy generally does not require staff to conduct background checks for organizational payees, and SSA only conducts credit checks for organizational payees that apply to collect fees. According to SSA data, as of July 2018, only 4 percent of organizational payees were authorized to collect fees and, therefore, may have undergone a credit check. Moreover, those credit checks that are conducted for organizations occur after their initial approval—when they are already serving beneficiaries—because organizations can not apply to collect fees until they have regularly served as payee for at least five beneficiaries for 1 calendar month or more. SSA officials told us the agency does not conduct background checks on organizations, in part because the process is more complicated than for individuals. SSA recommends that organizational payees screen employees who deal with beneficiary funds—identifying this as a best practice—but officials told us this is not required. However, in addition to employees who handle beneficiary funds, the criminal history of an organization’s principals (e.g., chief executive and operating officers, director, president, etc.) may also help inform SSA’s assessment of an organizational payee’s suitability, as these individuals may exert great influence over the tone and structure of the organization. Without conducting credit or background checks, SSA risks unknowingly approving questionable organizational applicants, therefore increasing the risk that beneficiary funds may be misused. In May 2019, SSA officials informed us that, while the agency has been focused on implementing criminal background checks on non-exempt individual representative payees, it is also exploring whether to conduct background checks on organizational payees’ employees or require organizational payee applicants to conduct background checks on their employees. In addition, they told us that SSA has also been considering whether to conduct credit checks on additional organizational payees, but has yet to make a decision on this matter. However, SSA did not provide information on the expected timeframes for this decision-making process. Further, SSA lacks a comprehensive plan for evaluating if and how to expand background and credit checks to organizational payees. SSA Also Faces Challenges Approving Replacement Organizational Payees When an organizational payee closes or is terminated, SSA must ensure that all affected beneficiaries can continue to access their benefits, either by finding a replacement payee or—when a beneficiary is deemed capable of managing their own finances—paying the individual directly. SSA officials told us they strive to avoid temporarily suspending benefits. However, temporarily suspending benefits may be necessary to avoid sending beneficiary funds to a former payee that is no longer able or willing to manage them. SSA’s policies delineate when temporarily suspending benefits may be necessary, such as when a beneficiary’s whereabouts are unknown. In 2017, according to SSA data, 427 organizational payees closed or were terminated by SSA. According to SSA data, SSA suspended benefits for more than 13,000 beneficiaries affected by payee closures and terminations in fiscal year 2017; their benefits were suspended for an average of 2.28 months. SSA policy describes the steps that SSA staff must take when dealing with the closure or termination of an organizational payee serving multiple beneficiaries, but SSA’s level of involvement in finding replacement payees varies depending on the situation. Staff at one field office said that, for the only organizational payee that closed in the last several years, they were involved in finding replacement payees for affected beneficiaries before they terminated the organizational payee. However, staff from two field offices told us that SSA is not always involved in finding new payees. For example, staff at one of these field offices said that when the state closed a nursing home in their jurisdiction, it was state officials and not SSA who found new facilities for affected beneficiaries. When these new facilities applied to serve as payee for their new residents, SSA processed the applications (see sidebar). Staff at another field office told us that before closing, some organizational payees identified prospective payees for affected beneficiaries. In those cases, payee staff submitted proposed payee changes to SSA, and SSA told these prospective payees they must file an application to become the approved payee. Officials in SSA’s central office told us that staff determine if the applicant is the most suitable payee before approving them. According to SSA officials, in 2015, SSA enhanced its policy on what to do when beneficiaries are affected by an organizational payee’s closure or termination. Specifically, national officials told us SSA added new procedures for appointing a new payee in cases of immediate payee termination and emphasized the narrow circumstances when it is appropriate to temporarily suspend benefits. Officials told us these changes were in response to a challenging experience terminating a large organizational payee in 2014 that served nearly 1,000 beneficiaries. Despite this change to agency policy on replacing organizational payees that are terminated or closed, SSA continues to face some challenges in approving replacement payees. Specifically, SSA staff we interviewed cited a number of challenges they had encountered, such as shortages of local organizational payees and difficulties obtaining information from terminated organizational payees. While these challenges may not apply to all field offices, they provide examples of circumstances that can complicate the process of reassigning beneficiaries. Lack of local organizational payees. Officials in some field and regional offices said they lack sufficient organizational payees in their local area. For example, staff in three field offices said many organizational payees in their area only serve certain types of beneficiaries, such as the elderly or individuals with developmental disabilities or specific medical conditions. Staff in two field offices told us they had unsuccessfully tried to recruit additional organizational payees in their jurisdiction. Similarly, a member of an SSA managers association noted that it has been several years since a new organizational payee was approved in her state. Difficulty ensuring community presence for fee-for-service organizational payees. Officials from SSA’s regional, area, and field offices told us that it can be challenging to meet the agency’s requirement that non-governmental fee-for-service organizational payees be community based. For example, staff at an SSA area office told us that finding payees within the community is challenging in sparsely populated and remote areas, such as along Maine’s border with Canada, where beneficiaries may not live near any approved organizational payees. In March 2019, SSA updated the policy on community presence for non-governmental fee-for-service organizational payees to better specify what is required for a payee to establish community presence, but it is not yet clear the extent to which this update resolves field office concerns about remote areas. Difficulty locating beneficiaries. Officials in some field and regional offices noted that they sometimes struggle to locate beneficiaries, which hinders reassignment. Homeless beneficiaries, in particular, can be difficult to find, according to staff in one regional office. Difficulty obtaining information from terminated organizational payees. Officials in some SSA offices told us that they may lack information necessary to complete the transfer of an affected beneficiary to another payee. For example, staff in a regional office said that terminated organizational payees may not always be forthcoming about unspent beneficiary funds. Staff in another field office told us that because a terminated organizational payee had not maintained adequate records of beneficiaries’ guardians, SSA staff had to go to court to identify them before approving replacement payees. SSA’s Communication with Organizational Payees Varies and Payee Feedback Is Not Systematically Collected SSA Has Various Opportunities to Communicate with Organizational Payees SSA staff communicate with organizational payees at various points. According to SSA policy, field offices should communicate with organizational payees when they initially apply, and field office staff may communicate with payees as part of periodic oversight activities—such as through record change reporting requirements or following up on annual accounting forms. During the application process, SSA field office staff should explain the responsibilities and duties of a payee. For example, they should explain that payees must submit an annual accounting form and that payees must keep detailed records of how benefits are used in order to provide an accurate report to SSA when requested. Field office staff also should explain when payees must contact SSA, such as when a payee’s address changes. Monitoring and oversight activities, such as reviews of annual accounting forms, also provide opportunities for SSA field staff to communicate with organizational payees. Similarly, SSA’s ongoing reporting requirements—such as to update certain beneficiary or payee information—provide another opportunity to interact. According to field staff we interviewed, staff frequently communicate with organizational payees regarding changes to a beneficiary’s address. Finally, according to SSA officials, SSA also communicates with organizational payees by providing information online and providing guidance documents when payees are approved. While all field offices communicate with their organizational payees, how field offices communicate with payees can vary. Four of the eight field offices we visited had designated specific staff either to work with each organizational payee or with high-volume payees. In the other four field offices, payees talk to whichever staff member is available. SSA officials told us that the different workforce arrangements stem from varying workflows and staffing resources at individual offices. Similarly, we found variation across field offices regarding whether SSA staff reach out to organizational payees even if changes do not need to be made or problems addressed. For example, staff at four of eight field offices also said that they have held training sessions for groups of organizational payees. Further, staff at three field offices told us that SSA provides training to specific organizational payees at their request, such as when an organization experiences staff turnover. Selected Organizational Payees Expressed Frustrations with SSA Communications Seven of the eight organizational payees we spoke with expressed frustration either with SSA’s follow-through on communications or with its processes for receiving information from payees. Application status updates. Three payees said that SSA staff did not tell them how long it would take to review their application. They also said SSA staff had not provided updates during the process, which took 2 to 3 months or longer to complete. Follow-up calls. These three payees also said that they were not told how long it would take for SSA staff to return their calls, and two said that sometimes they never received a call back. Wait times. Two payees said that it takes too long to provide information in person at SSA field offices. For example, after signing in at a kiosk, a payee may have to wait for hours until their number is called. This payee said that they often bring beneficiaries to the SSA office and that long wait times can be very difficult for them, particularly those with mental illness. In some cases, beneficiaries have walked out or passed out while waiting in the SSA office, according to the payee. The payee also said that long wait times are sometimes compounded when field office staff require them to return to the queue for each successive case rather than handling all the payee’s cases at once. However, because field offices are allowed to establish their own workflow processes, this issue may not apply to other field offices. Faxing documents versus sending them electronically. Three payees said that having to fax documentation to SSA rather than send this information electronically creates additional work. SSA officials said that the agency has a plan to allow individual payees to securely transmit personally identifiable information electronically, but has not established a timeframe for allowing organizational payees to do so. At the field offices we visited, managers had different expectations regarding time frames for responding to payee requests. Three managers we interviewed said that staff should respond to payees as soon as possible, three managers said that staff should respond within 24-48 hours, and two managers said staff should respond within 7-14 days. SSA officials told us that SSA has not set timeliness standards for field offices because doing so could affect other workloads in unanticipated ways and it is the agency’s goal to provide service and support to all payees on an ongoing basis. Organizational Payees May Provide Feedback to SSA but SSA Lacks Systematic or Formal Feedback Mechanisms for Collecting and Analyzing Feedback SSA may receive feedback from organizational payees through various mechanisms. Officials from SSA’s central office told us that organizational payees can provide feedback either by contacting their local field office or calling SSA’s national customer service number. Some field office staff also said that they provide informal opportunities for payees to offer feedback. For example, one field office manager told us that he spends time building relationships with organizational payees, solicits feedback by asking how things are going, and sometimes visits organizational payees when he is nearby. Another manager emphasized the importance of gathering and responding to organizational payee feedback. This manager said that she established quarterly calls with multiple payees to discuss issues and solicit feedback. Managers of two field offices told us that they provide standardized SSA customer comment cards in their waiting areas, although the cards do not ask respondents to identify whether they are organizational payees. However, SSA does not have a mechanism for payee feedback to be systematically collected, compiled, and analyzed across field offices to determine if programmatic changes are warranted. SSA officials said they do not have or plan to develop a formal mechanism for collecting and analyzing organizational payee feedback because the current process allows field offices to respond to all public contacts in a consistent and timely manner. However, federal internal control standards state that management should establish reporting lines that allow the agency to receive quality information from external stakeholders and specify that quality information, among other things, should be complete, current, and provided on a timely basis. Without a formal mechanism to systematically collect and analyze payees’ feedback and ideas for program improvement, SSA cannot be sure that it is receiving complete or current impressions from organizational payees on how efficient its processes are or how timely it responds to their needs. Being aware of and responding to payees’ concerns might help the agency retain and attract organizations to serve as payees and ensure it is well-positioned to meet future challenges. SSA Offices Use Several Methods to Oversee Organizational Payees, but the Methods Have Shortcomings SSA uses several methods to oversee organizational payees, including conducting onsite reviews, and reviewing annual accounting forms and collective accounts. However, each of these methods has shortcomings in its design and implementation, weakening SSA’s ability to effectively oversee payees and prevent fraud. SSA officials said they plan to conduct an over-arching assessment of fraud risks to the representative payee program in 2019, but the robustness of such a plan is yet to be determined. SSA is Transitioning to a New Onsite Review Process but its Process for Targeting Low-Volume Payees for Review is Poorly Documented Transition to SSA’s New Onsite Review Process State protection and advocacy agencies (“state grantees”), the national association grantee (which is currently the National Disability Rights Network, or NDRN), and SSA regional offices play key roles in the new onsite review process for organizational payees. Given the extent to which onsite reviews uncover misuse and other problems, the onsite review is a crucial control for the representative payee program. Under the new process, state grantees generally interview selected payees, beneficiaries, and legal guardians or third parties; review financial records for selected beneficiaries over a 12-month period; transmit findings from their reviews to SSA; and, in some cases, follow up on deficiencies they identify. State grantees also suggest additional payees to review (beyond those targeted by SSA) if they think such a review is warranted. According to SSA, the national association grantee’s responsibilities include: (1) training state grantees; (2) ensuring the quality of onsite reviews; (3) serving as the first point of contact for state grantee communication and questions; and (4) providing state grantees with technical assistance, administrative support, and data collection services. According to SSA, the regional offices are responsible for compiling information to facilitate grantees’ onsite reviews that is not automatically provided through SSA’s system and for clarifying procedural and technical information for the grantees. Regional offices also address and resolve all deficiencies the grantees do not resolve, according to SSA. Lastly, under the new system, state grantees, the national association grantee, and SSA input information from reviews and track progress towards completing their assigned reviews using SSA’s new Representative Payee Monitoring Tool, which is used to manage and control the new onsite review process. According to six NDRN representatives, transitioning to the new onsite review system involved challenges with grantees gaining access to equipment, working through bottlenecks at some regional offices, responding to unanticipated workloads, and receiving timely responses to feedback. Specifically, NDRN representatives said that while the process of clearing grantees to access beneficiaries’ personally identifiable information has been efficient, there have been delays providing grantees with access to SSA laptops, printers, and scanners. As a result of these equipment delays, grantees started to conduct reviews on paper and then input the information later, according to NDRN representatives, thus using less efficient, manual processes. NDRN representatives also said that the new onsite review process involves multiple handoffs between grantee and regional office staff, which has contributed to bottlenecks at some regional offices. Moreover, NDRN representatives noted that, in addition to the reviews SSA originally assigned to the grantees, regional offices have tasked them with conducting quick response checks. Because these reviews have generally involved assessing a large number of financial records and conducting many beneficiary interviews, and were not anticipated in SSA’s initial plan, NDRN representatives believe they may affect the ability of some state grantees to complete the other reviews SSA had initially planned. Lastly, an NDRN representative said that the timeliness of SSA’s responses to grantee feedback and concerns (communicated from state grantees via NDRN) has diminished in recent months. Specifically, the NDRN representative said that the computer program SSA staff developed to enable NDRN to submit questions to the agency was initially working well. However, recently, as the volume of NDRN’s questions has increased, the system is not working as well, and NDRN has asked for clarification on some important issues, to which SSA has not yet responded. As of May 2019, SSA reported to us on progress state grantees had made towards reaching the total number of reviews SSA had planned for the fiscal year. Specifically, as of May 21, 2019, state grantees had conducted 112 of 852 planned high-volume reviews; 45 of 461 planned fee-for-service reviews; and 0 out of 60 planned state mental institution reviews. Although SSA initially assigned 2,800 low-volume reviews in grant year 2019, SSA estimated in July 2019 that it will have initiated around 1600 low-volume reviews by the end of the first grant year—about the same number as completed in fiscal year 2018 (1,691). SSA officials acknowledged these challenges and said they have been addressing them, and will continue to address them and to monitor progress. SSA officials cited significant improvements in issuing laptops since they began the process in September of 2018. Regarding delays in distributing printers and scanners, SSA reported that they are in the final stages of procuring printers but that as of May 2019, they had not identified an acceptable scanner model. SSA officials also said they are developing a policy to govern grantee use of printers. SSA acknowledged that workflow bottlenecks involving regional offices may exist, and said that they will continue to monitor all actions required to be taken by regional office staff. SSA staff also acknowledged having initiated more quick response checks than originally anticipated, and said they are researching options to alleviate the impact of these reviews on NDRN and state grantee resources. Finally, SSA staff said that they will continue to evaluate how SSA collects and responds to state grantees’ feedback, and to hold weekly discussions with NDRN to identify ways to improve the new onsite review process. GAO is not making recommendations in this area because the onsite review process is new and SSA continues to implement it and work to address implementation challenges. Targeting Onsite Reviews for Organizations That Are Low- Volume Payees Onsite reviews are resource intensive because they involve examining organizational payee financial records and interviewing payee staff and beneficiaries; therefore, SSA uses a risk-based approach to select which organizational payees receive onsite reviews and how frequently such reviews occur. SSA reviews all fee-for-service, high-volume payees, and certain state mental institutions—which together account for around 67 percent of all beneficiaries and about 14 percent of all organizational payees—at regular intervals of every 3 or 4 years, depending on the type of organization. However, for the vast majority of organizations that are low-volume payees (29,082 of around 33,700), SSA selects a subset of payees to receive onsite reviews each year. As shown in figure 2, more than half of the onsite reviews SSA conducted in fiscal year 2018 were for low-volume payees (1,619 of 2,774 reviews). However, because there are so many low-volume payees, only about 6 percent of these payees received an on-site review. In contrast, the lower number of high-volume onsite reviews conducted (767) covered about 25 percent of high-volume payees. Given that only a fraction of low-volume payees are selected for onsite review each year, it is critical that SSA effectively prioritize which payees should receive onsite reviews so SSA can effectively allocate resources. To this end, SSA uses a predictive statistical model it first implemented in 2012 to rank low-volume organizations based on their chance of misusing beneficiary funds and selects for onsite reviews those organizations identified as having the highest risk. SSA staff told us they determine how many reviews to conduct based on available resources. However, we were unable to fully assess SSA’s decisions in developing its model, or the model’s accuracy at predicting misuse compared to alternative targeting methods, because SSA did not fully document or retain documentation that described in sufficient detail important decisions it made when developing it. For example, the available documentation does not explain in sufficient detail how SSA assembled data on the target population; how SSA sampled organizational payees for assessing characteristics; which variables SSA considered using to help predict misuse but ultimately decided not to include; how, if at all, it assessed or assured itself of the reliability of the data the model used; and how it decided to account for multiple beneficiaries with the same payee. An SSA official responsible for using the model said he was not sure whether documentation existed but was not retained, because the individuals who developed the model are no longer with the agency. Office of Management and Budget (OMB) standards for federal censuses and surveys—which contain accepted practices (but not requirements) for federal statistical efforts not officially covered by the standards—call for documentation that “includes those materials necessary to understand how to properly analyze data” and “replicate and evaluate” statistical estimates. Moreover, federal internal control standards state that effective documentation enables agencies to retain organizational knowledge, mitigate the risk of having knowledge limited to a few personnel, and communicate knowledge as needed to external parties, such as external auditors. Due to the absence of key documentation, neither SSA itself nor an external party is able to affirm whether, in comparison to other approaches, SSA’s predictive model is the optimal approach to identify low-volume payees and beneficiaries with the highest risk of misuse. SSA officials told us that they will revise the model at some point in the future—at which point they could improve the documentation—but that they do not have a formal plan to do so. SSA officials said they do not have imminent plans to update the model because the pool of identified misuse cases, which is driven by the number of onsite reviews conducted, is too small. Finally, SSA officials said they are hesitant to re-evaluate the organizational payee predictive model because they believe the current model is working effectively. However, seven years have passed since SSA first developed the model, and SSA cannot be assured that the current model remains as effective as when it was last formally validated and compared to alternative models or targeting methods. Accepted practices for developing predictive statistical models call for periodic re-estimation and re-validation, using data that are current and applicable to the conditions in which the model will be applied. Moreover, federal internal control standards call for agencies to conduct ongoing monitoring of the design and effectiveness of the internal control system including evaluations of control design. SSA reported conducting ongoing assessments of the model’s continued effectiveness, and provided us with aggregate performance data for 2012 to 2016. However, inclusion of older data and absence of more recent misuse data in aggregated results provide limited assurance of the model’s ongoing effectiveness. In addition, a recent report by SSA’s Office of the Inspector General (OIG) suggests that it may be possible to assess the ongoing suitability of nursing home payees by using additional data, although we did not evaluate the validity of the study’s conclusions. The SSA OIG’s report expressly looked at how data from the Centers for Medicare & Medicaid Services (CMS) might be used to evaluate the suitability of nursing homes and found that these data would help SSA more effectively assess the ongoing suitability of existing nursing home payees. Specifically, the OIG used CMS data reflecting penalties and other signs of underperformance to identify poorly-performing nursing homes that might also be poorly executing their duties as payees. For instance, according to SSA policy documents, the form can help SSA identify previously unreported changes to beneficiaries’ addresses; identify unapproved collective accounts; determine if certain beneficiaries’ savings are too high to qualify for benefits; or determine whether the organizational payee is authorized to charge a fee, if the payee reports charging one. outcomes would significantly dilute the model’s ability to detect misuse, which they consider to be the most important goal of the representative payee review process. Developing additional models to predict other types of poor payee performance besides misuse (such as poor recordkeeping or payees’ failing to meet beneficiary needs, which were identified in the OIG study) could reduce SSA’s reliance on a model for which the low number of misuse findings affects the efficacy of ongoing performance assessments and prevents timely updates. Since SSA has only identified 31 misuse cases using the predictive model since 2012, decades may pass before SSA has the approximately 5,300 misuse cases it wants in order to formally evaluate the model, and before SSA and others can be assured that low-volume payees are being optimally targeted for review. Without re-evaluating whether the current model remains predictive, and periodic assessments about whether it predicts high-risk payees better than an alternative model or targeting method, it is unknown whether SSA has maximized its ability to target low-volume payees. SSA Reviews Annual Accounting Form Submissions and Collective Accounts, but these Reviews Have Shortcomings Timeframes for Annual Accounting Form Follow Up The annual accounting form is a key oversight tool because it touches most organizational payees, and reviewing the annual accounting form helps SSA to maintain current beneficiary and payee information and to identify and resolve potential problems. For instance, according to SSA policy documents, the form can help SSA identify previously unreported changes to beneficiaries’ addresses; identify unapproved collective accounts; determine if certain beneficiaries’ savings are too high to qualify for benefits; or determine whether the organizational payee is authorized to charge a fee, if the payee reports charging one. electronic processing indicates a potential problem, field offices sometimes follow up with the payee to resolve the issue. However, SSA has not established time frames within which field offices must initiate this follow-up. For example, SSA guidance states that when organizational payees do not submit the form timely, field offices should contact the payee by phone to find out why the required form was not completed. However, the guidance does not establish time frames within which field offices should initiate the call. Similarly, SSA told us they do not have time frames within which staff should follow up to resolve potential problems flagged during electronic testing. In the absence of national guidance, area offices we interviewed varied in the extent to which they established time frames for the field offices in their purview to follow up with organizational payees that did not submit an annual accounting form or whose form was flagged for potential errors. One area office we talked with expected staff to follow up with payees within 30 days but did not track time frames, another area office had not established time frames, and officials from one field office told us that their area office considered follow-up over 120 days to be untimely. Given the absence of SSA guidance and variation in area office practices related to establishing timeframes, field offices may not ensure that this oversight mechanism is attended to in a timely manner. Officials at one field office we visited told us that they had a backlog of forms needing follow-up because the designated point person had left the agency. Officials from another field office attributed the backlog to multiple factors, including a staff person being out sick and their workload not being reassigned, and the office taking on a special project. While we heard from several field offices that the majority of follow-up on annual accounting forms is for clerical errors or mistakes, staff from one field office said that when staff must follow up with organizational payees to ensure they submit a simple accounting form, it raises concerns about whether those payees are fulfilling their other duties. Federal internal control standards state that managers should use quality information to achieve the entity’s objectives and that they should ensure information is complete and provided on a timely basis. In May 2019, SSA officials told us that they are now exploring approaches to implement a nation-wide time frame to address these forms because a 2018 law— which reduced the volume of annual accounting forms SSA has to process—allows staff to focus on problematic forms more expeditiously. SSA officials said that they had not previously established a time frame because they expected organizational payees to have routine contact with field offices and expected field offices to re-evaluate the payee’s suitability if the payee did not cooperate when conducting SSA business. In addition, SSA expects state grantees to follow up on accounting forms as part of their onsite reviews. At the same time, one of SSA’s stated purposes for using the annual accounting form is to evaluate payee suitability on a regular basis rather than relying on ad hoc interactions between the payee and field office, or relatively infrequent periodic and targeted reviews. Until SSA establishes time frames within which staff must follow up on issues identified during annual accounting reviews, the agency cannot ensure that it is taking timely action to resolve potential problems and maximize this monitoring tool. Content and Design of the Annual Accounting Form Although the accounting form is a key oversight tool for SSA, shortcomings exist in the form’s content and design. For example, SSA’s annual accounting form does not ask or remind organizational payees about all collective account requirements, and as a result does not fully support SSA’s oversight efforts. Collective accounts are permitted under SSA policy, but SSA reviews and approves them to ensure that payees comply with SSA’s policies and procedures. While the annual accounting form asks payees whether they put any saved funds into a collective account, the form does not ask whether the payee uses a collective account for day-to-day expenses. Payees should disclose the use of any collective account to SSA independent of the form but may have neglected to, and SSA does not use the form to fully ascertain the use of collective accounts. Consequently, SSA may not have up-to-date information about all of the collective accounts that an organizational payee might be using—information that could help place these risk-prone accounts on SSA’s radar to initiate the approval process and provide ongoing oversight. Federal internal control standards state that agencies should design control activities to achieve objectives and respond to risks. When SSA officials were asked why the annual accounting form does not ask about all collective accounts, the officials said this would be unnecessary because payees are required to notify the field office if they wish to open such accounts. SSA also indicated that its periodic and targeted onsite reviews will uncover collective account issues for the highest risk payees. However, SSA finds many instances of unapproved collective accounts during its onsite reviews, suggesting that organizational payees might not be proactively reporting opening such accounts to SSA as required. For example, in fiscal year 2018, SSA found unapproved collective accounts in nearly 17 percent of the onsite reviews it conducted of organizational payees (in 477 instances out of 2,882 reviews). Staff we interviewed from one field office also said they have identified organizational payees with unapproved collective accounts. Specifically, staff said they have identified at least three payees with unapproved accounts, one of which they identified when reviewing the payee’s annual accounting form. This suggests that some payees may be willing to report they have a collective account, but not remember or understand their responsibility to seek approval from SSA when they open such accounts. Although SSA’s accounting form includes reminders of various payee responsibilities, the form does not include a reminder to all payees that they should notify SSA when they establish collective accounts. Reminding payees of these responsibilities could serve as a regular reminder for payees to notify SSA about the existence of these accounts, and thereby help ensure SSA provides regular oversight of them. Stakeholders have also identified shortcomings in the content and design of the accounting form. For example, SSA currently provides payees’ total benefit amounts in the form, and asks payees to report how they spent those benefits. In a 2007 review of SSA’s representative payee program, the National Academy of Sciences (NAS) reported that because SSA preprints total annual benefit amounts on the annual accounting form, it is easy for payees to report spending that matches the total provided by SSA. Even if the amounts the payee reported were incorrect, SSA’s electronic check would not trigger further review of these responses as long as the numbers added up. NAS further suggested that omitting this information would reinforce payees’ responsibility for keeping and consulting their records. In light of this and other findings, NAS broadly recommended redesigning the form to collect more meaningful data—a recommendation echoed by the Social Security Advisory Board in 2018. When asked why SSA did not adopt NAS’ recommendation, SSA indicated to us that it believed that NAS signaled that other recommendations were more important, and cited NAS’ statement that “no form, by itself, is going to detect program misuse.” At the same time, NAS restated its recommendation to redesign the form twice in its report and in each instance noted how the form could complement other oversight efforts. Research also suggests that agencies can improve the quality of the data they collect via forms by applying behavioral science insights. For example, behavioral science research has shown that requiring a signature at the beginning of an online form helps promote honest self- reporting and can lead to government savings.77, Moreover, the Internal Revenue Service has identified approaches based on behavioral science insights for improving compliance and honest self-reporting, and for encouraging people to make good choices when providing information. Given the importance of the annual accounting forms for oversight of payees, considering and applying, where appropriate, behavioral science insights while redesigning the accounting forms could help SSA achieve more reliable and accurate reporting. Collective Account Follow Up Executive Office of the President. National Science and Technology Council. Social and Behavioral Sciences Team Annual Report (September 2015). See ep 31-32. Lisa L. Shu, Nina Mazar, Francesca Gino, Dan Ariely, and Max H. Bazerman, Signing at the beginning makes ethics salient and decreases dishonest self-reports in comparison to signing at the end.” Proceedings of the National Academy of Sciences of the United States of America. (Nov. 18, 2012). In contrast, the signature field in SSA’s accounting forms is located at the end of the form. accounts without oversight. A regional office analyst referred to this as a glitch in the system and told us this issue was recently raised during a meeting with the central office. In response to our inquiry about disappearing alerts and collective account information, SSA staff indicated that removing alerts and collective account information after approval expires is appropriate because field offices should always renew collective accounts before this occurs. SSA further explained that the alerts are not deleted from eRPS, but rather removed from the system’s “Workload Action Center” 30 days after the collective account expiration date. Similarly, SSA reported that collective account information is not deleted from eRPS, but rather no longer displayed as an active account. However, removing information on accounts that were not renewed timely weakens the efficacy of its collective account review process to the extent that accounts are operating without SSA approval and oversight. SSA Did Not Have a Process for Periodically Assessing Program Risks, but Recently Said it Plans to Conduct a Comprehensive Fraud Risk Assessment SSA has taken steps to address risk associated with payee oversight, but to date has not continuously assessed and responded to potential risks. Federal internal control standards state that to manage risk, agencies should identify risks that might prevent the agency from achieving its objective; assess the significance of those risks; and design responses so that analyzed risks are within the agency’s risk tolerance level. In June 2013, SSA formed a task team to conduct a comprehensive review of the representative payee program and develop recommendations. This effort resulted in, for example, a new process of sharing misuse information with the Department of Veterans Affairs. While this was a positive step, the task team disbanded in 2014 because it had generated a set of recommendations and SSA wanted to shift to implementing those recommendations, according to agency staff. However, resulting actions did not include a forum or system for continuously assessing lessons learned from audits and reviews or identifying solutions that might have addressed gaps we identified in this report. For example, we found that SSA discovers many instances of unapproved collective accounts during onsite reviews, but we have not seen documentation that SSA has assessed the risk of unapproved collective accounts existing among low- volume payees that do not receive any regular scrutiny. Having a process for continuously assessing and responding to potential risks could better position the agency to respond to pressure placed on the payee program due to an aging population. As of May 2019, SSA reported it was in the early stages of planning a fraud risk assessment of the representative payee program (for both individual and organizational payees). In January 2019, a staff person within SSA’s Office of Anti-Fraud Programs, which provides centralized accountability and oversight for the agency’s anti-fraud activities, told us they had identified the representative payee program as one that might benefit from a risk assessment, and that they were currently developing a strategy for conducting such risk assessments for a number of programs. At that time, the staff person did not know whether they would be doing a fraud risk assessment of the representative payee program specifically. SSA subsequently reported in May 2019 that the agency has established a schedule and business process for conducting its risk assessments, including one on the representative payee program. According to SSA, the fraud risk assessment will provide a comprehensive and strategic look at the fraud risks facing the representative payee program and the controls SSA has in place to mitigate those risks. SSA also reported it plans to begin the assessment of the representative payee program in October 2019, and update it every 3 years beginning in 2024 to determine whether there have been any changes to the risks and whether additional actions are required. While promising, SSA plans have yet to take shape. Ensuring that its fraud risk assessments periodically examine the results of onsite reviews and audits will be an important element in the design of SSA’s risk assessment efforts. Conclusions Organizational payees play a critical role in ensuring beneficiaries’ basic needs are met. The beneficiaries these payees serve—individuals who cannot manage their own finances and lack a family member or friend to do so on their behalf—are dependent on their representative payees and thus extremely vulnerable to financial abuse. It is therefore crucial that SSA take steps to shore up a range of gaps in how the agency evaluates, supports, and oversees payees to better ensure beneficiaries are protected. Carefully screening organizations applying to be representative payees is key to proactively avoiding potential abuse. However, in the absence of detailed and centrally-approved policy guidance on how to assess complex suitability factors for approving payees, SSA cannot be sure that field office staff are consistently and appropriately evaluating applicants’ suitability. Also, until SSA updates its electronic system to ensure staff’s rationale for approving or denying payees is captured in accordance with policy, SSA may not have the benefit of information to better monitor payees and inform future suitability decisions. Lastly, without a comprehensive plan, including timeframes, for evaluating if and how to conduct background and credit checks to help staff vet organizational payees—as it does for individual payee applicants—SSA may forgo potentially valuable safeguards for further protecting vulnerable beneficiaries. Once approved, organizational payees rely on SSA for information or action in order to effectively carry out their responsibilities. Absent a formal mechanism whereby feedback from payees on SSA services and processes can be collected, compiled, and analyzed, SSA may not be sufficiently aware of payee needs and frustrations, which in turn could result in lost opportunities to either retain or recruit organizations willing to serve this critical function, or make program improvements. To ensure payees are managing beneficiary funds appropriately, SSA relies on a number of monitoring mechanisms, including onsite reviews. Onsite reviews represent SSA’s most thorough and resource-intensive monitoring tool and must be appropriately targeted. Until SSA develops a plan to periodically review the predictive model’s design, considers inclusion of additional relevant data in the current model or an alternative model that predicts outcomes other than misuse, and documents any subsequent design changes, the model’s efficacy cannot be fully assessed or ultimately improved upon, and SSA may not be effectively targeting high-risk, low-volume payees for review. SSA may detect payee performance problems by reviewing annual accounting forms for all organizational payees; however, without a process to ensure prompt follow-up, SSA cannot be sure staff resolve problems in a timely manner. Moreover, mingling beneficiaries’ funds in collective accounts can mask misuse, and until SSA addresses gaps in the annual accounting form and issues with eRPS, SSA cannot effectively monitor payees’ use of such accounts. Addressing gaps in existing processes could improve the integrity of SSA’s representative payee program and reduce risks to SSA’s most vulnerable beneficiaries, but may not be sufficient in light of challenges posed by the nation’s aging population, which could swell the number of vulnerable beneficiaries that need payees. Carrying through with its plan to develop initial and periodic fraud risk assessments for the representative payee program—and ensuring that the assessments reflect consideration of findings from onsite reviews and audits—could help SSA anticipate potential problems and develop strategies to mitigate their impact. Recommendations We are making the following nine recommendations to SSA: The Commissioner of the Social Security Administration should ensure that (a) the agency’s policies and guidance are specific enough so field office staff know how to apply complex suitability criteria for assessing payee suitability, such as by providing a minimum set of specific questions; and (b) additional regional guidance that is made available to staff is centrally reviewed for compliance and completeness. (Recommendation 1) The Commissioner of the Social Security Administration should create safeguards in the eRPS system to ensure that field office staff fully document all required information, such as the rationale for their decision, before approving an application. (Recommendation 2) The Commissioner of the Social Security Administration should complete a plan, including timeframes, for comprehensively evaluating if and how to leverage external sources of information on organizations’ suitability, such as by conducting background checks or credit checks on organizations or key staff that handle beneficiaries’ funds or requiring organizations to conduct their own background checks on key staff. (Recommendation 3) The Commissioner of the Social Security Administration should develop and implement mechanisms to systematically obtain and review feedback from organizational payees and communicate findings to SSA management. (Recommendation 4) The Commissioner of the Social Security Administration should (a) establish a plan and time frame for periodically reviewing the predictive model’s design; (b) consider additional data sources that would allow for additional screening or modeling of potentially high-risk organizational payees; and (c) ensure that subsequent design decisions are documented in sufficient detail so the development process can be more fully understood and replicated, either by SSA or a knowledgeable third party, with minimal further explanation. (Recommendation 5) The Commissioner of the Social Security Administration should require field offices to contact payees about missing or problematic annual accounting forms within a specific time frame. (Recommendation 6) The Commissioner of the Social Security Administration should revise the annual accounting form to enhance its effectiveness. Such revisions could include (but not be limited to) more fully ascertaining the use of collective accounts, adopting stakeholders’ recommendations on using the form to collect more meaningful data, and reflecting best practices from behavioral science insights in the design of the form. (Recommendation 7) The Commissioner of the Social Security Administration should enhance the eRPS system to ensure that field offices are (a) alerted when collective accounts are due to be reviewed; and (b) able to take action on expired collective account information and thereby avoid payees’ continued use of these accounts without oversight. (Recommendation 8) The Commissioner of the Social Security Administration should, as it carries through with its plan to develop a risk assessment for the organizational payee program, ensure that that the plan reflects periodic consideration of findings from onsite reviews and audits. (Recommendation 9) Agency Comments We provided a draft of this report to SSA for review and comment. In written comments, reproduced in appendix IV, SSA agreed with all nine of our recommendations and outlined its planned actions to address several of the recommendations. SSA also provided technical comments that we incorporated into the report, as appropriate. SSA provided additional comments on its plans to address four of our recommendations. Specifically, with respect to our second recommendation that SSA create safeguards in its Electronic Representative Payee System (eRPS) to ensure that field office staff fully document decisions to approve organizational payee applications, SSA reported that, as part of implementing the Strengthening Protections for Social Security Beneficiaries Act of 2018, planned changes to eRPS will improve documentation of selection decisions. SSA also reported it will also consider additional enhancements to eRPS in the future. We welcome SSA’s intentions to improve documentation of selection decisions and consider additional enhancements to eRPS. With respect to our third recommendation that SSA complete a plan, including timeframes, for evaluating if and how to leverage external sources of information on organizations’ suitability, such as by conducting background checks or credit checks on organizational payee applicants, SSA officials reiterated that SSA is first focusing on implementing provisions of the Strengthening Protections for Social Security Beneficiaries Act of 2018 related to background checks for certain individual payees. After completing this work, SSA plans to evaluate conducting criminal background checks and credit checks on organizational payees and their staff. While we agree that implementing background screening pursuant to the law should take precedence, SSA should seek opportunities to implement screening for organizational payees at the earliest opportunity. With respect to our fifth recommendation related to SSA reviewing, enhancing and documenting its model for selecting low-volume organizational payees for on-site reviews, SSA reported that it will pursue other data sources to develop additional screening tools and models to identify potentially high-risk organizational payees, but that it is unable to incorporate additional data into the existing model. We recognize that the current model, which focuses on misuse findings and is based on historical data, presents challenges for both updating and including new data sources. Therefore, as SSA considers additional screening tools and models to identify high-risk, low-volume organizational payees, SSA should develop a plan for revising the existing model that allows for more timely updates and results in documentation of related design decisions. With respect to our eighth recommendation that SSA enhance the eRPS system to more effectively address expiring collective accounts, SSA officials reported that they would work with staff to ensure staff know where to find alerts for expiring accounts and enhance how eRPS displays information on collective accounts that have already expired. We agree with SSA’s proposed actions. However, we adjusted our recommendation to clarify that SSA should enhance eRPS in a manner that ensures staff take action on expired accounts and that payees do not continue to use expired accounts without oversight. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Commissioner of the Social Security Administration, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4040 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: Objectives, Scope, and Methodology The three objectives examined in this report are how the Social Security Administration (SSA): (1) approves organizations to be representative payees, (2) communicates with organizational payees, and (3) oversees these organizations. To address our three objectives, we reviewed relevant federal laws and SSA policies and guidance. We interviewed SSA officials in its central office and staff in four regional offices that we selected to reflect a range in the number of states and organizational payees they collectively oversee and to achieve diversity in geographic location. Within those regions, we visited eight field offices covering seven states, which were selected to include both metropolitan and non-metropolitan areas that maximized the number of files we would have available for our review (see next paragraph). We also interviewed officials in one area office per region—two representing metropolitan area field offices, and two representing non-metropolitan area offices that we visited. These interviews with regional, area, and field office staff are intended to obtain perspectives from SSA officials in different parts of the country and are not intended to be representative of all SSA field offices and staff. We also analyzed program data, including the number and type of organizational payees and the number of beneficiaries they serve. We assessed the reliability of these data by reviewing relevant documentation and interviewing SSA staff knowledgeable about the systems used to collect and maintain the data and determined the data were sufficiently reliable for our use. To determine how organizations are approved to be representative payees, we reviewed SSA’s policies and relevant federal laws and regulations. At each field office we visited, we (1) interviewed managers about their role in the application process and (2) reviewed up to six organizations’ electronic files in the Electronic Representative Payee System (eRPS), the primary data system SSA uses to track representative payees. Specifically, at each field office we reviewed up to two applications that SSA had approved (either initial applications to serve as representative payee or initial applications to collect fees); up to two applications that SSA had denied (initial or to collect fees); and files for up to two organizations that were terminated or closed in the past 5 years. In some cases, field offices we visited did not have the full number of cases available, and we reviewed fewer files in those offices. We selected the most recent approval, denial, and termination files that were available. In all, we reviewed 15 recently approved applications, six recently denied applications, and three recent terminations. We also interviewed cognizant SSA officials at the central office and the four regional and area offices we selected. We conducted background checks on a stratified random sample of 205 current organizational payees. The sample was selected to include fee- for-service organizations with 50 or more beneficiaries, fee-for-service organizations with fewer than 50 beneficiaries, non-fee-for-service organizations with 50 or more beneficiaries, and non-fee-for-service organizations with fewer than 50 beneficiaries. We entered information on selected organizations into a database called CLEAR and reviewed the resulting reports for any indication of criminal history. Many of these reports included the criminal history of individuals who are or may be associated with the organizational payee, and we reviewed these with particular focus on the crimes that bar individuals from serving as individual payees. For those reports that contained an indication of criminal history, we selected reports that indicated there may have been federal crimes or felonies at the state or local level and attempted to obtain court records to provide further insight into the nature of the crimes and the outcome of the cases. However, because we lacked information that would have made it possible for us to definitively link a conviction to staff in an organization—such as Social Security numbers for payee staff that are in leadership or financial management roles—the results of our analysis were not reliable enough to report. SSA collects Social Security numbers for individual payee applicants but not for any principals or staff from organizational payee applicants. Without this information, it is impossible to definitively link criminal convictions to individuals associated with organizational payees. To help understand how SSA communicates with organizational payees, we reviewed program guidance and interviewed representatives of eight organizational payees—one in the local area of each field office we visited, in addition to interviewing officials in each field office. We also interviewed cognizant SSA officials at the central office and the four regional and four area offices we selected. To review SSA’s overall oversight of organizational payees—including onsite reviews and reviews of the annual accounting form and payees’ use of collective accounts—we reviewed relevant federal laws and regulations, program policies, and relevant SSA documents; analyzed data; and interviewed SSA officials at the central office, the four regional and four area offices we selected, and the eight field offices we visited. To further understand SSA’s new onsite review process, we reviewed agency documents that describe the roles and responsibilities of key players in SSA’s new onsite review process. We also interviewed SSA officials and representatives of the National Disability Rights Network (NDRN) about the status of its implementation. To determine the extent to which different types of organizational payees receive onsite reviews, we analyzed SSA program data for fiscal year 2018. We assessed the reliability of these data by reviewing relevant documentation and interviewing knowledgeable agency officials and determined they were sufficiently reliable for our purposes. To learn about the outcomes of onsite reviews, such as how frequently unapproved collective accounts were identified, we reviewed SSA’s annual reports to Congress. We determined SSA data on the number of onsite reviews conducted and SSA data reported to Congress on unapproved collective accounts were sufficiently reliable for our purposes. We did not assess the efficacy of the new onsite review process or the quality of onsite reviews because we determined it was too soon to evaluate recent program changes. Instead, we described the roles and responsibilities of key players in the new process and interviewed SSA and NDRN to provide information on the status of implementation. To assess the predictive model SSA uses to select low-volume organizational payees for onsite reviews, we analyzed available documentation and interviewed SSA officials knowledgeable about the predictive model. This information included: (1) a list of variables; (2) the code SSA uses to execute the model; and (3) a brief description of how SSA developed the model, including a high-level description of its methodology and an analysis of the predictive power of the model compared to random chance. We compared the documentation SSA provided us with accepted practices for maintaining documentation of statistical models. For detailed results on the findings of this analysis, see appendix III. To obtain a range of perspectives on the organizational payee program, we interviewed staff of the Social Security Advisory Board, representatives of an SSA managers’ association, an organizational representative payee association, and NDRN. In addition, we interviewed representatives of advocacy groups for the aged, persons with physical disabilities, and persons with mental illness regarding their constituents’ experiences with SSA’s organizational payee program. Appendix II: SSA Policy Regarding How to Evaluate Organizational Payee Applicants Per Social Security Administration (SSA) policy, field office staff should consider certain factors when evaluating organizations’ suitability to serve as payees. Some factors apply to all applicants, including both individuals and organizations, while others apply only to organizational payee applicants (see table 2). In addition, there are some requirements for organizational payees applying to collect fees for their payee services. According to SSA policy, organizational payees that are applying to collect fees must meet the following requirements: Be regularly serving as a payee for at least five beneficiaries for at least 1 calendar month; Generally not be a creditor of the beneficiaries it serves; and Be a state or local agency with a qualified mission, or a non-profit social service agency that is community-based, bonded, and licensed. Appendix III: Additional Information on SSA’s Predictive Model and Our Assessment How SSA Selects Payees for Review Based on the Model The Social Security Administration (SSA) uses a predictive statistical model it implemented in 2012 to rank low-volume organizations based on their chance of misusing beneficiary funds and selects for onsite reviews those organizations identified as having the highest risk. The predictive model uses a logistic regression to estimate the chance that each payee will misuse benefits, given the characteristics of the beneficiary and payee, such as the length of time served as a payee and whether the beneficiary received a large lump sum payment from the payee. SSA takes the predictive model output, which is calculated for every payee and beneficiary pair, and uses it to rank payees. SSA assigns organizations for review depending on (a) their rank (organizations that have a higher likelihood of misusing benefits are more likely to be selected); and (b) available resources. How We Assessed SSA’s Predictive Model To review the predictive model, we interviewed SSA officials knowledgeable about the model and reviewed available documentation. This documentation included: (1) a list of variables; (2) the computer code SSA uses to execute the model; (3) a brief explanation of how SSA periodically assesses the model and related performance statistics; and (4) 2 documents (totaling 5 pages) describing how SSA developed the model. We compared this documentation to accepted practices for maintaining documentation of statistical analysis, such as standards published by the Office of Management and Budget (OMB). The documents describe, at a high level, SSA’s methodology for developing the model. It also includes an analysis of the predictive power of the model compared to random chance. of predictor variables, and ultimately selected a final model using a step- wise selection process. However, available documentation does not include information necessary to evaluate how SSA assessed other candidate models or understand the rationale for SSA’s decision to accept its final model. For example, there is limited documentation to: Reproduce SSA’s Target Population: The documentation does not describe in detail how SSA identified all organizational payees that served from 1993 to 2009 (such as how SSA queried the Representative Payee System), nor does it explain in detail how SSA linked beneficiary and organizational level data, such as to count the number of beneficiaries that each payee served. SSA subsequently explained in its technical comments that it used Social Security numbers to link information among several systems. However, SSA did not describe steps it took to establish the linkages, or steps taken to identify organizational payees that served from 1993 to 2009, in enough detail for an independent analyst to reproduce the work. Moreover, SSA did not provide this written documentation upon our original request, which suggests that SSA did not maintain complete records of the work. Reproduce SSA’s Sample Design: The documentation does not describe in detail how SSA designed the probability sample it used to develop the model or how, if at all, it weighted the sample to account for varying probabilities of selection in the sample. Selecting the appropriate sampling method for a model and applying appropriate weights generally increases its predictive accuracy. Reproduce SSA’s Process for Assembling the Data and Selecting the Final Model: The documentation provides limited information about the input variables and models that SSA tested but ultimately did not use. In addition, the documentation does not show how SSA assessed and addressed potential correlations between the variables it selected. For example, we could expect certain variables, such as receipt of a lump sum payment and receipt of a lump sum payment over $1,000, to be highly correlated. Although highly correlated variables do not necessarily impair the model’s predictive accuracy, they can influence which individual variables test as being predictive during the model’s development. The documentation also does not describe how SSA chose to split continuous variables into categorical variables—a choice which can influence predictive accuracy. Understand How SSA Assessed Data Reliability: Available documentation does not indicate whether SSA assessed the reliability of data used in its model. The reliability of the outcome variable— misuse—is particularly important. Unreliable data regarding whether misuse occurred, either due to incorrect data entry or other errors, would compromise the model’s ability to accurately predict the likelihood of misuse. In contrast, the reliability of variables that could signal risk of misuse—such as whether the beneficiary received a large disbursement of funds—is less critical. Even variables prone to measurement error may still predict misuse accurately. Nevertheless, assessing their reliability remains important, since reducing measurement error can increase the model’s predictive power. Such assessments could range from limited testing of the data—e.g., for outliers, illogical values, and missing data—to broader, independent verification of data reliability. Regardless of the approach used, documenting all data reliability assessments allows internal and external stakeholders to assess, and possibly improve, the model. Explain whether, or how, SSA’s model addressed potential patterns of misuse for beneficiaries served by the same payee: Statistical models typically assume that estimates can be generated independently for each unit of analysis—in this case, unique pairs of beneficiaries and payees. However, in cases where multiple beneficiaries are served by the same payee, this may not be the case. Patterns of misuse might be similar for all beneficiaries served by a given payee, such as if the payee were systematically defrauding all of its beneficiaries. Accurately modeling data with this kind of nested structure—which conflicts with typical statistical assumptions—often requires multi-level modeling methods. However, SSA’s documentation does not specify how or whether it applied these methods, or otherwise assessed or adjusted for the nesting of beneficiaries within payees. Reproduce SSA’s process for ranking organizations: With the current model, which assigns a score for each payee-beneficiary pair, SSA uses the predictive model’s output to then rank payees. However, there are various approaches for ranking payees, ranging in sophistication, and SSA does not have sufficient documentation to determine whether the approach currently being used best predicts risk to beneficiaries. Appendix IV: Comments from the Social Security Administration Appendix V: GAO Contact and Staff Acknowledgments GAO Contact: Staff Acknowledgments: In addition to the contact named above, Michele Grgich (Assistant Director), Isabella P. Anderson, Dan Meyer and Amy E. MacDonald (Analysts-in-Charge), Daniel Bibeault, Ted Burik, Daniel Concepcion, Jennifer Cook, Gus Fernandez, Alex Galuten, Sheila R. McCoy, Arthur Thomas Merriam, Jr., Mimi Nguyen, Ramon J. Rodriguez, Margie K. Shields, Joy Solmonson, Almeta Spencer, Jeff M. Tessin, Walter K. Vance, Kathleen van Gelder, Srinidhi Vijaykumar, and Khristi A. Wilkins made significant contributions to this report. In addition, Seto J. Bagdoyan, Joy Booth, Gabrielle M. Fagan, Robert H. Graves, Rosalind C. Romain, and Helina P. Wong contributed to the report.

Nearly a million individuals relied on organizational payees to manage their Social Security benefits in 2018. Due to an aging population more beneficiaries may need organizational payees in the future. These beneficiaries are among the most vulnerable because, in addition to being deemed incapable of managing their own benefits, they lack family or another responsible party to assume this responsibility. SSA reports that misuse of benefits by payees is rare, but its Office of Inspector General has identified cases of misuse that have harmed vulnerable beneficiaries. GAO was asked to review SSA's organizational payee program. This review examines, among other things SSA's process for approving payees and its monitoring efforts. GAO reviewed relevant federal laws, regulations, policies, and guidance; analyzed SSA data from fiscal year 2018; analyzed the predictive statistical model SSA uses to select low-volume payees for on-site reviews; and interviewed SSA central office staff and regional, area, and field office staff in four regions selected for geographic diversity. The Social Security Administration (SSA) approves organizational payees—such as nursing homes or non-profits that manage the Social Security benefits of individuals unable to do so on their own—by assessing a range of suitability factors, such as whether the organizations have adequate staff to manage benefits for multiple individuals. However, GAO found that SSA's policy does not specify how to assess more complex suitability factors, such as whether an organization demonstrates sound financial management. Without clearer guidance, unqualified or ill-prepared organizational payees could be approved to manage benefits. Also, SSA does not currently require background checks for key employees of an organizational payee. In contrast, SSA requires background checks for individual payees—such as a relative or friend of the beneficiary. A comprehensive evaluation could help SSA determine whether and how to expand their use of background checks to organizational payees. To ensure organizational payees are managing funds appropriately, SSA uses several monitoring tools, including resource-intensive onsite reviews. Certain organizational payees, such as those that charge fees for their services or have 50 or more beneficiaries (high-volume), receive onsite reviews every 3 to 4-years. In contrast, payees that serve fewer than 50 beneficiaries (low-volume)—the vast majority—are selected for review based on their estimated likelihood of misusing beneficiary funds, and a relatively low percent of them receive onsite reviews (see figure). SSA uses a predictive statistical model to identify higher risk low-volume payees, but the model's effectiveness cannot be fully assessed by GAO or others due to missing documentation on how it was designed. SSA officials said they will update the model in the future, but do not have a time frame for doing so. Establishing such a time frame and documenting design decisions are key steps toward assessing the model's effectiveness. Another way SSA oversees organizational payees is by reviewing their annual accounting forms, but shortcomings exist in SSA's review of the form and in the form's content and design. For example, SSA lacks timeframes for following up on missing or problematic forms. Also, the accounting form does not capture complete information on whether payees co-mingle beneficiaries' funds in collective accounts, which can limit SSA's ability to monitor those risk-prone accounts. Establishing timeframes and revising the form could enhance the effectiveness of the annual accounting form as an oversight tool.

GAO_GAO-19-572

Background Administration of USDA’s Nutrition Education Programs USDA administers its nutrition education programs through multiple agencies in two mission areas—Food, Nutrition, and Consumer Services and Research, Education, and Economics (see fig. 1). Within the Food, Nutrition, and Consumer Services mission area, FNS oversees nutrition assistance programs with nutrition education components, such as SNAP, WIC, and child nutrition programs. For SNAP-Ed and WIC, the FNS national office develops program policies and guidance and works with the FNS regional offices to provide technical assistance to state agencies. The FNS regional offices also review SNAP-Ed and WIC state plans. The Team Nutrition initiative is administered by FNS national officials who also work on child nutrition programs. FNS staff develop Team Nutrition materials, training resources, and guidance and provide assistance to state agencies and local entities overseeing the child nutrition programs. Within the Research, Education and Economics mission area, NIFA national officials oversee EFNEP, in part by providing program guidance, reviewing grant recipient plans, and conducting some monitoring and oversight of local implementing entities. The NIFA national office, together with the FNS national office, administers the FINI program. Although NIFA has primary responsibility over the grant award process, FNS has been overseeing an independent evaluation of program efforts. Interventions for USDA’s nutrition education programs are provided through varied local entities and settings. For example, land-grant universities may provide SNAP-Ed and EFNEP interventions, while local health clinics may provide WIC interventions. USDA’s programs also provide nutrition education in varied settings, ranging from grocery stores to hospitals (see fig. 2). Sometimes multiple nutrition education programs operate in the same setting. For example, SNAP-Ed may provide classes for students while Team Nutrition may distribute teacher training materials and nutrition education curricula to the same school. Structures, Target Populations, and Types of Education Most of USDA’s nutrition education programs target interventions to low- income populations with varied characteristics, as shown in table 1, and the programs also differ in how nutrition education fits into their structures. For example, SNAP-Ed and EFNEP are primarily focused on providing nutrition education to participants, while Team Nutrition provides nutrition education to both child nutrition program implementers and participants. WIC provides benefits for food and referrals to health and other social services, as well as nutrition education, including breastfeeding promotion and support, to participants. FINI provides benefits for purchasing healthy foods and may include additional nutrition education programming. Programs also provide nutrition education through various intervention methods, ranging from direct education, such as cooking demonstrations, classes on healthy eating, and one-on-one counseling, to social media campaigns and efforts to change policies, systems, or environments. SNAP-Ed provides direct education through a variety of nutrition educators, although its interventions also may involve social marketing and policy, systems, and environmental changes (PSE). PSE is intended to shape policies, practices, and physical environments to support and improve nutrition education, physical activity habits, and obesity prevention efforts. In fiscal year 2018, approximately 76 percent of SNAP-Ed interventions included direct education, whereas 54 percent included PSE, according to USDA data. EFNEP primarily provides direct education through paraprofessionals, also known as peer educators. Paraprofessionals typically live locally in the community, which allows them to recruit and receive referrals for new participants. University and locally-based professional staff train and supervise the paraprofessionals. In addition, EFNEP has incorporated PSE interventions in recent years. For example, USDA provides PSE training for EFNEP program implementers, as one step toward adopting the PSE approach. WIC programs also provide direct education, such as counseling and group discussions, and, according to federal regulations, are allowed to use other intervention methods as long as they are easily understood by participants and bear a practical relationship to participant nutritional needs, household situations, and cultural preferences. For example, WIC programs may conduct demonstrations or grocery store tours to help consumers understand how to read nutrition labels or shop on a budget. Team Nutrition creates and disseminates web-based and hard-copy educational materials to child nutrition program implementers in part to educate child nutrition program participants. For example, Team Nutrition provides curricula, posters, tools, guides, recipes, and cookbooks for schools and child care sites. Team Nutrition also provides annual grants to enhance nutrition education intervention efforts in schools and child care settings, as well as training for program implementers through its partnership with the Institute of Child Nutrition. FINI supports healthy eating choices by incentivizing the purchase and consumption of fruits and vegetables. For example, some FINI programs provide vouchers redeemable for qualifying fruits and vegetables. Further, according to USDA officials, a FINI program may partner with another USDA nutrition education program, such as SNAP-Ed or EFNEP, to provide nutrition education. Other USDA Nutrition Education Efforts USDA agencies also provide nutrition education through other research and guidance directed at the general public: USDA’s Center for Nutrition Policy and Promotion (CNPP), within FNS, works with the U.S. Department of Health and Human Services to develop the Dietary Guidelines for Americans, dietary guidance linking scientific research to the nutrition needs of consumers. CNPP also takes the lead on consumer nutrition education, including MyPlate, which translates the Dietary Guidelines for Americans for consumers. USDA’s Economic Research Service (ERS) conducts research and issues publicly available reports related to promoting the purchase and consumption of healthy, economical foods. ERS also provides data relevant to the nutrition of U.S. households and communities. USDA’s Agricultural Research Service (ARS) serves as a repository for publicly available nutrition education information and data. ARS manages the website Nutrition.gov, the Historical Dietary Guidance Digital Collection, and the FoodData Central data system, which provides food nutrient data for consumers. USDA Collects Information on Nutrition Education Participation and Expenditures, but Faces Challenges Assessing Effectiveness for One of Its Largest Programs Information on Participation Includes Those Receiving Direct Education and Other Measures of Program Reach According to USDA data, 3.8 million and 436,000 people participated in direct education interventions for SNAP-Ed and EFNEP, respectively, in fiscal year 2018. Direct education participation in these two programs, which are focused primarily on nutrition education, has decreased in recent years. Between fiscal years 2010 and 2018, SNAP-Ed direct education participation declined by 33 percent and EFNEP declined by 28 percent. Program officials we spoke with noted some factors that may in part explain these trends. For example, USDA officials said direct education has been less of a focus in SNAP-Ed in recent years, as the department has encouraged programs to use policy, systems, and environmental change interventions and social marketing, in addition to the traditional direct education, following implementation of the Healthy Hunger-Free Kids Act of 2010. USDA officials said that all WIC recipients are offered nutrition education, and therefore they report that 6.9 million people were offered nutrition education through the program in fiscal year 2018. Although officials consider this to be the best proxy for WIC nutrition education participation, more than 5.2 million of these WIC recipients were infants or children ages 5 and under. In addition, WIC recipients do not need to participate in nutrition education to receive the program’s food benefits. As a result, USDA’s proxy overcounts the number of people who participated in WIC nutrition education. For Team Nutrition, USDA tracks the reach of its nutrition education using the volume of materials distributed. Between fiscal years 2012 and 2018, Team Nutrition distributed around 5.1 million of its hard-copy materials, such as curricula, technical assistance and training tools, and other materials, to child nutrition program implementers, including schools and day care providers. Further, from March 2014 through fiscal year 2018, there were about 11 million unique views of Team Nutrition materials hosted on USDA’s Team Nutrition website. Additionally, USDA is collecting participation data for FINI through the FINI National Evaluation. The evaluation is ongoing and FINI participation data will be available after it concludes, according to USDA officials. USDA Collects Annual National Expenditure Data for All Programs, but Detailed Data Are Limited USDA’s data show that nearly $907 million was expended on nutrition education programs in fiscal year 2017, the most recent year for which complete data are available, with $826 million expended on two programs—WIC and SNAP-Ed (see fig. 3). Specifically, states expended $422 million on WIC nutrition education and nearly $404 million on SNAP-Ed in that year. Further, grantees expended $51 million on EFNEP, $16 million on Team Nutrition, and $13 million on FINI in fiscal year 2017. USDA has total annual expenditure data at a national level for its nutrition education programs, but it does not have detailed information on how the funding is expended that can be routinely analyzed in its two programs with the largest expenditures—WIC and SNAP-Ed. Since both programs allow states to use various types of nutrition education interventions, information on spending by type of intervention may help USDA compare costs, and with additional information, potentially assess the cost effectiveness of various nutrition education interventions. For WIC, USDA collected detailed information on nutrition education spending at the local agency level in 2016 through a survey and analyzed the costs associated with different types of nutrition education interventions. In contrast, USDA collects information on SNAP-Ed local implementing agency expenditures in narrative annual reports that make it difficult to assess spending by type of nutrition education intervention. USDA Has Taken Steps to Evaluate the Effectiveness of its Programs, and Faces Ongoing Challenges Assessing SNAP-Ed Through studies and data collection, USDA has gathered some information on the effectiveness of its nutrition education interventions. For example, in 2018, USDA completed the WIC Nutrition Education Study, which assessed WIC nutrition education in both descriptive and evaluative ways (see text box). Additionally, USDA officials said a new study is underway looking at how the WIC nutritional risk assessment tailors the benefit package participants receive, including the nutrition education offered. USDA has also funded various grants and cooperative agreements that have evaluated WIC nutrition education to some extent, according to USDA officials. Findings from WIC Nutrition Education Study: Phase II Report This 2018 study was designed to address research questions about the impact of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)’s nutrition education on participant nutrition and physical activity behaviors, among other things, in six pilot sites. Although pilot sites’ nutrition education practices varied, the study did not find significant differences in reported exposure to nutrition education, such as the number of contacts with an educator or receipt of materials to reinforce nutrition messages during visits, or significant differences in participant outcome behaviors, among participants by site. For EFNEP, USDA regularly collects participant data to assess the effectiveness of EFNEP interventions nationwide, and several studies have also assessed the cost effectiveness of EFNEP. Specifically, EFNEP participants take standardized food and physical activity questionnaires and provide information on their dietary consumption in the past 24 hours before and after participating in an intervention, such as a class. EFNEP administrators use this information to measure participant behavior change and also report it to USDA through EFNEP’s data reporting system (see text box). USDA is then able to aggregate these data at the national level and use them to assess the effectiveness of EFNEP interventions nationwide. Further, several studies have evaluated EFNEP cost effectiveness, including one which used national data to estimate EFNEP cost effectiveness by state. Outcomes Reported on Expanded Food and Nutrition Education Program (EFNEP) Participant Questionnaires Questionnaires are administered when adult EFNEP participants enter the program and again when they exit the program to measure behavior change in core areas, including diet quality and physical activity, food safety, food resource management, and food security. For fiscal year 2018, the majority of participants reported improvements in diet quality (92 percent), food resource management (80 percent), food safety (79 percent), and physical activity (78 percent). Further, almost half of participants reported improvement in food security (47 percent). In addition to WIC and EFNEP, USDA is currently collecting information from its grantees on FINI effectiveness as part of its forthcoming FINI National Evaluation. An interim evaluation report found a positive, but modest, impact of FINI on monthly household fruit and vegetable expenditures, but no measurable impact on adults’ daily fruit and vegetable consumption. Previously, USDA assessed the effectiveness of the Healthy Incentives Pilot, which was a predecessor to FINI. The pilot tested the impact of making fruits and vegetables more affordable for SNAP participants and found that participants consumed almost one- quarter of a cup more fruits and vegetables per day than non- participants. USDA has also taken steps to support evaluation of the effectiveness of SNAP-Ed interventions both through its own research and the development of an evaluation framework. In 2012 and 2013, USDA reviewed selected SNAP-Ed interventions to identify potential models of effective SNAP-Ed interventions and impact evaluations. Specifically, USDA evaluated five interventions aimed at increasing fruit and vegetable consumption in preschool or elementary-age children, one intervention aimed at increasing fruit and vegetable consumption in low-income seniors, and one intervention aimed at increasing low-income women’s knowledge of healthy eating choices. Also in 2013, the FNS Western Regional Office began an effort to develop the SNAP-Ed Evaluation Framework (Framework), which was finalized in 2016 and fully adopted for national use. The Framework was developed as a way to evaluate program interventions, and with the intention of encouraging use of policy, systems, and environmental change interventions, according to USDA officials. All states are currently using the Framework to evaluate SNAP-Ed program interventions, according to USDA officials; however, because the Framework allows for myriad ways to measure outcomes, information reported by states on the effectiveness of SNAP-Ed interventions varies widely. Within states, SNAP-Ed implementing entities can select from 51 indicators and various outcome measures in the Framework to evaluate their interventions. Although USDA has identified 7 of the Framework’s 51 indicators as priority indicators, and encouraged states to use these, each indicator has multiple outcome measures and data collection methods associated with it (see text box). Therefore, even if the same indicators are selected to evaluate the effectiveness of different SNAP-Ed interventions, each state may select different outcome measures and data collection methods, and report different information on effectiveness. In our prior work, we found that agencies that seek to manage an excessive number of performance measures may risk creating a confusing excess of data that will obscure rather than clarify performance issues. Elements of a Selected Medium Term Change Indicator: Healthy Eating The medium term change indicator for healthy eating acts as a priority indicator among the 51 indicators included in the Supplemental Nutrition Assistance Program Education (SNAP-Ed) Evaluation Framework. SNAP-Ed programs may use this indicator to measure healthy eating behavioral changes reported by SNAP-Ed participants before and after participation in a series of direct nutrition education classes. Within this indicator, programs may select from various outcome measures and data collection tools: Programs may select from 13 outcome measures to assess the participants on this indicator. Some options include eating more than one kind of vegetable, drinking water, and using MyPlate to make food choices. To assess these outcome measures, programs may select from 11 surveys and other data collection tools compiled by the U.S. Department of Agriculture, such as a food behavior checklist for adults and a beverage and snack questionnaire for older youth. In addition, USDA receives information on states’ evaluations of effectiveness that is not easily analyzed nationwide. Although states report information on SNAP-Ed interventions to USDA in a data system, including information on participation, demographic characteristics of direct education participants, and types of education interventions, the data system is not structured to allow states to report information on intervention effectiveness, including cost effectiveness. Instead, USDA uses SNAP-Ed state plans and annual reports to collect information on state efforts to evaluate program effectiveness, among other things. However, in their plans and reports, states identify the Framework indicators they use and describe their evaluation efforts and outcomes in narrative form, limiting USDA’s ability to aggregate evaluation information across states or interventions, according to USDA officials. One local SNAP-Ed official said her state’s most recent annual report was approximately 60 pages long, highlighting the magnitude of the narrative information some states provide. While USDA officials acknowledged these challenges, they said a narrative report is used to accommodate the differences among SNAP-Ed programs. USDA officials said that because the Framework is still relatively new, they are working to determine both how to assist states’ efforts to use it to evaluate SNAP-Ed effectiveness and to ensure these evaluations provide USDA with useful information for assessing these programs. Further, USDA officials said they are currently in the process of determining future SNAP-Ed reporting protocols to improve program implementation and impact. Federal internal control standards state that agencies should use relevant, quality information from reliable sources to inform decision- making and evaluate performance in achieving key objectives. Without information that can be compared across states or easily aggregated or reviewed nationwide, USDA is unable to assess the effectiveness of interventions used across the country to determine whether SNAP-Ed is achieving program goals. USDA Lacks a Formal Coordination Mechanism and Does Not Fully Leverage Internal Expertise for Its Nutrition Education Efforts Coordination of Nutrition Education Efforts Is Limited USDA’s national office does not have a formal coordination mechanism for department-wide nutrition education efforts; however, the department has taken some steps to coordinate efforts related to nutrition. For example, USDA convened staff from various program offices in November 2017 for a two-day Intra-Departmental Nutrition Workgroup Meeting. The focus of the meeting was not specifically nutrition education, but included a discussion of current and potential USDA efforts to encourage healthy food choices for certain age groups. The department also has a few committees that address nutrition issues, including the Human Nutrition Coordinating Committee and the Interagency Committee on Human Nutrition Research. Although these committees do not focus on nutrition education, they convene USDA officials and other federal partners on a regular basis. Despite the lack of a focus on nutrition education in these meetings, USDA officials who participated said these opportunities were useful for sharing related information with staff from across the department. USDA has also taken some steps to coordinate efforts across nutrition education programs that have an intersection of target populations, though this has not consistently occurred at the federal level, according to USDA officials. For example, in recent years, WIC officials collaborated with Team Nutrition officials on the development of infant feeding and breastfeeding resources for use in child care settings to ensure consistent messaging. However, USDA officials reported that other programs with similar target populations have not coordinated. For example: USDA officials told us WIC and SNAP-Ed officials have limited interaction, although both programs serve low-income families with young children and coordination could help reinforce key messaging from each program. Several regional SNAP-Ed officials said that they had limited involvement with Team Nutrition, although both programs may serve students in schools and sharing resources could help maximize program impact. Both SNAP-Ed and EFNEP focus on providing nutrition education to similar populations and are delivered by land-grant universities, yet there is limited coordination between the two programs. Regional officials who work on SNAP-Ed reported limited familiarity with EFNEP and said they have learned about EFNEP efforts intermittently through state and local officials, rather than from the national office. Similarly, representatives of the two land-grant universities we spoke with who solely administer EFNEP had limited information regarding SNAP-Ed efforts, though they expressed interest in coordinating efforts to maximize both programs’ reach and avoid duplication of effort. In the absence of formal coordination mechanisms from USDA headquarters, other efforts have developed to help coordinate nutrition education programs nationwide, though USDA national office involvement is limited. Association of SNAP Nutrition Education Administrators: Representatives of SNAP-Ed state implementing agencies formed the Association because they lacked a mechanism to communicate with FNS national office staff or one another on topics related to nutrition education, according to a representative of this group. Officials from FNS’s national and regional offices formally participate in the group’s annual conferences and other activities, but this representative told us that members of the group would appreciate more opportunities to interact directly with these officials. SNAP-Ed Program Development Group: Land-grant universities established this separate SNAP-Ed-focused workgroup to strengthen SNAP-Ed programs and nutrition networks at the state, regional, and national levels, and identify linkages between SNAP-Ed and the land- grant university system’s broader outreach, education, and research mission. SNAP-Ed officials from FNS’s national office do not regularly participate in this group, yet the NIFA administrator of EFNEP sits on the group’s leadership committee. Food, Nutrition, and Consumer Services Nutrition Council: This group convenes national and regional staff in the Food, Nutrition, and Consumer Services mission area on nutrition-related topics and is currently led by regional officials, although the group was previously led by both national and regional officials. FNS officials told us the Nutrition Council has not regained momentum at the national office level since leadership transitioned to the regional office level, and one regional official with leadership responsibilities on the Council told us the group would benefit from more leadership support from FNS national office staff. State Nutrition Action Councils (SNACs): At the state level, SNACs are primarily comprised of state representatives from FNS programs and develop statewide cross-program nutrition education plans. FNS’s national office has supported SNACs as a model for coalescing state programs around nutrition education and obesity prevention efforts but has delegated leadership of the SNACs to the regions, who work directly with state agencies. USDA does not have a dedicated individual or entity with leadership responsibility for nutrition education, and program staff who work on nutrition education are currently focused on their individual programs, according to USDA officials. Although FNS has a senior nutrition advisor who supports national and regional officials who work on FNS programs, the advisor’s role does not encompass department-wide coordination on nutrition education. Further, program staff whose responsibilities include nutrition education serve the needs of their individual programs and lack formal communication channels with one another, according to USDA officials. Previously, from 1998 through 2008, USDA had a centralized Nutrition Services Staff that served as a formal coordinating entity for FNS and held cross-program nutrition education meetings, which were useful for information sharing, according to USDA officials. In 2008, this division, which had been comprised largely of nutritionists, was dissolved, with its staff with nutrition expertise largely dispersed to individual program offices. According to national and regional officials, in recent years, coordinating nutrition education has not been a priority for USDA, and there has been a loss of staff resources dedicated to nutrition education in the department overall. National and regional officials said it is hard to find time to coordinate across nutrition education efforts because they face competing priorities and increased workloads, at times because staff with nutrition education expertise have left employment with USDA and not been replaced. According to regional officials, a voluntary group of FNS national and regional officials who meet to discuss nutrition issues has experienced diminishing participation in recent years, in part due to these reasons. Regional officials and land-grant university officials said that more formal coordination mechanisms to provide leadership and promote cross- department coordination and information sharing on nutrition education could help increase efficiency, maximize the use of federal resources, and avoid potential duplication of effort. One regional official said she regularly reaches out to a colleague to obtain information on other FNS nutrition education programs, but a centralized tool could provide this information quicker and more efficiently. Another regional official said she compiled information on USDA nutrition education grant opportunities for states in her region, but it would be helpful if this information were centrally compiled by the national office. Regional officials and land- grant university officials we spoke with also said formal collaboration mechanisms, such as a document or tool with information on all of USDA’s nutrition education efforts, examples of best practices for coordination, or an annual meeting to encourage information sharing, would be useful. Federal internal control standards state that agencies should communicate quality information across reporting lines to enable personnel to perform key roles in achieving objectives, and management should set the tone at the top and throughout the agency to ensure priorities are understood by all stakeholders. In our prior work, we reported that effective coordination can help reduce overlap and duplication, and we found that sustained leadership is an essential element to developing collaborative working relationships. We also identified leading practices that federal agencies can use to enhance the effectiveness of their collaborative efforts, such as agreeing on roles and responsibilities and establishing policies and procedures to work across organizational boundaries. USDA has acknowledged the importance of nutrition education coordination for maximizing the reach and potential impact of federal nutrition education and nutrition assistance programs in some of its program regulations and guidance, and this emphasis is consistent with new federal requirements. For example, FNS’s SNAP-Ed plan guidance directs states to coordinate SNAP-Ed activities with other national, state, and local nutrition education, obesity prevention, and health promotion initiatives and interventions, such as WIC and EFNEP. In our 2004 review of USDA’s nutrition education efforts, we found that increased coordination, such as sharing curricula, lessons learned, and data collection tools across efforts, could help USDA’s nutrition education programs make more efficient and effective use of resources. Consistent with this focus, the Agriculture Improvement Act of 2018 (Farm Bill) requires USDA to submit an annual report to Congress that includes an evaluation of the level of coordination between SNAP-Ed, EFNEP, and other USDA nutrition education programs. USDA Has Not Fully Leveraged Its Expertise for Nutrition Education Some USDA nutrition experts are in agencies disconnected from the nutrition education programs (see fig. 4), yet these agencies play a significant role in developing and compiling dietary guidance, research, and other information related to nutrition education (see table 2). Despite their role in developing and compiling research and information related to nutrition education, consultation with these experts by the program offices is limited, according to USDA officials, possibly because they are located in separate agencies. For example, Although CNPP leads a cross-cutting committee that reviews nutrition education materials developed by USDA program staff to ensure materials are consistent with the Dietary Guidelines for Americans,CNPP officials noted they have been infrequently consulted by program officials while materials are under development or activities are being implemented. This may have been in part related to organizational structure, as until recently CNPP and FNS were separate agencies that individually reported to the Office of the Under Secretary for Food, Nutrition, and Consumer Services, according to USDA officials. Some nutrition education program staff also told us they currently use the core nutrition messages on USDA’s website when developing nutrition education materials—messages that CNPP officials noted were developed in 2010 and have not been updated to reflect the latest edition of the Dietary Guidelines for Americans. This approach may lead to inefficiencies in the development of nutrition education materials. Although ERS conducts nutrition research, nutrition education program officials were not always aware of or using ERS resources, possibly because most of the programs reside in a different USDA mission area. A prior working group attempted to bridge the organizational divide between ERS and some of USDA’s other agencies and offices that work on nutrition education by assisting efforts to share information, but the group has since dissolved. Currently, some national and regional officials we spoke with who work on nutrition education programs had limited awareness of ERS’s nutrition education research. For example, some program officials in the national office were unsure whether ERS did work related to nutrition education and learned of ERS research through automated email updates. Further, one regional official learned of ERS data on food insecurity, which can help states meet federal requirements for targeting nutrition education services to local areas based on their level of need, through a meeting with an outside agency. Nutrition education program officials were also generally unaware of ARS’s efforts related to nutrition education. Specifically, USDA nutrition education program officials we spoke to said they had little direct contact with ARS officials and were generally unaware of ARS efforts related to nutrition education. Further, regional officials who work on SNAP-Ed had not used or distributed ARS resources to state officials and also seemed generally unaware of ARS’s nutrition education efforts. USDA lacks a mechanism for systematically integrating its internal nutrition expertise into its nutrition education programs, which may inhibit the effectiveness of the department’s efforts. Federal internal control standards state that agencies should use quality information from reliable internal sources, among others, to inform decision-making. Further, in our prior work, we found that identifying and addressing needs by leveraging resources is a leading practice for collaboration. Nutrition education program officials are missing opportunities to benefit from relevant expertise within USDA but outside their program offices. Failing to leverage its own internal expertise hinders USDA’s development of nutrition education materials that are informed by the latest nutrition guidance and research. Conclusions Poor nutrition contributes to costly chronic diseases that are among the leading causes of death for Americans, and USDA’s nutrition education programs and related efforts strive to educate Americans on nutrition and improve their dietary choices. Because USDA’s nutrition education programs are primarily targeted to low-income adults and children, who may receive federally-funded nutrition assistance benefits, these programs also have the potential to improve the likelihood that recipients will spend those benefits to obtain foods that have a positive impact on their health. However, in order to reach these goals, USDA needs to ensure that its programs are effectively educating participants to maximize the impact of the federal investment in nutrition education. Although USDA has some information on the effectiveness of its nutrition programs, without improvements to how USDA gathers information on the effectiveness of SNAP-Ed interventions nationwide, USDA will be unable to ensure one of its largest investments in nutrition education is meeting its goals. The 2018 Farm Bill included a requirement for USDA to begin reporting annually on the level of coordination between its nutrition education programs, and USDA has acknowledged the importance of coordination and information sharing to maximize nutrition education programs’ impacts. However, the department currently lacks a formal mechanism to ensure this occurs. As a result, USDA risks missing opportunities to increase efficiency, maximize the use of federal resources, and avoid potential duplication of effort. In addition, without coordination between nutrition education program officials and others with nutrition expertise in the department, programs will develop nutrition education materials that fail to fully leverage the latest nutrition guidance and research, possibly missing opportunities to effectively influence the dietary choices of their target populations in the process. Recommendations for Executive Action We are making the following three recommendations to USDA: 1. The Administrator of FNS should improve how FNS gathers information on the effectiveness of SNAP-Ed interventions, in order to ensure that these interventions are meeting program goals. (Recommendation 1) 2. The Secretary of Agriculture should direct the Under Secretaries for Food, Nutrition, and Consumer Services and for Research, Education, and Economics to develop a formal mechanism, such as a designated individual or group of individuals, for providing cross-department leadership for USDA’s nutrition education efforts and facilitating cross- program information sharing. (Recommendation 2) 3. The Secretary of Agriculture should direct the Under Secretaries for Food, Nutrition, and Consumer Services and for Research, Education, and Economics to identify and implement mechanisms to fully leverage the department’s nutrition expertise for its nutrition education efforts. (Recommendation 3) Agency Comments We provided a draft of this report to USDA for review and comment. In its comments, reproduced in appendix II, USDA generally agreed with our recommendations. USDA also noted that FNS has efforts underway to comply with the 2018 Farm Bill requirement that the department report annually on the level of coordination between its nutrition education programs. USDA also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Agriculture, congressional committees, and other interested parties. In addition, this report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology Our report examines the extent to which the U.S. Department of Agriculture (USDA) (1) has information on participation, expenditures, and effectiveness for its nutrition education programs; and (2) coordinates its nutrition education efforts and leverages internal nutrition expertise for these efforts. The scope of our review includes five federal programs that provide nutrition education: Supplemental Nutrition Assistance Program Education (SNAP-Ed), the Expanded Food and Nutrition Education Program (EFNEP), the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Team Nutrition, and the Food Insecurity Nutrition Incentive (FINI) Grant Program. Among USDA programs that provide nutrition education, four of these received the greatest amount of federal funding for nutrition education in fiscal year 2018—WIC, SNAP-Ed, EFNEP, and Team Nutrition. In addition, we included FINI because it is a grant program in which nutrition education can be a component, and the program’s goal is to incentivize healthy eating. We also reviewed USDA efforts that provide nutrition education through nutrition-related research and guidance directed at the general public. In addition to the methods discussed below, to address both of our research objectives, we reviewed relevant federal laws, regulations, and guidance, as well as our prior work on USDA nutrition education efforts and leading practices for collaboration. We interviewed officials from relevant USDA agencies, including the Food and Nutrition Service (FNS) and the National Institute of Food and Agriculture (NIFA), which oversee the nutrition education programs described in this report. We also interviewed officials from other USDA agencies overseeing nutrition- related research and guidance, including the Agricultural Research Service, the Center for Nutrition Policy and Promotion, and the Economic Research Service. Additionally, we interviewed officials from the seven FNS regional offices, including officials who work on SNAP-Ed and the Child and Adult Care Food Program. We also interviewed representatives of selected organizations knowledgeable about USDA’s nutrition education efforts. We assessed USDA’s efforts to collect information on its nutrition education programs, coordinate its nutrition education efforts, and leverage internal nutrition expertise against GAO’s standards for internal controls in the federal government. Participation Data To address the first objective, we analyzed USDA data on nutrition education participation. Two of the nutrition education programs, SNAP- Ed and EFNEP, collect data on direct education participation. We analyzed SNAP-Ed total direct education participation data for fiscal years 2010 through 2018 collected through SNAP-Ed’s data reporting system, the Education and Administrative Reporting System (EARS). We analyzed EFNEP total direct education participation data for fiscal years 2010 through 2018. These data are reported through the Web-based Nutrition Education, Evaluation and Reporting System (WebNEERS), an integrated data collection system, sponsored by NIFA, and used at the county, state, and federal levels. To assess the reliability of the SNAP-Ed and EFNEP participation data, we interviewed FNS and NIFA officials and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purpose of reporting the number of direct education participants in SNAP-Ed and EFNEP. We also reviewed available USDA data on the number of people reached by nutrition education efforts in SNAP-Ed and EFNEP other than through direct participation. SNAP-Ed collects information on the number of people reached by nutrition education efforts that are not direct education, such as policy, systems, and environmental change interventions and social marketing. However, states face challenges with tracking individuals reached by these education interventions, and these data are likely to include duplicate records of individuals, according to USDA officials. Therefore, we concluded that these data were not sufficiently reliable for the purpose of reporting the number of people indirectly reached by SNAP-Ed. EFNEP also collects information on indirect education reach. This information tracks other family members of adults who participated in direct education who therefore may also benefit from the information shared, according to USDA officials. To assess the reliability of these data, we interviewed NIFA officials and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purpose of describing the number of people indirectly reached by EFNEP. Because USDA officials consider the total number of WIC participants to be the best proxy for WIC nutrition education participation, as all WIC participants are offered nutrition education, we analyzed WIC total participation, and participation by women, infants, and children, for fiscal years 2010 through 2018. These data are reported on the FNS- 798/798A Financial Management and Participation Report form, which contains programmatic and financial data reported by state agencies, Indian Tribal Organizations, and U.S. territories through the Food Programs Reporting System (FPRS). To assess the reliability of these data, we interviewed FNS officials and reviewed relevant documentation. We determined that these data were sufficiently reliable for reporting the number of WIC participants offered WIC nutrition education. Data were unavailable on participation for Team Nutrition—a program which provides training and technical assistance to child nutrition program operators, and creates and disseminates materials for child nutrition program participants. As a proxy measure for program reach, we analyzed data on nutrition education materials disseminated to participants and the online views and downloads of nutrition education materials. To assess the reliability of these data, we interviewed FNS officials and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purpose of reporting the number of Team Nutrition materials disseminated. Expenditure Data To address the first objective, we also analyzed WIC, SNAP-Ed, EFNEP, Team Nutrition, and FINI total nutrition education expenditure data for fiscal year 2017, the most complete data available as of April 2019. Like WIC participation data, WIC expenditure data are reported on the FNS- 798/798A Financial Management and Participation Report form through FPRS. Federal SNAP-Ed and Team Nutrition expenditure data are reported on the SF-425 form, which state agencies submit quarterly, also through FPRS. USDA tracks nationwide expenditures for EFNEP and FINI through NIFA’s payment system, Automated Standard Application for Payments; grants management system, Cooperative Research, Education, and Extension Management; and financial management system, Financial Management Modernization Initiative. To assess the reliability of these data, we interviewed officials from FNS and NIFA and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purpose of reporting nationwide expenditures for these five programs. Program Evaluations and Additional Program Data To determine what information USDA has on the effectiveness of its nutrition education programs, we reviewed relevant program evaluations from USDA issued within the last 10 years. We selected these evaluations based on information we obtained from USDA and other knowledgeable officials through interviews and relevant documents. To provide additional context on program operations for SNAP-Ed and EFNEP, we reviewed various program data. We analyzed the EARS data on the total number of SNAP-Ed implementing agencies, including the number of land-grant universities that were implementing agencies, and the types of education provided by SNAP-Ed programs in fiscal year 2018. For EFNEP, we reviewed data on participant outcomes, reported through WebNEERS, for fiscal year 2018. To assess the reliability of these data, we interviewed officials from FNS and NIFA and reviewed relevant documentation. We determined that these data were sufficiently reliable for the purpose of our reporting objectives. Interviews with Land-Grant University Representatives To gain the perspective of officials involved in the implementation of nutrition education efforts, we interviewed representatives of four land- grant universities. Land-grant universities are the sole provider of EFNEP and one of the main providers of SNAP-Ed. We judgmentally selected a non-generalizable sample of four land-grant universities based on various criteria, including the recommendations of knowledgeable officials, geographic dispersion, and other factors, such as the percentage of the university’s state population in poverty. Two of the universities we selected solely administer EFNEP and two administer both EFNEP and SNAP-Ed. We gathered information from these land-grant university representatives on how they provide nutrition education through their programs and the extent to which they coordinate with other SNAP-Ed programs in their county and state, as well as with other USDA nutrition education programs. We also gathered information on support they receive from the USDA national office for coordination, if any; their perspectives on challenges USDA faces to coordinating nutrition education across its programs, if any; and their views on opportunities for USDA to improve coordination across nutrition education programs. Information collected from the land-grant university representatives cannot be generalized to all land-grant universities nationwide. We conducted this performance audit from December 2018 to July 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the U.S. Department of Agriculture Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Rachel Frisk (Assistant Director), Kristen Jones (Analyst-in-Charge), and Sara Rizik made key contributions to this report. Also contributing to this report were Monika Gomez, Stacy Ouellette, Almeta Spencer, Rachel Stoiko, Curtia Taylor, Walter Vance, Sarah Veale, and Adam Wendel.

The Centers for Disease Control and Prevention reports that many Americans' diets lack adequate sources of good nutrition and that this contributes to costly chronic health conditions. USDA funds and administers a variety of nutrition education efforts, which aim to help educate Americans on nutrition and improve their dietary choices. GAO was asked to review these efforts. This report examines the extent to which USDA (1) has information on participation, expenditures, and effectiveness for its nutrition education programs; and (2) coordinates its nutrition education efforts and leverages internal nutrition expertise for these efforts. GAO reviewed relevant federal laws, regulations, guidance, and GAO's prior work on nutrition education and leading practices for collaboration; analyzed USDA data on nutrition education participation in fiscal year 2018 and expenditures in fiscal year 2017, the most recent year with complete data available; and reviewed program evaluations and available outcome data for fiscal year 2018. GAO also interviewed USDA officials and representatives of relevant organizations. The U.S. Department of Agriculture (USDA) administers five key programs that provide nutrition education and has information on participation, expenditures, and effectiveness for most of these programs. USDA tracks the number of participants in direct education, such as classes and counseling, as well as other measures of program reach. For example, Supplemental Nutrition Assistance Program Education (SNAP-Ed), one of USDA's largest nutrition education programs, served 3.8 million participants through direct education in fiscal year 2018. USDA also collects nationwide expenditure data for all of its nutrition education programs, which totaled nearly $907 million in fiscal year 2017—the most recent year with complete data available. In addition, USDA collects some information on the effectiveness of most of its nutrition education programs; yet information USDA collects from states on SNAP-Ed effectiveness cannot be easily aggregated or reviewed. States provide this information in narrative reports, which hinders USDA's ability to assess the effectiveness of interventions used across the country and determine whether SNAP-Ed is achieving its goals. USDA does not have a formal coordination mechanism for its nutrition education efforts and does not fully leverage the department's nutrition expertise. According to USDA officials, coordinating nutrition education efforts has not been a priority in recent years, and the department does not have a dedicated individual or entity with leadership responsibility for nutrition education. This has resulted in limited coordination across USDA's nutrition education programs, including programs with similar target populations. GAO previously reported that effective coordination can help reduce overlap and duplication. In its absence, USDA's nutrition education programs are missing opportunities to share information and avoid duplicating efforts. Further, some USDA nutrition experts are not located in agencies or offices overseeing the nutrition education programs, and possibly because of this, program staff consult these experts on a limited basis, if at all. Failing to leverage its internal expertise hinders USDA's development of nutrition education materials that are informed by the latest nutrition guidance and research and may reduce the effectiveness of these efforts.

GAO_GAO-20-266

Background The federal government has long recognized the need to protect itself by ensuring contractors have appropriately allocated costs on cost-based contracts. In terms of what is potentially covered by CAS, cost-based contracts include cost-type contracts and certain fixed-price contracts where the contractor’s estimated or actual costs play a role in determining the amount the government pays. The total amount obligated annually by the government on these types of contracts is significant. For example, in fiscal year 2018, the federal government obligated approximately $172 billion on cost-type contracts alone, according to our analysis of Federal Procurement Data System information. Need for Uniform Cost Accounting Standards In 1968, the House Banking and Currency Committee held hearings to determine whether to renew the Defense Production Act of 1950. A witness at the hearings, U.S. Navy Admiral Hyman G. Rickover, testified that defense suppliers could make excessive profits and disguise them as overhead costs or hide them in other ways in the absence of a set of uniform cost accounting standards. Witnesses at the time testified that it was difficult to compare costs among prospective contractors’ cost estimates or even to assess costs incurred on contracts with the same contractor without a set of uniform and consistent standards. Congress subsequently directed us to study the feasibility of establishing such standards. In January 1970, we reported one of many examples of mischarges involving a contractor that had charged the government for costs above the allowed cost ceiling by moving them under a separate contract cost category. We concluded that then-existing financial reporting standards were neither created nor adequate for contract cost purposes. In addition, we concluded that it was feasible to create a set of cost accounting standards and recommended doing so. Creation of Board and Cost Accounting Standards In August 1970, Congress created the Board as an independent board within the legislative branch. The Board was initially chaired by the Comptroller General, who appointed four other members. The Board was authorized to promulgate standards designed to achieve uniformity and consistency in cost accounting practices used by federal contractors on defense contracts in excess of $100,000. The Board issued 19 cost accounting standards that went into effect between 1972 and 1980 for applicable DOD contracts. These standards covered areas such as consistency between how actual and estimated costs are calculated and reported, and ensuring that costs are not double- counted. The standards were intended to ensure that incurred costs were appropriately allocated to government contracts. Generally Accepted Accounting Principles In contrast, GAAP is a set of U.S. accounting standards, conventions, and rules focused on measuring companies’ financial performance. GAAP is meant to establish and improve financial accounting and reporting to provide useful information to investors and other users of financial reports, including measurement and recognition of costs in financial statements. Federal endorsement of generally accepted accounting practices or principles dates back to the Securities Act of 1933. Then, the Securities Exchange Act of 1934 created the Securities and Exchange Commission and gave it authority to oversee accounting and auditing methods for publicly traded companies. Subsequently, various professional accounting groups, with oversight by the Securities and Exchange Commission, began working to establish standards and practices for consistent and accurate financial reporting, which became known as GAAP. In 1973, the Securities and Exchange Commission recognized the Financial Accounting Standards Board (FASB) as the designated accounting standard setter for public companies in the United States, and FASB is responsible for GAAP. History of the Cost Accounting Standards Board In fiscal year 1981, Congress stopped funding the Board. However, after a number of disputes arose as to how to interpret various standards, Congress reestablished the Board in 1988. Congress placed the Board under OFPP, which is part of the Office of Management and Budget (OMB) within the executive branch. Congress also broadened the Board’s authority by applying CAS to all federal contracts—they were previously applicable only to defense contracts. Table 1 provides more information on the differences between CAS and GAAP. The Board met intermittently to address issues associated with interpretations of the standards after it was reestablished in 1988. In the late 2000s, the Board revised two of the standards related to pension contributions by government contractors for their employees. Effective in 2008, Congress changed the minimum contributions required to fund pension plans. This change caused pension contributions to greatly exceed CAS pension costs reflected in contract prices. The Board updated the CAS effective in 2012 to harmonize CAS pension costs with statutory changes to the pension funding requirements. However, the Board’s changes did not address how costs were settled when pension plans were curtailed. In January 2013, we recommended that the Board set a schedule to revise parts of the CAS dealing with settlement of pension plan curtailments. Citing our recommendation, the Board began efforts to resolve this issue in July 2013 and the work is on-going. While Board staff have been working to resolve these pension issues, the Board went several years without holding official meetings of the full board. Figure 1 illustrates the Board’s activities over time. The current Board is comprised of five members. The Administrator of OFFP is a member and serves as Board Chair. The other members include representatives from DOD, the General Services Administration, industry, and another private sector representative with cost accounting expertise. According to OFPP officials, the Board is also assisted by two OFPP staff—one on a full-time basis and one on a part-time basis—and a detailee from DCAA. In addition, OFPP officials said that the Board forms interagency working groups to address specific issues, such as pension harmonization. The Board receives its funding from OMB and does not have a separate funding source. According to OFPP officials, the Board’s main expenses were salary reimbursement for the non-government employees who serve on the Board and publication costs for Federal Register notices. Other federal agencies also have responsibilities to help administer the standards. For example, according to OFPP officials, most CAS-covered contracts are defense related. As such, DCAA reviews federal contractors’ disclosure statements for adequacy and compliance—that is, whether the statements are current, accurate, and complete. Disclosure statements describe the company’s actual or proposed cost accounting practices, including how they distinguish between costs, and how costs are allocated to contracts. DCAA also conducts audits to ensure contractors comply with CAS and with the contractors’ disclosed and established cost accounting practices and procedures. In addition, DCMA monitors contractor performance and the contractor’s business management systems, among other things, to ensure that the contractor is consistently following its cost accounting practices for contracts that are subject to CAS. There is no definitive list of the companies, business segments or units, or contracts that are subject to CAS. Whether a contractor’s business segment is required to comply with the standards on a particular contract depends largely on the value of the government contracts it is awarded during the year that are cost-based. Once a contractor’s business segment exceeds a certain dollar threshold of these “CAS-covered contracts,” the business segment is required to comply with either (1) all 19 standards (termed “full CAS-coverage”) or (2) four standards (termed “modified CAS-coverage”). Full coverage applies to business segments with CAS-covered contracts with a combined value of $50 million or more. Modified coverage may apply to business segments with a single CAS- covered contract of $7.5 million or more, and combined CAS-covered contracts valued at less than $50 million. Table 2 below lists all 19 CAS required under full coverage and the four CAS required under modified coverage. Prior GAO Reports and Recent Studies Related to the Board and Cost Accounting Standards We and congressionally established review panels have previously studied the potential impact of CAS on industry as well as possible changes to the CAS and the Board. For example: In April 1994, we reported that seven of eight companies we reviewed either kept their government contracting work separate from their commercial contracting or assigned additional staff to their government contracting segments due to the increased demands of government contracting, citing, among other things, CAS as a factor in that decision. In January 1997, we reported on DOD’s efforts to address acquisition cost drivers based, in part, on a prior DOD-directed study that identified CAS as one of the 10 largest cost drivers on DOD contracts. In that report, a DCMA official noted that, in his opinion, while the annual cost of maintaining a CAS-compliant system is relatively small, the cost to establish a CAS-compliant system may be significant. Congress asked us to lead a panel of experts to assess the future role of the Board. In April 1999, we issued the panel’s report focused on the Board and CAS in light of acquisition reforms and the evolution of GAAP. The panel concluded that, among other things, the Board should review CAS and its attendant requirements to determine whether standards could be streamlined to reduce unnecessary burden on affected contractors. In addition, the panel made several recommendations, including moving the Board out of OFPP to ensure autonomy. Congress did not act on this recommendation. The panel also recommended reviewing contract applicability and full-coverage thresholds for CAS. Congress subsequently set the modified coverage ceiling at $7.5 million in October 1999. In July 2017, most of the 12 companies we spoke with that had not done business with DOD told us they chose not to do so because it might trigger a large number of contract terms and conditions that would be expensive to implement. One reason provided by the companies for not competing for certain types of DOD contracts was the requirement to establish a government-unique cost accounting system and to disclose and follow cost accounting practices consistently. In June 2018, the Section 809 Panel—having been established to advise Congress on streamlining defense acquisition regulations— released the second of three volumes of its report. In its report, the panel made two recommendations related to CAS, which largely reiterated what the GAO-led panel recommended in 1999. In this regard, the Section 809 panel recommended that the Board should be relocated to the General Services Administration as an independent board with a budget sufficient to support at least three full-time, permanent staff. The panel also recommended raising CAS applicability threshold levels again to further reduce burden on contractors. Subsequently, in 2019, OMB submitted a legislative proposal on raising the CAS applicability threshold from $2 million to $15 million. OMB officials also indicated that they would continue analyzing the effects of additional threshold changes. Congress had not enacted the proposal into law at the time of this report. Board Efforts Generally Comply with Recent Legislative Requirements The CAS Board generally has complied or is in the process of complying with the administrative and reporting requirements prescribed by Section 820 of the National Defense Authorization Act for Fiscal Year 2017, including initial efforts to assess the extent to which CAS can be conformed with GAAP. To do so, the Board is taking steps to follow its statutorily prescribed four-step rulemaking process. The Board’s initial efforts focus on the extent to which two of the 19 standards might be modified or eliminated; however, Board members indicated that these efforts may take several more years to complete. CAS Board Has Generally Complied with Administrative and Reporting Requirements The Board has generally complied with the administrative requirements prescribed under Section 820 thus far, including meeting regularly, generally publishing notices and agendas in advance of meetings, and reviewing disputes involving cost accounting-related matters. According to officials from the Office of Federal Procurement Policy, the Board is working on the first of its annual reports on its efforts, including those associated with efforts to conform the standards with GAAP where practicable. Table 3 highlights the steps the Board is taking to address some of the administrative and reporting requirements mandated by Section 820. Board Has Undertaken Initial Efforts to Assess How CAS Can Be Conformed with GAAP The Board has also taken initial steps to address Section 820’s requirement that the Board review the standards and conform them to GAAP, where practicable (see table 4). In carrying out this work, the Board is taking steps to follow a statutorily prescribed four-step rulemaking process for promulgating CAS or interpretations. Figure 2 below outlines these requirements. In line with this process, between March and November 2018, the Board discussed the opportunities and methods available for conforming CAS to GAAP. The Board held informal discussions with its staff, industry representatives, and government agencies, such as DCAA. One of the messages coming from the feedback was for the Board to focus first on those standards that offered the greatest potential for change. By the end of 2018, the Board had completed development of the staff discussion paper. The Board expected to release this document in the Federal Register for public comment in January 2019; however, a partial shutdown of the federal government due to lapsed funding delayed its release until March 2019. The March 2019 staff discussion paper (1) outlined a set of five guiding principles that the Board would use to assess whether proposed CAS changes are necessary and whether those changes would reduce the burden on contractors while protecting the government’s interests, (2) identified a roadmap that prioritized the Board’s proposed review of standards, and 3) included a preliminary comparison of two standards to GAAP. Guiding Principles. The guiding principles outlined in the staff discussion paper describe the elements the Board will consider when determining whether changes to the CAS will reduce burden on contractors while continuing to protect the interests of the federal government. As stated in the staff discussion paper, the Board will: 1) reduce CAS requirements where practicable; 2) consider whether the proposed action would reduce burden on 3) consider whether other CAS or federal rules would protect the government’s interests in case of any gaps created by relying on GAAP; 4) monitor future changes to GAAP and the Federal Acquisition Regulation (FAR) to identify and evaluate their impact on CAS and revise CAS, as necessary; and 5) monitor future significant disputes related to the conformance to GAAP and evaluate whether the Board should address them through clarifying guidance or rulemaking. Prioritization. The Board grouped the 19 CAS into four categories based on the Board’s assessment of which standards are most likely to have overlap with GAAP (see figure 3). The Board plans to focus its initial efforts on the seven standards in the first group, which focus on cost measurement and assigning costs to accounting periods. According to its staff discussion paper, the Board’s proposed approach is to assess the standards by developing side-by-side comparisons of CAS requirements to corresponding GAAP requirements and identifying any gaps between the two. The Board will then evaluate the potential risk of any gaps identified, taking into account coverage by other CAS requirements and related regulations; for example, the FAR. The Board will also assess whether there is a history of compliance issues for those standards. According to OFPP officials, such assessments will help the Board determine whether they need to update guidance related to a particular CAS. Lastly, the Board plans to assess changes that have occurred in GAAP relative to CAS and to evaluate the need to conform CAS to the updated GAAP. For example, the Board has identified two recent changes in GAAP that it states may not align with CAS. Comparison. The Board has begun this effort by looking at two standards focused on measuring and assigning costs (CAS 408 and CAS 409), since it believes that GAAP potentially provided additional coverage compared to when the two CAS were established in 1975. OFPP officials stated that these two standards provided a good opportunity to modify and potentially eliminate duplicative coverage while testing the soundness of the Board’s approach to conform CAS to GAAP where practicable. Public Response to the Board’s Approach Has Been Mixed The Board received seven separate comment letters on the staff discussion paper from five industry organizations, one commercial business, and one private individual. Our review of the comments found that they were largely supportive of the Board’s guiding principles, but some commenters raised concerns regarding the Board’s approach to its conformance effort and questioned whether it would ease the burden on contractors. For example, four respondents commented that the Board should not limit its focus to only revising or eliminating particular CAS when it was clear that GAAP provided adequate coverage. Instead, these industry groups stated that each CAS should be eliminated unless proven to be absolutely necessary due to the barriers to contractors that these groups believe the CAS create. The Board members we met with stated that all options for refining CAS requirements were on the table. However, they also stated that GAAP and CAS are focused on two separate goals—the former on a business’s high-level financial statement, the latter on individual contract costs. Board members, as well as DCAA and DCMA officials, noted that eliminating CAS requirements to rely purely on GAAP standards would limit the government’s ability to compare contract proposals, assess actual costs to avoid overcharges by contractors, and protect its interests. For example, DCMA officials stated that the government has $3.1 billion in pending litigation for identified CAS noncompliances. Recovery of increased costs is accomplished in part through contract clauses that entitle the government to recover specific cost increases on affected CAS-covered contracts. Were CAS and the associated contract clauses eliminated, DCAA and DCMA officials noted that the government’s ability to recover these costs would be greatly reduced. In addition, the Board is concerned that in modifying or perhaps even eliminating certain CAS requirements, and instead using GAAP, there is the risk that future GAAP changes would no longer cover the areas of CAS concern. This would leave the government vulnerable to the issues that the modified or eliminated CAS were originally created to address. Members of the Board and staff we spoke with indicated that the Board is reviewing and assessing the public comments on the staff discussion paper to determine whether the Board needs to make changes to the paper’s guiding principles or methodology going forward. According to the Board members, the Board will issue a Federal Register notice explaining any changes resulting from public input and its own additional deliberations. Additionally, they said the Board will consult with the Financial Accounting Standards Board—which is responsible for GAAP— to answer technical questions and ensure that the Board has an accurate understanding of GAAP coverage as they continue to perform side-by- side comparisons of CAS and GAAP. Further, the Board stated that it will publish a notice to address public comments on CAS to GAAP conformance projects and that additional staff discussion papers and associated notices will be published in the Federal Register for public comment as they are completed. In addition to streamlining or eliminating CAS standards, some of the comments in response to the staff discussion paper pointed to other areas that the Board may want to consider to reduce the burden on government contractors. For example, some comments encouraged the Board to consider increasing CAS full-compliance dollar thresholds. Reassessing the CAS full-compliance threshold aligns with findings from congressionally established panel reports from 1999 and 2018. According to both panels’ findings, increasing compliance thresholds is a way to decrease burden on many government contractors while still protecting the bulk of the government’s contracting dollars. As previously noted, OMB recently submitted a legislative proposal to raise the threshold from $2 million to $15 million. OMB also indicated that it intends to continue studying available data to understand the costs and benefits of CAS threshold changes and whether additional changes to the threshold need to be made. Agency Comments We provided a draft of this report to DOD, the Office of Management and Budget, and the Cost Accounting Standards Board for their review and comment. DOD had no comments on the report. The Office of Management and Budget and the Board provided technical comments, which we incorporated where appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense; the Director, Defense Procurement and Contracting; the Director, Defense Contract Audit Agency; the Director, Defense Contract Management Agency; the Director, Office of Management and Budget; and the Administrator, Office of Federal Procurement Policy. In addition, this report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Appendix I: Description of the 19 Cost Accounting Standards and Their Purpose Appendix II: Cost Accounting Standards Applicability, Exemptions, and Compliance Cost Accounting Standards Applicability. In general, a business segment is not subject to Cost Accounting Standards (CAS) until it receives a non-exempt contract of $7.5 million or more from the federal government. Generally, a non-exempt contract is a contract that does not meet any of the exemptions listed below. Typically, once a business segment receives a non-exempt contract of $7.5 million or more, all of its prospective non-exempt contracts or subcontracts over $2 million are considered CAS-covered. Summary of Exemptions. The following categories of contracts and subcontracts are exempt from all CAS requirements: Sealed bid contracts; Negotiated contracts and subcontracts not in excess of the Truth in Negotiations Act (TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). For purposes of this exemption, an order issued by one segment to another segment shall be treated as a subcontract; Contracts and subcontracts with small businesses (Federal Acquisition Regulation (FAR) Subpart 19.3 addresses determination of status as a small business.); Contracts and subcontracts with foreign governments or their agents or instrumentalities or, insofar as the requirements of CAS other than CAS 401 and CAS 402 are concerned, any contract or subcontract awarded to a foreign concern; A contract or subcontract where the price is set by law or regulation; A contract or subcontract authorized in FAR § 12.207 for the acquisition of a commercial item; A contract or subcontract with a value of less than $7,500,000 if, at the time of award, the business segment of the contractor or subcontractor that will perform the work has not been awarded at least one contract or subcontract with a value of $7,500,000 or more that is covered by the standards. Subcontracts under the North Atlantic Treaty Organization’s Patrol Missile Hydrofoil Ship programs to be performed outside of the United States by a foreign concern; A firm-fixed price contract or subcontract awarded on the basis of adequate price competition without submission of certified cost or pricing data. In addition, in cases where the prime contract is exempt from CAS under any of the exemptions at 48 C.F.R. § 9903.201-1 any subcontract under that prime is always exempt from CAS. Also, Title 41 of the U.S. Code was amended effective in 2018 to allow executive agency heads can waive CAS requirements for a contract or subcontract with a value of less than $100 million if the business segment is primarily engaged in commercial work and would not otherwise be subject to CAS, or for exceptional circumstances where waiving CAS is necessary to meet agency needs. Compliance. There are two levels of CAS coverage—full and modified. Full coverage applies to business segments with CAS-covered contracts valued at $50 million or more; those business segments must comply with all 19 standards. Modified coverage may apply to business segments with CAS-covered contracts valued less than $50 million. Business segments that have contracts awarded with modified coverage must comply with four of the standards. Business segments with full CAS-covered contracts are also required to submit disclosure statements describing the company’s actual or proposed cost accounting practices and procedures, including how they distinguish direct costs from indirect costs and the basis used for allocating indirect costs. The Defense Contract Audit Agency (DCAA) reviews disclosure statements for adequacy and compliance—that is, whether the statement is current, accurate, and complete—prior to contract award and during contract performance. DCAA may also complete CAS compliance audits at the request of the cognizant federal agency official after contract award. In some circumstances, the Defense Contract Management Agency (DCMA) will review disclosure statements that are not audited by DCAA. According to officials, both DCAA and DCMA provide audit findings to the cognizant federal agency official, who then disposes the audit findings by making the final determination of adequacy and compliance. The purpose of disclosure statement audits is to determine whether the contractor’s disclosed or established practices are in compliance with CAS rules, regulations, and standards, as well as appropriate acquisition regulations. A CAS-related noncompliance may be found if a contractor with a CAS-covered contract proposes a practice that will violate CAS or a government acquisition regulations cost principle, or if the contractor’s actual practices are either inconsistent with their own disclosure statement or noncompliant with the cost standards or principles. For example, in 1970, we, along with DCAA auditors, found instances where contractors charged costs as both direct and indirect costs to the same contract, resulting in the contractors recovering the same charge twice. If an auditor discovers a noncompliance issue, the auditor will submit an advisory report to the cognizant federal agency official who makes the final determination. The consequences of a CAS noncompliance can range from a contract adjustment to litigation. According to the DCMA’s Contract Dispute Resolution Center, there were 15 judicial decisions issued in CAS-related board and court cases in the last five years. Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Bruce H. Thomas, Assistant Director; Peter Anderson; Jennifer Baker; Miranda Riemer; Jenny Shinn; Ryan Stott; and Roxanna T. Sun made key contributions to this report.

Each year, the federal government obligates billions of dollars on contracts for which the final costs depend, in part, on the amount of overhead and other costs charged to the contract. Congress created the Board in 1970. The standards it created ensure contractors appropriately charge costs to government contracts. In contrast, GAAP is a set of financial reporting principles that commercial firms may use in preparing financial statements and which include the basis for recognizing and measuring costs in such statements . Industry representatives and others have raised concerns that complying with CAS may be burdensome and questioned whether the government could rely on GAAP. In 2016, Congress included a provision in law that the Board, among other things, conform CAS with GAAP, where practicable. Congress also included a provision for GAO to assess Board efforts. This report assesses the extent to which the Board is taking steps to meet legislative requirements and describes the Board's efforts to conform CAS to GAAP. GAO reviewed applicable laws, regulations and guidance, Federal Register notices and other documentation on the Board's activities. GAO also examined the Board's methodology for comparing CAS to GAAP and its preliminary analysis of two of the cost accounting standards. Finally, GAO interviewed Board members and federal procurement officials. The Cost Accounting Standards Board (the Board) is generally meeting recent legislative requirements and has taken initial steps to assess the extent to which the government's Cost Accounting Standards (CAS) can be conformed with a set of 12commercial financial reporting principles known as Generally Accepted Accounting Principles (GAAP). Comprising five members representing the government and industry, the Board issued 19 standards between 1972 and 1980. After that point, the Board met intermittently until 2016. At that time, Congress included a provision in the National Defense Authorization Act for Fiscal Year 2017 to require the Board to meet quarterly, to review CAS-related disputes, to conform CAS with GAAP where practicable, and to report annually to Congress on its efforts, among other things. Since the legislation went into effect, the Board has met regularly, has been briefed on CAS-related disputes, and is preparing its initial report to Congress. The Board has also taken initial steps to assess the extent to which CAS can be conformed with GAAP. The Board summarized its approach in a March 2019 staff discussion paper, which it released for public comment. In it, the Board: outlined a set of five guiding principles to assess whether proposed CAS changes are necessary and whether those changes would reduce the burden on contractors while protecting the government's interests, identified a roadmap that prioritized the Board's proposed review of the standards, and included a preliminary comparison of two of the seven standards identified as having the most overlap with GAAP (see figure). Some comments submitted in response to the discussion paper by industry groups stated that each of the 19 CAS should be eliminated unless proven to be absolutely necessary. Board members told GAO they were considering all options for refining CAS but noted that GAAP and CAS are focused on two separate goals—GAAP on businesses' high-level financial performance, CAS on allocating costs to individual government contracts. The Board and other government officials said that eliminating CAS requirements to rely purely on GAAP would limit the government's ability to protect its interests.

GAO_GAO-19-477T

Number of NIV Adjudications and Refusal Rates Increased From Fiscal Years 2012 Through 2016, and Declined in Fiscal Year 2017 NIV Adjudications Increased Annually from Fiscal Years 2012 through 2016 and Declined in Fiscal Year 2017 We reported in August 2018 that the total number of NIV applications that consular officers adjudicated (NIV adjudications) annually peaked at about 13.4 million in fiscal year 2016, which was an increase of approximately 30 percent since fiscal year 2012. In fiscal year 2017 (the most recent data available at the time of our report), NIV adjudications decreased by about 880,000 adjudications, or about 7 percent. Figure 2 shows the number of applications adjudicated each year from fiscal years 2012 through 2017. Most NIV Applications Refused from Fiscal Years 2012 through 2017 Were for Reasons Other than Terrorism and Other Security-Related Concerns As shown in figure 2, the percentage of NIVs refused—known as the refusal rate—increased from fiscal years 2012 through 2016, and was about the same in fiscal year 2017 as the previous year. The NIV refusal rate rose from about 14 percent in fiscal year 2012 to about 22 percent in fiscal year 2016, and remained about the same in fiscal year 2017; averaging about 18 percent over the time period. The total number of NIVs issued peaked in fiscal year 2015 at about 10.89 million, before falling in fiscal years 2016 and 2017 to 10.38 million and 9.68 million, respectively. According to State data, while the majority of NIV refusals from fiscal years 2012 through 2017 were a result of consular officers finding the applicants ineligible, a relatively small number of refusals were due to terrorism and other security-related concerns. State data indicate that more than 90 percent of NIVs refused each year from fiscal years 2012 through 2017 were based on the consular officers’ determination that the applicants were ineligible nonimmigrants—in other words, the consular officers believed that the applicant was an intending immigrant seeking to stay permanently in the United States, which would generally violate NIV conditions, or that the applicant otherwise failed to demonstrate eligibility for the particular visa he or she was seeking. For example, an applicant applying for a student visa could be refused as an ineligible nonimmigrant for failure to demonstrate possession of sufficient funds to cover his or her educational expenses, as required. As we reported in August 2018, our analysis of State data indicates that relatively few applicants— approximately 0.05 percent—were refused for terrorism and other security-related reasons from fiscal years 2012 through 2017. As shown in figure 3, in fiscal year 2017, State data indicate that 1,256 refusals (or 0.05 percent) were based on terrorism and other security-related concerns, of which 357 refusals were specifically for terrorism-related reasons. Executive Actions Taken in Calendar Year 2017 Introduced New Visa Entry Restrictions and Requirements to Enhance Screening and Vetting, Including for NIVs The President issued Executive Order 13769, Protecting the Nation from Foreign Terrorist Entry Into the United States (EO-1), in January 2017. In March 2017, the President revoked and replaced EO-1 with the issuance of Executive Order 13780 (EO-2), which had the same title as EO-1. Among other things, EO-2 suspended entry of certain foreign nationals for a 90-day period, subject to exceptions and waivers. In September 2017, as a result of the reviews undertaken pursuant to EO-2, the President issued Presidential Proclamation 9645, Enhancing Vetting Capabilities and Processes for Detecting Attempted Entry into the United States by Terrorists or Other Public-Safety Threats (Proclamation), which imposes certain conditional restrictions and limitations on the entry of nationals of eight countries—Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela and Yemen—into the United States for an indefinite period. These restrictions, identified in table 1, are to remain in effect until the Secretaries of Homeland Security and State determine that a country provides sufficient information for the United States to assess adequately whether its nationals pose a security or safety threat. Challenges to both EOs and the Proclamation affected their implementation and, while EO-2’s entry restrictions have expired, the indefinite visa entry restrictions outlined in the Proclamation continued to be fully implemented as of our August 2018 report. We reported in August 2018 that our analysis of State data indicates that out of the nearly 2.8 million NIV applications refused in fiscal year 2017, 1,338 were refused due to visa entry restrictions implemented in accordance with the executive actions. To implement the entry restrictions, in March 2017, State directed its consular officers to continue to accept all NIV applications and determine whether the applicant was otherwise eligible for a visa without regard to the applicable EO or Proclamation. If the applicant was ineligible for the visa on grounds unrelated to the executive action, such as having prior immigration violations, the applicant was to be refused on those grounds. If the applicant was otherwise eligible for the visa, but fell within the scope of the nationality-specific visa restrictions implemented pursuant to the applicable EO or Proclamation and was not eligible for a waiver or exception, the consular officer was to refuse the visa and enter a refusal code into State’s NIV database indicating that the applicant was refused solely due to the executive actions. More than 90 percent of the NIV applications refused in fiscal year 2017 pursuant to an executive action were for tourist and business visitor visas, and more than 5 percent were for students and exchange visitors. CBP’s Air Predeparture Programs Interdict High-Risk Air Travelers, but CBP Has Not Fully Assessed the Programs’ Performance CBP Identifies and Interdicts High-Risk Travelers before They Board U.S.-Bound Flights As we reported in January 2017, CBP electronically vets all travelers before they board U.S.-bound flights, and continues to do so until they land at a U.S. port of entry. Through these vetting efforts, CBP seeks to identify high-risk travelers from the millions of individuals who travel to the United States each year. As we reported in January 2017, CBP’s vetting and targeting efforts are primarily conducted by its NTC and entail (1) traveler data matching and analysis, (2) rules-based targeting, and (3) recurrent vetting. Specifically: CBP’s primary method of identifying high-risk individuals is through the comparison of travelers’ information (such as name, date of birth, and gender) against records extracted from U.S. government databases, including the Terrorist Screening Database (TSDB)—the U.S. government’s consolidated terrorist watch list. Traveler data matching focuses on identifying known high-risk individuals—that is, individuals who may be inadmissible to the United States under U.S. immigration law or who may otherwise pose a threat to homeland or national security. CBP’s primary tool for vetting and targeting travelers is the Automated Targeting System (ATS), which is a computer-based enforcement and support system that compares traveler information against intelligence and law enforcement data to identify high-risk travelers. Traveler data matching occurs throughout the travel process and, upon a positive or possible match, CBP officers can select these individuals for further vetting, interviewing, and inspection. CBP’s rules-based targeting efforts seek to identify unknown high-risk travelers—that is, travelers for whom U.S. government entities do not have available derogatory information directly linking them to terrorist activities or any other actions that would make them potentially inadmissible to the United States but who may present a threat and thus warrant additional scrutiny. CBP identifies unknown high-risk individuals by comparing their information against a set of targeting rules based on intelligence, law enforcement, and other information. NTC officials stated that these rules have identified potential high-risk travelers, including potential foreign fighters. Rules-based targeting evaluates travelers during the travel process and, in some cases, in advance of the travel process. If a traveler is a rule “hit,” this individual can be selected for further vetting, interviewing, and inspection. CBP supports its traveler data matching and rules-based targeting efforts through the use of recurrent vetting. NTC’s vetting, targeting, and traveler data matching activities in ATS run 24 hours a day and 7 days a week and automatically scan updated traveler information, when available. This process is to ensure that new information that affects a traveler’s admissibility is identified in near real time. Recurrent vetting occurs throughout the travel process and continues until a traveler arrives at a domestic port of entry. For example, after checking into a foreign airport, a traveler may have his or her visa revoked for a security or immigration-related violation. Due to recurrent vetting, CBP would be alerted to this through ATS and could take action, as appropriate. CBP’s Air Predeparture Programs Interdict High- Risk Travelers on U.S.- Bound Flights, but CBP Has Not Fully Evaluated Overall Effectiveness of These Programs As we reported in January 2017, throughout the travel process, CBP’s predeparture programs use the results of NTC’s efforts to identify and interdict high-risk individuals destined for the United States while they are still overseas; however, we found that CBP had not evaluated the effectiveness of its predeparture programs as a whole, including implementing a system of performance measures and baselines to assess whether the programs are achieving their stated goals. CBP operates three air predeparture programs that are responsible for all U.S.-bound air travelers—(1) Preclearance; (2) the Immigration Advisory Program (IAP) and Joint Security Program (JSP); and (3) the regional carrier liaison groups (RCLG). As we reported in January 2017, CBP data indicated that these programs identified and ultimately interdicted approximately 22,000 high-risk air travelers in fiscal year 2015, the most recent data available at the time of our review. Information on individuals who the NTC identifies through traveler data matching or rules-based targeting, including recurrent vetting, is compiled automatically through ATS into a daily high-priority list (or, traveler referral list). CBP officers at the NTC review the traveler referral list for accuracy and to remove, if possible, any automatically generated matches determined to not be potential high-risk individuals. After this review, CBP officers at the NTC use ATS to send the traveler referral list to officers at each Preclearance, IAP, JSP, and RCLG location, as shown in figure 4. Preclearance. Preclearance locations operate at foreign airports and serve as U.S. ports of entry. Preclearance operations began in 1952 in Toronto to facilitate trade and travel between the United States and Canada. As of March 2018, CBP operated 15 air Preclearance locations in six countries. Through the Preclearance program, uniformed CBP officers at a foreign airport exercise U.S. legal authorities to inspect travelers and luggage and make admissibility determinations prior to an individual boarding a plane to the United States. According to CBP officials, an inspection at a Preclearance location is the same inspection as an individual would undergo at a domestic port of entry, and officers conducting Preclearance inspections exercise the same authority as officers at domestic ports of entry to approve or deny admission into the United States. As a result, travelers arriving at domestic air ports of entry from Preclearance locations do not have to be re-inspected upon entry. According to CBP data, in fiscal year 2015, CBP officers at Preclearance locations determined that 10,648 air travelers were inadmissible out of the approximately 16 million air travelers seeking admission to the United States through a Preclearance location. In addition to requiring that all travelers undergo a primary inspection, CBP officers in these locations also referred almost 290,000 individuals for secondary inspection. Immigration Advisory Program (IAP) and Joint Security Program (JSP). IAP and JSP operated at nine and two foreign airports, respectively, as of January 2017. According to CBP officials, under this program, unarmed, plainclothes CBP officers posted at foreign airports partner with air carriers and host country government officials to help prevent terrorists and other high-risk individuals from boarding U.S.- bound flights by vetting and interviewing them before travel. According to CBP program documentation, CBP established IAP in 2004 to prevent terrorists, high- risk travelers, and improperly documented travelers from boarding airlines destined to the United States. Building on the IAP concept, CBP established JSP in 2009 to partner with host country law enforcement officials to identify high-risk travelers. CBP officers at IAP and JSP locations have the ability to question travelers and review their travel documents. They are to act in an advisory manner to the air carriers and host governments and do not have authority to deny boarding to individuals on U.S.-bound flights or fully inspect travelers or their belongings. IAP and JSP officers are authorized by CBP to make recommendations to airlines as to whether to board or deny boarding (known as a no-board recommendation) to selected travelers based on their likely admissibility status upon arrival to the United States. The final decision to board travelers, however, lies with the carriers. According to CBP data, CBP officers at IAP and JSP locations made 3,925 no-board recommendations in fiscal year 2015 for the approximately 29 million air travelers bound for the United States from such locations. During this same time period, CBP data indicated 1,154 confirmed encounters with individuals in the TSDB, including 106 on the No Fly List. Regional Carrier Liaison Groups (RCLG). RCLGs are located and operate at three domestic airports—Miami International Airport, John F. Kennedy International Airport, and Honolulu International Airport. CBP established RCLGs in 2006 to assist air carriers with questions regarding U.S. admissibility requirements and travel document authenticity. According to CBP officials, RCLGs are responsible for coordinating with air carriers on all actionable referrals from NTC on U.S.-bound travelers departing from an airport without an IAP, JSP, or Preclearance presence. Each RCLG is assigned responsibility for travelers departing out of a specific geographic location. Similar to IAP and JSP, CBP officers in RCLGs also make no-board recommendations, as appropriate, to air carriers. CBP officers at RCLGs do not have authority to make admissibility determinations about U.S.-bound air travelers, and the final decision to board or not board a traveler lies with the carrier. We reported in January 2017 that CBP officers working at the three RCLGs made 7,664 no-board recommendations in fiscal year 2015 for the approximately 59 million travelers bound for the United States from locations within the RCLGs’ spheres of responsibility. During this time period, CBP data indicated that RCLGs also reported 1,634 confirmed encounters with individuals in the TSDB, including 119 on the No Fly List. In January 2017, we reported that CBP had not evaluated the effectiveness of its predeparture programs as a whole, including implementing a system of performance measures and baselines to assess whether the programs were achieving their stated goals. We reported that CBP had taken some initial steps to measure the performance of these programs. Specifically, CBP officials told us that they had collected a large quantity of data and statistics regarding the actions of their predeparture programs and had done so since program inception for all programs. However, due to changes in operational focus, technology updates, and the use of separate data systems at program locations, CBP had not collected consistent data across all of its predeparture programs. As a result, CBP did not have baseline data on which to measure program performance. Therefore, we recommended that CBP develop and implement a system of performance measures and baselines for each program to help ensure that these programs achieve their intended goals. In response, as of March 2018, CBP has developed three performance measures for its predeparture programs. On the basis of our review of CBP documentation, as of December 2018, CBP has collected the fiscal year 2018 data relevant to these measures, used those data to set preliminary targets for fiscal year 2019, and plans to analyze the fiscal year 2019 results and set targets for future fiscal years by October 31, 2019. We will review documentation of CBP’s analysis of the fiscal year 2019 results and future targets, when available, to determine if CBP’s actions address our recommendation. Chairwoman Rice, Chairman Rose, Ranking Members Higgins and Walker, and Members of the Subcommittees, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Acknowledgments For further information regarding this testimony, please contact Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony are Kathryn H. Bernet, Assistant Director; Eric Hauswirth; Thomas Lombardi; Sasan J. “Jon” Najmi; Erin O’Brien; and Natalie Swabb. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Previous attempted and successful terrorist attacks against the United States have raised questions about the security of the U.S. government's screening and vetting processes for NIVs. State manages the visa adjudication process. DHS seeks to identify and interdict travelers who are potential security threats to the United States, such as foreign fighters and potential terrorists, human traffickers, drug smugglers and otherwise inadmissible persons, at the earliest possible point in time. DHS also has certain responsibilities for strengthening the security of the visa process. In 2017, the President issued executive actions directing agencies to improve visa screening and vetting, and establishing nationality-based visa entry restrictions, which the Supreme Court upheld in June 2018. This statement addresses (1) data and information on NIV adjudications and (2) CBP programs aimed at preventing high-risk travelers from boarding U.S.-bound flights. This statement is based on prior products GAO issued in January 2017 and August 2018, along with selected updates conducted in December 2018 to obtain information from DHS on actions it has taken to address a prior GAO recommendation. In August 2018, GAO reported that the total number of nonimmigrant visa (NIV) applications that Department of State (State) consular officers adjudicated annually increased from fiscal years 2012 through 2016, but decreased in fiscal year 2017 (the most recent data available at the time of GAO's report). NIVs are issued to foreign nationals, such as tourists, business visitors, and students, seeking temporary admission into the United States. The number of adjudications peaked at about 13.4 million in fiscal year 2016, and decreased by about 880,000 adjudications in fiscal year 2017. State refused about 18 percent of adjudicated applications during this time period, of which more than 90 percent were because the applicant did not qualify for the visa sought and 0.05 percent were due to terrorism and security-related concerns. In 2017, two executive orders and a proclamation issued by the President required, among other actions, visa entry restrictions for nationals of certain listed countries of concern. GAO's analysis indicates that, out of the nearly 2.8 million NIV applications refused in fiscal year 2017, 1,338 applications were refused specifically due to visa entry restrictions implemented per the executive actions. In January 2017, GAO reported that the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP) operates predeparture programs to help identify and interdict high-risk travelers before they board U.S.- bound flights. CBP officers inspect all U.S.-bound travelers on those flights that are precleared at the 15 Preclearance locations at foreign airports—which serve as U.S. ports of entry—and, if deemed inadmissible, a traveler will not be permitted to board the aircraft. CBP also operates nine Immigration Advisory Program and two Joint Security Program locations, as well as three Regional Carrier Liaison Groups, through which CBP may recommend that air carriers not permit identified high-risk travelers to board U.S.-bound flights. CBP data showed that it identified and interdicted over 22,000 high-risk air travelers through these programs in fiscal year 2015 (the most recent data available at the time of GAO's report). While CBP tracked some data, such as the number of travelers deemed inadmissible, it had not fully evaluated the overall effectiveness of these programs. GAO recommended that CBP develop a system of performance measures and baselines to better position CBP to assess program performance. As of December 2018, CBP set preliminary performance targets for fiscal year 2019, and plans to set targets for future fiscal years by October 31, 2019. GAO will continue to review CBP's actions to address this recommendation.

CRS_R46324

Introduction On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law ( P.L. 116-136 ). The CARES Act includes $3.5 billion in supplemental appropriations for the Child Care and Development Block Grant (CCDBG). This report provides an overview of the CCDBG provisions in the CARES Act. Among other things, these provisions address allowable uses and flexibilities of the supplemental funds. The report also includes allocations for the additional $3.5 billion in CCDBG appropriations. The CCDBG Act (42 U.S.C. §§9858 et seq.) is the main federal law supporting child care programs for low-income working families. The CCDBG is administered by the U.S. Department of Health and Human Services (HHS). HHS allocates CCDBG funds to states, territories, and tribes according to a statutory formula. In addition, certain funds may be reserved for other activities, such as technical assistance and research. State, territory, and tribal lead agencies submit CCDBG plans to HHS every three years describing how their child care programs will operate. CCDBG funds are used to subsidize the cost of child care for eligible children of low-income working parents. Funds are also used to support activities to improve the quality of child care and for certain other costs. CCDBG Provisions in the CARES Act The CARES Act appropriates $3.5 billion in FY2020 emergency supplemental funds to the CCDBG. The funds are to be used to "prevent, prepare for, and respond to coronavirus." The CARES Act funds are provided in addition to FY2020 annual appropriations of $5.8 billion (see P.L. 116-94 ). The additional $3.5 billion represents a 60% increase in total appropriations to the CCDBG in FY2020. The additional funds are to remain available for obligation by HHS through September 30, 2021 (i.e., the end of FY2021). The CARES Act includes a number of provisions that clarify allowable uses and, in some cases, waive certain underlying requirements of the CCDBG Act. Below is a brief discussion of key provisions. Continued Assistance to Child Care Providers Under the CCDBG Act, lead agencies subsidize the cost of child care for eligible children. Lead agencies commonly provide subsidy payments directly to child care providers. In some cases, lead agencies may provide additional CCDBG funds to eligible providers for other purposes, such as supporting professional development or helping build the supply of quality child care. The CARES Act specifies that CCDBG funds appropriated in the act may be used to provide continued payments and assistance to child care providers in cases of decreased enrollment or closures related to coronavirus, and to ensure that providers are able to remain open or reopen as appropriate and applicable. The CCDBG Act generally encourages (but does not require) lead agencies to make payments to child care providers based on enrollment rather than attendance. Specifically, the law states that lead agencies should "to the extent practicable" delink provider reimbursements from an eligible child's occasional absences due to holidays or unforeseen circumstances such as illness. This provision of the law is intended to support the fixed costs incurred by providers. Eligible Child Care Providers The CARES Act specifies that CCDBG funds appropriated in the act shall be available to eligible child care providers under the CCDBG Act for the purposes of cleaning and sanitation, and other activities necessary to maintain or resume the operation of programs. The act clarifies that this provision applies to eligible child care providers even if those providers were not receiving CCDBG assistance prior to the public health emergency resulting from coronavirus. Under the CCDBG Act, eligible child care providers generally must be licensed, regulated, or registered by the state (though states may exempt certain providers from this requirement); and meet certain minimum health and safety standards. An exception to these requirements is made in cases of child care providers caring only for relatives. However, such providers must comply with requirements applicable to relative caregivers. Continued Pay for Child Care Staff The CARES Act encourages states, territories, and tribes to place conditions on payments to child care providers aimed at ensuring providers use a portion of the funds to continue to pay staff salaries and wages. Payment of salaries and wages is not explicitly addressed in the CCDBG Act, though presumably it is typical for some share of CCDBG provider payments to support these expenses. According to national estimates from the Bureau of Labor Statistics (BLS), the mean hourly wage for child care workers was $12.27 in May 2019. BLS estimated the mean annual wage for child care workers at $25,510 nationally. Support for Essential Workers The CARES Act specifies that states, territories, and tribes are authorized to use CCDBG funds appropriated in the act to provide child care assistance to health care sector employees, emergency responders, sanitation workers, and other workers deemed essential during the response to coronavirus by public officials. Further, the act specifies that such workers may receive CCDBG assistance without regard to the typical income eligibility requirements under the CCDBG Act. The CCDBG Act generally stipulates that eligible children must be under age 13 (children may be older in limited circumstances ); reside with a parent who is working or attending job training (unless the child is receiving or needs to receive protective services); have family income no greater than 85% of state median income (SMI), or lower depending on state policy; and have no more than $1 million in family assets. While the CARES Act waives income requirements for essential workers as noted above, it does not waive other eligibility requirements (e.g., those related to the child's age or the parent's work status). State Plan Amendments The CARES Act requires HHS to remind states that CCDBG state plans do not need to be amended prior to using "existing authorities in the CCDBG Act for the purposes provided" in the CARES Act. Typically, if a state intends to make a substantial change to policies laid out in its CCDBG plan (e.g., a change in eligibility rules, provider payment rates, family copayments), the state would submit a state plan amendment to HHS for approval. Under regulations, a plan amendment must be submitted within 60 days of the effective date of the requirement (i.e., the state may execute the policy change before submitting the amendment). HHS has 90 days to approve or deny a plan amendment. In the current circumstances, there are several reasons states might want to amend their plans. For instance, the CARES Act authorizes HHS to provide child care assistance to essential workers regardless of income. This is a substantial change, as federal law and state policies generally condition eligibility on family income. Spending Flexibilities and Other Technical Provisions The CARES Act effectively waives or adjusts certain requirements related to the obligation and expenditure of the CCDBG funds appropriated in the act. Quality Spending The CCDBG Act generally requires lead agencies to spend at least 9% of their FY2020 allotments on quality activities, plus an additional 3% on activities to improve the quality of care for infants and toddlers. All told, these quality set-asides are intended to account for at least 12% of spending from FY2020 allotments. The CARES Act effectively waives these quality spending minimums for funds provided in the act, offering lead agencies greater flexibility in how funds may be spent. Direct Spending The CCDBG Act includes requirements related to minimum spending on direct services. (The term direct services generally refers to child care assistance provided to families and is often, but not always, provided in the form of a voucher.) For instance, after lead agencies set aside funds to meet minimum quality spending requirements and for spending on administrative costs (capped at 5% for states and territories ), they must use at least 70% of remaining CCDBG funds for direct services. The CARES Act effectively waives direct spending requirements in the CCDBG Act, again offering lead agencies greater flexibility in how funds may be spent. Supplement, Not Supplant The CARES Act specifies that funds provided via the CCDBG are to be used to supplement, not supplant , state, territory, and tribal general revenue funding for child care assistance for low-income families (i.e., the funds provided under the act should not be used to replace existing state, territory, or tribal spending on such activities). CCDBG provisions in annual appropriations acts typically include similar provisions. Past guidance from HHS suggests that this requirement would likely be considered satisfied if a state, territory, or tribe does not make any administrative or legislative changes to reduce general revenue spending after the enactment of a new CCDBG appropriation. An action occurring after this date could potentially be considered a violation of the non-supplantation requirement, unless the lead agency demonstrates that the reduction was not due to increased federal CCDBG funds. Use of Funds for Prior Obligations The CARES Act specifies that the CCDBG funds it appropriates may be made available to restore amounts, either directly or through reimbursement, for obligations incurred prior to enactment. These amounts may only be restored with CARES Act funds if they were used to prevent, prepare for, and respond to coronavirus. Obligation Deadline for Lead Agencies (or Other Recipients) The CARES Act states that payments made by HHS may be obligated by the state, territory, tribe, or other recipient in the current fiscal year or the succeeding two fiscal years. Effectively, this means that lead agencies have through FY2022 to obligate funds they receive under the CARES Act. The CCDBG Act typically gives states or other recipients two fiscal years, rather than three, to obligate funds. Allocation of CCDBG Funds CCDBG funds are generally allocated according to a formula set in statute. Under the CCDBG Act formula, HHS is to reserve up to 0.5% for territories and not less than 2% for tribes and tribal organizations. The formula also includes set-asides for technical assistance (up to 0.5%); research, demonstrations, and evaluation (0.5%); and a national toll-free hotline and website (up to $1.5 million). After all reservations have been made, the remaining funds go to states. Funds are allocated to states according to a formula based on their share of children under age five, their share of children receiving free- or reduced-price lunches, and state per capita income. Table 1 presents FY2020 CCDBG allocations released by HHS. The table includes allocations from FY2020 annual appropriations ( P.L. 116-94 ), as well as the CARES Act ( P.L. 116-136 ).

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law ( P.L. 116-136 ). The CARES Act includes $3.5 billion in supplemental appropriations for the Child Care and Development Block Grant (CCDBG). These funds are to be used to "prevent, prepare for, and respond to coronavirus." The CCDBG Act (42 U.S.C. §§9858 et seq.) is the main federal law supporting child care programs for low-income working families. The CCDBG is administered by the U.S. Department of Health and Human Services (HHS). HHS allocates CCDBG funds to states, territories, and tribes according to a statutory formula. State, territory, and tribal lead agencies submit CCDBG plans to HHS every three years describing how their child care programs will operate. CCDBG funds are used to subsidize the cost of child care for eligible children of low-income working parents. Funds are also used to support activities to improve the quality of child care and for certain other activities. The $3.5 billion in supplemental CCDBG funds are provided in addition to FY2020 annual appropriations of $5.8 billion ( P.L. 116-94 ). The additional $3.5 billion represents a 60% increase in total appropriations to the CCDBG in FY2020. The CARES Act funds may be used under existing CCDBG Act authorities. In addition, the CARES Act includes a number of provisions that clarify allowable uses and, in some cases, waive certain underlying requirements of the CCDBG Act. For instance, the CARES Act specifies that the funds may be used to provide continued payments and assistance to child care providers in cases of decreased enrollment or closures related to coronavirus, and to ensure they are able to remain open or reopen; may be used to continue to pay staff salaries and wages of child care providers (CCDBG lead agencies are encouraged to place conditions on payments to child care providers aimed at ensuring that a portion of the funds they receive go toward costs of salaries and wages); may be used to provide child care assistance to health care sector employees, emergency responders, sanitation workers, and other workers deemed essential during the response to the coronavirus, without regard to typical CCDBG income eligibility requirements (federal law generally limits eligibility to those whose family income does not exceed 85% of state median income, though most states set income limits below this federal threshold); shall be available to eligible child care providers under the CCDBG Act (even if they were not receiving CCDBG funds previously) for the purposes of cleaning and sanitation, and other activities necessary to maintain or resume program operation; are exempt from the minimum spending requirements for quality activities and direct services; may be used for allowable obligations incurred prior to enactment of the CARES Act; may be used for purposes provided in the CARES Act before the lead agency submits any applicable CCDBG plan amendments to HHS (under regulations, lead agencies generally must submit state plan amendments within 60 days of policy change); shall be used to supplement, not supplant, state, territory, and tribal general revenue funds for child care assistance for low-income families; and are to remain available for obligation by HHS through the end of FY2021 and may remain available for obligation by CCDBG le ad a gencies through the end of FY2022.

GAO_GAO-19-457

Background OSS is software distributed under a license that provides broad rights to use, modify, and redistribute the original source code. Open source licenses impose certain obligations on users who exercise these rights. Specific obligations vary among the many different open source licenses. Common obligations include making the source code available, publishing a copyright notice, or giving any recipient of the program a copy of the license. Certain restrictive open source licenses allow users to copy, modify and distribute software provided that modified versions (i.e., derivatives) are subject to the same license terms and conditions as the original code. This is intended to prevent software that is derived from or contains code issued under such a license from becoming a closed- source product that can be marketed and sold exclusively. The reuse of OSS is viewed as a promising means to reduce development costs while improving software quality. According to software experts, software reuse has the potential to: increase reliability because systems will be developed with thoroughly tested and proven components, increase productivity by reducing the time and effort needed to develop software, reduce costs by enabling the sharing of knowledge and practices needed to develop and maintain software, and establish a more standard and consistent approach to software development and maintenance by using common components and procedures. OMB Memorandum on Federal Source Code Policy In August 2016, OMB issued a memorandum to the heads of departments and agencies to ensure that new custom-developed source code be made available for reuse across the federal government. The memorandum was intended to improve the way federal agencies buy, build, and deliver information technology and software, and required that all agencies establish a pilot program under which at least 20 percent of new custom-developed code would be released as OSS for 3 years. OMB also required that agencies develop a metric to calculate the percentage of code released as OSS to gauge its progress on implementing the pilot program. OMB’s memorandum also identified four supporting requirements, among others, needed to implement an OSS pilot program: Issue an OSS policy that ensures code is available for government- wide reuse. Conduct an OSS three-step software solutions analysis that includes: (1) a strategic analysis and analysis of alternatives, (2) consideration of existing commercial solutions, and (3) consideration of custom development. In addition, agencies must consider several factors throughout each of the three-steps of the analysis such as cloud computing and open standards. Secure data rights to government-wide reuse and inventory new custom code, in accordance with the guidance provided by the code.gov website. Facilitate the OSS community by developing and releasing the code in a manner that (1) fosters communities around shared challenges; (2) improves the ability of the OSS community to provide feedback on, and make contributions to, the source code; and (3) encourages federal employees and contractors to contribute back to the broader OSS community by adding value to existing projects. In doing so, agencies should comply with the following principles: (1) leverage existing communities, (2) engage in open development, (3) adopt a regular release schedule, (4) consider code contributions, and (5) document source code to facilitate use and adoption. DOD Implementation of OMB’s Open Source Software Requirements DOD’s CIO is responsible for implementing OMB’s requirements for the department’s OSS pilot program. The CIO reports directly to the Secretary of Defense, and is responsible for the department’s information technology (including national security systems and defense business systems), information resources management, and efficiencies. The CIO is also responsible for developing strategies and policy on the operation and protection of all of the department’s information technology and information systems. Other responsibilities include maintaining a consolidated inventory of mission critical and mission essential information systems, evaluating and monitoring performance measurements, and other duties to manage the information environment throughout the department. In addition, the Defense Digital Service is responsible for assisting the CIO in implementing the OSS pilot program, among other initiatives. The Defense Digital Service is composed of commercially experienced software developers, software designers, product managers, and problem solvers within DOD. The organization works on specific projects or programs in support of the DOD in a hands-on way to materially improve digital services across the department. The Defense Digital Service also works with the CIO to monitor the identified programs, facilitate the process to open source the code, and populate the source code inventory located on Code.mil. DOD’s Efforts to Increase Use of Open Source Software In June 2018, DOD’s CIO issued a report to Congress as directed by section 875(b) of National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91). The report provided Congress with the department’s plan to implement the OSS pilot program established by OMB’s memorandum. In the report, the CIO committed to sharing its unclassified, custom-developed source code as widely as possible in four ways: (1) review and select software programs that have self-identified to the Defense Digital Service as ready to open source its code; (2) query its contracts database to identify contracts that contain appropriate data rights language; (3) determine if source contained within existing source code repositories can be made available; and (4) issue a department- wide data call to identify and select programs where new, custom code is being developed. The CIO also reported that the department would prioritize and assess identified software programs and work with components to develop mechanisms to report progress. The report included selection criteria for identifying candidate software programs: (1) programs with contractually secured government data rights; (2) programs with contractual rights to enable, support, and enforce DOD and government-wide sharing and reuse of custom-developed code; (3) programs that have appropriate administration to ensure that government’s rights are maintained; and (4) programs that utilize best practices to ensure custom-developed code, documentation, and other associated materials are delivered in a reusable manner. The CIO also reported that the Defense Digital Service would assist programs. Specifically, the Defense Digital Service is to develop guidelines, processes, and answers to frequently asked questions regarding the use of OSS. In October 2018, the CIO issued a memorandum to the Chief Management Officer, secretaries of the military departments, Chairman of the Joint Chiefs of Staff, under secretaries of Defense, chiefs of the military services, general counsel, Director of Cost Assessment and Program Evaluation, Director of Operational Test and Evaluation, and the Assistant Secretary of Defense for Legislative Affairs notifying them of the need to implement an OSS pilot program in accordance with OMB’s 2016 memorandum. The CIO required these organizations to take four actions within 30 days of issuing the memorandum: Identify all unclassified custom-developed source code created or paid for by the department—regardless of data rights and open source status—created on or after August 2016 and provide the CIO information required by the guidelines on the code.gov website; Identify and provide a point of contact that can participate in open source efforts; Direct authorizing officials to rapidly review and approve unclassified code for public, open source release after appropriate security, code, and policy review; and Direct contracting officers to secure the least restrictive data rights to custom-developed source code in all future contracts in accordance with DOD federal acquisition regulations. DOD Has Not Fully Implemented an Open Source Software Pilot Program and Related OMB Requirements DOD was mandated by law to initiate the OSS pilot program established by OMB memorandum M-16-21 which required (1) releasing at least 20 percent of newly custom-developed code each year for the term of the pilot program, and (2) collecting additional data concerning new custom software to inform measures to gauge the performance of the pilot program. Further, the OMB memorandum also required DOD to (1) issue an OSS policy, (2) conduct an OSS analysis, (3) secure data rights and inventory custom code, and (4) facilitate the OSS community. As of late April 2019, DOD had not fully implemented the OSS pilot program mandated by law. DOD had partially implemented the requirement of releasing at least 20 percent of newly custom-developed code as OSS. Specifically, as of July 2019, the Code.gov website reported that the department had released less than 10 percent of its custom developed code. The department was in the early stages of its pilot program and had not determined when the pilot would be fully implemented. The CIO reported that the size of the department makes it nearly impossible to inventory all of its source code custom developed since August 2016. As such, the CIO stated that it would be difficult to meet the OMB memorandum’s goal of releasing at least 20 percent of its new custom code as OSS. In addition, DOD had not implemented the requirement to develop a consistent measure to gauge the performance of the department’s pilot program. DOD had not developed such a measure due to a lack of consensus in the department about what data should be collected. According to the CIO, if the measure is “lines of code,” then it unfairly discounts projects that invest a significant amount on research, but are small otherwise. If the measure is “project hours,” then it discounts those projects that came about from sparks of innovation that took little time to develop. If the measure is “project count,” then it ignores the other two possible measures. The CIO noted that since the components will be expected to collect and report the required data, the CIO office plans to reach out to them to facilitate consensus around data needs and what measure should be used to calculate and monitor performance. Regarding the four OMB memorandum requirements supporting the implementation of the pilot program, the department partially implemented three and did not implement the remaining one. Table 1 describes the extent to which DOD implemented the OMB supporting requirements, and is followed by a description of DOD’s efforts on each requirement. Issue OSS policy. DOD had not implemented the requirement to issue an OSS policy. According to DOD’s CIO, the department has existing acquisition policies applicable to OSS, such as the 5000 series and a memorandum issued in October 2009 that clarifies OSS. However, according to DOD officials, these policies are outdated and do not comply with OMB’s memorandum. For example, while the department’s policies indicated that programs must conduct an analysis of alternatives, trade studies, or a business case analysis prior to initiating any technology acquisition or custom code development, they did not require programs to consider the value of publishing custom code as OSS and negotiate data rights reflective of its value. The department acknowledged that it does not have a policy that addresses the OMB memorandum’s requirement. According to the CIO, the department had been slow to develop a policy because these types of changes require significant resources, coordination, and buy-in across the department that will take additional time to address. The CIO also stated that the department plans to update its existing OSS memorandum by the end of the 2019 calendar year and issue it as policy. In particular, DOD intends to work with acquisition and program management officials to define approaches, processes, and best practices to expand software reuse. If the department effectively implements this intended step consistent with the OMB memorandum, DOD should be able to fully address this requirement. Conduct OSS analyses. DOD had partially implemented the requirement to conduct analyses to consider alternative software solutions. According to the DOD CIO, of the three elements required by OMB for a three-step analysis, the department’s current 5000 series policy addresses some of these elements. For example, as previously mentioned, the policy required programs to conduct an analysis of alternatives, trade studies, or a business case analysis prior to initiating any technology acquisition or custom code development. However, according to the CIO, DOD’s policy did not require programs to consider the value of publishing custom code as OSS and negotiate data rights reflective of its value-consideration. According to the CIO, the department has plans to address gaps in its existing policy by the end of the 2019 calendar year. If the department effectively implements this intended step consistent with the OMB memorandum, DOD should be able to fully address this requirement. Secure data rights and inventory new custom code. DOD had partially implemented this requirement by initiating the process to secure data rights for government-wide reuse and inventory its new custom code. Specifically, the October 2018 memorandum called for defense organizations to direct contracting officers to secure the least restrictive data rights for custom-developed source code in all future contracts, and identify all unclassified custom-developed source code created after August 2016. However, when we discussed this matter with DOD information technology and software officials responsible for the management of software in December 2018—2 months after the October 2018 memorandum had been issued— seven of 11 officials were unaware of the statutory mandate to initiate the pilot program in compliance with the OMB memorandum. Further, DOD has not provided a milestone for when it expects its inventory to be completed. Facilitate OSS community. DOD had partially implemented the requirement to establish an OSS community. According to the DOD CIO’s Custom Developed Source Code Data Call memorandum, dated October 2018, the DOD CIO is working with Defense Digital Service to develop guidelines and processes on when and how to open source code. In February 2017, DOD announced the launch of Code.mil, an open source initiative led by Defense Digital Service, that allows software developers around the world to collaborate on unclassified code written by federal employees in support of DOD projects. Finally, the Defense Information Systems Agency established a website (Forge.mil) where community members can collaborate on open source and DOD community source software. The Forge.mil website also enables collaborative development through services such as software version control, requirements management, discussion forums and document repositories. However, DOD had not yet fully engaged in open source code development, established a regular release schedule for its software code, or fully documented its source code to facilitate use and adoption department-wide. According to the CIO, the department is in the early stages of implementing the OSS pilot program and had not yet published a revision to the existing OSS policy memorandum. The CIO stated that the office plans to request collaboration and input from organizations throughout DOD for improvement initiatives and identifying specific processes and expectations for improving custom-developed software within the Department. However, DOD has not provided a milestone for when the requirements will be fully implemented and stated that achieving 100 percent compliance is not a realistic expectation. Until DOD fully implements the OSS pilot program mandated in the National Defense Authorization Act for Fiscal Year 2018 including the requirements of OMB memorandum M-16-21, the department will likely miss opportunities to achieve related cost savings and efficiencies. Further, the department will not be effectively positioned to ensure management oversight and implementation of the pilot program. DOD Officials Shared Views of Expected Benefits and Risks Associated with the Use of Open Source Software DOD Officials Agree That Using Open Source Software Could Result in Financial Benefits and Increased Efficiency DOD officials representing 11 components reported that OSS can potentially yield financial benefits and increase efficiency. Officials provided the following examples of financial benefits: Officials in the office of the Navy Chief Information Officer, the Army Communications-Electronics Command, the Office of the Under Secretary of Defense for Acquisition and Sustainment, and the Office of the Assistant Secretary of the Air Force for Acquisition, Technology, and Logistics stated that OSS is generally less expensive than commercial off-the-shelf (COTS) leading to cost savings. An Air Force official we spoke with stated that the increased use of OSS may potentially result in cost savings. Further, the official noted general criteria used by the Air Force to identify software projects that may potentially be appropriate for the use of OSS. Specifically, OSS should be considered if, among other things, the required maintenance would not result in a reduction of cost savings or efficiency if the maintenance is performed in-house. An official we spoke with at the Defense Advanced Research Projects Agency stated that OSS has positive benefits in terms of reducing costs by reducing duplicative efforts. In addition, this official also stated that OSS allows institutions of any size and budget to partake in shared investments providing access to software capabilities at a much lower cost. A program manager from the Defense Information Systems Agency reported that the agency had identified an OSS solution that provided more functionality at less cost than the commercial solution provided through a vendor. The program manager explained that when the agency implemented the new OSS solution, it realized $20 million in annual savings over the commercial solution that had been maintained by a vendor. Officials also shared examples of how OSS can increase efficiency in software development. For example, Officials from the offices of the Navy CIO and the US Marine Corps CIO stated that OSS solutions may increase efficiency by providing a rapid resolution to the needs and requirements of users. In contrast, rapid development efforts are not conducive for COTS solutions because of the long process required to obtain solutions that are needed quickly. Similarly, an Air Force official noted that the increased use of OSS may result in increased efficiency by providing rapid responses to user requirements. A program manager from the Defense Information Systems Agency reported that the selection of an OSS solution rather than a COTS solution contracted through a vendor had resulted in increased efficiency. The official explained that the use of the OSS solution allowed the agency to develop and maintain in-house skills that would not have been available had they opted to contract with a vendor providing a skilled workforce. DOD Officials Expressed Differing Views on the Cybersecurity Risk Posed by Open Source Software Officials from the 11 components expressed mixed views on managing cybersecurity risks that could be posed by using OSS. Specifically, officials from three components expressed their views that security concerns and the lack of a cybersecurity governance process could result in the sporadic use of OSS. For example: A Navy CIO official viewed insider threats, such as a disgruntled employee embedding malicious code, as a factor that could significantly limit the use and sharing of OSS. According to Navy officials, without a process to verify that the software is free of malicious code, the Navy would risk the assurance it requires to increase the use of OSS. The official said that, in contrast, such concerns are not an issue when it comes to COTS software because of the test and verification process to ensure it is free from malicious code. An official in the office of the Marine Corps CIO stated that OSS is used sporadically in their software development efforts because some cybersecurity officials within the Marine Corps discourage its use due to security concerns. An official from the Army’s Communications-Electronics Command noted that DOD lacks a governance process once the originating entity releases the source code as open source. The originating entity no longer retains control over redistributed versions of the source code. According to Communications-Electronics Command officials, Army project managers may be hesitant to utilize OSS because of this perceived security risk. On the other hand, DOD officials from eight components stated that the potential cybersecurity risks posed by the use of OSS were manageable and that the use of OSS should not be limited. For example: The policy advisor from the Office of the Under Secretary of Defense for Acquisition and Sustainment noted that scanning tools to analyze and identify safe and reliable open source code are not being used. Employing available scanning tool options could result in discovering available OSS. The policy advisor also noted that building security into software operations, rather than through the development of software, would enable users to know if code has been subverted and to react appropriately. A program management official from the Office of the Under Secretary of Defense for Acquisition and Sustainment suggested that security concerns may be mitigated by establishing a secure repository for trusted code. An official in the Office of the Assistant Secretary of the Air Force for Acquisition, Technology, and Logistics reported that, as long as OSS is properly vetted to ensure it is secure and free from malware, it offers an opportunity for the department to achieve cost savings and efficiencies. Conclusions Pilot testing the use of OSS is an important way to ascertain and improve the way DOD buys, builds, and delivers information technology and software solutions. However, the department is in the early stages of implementing its pilot program and had not determined when the pilot would be fully implemented. Specifically, DOD has not made 20 percent of its new code available for reuse nor has it identified a measure to gauge the performance of its pilot program. Moreover, DOD has not yet established milestones for securing data rights and conducting an inventory or facilitating community. Until DOD fully implements its pilot program and establishes milestones for completing the OMB requirements, the department will not be positioned to take advantage of significant cost savings and efficiencies. Recommendations for Executive Action We are making the following four recommendations to DOD: The Secretary of Defense should ensure the department implements the pilot program by releasing at least 20 percent of newly custom- developed code as OSS. (Recommendation 1) The Secretary of Defense should ensure the department identifies a measure to calculate the percentage of code released to gauge its progress on implementing the pilot program. (Recommendation 2) The Secretary of Defense should ensure the department establishes milestones for completing the requirements of OMB memorandum M- 16-21 of securing data rights and conducting an inventory. (Recommendation 3) The Secretary of Defense should ensure the department establishes a milestone for completing the OMB memorandum’s requirement of facilitating an OSS community. (Recommendation 4) Agency Comments and Our Evaluation DOD provided written comments on a draft of this report, which are reproduced in appendix II. In its comments, the department did not concur with our first recommendation, partially concurred with our second recommendation, and concurred with the third and fourth. DOD did not concur with the first recommendation on ensuring that the department implements the pilot program by releasing at least 20 percent of newly custom-developed code as OSS. The department stated that it does not believe that the pilot program as described in the OMB memorandum is implementable as proposed. For example, DOD asserts that most of DOD’s custom developed software is created for weapons systems and releasing the associated code is sensitive for national security reasons. In addition, the size and complexity of DOD presents unique challenges for the department compared to other federal agencies such as inventorying all software development projects to establish a baseline. DOD added, however, that the OMB memorandum explicitly states that national security exceptions do not apply to the pilot program. DOD also stated that it recognizes the value of collaborative software development and has plans to release additional guidance on releasing OSS and procedures for maintaining its inventory. Once DOD establishes a baseline inventory of custom-developed software and the procedures for maintaining it, the department states it will be able to determine if the 20 percent is an appropriate goal. We understand the potential constraints DOD faces and that national security considerations are to be factored into decisions DOD will need to make about which custom developed software to include in the pilot. However, DOD is mandated by law to implement the OSS pilot program established by OMB memorandum M-16-21. Further, the OMB memorandum instructs agencies to refrain from selecting code for release that would fall under exceptions such as national security risk. As such, DOD has flexibility on making decisions about which custom-developed code to include in the pilot. While we agree that a baseline inventory is needed, DOD must include at least 20 percent of new custom-developed code each year for the term of the program to satisfy the mandate. DOD partially concurred with the second recommendation on ensuring that the department identifies a measure to calculate the percentage of code released to gauge its progress on implementing the pilot program. Specifically, the department stated that the additional guidance it plans to release before the end of 2019 on OSS will include measures to gauge how much code has been developed and how much has been released. In addition, DOD noted that these measures will support good management of the overall portfolio of information technology, even in the absence of the mandated pilot program established by the OMB memorandum. We believe that the measure to calculate the percentage of code should be used to assist the department in meeting the OMB memorandum’s requirements. We also agree with the benefits of developing a measure to manage the portfolio of information technology. DOD concurred with the third and fourth recommendations related to establishing milestones for completing the OMB memorandum’s requirements of securing data rights, conducting an inventory, and facilitating an OSS community. According to the department, it has issued a memorandum that directed contracting officers to secure the least restrictive data rights to custom-developed source code, in furtherance of the OMB requirements, and also included a data call that forms an initial basis of an inventory of custom-developed software. Regarding facilitating an OSS community, DOD stated that it has formed a community of practice called DevSecOps that is open to all software development organizations in the department and plans to use this forum to facilitate collaboration on the use of OSS. We are sending copies of this report to the appropriate congressional requesters and the Secretary of Defense. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-4456 or at harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology Our objectives were to: (1) assess the extent to which the Department of Defense (DOD) has implemented the open source software (OSS) pilot program and other related requirements established by the Office of Management and Budget (OMB), and (2) describe the views of responsible DOD officials on the use of OSS to achieve efficiency at the department. To address the first objective, we selected six requirements from the OMB memorandum titled the Federal Source Code Policy: Achieving Efficiency, Transparency, and Innovation through Reusable and Open Source Software (M-16-21, Aug. 8, 2016) as criteria to assess the extent to which DOD has implemented the OSS pilot program. Two requirements establish the OSS pilot program: (1) releasing at least 20 percent of newly custom-developed code each year for the term of the pilot program, and (2) developing a metric to gauge the performance of the pilot program. The other four requirements support the implementation of the pilot program: (1) issuing an OSS policy, (2) conducting an OSS analysis, (3) securing data rights and inventorying custom code, and (4) facilitating the OSS community. We met with officials from OMB to collect background information on the selection of requirements for the pilot program established in memorandum M-16-21. We also met with officials from the Office of the DOD Chief Information Officer (CIO) and the Defense Digital Service to discuss the status of the department’s implementation of the OSS pilot program. We reviewed DOD’s June 8, 2018 report to Congress and its October 2018 memorandum that details the department’s plans to implement the pilot program and compared them to the six requirements. To determine the extent to which the pilot program had been implemented, we evaluated DOD’s efforts to address each of the requirements using a 3- stage gradient scale (implemented, partially implemented, and not implemented). The requirement was assessed to be fully implemented if DOD provided us with sufficient evidence that the requirement had been fully met. We assessed a requirement to be partially implemented if DOD provided us with documentation of initial plans or had initiated action towards implementing the requirement. We determined that a requirement was not implemented when DOD did not provide us with documentation of planned or initiated actions to implement the requirement. To address the second objective on views of various responsible DOD officials, using professional judgement, we selected components across the department responsible for the management and development of OSS. The scope of stakeholders selected represent department-wide nongeneralizable views including military components, defense agencies, and other offices. At least one representative was selected from the following components: (1) Office of the Under Secretary of Defense for Acquisition and Sustainment, (2) Office of the DOD CIO, (3) office of a military service CIO, (4) Military Service Software Center or Command Center, (5) the Defense Information Systems Agency, and (6) the Defense Advanced Research Projects Agency. We conducted interviews with DOD officials from the following entities: Office of the Under Secretary of Defense for Acquisition and Sustainment; Office of the DOD CIO; Offices of the Navy and Marine Corps CIOs; Office of the Air Force Chief Technology Officer; Army Communications Electronics Command; the Defense Information Systems Agency; the Defense Advanced Research Projects Agency; and the Office of the Assistant Secretary of the Air Force for Acquisition, Technology, and Logistics. In order to summarize and report the views of the responsible DOD officials, we conducted structured interviews with representatives from the selected components. Each interview consisted of the same discussion topics based on the pilot program requirements established in OMB’s memorandum. The scope of this objective represents individual thoughts, views, and opinions and is not intended to convey an official or department response. Prior to each interview, participants were provided with OSS discussion topics, and the OMB memorandum, titled the Federal Source Code Policy: Achieving Efficiency, Transparency, and Innovation through Reusable and Open Source Software (M-16-21, Aug. 8, 2016). The contents of each interview were reviewed and summarized to identify the general views of OSS and on the anticipated implementation of the pilot program requirements established in OMB’s memorandum. We noted similarities and differences in the responses provided by the officials in the use of OSS including, but not limited to, potential benefits of using OSS, managing associated risk, and opinions on implementing the pilot program in compliance with the OMB memorandum. Discussions were split into two topic areas: practices on the use of OSS, and OMB’s memorandum to establish an OSS pilot program. Specifically, the discussion topics were presented during each meeting as follows: Part I: Practices on the use of OSS Your experience or your organization’s history with the practice of using OSS as a means to achieve cost reduction or efficiencies when buying, building, or delivering information technology and software solutions. The processes or practices that you or your organization perform to leverage open source code for projects that require the acquisition or development of custom source code. The extent to which you or your organization shares or uses open source software. For example, do you share or use open source software: (1) within your organization only, (2) across the DOD with other military services or defense agencies, (3) with other federal agencies, or (4) outside the federal government with the public. Also, how is the source code shared, leveraged, catalogued, stored, and accessed. Policies or guidance currently in use for OSS. General views and opinions on the use of open source code. Part II: OMB’s Memorandum to Establish an OSS Pilot Program When and how you or your organization became aware of OMB’s memorandum on Federal Source Code Policy. Your opinions and views about the OMB memorandum. Any specific concerns or reservations about the requirements contained in the OMB memorandum. The extent to which you or your organization may already be performing the steps in OMB’s proposed Three-Step Software Solutions Analysis. Discuss the feasibility of the pilot program requirement to release at least 20 percent of new custom-developed code as OSS. We conducted this performance audit from August 2018 to September 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Department of Defense Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Eric Winter (Assistant Director), John Ortiz (Analyst-in-Charge), Rebecca Eyler, Franklin Jackson, and Kate Nielsen made key contributions to this report.

Open source software is code that is released under a license which grants users the right to modify, share, and reuse the software. Making code available for reuse as open source can have major benefits such as decreasing costs and improving efficiencies. The National Defense Authorization Act for Fiscal Year 2018 required DOD to submit a plan to Congress for initiating the open source software pilot program established by OMB memorandum M-16-21. DOD submitted its plan to Congress in June 2018. The act includes a provision for GAO to report on DOD's implementation of the open source software pilot program. GAO's objectives were to (1) assess the extent to which DOD has implemented the open source software pilot program and other related requirements established by OMB; and (2) describe the views of responsible DOD officials on the use of open source software to achieve efficiency, transparency, and innovation at the department. To address these objectives, GAO compared DOD's plan for implementing the program to OMB's memo. GAO also interviewed defense officials at 11 DOD components including military departments, and defense agencies on their views about the benefits and risks of making code available as open source software. The Department of Defense (DOD) has not fully implemented an open source software pilot program and related Office of Management and Budget (OMB) requirements as mandated by the National Defense Authorization Act for Fiscal Year 2018. OMB memorandum M-16-21 calls for agencies to implement a pilot program, which it defines as (1) releasing at least 20 percent of new custom developed code as open source, and (2) establishing a metric for calculating program performance. However, DOD has not fully implemented the program and has not established the metric. The OMB memorandum also requires agencies to implement other supporting activities. These include issuing policy on government-wide use of code, conducting analyses of software solutions, securing data rights and inventory code, and facilitating the open source community. DOD has not implemented the policy requirement and has partially implemented the remaining three requirements. Regarding the policy and analysis requirements, DOD plans to issue a policy and conduct analyses by the end of the 2019 calendar year. If the department effectively implements these intended steps consistent with OMB direction, DOD should be able to fully address these requirements. For the requirement of securing data rights and inventorying code, DOD issued a memorandum that directs contracting officers to secure data rights and to identify all source code created after August 2016. However, DOD's components have not executed these activities nor has DOD identified a milestone for when they will be completed. For the facilitating community requirement, DOD issued a memorandum that encourages conversations to foster communities and allow others to contribute knowledge, among other initiatives. However, DOD has not fully engaged in open development, established a release schedule, or fully documented its source code to facilitate use and adoption. To address these areas, DOD's Chief Information Officer plans to issue guidance but has not established a milestone for doing so. Until DOD fully implements the pilot program and develops milestones for two of the four OMB requirements (secure data rights and inventory code, and facilitate community), it will not be positioned to satisfy the mandate established in the law. DOD officials from 11 components expressed their opinions that an open source pilot program would potentially result in financial benefits and increased efficiency. However, there were disparate views on how to manage the cybersecurity risk of using open source software. Specifically, officials from three components noted that security concerns could result in the sporadic use of OSS, whereas eight officials stated that the potential cybersecurity risks were managable.

CRS_R45974

Status of FY2020 Agriculture Appropriations On December 20, 2019, Congress passed and the President signed into law a full-year FY2020 appropriation—the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 )—that included Agriculture appropriations in Division B ( Table 1 ). During the regular appropriations cycle, the House passed a five-bill minibus appropriation on June 25, 2019 ( H.R. 3055 ), and the Senate passed a four-bill minibus on October 31, 2019 ( H.R. 3055 ). In both cases, Agriculture was in Division B. To develop these bills, the House and Senate Appropriations Committees reported Agriculture subcommittee bills ( H.R. 3164 and S. 2522 , respectively) with their own more detailed reports ( H.Rept. 116-107 and S.Rept. 116-110 , respectively). See Figure 1 for a comparison of timelines and Appendix D for more details. The Administration released its budget request in two parts: an overview on March 11, 2019, and more detailed documents on March 18, 2019. In the absence of an enacted appropriation at the beginning of the fiscal year, FY2020 began with two continuing resolutions (CRs). For overall spending levels, the House set its subcommittee allocations on May 14, 2019 ( H.Rept. 116-59 ). The Senate set its subcommittee allocation on September 12, 2019 ( S.Rept. 116-104 ), after the Bipartisan Budget Act of 2019 ( P.L. 116-37 ) raised caps on discretionary spending. The discretionary total of the FY2020 Agriculture appropriations act is $23.5 billion. This is $183 million more than the comparable amount for FY2019 (+0.8%) that includes the Commodity Futures Trading Commission (CFTC). The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws ( Table 2 ). Scope of Agriculture Appropriations The Agriculture appropriations bill—formally known as the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—funds all of the U.S. Department of Agriculture (USDA), excluding the U.S. Forest Service. It also funds the Food and Drug Administration (FDA) in the Department of Health and Human Services and, in even-numbered fiscal years, CFTC. Jurisdiction is with the House and Senate Committees on Appropriations and their Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. The bill includes mandatory and discretionary spending, but the discretionary amounts are the primary focus ( Figure 2 ). Some programs are not in the authorizing jurisdiction of the House or Senate Agriculture Committees, such as FDA, Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), or child nutrition (checkered regions in Figure 2 ). The federal budget process treats discretionary and mandatory spending differently: Discretionary spending is controlled by annual appropriations acts and receives most of the attention during the appropriations process. The annual budget resolution process sets spending limits for discretionary appropriations. Agency operations (salaries and expenses) and many grant programs are discretionary. Mandatory spending is carried in the appropriation and usually advanced unchanged, since it is controlled by budget rules during the authorization process. Spending for so-called entitlement programs is determined in laws such as the 2018 farm bill and 2010 child nutrition reauthorizations. In the FY2020 appropriation ( P.L. 116-94 ), the discretionary amount is 15% ($23 billion) of the $153 billion total. Mandatory spending carried in the act comprised $129 billion, about 85% of the total, of which about $106 billion is attributable to programs in the 2018 farm bill. Within the discretionary total, the largest spending items are WIC; agricultural research; rural development; FDA; foreign food aid and trade; farm assistance loans and salaries; food safety inspection; animal and plant health programs; and technical assistance for conservation program. The main mandatory spending items are the Supplemental Nutrition Assistance Program (SNAP) and other food and nutrition act programs, child nutrition (school lunch and related programs), crop insurance, and farm commodity and conservation programs that are funded through USDA's Commodity Credit Corporation (CCC). SNAP is referred to as an "appropriated entitlement" and requires an annual appropriation. Amounts for the nutrition program are based on projected spending needs. In contrast, the CCC appropriations reimburse spending from a line of credit. Recent Trends in Agriculture Appropriations Discretionary Agriculture appropriations were at an all-time high in FY2010, declined through FY2013, and have gradually increased since then. Changes within titles have generally been proportionate to changes in the overall bill, though some areas have sustained relative increases, such as FDA and rural development. The stacked bars in Figure 3 represent the discretionary authorization for each appropriations title. The total of the positive stacked bars is the budget authority in Titles I-VI. In FY2018, USDA reorganization affected the placement of some programs between Titles I and II of the bill (most noticeably, the Farm Service Agency). In most years, the cumulative appropriation for the agencies is higher than the official discretionary total in the spending allocation (the blue line) because of the budgetary offset from negative amounts in Title VII (general provisions) and other negative scorekeeping adjustments. These negative offsets are mostly due to rescissions of prior-year unobligated funds and, before FY2018, limits placed on mandatory programs. Historical trends may be tempered by inflation adjustments, as shown in the dotted line. The inflation-adjusted totals from FY2011-FY2017 had been fairly steady until increases in the FY2018-FY2020 appropriations. Action on FY2020 Appropriations Administration's Budget Request The Trump Administration released a general overview of its FY2020 budget request on March 11, 2019, and a detailed budget proposal to Congress on March 18, 2019. USDA released its more detailed budget summary and justification, as did the FDA, and the independent agencies of the CFTC and the Farm Credit Administration. The Administration also highlighted separately some of its proposed reductions and eliminations. For accounts in the jurisdiction of the Agriculture appropriations bill, the Administration's budget requested $19.2 billion, a $4.1 billion reduction from FY2019 (-18%; Table 2 , Figure 3 ). The Administration released its budget request for FY2020 after Congress had enacted the omnibus FY2019 appropriation in February 2019 ( P.L. 116-6 ). Amounts in the FY2019 column of the Administration's budget documents are based on FY2018 levels, not enacted FY2019 amounts. Discretionary Budget Caps and Subcommittee Allocations Budget enforcement has procedural and statutory elements. The procedural elements relate to a budget resolution and are enforced with points of order. The statutory elements impose discretionary spending limits and are enforced with budget caps and sequestration. Budget Resolution Typically, each chamber's Appropriations Committee receives a top-line limit on discretionary budget authority, referred to as a "302(a)" allocation, from the Budget Committee via an annual budget resolution. The Appropriations Committees then in turn subdivide the allocation among their subcommittees, referred to as the "302(b)" allocations. For FY2020, the House did not report or pass a budget resolution. The Senate Budget Committee reported S.Con.Res. 12 , though it received no further action. Budget Caps The Budget Control Act of 2011 (BCA, P.L. 112-25 ) set discretionary budget caps through FY2021 as a way of reducing federal spending. Sequestration is an across-the-board backstop to achieve budget reductions if spending exceeds the budget caps (2 U.S.C. §901(c)). Bipartisan Budget Acts (BBAs) have avoided sequestration on discretionary spending—with the exception of FY2013—by raising those caps four times in two-year increments in 2013, 2015, 2018, and 2019 ( Figure 4 ). Most recently, the BBA of 2019 ( P.L. 116-37 ) raised the cap on nondefense discretionary spending by $78 billion for FY2020 (to $621 billion) and by $72 billion for FY2021 (to $627 billion). The amount for FY2020 is 4.1% greater than the nondefense cap in FY2019. The BBA also provides language to execute (or "deem") those higher caps for the appropriations process without a budget resolution. Discretionary Spending Allocations In the absence of a budget resolution and before the BBA that occurred in August, the House Appropriations Committee on May 14, 2019, set an overall discretionary target and provided subcommittee allocations ( H.Rept. 116-59 ). The allocation for Agriculture appropriations was $24.3 billion, $1 billion greater (+4.3%) than the comparable amount for FY2019 ( Table 2 ). The Senate waited for the overall budget agreement in the BBA of 2019 before setting subcommittee allocations or proceeding to mark up appropriations bills. On September 12, 2019, the Senate Appropriations Committee set its subcommittee allocations ( S.Rept. 116-104 ). The subcommittee allocation was $23.1 billion, $0.1 billion greater (+0.3%) than FY2019. Without Congress having agreed on a joint budget resolution, different subcommittee allocations between the chambers further necessitated reconciliation in the final appropriation. Budget Sequestration on Mandatory Spending Despite the BBA agreements that raise discretionary spending caps and avoid sequestration on discretionary accounts, sequestration still impacts mandatory spending through FY2029. Sequestration on mandatory accounts began in FY2013, continues to the present, and has been extended five times beyond the original FY2021 sunset of the BCA. See Appendix C for effects. House Action The House Agriculture Appropriations Subcommittee marked up its FY2020 bill on May 23, 2019, by voice vote. On June 4, 2019, the full Appropriations Committee passed and reported an amended bill ( H.R. 3164 , H.Rept. 116-107 ) by a vote of 29-21. The committee adopted four amendments by voice vote. On June 25, 2019, the House passed a five-bill minibus appropriation ( H.R. 3055 ) with the Agriculture bill as Division B ( Table 1 , Figure 1 ). Under a structured rule, the Rules Committee allowed 35 amendments for floor debate (H.Res. 445, H.Rept. 116-119 ). The House considered 33 of those amendments, of which 31 were adopted and two were rejected. Of the 31 amendments that were adopted, 28 were adopted en bloc by voice vote, two were adopted by recorded votes, and another was adopted separately by voice vote. Of the 31 amendments that were adopted, 14 revised funding amounts with offsets, three added policy statements, and 14 made no substantive changes but were for the purposes of discussion. The $24.3 billion discretionary total in the House-passed FY2020 Agriculture appropriation would have been $1 billion more than (+4%) the comparable amount enacted for FY2019 that includes the CFTC ( Table 2 , Figure 3 ). Generally speaking, the House-passed bill did not include most of the reductions proposed by the Administration. Comparison of Discretionary Authority: House-Passed Bill to FY2019 Table 3 provides details of the House-passed bill at the agency level. The primary changes from FY2019 that comprised the $1 billion increase, ranked by increases and decreases, include the following: Increase Rural Development accounts by $412 million (+14%), including a $144 million increase for the Rural Housing Service (+9%) and a $238 million increase for the Rural Utilities Service (+38%) to support rural water and waste disposal and rural broadband. In addition, the General Provisions title included a $393 million increase for the ReConnect Broadband Pilot Program (+314%). Increase foreign agricultural assistance by $377 million (+19%), including increasing Food for Peace humanitarian assistance by $350 million and McGovern-Dole Food for Education by $25 million. In FY2019, Food for Peace had received a temporary increase of $216 million in the General Provisions title. The larger FY2020 amount would have been to the program's base appropriation rather than the FY2019 approach that used the General Provisions. Increase related agencies appropriations by $232 million, including raising FDA appropriations by $185 million (+6%) and the CFTC by $47 million (+18%). Increase other agricultural program appropriations by $151 million, including the following: Increase departmental administration accounts by a net $205 million (+53%), including funding most of the Administration's request for a $271 million increase for construction to renovate USDA headquarters. Increase USDA regulatory programs by $56 million, including increasing the Animal and Plant Health Inspection Service by $23 million (+2%) and the Agricultural Marketing Service by $33 million (+20%). Decrease agricultural research by a net $134 million (-4%). Agricultural Research Service (ARS) construction would have been reduced by $331 million from FY2019 (-87%), while salaries and expenses would have increased for ARS (+$44 million, +3%) and the National Institute of Food and Agriculture (NIFA) (+$146 million, +10%). Some of these increases would have been offset by a net change of -$175 million in budget authority through the General Provisions title. This was mostly a combination of greater rescissions of carryover balances in WIC (-$300 million) and the absence of continuing the FY2019 appropriations in the General Provisions for Food for Peace (-$216 million, as mentioned above) and rural water and waste disposal (-$75 million). The General Provisions would have provided increases in funding for rural broadband (+$393 million, as mentioned above) and several appropriations for miscellaneous programs (+$33 million). Comparison of Mandatory Spending: House-Passed Bill to FY2019 In addition to discretionary spending, the House-passed bill also carried mandatory spending that totaled $131 billion. This was about $2 billion more than in FY2019 generally because of automatic changes from economic conditions and expectations about enrollment in entitlement programs. Reimbursement for the CCC was projected to increase by $10 billion, mostly due to the cost of the first year of the Trump Administration's trade aid assistance package . Estimates for child nutrition programs would have increased by $0.9 billion. Crop insurance spending would have decreased by $6.4 billion, and SNAP spending decreased by about $2.4 billion. Senate Action The Senate Agriculture Appropriations Subcommittee marked up its FY2020 bill on September 17, 2019. On September 19, 2019, the full Appropriations Committee passed and reported an amended bill ( S. 2522 , S.Rept. 116-110 ) by a vote of 31-0. The committee adopted a manager's amendment with three additions to bill text and 19 additions to report language. On October 31, 2019, the Senate passed a four-bill minibus appropriation ( H.R. 3055 , after adopting S.Amdt. 948 , which was composed of four Senate-reported bills and amended by floor amendments). The Agriculture bill is Division B ( Table 1 , Figure 1 ). The Senate adopted 16 amendments to Division B, of which 14 were adopted en bloc by unanimous consent and two were adopted by recorded votes. Of these 16 amendments, eight revised funding amounts with offsets, three revised funding amounts within an existing appropriation, three changed the terms of an appropriation, and two required reports or studies. The $23.1 billion discretionary total in the Senate-passed FY2020 Agriculture appropriation would have been $57 million more than (+0.2%) the amount enacted for FY2019 ( Table 2 , Figure 3 ). The Senate bill was $894 million less than (-3.7%) the House-passed bill on a comparable basis without CFTC. Generally speaking, the Senate-passed bill did not include most of the reductions proposed by the Administration. Table 3 provides details of the Senate-passed bill at the agency level. Comparison of Discretionary Authority: Senate-Passed to House-Passed Bill Compared to the House-passed bill and ranked by increases and decreases, the primary changes in the Senate-passed bill that comprised the -$894 million difference from the House bill included the following: Agricultural research would have been $193 million greater in the Senate-passed bill than in the House-passed bill. ARS buildings and facilities would have been $255 million greater than in the House-passed bill, ARS salaries and expenses $77 million greater, and NIFA $132 million less. Departmental administration accounts would have been $97 million greater in the Senate bill than in the House bill, mostly by maintaining appropriations for the Chief Information Officer, General Counsel, and Departmental Administration that would have been reduced as offsets to pay for floor amendments that were adopted in the House bill. Rural Development would have been $407 million less in the Senate-passed bill than in the House-passed bill, mostly by a $300 million less for the Rural Utilities Service ($233 million less for rural water and waste disposal grants, $41 million less for distance learning and telemedicine, and $25 million less for existing non-pilot rural broadband programs), $70 million less for Rural Housing Service, and $22 million less for the Rural Business-Cooperative Service. In addition, for the separate ReConnect Broadband Pilot Program, the General Provisions title in the Senate-passed bill would not have provided for any of the $518 million that the House bill contained. Foreign agricultural assistance would have been $159 million less in the Senate bill than in the House bill, mostly by not increasing Food for Peace as much as in the House bill, and maintaining the McGovern-Dole program at a constant level. FDA appropriations would have been $105 million less in the Senate-passed bill than in the House-passed bill. Comparison of Mandatory Spending: Senate-Passed to House-Passed Bill In addition to discretionary spending, the Senate-passed bill also carried mandatory spending that totaled $129 billion. This was $153 million less than in FY2019 and $2.3 billion less than in the House-passed bill. Compared to the House-passed bill, amounts for CCC and crop insurance were the same. Mandatory amounts for the child nutrition programs were about $400 million less than the House bill, and the amount for SNAP was about $1.9 billion less than in the House bill. Continuing Resolutions In the absence of a final Agriculture appropriation at the beginning of FY2020 on October 1, 2019, Congress passed a CR to continue operations and prevent a government shutdown ( P.L. 116-59 , Division A). The first CR lasted nearly eight weeks until November 21, 2019. On November 21, a second CR ( P.L. 116-69 ) was enacted to last until December 20, 2019. On December 20, Congress passed and the President signed a full-year FY2020 appropriation. In general, a CR continues the funding rates and conditions that were in the previous year's appropriation. The Office of Management and Budget (OMB) may prorate funding to the agencies on an annualized basis for the duration of the CR through a process known as apportionment. For the first 52 days (about 14% of FY2020) through November 21, 2019, and the next 29 days (about 8% of FY2020) through December 20, 2019, the CRs continued the terms of the FY2019 Agriculture appropriations act (§101) with a proviso for rural development in the anomalies below; and provided sufficient funding to maintain mandatory program levels, including for nutrition programs (§111). This is similar to the approach taken in recent years. CRs may adjust prior-year amounts through anomalies or make specific administrative changes. Five anomalies applied specifically to the Agriculture appropriation during the first CR: Rural Water and Waste Disposal Program (§101(1)) . Allowed the CR to cover the cost of direct loans in addition to loan guarantees and grants. In FY2019, direct loans did not require appropriation because they had a negative subsidy rate (i.e., fees and repayments more than covered the cost of loan making). In FY2020, OMB estimated a need for a positive subsidy rate. Disaster Assistance for Sugar Beet Processors (§116) . Amended the list of eligible losses that may be covered under the Additional Supplemental Appropriations for Disaster Relief Act of FY2019 ( P.L. 116-20 , Title I) to include payments to cooperative processors for reduced sugar beet quantity and quality. The FY2019 supplemental provided $3 billion to cover agricultural production losses in 2018 and 2019 from natural disasters. Agricultural Research (§117) . Allowed USDA to waive the nonfederal matching funds requirement for grants made under the Specialty Crop Research Initiative (7 U.S.C. §7632(g)(3)). The requirement was added in the 2018 farm bill. Summer Food for Children Demonstration Projects (§118) . Allocated funding for the Food and Nutrition Service summer food for children demonstration projects at a rate so that projects could fully operate by May 2020 (prior to summer service, which typically starts in June). Similar provisions have been part of previous CRs. These projects, which include the Summer Electronic Benefit Transfer (EBT) demonstration, have operated in selected states since FY2010. C ommodity C redit C orporation ( §119 ) . Allowed CCC to receive its appropriation about a month earlier than usual so that it could reimburse the Treasury for a line of credit prior to a customary final report and audit. Many payments to farmers were due in October 2019, including USDA's plan to make supplemental payments under its trade assistance program. Without the anomaly, CCC might have exhausted its $30 billion line of credit in October or November 2019 before the audit was completed, which could have suspended payments. A similar provision was part of a CR in FY2019. In addition, the FY2020 CR required USDA to submit a report to Congress by October 31, 2019, with various disaggregated details about Market Facilitation Program payments, trade damages, and whether commodities were purchased from foreign-owned companies under the program. Hemp (§120) . Provided $16.5 million on an annualized basis to the USDA Agricultural Marketing Service to implement the Hemp Production Program ( P.L. 115-334 , §10113), which was created in the 2018 farm bill. The second CR continued the terms of the first CR until December 20, 2019. It added one new anomaly for Agriculture appropriations: Commodity Assistance Program (§146). Allowed funding for the Commodity Supplemental Food Program (CSFP) to be apportioned at a rate to maintain current program caseload. This meant that funding available under the second CR could exceed amounts that would otherwise would have been available. FY2020 Further Consolidated Appropriations Act On December 20, 2019, Congress passed and the President signed a full-year FY2020 appropriation—the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 ) —that included Agriculture appropriations in Division B. This was the second of two consolidated appropriations acts that were passed in tandem: P.L. 116-93 , which covered four appropriations subcommittee bills, and P.L. 116-94 , which covered eight appropriations subcommittee bills. The official discretionary total of the FY2020 Agriculture appropriation is $23.5 billion. This is $183 million more than (+0.8%) the comparable amount for FY2019 that includes CFTC. The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws. Thus the overall total of the agriculture portion is $153 billion. In addition to these amounts, the appropriation includes budget authority that is designated as emergency spending and does not count against discretionary spending caps. These include $535 million to FDA for Ebola prevention and treatment, and $1.5 billion to USDA for the Wildfires and Hurricanes Indemnity Program (WHIP). The latter amount was offset by a $1.5 billion rescission of unobligated WHIP funding from a prior appropriation and emergency designation. Comparison of Discretionary Authority Table 3 provides details of the enacted FY2020 Agriculture appropriation at the agency level, and compared with the House- and Senate-passed bills, the Administration's request, and three prior years. The primary changes from FY2019 that comprised the overall $183 million increase, ranked by increases and decreases, include the following: Increase foreign agricultural assistance by $235 million (+12%), including increasing Food for Peace humanitarian assistance by $225 million and McGovern-Dole Food for Education by $10 million. In FY2017-FY2019, Food for Peace had received temporary increases in the General Provisions title, including $216 million in FY2019. The larger FY2020 amount replaces the temporary amount with an increase in the program's base appropriation. Increase Rural Development accounts by $229 million (+8%), including a $130 million increase for the Rural Utilities Service (+21%) to support rural water and waste disposal and telemedicine and an $81 million increase for the Rural Housing Service (+5%). In addition, the General Provisions title included a $175 million increase for a rural broadband pilot program (+140%). Increase related agencies appropriations by $138 million, including raising FDA appropriations by $91 million (+3%) and the CFTC by $47 million (+18%). Increase other agricultural program appropriations by $199 million, including the following: Increase departmental administration accounts by a net $82 million (+21%), including funding for construction to renovate USDA headquarters. Increase USDA regulatory programs by $59 million, including increasing the Animal and Plant Health Inspection Service by $32 million (+3%) and the Agricultural Marketing Service by $28 million (+17%). Decrease agricultural research by a net $18 million (-0.5%). Agricultural Research Service (ARS) construction is reduced by $189 million compared with FY2019 (-49%), while salaries and expenses are increased for ARS (+$111 million, +9%) and grants for the National Institute of Food and Agriculture (NIFA) (+$56 million, +4%). Increase Farm Service Agency salaries and expenses by $47 million (+3%). Increase Natural Resources Conservation Service appropriations by $35 million, including Watershed and Flood Prevention by $25 million (+17%), and Conservation Operations by $10 million (+1%). Decrease Food and Nutrition Service discretionary appropriations by $54 million, including decreasing WIC by $75 million (-1%) and increasing Commodity Assistance Programs by $22 million (+7%). Some of these increases are offset by a net change of -$570 million in budget authority through the General Provisions title. This was mostly a combination of greater rescissions of carryover balances in WIC (-$500 million) and the absence of continuing the FY2019 appropriations in the General Provisions for Food for Peace (-$216 million, as mentioned above) and rural water and waste disposal grants (-$75 million). The General Provisions provides increases in funding for rural broadband (+$175 million, as mentioned above) and several appropriations for miscellaneous programs (+$63 million over FY2019). Not included above is emergency funding that is not subject to discretionary budget caps. This includes funding for Ebola ($535 million) and the Wildfires and Hurricanes Indemnity Program (WHIP, $1.5 billion). The latter emergency authorization was offset by an identically sized rescission of prior-year emergency funding for WHIP. Comparison of Mandatory Spending In addition to discretionary spending, the House-passed bill also carried mandatory spending—largely determined in separate authorizing laws—that totals $129 billion. This is about $354 million more than (+0.3%) FY2019, generally due to automatic changes from economic conditions and expectations about enrollment in entitlement programs. Reimbursement to the Treasury for the CCC increased by $10.9 billion (+71%), mostly due to the cost of the Trump Administration's trade aid assistance that was announced in 2018. Child nutrition programs increase by $0.5 billion (+2%). Crop insurance spending decreases by $5.5 billion (-35%), and SNAP spending decreases by about $5.6 billion (-8%). Policy-Related Provisions Besides setting spending authority, appropriations acts are also a vehicle for policy-related provisions that direct executive branch actions. These provisions, limitations, or riders may have the force of law if they are included in the act's text, but their effect is generally limited to the current fiscal year unless they amend the U.S. Code , which is rare in appropriations acts. Table 4 compares some of the primary policy provisions that are included directly in the FY2020 Agriculture appropriations act, and its development in the House and Senate bills. Report language may also provide policy instructions. Although report language does not carry the force of text in an act, it often explains congressional intent, which the agencies may be expected to follow. Statements in the joint explanatory statement and the committee reports are not included in Table 4 . In the past, Congress has said that committee reports and the joint explanatory statement need to be read together to capture all of the congressional intent for a fiscal year. For example, the explanatory statement for the FY2020 Further Consolidated Appropriations act instructs that the House and Senate reports should be read together with the conference agreement: Congressional Directives. The statement is silent on provisions that were in both the House Report ( H.Rept. 116-107 ) and Senate Report ( S.Rept. 116-110 ) that remain unchanged by this agreement, except as noted in this statement. The House and Senate report language that is not changed by the statement is approved and indicates congressional intentions. The statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. Appendix A. Appropriations in Administrative Accounts Appendix B. Appropriations in General Provisions Appendix C. Budget Sequestration Sequestration is a process to reduce federal spending through automatic, largely across-the-board reductions that permanently cancel mandatory and/or discretionary budget authority. Sequestration is triggered as a budget enforcement mechanism when federal spending would exceed statutory budget goals. Sequestration is currently authorized by the BCA ( P.L. 112-25 ). A sequestration rate is the percentage reduction that is subtracted from an appropriated budget authority to achieve an intended budget goal. OMB computes these rates annually. Table C-1 shows the rates of sequestration that have been announced and the total amounts of budget authority that have been cancelled from accounts in Agriculture appropriations. Table C-2 provides additional detail at the program level for mandatory accounts. Discretionary Spending For discretionary spending, sequestration is authorized through FY2021 if discretionary defense and nondefense spending exceed caps that are specified in statute (2 U.S.C. §901(c)). In FY2013, the timing of the appropriations acts and the first year of sequestration resulted in triggering sequestration on discretionary spending. In FY2014-FY2019, BBAs in 2013, 2015, and 2018 ( P.L. 113-67 , P.L. 114-74 , and P.L. 115-123 , respectively) have avoided sequestration on discretionary spending. These BBAs raised the discretionary budget caps that were placed in statute by the BCA and allowed Congress to enact larger appropriations than would have been allowed. The enacted appropriations in FY2014-FY2019 met the spending limitations of the revised budget caps, and therefore no sequestration on discretionary accounts was necessary. For FY2020-FY2021, the BBA of 2019 ( P.L. 116-37 ) similarly provides a higher discretionary cap that may avoid sequestration (see " Discretionary Budget Caps and Subcommittee Allocations "). Mandatory Spending Sequestration Occurs and Continues For mandatory spending, sequestration is presently authorized and scheduled to continue through FY2029, having been amended and extended by budget acts that were subsequent to the BCA (2 U.S.C. §901a(6)). That is, sequestration of mandatory spending has not been avoided by the BBAs and continues to apply annually to certain accounts ( Table C-2 ). The original FY2021 sunset on the sequestration of mandatory accounts has been extended five times as an offset to pay for raising the caps on discretionary spending to avoid sequestration in the near term (or as a general budgetary offset for other authorization acts): 1. Congress extended the duration of mandatory sequestration by two years (until FY2023) as an offset in BBA 2013. 2. Congress extended it by another year (until FY2024) to maintain retirement benefits for certain military personnel ( P.L. 113-82 ). 3. Congress extended sequestration on nonexempt mandatory accounts another year (until FY2025) as an offset in BBA 2015. 4. Congress extended sequestration on nonexempt mandatory accounts for two years (until FY2027) as an offset in BBA 2018 ( P.L. 115-123 , §30101(c)). 5. Congress extended sequestration on nonexempt mandatory accounts by another two years (until FY2029) as an offset in BBA 2019 ( P.L. 116-37 , §402). Exemptions from Sequestration Some USDA mandatory programs are statutorily exempt from sequestration. Those expressly exempt by statute are the nutrition programs (SNAP, the child nutrition programs, and the Commodity Supplemental Food Program) and the Conservation Reserve Program. Some prior legal obligations in the Federal Crop Insurance Corporation and the farm commodity programs may be exempt as determined by OMB. Generally speaking, the experience since FY2013 is that OMB has ruled that most of crop insurance is exempt from sequestration, while the farm commodity programs, disaster assistance, and most conservation programs have been subject to it. Implementation of Sequestration Nonexempt mandatory spending in FY2020 is to be reduced by a 5.9% sequestration rate ( Table C-1 ) and thus would be paid at 94.1% of what would otherwise have been provided. This is projected to result in a reduction of about $1.4 billion from mandatory agriculture accounts in FY2020, including over $900 million from amounts paid by the CCC ( Table C-2 ). For example, for the farm commodity programs that support farm income such as the Agricultural Risk Coverage and Price Loss Coverage programs, payments to farmers are computed by a regular formula authorized in the farm bill, and the final actual payment to the farmer is reduced by the sequestration rate. For programs that operate on a fixed budget authority, such as the Environmental Quality Incentives Program and the Market Assistance Program, the sequestration rate is applied to the available budget authority for the fiscal year. Appendix D. Action on Agriculture Appropriations, FY1996-FY2020

The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the U.S. Forest Service. It also funds the Food and Drug Administration (FDA) and—in even-numbered fiscal years—the Commodity Futures Trading Commission (CFTC). Agriculture appropriations include both mandatory and discretionary spending. Discretionary amounts, though, are the primary focus during the bill's development. The largest discretionary spending items are the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); agricultural research; rural development; FDA; foreign food assistance and trade; farm assistance loans and salaries; food safety inspection; animal and plant health programs; and technical assistance for conservation programs. Congress passed and the President signed a full-year FY2020 appropriation on December 20, 2019—the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 )—that included Agriculture appropriations in Division B. The discretionary total of the FY2020 Agriculture appropriations act is $23.5 billion. This is $183 million more than the comparable amount for FY2019 (+0.8%) that includes the Commodity Futures Trading Commission (CFTC). The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws. Thus, the overall total of the agriculture portion is $153 billion. In addition to these amounts, the FY2020 Further Consolidated Appropriations Act includes budget authority that is designated as emergency spending and does not count against discretionary spending caps. These include $535 million to FDA for Ebola prevention and treatment, and $1.5 billion to USDA for the Wildfires and Hurricanes Indemnity Program (WHIP). The latter amount was offset by a $1.5 billion rescission of unobligated WHIP funding from a prior appropriation and emergency designation. The primary components of the $183 million overall increase in the regular appropriation from FY2019 include increases to foreign agricultural assistance (+$235 million), rural development (+$229 million), rural broadband (+$175 million, separate from the rural development increase), agricultural research salaries and grants (+$167 million), FDA (+$91 million), departmental administration (+$82 million), Farm Service Agency (+$47 million), CFTC (+$47 million), the Natural Resources Conservation Service (+$35 million), Animal and Plant Health Inspection Service (+$32 million) and the Agricultural Marketing Service (+$28 million), and miscellaneous appropriations (+$63 million). Most of these increases are offset by decreases such as for construction for agricultural research facilities (-$189 million), Food and Nutrition Service discretionary appropriations (-$54 million), increasing a rescission of carryover balances in WIC (-$500 million), and not renewing temporary appropriations for Food for Peace and rural water and waste disposal grants (-$291 million). The Trump Administration had requested $19.2 billion for discretionary-funded accounts within the jurisdiction of Agriculture appropriations subcommittees. The request would have been a reduction of $4.1 billion from FY2019 (-18%). Policy provisions are also included that affect how the appropriation is delivered. This year, these provisions include issues such as the relocation of USDA agencies, disaster programs, rural definitions, livestock regulations, nutrition programs, and dietary guidelines. Budget sequestration continues to affect mandatory agricultural spending accounts. Sequestration refers to automatic across-the-board reductions in spending authority. In FY2020, sequestration on mandatory spending accounts is 5.9% and totals about $1.4 billion for agriculture accounts. Recent budget acts have extended sequestration through FY2029.

CRS_R46316

Introduction The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with case counts growing daily. Containment and mitigation efforts by federal, state, and local governments have been undertaken to "flatten the curve"—that is, to slow widespread transmission that could overwhelm the nation's health care system. The Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ) is the second of three comprehensive laws enacted specifically to support the response to the pandemic. The first law, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ), enacted on March 6, 2020, provides roughly $7.8 billion in discretionary supplemental appropriations to the Department of Health and Human Services (HHS), the Department of State, and the Small Business Administration. The law also authorizes the HHS Secretary to temporarily waive certain telehealth restrictions to make telehealth services more available during the emergency. The third law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ), was enacted on March 27, 2020. In addition to a number of economic stimulus and other provisions, the CARES Act provides payment for or requires coverage of a COVID-19 vaccine, when available, for federal health care payment and services programs and most private health insurance plans; it also provides appropriations to continue support for federal, state, and local public health efforts, and for federal purchase of COVID-19 vaccines. The act also appropriates a $100 billion "Provider Relief Fund" to assist health care facilities and providers facing revenue losses and uncompensated care as a result of the pandemic. This CRS report describes the health provisions included in FFCRA as of the date of enactment, including relevant background information. Other divisions in the law contain provisions regarding HHS social services programs, federal nutrition programs, and other matters that are not within the scope of this CRS report. Other CRS reports summarize the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, and the CARES Act, and will link to this report as they become available. Some provisions described in this report have been amended by the CARES Act, and in such cases, footnotes reference the relevant CRS expert who can answer questions about the amendments. This report will not otherwise be updated or changed to reflect subsequent congressional or administrative action related to the FFCRA health provisions. The Appendix contains a list of CRS experts for follow-up on further developments. FFCRA Overview Legislative History6 On March 14, 2020, the House amended and passed H.R. 6201 , the Families First Coronavirus Response Act, by a vote of 363-40. The House considered the measure under the suspension of the rules procedure, a process that allows for expedited consideration of measures that enjoy overwhelming support. The measure had been introduced on March 11, 2020, and referred to the Committee on Appropriations as the primary committee, as well as to the Committee on the Budget and the Committee on Ways and Means. The committees took no formal action on the legislation; the suspension of the rules procedure allows the House to take up a measure (even one in committee), amend it, and pass it, all with a single vote. To suspend the rules and pass the bill requires the support of two-thirds of those voting. On March 16, 2020, the House (by unanimous consent) considered and agreed to a resolution (H.Res. 904) that directed the Clerk to make changes to the legislation when preparing the final, official version of the House-passed bill. The process of preparing this version is called "engrossment." The engrossed version was sent to the Senate. The Senate considered the bill under the terms of a unanimous consent agreement that allowed for the consideration of three amendments and required the support of 60 Senators to approve any amendment and for final passage of the bill. The Senate did not agree to any of the amendments but passed the bill, 90-8, on March 18, 2020. The President signed the bill into law the same day. It became P.L. 116-127 . Provisions in Brief The Families First Coronavirus Response Act, among other things, increases appropriations to the Department of Defense, Indian Health Service (IHS), HHS, and Veterans Health Administration for testing and ancillary services associated with the SARS-CoV-2 virus, or COVID-19. Through several provisions in FFCRA Divisions A and F, the act provides payment for or requires coverage of testing for the COVID-19 virus, along with items and services associated with such testing, such as supplies and office visits, without any cost sharing, for individuals who are covered under Medicare, including Medicare Advantage, traditional Medicaid, the State Children's Health Insurance Program (CHIP), TRICARE, Veterans health care, the Federal Employees Health Benefits (FEHB) Program, most types of private health insurance plans, the IHS, and for individuals who are uninsured (as defined under FFCRA). These coverage provisions are effective beginning on the date of enactment through any portion of the COVID-19 public health emergency (declared pursuant to Section 319 of the Public Health Service Act). The FFCRA prohibits private health insurance plans and Medicare Advantage plans from employing utilization management tools, such as prior authorization, for the COVID-19 test, or the visit to furnish it. FFCRA provides for an increase to all states, the District of Columbia, and territories in the share of Medicaid expenditures financed by the federal government, subject to specific requirements. It provides additional Medicaid funding to territories. FFCRA modifies requirements related to waiving certain Medicare telehealth restrictions during the emergency. Finally, it waives liability, with a narrow exception, for manufacturers, distributors, or providers of specified respiratory protective devices used for COVID-19 response. The Congressional Budget Office and the Joint Committee on Taxation provided a preliminary estimate of the budget effects of the Families First Coronavirus Response Act. Overall, the act is estimated to increase discretionary spending by $2.4 billion from emergency supplemental appropriations, to increase mandatory outlays by $95 billion, and to decrease revenues by $94 billion. These estimates are based on assumptions about the severity and duration of the pandemic, and they may vary substantially from final estimates to be provided later this year. Discretionary spending totals and CBO's estimates of mandatory outlays for health care programs in Division F are provided in the " Summaries of Provisions " section. Key Definitions Several key terms are referred to repeatedly throughout this report: emergency period, COVID-19 testing and testing-related items and services, and uninsured individuals. This section provides the technical definitions for those terms. Duration of Emergency Period Several provisions in Division F define the effective period of the authorized activity as "the emergency period defined in paragraph (1)(B) of section 1135(g)," or comparable construction, referring to a paragraph in Section 1135 of the Social Security Act (SSA). Section 1135 allows the Secretary of Health and Human Services (HHS Secretary) to waive specified requirements and regulations to ensure that health care items and services are available to enrollees in the Medicare, Medicaid, and CHIP programs during emergencies. Paragraph (1)(B) of SSA Section 1135(g) refers to "the public health emergency declared with respect to the COVID-19 outbreak by the Secretary on January 31, 2020, pursuant to section 319 of the Public Health Service Act [PHSA]." Hence, the referenced emergency period in provisions in Division F is the period during which this particular Section 319 public health emergency declaration —whether initial or renewed—is in effect. However, while most Division F provisions are effective during any portion of the emergency period described above, those provisions bec a me effective as of the date of enactment of FFCRA , March 18, 2020, even though the emergency period began earlier. Division F provisions with different effective dates are so noted in the descriptions of the sections below. Definitions of COVID-19 Testing and Related Services Through several provisions in FFCRA Divisions A and F, the act provides payment for or requires coverage of testing for the COVID-19 virus, and items and services associated with such testing, such as supplies and office visits, without cost sharing. These coverage requirements apply to individuals who are covered under Medicare, traditional Medicaid, CHIP, TRICARE, Veterans health care, FEHB, the IHS, most types of private health insurance plans, and individuals who are uninsured (as defined below). COVID-19 Testing Provisions in Division F refer to COVID-19 testing in several ways: "In vitro diagnostic products (as defined in section 809.3(a) of title 21, Code of Federal Regulations) for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 that are approved, cleared, or authorized under section 510(k), 513, 515 or 564 of the Federal Food, Drug, and Cosmetic Act [FFDCA]"; "COVID-19 related items and services"; "in vitro diagnostic products"; "clinical diagnostic lab tests"; and "any COVID-19 related items and services." COVID- 19 stands for Coronavirus Disease 2019, the name of the pandemic disease. SARS-CoV- 2 is the scientific name of the virus that causes COVID-19. Diagnostic testing identifies the presence of the virus, which, in conjunction with clinical signs and symptoms, informs the diagnosis of COVID-19. In Vitro Diagnostics (IVDs) are medical devices used in the laboratory analysis of human samples, including commercial test products and instruments used in testing. IVDs may be used in a variety of settings, including a clinical laboratory, a physician's office, or in the home. IVDs are defined in FDA regulation as a specific subset of devices that include "reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions ... in order to cure, mitigate, treat, or prevent disease ... [s]uch products are intended for use in the collection, preparation, and examination of specimens taken from the human body." As indicated by this definition, an IVD may be either a complete test or a component of a test, and in either case, the IVD comes under FDA's regulatory purview. FDA premarket review of IVDs may include Premarket Approval (PMA); notification and clearance (510(k)); authorization pursuant to de novo classification; or authorization for use in an emergency pursuant to an Emergency Use Authorization (EUA) based on circumstances (e.g., a public health emergency determination) and the risk the device poses. Although the terms and definitions used to refer to COVID-19 testing vary throughout FFCRA, they do not necessarily reflect actual differences in the types of tests and ancillary services that are or must be covered. Some of these definitions and terms were amended in the CARES Act. In summarizing FFCRA provisions in this CRS Report, mention of any of these definitions of a COVID-19 test, as described above, is referred to as " COVID-19 testing ." Testing-Related Items and Services Sections in FFCRA Divisions A and F that refer to COVID-19 testing generally also refer to health care items and services furnished in relation to testing, such as supplies and office visits, although definitions vary. FFCRA Section 6001(a)(2) defines these ancillary services, in the context of private health insurance coverage, as [i]tems and services furnished to an individual during health care provider office visits (which term in this paragraph includes in-person visits and telehealth visits), urgent care center visits, and emergency room visits that result in an order for or administration of an in vitro diagnostic product described in paragraph (1), but only to the extent such items and services relate to the furnishing or administration of such product or to the evaluation of such individual for purposes of determining the need of such individual for such product. This definition could encompass additional diagnostic testing associated with the visit, which may include additional laboratory tests and imaging studies. However, it would not encompass treatment for COVID-19 illnesses . See the " Section 6001. Coverage of Testing for COVID-19 " section below regarding enforcement and implementation of this section's provisions. Applicable References Provisions in Division F that use language discussed above, comparable construction, or cross-reference, are as follows: Section 6001(a)(1)-(2), regarding specified types of private health insurance coverage. Section 6004(a)(1)(C), which amends SSA Section 1905(a)(3) regarding Medicaid medical assistance, and Section 6004(a)(2), which amends SSA Sections 1916 and 1916A regarding Medicaid cost-sharing. Both provisions refer to SSA Section 1905(a)(3), as amended. Section 6004(b)(1), which amends SSA Section 2103(c), regarding CHIP child coverage, and Section 6004(b)(2), which amends SSA Section 2112(b)(4), regarding CHIP pregnant women coverage. Both provisions reference SSA Section 1905(a)(3), as amended. Section 6006, regarding TRICARE, veterans health care, and federal civilian employee health coverage (FEHB), each referencing FFCRA Section 6001(a)(1)-(2). Section 6007, regarding IHS referencing FFCRA Section 6001(a)(1)-(2). In addition, appropriations provided in FFCRA Division A to the Defense Health Program, Veterans Health Administration, IHS, and the HHS Public Health and Social Services Emergency Fund are to be used, in whole or in part, to pay for COVID-19 testing and related services, with reference to Section 6001(a) of the act. However, Division F sections pertaining to Medicare, Medicare Advantage, and the Medicaid and CHIP programs do not reference FFCRA Section 6001(a)(1)-(2) with respect to the definition of COVID-19 tests, administration of the tests, or related items and services, but rather amend the Social Security Act directly to require coverage of these things. Definition of the Uninsured Two provisions in FFCRA facilitate access to COVID-19 testing for "uninsured individuals": Division A, Title V, and Division F, Section 6004. Title V provides funding to the National Medical Disaster System (NDMS) that can be used to reimburse health care providers for costs related to COVID-19 testing for uninsured individuals, as defined in that section (and as explained below). Section 6004 provides states an option to use Medicaid as a vehicle to provide COVID-19 testing without cost to uninsured individuals, as defined in that section. The respective definitions of uninsured individuals are similar but not identical. In Title V, "uninsured individual" means an individual who is not enrolled in coverage in any of the following three categories: A federal health care program, as defined: This includes but is not limited to Medicare, Medicaid, CHIP, TRICARE, and the VA health care system. Most types of private health insurance plans: This includes individual health insurance coverage and group plans, whether fully insured or self-insured. The explanation of these coverage types and the applicability of Section 6001 to them also apply to this provision. The Federal Employees Health Benefits ( FEHB ) Program: See the " Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians " section below for background on FEHB. In other words, individuals enrolled in coverage in one of these three categories are considered insured and are not eligible for the testing assistance described in Title V. Note that individuals with certain types of private coverage may be considered uninsured, due to the coverage definitions cited. The definition of individual health insurance coverage does not include a type of coverage called short-term, limited duration insurance (STLDI) (see " Section 6001. Coverage of Testing for COVID-19 "). Thus, individuals with STLDI appear to be considered uninsured for the purpose of eligibility for assistance under Title V. Section 6004 includes additional groups in the definition of "uninsured individual" that applies under such sections. Specifically, for the purposes of Section 6004, uninsured individuals are defined as those who are not enrolled in (1) a federal health care program, as defined; (2) a specified type of private health insurance plan; or (3) FEHB. Such individuals are also not Medicaid-eligible under one of Medicaid's mandatory eligibility pathways (e.g., the poverty-related pregnant women and child pathways, or the Medicaid expansion pathway under the Patient Protection and Affordable Care Act [ACA; P.L. 111-148 , as amended]). The first three categories are defined and referenced the same way in Section 6004 as they are in Title V, although wording and punctuation differ slightly. See the discussion of Section 6004 in this report for more information about the additional criteria related to COVID-19 testing without cost-sharing under Medicaid. Summaries of Provisions Division A—Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 This section describes the health care-related supplemental appropriations in FFCRA Division A for the Defense Health Program, the Veterans Health Administration, and HHS accounts, and applicable general provisions. All such appropriations are designated as an emergency requirement and, as a result, are not constrained by the statutory discretionary spending limits (often referred to as budget caps). Title II: Department of Defense, Defense Health Program The Defense Health Program (DHP) is an account in the Department of Defense budget that funds various functions of the Military Health System. These functions include the provision of health care services, certain medical readiness activities, expeditionary medical capabilities, education and training programs, medical research, management and headquarters activities, facilities sustainment, procurement, and civilian personnel. For FY2020, Congress appropriated $34.4 billion to the DHP. FFCRA appropriates an additional $82 million to the DHP for COVID-19 testing, administration of the test, and related items and services outlined in FFCRA Section 6006(a). (For a summary of this section, see " Definitions of COVID-19 Testing and Related Services " and " Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians .") The additional funds are designated as emergency spending and are to remain available until September 30, 2022. Title IV: Department of Health and Human Services, Indian Health Service The IHS within HHS is the lead federal agency charged with improving the health of American Indians and Alaska Natives. In FY2019, IHS provided health care to approximately 2.6 million eligible American Indians/Alaska Natives. IHS's FY2020 appropriation was $6.1 billion, with $4.3 billion appropriated to the Indian Health Services account, which supports the provision of clinical services and public health activities. The services provided at IHS facilities vary, with some facilities providing inpatient services, laboratory testing services, and emergency care, while others focus on outpatient primary care services. IHS does not offer a standard benefit package, nor is it required to cover certain services within its facilities or when it authorizes payment for services to its beneficiaries outside of the IHS system (see " Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care "). FFCRA appropriates an additional $64 million for COVID-19 testing, administration of the test, and related items and services as specified in FFCRA Section 6007. (See " Definitions of COVID-19 Testing and Related Services " and " Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care .") The section also specifies that the additional funds are to be allocated at the discretion of the IHS director. The additional funds are designated as emergency spending and are to remain available until September 30, 2022. Title V. Department of Health and Human Services, Public Health and Social Services Emergency Fund There is no federal assistance program designed purposefully to pay the uncompensated costs of health care for the uninsured and underinsured necessitated by a public health emergency or disaster. In general, there has been no consensus that doing so should be a federal responsibility. Nonetheless, Congress has provided appropriations for several limited mechanisms to address uncompensated health care costs in response to previous incidents. The health care needs of uninsured and underinsured individuals and the financial pressures many individuals and their health care providers are facing during the COVID-19 outbreak have spurred congressional interest in these approaches. Among other forms of assistance, the CARES Act ( P.L. 116-136 ) appropriates a $100 billion "Provider Relief Fund" to assist health care facilities and providers facing revenue losses and uncompensated care as a result of the pandemic. FFCRA uses the National Disaster Medical System (NDMS) Definitive Care Reimbursement Program as the mechanism for federal payment for COVID-19 testing and related services for uninsured individuals. Historically, NDMS has paid for health care items and services at between 100% and 110% of the applicable Medicare rate, and the Centers for Medicare & Medicaid Services (CMS) has processed payments. To fund this approach, FFCRA provides $1 billion to the Public Health and Social Services Emergency Fund (PHSSEF), an account used in appropriations acts to provide the HHS Secretary with one-time or emergency funding, as well as annual funding for the office of the HHS Assistance Secretary for Preparedness and Response (ASPR). Covered COVID-19 testing, administration of the test, and related services are as defined in Subsection 6001(a) of the act. (See " Definitions of COVID-19 Testing and Related Services .") An uninsured individual is defined, for purposes of this section, as someone who is not enrolled in (1) a federal health care program, as defined; (2) a specified type of private health insurance plan; or (3) FEHB. (See " Definition of the Uninsured " for more information.) The additional funds are designated as emergency spending and are to remain available until expended. Title VI. Department of Veterans Affairs, Veterans Health Administration The Veterans Health Administration (VHA) of the Department of Veterans' Affairs (VA) provides health care to eligible veterans and their dependents who meet certain criteria as authorized by law. The VHA is funded through five appropriations accounts: (1) medical services, (2) medical community care, (3) medical support and compliance, (4) medical facilities, and (5) medical and prosthetic research. The first four accounts provide funding for medical care for veterans. FFCRA provides $60 million in supplemental appropriations for FY2020 to the VHA—$30 million for medical services and $30 million for medical community care—for COVID-19 testing, administration of the test, and related items and services for visits for veterans. (See " Definitions of COVID-19 Testing and Related Services " and " Veterans .") The additional funds are designated as emergency spending and are to remain available until September 30, 2022. Title VII. General Provisions, Division A This title provides a reporting requirement (Section 1701) which states that each amount appropriated or made available by Division A is in addition to amounts otherwise appropriated for the fiscal year involved (Section 1703), and that unless otherwise provided, appropriations in Division A are not available for obligation beyond FY2020 (Section 1704). Title VII also includes Section 1702. This section was repealed in its entirety by Section 18115 of the CARES Act ( P.L. 116-136 ), which replaced it with a requirement for all laboratories carrying out COVID-19 testing to report testing data to HHS, as specified. An explanation of the repealed provision is provided here, for completeness. Section 1702: Repealed Generally, laboratories report testing results for specified diseases and conditions (called notifiable conditions ) directly to state or territorial (jurisdictional) health departments, pursuant to requirements in jurisdictional law. Through its National Notifiable Diseases Surveillance System (NNDSS), the HHS Centers for Disease Control and Prevention (CDC) works with jurisdictions and the Council of State and Territorial Epidemiologists (CSTE) to track national notifiable conditions, mostly infectious diseases and some noninfectious conditions (e.g., lead poisoning). Usually, such data are provided to CDC voluntarily. COVID-19 is a reportable disease in all reporting jurisdictions, and CDC receives data on COVID-19 cases and laboratory test results through NNDSS from all jurisdictions, as well as directly from some commercial laboratories. In addition, the FDA often includes, as a condition of an Emergency Use Authorization (EUA), the requirement that laboratories carrying out the EUA test comply with all relevant state and local reporting requirements. FFCRA Section 1702 would have required all states and local governments receiving funding under Division A to report real-time and aggregated data on both testing (tests performed) and test results to the respective State Emergency Operations Center. These data would then have been transmitted to the CDC. Division F—Health Provisions This section describes all of the provisions included in FFCRA Division F. Some provisions described below have been amended by the CARES Act ; in such cases, foot n otes reference the relevant CRS expert who can answer questions about the amendment s . In some cases, the amendments made by the CARES Act are substantial, in which case, the footnote may also provide a brief description of the amendment . Section 6001. Coverage of Testing for COVID-19 Private health insurance is the predominant source of health insurance coverage in the United States. In general, consumers may obtain individual health insurance coverage directly from an insurer, or they may enroll in a group health plan through their employer or another sponsor . Group health plan sponsors may finance coverage themselves (self-insure) or purchase (fully insured) coverage from an insurer. Covered benefits and consumer costs may vary by plan, subject to applicable federal and state requirements. The federal government may regulate all the coverage types noted above, and states may regulate all but self-insured group plans. Federal and state requirements may vary by coverage type. Some federal requirements apply to all coverage types noted above, while other federal requirements only apply to certain coverage types. Prior to the enactment of FFCRA, there were no federal requirements specifically mandating private health insurance coverage of items or services related to COVID-19 testing. In recent weeks, some states have announced relevant coverage requirements, and some insurers have clarified or expanded their policies to include relevant coverage. FFCRA newly requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services (see " Definitions of COVID-19 Testing and Related Services "). The coverage must be provided without consumer cost-sharing, including deductibles, copayments, or coinsurance. Prior authorization or other utilization management requirements are prohibited. These requirements apply to individual health insurance coverage and to group plans, whether fully insured or self-insured. This includes plans sold on and off the individual and small group exchanges. Per the definition of individual health insurance coverage cited in the act, the requirements do not apply to short-term, limited-duration plans. The requirements do apply to grandfathered plans , which are individual or group plans in which at least one individual was enrolled as of enactment of the ACA (March 23, 2010), and that continue to meet certain criteria. Plans that maintain their grandfathered status are exempt from some federal requirements, but FFCRA specifies that Section 6001 applies to them. The coverage requirements in this act apply only to the specified items and services that are furnished during the emergency period described in the act (see " Duration of Emergency Period "), as of the date of enactment (March 18, 2020). Subsection (b) states that the Secretaries of HHS, Labor, and the Treasury are required to enforce this section's provisions as if the provisions were incorporated into the PHSA, Employee Retirement Income Security Act (ERISA), and Internal Revenue Code (IRC), respectively. Subsection (c) states that those Secretaries also have authority to implement the provisions of this section "through sub-regulatory guidance, program instruction, or otherwise." CBO preliminarily estimates that Section 6001 will decrease federal revenues by $4 million and increase federal outlays by $7 million over the FY2020–FY2022 period. Section 6002. Waiving Cost Sharing Under the Medicare Program for Certain Visits Relating to Testing for COVID-19 Medicare Part B covers physicians' services, outpatient hospital services, durable medical equipment, and other medical services. Most physicians, providers, and practitioners are subject to limits on amounts they can bill beneficiaries for covered services, and they can bill the beneficiary for only the 20% coinsurance of the Medicare payment rate plus any unmet deductible. Part B also covers outpatient clinical laboratory tests provided by Medicare-participating laboratories, such as certain blood tests, urinalysis, and some screening tests, including the test for the coronavirus that causes COVID-19. These services may be furnished by labs located in hospitals and physician offices, as well as by independent labs. Beneficiaries have no coinsurance, co-payments, or deductibles for covered clinical lab services. FFCRA eliminates the Medicare Part B beneficiary cost-sharing for provider visits during which a coronavirus diagnostic test is administered or ordered during the emergency period (see " Duration of Emergency Period "). Beneficiaries are not responsible for any coinsurance payments or deductibles for any specified COVID-19 testing-related service, defined as a medical visit that falls within the evaluation and management service codes for the following categories: office and other outpatient services; hospital observation services; emergency department services; nursing facility services; domiciliary, rest home, or custodial care services; home services; or online digital evaluation and management services. The elimination of beneficiary cost-sharing for COVID-19 testing-related services applies to Medicare payment under the hospital outpatient prospective payment system, the physician fee schedule, the prospective payment system for federally qualified health centers, the outpatient hospital system payment system, and the rural health clinic services payment system. The HHS Secretary is to provide appropriate claims coding modifiers to identify the services for which beneficiary cost-sharing is waived. The HHS Secretary is allowed to implement this section by program instruction or otherwise. CBO preliminarily estimates that enacting Sections 6002 and 6003 will increase direct spending by $6.7 billion over the FY2020-FY2022 period. Section 6003. Coverage of Testing for COVID-10 at No Cost Sharing Under the Medicare Advantage Program Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person monthly amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plan. In general, cost sharing (copayments and coinsurance) under an MA plan must be actuarially equivalent to cost sharing under original Medicare, but cost sharing for a specific item or service may vary from amounts required under original Medicare. Private plans may use different techniques to influence the medical care used by enrollees, such as requiring enrollees to receive a referral to see specialists, or requiring prior approval or authorization from the plan before a service will be paid for. FFCRA requires MA plans to cover COVID-19 testing, the administration of the test, and related items and services during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). Plans are prohibited from charging cost sharing for those items and services, and are prohibited from using prior authorization or other utilization management techniques, with respect to the coverage of the test or ancillary services. The HHS Secretary is allowed to implement this section by program instruction or otherwise. CBO preliminarily estimates that enacting Sections 6002 and 6003 will increase direct federal spending by $6.7 billion over the FY2020-FY2022 period. Section 6004. Coverage at No Cost Sharing Under Medicaid and CHIP Medicaid Background Medicaid is a federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population. Medicaid is financed jointly by the federal government and the states. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Medicaid coverage includes a variety of primary and acute-care services, as well as long-term services and supports (LTSS). Not all Medicaid enrollees have access to the same set of services. An enrollee's eligibility pathway determines the available services within a benefit package. Most Medicaid beneficiaries receive services in the form of what is called traditional Medicaid. In general, under traditional Medicaid coverage, state Medicaid programs must cover specific required services listed in statute (e.g., inpatient and outpatient hospital services, physician's services, or laboratory and x-ray services) and may elect to cover certain optional services (e.g., prescription drugs, case management, or physical therapy services). Under alternative benefit plans (ABPs), by contrast, states must provide comprehensive benefit coverage that is based on a coverage benchmark rather than a list of discrete items and services, as under traditional Medicaid. Coverage under an ABP must include at least the essential health benefits (EHBs) that most plans in the private health insurance market are required to furnish. States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage to the individuals eligible for Medicaid through the expansion (with exceptions for selected special-needs subgroups), and are permitted to extend such coverage to other groups. Beneficiary cost sharing (e.g., premiums and co-payments) is limited under the Medicaid program. States can require certain beneficiaries to share in the cost of Medicaid services, but there are limits on (1) the amounts that states can impose, (2) the beneficiary groups that can be required to pay, and (3) the services for which cost sharing can be charged. CHIP Background The State Children's Health Insurance Program (CHIP) is a federal-state program that provides health coverage to uninsured children and certain pregnant women with annual family income too high to qualify for Medicaid. CHIP is jointly financed by the federal government and states, and is administered by the states. Like Medicaid, the federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's framework. As a result, CHIP programs vary significantly from state to state. States may design their CHIP programs as (1) a CHIP Medicaid expansion, (2) a separate CHIP program, or (3) a combination approach, where the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. CHIP benefit coverage and cost-sharing rules depend on program design. CHIP Medicaid expansions must follow the federal Medicaid rules for benefits and cost sharing. For separate CHIP programs, the benefits are permitted to look more like private health insurance, and states may impose cost sharing, such as premiums or enrollment fees, with a maximum allowable amount that is tied to annual family income. Regardless of the choice of program design, all states must cover emergency services, well-baby and well-child care including age-appropriate immunizations, and dental services. FFCRA Provision FFCRA adds COVID-19 testing and related services the list of Medicaid mandatory services under traditional Medicaid benefits for the period beginning March 18, 2020, through the duration of the public health emergency as declared by the HHS Secretary pursuant to Section 319 of the PHSA (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). States and territories are prohibited from charging beneficiary cost sharing for such testing, or for testing-related state plan services furnished during this period. FFCRA also permits states to extend COVID-19 testing, testing-related state plan services, testing-related visit and the administration of the testing without cost sharing (as referenced earlier in this provision) to uninsured individuals during the specified public health emergency period. For the purposes of this provision, uninsured individuals are defined as those who are not Medicaid-eligible under one of Medicaid's mandatory eligibility pathways (e.g., the poverty-related pregnant women and child pathways, or the ACA Medicaid expansion pathway), and who are not enrolled in (1) a federal health care program (e.g., Medicare, Medicaid, CHIP, or TRICARE); (2) a specified type of private health insurance plan (e.g., individual health insurance coverage and group plans, whether fully insured or self-insured); or (3) FEHB (see " Definition of the Uninsured "). The law provides 100% federal medical assistance percentage (FMAP or federal matching rate) for medical assistance and administrative costs associated with uninsured individuals who are eligible for Medicaid under this provision. The law also requires CHIP programs (regardless of program design) to cover COVID-19 testing for CHIP enrollees for the period beginning March 18, 2020, through the duration of the public health emergency period as specified (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). States are prohibited from charging beneficiary cost sharing for such testing, or for testing-related visits furnished to CHIP enrollees during this period. CBO preliminarily estimates that Section 6004 will increase direct federal spending by a total of $1.9 billion in FY2020 and FY2021. Section 6005. Treatment of Personal Respiratory Protective Devices as Covered Countermeasures In 2005 Congress passed the Public Readiness and Emergency Preparedness Act (PREP Act), which authorizes the federal government to waive liability (except for willful misconduct) for manufacturers, distributors, and providers of medical countermeasures, such as drugs and medical supplies, that are needed to respond to a public health emergency. The act also authorizes the federal government to establish a program to compensate eligible individuals who suffer injuries from administration or use of products covered by the PREP Act's immunity provisions. FFCRA explicitly adds to the list of PREP Act-covered countermeasures any personal respiratory protective device that is (1) approved by the National Institute for Occupational Safety and Health (NIOSH); (2) subject to an emergency use authorization (EUA); and (3) used for the COVID-19 response, retroactive from January 27, 2020, and through October 1, 2024. The CARES Act, Section 3103, amends this provision to define a covered personal respiratory protective device as one that "is approved by [NIOSH], and that the Secretary determines to be a priority for use during a public health emergency declared under section 319." This amendment removes the requirement for an FDA authorization and extends PREP Act authority to these devices during both the COVID-19 emergency period and any future public health emergencies declared pursuant to PHSA Section 319. CBO did not provide an estimate of this provision. Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians TRICARE Under Chapter 55 of Title 10, U.S. Code , the Department of Defense administers a statutory health entitlement to approximately 9.5 million beneficiaries (i.e., servicemembers, military retirees, and family members). These entitlements are delivered through the Military Health System (MHS), which offers health care services in military hospitals and clinics—known as military treatment facilities—and through civilian health care providers participating in TRICARE. With the exception of active duty servicemembers, MHS beneficiaries may have a choice of TRICARE plan options depending on their status and geographic location. Each plan option has different beneficiary cost-sharing features, including annual enrollment fees, deductibles, copayments, and an annual catastrophic cap. FFCRA requires the Secretary of Defense to waive any TRICARE cost-sharing requirements related to COVID-19 testing, administration of the test, and related items and services provided during an associated health care office, urgent care, or emergency department visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). Veterans All veterans enrolled in the VA health care system are eligible for a standard medical package that includes laboratory services. Currently, some veterans are required to pay copayments for medical services and outpatient medications related to the treatment of a nonservice-connected condition. Any health service or medication provided in connection to the treatment of a service-connected condition or disability is always furnished without cost sharing. In addition, the VA does not charge copayments for preventive screenings, such as those for infectious diseases; cancers; heart and vascular diseases; mental health conditions and substance abuse; metabolic, obstetric, and gynecological conditions; and vision disorders, as well as regular recommended immunizations. Generally, laboratory services are also expressly exempt from copayment requirements. FFCRA requires the VA Secretary to waive any copayment or other cost-sharing requirements related to COVID-19 testing, administration of the test, and related items and services for visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). Federal Civilians The FEHB Program provides health insurance to federal employees, retirees, and their dependents. Cost-sharing requirements (e.g., deductibles, co-payments, and coinsurance amounts) vary by plans participating in the FEHB Program. For some services, such as the preventive care services outlined in the ACA, plans are not allowed to impose cost sharing. FFCRA requires that no federal civil servants enrolled in a health benefits plan or FEHB enrollees may be required to pay a copayment or other cost sharing related to COVID-19 testing, administration of the test, related items and services for visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care IHS provides health care to eligible American Indians/Alaska Natives either directly or through facilities and programs operated by Indian tribes or tribal organizations through self-determination contracts and self-governance compacts authorized in the Indian Self-Determination and Education Assistance Act (ISDEAA). IHS also provides services to urban Indians through grants or contracts to Urban Indian Organizations (UIOs). The services provided vary by facility, and IHS does not offer a standard benefit package, nor is it required to cover certain services that its beneficiaries may receive at facilities outside of IHS. When services are not available at an IHS facility, the IHS facilities may authorize payment through the Purchased Referred Care Program (PRC). Generally, PRC requires prior approval except in cases of emergency. PRC funds are limited, and as such, not all PRC claims are authorized and PRC is not available to UIOs. To be authorized, claims must meet medical priority levels, individuals must not be eligible for another source of coverage (e.g., Medicaid or private health insurance), and individuals must live in certain geographic areas. FFCRA requires IHS to pay for the cost of COVID-19 testing and related items and services, as described in Section 6001(a), without any cost-sharing requirements, from the date of enactment (i.e., March 18, 2020) throughout the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). This requirement applies to any Indian receiving services through the IHS including through UIOs. It also specifies that the requirement to waive cost-sharing requirements applies regardless of whether the testing and related services were authorized through PRC. Section 6008. Temporary Increase of Medicaid FMAP Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP) rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. In the past, there were two temporary FMAP exceptions to provide states with fiscal relief due to recessions. They were provided through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JRTRRA, P.L. 108-27 ) and the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). To be eligible for both of these temporary FMAP increases, states had to abide by some requirements. These requirements varied in the two FMAP increases, but for both increases, states were required to maintain Medicaid "eligibility standards, methodologies, and procedures" and ensure that local governments did not pay a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required. FFCRA provides an increase to the FMAP rate for all states, the District of Columbia, and the territories of 6.2 percentage points for each calendar quarter occurring during the period beginning on the first day of the emergency period (i.e., January 1, 2020) and ending on the last day of the calendar quarter in which the last day of the public health emergency period ends (see " Duration of Emergency Period "). States, the District of Columbia, and the territories will not receive this FMAP rate increase if (1) the state's Medicaid "eligibility standards, methodologies, or procedures" are more restrictive than what was in effect on January 1, 2020; (2) the amount of premiums imposed by the state exceeds the amount as of January 1, 2020; (3) the state does not maintain eligibility for individuals enrolled in Medicaid on the date of enactment (i.e., March 18, 2020) or for individuals who enroll during the emergency period through the end of the month in which the emergency period ends (unless the individual requests a voluntary termination of eligibility or the individual ceases to be a resident of the state); or (4) the state does not provide coverage (without the imposition of cost sharing) for any testing services and treatments for COVID-19 (including vaccines, specialized equipment, and therapies). FFCRA adds another condition for the FMAP rate increase. Specifically, states, the District of Columbia, and the territories cannot require local governments to fund a larger percentage of the state's nonfederal Medicaid expenditures for the Medicaid state plan or Medicaid disproportionate share hospital (DSH) payments than what was required on March 11, 2020. CBO preliminarily estimates that Section 6008 will increase direct spending by about $50.0 billion over the FY2020-FY2022 period. Section 6009. Increase in Medicaid Allotments for Territories Medicaid financing for the territories (i.e., America Samoa, Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands) is different than the financing for the 50 states and the District of Columbia. Federal Medicaid funding to the states and the District of Columbia is open-ended, but the Medicaid programs in the territories are subject to annual federal capped funding. Federal Medicaid funding for the territories comes from different sources. The permanent source of federal Medicaid funding for the territories is the annual capped funding. Currently, the Medicaid annual capped funding for the territories is supplemented by additional funding for FY2020 and FY2021 that was provided through the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). FFCRA increases the additional funding available for each territory for FY2020 and FY2021. The aggregate additional funding for the territories increases from $3.0 billion to $3.1 billion for FY2020 and $3.1 billion to $3.2 billion for FY2021. CBO preliminarily estimates that Section 6009 increases the allotment amount, and thus direct spending, by $204 million over the FY2020-FY2021 period. Section 6010. Clarification Relating to Secretarial Authority Regarding Medicare Telehealth Services Furnished During COVID-19 Emergency Periods Medicare coverage under Part B (fee-for-service) for telehealth services is defined under SSA Sec. 1834(m), which places certain conditions on such care including who can furnish and be paid for the service, where the patient is located (the originating site), where the physician is located (the distant site), and the types of services that are covered. Recent legislation has modified some of the conditions under which telehealth services may be furnished under Medicare. The Coronavirus Preparedness and Response Supplemental Appropriations Act ( P.L. 116-123 ), Division B, Sec. 102, added certain Medicare telehealth restrictions to the list of applicable conditions for which the Secretary could temporarily waive or modify program requirements or regulations during the COVID-19 emergency period. (See " Duration of Emergency Period ".) The provision also defined a qualified telehealth provider, requiring a prior relationship within the past three years between the patient and the provider under Medicare. FFCRA expands the definition of a qualified provider to include those who had provider-patient relationships within the past three years outside of Medicare. Appendix. CRS Experts and Contact Information Below is a list of the health care provisions in FFCRA with the name and contact information for the CRS expert on that provision. In some cases, more than one expert contributed to a section, in which case their topics of expertise are also included.

The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with case counts growing daily. Containment and mitigation efforts by federal, state, and local governments have been undertaken to "flatten the curve"—that is, to slow widespread transmission that could overwhelm the nation's health care system. The Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ) was enacted on March 18, 2020. It is the second of three comprehensive laws enacted in March specifically to support the response to the pandemic. The FFCRA, among other things, increases appropriations to the Department of Defense, the Indian Health Service, the Department of Health and Human Services Public Health and Social Services Emergency Fund, and the Veterans Health Administration for testing and ancillary services associated with the SARS-Co V-2 virus, that virus that causes COVID-19 disease. Beginning on the date of enactment through any portion of the COVID-19 public health emergency (declared pursuant to Section 319 of the Public Health Service Act), the FFCRA provides payment for or requires coverage of testing for the COVID-19 virus, and items and services associated with such testing, such as supplies and office visits, without any cost sharing, for individuals who are covered under Medicare, including Medicare Advantage, traditional Medicaid, CHIP, TRICARE, Veterans healthcare, the Federal Employees Health Benefits (FEHB) Program, most types of private health insurance plans, the Indian Health Service, and individuals who are uninsured (as defined under FFCRA). It prohibits private health insurance plans and Medicare Advantage plans from employing utilization management tools, such as prior authorization, for the COVID-19 test, or the visit to furnish it. In addition, FFCRA provides for an increase to all states, the District of Columbia, and territories in the share of Medicaid expenditures financed by the federal government, subject to specific requirements. It provides additional Medicaid funding to territories. FFCRA modifies requirements related to waiving certain Medicare telehealth restrictions during the emergency. Finally, FFCRA waives liability, with a narrow exception, for manufacturers, distributors, or providers of specified respiratory protective devices used for COVID-19 response.

GAO_GAO-19-430

Background Private Student Loan Market Private student loans are not guaranteed by the federal government. Generally, private lenders underwrite the loans based on the borrower’s credit history and ability to repay, and they often require a cosigner. Private student loans generally carry a market interest rate, which can be a variable rate that is higher than that of federal student loans. As of September 30, 2018, five banks held almost half of all private student loan balances. Other private student loan lenders include credit unions and nonbanks: Credit unions originate private student loans either directly or indirectly through a third party. Nonbanks include both for-profit nonbank lenders and nonbank state lenders. For-profit nonbank lenders can originate, service, refinance, and purchase loans. Nonbank state lenders promote affordable access to education by generally offering low, fixed-rate interest rates and low or no origination fees on student loans. As of September 2018, outstanding private student loan balances made up about 8 percent of the $1.56 trillion in total outstanding student loans (see fig. 1). The volume of new private student loans originated has fluctuated, representing about 25 percent of all student loans originated in academic year 2007–2008, 7 percent in 2010–2011 (after the financial crisis), and 11 percent in 2017–2018. Consumer Reporting for Private Student Loans FCRA, the primary federal statute that governs consumer reporting, is designed to promote the accuracy, fairness, and privacy of information in the files of CRAs. FCRA, and its implementing regulation, Regulation V, govern the compilation, maintenance, furnishing, use, and disclosure of consumer report information for credit, insurance, employment, and other eligibility decisions made about consumers. The consumer reporting market includes the following entities: CRAs assemble or evaluate consumer credit information or other consumer information for the purpose of producing consumer reports (commonly known as credit reports). Equifax, Experian, and TransUnion are the three nationwide CRAs. Data furnishers report information about consumers’ financial behavior, such as repayment histories, to CRAs. Data furnishers include credit providers (such as private student loan lenders), utilities, and debt collection agencies. Credit report users include banks, employers, and others that use credit reports to make decisions on an individual’s eligibility for products and services such as credit, employment, housing, and insurance. FCRA imposes duties on data furnishers with respect to the accuracy of the data they furnish. Data furnishers are required to, among other things, refrain from providing CRAs with information they know or have reasonable cause to believe is inaccurate and develop reasonable written policies and procedures regarding the accuracy of the information they furnish. The Act entitles financial institutions that choose to offer a private student loan rehabilitation program that meets the Act’s requirements a safe harbor from potential inaccurate information claims under FCRA related to the removal of the private student loan default from a credit report. To assist data furnishers in complying with their responsibilities under FCRA, the credit reporting industry has adopted a standard electronic data-reporting format called the Metro 2® Format. This format includes standards on how and what information furnishers should report to CRAs on private student loans. The information that private student loan lenders furnish to CRAs on their borrowers includes consumer identification; account number; date of last payment; account status, such as in deferment, current, or delinquent (including how many days past due); and, if appropriate, information indicating defaults. An account becomes delinquent on the day after the due date of a payment when the borrower fails to make a full payment. Private student loan lenders’ policies and terms of loan contracts generally determine when a private student loan is in default. While private student loan lenders may differ in their definitions of what constitutes a default, federal banking regulator policy states that closed- end retail loans (which include private student loans) that become past due 120 cumulative days from the contractual due date should be classified as a loss and “charged off.” Private student loan lenders can indicate that a loan is in default and they do not anticipate being able to recover losses on it by reporting to CRAs one of a number of Metro 2® Format status codes. Participation in a private student loan rehabilitation program entitles borrowers who successfully complete the program to request that the indicator of a student loan default be removed from their credit report, but the delinquencies leading up to the default would remain on the credit report. Figure 2 shows an example of credit reporting for a borrower who defaults on a private student loan and completes a rehabilitation program. Credit Scoring A credit score is a measure that credit providers use to predict financial behaviors and is typically computed using information from consumer credit reports. Credit scores can help predict the likelihood that a borrower may default on a loan, file an insurance claim, overdraw a bank account, or not pay a utility bill. FICO and VantageScore are the two firms that develop credit score models with nationwide coverage. FICO develops credit score models for distribution by each of the three nationwide CRAs, whereas VantageScore’s models are developed across the three CRAs resulting in a single consistent algorithm to assess risk. FICO and VantageScore each have their own proprietary statistical credit score models that choose which consumer information to include in calculations and how to weigh that information. The three nationwide CRAs also develop credit score models derived from their own data. There are different types of credit scores, including generic, industry- specific, and custom. Generic scores are based on a representative sample of all individuals in a CRA’s records, and the information used to predict repayment is limited to the information in consumer credit records. Generic scores are designed to predict the likelihood of a borrower not paying as agreed in the future on any type of credit obligation. Both FICO and VantageScore develop generic credit scores. FICO and VantageScore generic scores generally use a range from 300 to 850, with higher numbers representing lower credit risk. For example, VantageScore classifies borrowers in the following categories: subprime (those with a VantageScore of 300–600), near prime (601–660), prime (661–780), and super prime (781–850). A prime borrower is someone who is considered a low-risk borrower and likely to make loan payments on time and repay the loan in full, whereas a subprime borrower has a tarnished or limited credit history. FICO and VantageScore generic scores generally use similar elements in determining a borrower’s credit score, including a borrower’s payment history, the amounts owed on credit accounts, the length of credit history and types of credit, and the number of recently opened credit accounts and credit inquiries. FICO has developed industry-specific scores for the mortgage, automobile finance, and credit card industries. These scores are designed to predict the likelihood of not paying as agreed in the future on these specific types of credit. In addition, credit providers sometimes use custom credit scores instead of, or in addition to, generic credit scores. Credit providers derive custom scores from credit reports and other information, such as account history, from the lender’s own portfolio. The scores can be developed internally by credit providers or with the assistance of external parties such as FICO or the three nationwide CRAs. Federal Oversight of Private Student Loans CFPB has supervisory authority over certain private student loan lenders, including banks and credit unions with over $10 billion in assets and all nonbanks, for compliance with Federal consumer financial laws. CFPB also has supervisory authority over the largest CRAs and many of the entities that furnish information about consumers’ financial behavior to CRAs. To assess compliance with Federal consumer financial laws, CFPB conducts compliance examinations. According to CFPB, because of its mission and statutory requirement regarding nonbank supervision, it prioritizes its examinations by focusing on risks to consumers rather than risks to institutions. Given the large number, size, and complexity of the entities under its authority, CFPB prioritizes its examinations by focusing on individual product lines rather than all of an institution’s products and services. CFPB also has enforcement authority under FCRA regarding certain banks, credit unions, and nonbanks and broad authority to promulgate rules to carry out the purposes of FCRA. The prudential regulators—FDIC, Federal Reserve, NCUA, and OCC— oversee all banks and most credit unions that offer private student loans. Their oversight includes routine safety and soundness examinations for all regulated entities. These examinations may include a review of operations, including policies, procedures, and practices, to ensure that private student loans are not posing a risk to the entities’ safety and soundness. Prudential regulators also have supervisory authority for FCRA compliance for banks and certain credit unions with $10 billion or less in assets. No Banks Are Offering Rehabilitation Programs, and Authority Is Unclear for Other Lenders Banks and Credit Unions Are Not Offering Rehabilitation Programs, but Federal Banking Regulators Have Established Approval Processes As of January 2019, none of the five banks with the largest private student loan portfolios that we contacted offered rehabilitation programs for defaulted private student loans. In addition, officials from the federal banking regulators told us that as of March 2019, no banks had submitted applications to have rehabilitation programs approved. Representatives from three of the five banks we contacted told us they had decided not to offer a rehabilitation program, and the other two had not yet made a final determination. Representatives from these five banks provided several reasons they were not offering rehabilitation programs for private student loans. Low delinquency and default rates. All five banks’ representatives stated that they had low default rates for private student loans, so the demand for these programs would be low for each bank. Availability of predefault payment programs. Representatives of all five banks said they already offer alternative payment programs, such as forbearance, to help prevent defaults, and two of them explicitly noted this as a reason that a rehabilitation program was unnecessary. Operational uncertainties. Most of the banks’ representatives were not sure how they would operationalize rehabilitation programs. One bank’s representatives said that they sell defaulted loans to debt purchasers and that it would be difficult to offer rehabilitation programs for loans that had been sold. Representatives of two other banks said that the banks’ systems are not able to change the status of a loan once it has defaulted, so they were not certain how their systems would track rehabilitated loans. Another bank’s representatives said that they did not know how rehabilitated loans would be included for accounting purposes in developing their financial statements. Reduced borrower incentives to avoid default. Representatives from two banks said they believed the option to rehabilitate a defaulted loan might reduce borrowers’ incentives to avoid default or to enter a repayment program before default. Risk of compliance violations. One bank representative said a rehabilitation program could put the bank at risk for violations of unfair and deceptive acts and practices if borrowers misunderstood or misinterpreted how much the program would improve their credit scores. Representatives from this bank and another explained that they did not know how much the program would improve credit scores, limiting their ability to describe the program’s benefit to borrowers. Representatives from three of these banks and other organizations, however, noted that there could be advantages for banks to offer private student loan rehabilitation programs. Representatives from the banks said these programs could help banks recover some nonperforming debt, and one of these representatives stated the program could be marketed to borrowers as a benefit offered by the bank. A representative of a consumer advocacy group said a rehabilitation program could improve a bank’s reputation by distinguishing the bank from peer institutions that do not offer rehabilitation for private student loans. Because NCUA is not one of the federal banking regulators by statutory definition, officials said the Act does not require credit unions to seek approval from the agency before offering a rehabilitation program. NCUA officials told us examiners would likely review private student loan rehabilitation programs for the credit unions that choose to offer them as part of normal safety and soundness examinations. The two credit unions we spoke with—which are among the largest credit union providers of private student loans—told us they do not plan to offer rehabilitation programs. One of these credit unions cited reasons similar to those offered by banks, including a low private student loan default rate that suggested there would be a lack of demand for a rehabilitation program. The other credit union explained that it was worried about the effect of removing defaults from credit reports on its ability to make sound lending decisions. NCUA officials also noted that as of January 2019, they had not received any inquiries from credit unions about these programs. OCC, FDIC, and the Federal Reserve have issued information regarding the availability of private student loan rehabilitation programs to their regulated entities, including how they would review applications. In doing so, the agencies informally coordinated to ensure that the statements issued would contain similar information on rehabilitation programs. The three agencies’ statements explained that their regulated entities must receive written approval to begin a program and that the relevant agency would provide feedback or notify them of its decision within 120 days of receiving a written application. The agencies will review the proposed program to ensure that it requires borrowers to make a minimum number of consecutive, on-time, monthly payments that demonstrate renewed ability and willingness to repay the loan. Uncertainty Exists about Nonbank Lenders’ Authority and What Information Should Be Removed from a Credit Report Uncertainty exists regarding two issues with private student loan rehabilitation programs. First, some nonbank private student loan lenders are not certain that they have the authority to implement these programs. Second, the Act does not explain what constitutes a “default” for the purposes of removing information from credit reports. Uncertainty about Nonbank State Lenders’ Authorities With regard to nonbank state lenders, uncertainty exists about their authority under FCRA to offer private student loan rehabilitation programs that include removing information from credit reports. As discussed previously, for financial institutions such as banks and credit unions, the Act provides an explicit safe harbor to request removal of a private student loan default from a borrower’s credit report and remain in compliance with FCRA. However, the Act does not specify that for-profit nonbank lenders and nonbank state lenders have this same authority. Representatives of the five nonbank state lenders we spoke with had different interpretations of their authority to offer rehabilitation programs. At least two nonbank state lenders currently offer rehabilitation programs, and their representatives told us they believed they have the authority to do so. Another nonbank state lender told us its state has legislation pending to implement such a program. In contrast, representatives of two other nonbank state lenders told us they were interested in offering a rehabilitation program but did not think that they had the authority to do so. In addition, representatives from a trade association that represents nonbank state lenders noted that confusion exists among some of their members and they are seeking a way to obtain explicit authority for nonbank lenders to offer rehabilitation programs for their private student loans. Two trade associations that represent nonbank state lenders also told us that some of their members would be interested in offering these programs if it was made explicit that they were allowed to do so. CFPB officials told us the agency has not made any determination on whether it plans to clarify for nonbanks—including for-profit nonbank lenders and nonbank state lenders—if they have the authority under FCRA to have private student loan defaults removed from credit reports for borrowers who have completed a rehabilitation program. CFPB officials said that the agency does not approve or prevent its regulated entities from offering any type of program or product. Unlike for the federal banking regulators, the Act did not require CFPB to approve rehabilitation programs offered by the entities it regulates. However, CFPB does have general FCRA rulemaking authority. It generally also has FCRA enforcement and supervisory responsibilities over its regulated entities, which includes certain entities that originate private student loans. This authority allows the agency to provide written clarification of provisions or define terms as needed. As a result, CFPB could play a role in clarifying for nonbanks whether they are authorized under FCRA to offer private student loan rehabilitation programs. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. Without clarification from CFPB on nonbanks’ authority to offer private student loan rehabilitation programs that allow them to delete information from the borrower’s credit report, there will continue to be a lack of clarity on this issue among these entities. Providing such clarity could—depending on CFPB’s interpretation—result in additional lenders offering rehabilitation programs that would allow more borrowers the opportunity to participate, or it could help ensure that only those entities CFPB has interpreted as being eligible to offer programs are doing so. No Standard for What Constitutes a “Default” Statutory changes made to FCRA by the Act do not explain what information on a consumer’s credit report constitutes a private student loan “default” that may be removed when a borrower successfully completes a rehabilitation program. According to the three nationwide CRAs and a credit reporting trade association, the term “default” is not used in credit reporting for private student loans. As discussed previously, private student loan lenders use one of a number of Metro 2® Format status codes to indicate that a loan is in default (i.e., they do not anticipate being able to recover losses on the loan). Representatives of the CRAs and a credit reporting trade association said that private student loan lenders will need to make their own interpretation of what information constitutes a default for the purposes of removing information from a credit report following successful completion of a private student loan rehabilitation program. The statements issued by FDIC, the Federal Reserve, and OCC on rehabilitation programs do not explain what information constitutes a private student loan “default” that may be removed from borrowers’ credit reports upon successful completion of a rehabilitation program. Officials from FDIC, the Federal Reserve, and OCC explained that they do not have the authority to interpret what constitutes a private student loan default on credit reports because the responsibilities for interpreting FCRA fall under CFPB. CFPB officials told us they are monitoring the issue but have not yet determined if there is a need to address it. Given CFPB’s rulemaking authority for FCRA, it could clarify the term “default” for private student loan lenders. In doing so, CFPB could obtain insight from the prudential regulators and relevant industry groups on how private student loan lenders currently report private student loan defaults on credit reports and on how to develop a consistent standard for what information may be removed. According to federal internal control standards, management should externally communicate the necessary quality information to achieve objectives. This can include obtaining quality information from external parties, such as other regulators and relevant industry groups. Without clarification from CFPB, there may be differences among private student loan lenders in what information they determine constitutes a “default” and may be removed from a credit report. Variations in lenders’ interpretations could have different effects on borrowers’ credit scores and credit records, resulting in different treatment of borrowers by credit providers. This could affect borrowers’ access to credit or the terms of credit offered, such as interest rates or the size of down payments required on a variety of consumer loans. In addition, as mentioned previously, the credit reporting industry follows a standard reporting format to help ensure the most accurate credit reporting information possible. Without clarification on what information may be removed from credit reports following successful completion of rehabilitation programs, differences in lenders’ interpretation could introduce inconsistencies in credit reporting data that may affect their accuracy. Private Student Loan Rehabilitation Programs Would Likely Pose Minimal Risks to Financial Institutions Programs Are Expected to Pose Little Safety and Soundness Risk for Banks and Credit Unions Rehabilitation programs for private student loans are expected to pose minimal additional risk to banks’ and credit unions’ safety and soundness. Prudential regulators require that banks and credit unions underwrite student loans to mitigate risks and ensure sound lending practices, and OCC guidance specifies that underwriting practices should minimize the occurrence of defaults and the need for repayment assistance. Lenders generally use underwriting criteria based on borrowers’ credit information to recognize and account for risks associated with private student loans. According to officials from OCC, FDIC, and the Federal Reserve and representatives from the major bank and credit union private student loan lenders we spoke with, lenders participating in private student loan rehabilitation programs would face minimal additional risks for several reasons: Loans are already classified as a loss. Loans entering a rehabilitation program are likely to be 120 days past due and to have been charged off, and thus they would have already been classified as a loss by banks and credit unions. OCC officials told us a program to rehabilitate these loans would, therefore, pose no additional risks to the safety and soundness of institutions that offer them. Default rates are low, and loans typically use cosigners. Representatives from the five major banks and two credit unions told us that private student loans generally perform well and have low rates of delinquencies and defaults. Aggregate data on the majority of outstanding loan balances show that the default rate for private student loans was below 3 percent from the second quarter of 2014 through the third quarter of 2018. Lenders also generally require borrowers of private student loans to have cosigners—someone who is liable to make payments on the loan should the student borrower default—which helps reduce the risk of the loan not being repaid. Since the academic year 2010–2011, the rate of undergraduate private student loan borrowers with cosigners has exceeded 90 percent. Private student loan portfolios are generally small. Private student loans make up a small portion of the overall loan portfolios for most of the banks and credit unions we spoke with. For four of the five major banks with the largest portfolios of private student loans, these constituted between about 2 percent to 11 percent of their total loan portfolio in 2017. The fifth bank’s entire portfolio was education financing, with private student loans accounting for about 93 percent of its 2017 portfolio. For the two credit unions we contacted, private student loans constituted about 2 percent and 6 percent of their total assets in 2018. Private student loan rehabilitation programs may create certain operational costs for banks or credit unions that offer them. However, no representatives of the five banks and two credit unions with whom we spoke were able to provide a cost estimate since none had yet designed or implemented such a program. Representatives from four banks and one credit union we spoke with said that potential costs to implement a rehabilitation program would be associated with information technology systems, designing and developing new systems to manage the program, increased human resource needs, additional communications with borrowers, credit reporting, compliance, monitoring, risk management, and any related legal fees. In addition, like any other type of consumer loan, banks and credit unions could face potential risks with private student loan rehabilitation programs, including operational, compliance, or reputational risks. For example, a representative of one bank cited operational risks such as those that could stem from errors in credit reporting or inadequate collection practices for rehabilitated private student loans. Rehabilitation Programs Are Expected to Have Little Effect on Financial Institutions’ Ability to Make Prudent Lending Decisions One concern about removing information from credit reports—as authorized in connection with the Act’s loan rehabilitation programs—is that it could degrade the quality of the credit information that credit providers use to assess the creditworthiness of potential borrowers. However, the removal of defaults from credit reports resulting from loan rehabilitation programs is unlikely to affect financial institutions’ ability to make sound lending decisions, according to prudential regulator officials and representatives from three private student lenders and three other credit providers with whom we spoke. OCC and FDIC officials and representatives from two of these private student lenders noted that because rehabilitation programs leave the delinquencies leading up to the default on borrowers’ credit reports, lenders would still be able to adequately assess borrower risk. In addition, representatives from one automobile lender and one mortgage lender said that over time, the methods they use to assess creditworthiness would be able to detect whether rehabilitated private student loans were affecting their ability to identify risk patterns in credit information and they could adjust the methods accordingly. Representatives from the Federal Reserve provided three additional reasons why they expected that rehabilitation programs would have little effect on banks’ and credit unions’ lending decisions. First, under the statutory requirement for private student loan rehabilitation, removal of a default from a borrower’s credit report can only occur once per loan. A single default removal would be unlikely to distort the accuracy of credit reporting in general. Second, they said that borrowers who have successfully completed a rehabilitation program by making consecutive on-time payments have demonstrated a proven repayment record, and therefore they likely represent a better credit risk. Finally, because participation in the private student loan rehabilitation program is expected to be low, its effect on the soundness of financial institutions’ lending decisions is expected to be minimal. Private Student Loan Rehabilitation Programs Would Likely Result In Minimal Improvements in Borrowers’ Access to Credit Effect of Rehabilitation Programs on Most Borrowers’ Access to Credit Would Likely Be Small The effects of private student loan rehabilitation programs on most borrowers’ access to credit would likely be minimal. A simulation conducted by VantageScore found that removing a student loan default increased a borrower’s credit score by 8 points, on average. An 8 point rise in a borrower’s credit score within VantageScore’s range of 300 to 850 represents only a very small improvement to that borrower’s creditworthiness. Therefore, most borrowers who successfully completed a private student loan rehabilitation program would likely see minimal improvement in their access to credit, particularly for credit where the decision-making is based solely on generic credit scores. Factors Credit Providers Consider Prior to Lending Credit providers assess a borrower’s creditworthiness based on several factors, including the following: Generic credit scores: Credit providers can rely solely on generic credit scores, such as those developed by Fair Isaac Corporation and VantageScore Solutions, LLC, to make lending decisions. Credit providers generally do not provide credit to borrowers whose scores do not meet a minimum threshold. Industry-specific credit scores: Certain types of credit providers, such as mortgage lenders, automobile loan lenders, and credit card issuers, may use industry-specific credit scores rather than generic credit scores to make lending decisions. This is because these scores may help them better predict lending risks specific to their industry. Internal credit reviews: Credit providers can customize methods unique to their institution that review different aspects of borrowers’ credit information, such as debt-to-income ratios, employment history, and borrowers’ existing relationships with the institution. Credit providers may also develop custom credit scores that are tailored to their specific needs and include factors they have deemed important in predicting risks of nonpayment. Credit providers incorporate their own internal data in these scores as well as information contained in borrowers’ credit reports. The effect of a rehabilitation program on credit scores will likely be somewhat greater for borrowers with lower credit scores, and smaller for borrowers with higher credit scores. For example, the VantageScore simulation suggests that borrowers in the subprime range (with scores of 300–600) could see score increases of 11 points, on average, while borrowers in the prime (661–780) and super prime (781–850) ranges could see increases of less than 1 point, on average (see fig. 3). The effect of removing a default from a credit report varies among borrowers because a credit score is influenced by other information in a borrower’s credit report, such as other outstanding derogatory credit markers, the length of time since the default, and other types of outstanding loans. Reasons that removing a student loan default may improve a borrower’s credit score and access to credit only minimally include the following: Delinquencies remain in the credit report. A key reason that removing a student loan default has a small effect on a credit score, according to VantageScore officials, is that the delinquencies leading to that default remain in the credit report for borrowers who successfully complete rehabilitation programs. Adding a delinquency in the simulation decreased a credit score by 61 points, on average. Thus, the simulation suggests that the increase in a credit score from removing a student loan default is not as substantial as the decrease from adding the initial delinquency. Credit scoring treats student loans differently. Some credit score models place less emphasis on student loans than on other types of consumer loans in predicting the risk of nonpayment. One credit scoring firm and two CRAs we spoke with said that student loans have a lower weight than other types of consumer loans in their generic credit scoring algorithms. They explained that there are fewer student loans than other types of consumer loans in the sample they use to develop the score, and student debt has proved to be less important statistically at predicting credit risk in their models. Student loans also may have less weight in predicting defaults in industry- specific or custom models of scores. A representative of one credit scoring firm said the algorithm for an industry-specific credit score that predicts the risk of nonpayment on a credit card may place less emphasis on a student loan than the algorithm for a generic credit score that is meant to predict risk more broadly. Further, CRA officials we spoke with said that because their custom credit scoring models are specific to clients’ needs, the models may not include student loans as a predictor of default at all, or they may place greater emphasis on student loans, depending on the clients’ needs. Borrowers in default typically already have poor credit. Borrowers who complete a rehabilitation program have a high likelihood of having other derogatory credit items in their credit report, in addition to the student loan delinquencies that led to the default, according to a study conducted by a research organization, several CRAs, and one credit provider with whom we spoke. The VantageScore simulation also showed that borrowers who had at least one student loan delinquency or default in their credit profile had an average of five derogatory credit items in their profile. Because student loan defaults and student loan delinquencies are both negative credit events that affect credit providers’ credit assessment methods, the removal of one student loan default from a borrower’s credit report likely will not make a large difference in how credit providers evaluate the borrower. Programs May Hold Additional Benefits as Well as Disadvantages for Borrowers Consumer advocates and academic studies cited potential benefits of rehabilitation programs apart from their effect on credit scores and access to credit: Borrowers defaulting on private student loans issued by nonbank state lenders could have wage garnishments stopped after successfully completing a rehabilitation program. Rehabilitation would stop debt collection efforts against a private student loan borrower. Participating in a loan modification program for one loan may help borrowers better meet their other loan obligations, according to studies we reviewed. For example, one study found that participation in mortgage modification programs was associated with lower delinquency rates on nonmortgage loans. However, programs may also have some disadvantages or pose challenges to borrowers, according to representatives from consumer advocacy groups and academic sources: A rehabilitation program may restart the statute of limitations on loan collections, according to representatives of consumer advocacy groups. Borrowers who redefault following entry into a rehabilitation program near the end of the statute of limitations on their debt could have collection efforts extended on these loans. Programs may extend adverse credit reporting. Generally, negative credit information stays on consumer reports for 7 or 10 years; therefore, depending on when a borrower enters into a rehabilitation program, a payment on the loan might prolong the adverse credit reporting for that account. The lack of income-driven repayment programs offered to borrowers in the private student loan market means that borrowers who complete rehabilitation programs may have a high likelihood of redefaulting on their loans. Because removing adverse information from credit reports does not change a borrower’s underlying creditworthiness, improved credit scores and access to credit may cause borrowers to borrow too much relative to their ability and willingness to pay. For example, one study found that for consumers who had filed for bankruptcy, their FICO scores and credit lines increased within the first year after the bankruptcy was removed from their credit report. However, the study found the initial credit score increase had disappeared by about 18 months after the bankruptcy was removed and that debt and delinquency were higher than expected, increasing the probability of a future default. Conclusions Private student loan rehabilitation programs can provide an opportunity for private student loan borrowers to help repair their credit reports. However, some nonbank state lenders have different interpretations of whether FCRA authorizes them to offer such programs. During our review, CFPB had not determined if it would clarify these uncertainties for nonbank state lenders and other nonbank private student loan lenders. Providing such clarity could—depending on CFPB’s interpretation—result in additional lenders offering rehabilitation (allowing more borrowers the opportunity to participate), or help to ensure that only entities deemed eligible by CFPB to offer programs are doing so. In addition, the Act does not explain what information on a consumer’s credit report constitutes a private student loan “default” that may be removed following the successful completion of a private student loan rehabilitation program. Without clarification from CFPB—after consulting with the prudential regulators and relevant industry groups—on what information in a credit report constitutes a private student loan default that may be removed, lenders may be inconsistent in the credit report information they remove. As a result, variations in lenders’ interpretations could have different effects on borrowers’ credit scores and credit records, which could affect how they are treated by credit providers and could also result in inconsistencies that affect the accuracy of credit reporting data. Recommendations for Executive Action We are making the following two recommendations to CFPB: The Director of CFPB should provide written clarification to nonbank private student loan lenders on their authorities under FCRA to offer private student loan rehabilitation programs that include removing information from credit reports. (Recommendation 1) The Director of CFPB, after consulting with the prudential regulators and relevant industry groups, should provide written clarification on what information in a consumer’s credit report constitutes a private student loan reported “default” that may be removed after successful completion of a private student loan rehabilitation program. (Recommendation 2) Agency Comments and Our Evaluation We provided a draft copy of this report to CFPB, the Department of Education, FDIC, the Federal Reserve, the Federal Trade Commission, NCUA, OCC, and the Department of the Treasury for review and comment. We also provided FICO and VantageScore excerpts of the draft report for review and comment. CFPB and NCUA provided written comments, which have been reproduced in appendixes II and III, respectively. FDIC, the Federal Trade Commission, OCC, and the Department of the Treasury provided technical comments on the draft report, which we have incorporated, as appropriate. The Department of Education and the Federal Reserve did not provide any comments on the draft of this report. FICO and VantageScore provided technical comments, which we have incorporated, as appropriate. In its written response, CFPB stated that it does not plan to act on our first recommendation to provide written clarification to nonbank private student loan lenders on their authorities under FCRA to offer private student loan rehabilitation programs. CFPB stated—and we agree—that the Act does not regulate the authority of private student loan lenders that are not included in FCRA’s definition of a “financial institution,” nor direct financial institutions that are not supervised by a federal banking agency to seek CFPB’s approval concerning the terms and conditions of rehabilitation programs. However, CFPB’s written response does not discuss the authority of private student loan lenders that potentially fall outside FCRA’s definition of a financial institution to offer rehabilitation programs that include removing information from credit reports. As we discuss in the report, uncertainty exists among nonbank private student loan lenders regarding their authority to implement such programs. We maintain that although the Act does not require CFPB to act on this issue, CFPB could play a role in clarifying whether FCRA authorizes nonbanks to offer rehabilitation programs that enable the lender to obtain legal protection for removal of default information from a credit report. CFPB intervention is warranted given the lack of clarity in the private student lending industry and is consistent with CFPB’s supervisory authority over nonbank financial institutions and its FCRA enforcement and rulemaking authorities. We do not suggest that CFPB play a role in approving rehabilitation programs. As we note in the report, clarification of nonbanks’ authorities could result in additional lenders offering rehabilitation programs and providing more consistent opportunities for private student loan borrowers, or it could help ensure that only those entities authorized to offer programs are doing so. With respect to our second recommendation on providing written clarification on what information in a consumer’s credit report constitutes a private student loan reported default that may be removed after successful completion of a private student loan rehabilitation program, CFPB’s letter states that such clarification is premature because of ongoing work by the Consumer Data Industry Association. The letter states that after that work is completed, CFPB will consult with the relevant regulators and other interested parties to determine if additional guidance or clarification is needed. As we stated in the report, we are aware of the work of the Consumer Data Industry Association to update the credit reporting guidelines for private student loans. We maintain that this work presents a good opportunity for CFPB to participate in these discussions and to work in conjunction with the industry and other relevant regulators to help alleviate any contradiction between what CFPB would determine in isolation from any determination made by industry. Further, such participation would allow CFPB to weigh in on legal and policy issues from the start, potentially avoiding any need for future rulemaking. In addition, CFPB’s involvement in this determination and issuance of clarification would help ensure more consistent treatment among borrowers participating in private student loan rehabilitation programs, as well as consistency in credit reporting information. NCUA’s written response stated that federal credit unions were authorized to offer rehabilitation programs for private student loan borrowers prior to the Act and that federal credit unions are not required to obtain review and approval from NCUA to offer such programs. The letter notes, however, that the Act requires federal credit unions that offer such programs to remove private student loan defaults from consumer credit reports if borrowers successfully complete a rehabilitation program. NCUA noted that even though removal of the default may result in a relatively small credit score increase, this can benefit credit union members. NCUA stated that it stands ready to assist CFPB in implementing the report’s two recommendations. We are sending copies of this report to CFPB, the Department of Education, FDIC, the Federal Reserve, the Federal Trade Commission, NCUA, OCC, the Department of the Treasury, the appropriate congressional committees and members, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Objectives, Scope, and Methodology Our objectives were to examine (1) the factors affecting financial institutions’ participation in private student loan rehabilitation programs, (2) the risks that these programs may pose to financial institutions, and (3) the effects that these programs may have on student loan borrowers’ access to future credit. To examine the factors that affect financial institutions’ participation in private student loan rehabilitation programs and how the federal banking regulators are implementing the Economic Growth, Regulatory Relief, and Consumer Protection Act’s (the Act) provisions on private student loan rehabilitation programs, we reviewed the statements issued by the three regulators tasked with approving the loan rehabilitation programs of their regulated entities—the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC)—as well as OCC’s examiner guidance. We also interviewed officials from these regulators about their time frames for issuing statements, what topics the statements cover, and how they coordinated in issuing the statements. We reviewed the legal authorities of the Consumer Financial Protection Bureau (CFPB) and National Credit Union Administration (NCUA)—which oversee nonbank private student loan lenders and most credit unions that issue private student loans, respectively—concerning private student loan rehabilitation programs and the legislative history of the Act’s provisions on the programs. Finally, we interviewed officials from NCUA and CFPB about their authorities related to implementing the Act’s provisions on private student loan rehabilitation programs and whether they planned to take any actions related to the provisions. In addition, we interviewed representatives from a nongeneralizable sample of 15 private student loan lenders: the five largest bank lenders, two of the largest credit union lenders, and eight nonbank financial institutions (nonbank). The eight nonbank lenders included three for-profit nonbank lenders and five nonprofit state-affiliated lenders (nonbank state lenders). We asked these lenders about their decisions to offer private student loan rehabilitation programs, risks and costs associated with the programs, and the effects that such programs could have on their lending decisions. We identified the five largest bank lenders by reviewing data from MeasureOne—a private data analytics company that studies the private student loan market—and discussions with officials from the Federal Reserve, FDIC, OCC, and CFPB. We assessed the reliability of data from MeasureOne through discussions with representatives from the company on the methodology used to develop its estimates and its internal controls. We determined that this data source was sufficiently reliable for selecting a sample of private student lenders to interview about participation in rehabilitation programs. We reviewed these five banks’ 2017 10-K reports (annual financial filings with the Securities and Exchange Commission) to verify the size of their student loan portfolios. We selected the two credit unions to interview by reviewing 2018 NCUA data on credit unions’ portfolios to identify two credit unions that were among the largest credit union private student loan lenders. To select the for-profit nonbank lenders, we used suggestions from officials at CFPB, OCC, and the Department of Education, as well as reports from private sources that contained information on nonbank private student loan lenders. We selected nonbank state lenders based on information that indicated they were operating or interested in offering rehabilitation programs. Sources of this information included the Education Finance Council’s 2018–2019 NonProfit & State-Based Education Loan Handbook, an interview with the Education Finance Council, and information received from a 2013 CFPB Request for Information Regarding an Initiative to Promote Student Loan Affordability. Because this sample is nongeneralizable, our results cannot be generalized to all private student loan lenders. To examine the risks, if any, that private student loan rehabilitation programs pose to financial institutions, we reviewed bank and credit union regulator policies and guidance on private student lending. We also analyzed data on delinquency and default rates of private student loans. To do this, we reviewed industry data from MeasureOne and the 2017 10- K filings for the five banks whose representatives we interviewed. We assessed the reliability of MeasureOne’s performance data through discussions with representatives from the company on the methodology it uses to develop these metrics and its internal controls. We determined that this data source was sufficiently reliable for assessing the performance of banks’ portfolios of private student loans. For these five banks, we also used the 10-K filings to estimate the volume of the portion of their portfolios that was composed of private student loans. We also compared private student loan default rates to default rates of other types of consumer loans, including mortgages, credit cards, and automobile loans. To do this, we used data from FDIC’s Statistics on Depository Institutions database to analyze indicators of asset quality for mortgages, credit cards, and automobile loans from 2013 through 2017. We assessed the reliability of FDIC’s Statistics on Depository Institutions database by reviewing related documentation and conducting testing for missing data, outliers, or any obvious errors. We determined that this data source was sufficiently reliable for assessing the performance and risk of banks’ portfolios of private student loans and other types of consumer loans. We also interviewed officials from the Federal Reserve, FDIC, NCUA, and OCC about the types of costs and risks that could be associated with private student loan rehabilitation programs. In addition, we interviewed representatives of our nongeneralizable sample of 15 private student loan lenders about the potential risks and costs of offering rehabilitation programs. To assess potential risks of private student loan rehabilitation programs for other types of financial institutions, we interviewed a nongeneralizable sample of seven credit providers about how these programs could affect their ability to make sound lending decisions. We focused on financial institutions that offer mortgage loans, automobile loans, and credit cards. According to data from the 2016 Survey of Consumer Finances, these are the most common types of debt consumers hold. We selected a nongeneralizable sample of banks and nonbank financial institutions that provide these types of credit. We selected the bank credit providers using data from FDIC’s Statistics on Depository Institutions by identifying the mortgage and automobile loan lenders and credit card issuers that were among the largest holders of assets in these lending categories as of the fourth quarter 2017. To identify nonbank financial institution lenders, we reviewed an industry report to identify some of the larger nonbank mortgage lenders, and we reviewed a list prepared by CFPB of larger industry participants in the automobile finance market industry. We judgmentally selected the final sample of these credit providers based on their size and, to the extent applicable, their federal regulator to obtain a diversity of opinions. We determined that industry reports, CFPB’s list of larger industry participants, and 10-K filings were sufficiently reliable for selecting a sample of nonbank financial institutions to interview about risks posed by rehabilitation programs. Because this sample is nongeneralizable, our results cannot be generalized to all credit providers. We also interviewed representatives of four industry groups and two trade associations that work with these credit providers and student loan borrowers on the types of risks and costs that rehabilitation programs could create for lenders. To examine the effects that private student loan rehabilitation programs may have on student loan borrowers’ access to future credit, we conducted a literature search for studies that empirically analyzed the effects on credit scores and access to credit of adverse credit events, such as foreclosures or bankruptcies; loan modifications, broadly defined; and removal of accurate but adverse information from credit reports, such as a bankruptcy. We identified these studies through our initial background search, targeted searches of the EconLit database, and a search of the Federal Reserve Bank of New York Center for Microeconomic Data publications, and through bibliographies of studies we reviewed. We also asked VantageScore Solutions, LLC (VantageScore)—a credit scoring firm—to conduct a quantitative analysis simulating the effect of adding a student loan delinquency to and removing a student loan default from a borrower’s credit profile on its VantageScore 3.0 credit score. The analysis was conducted using a sample of VantageScore’s data that it obtained from the three nationwide CRAs and that represents actual credit profiles of borrowers. VantageScore analyzed data for borrowers with at least one outstanding student loan with a balance greater than $0. Table 1 contains the results of the simulation and information on the number and characteristics of borrowers whose credit profiles were analyzed. The results of the simulation are specific to changes in the VantageScore 3.0 credit score. The simulated results represent averages for borrowers whose credit profiles were analyzed and are meant to be illustrative. Additionally, because this was a simulation, it is unlikely that any one borrower’s credit profile exactly matches the average profiles used in the simulations. The results of the VantageScore analysis only apply to VantageScore 3.0 credit scores in the 2014–2016, 2015–2017, and 2016–2018 cohorts of borrowers and may not be generalized to other VantageScore credit scores, to Fair Isaac Corporation (FICO) credit scores, or for different cohorts in different years. While we present only the results of the most recent cohort (2016–2018) in our report, VantageScore simulated the analysis across three cohorts to determine whether the results varied substantially over time. The results for all three cohorts were similar. Through reviewing documentation and conducting interviews, we determined that the data used by VantageScore to conduct this analysis were sufficiently reliable for simulating the effects of derogatory credit marks on borrowers’ credit scores. FICO declined our request to develop a similar analysis. To examine how a rehabilitation program may affect borrowers’ future access to credit, we interviewed officials from CFPB, the Department of Education, FDIC, the Federal Reserve, Federal Trade Commission, NCUA, OCC, and the Department of the Treasury. We also interviewed representatives of the four consumer reporting agencies that collect and report information on student loans (Equifax, Experian, Innovis, and TransUnion) and the two credit scoring firms that develop credit score models with nationwide coverage (FICO and VantageScore). We also interviewed representatives from the 15 private student loan lenders and seven credit providers described above, as well as banking, credit reporting, and student loan lending and servicing industry groups and consumer advocacy organizations. We conducted this performance audit from July 2018 to May 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Consumer Financial Protection Bureau Appendix III: Comments from the National Credit Union Administration Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Jill Naamane (Assistant Director), Christine McGinty (Analyst-in-Charge), Jill Lacey, Courtney LaFountain, Jon D. Menaster, Tovah Rom, Jessica Sandler, Eric Schwab, and Aisha Shafi made key contributions to this report. Also contributing to this report were Melissa Emrey-Arras, Debra Prescott, and Jena Sinkfield.

The Economic Growth, Regulatory Relief, and Consumer Protection Act enabled lenders to offer a rehabilitation program to private student loan borrowers who have a reported default on their credit report. The lender may remove the reported default from credit reports if the borrower meets certain conditions. Congress included a provision in statute for GAO to review the implementation and effects of these programs. This report examines (1) the factors affecting financial institutions' participation in private student loan rehabilitation programs, (2) the risks the programs may pose to financial institutions, and (3) the effects the programs may have on student loan borrowers' access to credit. GAO reviewed applicable statutes and agency guidance. GAO also asked a credit scoring firm to simulate the effect on borrowers' credit scores of removing student loan defaults. GAO also interviewed representatives of regulators, some of the largest private student loan lenders, other credit providers, credit bureaus, credit scoring firms, and industry and consumer advocacy organizations. The five largest banks that provide private student loans—student loans that are not guaranteed by the federal government—told GAO that they do not offer private student loan rehabilitation programs because few private student loan borrowers are in default, and because they already offer existing repayment programs to assist distressed borrowers. (Loan rehabilitation programs described in the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) enable financial institutions to remove reported defaults from credit reports after borrowers make a number of consecutive, on-time payments.) Some nonbank private student loan lenders offer rehabilitation programs, but others do not, because they believe the Act does not authorize them to do so. Clarification of this matter by the Consumer Financial Protection Bureau (CFPB)—which oversees credit reporting and nonbank lenders—could enable more borrowers to participate in these programs or ensure that only eligible entities offer them. Private student loan rehabilitation programs are expected to pose minimal additional risks to financial institutions. Private student loans compose a small portion of most banks' portfolios and have consistently low default rates. Banks mitigate credit risks by requiring cosigners for almost all private student loans. Rehabilitation programs are also unlikely to affect financial institutions' ability to make sound lending decisions, in part because the programs leave some derogatory credit information—such as delinquencies leading to the default—in the credit reports. Borrowers completing private student loan rehabilitation programs would likely experience minimal improvement in their access to credit. Removing a student loan default from a credit profile would increase the borrower's credit score by only about 8 points, on average, according to a simulation that a credit scoring firm conducted for GAO. The effect of removing the default was greater for borrowers with lower credit scores and smaller for borrowers with higher credit scores (see figure). Reasons that removing a student loan default could have little effect on a credit score include that the delinquencies leading to that default—which also negatively affect credit scores—remain in the credit report and borrowers in default may already have poor credit.

CRS_R46246

Introduction Taxpayers who elect to itemize their deductions may reduce their federal income tax liability by claiming a deduction for certain state and local taxes paid, often called the "SALT deduction." The 2017 tax revision (commonly referred to as the Tax Cuts and Jobs Act, TCJA; P.L. 115-97 ) established a temporary $10,000 limit, or "SALT cap," on annual SALT deduction claims. By limiting the amount of the SALT deduction, the SALT cap increases the tax liability of certain taxpayers, which increases federal tax revenues relative to what otherwise would have been collected without a limitation in place. The SALT cap's effect on tax liability varies significantly with taxpayer income and with state and local tax rates. A number of bills introduced in the 116 th Congress would modify the SALT cap, and federal regulatory efforts responding to related state and local government activity are ongoing. This report discusses the SALT cap's features, analyzes its potential impact, and summarizes recent legislation and regulatory action to modify the cap. Cap Mechanics and Revenue Effects Under current law, taxpayers itemizing deductions (in lieu of claiming the standard deduction) may reduce their taxable income by claiming the SALT deduction for certain state and local taxes paid during the tax year. The state and local taxes eligible for the SALT deduction are income taxes, sales taxes (claimed in lieu of income taxes), personal property taxes, and certain real property taxes not paid in the carrying on of a trade or business. For taxpayers who would have itemized deductions without access to the SALT deduction, it generates tax savings equal to the amount deducted multiplied by the taxpayer's marginal income tax rate. For example, a taxpayer with $20,000 of eligible state and local taxes and a top marginal tax rate of 35% would save $7,000 from the SALT deduction (i.e., $20,000*0.35). For taxpayers who would have claimed the standard deduction without access to the SALT deduction, it generates tax savings equal to the difference between their tax liability if they had claimed the standard deduction and their total tax liability with itemized deductions (inclusive of the SALT deduction). (Throughout this report, the tax savings attributable to the SALT deduction is also referred to as the benefit from the deduction.) The TCJA established a temporary SALT cap for tax years 2018 through 2025. The SALT cap is set at $10,000 for single taxpayers or married couples filing jointly and $5,000 for married taxpayers filing separately. By limiting the SALT deduction available to certain taxpayers, the SALT cap decreases the tax savings associated with the deduction relative to prior law, thereby increasing federal revenues. The TCJA also changed a number of tax code features (e.g., standard deduction amounts, marginal tax rates) that indirectly affect SALT deduction eligibility and the value of the tax savings it generates. The TCJA roughly doubled the standard deduction and limited other itemized deductions. The TCJA also prohibited SALT deduction claims on taxes paid on foreign real property for tax years 2018 through 2025. The SALT cap, the increased value of the standard deduction, and other tax changes enacted by the TCJA have reduced the number of taxpayers claiming the SALT deduction and the total tax savings from those claims. Table 1 shows the most recent estimates of reductions in federal revenues attributable to the SALT deduction for FY2017, the last full year before enactment of P.L. 115-97 , and FY2019 through FY2023. Revenue losses from the SALT deduction in FY2017 ($100.9 billion) nearly equaled the total losses projected from FY2019 through FY2023 ($117.2 billion). The Joint Committee on Taxation (JCT) projects that 16.4 million taxpayers will claim a SALT deduction for tax year 2019, compared to 46.6 million taxpayers who the Internal Revenue Service (IRS) reported claiming the deduction in 2017. Recent research has estimated the SALT cap's effect on SALT deduction claims independent of other tax changes enacted through the TCJA. A 2019 Treasury Inspector General report examined the SALT cap's hypothetical effect had it been imposed in tax year 2017, prior to the other TCJA changes taking effect. The report found that the cap would have reduced SALT deduction benefits for 10.9 million taxpayers (about 25% of all households claiming the deduction) and reduced deduction amounts by $323 billion, or just over half of the actual amounts deducted in that year. In June 2019, JCT estimated that holding all other portions of the tax code constant, repealing the SALT cap for tax year 2018 would decrease FY2019 federal revenues by $77.4 billion. Effects on State and Local Governments The SALT deduction provides state and local governments with an increased ability to levy taxes by reducing the after-tax cost of state and local taxes to taxpayers. By limiting the deduction's benefits, the SALT cap increases the cost (or "price") of state and local taxes for affected taxpayers. For example, consider a taxpayer with itemized deductions, a 35% marginal tax rate, and $20,000 in eligible SALT payments. Without a SALT cap in place, the net price of those taxes for the taxpayer would be $13,000 (or $20,000*[1-0.35]), as the taxpayer can use all $20,000 of those tax payments to reduce federal tax liability. When a $10,000 SALT cap is imposed, the final price of those taxes rises to $16,500 (or $10,000 + [$10,000*(1-0.35)]). The basic economic law of demand—there is an inverse relationship between the price of a good and the quantity demanded—suggests that by increasing the price of state and local taxes, a SALT cap would lead to a decline in demand for state and local government activity. The size of the decrease would be a function of the sensitivity of public desire for state and local services, paid for by taxes, to changes in the price of those services (i.e., the elasticity of demand). Research has found indications that state and local governments respond to federal tax changes with shifts in their own tax and spending practices. Response to the SALT cap could be a function of its salience , that is, the public awareness of its effect on tax liability. SALT cap salience may depend on awareness of the state and local taxes themselves, which can vary significantly across tax system features. Salience for taxpayers who take the standard deduction, but who would be better off itemizing deductions if not for the SALT cap, may be particularly low, as the SALT cap's effects may not be apparent in tax filing software. Taxpayers could also have difficulty differentiating SALT cap-related liability changes from other changes enacted through the TCJA. State and local governments are generally limited in their ability to respond to shifts in demand for government services with changes in fiscal outcomes (i.e., increased deficits or reduced surpluses). Unlike the federal government, which has no enforceable balanced-budget requirement, most state and local governments are statutorily required to balance operating revenues and operating expenses over a one-year or two-year period. Governments with a binding balanced-budget requirement would therefore need to match any reduction in SALT revenue resulting from the cap with a reduction in spending on services provided or increases in other revenue sources. Distributional Effects This section explores features of localities and households that are likely to influence the distribution and intensity of SALT cap effects on tax liability. The recent enactment and implementation of the SALT cap means that tax return data on its impact by state, locality, and income level are currently unavailable. However, analyzing the SALT deduction's distribution prior to the cap's imposition can provide insight into its likely impact. The data indicate that the SALT cap's effects will vary significantly across state and local jurisdictions and household income. Distribution Across States and Congressional Districts The SALT cap's effect is in part a function of state and local tax policies. For example, greater effective rates levied on taxes that qualify for the deduction (income taxes, general sales taxes, real and personal property taxes) would increase the amount of SALT-eligible tax payments and therefore increase the probability that a taxpayer will have SALT deductions that exceed the cap. State and local tax rates could thus affect both the number of taxpayers with higher tax liability from the SALT cap (sometimes referred to as SALT cap exposure) and the amount of those increases (sometimes referred to as the SALT cap burden). Differences in local incomes and price levels are another determinant of the SALT cap's effect. Wages and prices are the bases against which state and local governments levy SALT-eligible income, sales, and property taxes. Consider two households that are in separate localities and have different incomes but the same tax rates and the same purchasing power. In other words, adjusting for their local price levels, each household is able to purchase the same sets of goods and services. Although each household faces the same set of purchasing options on the public and private markets, the household facing higher price levels is more likely to have SALT payments in excess of the SALT cap. State and local governments raised a combined $1.30 trillion in individual income taxes, general sales taxes, and property taxes in 2017, an average of about $8,500 per federal income taxpayer. Those revenues are divided almost evenly between state governments ($667 billion in revenues), which collected the majority of the income and sales taxes, and local governments ($632 billion), which collected the majority of property taxes. There is considerable geographic variation in the rates at which taxes are levied and in the incomes and prices to which those taxes apply. Figure 1 shows effective state and local tax rates for all SALT-eligible taxes in each state, calculated as the percentage of total adjusted gross income paid in-state and local general sales taxes, individual income taxes, and property taxes. In 2017, New York (17.2% effective tax rate), Washington, DC (16.9%), Hawaii (16.1%), Maine (15.0%), and Nebraska (14.2%) had the highest combined effective state and local tax rates. Delaware (6.8%), Alaska (7.6%), Florida (7.7%), New Hampshire (8.3%) and Tennessee (8.4%) had the lowest combined tax rates. All else equal, states with higher SALT-eligible effective tax rates are likely to experience greater SALT cap effects on tax liability than states with lower rates. Figure 2 plots the average SALT deduction amount for each 2017 congressional district (districts are from the 115 th Congress). The districts with the 20 highest average SALT deductions are located in states with above-average effective tax rates in Figure 1 , including New York, California, Connecticut, and New Jersey. Nineteen of the districts with the 20 lowest average SALT deductions are located in Florida, Texas, Tennessee, Alabama, Nevada, Arizona, and Alaska, all states with below-average effective state and local tax rates. Figure 2 shows the potential significance of local tax and economic activity on the SALT cap's effects. Figure 3 adds a layer of analysis by plotting two variables on each congressional district: (1) average adjusted gross income (AGI) of taxpayers and (2) average effective SALT rates. Each district categorized as having low effective SALT rates in Figure 3 had an average AGI below $75,000, and 13 of these districts had average AGI below $50,000. Nineteen of the 20 districts with the highest effective SALT rates had an average AGI above $100,000, and four of the top five districts had an average AGI above $200,000. The distribution of SALT deductions across household income is discussed further in the next section. Figure 3 demonstrates the importance of considering both tax rates and the tax base when examining potential SALT cap effects. Distribution Across Income Levels As with other tax deductions, SALT deduction benefits accrue more for higher-income taxpayers than lower-income taxpayers. Two factors explain this pattern: (1) higher incomes directly lead to more state and local income taxes and are correlated with higher sales and property tax payments stemming from greater consumption; and (2) taxpayers with higher incomes are subject to higher marginal tax rates, so each dollar deducted from tax liability results in greater tax savings. Table 2 shows the JCT projections of SALT benefits by income class in tax years 2017 (the last year before the TCJA took effect) and 2019. Taxpayers with more than $100,000 of AGI received the vast majority of SALT benefits in both 2017 (93%) and 2019 (89%). Taxpayers with income between $50,000 and $200,000 received a larger share of total benefits in 2019 (44%) than 2017 (29%), whereas the opposite trend occurs for taxpayers with more than $200,000 (declining from 71% to 56%). Taxpayers with less than $50,000 received relatively little benefit from the SALT deduction in both years. Data from Table 2 suggest that the SALT cap increased the federal tax burden of high-income taxpayers. This occurs because the SALT cap (1) reduced the number of taxpayers claiming the SALT deduction, who disproportionately fell in higher income classes; and (2) reduced SALT benefit levels of taxpayers with more than $10,000 in SALT payments, who were particularly likely to have high levels of income. JCT estimated that were the SALT cap eliminated in tax year 2019, more than half of the additional tax benefits would have been claimed by taxpayers with incomes exceeding $1 million. The SALT cap's total effect on the combined federal, state, and local tax burden across income levels will depend on the state and local government response to the SALT cap, which is uncertain. Figure 4 plots the percentage of all tax returns, the percentage of returns claiming SALT deductions, and the percentage of SALT deduction amounts claimed across income levels in tax year 2017, the latest year for which data are available. (The amount of SALT deduction claimed reflects the dollars deducted and not the tax savings associated with the deduction.) Tax returns with AGI exceeding $1 million represented less than 1% of all tax returns, but claimed over 25% of all SALT deduction amounts. Tax returns with over $100,000 in AGI claimed more than 78% of the SALT deduction amounts claimed, while returns with AGI below $50,000 claimed less than 10% of that total. The composition of state and local taxes also affects the SALT cap's ultimate effect on taxpayers within a local jurisdiction. Table 3 illustrates how SALT cap burden distribution can differ when the composition of state and local taxes changes while holding total tax revenue constant. In both jurisdictions, total tax revenues are $44,000. In Jurisdiction I, relatively high income tax rates generate higher income tax payments, and the SALT cap burden falls on Tax Units A and B, the taxpayers with higher incomes. In Jurisdiction II, property tax rates are higher than income tax rates, and the SALT cap burden instead falls on Tax Units A and C, the taxpayers with high property values. More of the state and local tax revenue in Jurisdiction II is above the SALT cap, meaning that taxpayers in Jurisdiction II are able to deduct less in SALT deductions on their federal income tax returns. This analysis highlights the importance of state and local tax structure in determining the SALT cap's effect on taxpayer liability even when holding the average level of taxes constant. State Responses to the SALT Cap The state and local response to the SALT cap's effect has varied across municipalities. Certain governments in states with relatively high mean SALT deduction values (see Figure 1 ) have either enacted legislation that would appear to make tax changes to reduce the SALT cap's effect on their taxpayers or taken legal action against the federal government. Recent federal and legal responses to some of these actions suggest these efforts will likely be unsuccessful. State and local governments with relatively lower levels of SALT cap exposure have taken little to no action. Following enactment of the TCJA, several state governments made changes to their tax codes with the potential to lower their residents' SALT cap exposure. Certain states enacted laws that provided taxpayers a credit against state taxes for charitable donations to state entities, which would then be eligible for the federal charitable deduction under Section 170 of the Internal Revenue Code. The IRS has since issued a final ruling limiting the availability of Section 170 charitable deductions in such a way that would render the new charitable activity ineligible. A legislative proposal that would overturn IRS regulations, S.J.Res. 50 , was rejected by the Senate in October 2019. Some states have tried to use a "pass-through work around" to reduce the SALT cap's impact on some of their taxpayers with pass-through business income. Many types of businesses that do not pay corporate income taxes (including S corporations and partnerships) pass through income to their owners, who pay taxes on that income at the individual level. The SALT cap does not limit SALT deductions associated with the carrying on of a trade or business. Hence, taxpayers whose SALT tax payments are associated with pass-through business income may not be subject to the SALT cap in the same manner as other individual income tax payments. Certain state governments have adjusted for this activity by enacting laws that levy or raise taxes on the pass-through business entity itself that are offset (holding total tax rates constant) by tax reductions or tax credits applied to individual income liability for pass-through business members subject to the tax increase . The IRS has not issued guidance on the viability of such legislation or its effect on SALT cap exposure. Several states also took legal action related to the SALT cap following enactment of the TCJA, filing suit against the U.S. government in July 2018 and challenging the cap's constitutionality. A September 2019 federal district court ruling upheld the SALT cap's constitutionality, asserting that it did not unconstitutionally penalize certain jurisdictions. Legislation in the 116th Congress Legislation introduced in the 116 th Congress would modify the SALT cap, including proposals that would (1) repeal the SALT cap entirely; (2) increase the SALT cap's value for all taxpayers; (3) increase the SALT cap's value for some taxpayers; (4) make the SALT cap permanent; and (5) repeal IRS regulations affecting SALT cap liability. Table 4 displays legislation in the 116 th Congress that would directly modify the SALT cap.

Taxpayers who elect to itemize their deductions may reduce their federal income tax liability by claiming a deduction for certain state and local taxes paid, often called the "SALT deduction." The 2017 tax revision (commonly referred to as the Tax Cuts and Jobs Act, TCJA; P.L. 115-97 ) made a number of changes to the SALT deduction. Most notably, the TCJA established a limit, or "SALT cap," on the amounts claimed as SALT deductions for tax years 2018 through 2025. The SALT cap is $10,000 for single taxpayers and married couples filing jointly and $5,000 for married taxpayers filing separately. The changes enacted in the TCJA will considerably affect SALT deduction activity in the next several years. The increased value of the standard deduction (roughly doubling from its pre-TCJA value for tax years 2018 through 2025), along with the reduced availability of SALT and other itemized deductions, are projected to significantly reduce the number of SALT deduction claims made in those years. The Joint Committee on Taxation (JCT) projected that repealing that SALT cap for tax year 2019 would increase federal revenues by $77.4 billion. The SALT deduction reduces the cost of state and local government taxes to taxpayers because a portion of the taxes deducted is effectively paid for by the federal government. By reducing the deduction's value, the SALT cap therefore increases the cost to the taxpayer of state and local taxes. That may affect state and local tax and spending behavior, as any reduction in state and local revenues from increased sensitivity to SALT-eligible tax rates must be offset by reductions in outlays or increases in other revenue to maintain budget outcomes. The SALT cap's effect on the SALT deduction's value is in part a function of state and local tax policies. Nationwide, there is considerable variation in both the combined level of income and sales taxes levied by states and the property taxes and other charges levied by local governments. Differences in incomes and price levels that serve as the base for those taxes are another source of disparity in SALT cap exposure. Internal Revenue Service (IRS) data showed that in 2017, the average SALT deduction claimed in New York ($23,804) was more than four times the average in Alaska ($5,451). The SALT cap predominantly affects taxpayers with higher incomes. State and local tax payments tend to increase with income, both as a direct function of the income tax structure and because higher incomes lead to increased consumption and thus sales and property tax payments. Increased income, therefore, makes higher-income taxpayers more likely to make SALT-eligible tax payments in amounts exceeding the SALT cap value. The benefit of SALT deductions in terms of tax savings is also larger for taxpayers with higher incomes because a federal tax deduction's value is proportional to the taxpayer's marginal income tax rate. JCT projected that more than half of 2019 benefits for the SALT deduction will accrue to taxpayers with incomes exceeding $200,000. Several pieces of legislation introduced in the 116 th Congress would modify the SALT cap, including legislation that would (1) repeal the SALT cap entirely; (2) increase the SALT cap's value for all taxpayers; (3) increase the SALT cap's value for some taxpayers; (4) make the SALT cap permanent; and (5) repeal IRS regulations affecting SALT cap liability. Following enactment of the TCJA, several states proposed or passed legislation that provided possible avenues to reduce the SALT cap's effect on taxpayers without reducing their relevant state or local tax burdens. Subsequent guidance by the IRS, however, makes it unclear or unlikely that those laws will prevent taxpayers from experiencing the SALT cap's effects.

CRS_R45746

Introduction Technological convergence, in general, refers to the trend or phenomenon where two or more independent technologies integrate and form a new outcome. One example is the smartphone. A smartphone integrates several independent technologies—such as telephone, computer, camera, music player, television (TV), and geolocating and navigation tool—into a single device. The smartphone has become its own, identifiable category of technology. Currently, over 35% of the global population are smartphone users and over 3 billion active devices are in circulation. In the United States, about 80% of the U.S. population are smartphone users, and over 280 million active devices are in circulation. The technological convergence has resulted in establishing a new and prominent smartphone industry sector, worth over $350 billion globally, according to some estimates. Technological convergence may present a range of issues where Congress may take legislative and/or oversight actions. Three selected issue areas associated with technological convergence are regulatory jurisdiction, digital privacy, and data security. First, merging and integrating multiple technologies from distinct functional categories into one converged technology may pose challenges to defining regulatory policies, roles, and responsibilities. Determining oversight jurisdictions and regulatory authorities for converged technologies may become complicated as the boundaries that once separated single-function technologies are blended together. In other words, delineating which policy authorizes which government agency to apply which standards to regulate which industry is no longer simple and straightforward. How Congress chooses to oversee certain industries and government agencies may also become complicated due to converging technologies that blur and blend existing categorical boundaries. Second, digital privacy concerns stem from converged technologies' collection and usage of personal and machine data. Technological convergence facilitates increasing consumption and collection of data, which poses potential digital privacy concerns for consumers. Data collection and usage are tied to digital privacy issues because a piece or aggregation of information could identify an individual or reveal patterns in their activities. Converged technologies leverage large volumes of data to try to improve the user experience by generating more tailored and anticipatory results. This data can also potentially be used to identify, locate, track, and monitor an individual without the person's knowledge. The same data can potentially be sold to third-party entities without an individual's awareness. As the use of converged technologies continues to propagate, digital privacy issues will likely remain central to the policy debate. Third, data security concerns are often associated with smart devices. As devices are able to interconnect, the convenient ubiquitous features may create vulnerabilities that could be exploited by malicious actors. Data security, a component of cybersecurity, protects data from unauthorized access and use. Along with digital privacy, data security is a pertinent issue for converged technologies, which generate and consume large volumes of data. Technological convergence poses three potential data security concerns: increased number of access points susceptible to cyberattacks, linkage to physical security, and theft of data. The first section of this report describes technological convergence along with closely associated media convergence and network convergence. The report uses the Internet of Things (IoT) and smart home devices as primary examples. Of these three convergences, consumers most often directly engage with converged technologies. In contrast, general consumers may not have the same level of engagement or understanding of media and network convergences, as they often occur in the background. The second section of this report presents regulatory, digital privacy, and data security issues pertaining to technological convergence. The current state, challenges, and recent legislative activities are discussed. The third section of this report concludes with potential considerations for Congress. An overarching consideration for regulatory, digital privacy, and data security issues may be determining the role, if any, of the federal government in an environment where technological evolution changes quickly and continues to disrupt existing frameworks. Policies governing these three issues—regulations, digital privacy, and data security—may be of interest to Congress as well as other stakeholders, including U.S. government agencies, commercial entities, and the general public. Description of Technological Convergence "Technological convergence" is a concept whereby merging, blending, integration, and transformation of independent technologies leads to a completely new converged technology. This broad, complex concept encompasses a wide range of technologies, including IoT and smart home devices. When a converged technology emerges, it often replaces single-function technologies or renders them obsolete. In this sense, technological convergence can be viewed as a progression or evolution of technology. A discussion of technological convergence in isolation is difficult because technological convergence is closely associated with media convergence and network convergence. Technological, media, and network convergences are interdependent, but each possesses subtle distinctions. These three terms are often used interchangeably, further complicating the discussion of an already complex topic. Figure 1 illustrates relationships between technological, media, and network convergences. Technological convergence : This occurs when the functions of different technologies are merged and interoperate as a single unit. A converged unit can typically process multiple types of media that correspond to each technology that merged. Technological convergence includes devices and systems that interface with end users. For example, a user interacts with converged devices, such as a smart television (TV), to access the contents that are distributed over a network. A smart TV has combined the functions of a traditional TV, a computer, and several other devices that used to have one specific purpose. In addition to displaying over-the-air broadcast TV channels, smart TVs interface with users to surf the internet, view photos taken from smartphones and stored in the "cloud," display feeds from home security cameras connected to a network, play music, notify users of incoming calls and messages, and allow video teleconferencing. Smart TVs can process a variety of formats of media to perform multiple functions. Media convergence : This refers to content that is made available through multiple forms, formats, and access points. Media convergence proliferated as analog mediums of communication became digitized. For example, the contents on a newspaper used to be available only in print. The same content is currently available in both print and digital forms, as text, visual, and/or audio formats, and through multiple devices and platforms including social media. Network convergence : This refers to a single network infrastructure that handles and distributes multiple types of media. Network convergence became prominent when telecommunications and information networks integrated; it became prevalent when mobile cellular communications incorporated access to the internet and made it widespread. For example, today's cable companies process information in forms of voice, video, and data on a single network and often offer their services as a bundle package (e.g., phone, television, and internet services). Similarly, cellular networks, which distribute information to and from mobile devices and fixed platforms, process voice, video, and data. Prior to network, media, and technological convergences, a separate, independent network was dedicated to handling and distributing one particular type of media that was processed by a single-function device. For example, a telephone network distributed audio information (i.e., voice) between telephone handsets. A broadcasting network delivered video to television sets. Convergence removes such pairing (i.e., "decouples") between media, network, and device. Decoupling gives convergence its versatility, flexibility, and complexity. Characteristics of Smart Devices Many technological convergence devices are called "smart" devices, which often include IoT devices. (Examples of IoT devices are discussed in following sections.) Despite a wide range of applications, smart converged technologies share key characteristics: Smart devices can execute multiple functions to serve blended purposes; Smart devices can collect and use data in various formats and employ machine learning algorithms to deliver optimized and enhanced user experience; and Smart devices are connected to a network directly and/or are interconnected with other smart devices, offering ubiquitous access to users from anywhere on any platform. These key characteristics may present potential policy questions for Congress, including the following: Who will provide oversight and how will regulatory authorities be applied to technologies that serve multiple functions or that do not belong to an established category? How should consumer data be collected and used to protect digital privacy without limiting technology innovation? How to shape data security practices to safeguard personal information and physical security from malicious actors? An Overview of Internet of Things The IoT is a common example of technological convergence. The IoT is a system of devices that are connected to a network and each other, exchanging data without necessarily requiring human-to-human or human-to-computer interaction. In other words, IoT is a collection of electronic devices that can share information among themselves (e.g., smart home devices). The IoT possess all three characteristics of converged technologies: multiple functions, data collection and use, and ubiquitous access. Various categories of IoT include industrial Internet of Things, Internet of Medical Things, smart city infrastructures, and smart home devices. IoT industry is a growing market both globally and in the United States. According to some estimates, in 2018, the IoT retail market in the United States was almost $4 billion, and over 700 million consumer IoT devices were in use in 2017 in the United States. Figure 2 illustrates global revenue of the IoT from 2012 to 2018, according to Statista, a company that consolidates statistical data, based on information from IC Insights. In 2018, consumer IoT devices, such as wearable and connected smart home devices, generated over $14 billion globally. The connected cities category, or smart cities, was the largest (41%) of 2018 global IoT revenue. The industrial Internet of Things, such as smart factories, had the biggest growth in terms of global revenue between 2017 and 2018 among the different categories of the IoT. An estimate of various IoT markets by McKinsey also shows the industrial IoT as potentially increasing the most by 2025 compared to other IoT systems. The development, application, and usage of IoT will likely continue to grow with Fifth-Generation (5G) Technologies cellular service, which will allow a larger number of devices to be connected simultaneously to a network, supporting not only consumer but industrial use of IoT devices and systems. IoT devices are used in many different fields and serve a variety of functions. The IoT encompasses a broad range of applications. Selected categories of IoT devices are discussed below. Industrial Internet of Things (IIoT): Examples of commercial application of the IoT can be found in the manufacturing industry. Referred to as industrial Internet of Things (IIoT), networked machines in a production facility can communicate and share information to improve efficiency, productivity, and performance. The application of IIoT can vary significantly, from detecting corrosion inside a refinery pipe to providing real-time production data. Also, IIoTs can enable a variety of industries, such as manufacturing, chemicals, food and beverage, automotive, and steel, to transform their operations and potentially yield financial benefits. Currently in North America, there are more consumer IoT connections than IIoT connections, but this may change in the future. Incorporation of IIoT and analytics is considered by some as the Fourth Industrial Revolution (4IR). Internet of Medical Things (IoMT): Some experts project the use of Internet of Medical Things (IoMT) is increasing. IoMT devices, such as heart monitors and pace makers, collect and send a patient's health statistics over various networks to healthcare providers for monitoring, remote configuration, and preventions. In 2017, over 300 million IoT devices in the medical sector were connected worldwide, and, in 2018, over 400 million devices were connected. At a personal health level, wearable IoT devices, such as smart watches and fitness trackers, can track a user's physical activities, basic vitals, and sleeping patterns. In 2017, over 40 million fitness tracker IoT were in use in the United States. Smart Cities: IoT devices and systems in transportation, utilities, and infrastructure sectors may be grouped under the category of "smart city." An example of utilities IoT in a smart city is "smart" grid and meters for electricity, water, and gas where sensors collect and share customer usage data to enable the central control system to optimize production and distribution to meet demand real-time. An example of transportation IoT in a smart city is fare readers and status trackers or locaters that interface across all public transportation platforms. Columbus, OH's winning proposal for the Department of Transportation's (DOT) Smart City Challenge of 2016, included connected infrastructure that interacts with vehicles, trip planning and common payment system across multiple transit system, and electric autonomous vehicles and shuttles. Other finalists of the DoT Smart City Challenge were Austin, TX; Denver, CO; Kansas City, MO; Pittsburgh, PA; Portland, OR; and San Francisco, CA. Smart cities is currently the largest segment of IoT in terms of revenue. Smart Home: Consumer product IoT devices used in homes and buildings are often grouped under the "smart home" category. Included in this categories are smart appliances, smart TV, smart entertainment systems, smart thermostats, and network-connected light bulbs, outlets, door locks, door bells, and home security systems. These smart home IoT devices are connected to a single network and can be controlled remotely over the internet. Eight of 11 categories of consumer IoT devices used in 2017 were related to smart home. In 2018, the size of the global smart home market was estimated to be over $30 billion. An Example: Smart Home A smart home contains a collection of consumer IoT devices intended for personal use where user experience is improved by connecting various features of a house to a network. For example, smart home IoT devices may be interconnected to each other and to a central control system for a home with voice interface, often referred to as a virtual assistant. Commonly known examples of virtual assistants are Amazon's Alexa, Apple's Siri, Google Assistant, Microsoft's Cortana, and Samsung's Bixby. A virtual assistant is a platform that can manage and relay information to smart home devices based on user-established criteria. Moreover, a smart home may have a doorbell with a video camera and a speaker that allows a user to see who is at the door and to speak to the person at the door from anywhere over the internet. A smart home may have a smart door lock that can be locked and unlocked remotely. In addition, the thermostat, lights, electrical outlets, and appliances in a smart home may be remotely controlled by a user over the internet. A smart appliance, such as a smart refrigerator that is networked, can use its sensors to identify items and can notify a user based on set criteria, such as restocking alerts or suggested recipes. Some smart home devices resemble traditional devices, but with cross-over functions or networking abilities. Examples include smart lightbulbs, smart electrical outlet plugs, smart TV, and smart appliances. Some smart home devices are establishing a new category of industry segment that did not exist previously. An example is Amazon's Echo products with virtual assistant Alexa as voice user interface. Whether it is the former (evolutionary technologies) or the latter (new/revolutionary technologies), the smart home industry is fast emerging and growing. Smart home devices, which are a type of IoT, possess the three characteristics of converged technologies: multiple or blended functions, collection and use of data, and ubiquitous access through network connection. Thus, potential policy interests associated with technological convergence can be also observed in smart home devices. Potential smart home issues for Congress include the following. Congress may decide it is necessary to resolve oversight jurisdictions and regulatory authorities of smart home devices, especially for products like virtual assistants, which may not belong to an established category of technology. The mission of the Federal Trade Commission (FTC) includes both protecting consumers and promoting business competition. Congress may choose to review the FTC's current authorities to ensure that they are sufficient to oversee emerging smart home technologies. In addition, potentially deconflicting or harmonizing jurisdictions may be discussed if other federal government organizations and their mission are impacted by emerging smart home technologies. Congress may decide that new or expanded policies are necessary to protect consumer digital privacy, including personal data that are collected and used by smart home devices, such as a smart TV, in private spaces, such as a user's home. Although the FTC does promote a level of digital privacy through its consumer protection authorities, emerging digital privacy issues are linked to practices that are legal as opposed to fraud, theft, or other malicious activities. Congress may examine whether a federal law that comprehensively addresses personal digital privacy is necessary or an expansion of the FTC's consumer data protection authorities is required. Emerging smart home technologies may further necessitate safeguarding data from malicious actors. In addition to collecting and using personal data, smart home devices bridge physical security and cybersecurity. Malicious actors may have more means to exploit a user's information and home through smart home devices, which offer ubiquitous access as a key convenience feature. Whether current policies adequately addresses data, cyber, and physical security concerns may also be considered. Selected Issues Associated with Technological Convergence Regulation, digital privacy, and data security are three selected issues associated with technological convergence that may be of interest to many stakeholders, including Congress. As identified in the smart home example in the previous section, each of these three issues is discussed further in subsequent subsections. The three selected issues are tied to the three characteristics of converged technologies discussed previously in the " Characteristics of Smart Devices " section. First, convergence of technologies blend and blur existing categorical distinctions for each technology because a converged technology can perform multiple functions. Second, technological convergence consumes, collects, and generates a large volume of both personal and machine data. Third, converged technologies allow ubiquitous access points to the end users. These characteristics are typically observed as a result of decoupling the devices from media and network. Regulatory Issues Congress may consider policies that address blending standards and boundaries as converged technologies and companies merge and replace traditionally independent and distinct categories. Policy issues may include oversight jurisdictions, regulatory authorities, and commercial competitiveness since a converged technology could fall within multiple domains. An example may be delineating the Federal Communications and Commission's (FCC) and the FTC's authorities on convergence technologies as more devices and services become mobile and wirelessly connected. Merging and integrating multiple technologies from distinct functional categories into one converged technology pose challenges to regulatory policies and responsibilities. Determining oversight jurisdictions and regulatory authorities for converged technologies becomes unclear as the boundaries that once separated single-function technologies blend and blur together. A challenge for policymakers may be in delineating which government agency and which policies and standards would best apply to certain technologies or certain industries. Where there were once clear lines of authority by industry or media type (e.g., voice, video, data), they are no longer simple and straightforward for technologies where these functionalities have converged. How Congress oversees which industries and government agencies may become complicated due to converging technologies that blend existing categorical boundaries. Congress may decide that it is necessary for specific legislative committees to effectively oversee a converged technology that serves multiple functions. As a result, the alignment of converged technologies to regulatory authorities may shift as technologies evolve. The complexities in setting regulatory jurisdiction can be further subdivided into regulating converging technologies and regulating evolving technology companies . They are discussed below. Regulating Converging Technologies Regulating a converging technology, which is a result of blending or integrating multiple technologies, can be challenging. This is because (1) the one-to-one relationship between a converging technology and a regulatory entity is no longer clear, and (2) a converging technology may create a new sector where a regulatory entity has not been identified. Initially, the standards and oversight policies for a specific technology were established independently. They were not necessarily developed with merging or interoperability in mind. For example, telephony (when providing voice), cable TV (when providing video), and mobile cellular technologies each follow their respective standards, and these services were regulated by policies specific to each type. When a converged technology utilizes differing communications technologies, it may be required to adhere to multiple standards and regulations. In such cases, multiple agencies may need to regulate a single converged technology. This may require extended timelines for regulatory reviews. Industry may incur additional costs to meet standards and reporting requirements for converged technologies. In other situations, as technologies converge, the outcome may yield a completely new technology for which a regulatory category did not previously exist. Examples include social media, IoTs, and virtual assistants. Without a clear regulatory and oversight framework in place, new converged technologies may be left unregulated, partially regulated, or regulated under a newly developed framework. They could also be left to self-regulate by the industry; or they could be overlooked as governing bodies remain indeterminate on which jurisdictional boundaries need to be stretched to cover emerging technology fields. Regulating Evolving Companies Regulating companies that offer converged technologies is challenging because the services and product lines evolve and expand such that they do not fall within a single category. Although diversification is considered normal business practice, technological convergence broadens the operational range for companies, spanning multiple industry sectors. Antitrust concerns could arise, or companies may not be subjected to the same level of oversight and regulation due to lack of classification. For example, companies such as Amazon, Apple, and Google each offer smart home devices and platforms. Some of these devices, such as a smart doorbell with a video camera, smart doors and locks, and networked contact sensors and video cameras, may function as home security devices. Many of these products are bundled as a starting kit for home security. However, these technology convergence companies may not be required to follow state and local regulations as traditional home security companies that provide monitored security service do. Another example discussed widely in Congress is social media—whether social media companies should be classified as information technology companies, as advertising and marketing firms, as communications platforms, or as the press. As converged technologies and associated companies straddle or fall between jurisdictional boundaries, regulatory roles and responsibilities become more complex. Digital Privacy Issues Congress may be interested in digital privacy concerns of converged technologies, which often collect and use personal information and machine data as they directly interface with end-users. Current federal laws protect certain types of data pertaining to privacy by specifying collection, storage, use, and dissemination practices. As converged technologies generate and innovatively leverage more types and volumes of data that can identify, locate, or track a person, consumer concerns for protecting digital privacy may intensify. Technological convergence facilitates increased consumption and collection of data, posing potential digital privacy concerns for consumers. Data collection and usage are tied to digital privacy issues because a piece or aggregation of information could identify an individual or reveal patterns in their activities. Converged technologies leverage large volumes of data to try to improve the user experience by generating more tailored and anticipatory results. However, such data can potentially identify, locate, track, and monitor an individual without the person's knowledge. As the use of converged technologies continues to propagate, digital privacy issues will likely remain central. Current Data Protection Laws While a federal law that comprehensively addresses digital privacy does not currently exist, many laws are in place to protect certain types of data and their impact on specific aspects of privacy. Current U.S. data protection laws include the following, as taken from CRS Report R45631, Data Protection Law: An Overview : Gramm-Leach-Bliley Act (GLBA): The GLBA imposes several data protection obligations on financial institutions. These obligations are centered on a category of data called "consumer" "nonpublic personal information" (NPI), and generally relate to: (1) sharing NPI with third parties, (2) providing privacy notices to consumers, and (3) security NPI from unauthorized access. Health Insurance Portability and Accountability Act (HIPAA): Under the HIPAA, the Department of Health and Human Services (HHS) has enacted regulations protecting a category of medical information called "protected health information" (PHI). These regulations apply to health care providers, health plans, and health care clearinghouses (covered entities), as well as certain "business associates" of such entities. The HIPAA regulations generally speak to covered entities': (1) using or sharing of PHI, (2) disclosure of information to consumers, (3) safeguards for securing PHI, and (4) notification of consumers following a breach of PHI. Fair Credit Reporting Act (FCRA): The FCRA covers the collection and use of information bearing on a consumer's creditworthiness. FCRA and its implementing regulations govern the activities of three categories of entities: (1) credit reporting agencies (CRAs), (2) entities furnishing information to CRAs (furnishers), and (3) individuals who use credit reports issued by CRAs (users). In contrast to HIPAA or GLBA, there are no privacy provisions in FCRA requiring entities to provide notice to a consumer or to obtain his opt-in or opt-out consent before collecting or disclosing the consumer's data to third parties. FCRA further has no data security provisions requiring entities to maintain safeguards to protect consumer information from unauthorized access. Rather, FCRA's requirements generally focus on ensuring that the consumer information reported by CRAs and furnishers is accurate and that it is used only for certain permissible purposes. The Communications Act : The Communications Act of 1934 (Communications Act or Act), as amended, established the Federal Communications Commission (FCC) and provides a "comprehensive scheme" for the regulations of interstate communication. [T]he Communications Act includes data protection provisions applicable to common carriers, cable operators, and satellite carriers. Video Privacy Protection Act (VPPA): The VPPA was enacted in 1988 in order to "preserve personal privacy with respect to the rental, purchase, or delivery of video tapes or similar audio visual materials." The VPPA does not have any data security provisions requiring entities to maintain safeguards to protect consumer information from unauthorized access. However, it does have privacy provisions restricting when covered entities can share certain consumer information. Specifically, the VPPA prohibits "video tape service providers"—a term that includes both digital video streaming services and brick-and-mortar video rental stores—from knowingly disclosing [personally identifiable information] (PII) concerning any "consumer" without that consumer's opt-in consent. The VPPA does not empower any federal agency to enforce violations or the Act and there are no criminal penalties for violations, but it does provide for a private right of action for persons aggrieved by the Act. Family Educational Rights and Privacy Act (FERPA): The FERPA creates privacy protections for student education records. "Education records" are defined broadly to generally include any "materials which contain information directly related to a student" and are "maintained by an educational agency or institution." FERPA defines an "educational agency of institution" to include "any public or private agency or institution which is the recipient of funds under any applicable program." FERPA generally requires that any "educational agency or institution" (i.e., covered entities) give parents or, depending on their age, the student (1) control over the disclosure of the student's educational records, (2) an opportunity to review those records, and (3) an opportunity to challenge them as inaccurate. Federal Securities Laws : While federal securities statutes and regulations do not explicitly address data protection, two requirements under these laws have implications for how companies prevent and respond to data breaches. First, federal securities laws may require companies to adopt controls designed to protect against data breaches. Second, federal securities laws may require companies to discuss data breaches when making required disclosures under securities laws. Children's Online Privacy Protection Act (COPPA): The COPPA and the FTC's implementing regulations regulate the online collection and use of children's information. Specifically, COPPA's requirements apply to: (1) any "operator" of a website or online service that is "directed to children," or (2) any operator that has any "actual knowledge that it is collecting personal information from a child" (i.e., covered operators). Covered operators must comply with various requirements regarding data collection and use, privacy policy notifications, and data security. Electronic Communications Privacy Act (ECPA): The ECPA was enacted in 1986, and is composed of three acts: the Wiretap Act, the Stored Communications Act (SCA), and the Pen Register Act. Much of ECPA is directed at law enforcement, providing "Fourth Amendment like privacy protections" to electronic communications. However, "ECPA's three acts also contain privacy obligations relevant to non-governmental actors. ECPA is perhaps the most compressive federal law on electronic privacy, as it is not sector-specific, and many of its provisions apply to a wide range of private and public actors. Nevertheless, its impact on online privacy has been limited. As some commentators have observed, ECPA "was designed to regulate wiretapping and electronic snooping rather than commercial data gathering," and litigants attempting to apply ECPA to online data collection have generally been unsuccessful. Computer Fraud and Abuse Act (CFAA): The CFAA was originally intended as a computer hacking statute and is centrally concerned with prohibiting unauthorized intrusions into computers, rather than addressing other data protection issues such as the collection or use of data. Specifically, the CFAA imposes liability when a person "intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains… information from any protected computer." A "protected computer" is broadly defined as any computer used in or affecting interstate commerce or communications, functionally allowing the statute to apply to any computer that is connected to the internet. Federal Trade Commission Act (FTC Act): The FTC Act has emerged as a critical law relevant to data privacy and security. As some commentators have noted, the FTC has used its authority under the Act to become the "go-to agency for privacy," effectively filling in gaps left by the aforementioned federal statutes. While the FTC Act was originally enacted in 1914 to strengthen competition law, the 1938 Wheeler-Lea amendment revised Section 5 of the Act to prohibit a broad range of unscrupulous or misleading practices harmful to consumers. The Act gives the FTC jurisdiction over most individuals and entities, although there are several exemptions. For instance, the FTC Act exempts common carriers, nonprofits, and financial institutions such as banks, savings and loan institutions, and federal credit unions. Consumer Financial Protection Act (CFPA): Similar to the FTC Act, the CFPA prohibits covered entities from engaging in certain unfair, deceptive, or abusive acts. Enacted in 2010 as Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPA created the Consumer Financial Protection Bureau (CFPB) as an independent agency within the Federal Reserve System. The Act gives the CFPB certain "organic" authorities, including the authority to take any action to prevent any "covered person" from "committing or engaging in an unfair, deceptive, or abusive act or practice" (UDAAP) in connection with offering or providing a "consumer financial product or service." State laws, such as California Consumer Privacy Act (CCPA), and international laws, such as European Union's General Data Protection Regulations (GDPR), aim to provide a comprehensive guidance on digital privacy. The FTC Act and the Clayton Act are the primary statutes that give the FTC investigative, law enforcement, and litigating authority to protect consumers and promote competition (i.e., antitrust). The FTC "has enforcement or administrative responsibilities under more than 70 laws." The FTC's consumer protection mission currently focuses more on data security issues—such as identity theft, violation of Do Not Call or Do Not Track, and deceptive advertising—than digital privacy concerns associated with lawful activities. While consumer protection and digital privacy are increasingly becoming synonymous, consumer protection law alone may not provide sufficient jurisdiction and authority to encompass digital privacy and data security issues for all data on all devices. Data Privacy and Data Security Digital privacy discussions often involve two closely associated topics: data privacy and data security. Data privacy is the governing of data collection, use, and sharing. Data security is protection of data from unauthorized or malicious actors. These two topics often differ in the lawfulness of activities, the intended use of data, and the effect on an individual. Data security is an aspect of cybersecurity more so than privacy. Data security defends against illicit activities such as theft of data. Data security practices include proactive measures against cyber-attacks and responsive measures such as sending notifications to affected individuals upon a data breach. Data security issues typically involve actors whose intents are malicious, who carry out unlawful activities, and use data in ways that harm an individual. Examples include breaking into a database or sending spear phishing emails to steal identity and financial information. Stolen identity and financial information are often exploited, causing financial damage to individuals and businesses. Privacy implications arise when personal information is compromised during a data security incident. D ata privacy practices determine how and to what extent data are collected, used, and with whom the data are shared. Data privacy sets the scope for control of personal information—this may include data ownership and responsibilities of involved entities. Data privacy issues typically arise from lawful activities, but personal information may have been collected, used, or shared beyond given permission or awareness of an individual. The process or results may reveal aspects of an individual that were unexpected. Examples of data privacy issues include mobile apps and websites collecting and using an individual's online activity and location data to suggest targeted ads. In general, such activities are a lawful commercial marketing strategy, from which the customers may benefit in forms of enhanced user experience and discounts. But, these activities become an issue when they lack transparency (i.e., when customers are not aware of what information is collected on them, who shares the information with whom, and how the information is used and for what purpose). Individuals may experience that their rights to privacy have been violated when aggregation of information reveals highly targeted information that an individual did not anticipate. Key aspects of data privacy—such as data collection, storage, sharing, access, and use—are not defined for digital data that are often leveraged by convergent technologies. These key aspects are defined only for certain types of information, such as medical and financial, where federal laws are in place. Similar guidance is limited or not available for other personal data, such as the following: Geolocation data collected by apps; Contact information and other user-generated content on social media; Video recordings made by smart home IoT devices; Voice recordings made by virtual assistants; and Vitals and health data collected by fitness tracking wearable IoT devices. Committees in both the House and the Senate of the 115 th Congress held several hearings where technology companies were present as witnesses. Over a dozen bills were introduced in the 115 th Congress to address various aspects of data privacy and security; but, none became a law. Committees in both the House and the Senate of the 116 th Congress have already held multiple hearings on privacy. Several bills were introduced by the 116 th Congress to address data privacy concerns as they relate to technological convergence. These bills include the following: H.R. 1282 (Representative Bobby Rush), introduced on February 14, 2019, as the Data Accountability and Trust Act, would "require certain entities who collect and maintain personal information of individuals to secure such information and to provide notice to such individuals in the case of a breach of security involving such information…." This bill would define the term personal information; outline special requirements for information brokers; and assign specific responsibilities to the FTC to regulate commercial entities' data security policies and procedures for using and protecting personal information. S. 142 (Senator Marco Rubio), introduced on January 16, 2019, as the American Data Dissemination (ADD) Act of 2019, would "impose privacy requirements on providers of internet services similar to the requirement imposed on Federal agencies under the Privacy Act of 1974." This bill would require the FTC to submit recommendations for privacy requirements for internet service providers. S. 189 (Senator Amy Klobuchar), introduced on January 17, 2019, as the Social Media Privacy Protection and Consumer Rights Act of 2019, would "protect the privacy of users of social media and other online platforms." This bill would require commercial entities with an online platform to clearly disclose their practices for personal data collection and use prior to obtaining user consents. This bill also outlines enforcement of privacy requirements by the FTC and the attorney general of each state. S. 583 (Senator Catherine Cortez Masto), introduced on February 27, 2019, as the Digital Accountability and Transparency to Advance (DATA) Privacy Act, would provide "digital accountability and transparency." This bill would require commercial entities to clearly disclose its privacy practices for various collected data. This bill also would require the FTC to enforce privacy practices to ensure that the minimum requirements are satisfied. Data Brokers According to the FTC, data brokers are companies that collect consumers' personal information and resell or share that information with others. Data brokers collect personal information about consumers from a wide range of sources and provide it for a variety of purposes, including verifying an individual's identity, marking products, and detecting fraud. Because these companies generally never interact with consumers, consumers are often unaware of their existence, much less the variety of practices in which they engage. The FTC classifies data brokers into three categories: 1. Entities subject to the FCRA; 2. Entities that maintain data for marketing purposes; and 3. Non-FCRA covered entities that maintain data for non-marketing purposes that fall outside of the FCRA. The FCRA governs the activities of credit reporting agencies, such as Equifax, Experian, and TransUnion; entities furnishing information to credit reporting agencies; and individuals who use credit reports issued by credit reporting agencies. These entities subjected to the FCRA fall within the first of the three categories of data brokers listed above. However, the FCRA does not have privacy or data security provisions. Regarding the second and third categories of data brokers, the FTC report notes that "while the FCRA addresses a number of critical transparency issues associated with companies that sell data for credit, employment, and insurance purposes, data brokers within the other two categories remain opaque." Data brokerage companies include Acxiom, Cambridge Analytica, Corelogic, Datalogix, Epsilon, Exactis, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future in addition to the "big three" credit reporting agencies (Equifax, Experian, and TransUnion). Many data brokers, which are conducting lawful activities, are self-regulated. As depicted in Figure 3 , data brokerage companies purchase and aggregate information from various sources, which are also self-regulated. These sources include app developers, websites, and social media. As technological convergence continues to proliferate, more data will likely be generated and consumed. Aggregations of seemingly simple and benign pieces of data when examined together could expose highly personal aspects in detail. Data brokers and entities that collect data could significantly impact digital privacy especially if individuals remain unaware of activities pertaining to their personal data. Data Security Issues Congress may be interested in data and physical security aspects of converged technologies because ubiquitous access equates to more possible entry points for both authorized and unauthorized users. This is often referred to as increase in attack surface. As more converged devices become connected to each other and to the internet, the overall impact of a compromise increases, along with the possibility of a cascading effect of a cyberattack. In policies, the requirements and responsibilities of data protection may be addressed separately from privacy concerns associated with legal use of personal data. Data security, a component of cybersecurity, protects data from unauthorized access and use. Along with digital privacy, data security is a pertinent issue to technological convergence, which generates and consumes large volumes of data. Technological convergence poses a number of different types of potential data security concerns, including the following: potentially increased number of access points susceptible to cyberattacks, linkage to physical security, and theft of data. Increased connectivity generally translates to increased risk of cyberattack. Converged technologies, such as IoT devices, offer the users ubiquitous access: access from anywhere, at any time, using any device. While this is an extremely convenient characteristic, it also poses cybersecurity concerns. Multiple access points equate to increased points or opportunities for potential exploitation by malicious actors. This is often described as increased attack vectors, or broadening attack surface, which is a sum of attack vectors. The same entry points a user may use for remote access can be exploited by an adversary to steal personal information. From the data security perspective, this is a tradeoff to consider between convenience and vulnerability. Cybersecurity and physical security are directly linked through converged technologies. For example, when smart doors and smart locks are remotely controlled by a malicious actor through cyberattack, the physical security of that building also becomes compromised. The damage may not be limited to loss of digital content or information. Loss of personal data stored in the compromised location as well as personal security could be in jeopardy. Potential loss or theft of personal data may be a data security concern for converged technologies because IoT devices often do not employ strong encryption at the device or user interface level. Not implementing strong encryption may be intentional due to associated benefits—it usually keeps the cost low, increases battery life of devices, minimizes memory requirements, reduces device size, and is easier to use or implement. This means, not only is the attack vector increased, but a system is also easier to break into. IoT devices may be the most vulnerable points of a system targeted by malicious actors for exploitation. Some experts note that IoT security currently lacks critical elements such as end-to-end security solutions, common security standards across the IoT industry, and customers' willingness to pay additional cost for enhanced security. Congressional Considerations for Technological Convergence With relatively few policies in place for specifically overseeing technological convergence, Congress may consider potential policy options to address the issues discussed in this report. The fundamental policy considerations to identifying options may be determining the role, if any, of the federal government in overseeing technological convergence, digital privacy, and data security. Regulatory Considerations Regulating technological convergence may entail policies for jurisdictional deconfliction, harmonization, and expansion to address blended or new categories of technology. Currently, aspects of converged technologies may be regulated by different agencies based on the individual technologies that compose the convergence, but not as a whole. Regulating a converged technology as a whole can also be challenging because the combinations of technologies may generate too many possible outcomes. When converged technologies establish a new domain and fall outside of existing regulatory jurisdictions, they are often left to self-regulate. Congress and the Administration could take a number of approaches in regulating technological convergence. Three potential approaches are discussed here. First, the federal government could continue to allow industry to self-regulate, especially where technology evolves quickly. This may promote innovative space, but relies on the industry to exercise responsible and accountable practices. Second, Congress and the Administration could maintain current regulatory jurisdiction but leverage a deconfliction or harmonization policy so that convergent technologies are regulated under one primary authority instead of potentially multiple authorities. Preserving existing regulatory jurisdiction may require minimal restructuring and allow relatively short timeline for implementation. While a deconfliction or harmonization policy could increase coordination, overlaying such policy on an existing regulatory framework may not present the most efficient process. Third, the Administration could consider expanding regulatory jurisdictions and authorities to include new and emerging convergent technologies that are self-regulated. This may require a complete overhaul of the technology regulatory framework, requiring congressional action and a relatively lengthy adaptation timeline for the affected industries. Some could also view such actions as extensive regulation that stifles innovation and commercial growth. On the other hand, this approach could present an opportunity to update policies on par with technology progressions and posture for emerging capabilities. Digital Privacy Considerations Federal data protection laws currently in place apply to specific types of data and have varied privacy and data security provisions. A federal law that comprehensively addresses digital privacy for all types of data is not in place. While illegal use of personal information (such as identity theft and fraud) is defined and enforced by federal agencies, legal use of data generated by users or converged technologies (such as social media and IoT) is not regulated to the same extent. Transparency into the activities of legal data brokers and collectors is limited. Congress may choose to define the role of the federal government overseeing digital privacy by introducing new comprehensive federal law(s) and/or by determining minimal required standards of digital privacy. An alternative option could be expanding existing digital privacy authorities. This could include deciding whether federal entities, such as the FTC, should have their rulemaking abilities clarified or expanded. An expanded or new federal digital privacy policy may require a variety of decisions by Congress. Two of many potential decisions pertaining to federal digital privacy policy are determining how data privacy and data security could be addressed legislatively and determining whether various types, or categories, of personal data should be treated equally or differently under varied guidance. Data Security Considerations Data security, as it pertains to technological convergence, may impact both the cyber and physical fronts. Some of the federal data protection laws currently in place have data security provisions, though they vary and may be focused predominantly on the cyber-aspect. This also means that different data security protocols apply to different types of data. For instance, the guidance for notifying users when personal data gets compromised is different for health, financial, and location data. Similar to the digital privacy considerations, Congress could begin by determining whether overarching legislation for data security is necessary. Congress may consider new legislation explicitly addressing data security concerns pertaining to technological convergence. Or, Congress may consider new legislation to expand existing cybersecurity missions to address data security issues. Data security is often considered as a component of cybersecurity, but protection of the data is equally important as safeguarding a network or a system. As with any security challenge, finding the right balance between convenience and security measures is a key component of an effective security policy. A data security policy that predominantly focuses on security measures to address potential vulnerabilities created by converged technologies could negate convenient features and beneficial capabilities, such as ubiquitous access, offered by the converged technologies. On the other hand, allowing maximum accessibility without a security measure exposes both the data and the system to risks. Not having an updated data security policy relies on existing cybersecurity measures to address potential vulnerabilities introduced by technological convergence. Congress may determine whether data privacy and data security should be addressed in one policy. Data privacy and data security are linked and complementary, especially for digital information. While two coupled topics could be addressed in a single policy, data privacy and data security are two distinct issues. Having separate complementary policies could potentially focus more clearly on specific aspects of each issue.

Technological convergence, in general, refers to the trend or phenomenon where two or more independent technologies integrate and form a new outcome. One example is the smartphone. A smartphone integrated several independent technologies—such as telephone, computer, camera, music player, television (TV), and geolocating and navigation tool—into a single device. The smartphone has become its own, identifiable category of technology, establishing a $350 billion industry. Of the three closely associated convergences—technological convergence, media convergence, and network convergence—consumers most often directly engage with technological convergence. Technological convergent devices share three key characteristics. First, converged devices can execute multiple functions to serve blended purpose. Second, converged devices can collect and use data in various formats and employ machine learning techniques to deliver enhanced user experience. Third, converged devices are connected to a network directly and/or are interconnected with other devices to offer ubiquitous access to users. Technological convergence may present a range of issues where Congress may take legislative and/or oversight actions. Three selected issue areas associated with technological convergence are regulatory jurisdiction, digital privacy, and data security. First, merging and integrating multiple technologies from distinct functional categories into one converged technology may pose challenges to defining regulatory policies and responsibilities. Determining oversight jurisdictions and regulatory authorities for converged technologies can become unclear as the boundaries that once separated single-function technologies blend together. A challenge for Congress may be in delineating which government agency has jurisdiction over various converged technologies. Defining policies that regulate technological convergence industry may not be simple or straightforward. This may further complicate how Congress oversees government agencies and converged industries due to blending boundaries of existing categories. Second, converged technologies collect and use personal and machine data which may raise digital privacy concerns for consumers. Data collection and usage are tied to digital privacy issues because a piece or aggregation of information could identify an individual or reveal patterns in one's activities. Converged or smart technologies leverage large volumes of data to try to improve the user experience by generating more tailored and anticipatory results. However, such data can potentially identify, locate, track, and monitor an individual without the person's knowledge. Such data can also potentially be sold to third-party entities without an individual's awareness. As the use of converged technologies continues to propagate, digital privacy issues will likely remain central. Third, data security concerns are often associated with smart devices' convenient ubiquitous features that may double as vulnerabilities exploited by malicious actors. Data security, a component of cybersecurity, protects data from unauthorized access and use. Along with digital privacy, data security is a pertinent issue to technological convergence. As converged devices generate and consume large volumes of data, multiple data security concerns have emerged: potentially increased number of access points susceptible to cyberattacks, linkage to physical security, and theft of data. Relatively few policies are in place for specifically overseeing technological convergence, and current federal data protection laws have varied privacy and data security provisions for different types of personal data. To address regulatory, digital privacy, and data security issues, Congress may consider the role of the federal government in an environment where technological evolution changes quickly and continues to disrupt existing regulatory frameworks. Regulating technological convergence may entail policies for jurisdictional deconfliction, harmonization, and expansion to address blended or new categories of technology. One approach could be for Congress to define the role of federal government oversight of digital privacy and data security by introducing new legislation that comprehensively addresses digital privacy and data security issues or by expanding the current authorities of federal agencies. When considering new legislation or expanding the authorities of federal agencies, three potential policy decisions are (1) whether data privacy and data security should be addressed together or separately, (2) whether various types of personal data should be treated equally or differently, and (3) which agencies should be responsible for implementing any new laws.

GAO_GAO-20-330

Background Federal Roles and Responsibilities Within DHS, ICE is responsible for immigration enforcement and removal operations. This entails, among other duties, identifying, arresting, and detaining foreign nationals for the administrative purpose of facilitating their appearance during removal proceedings, and for processing, and preparing them for removal from the United States, among other things. As such, ICE manages the nation’s immigration detention system, which houses foreign nationals detained while their immigration cases are pending or after being ordered removed from the country. ICE generally has broad discretion in determining whether to detain removable foreign nationals or release them under various conditions, unless the law specifies that detention is mandatory. Additionally, foreign nationals arriving at the U.S. border or a port of entry without valid entry documents and placed into expedited removal proceedings are required to be detained while awaiting an inadmissibility determination and, as applicable, any subsequent credible fear decision. Except in cases where detention is mandatory, ICE may release an individual pending the outcome of removal proceedings and has various release options for doing so, including the Alternatives to Detention program. While foreign nationals are detained, ICE is responsible for providing accommodations and medical care to individuals in detention with special needs or vulnerabilities, such as those who are pregnant. ICE’s December 2017 memo, Identification and Monitoring of Pregnant Detainees, sets forth policy and procedures to ensure pregnant detainees in ICE custody are identified, monitored, tracked, and housed in an appropriate facility. CBP is a component within DHS and the lead federal agency charged with a dual mission of facilitating the flow of legitimate travel and trade at our nation’s borders while also keeping terrorists and their weapons, criminals and their contraband, and inadmissible foreign nationals out of the country. CBP temporarily holds individuals to complete general processing and determine the appropriate course of action, such as transferring them to a court, jail, prison, or another agency; relocating them into ICE detention facilities; removing them from the country; or releasing them—as CBP has discretion to release individuals with a notice to appear in court. Within CBP, individuals, including pregnant women, could be held by Border Patrol or OFO. ICE Detention Facility Types, Detention Standards, and Medical Care ICE detains individuals in both under-72-hour and over-72-hour detention facilities. Detention facilities may be for male only, female only, or both; and some are specifically reserved for family units (also known as family residential centers). ICE uses various types of detention facilities to hold detainees for more than 72-hours. These include ICE owned and operated detention facilities, also known as service processing centers, as well as facilities that ICE oversees but the day-to-day operations are generally run by another entity, as follows: contract detention facilities owned and operated by a private company under direct ICE contract that exclusively houses ICE detainees, facilities owned by state or local government or private entity, operating under an intergovernmental service agreement (IGSA), that exclusively houses ICE detainees or houses ICE detainees and other confined populations, and facilities owned by state or local government or private entity, operating under an intergovernmental agreement (IGA), or contract, with U.S. Marshals Service (USMS), that exclusively houses ICE detainees or houses ICE detainees and other confined populations. ICE detention facilities are generally required to adhere to one of four sets of detention standards. The detention standards vary depending on the contract or agreement. As we have previously reported, ICE’s detention standards are based on the American Correctional Association’s expected practices and have been updated when ICE identified issues of heightened concern or gaps in agency procedures. Some detention facilities used by ICE are not obligated to adhere to ICE’s detention standards—because, for example, ICE is a rider on the contract and the facility may be held to other standards. Further, on-site medical care may be directly provided by ICE Health Service Corps (IHSC) or other entities at these detention facilities. IHSC provides direct on-site medical services in 20 ICE facilities authorized to house detainees for over 72 hours. In addition to any applicable detention standards, IHSC staff must also adhere to IHSC policies. At detention facilities that are not staffed with IHSC personnel (non-IHSC facilities), medical care is provided onsite by local government staff or private contractors and overseen by IHSC. ICE inspects “authorized” detention facilities against detention standards and any applicable IHSC policies. Table 1 details information on each of the detention standards, the number of authorized facilities contractually obligated to each standard, the percent of the average daily population at each, and the presence of IHSC staff. CBP Facilities, Standards, and Medical Care CBP operates all of its short-term holding facilities and hold rooms, and does not utilize contract services for the management of individuals in CBP custody. In October 2015, CBP issued its first nationwide standards, which govern CBP’s interaction with detained individuals. The standards include requirements regarding transport, escort, detention, and search provisions, as well as care for “at-risk individuals”, which includes pregnant women. Given that CBP short-term facilities are intended to hold individuals for no more than 72 hours, CBP historically did not have on-site medical professionals at most of its facilities. However, as a result of surges in unaccompanied minors and families crossing the border, CBP issued a directive in January 2019 titled Interim Enhanced Medical Efforts (January 2019). According to the directive, enhanced medical services were needed to address growing public health concerns and mitigate risk to, and improve care for, individuals in CBP custody along the southwest border. The January 2019 directive was superseded by a December 2019 directive, Enhanced Medical Support Efforts, which also calls for medical support to mitigate risk to, and sustain enhanced medical efforts for persons in CBP custody along the southwest border. A related memo issued by the CBP Commissioner, titled CBP’s Expansion of Existing Medical Services Contracts and Expedited Deployment of Additional Contracted Medical Services Personnel to the Southwest Border, called for the expansion of CBP’s medical services contract to numerous Border Patrol facilities and OFO ports of entry along the southwest border. This effort is discussed later in our report. DHS Had Over 4,600 Detentions of Pregnant Women from 2016 through 2018 for Different Lengths of Time and In Varying Types of Facilities About Two-thirds of ICE’s Detentions of Pregnant Women Were for a Week or Less Number of pregnant women detentions. From calendar year 2016 through 2018, ICE had over 4,600 detentions of pregnant women. The number of detentions decreased from 1,380 in calendar year 2016 to 1,160 in 2017, and then increased to 2,098 in calendar year 2018 (see figure 1). Of the more than 4,600 detentions of pregnant women from calendar year 2016 through 2018, 32 percent involved pregnant women who were expedited removal cases and were subject to mandatory detention, including those that awaited a credible fear determination. Of the remaining detentions, 49 percent involved pregnant women who were deemed inadmissible and were either awaiting their hearing or an adjudication by an immigration judge, 11 percent involved pregnant women who had a final order of removal, and the remaining detentions (8 percent) involved various other immigration-related circumstances, such as those for which ICE was unable to obtain travel documents. Further, as we reported in December 2019, detentions of non-criminal pregnant women accounted for most of the total detentions of pregnant women each year (ranging from 91 to 97 percent). Length of detention. From calendar years 2016 through 2018, 68 percent of ICE detentions of pregnant women were for 7 days or less, 22 percent for 8 to 30 days, and 10 percent for more than 30 days, as shown in table 2. According to ICE officials, individual circumstances of each case dictate how long they detain a pregnant woman. For example, ICE may determine not to release a pregnant woman from ICE custody if her case is adjudicated quickly, she is ordered removed, and she is cleared to travel by a medical professional. Pregnancy outcomes. Our analysis of ICE data shows that from January 2015 through July 2019, 58 pregnant women in ICE custody experienced a miscarriage, two had an abortion, and one gave birth. Of those, 37 miscarriages and one birth involved women detained at IHSC-staffed facilities at the time of the outcome. Some of these women were in our study population of over 4,600 detentions from calendar years 2016 through 2018, but some were pregnant women detained in 2019. Most ICE Detentions of Pregnant Women Were at IHSC-Staffed Facilities; and Some Data on Gestation of Pregnancy Were Available Detention facility. Our analyses of ICE data found that of the over 4,600 detentions of pregnant women, 78 percent of detentions of pregnant women were initially detained at an IHSC-staffed facility. See appendix II for more details on these data. According to ICE officials, pregnant women may first learn about their pregnancy when a test is performed during their intake into a detention facility. These over 4,600 detentions of pregnant women resulted in approximately 50,300 detention days with more than 66 percent of total detention days spent at IHSC-staffed facilities (see App. II). Some facilities may have a large number of detention days associated with the intake of pregnant women, but may not detain women for a long period of time before releasing or transferring them. For example, at a facility that had one of the largest number of detention days for pregnant women, officials stated that they generally release women once the pregnancy is confirmed. Further, according to ICE officials, ICE will try to transfer pregnant women from their initial detention facility to an IHSC- staffed detention facility or a family residential center—if she is part of a family unit—to ensure they are provided the appropriate accommodations and care. For example, ICE may transfer a pregnant woman awaiting a credible fear determination, as these cases may take longer to process and result in longer detention stays. However, an IHSC official also stated that ICE may detain pregnant women at non-IHSC facilities if ICE believes that the facility can provide the appropriate level of care. Nearly 70 percent of pregnant women’s detention days were spent at an IHSC- staffed facility or a family residential center. Contract detention facilities— both IHSC-staffed and non-IHSC—had the highest average number of days for the detention of pregnant women, as shown in table 3. Gestation of pregnancy. Of the 1,450 detentions of pregnant women for which gestation data were available, 49 percent were for women in their first trimester and 41 percent were for women in their second trimester at the time of intake. Ten percent were for women in their third trimester at the time of intake. Of the detentions involving pregnant women in their third trimester, 75 percent were released within one week or less, 9 percent between 8 and 15 days, and the remaining 16 percent between 16 and 90 days. According to ICE officials, ICE does not detain pregnant woman in their third trimester or a pregnant woman who is unlikely to be removed. However, officials stated that there are instances when it takes ICE time to gather information prior to making a custody determination— such as when it needs to collect criminal conviction data to making a custody determination—which could result in detained pregnant women who are nearing or in their third trimester. This is consistent with what ICE officials told us during our visits to facilities in all four locations—that they generally do not detain pregnant women in their third trimester. However, some explained, that pregnant women in their third trimester may be detained if, for example, they are subject to mandatory detention. CBP Has Data on Pregnant Women in Certain Locations and Has Taken Action that Could Provide Additional Information on Pregnant Women at Other Locations Number of pregnant women. Because of CBP facilities’ short-term nature and limited on-site medical care, CBP does not routinely conduct pregnancy tests of women in their custody, and as such, has limited data on pregnancy. However, ICE data provide insight into CBP encounters with pregnant women. Specifically, our analysis of ICE data from calendar years 2016 through 2018 indicated that nearly 4,400 of ICE’s over 4,600 detentions of pregnant women resulted from CBP arrests. In addition, OFO and Border Patrol collected some data on women in their custody who reported being pregnant. OFO reported holding over 3,900 pregnant women from March 2018 through September 2019 at its ports of entry. At the two sectors where Border Patrol is required to collect such data, Border Patrol reported holding over 750 pregnant women in its facilities from March 2017 through March 2019. As shown in table 4, most of these women reported being in their second or third trimester. These women may have been transferred to ICE and may also be included in the count of pregnant women detained by ICE. In accordance with its January 2019 directive, Interim Enhanced Medical Efforts (January 2019), CBP developed a standardized health interview form that can be used by Border Patrol and OFO. The form includes a question about pregnancy and nursing which could allow for additional data on the number of women in CBP custody that report being pregnant. In December 2019, CBP officials told us that they distributed the form to its field locations. Pregnancy Outcomes. In addition, we reviewed CBP significant incident reports to determine if any pregnant woman encountered or held by CBP had experienced a birth, stillbirth, or miscarriage during calendar year 2015 through February 2019. Our analysis of CBP reports during this time frame found that pregnant women encountered or apprehended by CBP experienced 43 births, three miscarriages, and six stillbirths after being taken to the hospital by CBP. In some of these incidents, Border Patrol agents encountered pregnant women in the field and took them directly to the hospital. In these cases, the pregnant woman was not in a Border Patrol facility directly prior to being taken to the hospital. DHS Policies and Detention Standards that Address the Care of Pregnant Women Vary by Facility Type and Component ICE Policies and Detention Standards Address a Range of Pregnancy-Care Topics that Vary across Facility Types; ICE Has Planned Updates to Address Gaps ICE has policies and detention standards that address a variety of pregnancy-related topics regarding the care of pregnant women, such as pregnancy testing requirements, the use of restraints, and prenatal care. However, we identified certain facility types that did not address all pregnancy-related topics in their policies or detention standards as of December 2019, which ICE is taking actions to address. Appendix III details ICE’s policies and detention standards related to the care of pregnant women in detention. For the purpose of our analysis, the facility type is based on contractually obligated detention standards and the presence of IHSC staff, as these factors dictate which detention standards the facility type is required to adhere to and whether IHSC policies apply. Specifically, we identified 16 topics related to the care of pregnant women and found that in most facility types, ICE had at least one policy or detention standard that addressed many of these topics. Further, we found that if the facility type had policies or detention standards in place regarding a specific topic on the care of pregnant women, at least one of the policies or detention standards generally aligned with recommended guidance from professional associations, NGOs, and federal agencies, (see app. IV for our summary of recommended guidance and associated examples). In addition, we found that from calendar years 2016 through 2018, 64 percent of the detentions of pregnant women were initially detained at the two facility types that had the most policies or detention standards related to each of the pregnancy topics, as of December 2019. Table 5 shows whether policies or detention standards at the various facility types addressed each of the 16 topics, as well as the associated number of detentions of pregnant women—based on the facility in which they were first detained and number of detention days from calendar years 2016 through 2018. ICE is taking numerous actions to address these gaps in its policies and detention standards. For example, according to ICE officials, ICE has updated, or is in the process of updating, its policies and detention standards, and these updates will address many of the gaps that we identified for the pregnancy-related topics. Specifically, ICE revised its 2000 NDS in December 2019 and the 2007 Family Residential Standards are under revision and will be sent to management for review in February 2020. According to IHSC officials, the revised standards will address all of the gaps we identified for 2007 Family Residential Standards and 2000 NDS facility types. Further, IHSC officials stated that they are revising IHSC’s Women’s Health Directive and guidance on care for chronic conditions to include required and recommended vaccines for pregnant women and HIV care, respectively—which will address these gaps at IHSC-staffed facilities. Finally, according to ICE officials, facility types operating under the 2008 PBNDS will be modified to either the 2019 NDS 2019 or 2011 PBNDS. In addition to these updates, in accordance with ICE’s December 2017 memo on Identification and Monitoring of Pregnant Detainees, ICE is to ensure pregnant detainees receive appropriate medical care, and ensure detention facilities are aware of their obligations regarding directives and detention standards that apply to pregnant detainees, among other things. ICE has mechanisms for maintaining oversight of pregnant detainees, as required by policy. Specifically, ICE collects data to monitor the condition of pregnant women in its custody, and according to ICE officials, ensures that the facility can accommodate the woman. In addition, IHSC conducts weekly reviews that focus on high-risk pregnancies, pregnancies in the third trimester, and recent miscarriages. According to an IHSC official, ICE inspections can contribute to IHSC’s understanding of the care of pregnant women at a given facility. Further, although ICE officials stated that it does not have training dedicated to the care of pregnant women in ICE detention specifically, its basic training includes instruction on pregnant detainees. This training is in addition to the professional qualifications of medical staff onsite. CBP Has Policies and Standards Regarding Its Short-Term Care of Pregnant Women CBP has some policies and standards regarding the care of pregnant women held in their short-term facilities. Specifically, CBP has national standards on the transport, escort, detention, and search of detainees, with specific requirements for pregnant women. For example, these standards state that barring exigent circumstances, CBP must not use restraints on pregnant detainees unless they have demonstrated or threatened violent behavior, have a history of criminal or violent activity or an articulable likelihood of escape exists. Further, Border Patrol and OFO have policies that address nutrition and special accommodations for pregnant women. See appendix V for more details on CBP policies related to pregnant women. Although these policies and national standards do not cover the full range of the 16 pregnancy-related care topics we identified, CBP facilities are designed for holding individuals for no more than 72 hours; therefore, CBP’s facilities are not equipped to provide long-term care. Specifically, CBP does not routinely conduct pregnancy testing and historically it did not have on-site medical care at all its facilities. For the policies and standards that CBP does have in place regarding pregnant women, we found that they generally aligned with the recommended guidance from expert and professional organizations. In addition to policies that direct the care of pregnant women, although CBP does not have training dedicated to the care of pregnant women specifically, CBP provides initial and annual refresher training on its national standards for the transport, escort, detention, and search of detainees, which includes requirements for pregnant women. DHS Inspections, Medical Data, and Complaints Offer Insights into the Care Provided to Pregnant Women ICE Inspections Found 79 Percent or Greater Compliance with Most of Its Pregnancy-Related Performance Measures ICE uses various inspections for accessing facilities’ compliance with policies and detention standards—the frequency and focus of which vary. Some inspections also include pregnancy-related performance measures, such as a measure assessing whether a pregnancy test was performed at intake. We reviewed results from the five ICE inspections that address compliance with pregnancy-related policies and detention standards from 2015 through June 2019. These inspections vary in their scope and targeted facility types (see app. I for more details on each of these inspections). These inspections—along with available medical data—offer insight into the care of pregnant women. Two inspections include pregnancy-related performance measures, and compliance with these measures ranged from 53 to 100 percent, with most indicating 79 percent or more compliance. Specifically, one inspection of 129 ICE detention facilities—that included inspections of both IHSC-staffed and non-IHSC facilities—found that compliance was 91 percent or more for each of the six performance measures from December 2016 through March 2019, as shown below. Pregnancy testing performed at intake: 93 percent Pregnancy testing performed prior to x-rays or initiating medication: 100 percent Obstetrician-gynecologist (OB-GYN) consult ordered within 7 days of pregnancy confirmation: 98 percent Patient seen by OB-GYN within 30 days of pregnancy confirmation: Prenatal vitamins prescribed: 100 percent Screened for HIV, sexually transmitted infections, and viral hepatitis: Instances of non-compliance—which were 9 percent or less for each measure—occurred at 16 detention facilities subject to a range of detention standards. Three of these facilities were IHSC-staffed facilities, and 13 were non-IHSC facilities. IHSC documentation indicates that corrective actions are to be implemented to help address inspection findings. See appendix VI for details on the number of records reviewed during the inspections, and the compliance rates. Our analysis of available medical data and interviews with pregnant detainees showed similar findings regarding pregnancy testing at intake. Specifically, from calendar year 2016 through 2018, 92 percent of women in ICE detention facilities received a pregnancy test either the same day as intake to the facility or the next day. This could include women who arrived at a detention facility in the evening and are tested the next day. Of the remaining, 3 percent were tested within 2 to 3 days of intake, 4 percent were tested between 4 days and 2 weeks, and 2 percent were tested after 2 weeks of being detained. According to the 10 pregnant women we interviewed who were detained at 3 ICE detention facilities we visited, all 10 stated that they received a pregnancy test when they arrived at the facility or within the same day. For the second inspection that included performance measures related to the care of pregnant women at IHSC-staffed facilities, overall compliance was 79 percent or more for most of the nine performance measures from fiscal years 2015 through 2018. The following shows the minimum level of overall compliance for all facilities during this timeframe. OB-GYN consult ordered and documented within 7 days of pregnancy Patient seen by OB-GYN within 30 days: 92 percent Prenatal vitamins prescribed: 95 percent Detainee education documented at each encounter: 79 percent Records reviewed by provider after OB appointment: 79 percent Proper diet ordered: 86 percent Appropriate labs ordered if not obtained from OB-GYN: 79 percent Pregnant patient screened for HIV, sexually transmitted infections, and viral hepatitis: 81 percent Hepatitis B vaccine offered: 53 percent However, for one measure—whether the Hepatitis B vaccine was offered—compliance was 53 percent. ICE officials stated that this performance measure reflects recommended practices but is not specifically required by policy or detention standards. According to ICE officials, any issues identified during IHSC inspections are handled locally at the field level through facilities’ quality improvement processes, which includes developing corrective action plans. See appendix VI for the average annual compliance for each measure from fiscal years 2015 through 2018. Our analysis of available medical data for IHSC-staffed facilities and interviews with pregnant detainees and NGOs provides additional perspectives regarding these issues on the care of pregnant women. Specifically, our analysis of ICE data showed 422 detentions in which a pregnant woman was in an IHSC-staffed facility at some point received at least one referral to an OB or OB-GYN between calendar year 2016 and 2018. Based on ICE’s performance measures, pregnant women are to receive an OB-GYN referral within 7 days of pregnancy confirmation— although available data showed that most pregnant women were being released from detention within 7 days. In addition, our analysis of ICE data showed that detentions in which a pregnant woman was in an IHSC- staffed facility at some point were assigned certain special needs, such as a special diet (1,245), lower bunk (113), no heavy lifting (87), and limitations on the use of restraints (316). In addition, all 7 of the pregnant women we spoke with in IHSC-staffed detention facilities said that they received appropriate accommodations, such as a lower bunk and blankets. Similarly, 6 of the 7 pregnant women we spoke with at IHSC-staffed facilities said that they were provided proper nutrition and snacks. The other pregnant woman did not discuss the adequacy of the nutrition she was provided. In addition, both of these two inspections provided insights into OB-GYN referrals and prenatal vitamins that were generally similar to the information we obtained from pregnant detainees at the locations we visited. Specifically, the above inspections indicated 75 to 98 percent compliance on performance measures related to access to OB-GYN care. Eight of the 10 pregnant women we spoke with in ICE detention did not express concerns about access to OB-GYN when asked about the sufficiency of medical care. However, two stated that they would like more timely access to an OB-GYN, and they did not know when their appointments would occur. In addition, representatives from three NGOs stated that they heard concerns about pregnant women not having access to OB-GYN care or prenatal vitamins. Further, the above inspections indicated 95 to 100 percent compliance on performance measures related to prescribing prenatal vitamins, and all 10 of the pregnant women we spoke with in ICE detention said that they were provided prenatal vitamins. Although they did not have specific performance measures, three additional inspections identified 19 findings related to the care of pregnant women. All of the findings occurred at non-IHSC facilities. Three of the 19 findings indicated that medical care was not provided or offered. For example, one pregnant woman was not offered a mental health assessment after reporting that she had a miscarriage at a prior facility. Seven included a recommendation to provide additional medical care, such as pregnancy testing. Four indicated insufficient documentation, such as medical records that were not transferred between facilities, or no documentation that pregnancy testing had occurred. Five indicated that a required policy did not exist or did not specify the required standards of care. All but one of the facilities inspected took corrective actions to address the findings. For example, one inspection found that the facility’s initial health assessment form did not address pregnancy testing. In response, the facility updated its intake screening form to include pregnancy testing. ICE determined that the facility that did not implement corrective actions to address deficiencies identified during the inspection would not be used for the detention of ICE detainees. See appendix VI for additional information on each deficiency, recommendation, and corrective action. Additionally, our review of available data and interviews with pregnant detainees and officials at the locations we visited provided insight into issues related to segregation and the use of restraints—generally finding that these were rarely used. Specifically, our review of ICE data identified two pregnant women who were initially detained from 2015 through 2018, and segregated at some point during their detention—one for 8 days and one for over 4 months. In both cases, ICE reported the reason for the segregation was that the detainee was a threat to the facility’s security. Further, all 10 of the pregnant women we interviewed stated that they had not been segregated, and all the detention officials we interviewed at the four locations we visited stated that they were not aware of any instances of pregnant women being segregated. Similarly, none of the 10 pregnant detainees reported being placed in restraints, and the officials we interviewed at the four locations generally stated that pregnant women are not to be restrained except in extreme circumstances, such as risk of violence or escape—which is consistent with ICE policies and standards. One official said that he was aware of an incident where a pregnant woman was restrained when she attempted to harm herself and her child. In addition, officials from five local organizations or coalitions we spoke with stated that they had not heard concerns about instances of the use of restraints or segregation. CBP Generally Takes Pregnant Women to Offsite Facilities for Care, and Has Plans to Enhance its Medical Support CBP generally relies on offsite care for pregnant women, and as a result, has limited available information on care CBP provided to pregnant women. However, they have efforts underway to enhance its medical support at selected facilities. As previously discussed, CBP facilities are designed for short-term care, and CBP does not routinely administer pregnancy tests and generally did not have on-site medical personnel. According to CBP officials, they typically refer individuals to local medical providers in their area, as appropriate and for all emergent or serious issues—including concerns presented by pregnant women. In addition, if CBP needed to provide a pregnancy test to a woman in its custody, it would take the woman to an offsite medical provider. Our analyses of available data indicate that CBP took pregnant women for a hospital visit or admission at least 168 times from 2015 through 2018. See table 6 for additional information. Ninety-nine percent of these hospital trips involved Border Patrol, while the remaining 4 percent involved OFO. Although CBP generally relies on offsite care for pregnant women, CBP established some on-site medical care and has efforts underway to enhance its medical support at additional Border Patrol facilities and OFO ports of entry. Specifically, one port of entry and three Border Patrol facilities established on-site medical care in 2013 and 2015, respectively. CBP officials at one of these locations told us that they developed on-site medical care based on the volume of crossings, as well as the operational costs for transporting individuals to offsite medical facilities and performing hospital watches. Subsequently, CBP’s January 2019 memo regarding enhanced medical efforts at CBP facilities included efforts to expand medical support. According to a senior CBP official, the agency had staffed more than 40 Border Patrol facilities and OFO ports of entry along the southwest border with on-site contracted medical care, as of January 2020. According to CBP officials, contracted medical staff provide enhanced medical support through initial health intake interviews, medical assessments, diagnosis, treatment, referral, and follow up for persons in custody, including pregnant women. CBP officials stated that they will continue to rely on offsite care to provide emergency or advanced care. Over 100 Complaints Were Filed about ICE and CBP’s Care of Pregnant Women DHS has various processes to obtain and address the hundreds of medical care complaints it receives annually. Specifically, an individual can file a complaint directly to facilities, ICE, CBP, and other DHS entities, including the Office of Inspector General and Office for Civil Rights and Civil Liberties (CRCL). We identified 107 unique complaints that detainees, family members, NGOs, or other parties submitted to various entities from January 2015 through April 2019—54 that involved ICE’s care of pregnant women, 50 that involved CBP, and 3 that involved both. As shown in figure 2, some of these complaints were under investigation as of August 2019, and some were substantiated; however, in most cases there was not enough information for the investigating agency to determine if proper care had been provided, among other things. Regarding the complaints against ICE, the most common type was that ICE allegedly did not provide medical care, or that the medical care was not quality or timely. See appendix VIII for additional information about the number and types of complaints submitted. Eleven of the 54 complaints against ICE remained open as part of an on- going investigation, while the remaining 43 were closed. Of the 43 complaints that were closed: An investigation substantiated one complaint that prenatal vitamins had not been provided at an IHSC-staffed facility. In response, ICE reported taking actions to address the complaint. Investigations partially substantiated one complaint regarding delays in medical care being provided. According to ICE, the delays had resulted from the time required to get medication approved. In response to the complaint, ICE reported coordinating with the facility to address the issues identified. Investigations found that 18 complaints were unsubstantiated. For example, ICE’s review of medical records found that appropriate care had been provided. For the remaining 23 closed complaints, the complaint was not substantiated or unsubstantiated for a variety of reasons. For 11 complaints, the investigating agency determined that it did not have enough information to conduct an investigation, or the agency investigated the complaint but did not have enough information to establish whether the complaint was substantiated or unsubstantiated. For example, the allegation did not contain detailed biographical information, medical records did not contain enough information, or the detainee had been released and the agency could not follow-up. For the remaining 12 complaints, agency documentation did not clearly specify whether the complaint was substantiated or unsubstantiated. Regarding complaints against CBP, the most common type was that pregnant women had allegedly been physically, verbally, or otherwise mistreated. See appendix VIII for additional information about the number and types of complaints submitted. Of the 50 complaints against CBP, four remained open as part of an on- going investigation, while the remaining 46 were closed. Of the 46 complaints that were closed: An investigation substantiated one complaint that a Border Patrol agent violated social media policy by posting a picture and information about a pregnant woman in custody. In response, CBP reported that the employee was suspended for two days. Investigations found that five complaints were unsubstantiated, and one was partially unsubstantiated. For example, an investigation included a review of video footage at a port of entry, among other things, and found that excessive force had not been used. Eight complaints described an event that occurred, such as a miscarriage, but the complaint did not allege that mistreatment or improper care occurred. For the remaining 31 closed complaints, the complaint was not substantiated or unsubstantiated—for a variety of reasons. For 10 complaints, the investigating agency determined that it did not have enough information to conduct an investigation, or the agency investigated the complaint but did not have enough information to establish whether the complaint was substantiated or unsubstantiated. For the remaining 21 complaints, agency documentation did not clearly specify whether the complaint was substantiated or unsubstantiated. With regard to the three complaints that involved allegations against both ICE and CBP, one remained open as part of an on-going investigation, while the other two complaints were found to be unsubstantiated. Agency Comments We provided a draft of this report to DHS for review and comment. DHS provided comments, which are reproduced in appendix IX. DHS also provided technical comments, which we incorporated as appropriate. In addition, we provided relevant excerpts of the report to American College of Obstetricians and Gynecologists, American Correctional Association, and National Commission on Correctional Health Care for review. Officials from these entities provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Acting Secretary of the Department of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or goodwing@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix X. Appendix I: Methodology for Analyses of Data, Inspections, and Complaints This appendix provides additional details on selected methodologies used to address our questions. Specifically, this includes information on our analyses of U.S. Immigration and Customs Enforcement (ICE) data and inspection findings and Department of Homeland Security (DHS) complaints used to address these questions: 1. What do available data indicate about pregnant women detained or held in DHS facilities? 2. What policies and standards does DHS have to address the care of pregnant women, and to what extent are they applicable across all facilities? 3. What is known about the care provided to pregnant women in DHS facilities? Analyses of ICE Data To address our first and third objectives, and provide context for our second objective, we reviewed data sources that ICE uses to track pregnant women in detention from calendar years 2016 through 2018 and matched these data with various ICE databases. We selected these years since ICE first collected data on all pregnant women beginning in June 2015, and 2018 was the last full year of available data for our audit. Specifically, we matched ICE Health Service Corps (IHSC) records for pregnant women detained during calendar years 2016 through 2018 with individual-level detention dataset the ICE Integrated Decision Support (IIDS) database to determine the total number of detentions of pregnant women, as well as the length of detention, facility location, case category status, arresting agency, gestation of pregnancy, when the pregnancy test was conducted, and whether there is an associated criminal conviction (criminality). To conduct our analyses, we matched pregnancy data to the IIDS detention data using alien number and excluded additional records we were unable to match. Because individuals may have multiple detentions, we compared the admission or book-in date from each data source with the book-in dates from the IIDS detention data, and excluded additional records with dates more than 30 days apart. ICE collected data for 1,437 pregnant detainees in 2016; 1,170 in 2017; and 2,126 in 2018. We excluded 60 of the unique pregnant detainee records for 2016; 20 for 2017; and 32 for 2018 because we were unable to match these records to the IIDS individual-level detention data using alien number and book-in date combinations. According to ICE officials, this may be due to data entry errors. As a result, our analyses are based on over 4,600 detainee records we were able to match: 1,377 for 2016; 1,150 for 2017; and 2,094 for 2018. In general, this was our study population, unless otherwise noted in the report. We also merged the detention data with data from ICE’s weekly facility list report, as of February 2019, to determine who owned and operated the facility, whether it was staffed by IHSC officials, and in what state the facility was located. Further, we merged additional IHSC data with our study population to determine the number of obstetrician-gynecologist referrals and numbers that were assigned certain special needs, such as a special diet, lower bunk, no heavy lifting, and limitations on the use of restraints. We also obtained and analyzed data from ICE’s Segregation Review Management System to determine if any of the pregnant women had been segregated. Finally, we analyzed ICE IHSC data on pregnancy outcomes—abortions, births, stillbirths, and miscarriages. These women who experienced such outcomes while detained may include the same women reported in our study population of more than 4,600 pregnant women detentions from calendar years 2016 through 2018, as well as pregnant women detained in calendar year 2015 and January through June 2019. We did not merge the outcome data with our other data sets, but were able to confirm that most of the outcomes were associated with alien numbers from the over 4,600 detentions in our study population. We assessed the reliability of the data used in each of our analyses by analyzing available documentation, such as related data dictionaries; interviewing ICE officials knowledgeable about the data; conducting electronic tests to identify missing data, anomalies, or potentially erroneous values; and following up with officials, as appropriate. We determined the data were sufficiently reliable for describing general information on pregnant women detained by ICE, as well as the care provided to them. Analyses of ICE Inspection Results To address our third objective, we analyzed reports and data from five ICE inspections that address compliance with pregnancy-related policies and detention standards from 2015 through July 2019—the most recent information available at the time of our review. We selected these inspections because they review some aspect of the care provided to pregnant women. Table 7 provides additional information on these inspections. As noted in the table, two of these inspections contained pregnancy- related performance measures. The remaining three inspections assess compliance and identified findings related to the care of pregnant women, but did not have specific performance measures. For the three inspections that did not contain performance measures, we categorized the nature of each finding, such as a recommendation to provide additional medical care. We developed these categories based on a content analysis of the inspection findings, which involved one analyst categorizing the finding and a second person verifying the categories. If there were differences in analyses, these were reconciled through discussion between the two analysts and a final determination of the appropriate category was made. We also analyzed ICE documentation on corrective actions that facilities reported taking to address inspection findings, and used ICE facility data to determine who provided medical care at these facilities. To determine the scope and any limitations of inspection reports and data, we spoke with agency officials responsible for managing these inspections and the data systems used for documenting results. We also reviewed relevant documentation, such as data dictionaries and inspection worksheets. We determined that these data were sufficiently reliable for our purposes of describing the results of inspections regarding the care of pregnant women in ICE custody. Analyses of Complaints We reviewed and categorized complaints that detainees, family members, non-governmental organizations, or other parties submitted to various entities from January 2015 through April 2019—the latest available complaints at the time of our review—regarding ICE and CBP’s care of pregnant women. Specifically, we reviewed complaint data from DHS’s Office for Civil Rights and Civil Liberties (CRCL), DHS’s Office of Inspector General, and IHSC. We selected these complaint systems because, according to DHS officials, they contained relevant information on the care of pregnant women, could be queried in an electronic format, and minimized duplicate complaints across systems. We categorized each complaint based on a content analysis of the complaint narrative, which involved one analyst categorizing the complaint and a second person verifying the category. If there were differences in analyses, these were reconciled through discussion between the two analysts and a final determination of the appropriate category was made. We developed categories for 10 pregnancy outcomes, including births or miscarriages at a DHS facility or hospital, as well as 20 categories to describe the nature of the concerns, including physical mistreatment, use of restraints, or medical care not provided. The total number of concerns identified in our analysis exceeds the number of unique complaints filed because each unique complaint may identify more than one area of concern. We also used ICE facility data to determine, for example, who provides medical care at the facilities where the alleged events occurred. In addition, we analyzed agency documentation on the extent to which complaints could be substantiated, and any corrective actions that agencies and facilities reported taking to address complaints. To determine the scope and any limitations of the complaint information we received, we spoke with agency officials responsible for managing these complaint processes and the data systems used for documenting results. We also reviewed relevant documentation, such as user manuals for complaint systems. Appendix II: Initial Detention Facility and Detention Days for Pregnant Women in U.S. Immigration and Customs Enforcement Facilities This appendix provides additional details on our analyses of U.S. Immigration and Customs Enforcement (ICE) data from calendar years 2016 through 2018 on (a) where pregnant women were initially detained and (b) facilities that had the largest number of detention days involving pregnant women. In particular, these analyses describe whether the facility has ICE Health Service Corps (IHSC) staff and who owns and operates the facility, based on contracts or agreements. Initial detention facility. Our analyses of ICE data found that of the over 4,600 detentions of pregnant women, in regards to IHSC presence, almost 78 percent of detentions of pregnant women were initially detained at an IHSC-staffed facility. Further, 51 percent were at service processing centers that are owned and primarily operated by ICE, all of which were also staffed by IHSC, as shown in table 8. According to ICE officials, many pregnant women first learn about their pregnancy when a test is performed during their intake into a detention facility. Although pregnant women were initially detained in various facility types—based on IHSC presence and who owns and operates the facility, most occurred in eight specific detention facilities located in three states. Specifically, of ICE’s over 4,600 pregnant women detentions from calendar year 2016 through 2018, 86 percent were initially detained in one of eight of these detention facilities—with one facility having 45 percent of the intakes of pregnant women. Facilities with the most number of detention days. For these over 4,600 detentions of pregnant women, ICE detained them for a total of almost 50,300 days from calendar year 2016 through 2018. Our analyses of ICE data found that of the 50,300 detention days of pregnant women, in regards to IHSC presence, 66 percent of these days were at an IHSC-staffed facility. Further, over half were at intergovernmental service agreement facilities—including family residential centers, as shown in table 9. Some facilities may have a large number of detention days associated with the intake of pregnant women, but these facilities may not detain women for a long period of time before releasing or transferring them. For example, at a facility that had one of the largest number of detention days for pregnant women, officials stated that they generally release women once the pregnancy is confirmed. Although pregnant women spent their detention days in various facility types—based on IHSC presence and who owns and operates the facility, most occurred in 19 specific detention facilities located in seven states. Specifically, of those days that pregnant women were detained by ICE, 89 percent of these days were in one of these 19 detention facilities. Appendix III: U.S. Immigration and Customs Enforcement Policies on Care for Pregnant Women U.S. Immigration and Customs Enforcement (ICE) detention facilities and staff are subject to a variety of policies, including ICE-wide policy directives and memoranda, ICE Health Service Corps (IHSC) policies, and detention standards, as of December 2019. We categorized and summarized these policies and standards, as shown below. ICE-wide Policies ICE-wide policies are directed at ICE staff and officers, and not to contractors or facility staff. The following ICE policies address pregnant detainees and ICE supervision of pregnant detainees: ICE Directive 11032.3: Identification and Monitoring of Pregnant Detainees (2017) ICE Directive 11065.1: Review of the Use of Segregation for ICE Detainees (2013) ICE Directive 11002.1: Parole of Arriving Aliens found to Have a Credible Fear of Persecution or Torture (2010) ICE Memorandum: Use of GPS Monitoring Devices on Persons who are Pregnant or Diagnosed with a Severe Medical Condition (2009) ICE ERO Policy 11155.1: Use of Restraints (2012) Enforcement and Removal Operations National Detainee Handbook (2016) These ICE-wide policies do not apply to contract or facility staff unless ICE modified the facility’s contract or if these are already included in the facility’s detention standards to which they are obligated. However, the National Detainee Handbook is a resource for detainees at detention facilities operating under ICE detention standards, excluding family residential centers. We categorized these policies and summarized them accordingly. Intake health screening inquiries about pregnancy. The policy refers to ICE’s responsibility to monitor detention facilities and ensure they meet national detention standard requirements to provide all newly admitted detainees an initial medical screening including pregnancy screening. ICE Directive 11032.3: Identification and Monitoring of Pregnant Detainees (2017) Provision of prenatal care. ICE supervisory staff have responsibilities to ensure that pregnant detainees receive appropriate medical care, including transfer to a different facility if necessary. ICE medical staff also have a responsibility to monitor the condition of pregnant detainees and communicate any concerns to supervisory staff. ICE Directive 11032.3: Identification and Monitoring of Pregnant Detainees (2017) Enforcement and Removal Operations National Detainee Handbook (2016) Segregation of pregnant women. ICE has a responsibility to monitor the use of segregation at detention facilities to ensure that they are adhering to detention standards. ICE Directive 11065.1: Review of the Use of Segregation for ICE Detainees (2013) Use of restraints on pregnant women. Officers should take reasonable precautions to avoid causing discomfort when transporting a restrained detainee. At processing sites or non-ICE detention facilities, ICE personnel shall follow local policies and procedures. ICE ERO Policy 11155.1: Use of Restraints (2012) Record keeping on pregnant women actions. ICE supervisors should ensure that ICE staff and contracted medical staff have processes to notify them of the arrival of a pregnant woman to a detention facility and ensure staff and facilities are aware of their obligations regarding pregnant detainees. IHSC staff are responsible for monitoring the condition of pregnant women while detained, as well as maintaining their medical records. Any instance of segregation of a pregnant woman must be documented in writing. ICE Directive 11032.3: Identification and Monitoring of Pregnant Detainees (2017) ICE Directive 11065.1: Review of the Use of Segregation for ICE Detainees (2013) IHSC-wide Policies IHSC policies are directed specifically toward IHSC staff at detention facilities where IHSC provides medical services. The following IHSC policies address pregnant detainees: ICE Directive 11772.2: Women’s Health Services (2017) ICE Directive 11741.4: Health Assessment (2016) ICE Directive 11742.2: Pre-Screening (2015) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) We categorized these policies and summarized them accordingly. Intake health screening inquiries about pregnancy. Intake screening includes pregnancy testing of women 10 to 56 years of age as well as questioning of pregnancy status. ICE Directive 11772.2: Women’s Health Services (2017) ICE Directive 11742.2: Pre-Screening (2015) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) Pregnancy testing at intake. Intake screening includes pregnancy testing of women 10 to 56 years of age and inquiry of reproductive health including previous pregnancies. ICE Directive 11772.2: Women’s Health Services (2017) ICE Directive 11741.4: Health Assessment (2016) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) Access to abortion. In the event of a threat to a woman’s life from carrying a pregnancy to term, or else in cases of rape or incest, ICE must bear the cost of a detainee’s decision to terminate a pregnancy; otherwise the woman must bear the cost. ICE should offer medical resources to support effective recovery and follow-up care. ICE Directive 11772.2: Women’s Health Services (2017) Provision of prenatal care. Pregnant women should be seen by medical providers at least once a month while detained. They should also be referred to an obstetric specialist, and their medical records shared with the specialist to facilitate care. ICE Directive 11772.2: Women’s Health Services (2017) ICE Directive 11741.4: Health Assessment (2016) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) Provision of postnatal care. A postpartum detainee must receive postnatal care from a medical provider, in consultation with an obstetric specialist, at least once a month. ICE Directive 11772.2: Women’s Health Services (2017) Mental health services and counseling for pregnant women. Any female detainee who gave birth, miscarried, or terminated a pregnancy within the last 30 days must receive a mental health evaluation, with the evaluation to occur no later than 72 hours after initial referral. ICE Directive 11772.2: Women’s Health Services (2017) Care for pregnant women with substance use disorder. Chemically dependent pregnant women are considered high-risk and should be referred to an obstetrician or other appropriate medical provider as soon as they are identified. ICE Directive 11772.2: Women’s Health Service (2017) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) Use of restraints on pregnant women. Pregnant detainees or those in postdelivery recuperation should not be restrained except in extraordinary circumstances that are documented by a supervisor or directed by a medical authority, whether in an ICE detention facility, in transport, or at a medical facility. Detainees in active labor or delivery can never be restrained. Even if restraints are used, a pregnant woman should never be restrained face down or on her back, or restrained with a belt that constricts the abdomen or pelvis. ICE Directive 11772.2: Women’s Health Service (2017) Record keeping on pregnant women actions. Intake screenings and assessments including pregnancy test results must be documented, as are risk factors for high risk pregnancies. Any use of restraints or request for abortion services must be documented. ICE supervisory staff must be notified within 72 hours of the arrival at a detention facility of a pregnant woman. ICE Directive 11772.2: Women’s Health Service (2017) ICE Directive 11741.4: Health Assessment (2016) ICE Directive 11744.2: Intake Screening and Intake Reviews (2016) ICE Detention Standards Entities that have a contract or agreement with ICE to hold immigration detainees are generally contractually obligated to one of four sets of detention standards. These standards address a range of our pregnancy- related categories of care and vary by standard. 2000 ICE National Detention Standards (NDS) 2007 ICE Family Residential Standards (FRS) 2008 ICE Performance-Based National Detention Standards 2008 (2008 PBNDS) 2011 ICE Performance-Based National Detention Standards 2011 (2011 PBNDS) We categorized these standards and summarized them accordingly. The 2011 PBNDS standards received revision in 2016. Whether a 2011 PBNDS facility is contractually required to adhere to the 2016 revision is dependent upon the contract language negotiated in each agreement. Where appropriate, the summaries below note changes to policy as a result of those revisions. Intake health screening inquiries about pregnancy. 2008 PBNDS: Initial screening should be done within 12 hours of arrival and should inquire about the possibility of pregnancy. 2011 PBNDS: Initial screening should be done within 12 hours of arrival and should inquire about the possibility of pregnancy. In the 2016 revisions, the evaluation also includes a pregnancy test for women aged 18 to 56. Pregnancy testing at intake. 2008 PBNDS: Initial screening should be done within 12 hours of arrival and should inquire about the possibility of pregnancy. 2011 PBNDS: In the 2016 revisions, initial screening includes pregnancy testing of women 18 to 56. Access to abortion. 2011 PBNDS: If the life of the mother is endangered by carrying the fetus to term, or in the case of rape or incest, ICE will assume the costs to terminate the pregnancy. ICE shall arrange the transportation for the medical appointment, and to counseling services if requested in all cases, including those where rape, incest, or risk to life do not apply. Every facility, either directly or via contractor, must provide female detainees with access to counseling for pregnancy planning if the detainee wishes to receive an abortion. Provision of prenatal care. FRS: Female residents will have access to pregnancy management services including routine prenatal care 2008 PBNDS: Female detainees will have access to pregnancy management services including routine prenatal care 2011 PBNDS: Pregnant detainees will have access to pregnancy management services including routine prenatal care. They will also receive access to a specialist and receive a health assessment. The 2016 revisions note those actions should occur as soon as appropriate or within two working days. The 2016 revisions also give the medical provider authority to identify pregnant detainees’ special needs such as diet or housing requirements and inform all necessary staff and authorities. Provision of postnatal care. FRS: Female residents will have access to pregnancy management services including postpartum follow-up care. 2008 PBNDS: Female detainees will have access to pregnancy management services including postpartum follow-up care. 2011 PBNDS: Pregnant detainees will have access to pregnancy management services including postpartum follow-up care. After giving birth, receiving an abortion or miscarrying, mental health assessments should also be offered. Provision of perinatal/labor care. 2011 PBNDS: Pregnant detainees will have access to specialized care including labor and delivery. Mental health services and counseling for pregnant women. FRS: Pregnant females will have access to pregnancy management services that include counseling and assistance. 2008 PBNDS: Pregnant females will have access to pregnancy management services that include counseling and assistance. 2011 PBNDS: Pregnant detainees will have access to care including counseling and assistance. Detainees can also request transportation to religious, medical and social counseling when considering termination of a pregnancy. In 2016 revisions, intake screening should include education to female detainees about mental health services related to pregnancy and women’s health. Care for pregnant women with substance use disorder. 2008 PBNDS: Female detainees will have access to pregnancy management services that include addiction management. 2011 PBNDS: In 2016 revisions, all chemically dependent pregnant detainees are to be considered high risk and referred to an obstetrician or other provider capable of addressing their needs immediately. HIV care for pregnant women. 2011 PBNDS: Medical personnel shall provide all detainees diagnosed with HIV/AIDS medical care consistent with national recommendations and guidelines disseminated through the U.S. Department of Health and Human Services, the Center for Disease Control, and the Infectious Diseases Society of America. Prenatal vitamins. 2011 PBNDS: Pregnant detainees will have access to prenatal care including prenatal vitamins. Nutrition for pregnant women. NDS: Physicians may order snacks or supplemental feedings to increase protein or calories for reasons including pregnancy. In hold rooms, pregnant women should have regular access to snacks, milk, and juice. FRS: Physicians may order snacks or supplemental feedings to increase protein or calories for reasons including pregnancy. Pregnant women will have access to pregnancy management services that include nutrition. 2008 PBNDS: Physicians may order snacks or supplemental feedings to increase protein or calories for reasons including pregnancy. In hold rooms, pregnant women should have regular access to snacks, milk, and juice. Pregnant women will have access to pregnancy management services that include nutrition. 2011 PBNDS: Physicians may order snacks or supplemental feedings to increase protein or calories for reasons including pregnancy. In hold rooms, pregnant women should have regular access to snacks, milk, and juice. Pregnant women will have access to pregnancy management services that include nutrition. Special consideration is given to pregnant women when providing meals and snacks during transportation. In the 2016 revisions, the medical provider is responsible for identifying special needs of pregnant detainees, including diet, and notifying all necessary staff. Special accommodations for pregnant women. 2008 PBNDS: In hold rooms, pregnant women will have access to temperature appropriate clothing and blankets and may, depending on facility, have access to bunks, cots, or beds, normally not kept in hold rooms. 2011 PBNDS: In hold rooms, pregnant women will have access to temperature appropriate clothing and blankets and may, depending on facility, have access to bunks, cots, or beds, normally not kept in hold rooms. Pregnant detainees should also have access to lactation services in the facility. In the 2016 revisions, the medical provider is responsible for identifying special needs of pregnant detainees and notifying all necessary staff. Segregation of pregnant women. 2011 PBNDS: In the 2016 revisions, it is stated that women who are pregnant, post-partum, recently had a miscarriage, or recently had a terminated pregnancy should as a general matter not be placed in a Special Management Unit. In very rare situations, a woman who is pregnant, postpartum, recently had a miscarriage, or recently had a terminated pregnancy may be placed in a Special Management Unit as a response to behavior that poses a serious and immediate risk of physical harm, or if the detainee has requested to be placed in protective custody administrative segregation and there are no more appropriate alternatives available. Also in the 2016 revisions, a facility administrator must notify the appropriate field office director in writing as soon as possible, but no later than 72 hours any time a pregnant woman or one who recently had a miscarriage is placed in segregation. In all cases, in the 2016 revisions, this decision must be approved by a representative of the detention facility administration, in consultation with a medical professional, and must be reviewed every 48 hours. Use of restraints on pregnant women. NDS: Pregnant detainees should be given special consideration if restrained as a result of a physical encounter. A medical professional should be consulted immediately in the aftermath, and the detainee examined. Pregnant detainees should be restrained in such a way as to avoid harming the fetus such as not restraining face down. FRS: Medical staff will advise on the necessary precautions to take when restraining a pregnant detainee and restraint should be done only when other methods have been tried or are impracticable. 2008 PBNDS: Medical staff will advise on the necessary precautions to take when restraining a pregnant detainee. Pregnant detainees should be restrained in such a way as to avoid harming the fetus such as not restraining face down. 2011 PBNDS: A pregnant detainee is not to be restrained except in truly extraordinary circumstances. Even then, it must be documented by a supervisor and directed by a medical authority. Women in active labor or delivery can never be restrained, and if restrained, the detainee should never be face down, on her back, or restrained with a belt that constricts the area of pregnancy. Record keeping on pregnant women actions. NDS: The medical provider of a facility will notify the ICE officer in charge whenever a pregnant detainee is identified and any use of force or application of restraints on a detainee should be followed by a medical examination, and its results documented. FRS: The medical provider of a facility will notify the ICE facility administrator whenever a pregnant detainee is identified. A treatment plan should be developed for any detainee requiring close medical supervision, and approved by the appropriate physician or other medical provider. 2011 PBNDS: When a detainee is pregnant, an alert is notified in their medical record and the facility administrator will receive notice. If a detainee is transferred, it is the administrator’s responsibility to inform ICE of the medical alert. Any use of restraints requires documented approval, including in the detainee’s detention and medical files and guidance from the on-site medical authority. A request to terminate a pregnancy must be documented in the medical file and signed by the detainee. In the 2016 revisions, ICE supervisory staff must be informed within 72 hours when a pregnant detainee is identified. Appendix IV: Recommended Guidance on the Care of Pregnant Women Detainees Numerous professional associations, non-governmental organizations, and federal agencies have issued guidance on care to be provided to pregnant women. Specifically, we reviewed the following guidance: American Civil Liberties Union: Worse than Second-Class: Solitary Confinement of Women in the United States (2014) American College of Obstetricians and Gynecologists: Committee Opinion: Health Care for Pregnant and Postpartum Incarcerated Women and Adolescent Females (2016) Guidelines for Perinatal Care, Eighth Edition (2017) American Correctional Association Performance-Based Standards and Expected Practices for Adult Correctional Institution, 5th Edition Joint Public Correctional Policy on the Treatment of Opioid Use Disorders for Justice Involved Individuals (2018) Joint Statement on the Federal Role in Restricting the Use of Restraints on Incarcerated Women and Girls during Pregnancy, Labor, and Postpartum Recovery National Commission on Correctional Health Care (NCCHC): Position Statement: Restraint of Pregnant Inmates (2015) Position Statement on Solitary Confinement (Isolation) (2016) Position Statement on Breastfeeding in Correctional Settings (2018) Standards for Health Services in Jails (2018) Sufrin C., Pregnancy and Postpartum Care in Correctional Settings, National Commission on Correctional Health Care, Clinical Resources Series. (2018) National Women’s Law Center: Women Behind Bars: A state-by-state report card and analysis of federal policies on conditions of confinement for pregnant and parenting women and the effect on their children (2010) United Nations Rules for the Treatment of Women Prisoners and Non- custodial Measures for Women Offenders (the Bangkok Rules) (2010) U.S. Department of Homeland Security (DHS): Report of the DHS Advisory Committee on Family Residential Centers (2016) U.S. Department of Justice, Bureau of Justice Assistance: Best Practices in the Use of Restraints with Pregnant Women and Girls Under Correctional Custody (2014) U.S Department of Justice Report and Recommendations Concerning the Use of Restrictive Housing (2016) Because the specificity of the guidance varies across entities, we summarized the recommended guidance for our report purposes. For example, guidance on nutrition may range from calling for additional meals for pregnant women to more specifically outlining extra caloric and dietary needs. Our summary statement for each of the pregnancy-related topics is included below, along with examples from relevant recommended guidance. Intake health screening inquiries about pregnancy. Summary of recommended guidance: The sources that have guidance generally agree that intake health screenings should include inquiry regarding pregnancy and related conditions. Example: “Screening is performed on all inmates upon arrival at the intake facility…The receiving screening form…inquires as to the inmate’s…possible, current, or recent pregnancy…” – NCCHC Standards for Health Services in Jails (2018) Pregnancy testing at intake. Summary of recommended guidance: Sources that have guidance generally agree that pregnancy testing should be conducted on newly detained women of childbearing age, but some provide additional guidance on when this should be done, and this may vary. Example: “All women at risk for pregnancy should be offered a pregnancy test within 48 hours of admission…A simple approach would be to offer pregnancy testing to all women under the age of 55.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Example: “…medical providers should continue to offer pregnancy tests to every female of child-bearing age who is newly detained…” – Report of the DHS Advisory Committee on Family Residential Centers (2016) Access to abortion. Summary of recommended guidance: Sources that have guidance generally agree abortion services should be offered to detained pregnant women, with one source providing additional details, including swift facilitation of a woman’s choice of termination and non- interference of outside bodies in the decision. Example: “Pregnancy termination is generally to be performed as safely and as early in pregnancy as possible…Termination of pregnancy should not depend on whether or not the specific procedure is available on site. Each woman will decide what option to choose…this decision is to be made without undue interference by outside bodies, including governmental bodies.” – Report of the DHS Advisory Committee on Family Residential Centers (2016) Provision of prenatal care. Summary of recommended guidance: Sources that have guidance generally agree that some form of prenatal care should be provided to detained pregnant women, but differ on the level of specificity for the standard of care, from stating simply that prenatal care be provided to specifying requirements including regularly scheduled obstetric care and access to 24-hour emergency care. Example: “Incarcerated women who wish to continue their pregnancies should have access to readily available and regularly scheduled obstetric care, beginning in early pregnancy and continuing through the postpartum period. Incarcerated pregnant women also should have access to unscheduled or emergency obstetric visits on a 24-hour basis.” – American College of Obstetricians and Gynecologists Committee Opinion: Health Care for Pregnant and Postpartum Incarcerated Women and Adolescent Females (2016) Example: “Prenatal care in correctional facilities must reflect national standards, including visit frequency with a qualified prenatal care provider, screening and diagnostic tests, and referrals for complications.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Provision of postnatal care. Summary of recommended guidance: Sources that have guidance generally agree that the provision of postnatal care be provided to women who give birth. However, they vary in their specifics. For example, some specifically state that lactation service or postnatal birth control should be provided. One source also recommends specific forms of accommodation to aid postnatal recovery. Example: “…appropriate accommodations should be made, such as allowing women to rest when needed…Discharge instructions from the hospital, which may include postpartum blood pressure monitoring or diabetes screening, should be adhered to.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Example: “Allow immediately postpartum women to breastfeed their babies and have lactation support services from the hospital.” – NCCHC Position Statement on Breastfeeding in Correctional Settings (2018) Provision of perinatal/labor care. Summary of recommended guidance: Sources that have guidance generally agree a pregnant woman should be transported to a hospital if there are signs of labor. Some sources state that detention staff be trained in emergency delivery in the event of a delivery occurring in the facility, away from professional care. Example: “Due to the time necessary to arrange transport to a nearby hospital, there is a low threshold to send pregnant inmates out for evaluation of a labor when signs or symptoms of labor or ruptured membranes are present… Any facility that houses pregnant women should have an emergency delivery kit available on-site, and health staff should be trained in its use in the event that a delivery occurs in the facility.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Example: “Having a preexisting arrangement to have the babies of incarcerated women delivered at a local hospital reduces confusion and uncertainty when a woman goes into labor.” – National Women’s Law Center Women Behind Bars: A state-by-state report card and analysis of federal policies on conditions of confinement for pregnant and parenting women and the effect on their children (2010) Mental health services and counseling for pregnant women. Summary of recommended guidance: Sources that have guidance generally agree that pregnant and postpartum women should have access to mental health/counseling services. Example: “Pregnant inmates are given comprehensive counseling and care in accordance with national standards and their expressed desires regarding their pregnancy.” – NCCHC Standards for Health Services in Jails (2018) Care for pregnant women with substance use disorder. Summary of recommended guidance: Sources that have guidance generally agree that addicted pregnant women should have access to screening and specialized addiction-treatment programs. Example: “Screening for drug and alcohol use is a first step and is followed with referral to treatment. For women who report opiate use, the standard of care is not to detoxify from opiates during pregnancy due to the fetal risks of withdrawal. Rather the standard of care is to provide…methadone or buprenorphine…” – Pregnancy and Postpartum Care in Correctional Settings (2018) Example: “The standard of care for pregnant women with [opioid use disorder] is and should therefore be offered/continued for all pregnant detainees and incarcerated individuals.” – Joint Public Correctional Policy on the Treatment of Opioid Use (2018) HIV care for pregnant women. Summary of recommended guidance: Sources that have guidance generally agree that pregnant women should have access to testing and treatment of HIV for the benefit of both the mother and child. Example: “The Centers for Disease Control and Prevention recommends universal opt-out HIV screening for pregnant women; with early detection, prevention of mother-to-child transmission can be accomplished…” – Pregnancy and Postpartum Care in Correctional Settings (2018) Vaccinations for pregnant women. Summary of recommended guidance: Sources that have guidance generally agree that vaccines recommended for pregnant women be provided to detainees in accordance with accepted medical guidelines. Example: “Current recommendations are that all pregnant women should be vaccinated with the flu vaccine during flu season and tetanus, diphtheria, and pertussis during the third trimester, regardless of whether they were vaccinated outside of pregnancy.” – NCCHC Standards for Health Services in Jails (2018) Example: “Vaccines related to pregnancy should be offered pursuant to CDC guidelines…” – Report of the DHS Advisory Committee on Family Residential Centers (2016) Prenatal vitamins. Summary of recommended guidance: The sources that have guidance generally agree that prenatal vitamins should be provided to pregnant women, and some sources state that prenatal vitamins should be provided to breastfeeding women. Example: “Pregnant women must also receive prenatal vitamins that contain, among other essential vitamins and minerals, 400mcg to 800mcg of folic acid... Women with documented anemia (hemoglobin<11) should receive additional iron supplementation.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Example: “Appropriate nutrition and prenatal vitamins should be given to lactating women…” – NCCHC Standards for Health Services in Jails (2018) Nutrition for pregnant women. Summary of recommended guidance: Sources that have guidance generally recommend special nutrition regimens for pregnant women, with varying degrees of specificity, ranging from recommending the use of supplements broadly to specifying required nutrients such as folic acid and calcium and extra calories in the form of additional meals, larger meals, or food between meals, and in some cases specifying that these requirements also apply for postpartum women. Example: “Pregnant and postpartum women have additional nutritional needs and should be counseled on the importance of adequate nutrition. Diets provided by correctional institutions should be specialized to the women’s needs and be rich in whole grains, calcium, and fruits and vegetables. In the second and third trimesters, women require an additional 300 calories per day…” – Pregnancy and Postpartum Care in Correctional Settings (2018) Special accommodations for pregnant women. Summary of recommended guidance: Sources that have guidance generally agree that accommodations should be provided to pregnant women. Some sources specify accommodations such as appropriate programming and hygiene for pregnant women and nursing mothers, appropriately adjusted work assignments and exercise, and bottom bunks. Example: “Activity for pregnant women must take into account the physical constraints of being in a correctional facility. All pregnant women must have a bottom bunk so that they do not risk falling from a top bunk. Certain work assignments may be inappropriate…Work assignments should be adjusted accordingly. In the absence of medical or obstetric complications, 30 minutes or more of moderate exercise a day on most, if not all, days of the week is recommended.” – Pregnancy and Postpartum Care in Correctional Settings (2018) Segregation of Pregnant Women. Summary of recommended guidance: Sources that have guidance generally agree that pregnant women should not be placed in segregation, though some suggests this could be necessary in certain cases. Example: “Women who are pregnant, who are postpartum, who recently had a miscarriage, or who recently had a terminated pregnancy should not be placed in restrictive housing…In very rare situations, a woman who is pregnant, is postpartum, recently had a miscarriage, or recently had a terminated pregnancy may be placed in restrictive housing as a temporary response to behavior that poses a serious and immediate risk of physical harm…” – U.S Department of Justice Report and Recommendations Concerning the Use of Restrictive Housing (2017) Use of Restraints on Pregnant Women. Summary of recommended guidance: Sources that have guidance generally agree that restraints generally should not be used on a pregnant woman, except when necessary. Some sources indicate that if restraints are necessary, it should be well documented and require approval and assessment from a senior official and/or medical professional. Some sources specify the types of restraints that should never be used including abdominal restraints, handcuffs behind the back, and leg and ankle restraints. Example: “Restraint of pregnant inmates during labor and delivery should not be used. The application of restraints during all other pre- and postpartum periods should be restricted as much as possible and, when used, done so with consultation from medical staff and in the least restrictive means possible. All uses of restraints in pregnant inmates must be documented and reviewed.” – NCCHC Position Statement: Restraint of Pregnant Inmates (2015) Example: “Policies and procedures on the use of restraints on pregnant women and girls under correctional custody should be developed collaboratively by correctional leaders and medical staff who have knowledge about the potential health risks…The use of restraints on pregnant women and girls under correctional custody should be limited to absolute necessity.” - U.S. Department of Justice, Bureau of Justice Assistance: Best Practices in the Use of Restraints with Pregnant Women and Girls Under Correctional Custody (2014) Record Keeping on Pregnant Women Actions. Summary of recommended guidance: Sources that have guidance generally agree that accurate records of detention regarding pregnant women should be kept, with varying levels of specificity ranging from noting that records should be kept for incidents of restraint to specifying how documentation is kept and reviewed. One source notes that medical records should also be easily accessible for offsite care providers. Example: “If detention continues ICE should ensure…reporting of detention to ICE Headquarters and continued review of the need to detain.” – Report of the DHS Advisory Committee on Family Residential Centers (2016) Example: “Obstetrician-gynecologists and other obstetric care providers of antepartum care should be able to either primarily provide or easily refer to others to provide a wide array of services. These services include… imely transmittal of prenatal records to the site of the woman’s planned delivery so that her records are readily accessible at the time of delivery.” – American College of Obstetricians and Gynecologists Guidelines for Perinatal Care, Eighth Edition (2017) Appendix V: U.S. Customs and Border Protection Policies on Care for Pregnant Women U.S. Customs and Border Protection (CBP) and its components, Border Patrol and the Office of Field Operations (OFO), have several policies and standards that address the care and treatment of pregnant women in their custody. Specifically, these include the following: CBP: National Standards on Transport, Escort, Detention, and Search (2015) OFO: Personal Search Handbook (2004) OFO: Directive: Secure Detention, Transport and Escort Procedures at Ports of Entry, CBP Directive No. 3340-030B (2008) Border Patrol: U.S. Border Patrol Policy: Hold Rooms and Short Term Custody (2008) Summaries of these policies and standards are provided below, along with the titles of the policies or standards on which each summary is based. Processing and holding. Officers and agents will consider pregnancy when expediting processing of vulnerable detained persons and when placing detained persons with others in hold rooms and holding facilities. Secure Detention, Transport and Escort Procedures at Ports of Entry (2008) and U.S. Border Patrol Policy: Hold Rooms and Short Term Custody (2008) Mental health services and counseling for pregnant women. If an agent or officer observes signs of mental illness, it should be reported to a supervisor and appropriate medical care be provided or sought, including calling emergency services in the event of an emergency. Transport, Escort, Detention, and Search (2015) Nutrition for pregnant women. Pregnant detainees should be offered a meal every six hours they are in detention and have access to snacks, milk, or juice at all times. Transport, Escort, Detention, and Search (2015); Secure Detention, Transport and Escort Procedures at Ports of Entry (2008); and U.S. Border Patrol Policy: Hold Rooms and Short Term Custody (2008) Special accommodations for pregnant women. Reasonable accommodations should be made for pregnant women, including placement in the least restrictive appropriate setting. If circumstances permit, pregnant women should not be placed in hold rooms or other secure areas, but instead in an open area under supervision. Transport, Escort, Detention, and Search (2015); Secure Detention, Transport and Escort Procedures at Ports of Entry (2008); and U.S. Border Patrol Policy: Hold Rooms and Short Term Custody (2008) Use of restraints on pregnant women. Officers and agents should not use restraints on pregnant women unless they demonstrate or threaten violence, have a criminal and/or violent history, or there is an articulable escape risk. Even if restraints are used, pregnant detainees are not to be restrained face-down, on their backs, or with a belt that constricts the area of her pregnancy. Pregnant women can never be restrained while in active labor or delivery. All use of restraints must be documented. Transport, Escort, Detention, and Search (2015) Record keeping on pregnant women actions. All physical interactions with pregnant women must be recorded after they occur. Any medical emergency must be recorded as soon as practical after emergency services have been contacted. Further, Border Patrol agents must create a booking record for persons detained and the record must include a medical annotation for conditions requiring care, including pregnancy. Transport, Escort, Detention, and Search (2015) and U.S. Border Patrol Policy: Hold Rooms and Short Term Custody (2008) Appendix VI: U.S. Immigration and Customs Enforcement Inspection Results for Care of Pregnant Women U.S. Immigration and Customs Enforcement (ICE) uses various inspections for accessing facilities’ compliance with policies and detention standards—the frequency and focus of which vary. Some inspections also include pregnancy-related performance measures, such as a measure assessing whether a pregnancy test was performed at intake. We analyzed reports and data from five ICE inspections that address compliance with pregnancy-related policies and detention standards from 2015 through June 2019—the most recent data available at the time of our review. We selected these inspections because they review some aspect of the care provided to pregnant women. These inspections address compliance at ICE detention facilities where on-site medical care is provided by both ICE Health Service Corps (IHSC) as well as other entities (non-IHSC facilities). Pregnancy-related Performance Measures at IHSC-staffed and non- IHSC Facilities We reviewed results from IHSC’s inspections of IHSC-staffed and non- IHSC facilities, which includes pregnancy-related performance measures. We found that instances of non-compliance occurred at 16 facilities subject to a range of detention standards. Three of these facilities were IHSC-staffed, and 13 were non-IHSC. Table 10 shows results from December 2016 through March 2019. Pregnancy-related Performance Measures at IHSC-staffed Facilities We reviewed information on pregnancy-related performance measures reported by facilities staffed by IHSC. Table 11 shows results from fiscal years 2015 through 2018. Although the table shows average annual compliance across all IHSC- staffed facilities, variation exists between facilities, and over time. For example, in fiscal year 2018, one facility improved its performance on the measure of whether prenatal vitamins were prescribed from 33 percent compliance in the first quarter to 100 percent compliance in the second quarter. In addition, in fiscal year 2018, facilities’ compliance with each measure ranged as follows: Obstetrician-gynecologist consult ordered is documented within 7 business days of identification: 50 to 100 percent (average 80 percent) Obstetrician-gynecologist scheduled appointment time documented within 7 business days of identification: 15 to 100 percent (average 75 percent) Detainee education documented at each encounter: 0 to 100 percent (average 79 percent) Records reviewed by provider after obstetrician appointment: 0 to 100 percent (average 79 percent) Appropriate labs ordered if not obtained from obstetrician- gynecologist: 50 to 100 percent (average 79 percent) Deficiencies, Recommendations, and Corrective Actions for ICE Inspections of Pregnancy- related Detention Standards Three additional ICE inspections identified 19 findings at 13 facilities related to the care of pregnant women. All of the findings occurred at non- IHSC facilities. Table 12 provides additional information on the findings and corrective actions that facilities reported taking. Appendix VII: Summary of Interviews with Pregnant Women Regarding Their Care in Department of Homeland Security Custody We interviewed ten pregnant women who were detained at three of the four U.S. Immigration and Customs Enforcement (ICE) facilities we visited, including facilities staffed by ICE Health Service Corps (IHSC- staffed) and non-IHSC facilities. We interviewed an additional four pregnant women at a local shelter in Texas which provides temporary accommodations to those in need of housing after their release from DHS custody. These four women may not have known which agency they had been detained or held by prior to entering the shelter. As a result, their perspectives are listed separately in the table below from the 10 women with whom we spoke at ICE detention facilities. Table 13 summarizes the perspectives of these 14 pregnant women. Although these interviews are not generalizable and may not be indicative of the care provided at all detention facilities, they provided us with perspectives on the care provided to pregnant women. We did not independently verify statements made by these 14 women we interviewed. Appendix VIII: Complaints Regarding U.S. Immigration and Customs Enforcement’s and U.S. Customs and Border Protection’s Care of Pregnant Women We analyzed and categorized complaints that detainees, family members, non-governmental organizations, or other parties submitted to various entities from January 2015 through April 2019 regarding U.S. Immigration and Customs Enforcement’s (ICE) and U.S. Customs and Border Protection’s (CBP) care of pregnant women. Specifically, we reviewed complaints from Department of Homeland Security’s (DHS) Office for Civil Rights and Civil Liberties (CRCL), DHS’s Office of Inspector General, and ICE Health Service Corps (IHSC). We identified a total of 107 complaints—54 regarding ICE, 50 regarding CBP, and three regarding both ICE and CBP. Complaints against ICE We identified 54 unique complaints submitted from January 2015 through April 2019 regarding ICE’s care of pregnant women. Each of the 54 complaints may identify more than one area of concern, and as such we identified 104 concerns. The most common concern was that ICE allegedly did not provide medical care or the medical care was not quality or timely. As previously described in this report, the investigating agency determined that one complaint was substantiated and one complaint was partially substantiated. The remaining complaints were either still open as part of an on-going investigation, unsubstantiated by the investigating agency, or the complaint was not substantiated or unsubstantiated for a variety of reasons. Table 14 provides additional information on the number and types of concerns identified in the 54 complaints regarding ICE’s care of pregnant women. Complaints against CBP We identified 50 unique complaints submitted from January 2015 through April 2019 regarding CBP’s care of pregnant women. Each of the 50 complaints may identify more than one area of concern, and as such we identified 81 concerns. The most common concern was that pregnant women had allegedly been physically, verbally, or otherwise mistreated. As previously described in this report, the investigating agency determined that one complaint was substantiated. The remaining complaints were either still open as part of an on-going investigation, unsubstantiated or partially unsubstantiated by the investigating agency, the complaint was not substantiated or unsubstantiated for a variety of reasons, or the complaint described an event that occurred, such as a miscarriage, but did not allege that mistreatment or improper care occurred. Table 15 provides additional information on the number and types of issues identified in the 50 complaints regarding CBP’s care of pregnant women. Appendix IX: Comments from the Department of Homeland Security Appendix X: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Dawn Locke (Assistant Director), Tracey Cross (Analyst-in-Charge), Hiwotte Amare, David Bieler, Christine Davis, Elizabeth Dretsch, Kelsey Griffiths, Eric Hauswirth, Sasan J. “Jon” Najmi, Sean Sannwaldt, and Adam Vogt made key contributions to this report.

In December 2017, the Department of Homeland Security (DHS) updated its policy on pregnant women, removing language that stated that pregnant women would generally not be detained except in extraordinary circumstances or as mandated by law. Within DHS, CBP temporarily holds individuals in its facilities and processes them for further action, such as release or transfer to ICE. ICE manages the nation's immigration detention system. ICE utilizes various facility types to detain individuals, such as those owned and operated by ICE and contract facilities. GAO was asked to review issues related to the care of pregnant women in DHS facilities. This report examines (1) what available data indicate about pregnant women detained or held in DHS facilities, (2) DHS policies and standards that address the care of pregnant women, and (3) what is known about the care provided to pregnant women in DHS facilities. GAO analyzed available DHS data and documents from calendar years 2015 through 2019, including detention data, inspection reports and data, and complaints; reviewed policies related to the care of pregnant women; and interviewed agency officials and three national non-governmental organizations. GAO also interviewed a non-generalizable sample of 14 pregnant women detained or released by DHS and five non-governmental organizations in four field locations that had the greatest number of detentions of pregnant women, among other things. GAO's analyses of U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP) data on pregnant women found: ICE detained pregnant women over 4,600 times from calendar year 2016 through 2018, with more than 90 percent resulting from CBP arrests. Sixty-eight percent of these detentions were for 1 week or less, while 10 percent were for more than 30 days. Seventy-eight percent of these initial detentions occurred at facilities staffed with ICE medical personnel. ICE has policies and detention standards that address a variety of topics regarding the care of pregnant women, such as pregnancy testing requirements, for which non-governmental organizations, professional associations, and federal agencies have issued recommended guidance. However, some facility types—which vary based on who owns, operates, and provides medical care at the facility—did not address all these pregnancy-related topics in their policies and standards, such as prenatal vitamins, as of December 2019. ICE has plans to address the gaps GAO identified in these facility types, including updating some of its policies and detention standards in February 2020. In regards to CBP, its facilities are designed for holding individuals for no more than 72 hours, and therefore are not equipped to provide long-term care. Nonetheless, CBP has some policies and standards regarding pregnant women for its short-term facilities, including those related to nutrition and the circumstances in which restraints could be used. GAO's analyses of inspections and complaint mechanisms offered the following insights into the care provided to pregnant women: ICE inspections found 79 percent or greater compliance with most of its pregnancy-related performance measures. For example, inspections found 91 percent of pregnant woman were seen by an obstetrician-gynecologist within 30 days of pregnancy confirmation, from December 2016 through March 2019. According to ICE officials and agency documentation, ICE has processes in place to address non-compliance. Additional inspections identified pregnancy-related issues at 13 facilities from January 2015 through July 2019. The facilities or ICE have taken actions to address the issues. CBP generally relies on offsite care for pregnant women, and as a result has limited information on care CBP provided. However, CBP has efforts underway to enhance medical support at selected facilities. Over 100 complaints were filed about ICE's and CBP's care of pregnant women from January 2015 through April 2019. Of these complaints, 3 were substantiated or partially substantiated, and 24 were unsubstantiated or partially unsubstantiated. In most cases there was not enough information for the investigating agency to determine whether proper care had been provided.

GAO_GAO-20-322

Background Government-wide Reform Plan Requirements and Timeline As shown in figure 2, a number of activities led up to OMB publishing the reform plan in June 2018, and subsequently OMB has provided updates on the proposals in the reform plan. In March 2017, the President issued an executive order requiring comprehensive reorganization plans for executive branch agencies. In April 2017, OMB provided guidance to federal agencies for developing their respective reform plans. According to this guidance, the government-wide reform plan was to have been based on the agency reform plans, OMB-coordinated crosscutting proposals, and public input. In addition, OMB’s guidance indicated that OMB would track the progress of the reforms in coordination with the President’s Management Council. OMB’s guidance also stated that it would track progress of the reforms by leveraging the federal performance planning and reporting framework that was originally put into place by the Government Performance and Results Act of 1993 (GPRA), and significantly enhanced by the GPRA Modernization Act of 2010 (GPRAMA). Accordingly, OMB’s guidance explained that progress would be tracked through the use of cross- agency priority (CAP) goals, agency priority goals, and Performance.gov. The President’s Management Agenda In March 2018, OMB released the President’s Management Agenda, which identified a set of CAP goals, required under GPRAMA. The CAP goals target areas where multiple agencies must collaborate to effect change, and agencies must report CAP goal progress in a manner the public can easily track. The Government-wide Reform Plan In June 2018, the administration released its government-wide reform plan, Delivering Government Solutions in the 21st Century: Reform Plan and Reorganization Recommendations (reform plan). In July 2019, the administration reported on the first year of progress toward its reform proposals. According to the 1-year update, the President’s Fiscal Year 2020 Budget included 18 of the proposed reform proposals in whole, or in part, and also described administrative actions by agencies to implement more than 20 of its 32 proposals. Of these proposals, the administration reported progress toward four of the five reforms we selected for review: (1) moving personnel security clearance background investigations from OPM to DOD; (2) solving the cybersecurity workforce shortage; (3) establishing the GEAR Center; and (4) reorganizing OPM. OMB officials said that they are not planning to move forward with the customer experience improvement capability reform during fiscal year 2020 because they are pursuing other customer experience activities, such as those included in the CAP goal for Improving Customer Experience with Federal Services. The Extent to Which Key Practices for Effective Reforms Were Followed Has Varied, and Agencies Identified Some Legal Authorities for Implementation Moving Background Investigations from OPM to DOD: Most Selected Key Practices Addressed We added the government-wide personnel security clearance process to our High-Risk List in January 2018 because it continues to face challenges in the timely processing of clearances, measuring the quality of investigations, and ensuring the security of related information technology (IT) systems. The National Defense Authorization Act (NDAA) for Fiscal Year 2018 included provisions that resulted in the transfer of background investigations from OPM’s National Background Investigations Bureau (NBIB) to DOD for certain DOD personnel, which represented approximately 70 percent of all federal background investigations performed by NBIB. Subsequently, the selected reform proposal recommended moving the remaining 30 percent of investigations to DOD. According to the reform plan, this transfer would provide an opportunity to conduct the background investigations more efficiently and economically than having them be performed by separate agencies. In January 2019, DOD formally established the Personnel Vetting Transformation Office (PVTO) to implement and oversee activities related to the transfer of NBIB functions. In April 2019, the President issued Executive Order 13869 which generally provided for the transfer of the remaining background investigation operations from OPM to DOD. The executive order also called on the Secretary of Defense to enter into an agreement with the Director of OPM to set forth expectations and designate the appropriate support functions for the transfer. As directed, in June 2019, OPM and DOD signed an interagency memorandum that set forth expectations for activities necessary for the transfer of functions of NBIB and associated employees and resources from OPM to DOD, including measurable deliverables, key considerations for executing deliverables, and processes for coordination and governance. According to documents we received from DOD, the transfer of NBIB functions to DOD occurred by September 30, 2019, as required by the April executive order. As shown in figure 3, OMB, OPM, and DOD have generally addressed most key reform practices in implementing the transfer of background investigations from OPM to DOD. According to DOD, more than 99 percent of NBIB employees, totaling 2,979 individuals, accepted positions transferring them to DOD’s Defense Counterintelligence and Security Agency (DCSA) by September 30, 2019. According to the DOD’s PVTO Director, 17 individuals chose not to transfer, and instead retired as permitted. Going forward, we will continue to monitor the government- wide personnel security clearance process as part of our work to identify and assess high-risk issues across the government. Establishing Goals and Outcomes OMB, OPM, and DOD have generally addressed key practices related to establishing goals and outcomes. The NDAA for Fiscal Year 2018 and Executive Order 13869 established a goal and related requirements for the transfer of OPM’s NBIB personnel, resources, and functions to DOD. Specifically, the executive order established a goal to complete the transfer of all NBIB administrative and operational functions to DOD by September 30, 2019. The executive order also outlined a series of deliverables and objectives for OMB, OPM, and DOD to achieve during the transfer. For example, the executive order required DOD to execute a written agreement with OPM to establish expectations for the transition period related to detailing personnel, safeguarding information technology, contracting, and funding background investigations, among others. OPM and DOD achieved their intended goal, and as of September 30, 2019, DOD is the primary provider of national security background investigations for the federal government. As directed, OPM and DOD signed an interagency agreement in June 2019 to address expectations, including governance, information technology, contracting, and funding issues, among others. According to documents provided by DOD, the Transfer Tollgate group and the Executive Steering Committee provided interagency leadership including an executive-level decision venue for implementation, resourcing, and other decisions. According to DOD, these interagency groups also provided accountability for implementation milestones. Under the leadership of these two groups, DOD officials shared with us that they worked with OPM to resolve a host of issues such as the transfer of personnel, funding for transfer costs, transfer of information technology assets, financial management issues, and acquisition concerns, among other critical issues. To help address differences in the financial management and funding of background investigations between OPM and DOD, the agreement required DOD to establish a Working Capital Fund to fund DCSA’s background investigation mission by September 1, 2019. According to DOD officials and the agency’s Transfer Status Dashboard, the Working Capital Fund was established prior to the September 1, 2019, deadline; and, as of October 7, 2019, the fund had a balance of approximately $1 billion. Neither the NDAA for Fiscal Year 2018 nor the executive order outlined measurable outcomes related to the efficient and effective delivery of background investigations, but rather goals and deliverables related to transferring NBIB functions to DOD, among other things. According to DOD officials we spoke with, the reform’s objective was the timely transfer of background investigation functions and coordination between affected agencies and stakeholders. DOD officials explained that following completion of the transfer, on October 1, 2019, PVTO, in coordination with other DOD components and federal stakeholders, began work transforming DCSA’s processes and procedures, including the background investigation process, to improve outcomes. Involving Employees and Key Stakeholders OMB, OPM, and DOD generally addressed key practices related to involving employees and key stakeholders. OPM and DOD generally communicated with affected employees and key stakeholders and involved them in the implementation of the transfer of NBIB functions to DOD. Agencies’ communication included email correspondence to affected staff from agency leaders including OPM’s Acting Director, and the Director of NBIB. These emails provided NBIB staff regular updates on the status and details surrounding the transfer of NBIB functions to DOD. Based on documents provided by OPM, communication to affected staff began in June 2017, informing staff that Congress was considering a legislative proposal to move certain NBIB functions to DOD. According to documents we received, communication with staff has continued regularly since this time, including a July 29, 2019, message to affected staff with an official notice that NBIB employees would be offered an appointment to DOD’s DCSA effective September 29, 2019. This notice explained that OPM’s NBIB employees accepting this appointment would transfer to DOD without changes to their duty stations, grades, or benefits. In addition to email communication, in-person town hall meetings were held between agency leaders and affected staff to provide updates on the status of the transfer and answer questions. According to OPM’s then NBIB Director, a July 2017 town hall was held addressing the congressional proposal to move the majority of NBIB staff to DOD. The Director also reported that OPM and DOD had worked via meetings, information exchanges, site visits, and communication at all levels in the organization to assemble information on the implication of the transfer and its potential impacts. OPM officials testified at a number of hearings in 2018 and 2019 related to the transfer, and OPM officials told us that they joined DOD in providing quarterly briefings required by the NDAA for Fiscal Year 2018, on the status and progress of the transfer. DOD and OPM also developed a Joint Transfer Plan that described strategic communication activities with affected employees, contractors, and other stakeholders including public media outlets, ourselves, and state and local law enforcement agencies, among others. DOD officials at the PVTO explained that they developed a more detailed communication plan in March 2019 that was implemented prior to the transfer. Addressing High-Risk Areas and Longstanding Management Challenges OMB, OPM, and DOD have partially addressed key practices related to addressing high-risk areas and longstanding management challenges. As previously mentioned, we placed the government-wide personnel security clearance process on our High-Risk List because of continuing challenges in the timely processing of clearances, measuring the quality of investigations, and ensuring the security of related IT systems. While OMB and lead agencies have considered our related high-risk work, the reform proposal and implementation plans do not demonstrate how the transfer and delegation of background investigation functions from OPM to DOD will address these challenges. Moreover, in November 2019, OPM’s Inspector General identified the background investigation legacy information systems as an ongoing top management challenge that will need to be addressed by both OPM and DOD moving forward. The Director of the PVTO told us that the office’s initial goal was to ensure a smooth and timely transition of functions from OPM’s NBIB to DOD by the beginning of fiscal year 2020. The Director also told us that after the transfer occurred, the office would shift its focus to address our high-risk area by, among other things, transforming these security clearance services to optimize processes government-wide. Specifically, the PVTO charter established a goal to “identify efficiencies to be gained, areas where the organizational structure and business services may be incomplete, maximize synergy where possible, and propose mitigation strategies to address gaps and shortfalls.” We will continue to monitor the government’s progress toward addressing security clearance challenges as part of our work to track high-risk issues across the government. Leadership Focus and Attention OMB, OPM, and DOD have generally addressed key practices related to leadership focus and attention. In particular, Executive Order 13869 outlined the roles and responsibilities of OMB, OPM, and DOD, and authorized a new office (PVTO) to assist in the execution of the transfer. The executive order also clarified agencies’ roles and requirements for coordinating the transfer, delegation, and other activities. Specifically, the executive order directed the Secretary of Defense and the OPM Director, in consultation with the OMB Director and the Security Executive Agent, to provide for the transfer of the bulk of OPM’s investigative functions to the DCSA, along with any appropriate OPM-associated personnel and resources, including infrastructure and certain investigation-related support functions. With regard to a dedicated implementation team, PVTO was responsible for ensuring coordination and resource alignment during the transfer, as well as ensuring that personnel security background investigations continued without disruption during the transfer. The PVTO Director told us in July 2019 that his team reports directly to the Office of the Under Secretary of Defense for Intelligence. The Director stated that he has experience in the areas of acquisitions, mergers, and reorganizations, and has support from experts and top leadership throughout the department. In addition, the PVTO charter states that the office be composed of employees with extensive experience and expertise in personnel vetting processes and reform efforts, as well as business and technology innovation, program evaluation, acquisitions and mergers, and organization and change management. Managing and Monitoring OMB, OPM, and DOD have generally addressed key practices related to managing and monitoring. Specifically, PVTO developed a joint transfer plan outlining critical assumptions for the transfer, major activities, and time frames across nine functional areas, including personnel, training, information technology, financial management, acquisitions, strategic communications, and security, among others. For each functional area, the transfer plan provided a summary of the functional area’s objective and a set of recommended major activities. For example, the functional area for IT had an objective to provide secure, current hardware and software in compliance with DOD and federal standards, and promote the unique requirements of a highly mobile, geographically dispersed workforce managing significant volumes of personally identifiable information and other sensitive data. Major activities included: (1) the transfer of IT infrastructure, (2) the completion of a gap analysis to determine which NBIB systems and hardware are transferrable or require new acquisitions, and (3) the provision of secure devices that support mobile operations. The PVTO Director also showed us a detailed implementation plan organized around the nine functional areas identified in the broader joint transfer plan. The implementation plan tracked thousands of activities and provided a detailed timeline for completion. The Director also provided us a dashboard that his team used to track implementation progress. The Director told us that his office used the dashboard to manage and monitor the transfer daily. The dashboard allowed the implementation team to identify areas where attention was needed using red, yellow, and green stoplight indicators signaling the status of major objectives. The annual assessments of timeliness and quarterly briefings required by the NDAA for Fiscal Year 2018 also serve as mechanisms for Congress and the executive branch to monitor timeliness, costs, and continuous evaluation, among other things. OMB also publishes quarterly milestone progress and metrics on the related Security Clearance, Suitability, and Credentialing Reform cross-agency priority goal on Performance.gov. Employee Engagement OMB, OPM, and DOD have generally addressed key practices related to employee engagement. In addition to the communication and outreach activities described above, OPM and DOD have undertaken additional efforts to engage affected employees and monitor levels of employee engagement at both agencies. For example, according to DOD officials, to engage and communicate with affected employees the agency held several town hall meetings to provide information and answer questions. They also said that DOD leadership regularly emailed affected staff providing updates on the status of the transfer and held separate question-and-answer sessions to keep staff informed and engaged. According to PVTO planning documents, the office also developed a strategy to achieve stakeholder buy-in through empowering leaders and through efforts to build a coalition of stakeholders around a common vision for the future of the background investigation function at DOD. In April 2019, OPM also conducted an internal survey of agency staff to collect information on employees’ perceptions of the transition to DOD, personal work experiences, satisfaction with their job, and any intent to leave DOD and reasons for leaving. The survey asked NBIB employees the extent to which they felt informed about the upcoming transition to DOD. According to the roughly one-third of staff who responded, 35 percent felt extremely or moderately informed, 32 percent felt somewhat informed, and 33 percent felt slightly or not at all informed. Approximately 75 percent of the survey respondents reported that they had enough information to do their job well, and 74 percent reported that they were proud to tell others they worked at their organization. When asked about satisfaction with involvement with decisions that affect their work, 38 percent of respondents were positive, 34 percent were neutral, and 28 percent were negative. OPM officials told us that they continued to monitor engagement of NBIB staff throughout the transition. Strategic Workforce Planning OPM and DOD have partially addressed key practices related to strategic workforce planning. In March 2019, we reported that, to make progress on removing the Government-wide Personnel Security Clearance Process from our High-Risk List, OPM and DOD should develop and implement a comprehensive strategic workforce plan that identifies the workforce needed to meet the current and future demand for its services, as well as reduce the current backlog to a manageable level. OPM completed this action in September 2019 with the release of the NBIB Strategic Workforce Plan for the Background Investigation Mission. The strategic workforce plan includes initiatives to strengthen investigative workforce capacity and training, promote the use of different hiring authorities, and provide succession planning, among other initiatives. According to the plan, senior leadership will build upon the strategic workforce plan to create an implementation strategy. While OPM has taken action, DOD has yet to complete its workforce plan. As of October 2019, DOD’s strategic workforce plan for the new DCSA enterprise was under development. Moving Background Investigations from OPM to DOD: Agencies Identified a Number of Legal Authorities In response to our request for information, OPM, DOD, and OMB provided information regarding the authorities they are using to implement the reform proposal to move all background investigations from OPM to DOD. According to OPM and OMB, the legal authorities by which NBIB moved to DOD consisted of section 925 of the National Defense Authorization Act for Fiscal Year 2018 (NDAA 2018) and Executive Order 13869, issued in April 2019, which re-designated DOD’s DCSA as the primary investigative service provider for national security investigations. OPM also cited 5 U.S.C. § 1104, which permits OPM to delegate certain personnel management functions to other agencies. Section 925 of the NDAA 2018 authorized DOD to conduct its own background investigations and required DOD to begin carrying out an implementation plan required under the National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017) by October 1, 2020. The NDAA 2018 also required the Secretary of Defense, in consultation with the OPM Director, to provide for a phased transition of DOD background investigations from OPM to DOD. According to OPM, the DOD background investigations, consisting of investigations for civil service, military, contract, and non-appropriated fund personnel, constitute approximately 70 percent of the work performed by NBIB. Executive Order 13869 provided for the transfer of the primary responsibility for conducting national security background investigations, government-wide, from OPM to DOD. The executive order designated DOD, rather than OPM, as the agency to serve as the primary entity for conducting background investigations for national security adjudications, pursuant to and consistent with the NDAA 2018 and section 3001(c) of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA). According to OPM, this has the effect of moving the remaining national security investigations, not already transferred by section 925 of the NDAA 2018, to DOD. The Executive Order also acknowledged that OPM will delegate, pursuant to 5 U.S.C. § 1104, other background investigation functions to DOD for non-DOD personnel, such as investigations performed to enable the adjudication of the subject’s suitability or fitness for federal employment, eligibility for logical or physical access to systems and facilities, fitness to perform work for a federal agency under a government contract, and fitness to work as a nonappropriated fund employee. In accordance with the executive order, DOD and OPM signed an agreement on June 25, 2019 that set forth the expectations for necessary activities for the transfer of functions of the NBIB from OPM to DOD. The agreement provided that the period of transition was from June 24, 2019, through September 30, 2019. The agreement covered such areas as personnel, information technology, facilities and property, contracting, administrative support, records access, claims, and funding. Solving the Cybersecurity Workforce Shortage: Most Selected Key Practices Partially Addressed This reform proposal directs OMB and DHS, in coordination with other agencies, to prioritize and accelerate efforts to recruit, evaluate, hire, pay, and distribute cybersecurity talent across the federal government. Ensuring the cybersecurity of the nation is a longstanding challenge that has been on our High-Risk List for more than two decades. Efforts to solve the cybersecurity workforce shortage will help to address a number of high-risk issues we have previously identified. To accomplish the objective of filling cybersecurity vacancies, the reform lays out a series of projects and activities intended to identify and close workforce skills gaps and develop a standardized approach to hiring, training, and retaining qualified cybersecurity professionals. Specifically, the proposal calls for: identifying and categorizing the federal cybersecurity workforce using the National Initiative for Cybersecurity Education Cybersecurity Workforce Framework (NICE framework), implementing DHS’s Cyber Talent Management System (CTMS) with options to expand the capability across the government, rationalizing and expediting the security clearance process, standardizing training for cybersecurity employees, increasing the mobility of cybersecurity positions, developing plans to establish a cybersecurity reservist program to provide needed surge capacity, reskilling federal employees to fill critical cyber positions, and rationalizing the size and scope of federal cybersecurity education programs. As shown in table 2, OMB, DHS, and other federal agencies have made progress in implementing certain projects and activities included in the reform proposal. Although OMB and DHS have several projects and activities underway related to this reform, they did not provide us with information about the government-wide goals or implementation plans for the proposal. In November 2019, OMB staff told us that they did not have additional information to share regarding their application of key reform practices because they are still developing this reform. As a result, we found that most of the key reform practices were partially met (see figure 4). We did obtain information showing that OMB and DHS addressed key practices for some of the projects and activities included in the reform proposal, but the extent to which these practices were being applied to the reform proposal as a whole, or being coordinated government-wide, was unclear. Establishing Goals and Outcomes OMB and DHS have partially addressed key practices related to establishing goals and outcomes. We found that this reform established an objective to solve the cybersecurity workforce shortage across the government, and DHS established outcome-oriented goals and performance measures for certain agency-specific projects that are part of the reform. For example, as shown in table 2, DHS established a measure to hire at least 150 cybersecurity professionals at the agency during fiscal year 2020 using its new Cyber Talent Management System. In addition, DHS provided us its 2017 Comprehensive Cybersecurity Workforce Update, which includes an array of data and analysis, including cybersecurity workforce trends, metrics on DHS components’ vacancies, attrition, capacity gaps, hiring, and other information describing the status of the agency’s cybersecurity workforce. The administration also released a National Cyber Strategy in September 2018 outlining broad activities related to the government-wide reform such as building a talent pipeline, reskilling employees, and improving the process of recruiting and retaining qualified cybersecurity professionals. These documents may provide a first step toward developing clear outcome-oriented goals and performance measures for the reform as a whole. However, OMB and DHS have not yet established measurable outcome- oriented goals for the government-wide projects and activities outlined in the reform proposal. For example, there are not government-wide measurable goals for hiring cybersecurity professional across the government, reductions to attrition, training, or other aspects of the reform. As shown in table 2, OMB and agencies have made progress on a number of areas related to the reform; however, without establishing government-wide measurable goals and outcomes, OMB and DHS will not be able to determine whether progress is being made across the federal government to solve the cybersecurity workforce shortage. Involving Employees and Key Stakeholders OMB and DHS have partially addressed key practices related to involving employees and key stakeholders. We obtained information on targeted outreach to employees and stakeholders for certain projects and activities outlined in the reform, but as of November 2019, OMB and DHS did not have information on how they were addressing these key practices for the reform as a whole. For example, DHS’s Cybersecurity and Infrastructure Security Agency (CISA) officials told us that they participate in interagency coordination activities related to the NICE framework with OMB, the Department of Commerce National Institute of Standards and Technology (NIST), the Federal Chief Information Officers Council, and outside stakeholders. CISA officials said they worked with government and industry stakeholders to develop the NICE framework, and are working with educators and certification vendors to help build a pipeline of cybersecurity talent. Additionally, in March 2019, we reported that OPM and NIST coordinated with academia and the private sector to develop a cybersecurity coding structure that aligns with the work roles identified in the NICE framework. While OMB and DHS conducted outreach for certain projects and activities included in the reform proposal, it is unclear what, if any, outreach occurred for other projects. However, without a government- wide or project-by-project plan for communicating with and involving employees and stakeholders across the government, OMB and lead agencies will not know if certain agencies or employee groups are being adequately involved and informed. We have previously reported that creating an effective, ongoing communication strategy is essential to implementing a government-wide reform. The most effective strategies involve communicating early and often, ensuring consistency of message, encouraging two-way communication, and providing information to meet the specific needs of affected employees. This reform will be more likely to achieve its intended objective if OMB and DHS establish effective lines of communication with affected federal employees and the broader cybersecurity community. Addressing High-Risk Areas and Longstanding Management Challenges OMB and DHS have partially addressed key practices related to addressing high-risk areas and longstanding management challenges. We have designated information security as a government-wide high-risk area since 1997. We expanded this high-risk area in 2003 to include protection of critical cyber infrastructure and, in 2015, to include protecting the privacy of personally identifiable information. OMB and DHS generally considered areas that we previously identified as high-risk. OMB staff and DHS officials told us that they considered our high-risk reports when developing reform proposals, and have provided some documentation of these considerations. For example, OMB’s former Deputy Director for Management stated that, when developing the Solving the Cybersecurity Workforce Shortage reform, OMB used our 2017 High-Risk Series and noted that of more than 2,500 past recommendations, about 1,000 still needed to be implemented. OMB also identified several of our reports that touch on cybersecurity workforce issues. Although OMB and DHS have considered our prior work, as of November 2019, they had not demonstrated how the projects and activities outlined in the reform proposal would address our related high-risk issues and open recommendations. Without more detailed information describing how our high-risk issues are being addressed across the reform projects and activities, it is unclear which issues and recommendations are being targeted, and which are outside of the scope of this reform. Leadership Focus and Attention OMB and DHS have partially addressed key practices related to leadership focus and attention. In May 2019, the President issued Executive Order 13870 requiring federal agencies to take a variety of actions related to cybersecurity, including efforts to enhance the mobility of cybersecurity practitioners, support the development of cybersecurity skills, and create organizational and technological tools to maximize cybersecurity talents and capabilities. Many of the actions outlined in this executive order align with the stated objectives and components outlined in the reform proposal. However, neither OMB nor DHS have created a dedicated team with necessary resources to manage and implement this reform on a government-wide scale. Moreover, DHS staff we spoke with told us that OMB was the government-wide lead for this reform, and their agency was responsible for a subset of the projects and activities outlined in the reform proposal. OMB staff did not provide us with any plans or other documents regarding the individuals or team responsible for implementation across the government. OMB staff explained that DHS’s CISA and the Federal Chief Information Security Officer Council have some responsibility for federal cybersecurity workforce issues; however, they did not clarify which organization, team, or individuals were responsible for coordinating and implementing the reform government- wide. Our prior work has shown that establishing a strong and stable team that will be responsible for the transformation’s day-to-day management is important to ensuring that it receives the resources and attention needed to be successful. A dedicated leadership team responsible for overseeing and implementing the reform can also help ensure that various change initiatives are sequenced and implemented in a coherent and integrated way. Managing and Monitoring OMB and DHS have partially addressed key practices related to managing and monitoring. DHS has developed some agency-specific implementation plans and mechanisms to monitor progress. For example, DHS provides progress updates to Congress related to its continued efforts to code cybersecurity positions and to review the readiness of the cybersecurity workforce to meet DHS mission requirements, among other agency-specific assessments. However, OMB and DHS have not yet developed a government-wide implementation plan with goals, timelines, key milestones, and deliverables for the reform proposal as a whole. As previously discussed, OMB staff told us that they did not yet have a government-wide reform plan because they are still developing this reform. Without a government-wide implementation plan to track and communicate implementation progress, OMB and DHS will be unable to determine whether the reform is achieving its intended objectives, or whether unanticipated challenges or negative workforce trends are impeding efforts to close the cybersecurity workforce gaps across the government. Employee Engagement OMB and DHS have not addressed key practices related to employee engagement. In February 2019, DHS officials told us that the agency had not yet reached the stage of implementation for its projects and activities where they were considering employee engagement in this reform. According to DHS officials, they have started collecting data on employees, but have not interacted with individual employees on specific reform initiatives. As of November 2019, OMB had not provided information on its efforts to engage affected employees across the government on this reform. We have reported that employee engagement affects attrition, absenteeism, and productivity. Moreover, we have found that failure to adequately address a wide variety of people and cultural issues, including employee engagement, can also lead to unsuccessful change. We identified six key drivers of engagement based on our analysis of selected questions in the Federal Employee Viewpoint Survey, such as communication from management. Given that the objective of this reform is to address a critical workforce skills gap, it is important that OMB and DHS remain attentive to the engagement levels of cybersecurity employees across the government to ensure that productivity and morale are not adversely affected. As previously discussed, OMB and DHS lack a government-wide or project-by-project plan for communicating with and involving employees across the government. Such a communications strategy could be used to inform and, as appropriate, involve employees on implementation of the reform. Strategic Workforce Planning OMB and DHS have partially addressed key practices related to strategic workforce planning. As set forth in the Cybersecurity Workforce Assessment Act, DHS developed and published its Cybersecurity Workforce Strategy for 2019 through 2023. DHS’s strategy contains a 5- year implementation plan and a set of goals and objectives. Goals and objectives include an analysis of DHS’s cybersecurity workforce needs, a multi-phase recruitment strategy, professional and technical development opportunities, and plans to develop a talent management system, among others. OMB and DHS have yet to develop a government-wide cybersecurity strategic workforce plan that addresses the needs of all federal agencies. However, because this reform is focused on addressing a government- wide workforce shortage, it is particularly important that OMB and DHS complete their efforts to develop a strategic workforce plan for cybersecurity professionals that takes into account existing workforce capabilities, workforce trends, and shortages across the government. Without this information, DHS and OMB will not be able to determine if they are making progress or when they have addressed the government’s cybersecurity workforce shortage. Solving the Cybersecurity Workforce Shortage: OMB and DHS Identified Legal Authorities for Certain Reform Activities, and Stated That Additional Authority Would Be Sought If Needed DHS identified some existing legal authority for implementing aspects of the reform proposal, but neither DHS nor OMB provided us with a legal analysis for full implementation of the reform. OMB’s General Counsel stated, in a November 2019 letter to us, that OMB continues to collaborate with DHS and other federal agencies on a wide range of measures to address the cybersecurity workforce shortage. OMB stated that efforts had been within the confines of various current laws and appropriations, and that new legislation had not been required for any of these efforts. OMB did not provide additional details on the existing legal authorities on which it is relying. OMB also stated that the administration would seek legislation for any efforts beyond the scope of what is permitted under current law. DHS identified activities it is currently implementing related to the reform proposal that were previously authorized or required by law. For example, the CISA Chief Counsel identified DHS’s effort in establishing the forthcoming Cyber Talent Management System (CTMS) as a reform activity authorized by statute. The Chief Counsel noted DHS was authorized to establish this new personnel system for recruitment and retention of cybersecurity workers by the Border Patrol Agent Pay Reform Act of 2014. Under the act, DHS may establish cybersecurity positions; appoint personnel; fix rates of pay; and provide additional compensation, incentives, and allowances, subject to certain restrictions. The authority to implement this new system, however, is limited to DHS, and DHS officials acknowledged that CTMS cannot be implemented government-wide without statutory authorization. Additionally, DHS officials identified work being conducted at DHS to identify and categorize cybersecurity workforce positions, another activity related to the reform proposal and required by statute. Specifically, DHS was required by the Homeland Security Cyber Workforce Assessment Act of 2014, to: identify all cybersecurity workforce positions, determine the cybersecurity work category and specialty area of such assign data element codes developed by OPM in alignment with the NICE framework for each position. Furthermore, the Federal Cybersecurity Workforce Assessment Act of 2015 required OPM, in consultation with DHS, to identify critical needs for the IT, cybersecurity, or cyber-related workforce across federal agencies and to report to Congress on the identification of IT, cybersecurity, or cyber-related work roles of critical need. DHS officials also explained that, consistent with the 2015 act, it is currently working with other agencies and with industry to catalogue the federal cybersecurity workforce. The CISA Chief Counsel also identified DHS authorities that, under subchapter II of chapter 35 of Title 44 of the United States Code, CISA could leverage when implementing reform activities having government- wide or interagency impacts. Under these authorities, CISA (in consultation with OMB) administers the implementation of agency information security policies and practices, assists OMB with carrying out its responsibilities for overseeing agency information security policies and practices, and coordinates government-wide efforts on information security policies and practices. The Chief Counsel added that CISA “continues to consider, new, more specific…statutory authority aligned to specific reform responsibilities.” Establishing the GEAR Center: OMB Generally or Partially Addressed Selected Key Practices The administration is working toward establishing the GEAR Center, which it described in the reform plan as a vehicle for applied research that would help improve government operations and decision-making. OMB staff stated that the GEAR Center would be administered as a public- private partnership, and that the administration spent about $3 million for it in fiscal years 2018 through 2020 from available appropriations (see table 3). On Performance.gov, OMB provided options for the GEAR Center’s structure; it could be housed in a physical location, composed of a network of researchers working in multiple locations, or follow a different model. The administration does not envision that the GEAR Center will require government funds to conduct all of its initiatives in the long term. Instead, OMB staff said that the private sector would help fund its work after an initial stand-up period. According to the reform plan, GEAR Center research could help inform, for example, how the government responds to technological advances, how to provide better customer service experiences, and how to better leverage government data. In March 2019, OMB staff told us that they planned to establish the GEAR Center in fiscal year 2019, but as of February 2020, the center had not been formally established. To date, OMB staff have conducted preparation activities for establishing the GEAR Center, such as gathering stakeholder input through a Request for Information and a GSA- administered GEAR Center challenge competition to learn more about the types of projects a GEAR Center could facilitate. Through the challenge, GSA requested ideas on possible research projects, as well as related materials such as a project plan and ways to measure success. The challenge competition judges, which included OMB staff, selected three winning project plans with a prize of $300,000 each (for a total of $900,000). GSA specified that the cash prizes were for high potential project plans, and not grants to execute work on behalf of the government. In September 2019, GSA announced and awarded the winners of the GEAR Center challenge. The grand prize winners submitted 1-year project plans to: (1) help solve the federal cybersecurity workforce shortage by involving neurodiverse individuals, such as those with autism; (2) integrate currently disparate datasets to measure the impact of a federally funded program; and (3) train federal employees on how to better use their data for decision-making and accountability. In addition to the challenge competition, OMB contracted with the Center for Enterprise Modernization, a Federally Funded Research and Development Center operated by the MITRE Corporation, to examine options for operating the GEAR Center, in two projects. The first project— conducted from July 2019 through September 2019—was to explore a number of options for operating the GEAR Center. Following the first project, OMB staff laid out three tasks to accomplish during calendar year 2020 that they said would help them establish the GEAR Center: (1) establish a central coordinating function for the GEAR Center, (2) build the GEAR Center’s network of research partners, and (3) develop a draft government-wide learning agenda with input from federal agencies to inform the GEAR Center’s research and piloting activities. For the second project—which began in September 2019 and is scheduled to be completed in July 2020—the contractor is to provide additional detail on options for operating the GEAR Center, including on creating a network of research partners to support the GEAR Center. Table 3 provides details on these expenditures. As shown in figure 5, OMB has generally addressed most of our relevant key reform practices, and partially addressed the others. Determining the Appropriate Role of the Federal Government OMB staff generally addressed key practices related to determining the appropriate role of the federal government for the GEAR Center. While OMB staff have not developed a detailed governance structure for the GEAR Center, they have determined, with input from the private sector, that the GEAR Center will be a public-private partnership. Specifically, OMB staff considered the private sector’s ability or likelihood to invest its own resources in the initiatives the GEAR Center undertakes and otherwise contribute to the GEAR Center’s work. OMB did this by formally seeking the private sector’s input on these topics first through a Request for Information, and subsequently through a challenge competition. Establishing Goals and Outcomes OMB has partially addressed key practices related to establishing goals and outcomes. Specifically, OMB has initiated a process for developing outcome-oriented goals and performance measures for the GEAR Center, but has not finalized them. The GEAR Center challenge competition asked respondents to provide short- and long-term outcome- focused measures of success for the proposed projects in their submissions. However, as of November 2019, OMB staff told us they have not finalized these goals and measures for the GEAR Center. They stated that this is because they have not yet analyzed the results of the progress made by the challenge competition’s grand prize winners, and because they believe the purpose, or broad goal, of the GEAR Center is sufficient for their purposes at this stage of implementation. OMB staff told us that while they acknowledge that grand prize winners are not required to complete the projects they proposed, they anticipate the winners will carry them out to some extent, and they plan to monitor their work to inform GEAR Center planning activities. As OMB moves forward with establishing the GEAR Center, OMB staff should complete their efforts to develop goals and measures, because they will be necessary to track and communicate the GEAR Center’s progress over time. In addition, OMB staff have not yet fully assessed the costs and benefits of the various options OMB is considering for operating the GEAR Center. As previously discussed, OMB has stated that the GEAR Center could be housed in a physical location, composed of a network of researchers working in multiple locations, or follow a different model. Also, as previously stated, MITRE is currently exploring details of options for operating the center, and plans to provide them to OMB in July 2020. However, OMB has not yet conducted an analysis of the costs and benefits of the options for operating the center. In July 2018, OMB’s then Deputy Director for Management said that defining costs and benefits is dependent on refining and finalizing implementation plans. As of November 2019, OMB had not developed an implementation plan for establishing the GEAR Center. As OMB moves forward with establishing the center, assessing the costs and benefits of the various options for operating it will enable OMB to communicate the value of each option to Congress and other stakeholders. This assessment can help build a business case for OMB’s ultimate choice of how to operate the GEAR Center that presents facts and supporting details among competing alternatives. Involving Employees and Key Stakeholders OMB has generally addressed key practices related to involving employees and relevant stakeholders. Specifically, OMB has coordinated with internal government stakeholders, sought input from the private sector, and publicly communicated GEAR Center progress. For example, OMB staff said that they have worked to develop the GEAR Center with the President’s Management Council, the National Science Foundation, and DOD’s National Security Technology Accelerator group. Also, OMB held a Virtual Stakeholder Forum to provide information about the GEAR Center and to gather stakeholder input. During the forum, OMB sought attendees’ input through live polls, and announced that attendees could ask questions and provide additional input by sending messages to an OMB email account. OMB also sought stakeholder input through the GEAR Center Request for Information and challenge competition. Finally, as shown in figure 6, OMB has publicly reported on the GEAR Center’s progress on Performance.gov. Leadership Focus and Attention OMB has generally addressed key practices related to leadership focus and attention. To accomplish this, OMB has designated leaders, including OMB’s former Deputy Director for Management, a member of OMB’s Performance Team, and other staff to be responsible for implementing the reform. Managing and Monitoring OMB has partially addressed key practices related to managing and monitoring the reform to establish the GEAR Center. Specifically, OMB has gathered input from stakeholders on what research it could pursue, and from both stakeholders and a contractor on how the GEAR Center could be operated. OMB has done some analysis of that input, but has neither determined how the GEAR Center will operate nor developed an implementation plan. For example, OMB’s analysis of Request for Information responses shows that OMB is considering several options for how to execute the GEAR Center’s public-private partnership—a network of researchers, a physical location, etc.—but has not decided on one. In addition, as discussed previously, OMB contracted with MITRE to further assist with determining how the GEAR Center will operate. As OMB moves forward with establishing the GEAR Center, it will be able to track the GEAR Center’s progress, and communicate these results to Congress and key stakeholders, by developing and communicating an implementation plan with key milestones and deliverables. Establishing the GEAR Center: OMB Stated That It Will Seek Additional Authority to Conduct Implementation Activities, If Needed In response to our request to identify the legal authority OMB will need to implement this reform, OMB’s General Counsel stated in a November 2019 letter to us that it and its agency partners have relied upon existing legal authorities and available appropriations to develop the Request for Information, obtain external submissions for ideas to develop the GEAR Center, and issue the prize challenge. OMB stated that in conducting any future implementation activities, it would seek new legislative authority, if necessary. Conclusions While planning and implementation progress has been made since the administration’s government-wide reform plan was released in June 2018, important details surrounding the implementation of certain reform proposals have not been developed or communicated. OMB has a central role in overseeing and prioritizing these reforms for implementation, with support from lead agencies. In our previous work on government reorganization and reforms, we have found that there are key practices that, if followed, can help manage the risk of reduced productivity and effectiveness that often occurs as a result of major change initiatives. Important practices such as engaging and communicating with Congress, employees, and key stakeholders; dedicating a senior leadership team; and developing implementation plans, can help to ensure the successful implementation of reorganizations and reforms. OMB and DHS partially addressed most of the leading practices through their efforts to implement several projects related to the cybersecurity workforce reform, including efforts to reskill employees to fill vacant cybersecurity positions, establish a cybersecurity reservist program to provide needed surge capacity, and streamline relevant hiring processes. However, OMB, in coordination with DHS, has not yet followed relevant key practices to implement its reforms government-wide. Specifically, OMB and DHS have not yet developed a communications strategy to involve Congress, employees, and other stakeholders; established a dedicated government-wide leadership team; or developed a government-wide implementation plan with outcome-oriented goals, timelines, key milestones, deliverables, and processes to monitor implementation progress. In addition, OMB and DHS have not demonstrated how the projects and activities outlined in the reform proposal would address our related high-risk issues and major management challenges, or developed workforce plans that assess the effects of the proposal on the current and future workforce. If OMB, in coordination with DHS, applied key reform practices government-wide, they would be better positioned to manage the reform, and track progress across all agencies facing cybersecurity workforce shortages. OMB has taken steps toward determining how the GEAR Center will operate, such as, by determining the appropriate role of the federal government; providing leadership focus and attention; and collecting input from the public, academia, and industry on how the center could operate and on ideas for possible research projects. However, OMB has neither assessed the costs and benefits of the options it is considering for operating the center, nor developed an implementation plan with outcome-oriented goals and performance measures for it. As OMB moves forward with establishing the GEAR Center, completing these two activities can help OMB (1) make a case for why OMB’s ultimate decisions on how to operate the center are the most optimal, and (2) provide greater transparency to the public and private partners involved in its development, help build momentum, and demonstrate the center’s value. Recommendations for Executive Action: We are making a total of seven recommendations to OMB. The Director of OMB, working with DHS, should develop a government- wide communications strategy to inform and, as appropriate, involve Congress, employees, and other stakeholders in implementation of the reform proposal to solve the cybersecurity workforce shortage. (Recommendation 1) The Director of OMB, working with DHS, should establish a dedicated government-wide leadership team with responsibility for implementing the reform proposal to solve the cybersecurity workforce shortage. (Recommendation 2) The Director of OMB, working with DHS, should develop a government- wide implementation plan with goals, timelines, key milestones, and deliverables to track and communicate implementation progress of the reform proposal to solve the cybersecurity workforce shortage. (Recommendation 3) The Director of OMB, working with DHS, should provide additional information to describe how the projects and activities associated with the reform proposal to solve the cybersecurity workforce shortage will address our high-risk issues related to ensuring the cybersecurity of the nation. (Recommendation 4) The Director of OMB, working with DHS, should develop a government- wide workforce plan that assesses the effects of the reform proposal to solve the cybersecurity workforce shortage on the current and future federal workforce. (Recommendation 5) The Director of OMB should assess the costs and benefits of options for operating the GEAR Center. (Recommendation 6) The Director of OMB should develop an implementation plan that includes outcome-oriented goals, timelines, key milestones, and deliverables to track and communicate implementation progress of the reform proposal to establish the GEAR Center. (Recommendation 7) Agency Comments We provided a draft of this report for review and comment to the Directors of OMB and OPM, the Secretary of DOD, the Acting Secretary of DHS, and the Administrator of GSA. OMB did not comment on the report. DHS and DOD provided technical clarifications, which we incorporated as appropriate. OPM and GSA responded that they did not have comments on the report. We are sending copies of this report to the Director of OMB and the heads of the agencies we reviewed as well as appropriate congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or Mcneilt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Key Practices and Questions to Assess Agency Reforms In a 2018 report, we developed key questions based on our prior work on key practices that can help assess agency reform efforts. The 58 questions are organized into four broad categories and 12 subcategories, as shown in table 4. For the purpose of this review, we selected those subcategories and key questions that were most relevant to the selected reforms based on the information contained in the reform proposals, agency documentation, and interviews with the Office of Management and Budget and lead agencies for each of the reforms. Appendix II: Reform Plan Effort to Reorganize the Office of Personnel Management Reorganizing OPM: Most Key Practices Partially Addressed; National Defense Authorization Act for Fiscal Year 2020 Calls for Study of OPM The administration’s proposal to reorganize the Office of Personnel Management (OPM) evolved from June 2018 through November 2019, and was effectively halted by Congress in December 2019. In the June 2018 government-wide reform plan, the administration proposed: (1) moving OPM’s policy functions to a new office in the Executive Office of the President, which would also provide a government-wide view of human capital policy issues, (2) merging a number of OPM’s responsibilities with the General Service Administration’s (GSA) or other government entities’ to be determined at a later date, and (3) renaming GSA as the Government Services Agency. The goals of this proposal were to help elevate the importance of these functions, improve efficiency of operations, and save money, according to the reform plan. Specifically, the administration suggested integrating the following duties into the Government Services Agency or other government entities: administration of healthcare and insurance programs, Human Resources Solutions (HRS), which provides products and services to other federal agencies on a reimbursable basis, and information technology services. In addition, the reform plan contained another proposal to move all of OPM’s national security background investigation functions to the Department of Defense (DOD). The President’s Fiscal Year 2020 Budget, published in March 2019, expanded and modified the original OPM reorganization proposal. It proposed that all of OPM’s functions beyond those moving to the Executive Office of the President and DOD be transferred to GSA, rather than merging a portion of them into a newly formed Government Services Agency. It also called for creating a new GSA service area to house certain functions, and for moving OPM’s Office of the Inspector General to GSA. In May 2019, the administration submitted a legislative proposal to Congress requesting new authority to implement aspects of the OPM reorganization reform proposal. As of December 2019, this proposal had not been introduced in Congress. In May 2019, we testified on issues to consider in the proposed reorganization of OPM. We found that the Office of Management and Budget (OMB) and the two lead agencies (OPM and GSA) had generally not addressed key practices for reforms, such as establishing outcome- oriented goals, assessing costs and benefits, or developing an implementation plan, and had not fully involved or communicated their efforts with Congress, employees, and other key stakeholders. We also found that OMB, OPM, and GSA had not shown how they would address management challenges that may affect their ability to successfully reorganize the government’s central human capital functions. Between May and September 2019, OPM provided us with additional information, which contributed to our assessment of the extent to which OMB, OPM, and GSA addressed key practices for this reform (see figure 7). In October and November 2019, OMB staff and OPM and GSA officials provided us with updates on the status of the OPM reorganization reform proposal. OMB staff and OPM and GSA officials told us that the transfer of major functions from OPM to GSA, such as retirement services and HRS, was on hold until Congress, through legislation, provided the necessary authority to move these functions. They also told us that they were working together on moving the following functions from OPM to GSA through their existing authorities: (1) administrative responsibilities for the Chief Human Capital Officers (CHCO) Council; (2) the Program Management Office for the Security, Suitability, and Credentialing Performance Accountability Council (PAC); and (3) management of two OPM office buildings—the Theodore Roosevelt Building, which houses OPM’s headquarters in Washington, D.C., and the Federal Executive Institute located in Charlottesville, Virginia. OMB staff and OPM and GSA officials stated that the primary purpose of these moves was to achieve greater efficiency of operations, and that these transfers were not components of the OPM reorganization reform proposal. In November 2019, OPM’s Inspector General expressed concern over ongoing efforts to merge these functions with GSA, noting that the specific details of the full merger continued to evolve, and every iteration of the proposed reorganization would fundamentally alter how agency functions and duties are performed. In the National Defense Authorization Act (NDAA) for Fiscal Year 2020, signed into law in December 2019, Congress effectively halted actions to reorganize OPM pending the completion of reports by the National Academy of Public Administration (NAPA) and OPM. The law directed OPM to enter into a contract with NAPA to conduct a study to identify challenges associated with OPM’s execution of its functions and make recommendations for addressing them, including a cost-benefit analysis of proposed changes, and the identification of statutory or regulatory changes needed to execute recommended actions, among other things. Approximately 6 months after the NAPA report, OPM must submit a report providing its views on the NAPA report and its recommendations for changes to its functions. OPM is also to include a business case analysis associated with such changes and a proposal for legislative and regulatory action required to effect the changes. Many of these requirements reflect the issues we raised in our May 2019 testimony on the extent to which the proposal to reorganize OPM was consistent with our key reform practices. According to the President’s fiscal year 2021 budget request, the administration continues to pursue implementation of OPM’s reorganization. Specifically, it proposes to transfer the functions of OPM to GSA, contingent upon enactment of authorizing legislation. Establishing Goals and Outcomes OMB, OPM, and GSA partially addressed the key practices related to establishing goals and outcomes. First, OMB, OPM, and GSA considered how the upfront costs of the reform would be funded by, for example, requesting funds through the President’s Fiscal Year 2020 Budget. However, OMB, OPM, and GSA did not fully address other aspects of the key practices. Specifically, since our May 2019 testimony, OPM provided us information on additional draft goals and measures for some portions of the reform. For example, according to a document we received from OPM in August 2019, a team leading the reform effort was developing “critical to quality” metrics in areas such as cost reduction, employee engagement, and flexible operations. However, these metrics did not have targets and had not been finalized. In November 2019, OMB staff told us that metrics were not yet final because they were still working with Congress to develop a legislative proposal authorizing the reform, and implementation of the merger was not yet underway. The NDAA for Fiscal Year 2020 requires NAPA and OPM to make recommendations for changes to OPM’s structure, functions, responsibilities and authorities, which may differ from those the administration proposed. We have also previously reported that major change initiatives should be based on either a clearly presented business case or analysis of costs and benefits grounded in accurate and reliable data, both of which can show stakeholders why a particular initiative is being considered and the range of alternatives considered. While OPM officials had some information on the costs and benefits they planned to achieve by merging functions with other agencies, they did not have an analysis or underlying data supporting their conclusions. Specifically, OPM provided us with its rationale for the reform in several documents, including: a summary of the agency’s financial and management challenges, a qualitative business case, a list of state and foreign governments’ administrative models where human resources and administrative functions are merged, and a presentation providing OPM’s estimate of the annual savings that could be realized by “fully integrating OPM’s operations into GSA.” However, the information that OPM provided did not include measurable performance or outcome metrics, or quantify benefits relative to costs, to provide a complete assessment of the costs and benefits and any alternative solutions to the reform proposal. OPM’s Office of Inspector General also found, in its fiscal year 2020 top management challenges report, that OPM had not developed a thorough analysis of costs and benefits. Shortly after OMB published the reform plan, OMB’s then Deputy Director for Management, who also served as OPM’s Acting Director, said that defining costs and benefits was dependent on refining and finalizing implementation plans. Since then, in the NDAA for Fiscal Year 2020, Congress required that NAPA’s study include an analysis of the benefits, costs, and feasibility of each recommendation, and a timetable for implementing these options. In addition, the law requires that OPM’s report include a business case analysis that describes the operational efficiencies and cost savings (both short- and long-term) associated with its recommendations. Involving Employees and Key Stakeholders OMB, OPM, and GSA partially addressed the key practices related to involving employees and key stakeholders. Specifically, since our May 2019 testimony, OPM officials provided us with documents to demonstrate that the agency took additional actions in this area, as discussed in more detail below. However, we found that OPM’s early outreach efforts to employees and stakeholders were insufficient, the agency did not have a plan for incorporating employee and stakeholder feedback, and it did not share relevant implementation details that may have affected employees and stakeholders. For example, OPM provided us with a communications tracker that listed meetings and correspondence with Congress, staff, and employee groups from OPM’s Acting Director, Deputy Director, and Deputy Chief of Staff. While this document listed a number of meetings and calls, it showed that most of OPM’s efforts to involve Congress, employees, and employee groups began in April 2019, more than 9 months after OMB published the reform plan, and more than 8 months after OPM’s Director and GSA’s Administrator testified before Congress about their plans for carrying out the reform proposal. In addition, both members of Congress and employee groups expressed dissatisfaction with initial outreach from OMB, OPM, and GSA, including lack of transparency. For example, during a House Committee on Oversight and Reform Subcommittee on Government Operations hearing on May 21, 2019, members of Congress and employee groups testified that they felt insufficiently involved in the reform. Both groups stated that OPM officials communicated with them on few occasions, and members of Congress said that they had not received key documents they requested from OPM, including an implementation plan. In August 2019, OPM provided us with a strategic communications plan that included high level messages and strategies for reaching out to Congress, employees, and the public. This and other OPM documents demonstrated that OPM communicated with employees and key stakeholders, and provided opportunities for its employees to ask questions and provide comments about the reform, activities consistent with our key practices. However, the documents did not indicate how senior OPM officials planned to use the feedback they received from their employees. Similarly, neither OMB nor GSA described how they planned to use employee feedback to inform their reform efforts. The NAPA study required by the NDAA for Fiscal Year 2020 must include methods for involving, engaging with, and receiving input from other federal agencies, departments, and entities potentially affected by any change in OPM that NAPA recommends. The study must also incorporate the views of stakeholders. Addressing High-Risk Areas and Longstanding Management Challenges OMB, OPM, and GSA partially addressed the key practices related to addressing high-risk areas and longstanding management challenges, consistent with our assessment in May 2019. Since then, OPM provided additional documents related to (1) our relevant high-risk area of strategic human capital management, as well as (2) longstanding challenges at OPM we and OPM’s Inspector General have reported. However, OMB, OPM, and GSA did not explain how the OPM reorganization reform proposal would address our high-risk issue or mitigate major management challenges, and did not have plans to monitor the potential effects of the reform on these issues. As a result, OMB, OPM, and GSA did not fully consider the potential risks of transferring OPM systems with longstanding weaknesses to GSA, and of GSA taking on duties in areas such as information technology, where it faces major management challenges. They also lacked a means of monitoring the reform’s potential effects on our strategic human capital management high-risk area and on major management challenges. Moreover, in November 2019, OPM’s Office of the Inspector General continued to identify the proposed merger of OPM with GSA as a top management challenge because the proposal did not include an implementation plan, and created a burden for the agency to fully study, plan, and execute reorganization activities. In November 2019, OMB staff told us that, because the proposed merger was a long-term effort and plans were still under development, they had not yet determined how our high-risk and other management challenges would be addressed. The NDAA for Fiscal Year 2020 requires the NAPA study to include analyses of OPM’s challenges and a recommended course of action for resolving them. Leadership Focus and Attention OMB, OPM, and GSA generally addressed the key practices related to leadership focus and attention. Specifically, since our May 2019 testimony, OPM officials provided us with documents demonstrating that OMB, OPM, and GSA made progress in this area. For example, OPM documents showed that OPM, OMB, and GSA leaders approved a governance structure for leading reform efforts that included: an executive steering committee that provided guidance and made decisions. Its members included the OMB Deputy Director for Management (serves as executive sponsor and chair), the OPM Director (serves as a vice-chair), and the GSA Administrator (serves as a vice-chair). The group used the Lean Six Sigma management approach to make decisions related to planning and implementing the reform during Tollgate meetings. an interagency task force that led activities to implement the reform, and that raised issues to the Executive Steering Committee as needed. Its members included leaders from OMB, OPM, and GSA. interagency teams, which provided subject matter expertise and performed tasks and activities to implement the reform. Their members were OPM and GSA officials. From August 2018 through April 2019, our analysis of OPM documents showed that these groups met and communicated frequently—from every few days to every few weeks, depending on the group. From May 2019— when the administration transmitted their legislative proposal to Congress to reorganize OPM—to November 2019, these groups met less frequently, according to OMB staff and GSA officials. Managing and Monitoring OMB, OPM, and GSA partially addressed the key practices related to managing and monitoring. Since our May 2019 testimony, OPM provided us with documents that demonstrated improvements in this area, but as of November 2019, had yet to finalize an implementation plan. Specifically, the documents showed that OMB, OPM, and GSA held leadership meetings and systematically tracked various aspects of the reform. For example, OPM officials tracked the status of certain activities associated with the reform, such as progress on developing a plan for communicating with employees and stakeholders, through leadership meetings. Also, OPM had a document identifying risks associated with the reform, such as ensuring continuity of services, as well as mitigation strategies, such as including provisions in OPM-GSA interagency agreements. The document also specified individual agency officials responsible for each risk. OMB, OPM, and GSA did not develop an implementation plan for the OPM reorganization reform that included key milestones and deliverables. In November 2019, OMB staff told us that their plans were still being developed because they were waiting for Congress to pass the administration’s legislative proposal authorizing the reform. The NDAA for Fiscal Year 2020 requires NAPA and OPM to make recommendations for changes to OPM’s structure, functions, responsibilities, and authorities, which may differ from those the administration proposed. Employee Engagement OMB, OPM, and GSA partially addressed the key practices related to employee engagement. Specifically, while OMB and agencies undertook activities to measure employee engagement, such as surveying and communicating with employees, they did not develop a comprehensive strategy for sustaining and strengthening employee engagement during and after the reform. For example, GSA officials told us that they established a GSA-OPM change management and communications workgroup, which developed a change management and communications plan that included employee engagement activities. Also, in April 2019, OPM conducted an internal survey of agency staff to measure employee engagement, among other factors. OPM officials also identified employee morale issues as a risk in a document identifying risks associated with the reform and risk mitigation strategies. To address employee dissatisfaction and low morale, OPM officials, including OPM’s then-Acting Director, shared the survey results with employees, held listening sessions to determine employees’ preferences for communications about the OPM reorganization reform proposal, and developed a communications strategy. However, OPM officials did not determine how they planned to use these communications to sustain and strengthen employee engagement. In November 2019, OMB staff told us that because they were still in the planning stages of the reorganization, the proposed reform had not yet involved major changes for employees, so they put employee engagement efforts on hold. The NAPA study required by the NDAA for Fiscal Year 2020 is to include methods for involving, engaging with, and receiving input from other federal agencies, departments, and entities potentially affected by any change in OPM that NAPA recommends. The study is to also incorporate the views of stakeholders. Strategic Workforce Planning OMB, OPM, and GSA did not address the key practices related to strategic workforce planning. OPM and GSA officials told us that they were conducting workforce planning activities associated with the OPM reorganization reform. Also, the President’s Fiscal Year 2020 Budget provided some information about staff levels at OPM and GSA. However, OMB, OPM, and GSA did not produce strategic workforce plans for OPM and GSA employees. OPM and GSA officials stated that they had not provided us with these plans because they were under development. In November 2019, GSA officials added that they were waiting for congressional authorization to carry out the reform proposal, so they had put their efforts to develop a workforce plan on hold. The NDAA for Fiscal Year 2020 requires that NAPA and OPM make recommendations on changes to OPM, which may differ from the administration’s proposed reorganization of OPM. Reorganizing OPM: NDAA for Fiscal Year 2020 Provides for the Identification of Legal Authorities As part of our review, our Office of General Counsel sent letters to the Offices of General Counsel at OPM, GSA, and OMB requesting they provide us with a description of the legal authorities they were using to support the proposed OPM reorganization. OMB, OPM, and GSA provided responses to our letter, but did not identify which aspects of the OPM reorganization could be carried out under existing law and which would require legislative authority. GSA, OPM, and OMB officials stated that they had not yet finalized their legal analysis, and that they were still determining which legal authorities they could use to implement elements of the reform. OMB General Counsel stated that to implement the administration’s proposed reorganization, both legislative and administrative actions would be necessary and dependent on each other “in the long run.” In May 2019, the administration submitted a legislative proposal requesting authority to transfer OPM functions—such as Human Resources Solutions, Information Technology, Retirement, and Health and Insurance Services—to GSA. As of December 2019, the proposal had not been introduced in Congress. OMB staff told us that the legislative proposal was an effort to communicate transparently about the extent to which new authorities would be required. As discussed earlier, in December 2019, Congress passed the NDAA for Fiscal Year 2020. In the NAPA study required under the NDAA, NAPA is to provide a comprehensive assessment and analysis of the statutory or regulatory changes needed to implement any recommended course of action, and to submit this report to Congress and the Director of OPM. The Director of OPM is then to submit a report to Congress that lays out OPM’s views on the findings and recommendations of the NAPA study, along with OPM’s recommendations for change. Any recommendation submitted by OPM for change is to include a business case analysis that sets forward the efficiencies and cost savings (both short- and long-term) associated with the change, and a proposal for legislative or administrative action required to effect the change. The statutory provisions in the act generally provide that no aspect of the agency that is assigned in law to OPM may be moved to GSA, OMB, or the Executive Office of the President until 180 days after OPM’s report is submitted to congressional committees, and subject to the enactment of any required legislation. Appendix III: Reform Plan Effort to Develop a Capability to Improve the Customer Experience This reform proposal aims to modernize and streamline the way citizens interact with the federal government, and to raise customer experience to a level comparable with leading private sector organizations. With support from the United States Digital Service (USDS) and GSA’s Technology Transformation Service, OMB has stated that it will lead an effort to establish a government-wide capability that will enable agencies to identify their customers, map their interactions (or journeys) with federal programs or services, and leverage digital tools and services to improve their experiences and overall satisfaction. For example, as reported in the reform plan, the U.S. Department of Agriculture created a “digital front door,” accessible at Farmers.gov, that is organized around the user experience rather than the government’s structure. The reform plan further explains that the improved capability provided by USDS and GSA would also provide for a government-wide resource to manage organizational change, including improved project planning, facilitating interagency collaboration, and sharing best practices on change management. OMB staff told us in early 2019 that they have delayed implementation of this reform, and instead will focus on other customer experience activities, such as those outlined in the related Cross-Agency Priority (CAP) goal. Upon release of the President’s Fiscal Year 2020 budget in March 2019, we confirmed that this reform was not included in the administration’s reorganization priorities, and OMB confirmed that no funding was requested for its implementation. OMB and agencies are also pursuing a related but distinct CAP goal under the President’s Management Agenda–Improving Customer Experience with Federal Services–with the aim of providing a modern, streamlined, and responsive customer experience across government, comparable to leading private-sector organizations. According to OMB, the reform proposal is meant to stand up a central capacity, or office, within GSA to manage customer experience government-wide; whereas, the CAP goal is intended to support capacity growth and accountability within agencies to develop and manage their own customers’ experience and satisfaction. Because OMB has not yet begun to implement this reform, and no actions are planned for fiscal year 2020, we are not able to assess the extent to which the reform is adhering to key reform practices. When the administration moves forward with implementing this reform, it will be better positioned for its successful implementation if the key reform practices are followed. In response to our request to identify the legal authority OMB will need to implement this reform, OMB’s General Counsel responded in a November 2019 letter that the initiative will not require new legislation. OMB stated the reform can be implemented within current law and available appropriations. Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contact Staff Acknowledgments Triana McNeil at (202) 512-6806 or Mcneilt@gao.gov. In addition to the contact named above, Sarah E. Veale (Assistant Director, Strategic Issues), Peter Beck (Analyst-in-Charge, Strategic Issues), Colenn Berracasa, Karin Fangman, Steven Putansu, Janet Temko-Blinder, Peter Verchinski, and Kellen Wartnow made key contributions to this report. Timothy Carr, Jacqueline Chapin, Tom Costa, Sara Cradic, Brenda Farrell, Patrick Hickey, Shirley Jones, Tammi Kalugdan, Brian Mazanec, Kimberly Seay, Gregory Wilshusen, and Alicia White also contributed to this report.

In June 2018, the administration released its government-wide reform plan, which included 32 proposals aimed at achieving management improvements and organizational efficiencies, among other things. OMB has a central role in overseeing these reform proposals, with support from various lead agencies. In July 2018, GAO reported on key questions to consider when developing and implementing reforms. GAO was asked to examine reform implementation. This report discusses three selected reforms that the administration prioritized: (1) moving background investigations from OPM to DOD, (2) solving the cybersecurity workforce shortage, and (3) establishing the GEAR Center. For each selected reform, GAO determined the extent to which OMB and the lead agencies addressed key practices for effectively implementing reforms, among other issues. GAO reviewed relevant documentation and interviewed OMB staff and agency officials. GAO assessed OMB's and lead agencies' efforts against relevant key practices for effective reforms. In working to implement three selected government-wide reforms that GAO reviewed, the Office of Management and Budget (OMB) and lead agencies followed some, but not all, of the key practices associated with effective reforms. Following key practices, such as those reflected in the questions below, would better position OMB and lead agencies to effectively implement such major change initiatives and achieve their intended objectives. Moving background investigations from the Office of Personnel Management (OPM) to the Department of Defense (DOD) : As required, the transfer of background investigations took place by September 30, 2019. OMB, OPM, and DOD generally addressed most key reform practices in this transfer, including involving employees and stakeholders, establishing an implementation team, and developing implementation plans. With the transfer complete, DOD officials told GAO they are shifting focus toward addressing GAO's high-risk area on the government-wide personnel security clearance process. Solving the cybersecurity workforce shortage : OMB and the Department of Homeland Security (DHS) partially addressed most leading practices through their efforts to implement several projects, such as reskilling employees to fill vacant cybersecurity positions, and streamlining hiring processes. However, GAO found that OMB and DHS have not established a dedicated implementation team, or a government-wide implementation plan, among other practices. Without these practices in place, OMB and DHS may not be able to monitor implementation activities and determine whether progress is being made toward solving the cybersecurity workforce shortage. Establishing the Government Effectiveness Advanced Research (GEAR) Center : According to OMB, the GEAR Center will bring together researchers from private and public sectors to inform and develop ways to improve government services and operations. OMB is working toward establishing the GEAR Center by collecting input from the public, academia, and industry for how the Center could be structured and ideas for possible research projects. However, OMB has not yet developed an implementation plan with key milestones and deliverables to track its progress. Developing and communicating an implementation plan will help OMB track the GEAR Center's progress and communicate its results.

CRS_R46183

Introduction The United States has been a global leader in developing advanced genetic technologies and applying them to crops and livestock. Federal regulators first approved a genetically engineered (GE) food, the Flavr Savr tomato, for sale in 1994. As additional GE crops gained federal approval, farmers rapidly adopted them. Today, about 90% of canola, corn, cotton, soybean, and sugarbeet acres in the United States are planted with GE varieties. GE foods predominantly enter commerce as processed foods and food ingredients (e.g., soybean oil, corn syrup, and sugar). Some members of the public seek to avoid consuming GE foods, as advances in biotechnology have outpaced their acceptance. In July 2016, Congress enacted P.L. 114-216 (the 2016 Act), requiring the U.S. Department of Agriculture (USDA) to establish a National Bioengineered Food Disclosure Standard (the Standard) within two years. The 2016 Act followed decades of societal debate about genetic engineering, and it marked the first time that the federal government would require the disclosure of GE foods to consumers. (The 2016 Act defined these as bioengineered foods .) With the 2016 Act, the United States joined more than 60 countries that require some form of GE labeling , or on-package disclosure of GE foods or food ingredients. The Standard provides a mandatory national standard for disclosure of the presence of bioengineered foods and food ingredients to consumers. It details who is responsible for making disclosures, what they must look like, and when they are and are not required. The Standard provides U.S. food manufacturers, importers, and retailers with a voluntary compliance period and a mandatory compliance deadline. The more than 126,000 comments that USDA received during the rulemaking process demonstrate significant public interest in its formulation. USDA released the final rule in December 2018, and phased implementation began in January 2020. Stakeholder reactions to the final Standard have been mixed. Several organizations immediately criticized the final rule, while others supported it. The Organic Trade Association (OTA), the Center for Food Safety (CFS), the Non-GMO Project, and the Institute for Agriculture and Trade Policy (IATP) each released statements with critical comments. OTA remarked that it is "deeply disappointed in the U.S. Department of Agriculture's final GMO labeling rule and calls on companies to voluntarily act on their own to provide full disclosures on their food products about GMO content." CFS stated that "the USDA has betrayed the public trust by denying Americans the right to know how their food is produce[d]." The Non-GMO Project commented that it "is disappointed by the content of the final rule, which jeopardizes GMO transparency for Americans." IATP stated that "unfortunately, the final rule fails to fix the most egregious provisions of the draft rule and is practically useless in conveying accurate information about food ingredients to consumers while they are shopping." In contrast, the National Corn Growers Association (NCGA), the American Soybean Association (ASA), and the Food Marketing Institute (FMI) provided supportive comments. NCGA commented that "America's corn farmers need a consistent, transparent system to provide consumers with information without stigmatizing important, safe technology. Thus, we are pleased with the issuance of these rules and look forward to reviewing the details in the coming days." ASA stated, "we believe that it allows transparency for consumers while following the intent of Congress that only food that contains modified genetic material be required to be labeled bioengineered under the law, with food companies having the option of providing additional information if they choose." FMI stated, "the rule provides a consistent way to provide transparency regarding the foods we sell and allow[s] our customers across the country the means to learn more about grocery products containing bioengineered ingredients." This report provides background information on agricultural biotechnology; reviews major provisions of the Standard (related to applicability, disclosure options, and administrative provisions); and concludes with potential considerations for Congress. The Appendix provides definitions of select scientific and related terms used in this report. Agricultural Biotechnology Background People have been changing plants, animals, and other edible organisms since before agriculture began more than 10,000 years ago. Before people planted crops and raised farm animals, hunting and gathering changed the genetic composition of species. The pace of these changes accelerated with the onset of agriculture. Selective breeding helped create and improve agricultural varieties to meet farmer and consumer needs. Conventional (traditional) breeding created hybrid varieties with enhanced size, growth rate, and other valuable characteristics. Since the mid-20 th century, laboratory-based breeding techniques have further strengthened the ability to modify agricultural varieties. In recent decades, genetic engineering has allowed for increasingly specific genetic manipulation. These techniques can change plants and animals in ways that, with conventional breeding, would not be possible or could take decades to achieve. The public has come to recognize plants and animals altered through modern biotechnology and genetic engineering as genetically modified organisms (GMOs) . Scientific and federal government experts identify the term g enetically modified as more general than genetically engineered , and as such genetically modified may include conventional breeding. In this report, genetic engineering refers to genetic modification techniques other than conventional breeding. The Standard addresses food labeling, and it does not change how foods derived from biotechnology are regulated for safety and approval for human or animal consumption. The federal government's 1986 Coordinated Framework for Regulation of Biotechnology (the Coordinated Framework) governs how USDA, the U.S. Food and Drug Administration (FDA), and the U.S. Environmental Protection Agency (EPA) apply existing statutes to evaluate biotechnology products. USDA regulates plants under the Plant Protection Act (7 U.S.C. §7701 et seq.). FDA regulates food, animal feed additives, and human and animal drugs, primarily under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §301 et seq.) and the Public Health Service Act (42 U.S.C. §201 et seq.). EPA registers and approves the use of pesticides, including those incorporated into plants through biotechnology, under the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136 et seq.). A key principle of the Coordinated Framework is to regulate products according to their characteristics and unique features rather than the processes used to develop them. More generally, FDA and the USDA Animal and Plant Health Inspection Service (APHIS) have responsibilities for assuring that foods sold in the United States are safe, with respect to human and agricultural health, and properly labeled. FDA released a policy statement on GE foods in 1992, indicating that in most cases they are "substantially similar" to non-GE foods and do not require additional regulation or labeling beyond what is required for comparable non-GE foods. A legal decision in 2000 upheld this policy. FDA requires labeling of GE foods that (1) have nutritional characteristics that differ from comparable non-GE foods, (2) contain GE material from known allergenic sources, or (3) have elevated levels of toxic compounds. This labeling is not required to indicate the GE status of the food. APHIS reviews GE organisms on the basis of whether they pose plant pest risks to agriculture. In 2019, the agency issued a proposed rule to exempt several categories of GE plants from review, citing 30 years of evidence indicating that "genetically engineering a plant with a plant pest as a vector, vector agent, or donor does not in and of itself result in a GE plant that presents a plant pest risk." The proposed rule further stated that new GE technologies, such as gene editing, do not engage with plant pests in any way. The National Bioengineered Food Disclosure Standard The Standard provides a mandatory national standard for disclosure of the presence of bioengineered foods and food ingredients to consumers. It provides U.S. food manufacturers, importers, and retailers with a voluntary compliance period and a mandatory compliance deadline. Following enactment of the 2016 Act, USDA delegated development and implementation of the Standard to the USDA Agricultural Marketing Service (AMS), which oversees many other USDA food-labeling programs, including mandatory Country of Origin Labeling (COOL), the voluntary National Organic Program (NOP), and the voluntary Process Verified Program (PVP). AMS developed the Standard through federal rulemaking, and issued the final rule in December 2018. The final rule defines key terms and interprets issues arising from the 2016 Act. The text box below includes terms defined in the Standard. The Standard identifies regulated entities as the food manufacturers, importers, and retailers responsible for making disclosures under the Standard. All regulated entities must comply with the Standard by January 1, 2022, although disclosures may begin during the voluntary compliance period, which started on January 1, 2020. As required for economically significant regulations, AMS prepared and published a regulatory impact analysis (RIA) of the Standard. The RIA estimates that implementation will cost between $570 million and $3.9 billion in the first year, and between $52 million and $118 million in each following year. It attributes most first year costs to those incurred by manufacturers analyzing the applicability of the rule and their compliance with the rule ($401 million to $3.1 billion). After the first year, the RIA attributes most ongoing costs to regulated entities avoiding mandatory disclosures by verifying that foods are not subject to the Standard ($0 to $59 million) and replacing bioengineered ingredients with non-bioengineered ingredients ($41 million to $44 million). The RIA estimates annual financial benefits of $190 million to $565 million, mostly attributed to costs avoided: the costs of complying with a patchwork of state laws, which are avoided and by implementation of the federal Standard. The RIA does not anticipate that the new Standard will provide any benefits to human health or the environment. Key provisions of the Standard, along with associated issues raised by stakeholders, are identified below within three categories: (1) applicability, (2) disclosure options, and (3) administrative provisions. Many components of the Standard remain controversial. Public reactions are discussed after each category. Applicability The Standard addresses its applicability to specific types of foods and types of entities involved in the manufacture, sale, and distribution of food. These issues were debated in policy discussions about GE food labeling, and they range from how the Standard defines a bioengineered food to which entities must comply with the Standard and which are exempt. Bioengineered Food Definition and Exclusions The 2016 Act defined bioengineering , with respect to food, as a food "(A) that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (DNA) techniques; and (B) for which the modification could not otherwise be obtained through conventional breeding or found in nature." It did not identify any specific technologies that would meet the definition of bioengineering . The 2016 Act specified that bioengineering referred to foods "intended for human consumption," and the act left open the possibility that USDA could use additional similar terms in the Standard. When issuing the Standard, USDA added detail to some statutory definitions and did not provide explicit definition of some other terms. While the Standard builds on the definition of bioengineering by describing the applicability of term, it does not define component parts of the definition, including conventional breeding or found in nature . Nor does it specify whether foods developed through specific technologies, such as gene editing, require disclosure to consumers. The Standard requires use of the term bioengineering rather than similar terms, such as genetic engineering , genetically modified , or GMO . The final rule sets boundaries for the foods that require disclosure. Based on the definition of bioengineering in the 2016 Act, AMS determined that certain products that derive from GE sources do not require labeling. The Standard identifies these exclusions in its definition of bioengineered food . They include animal feed, which is not considered food because it is not intended for human consumption; foods in which modified DNA is not detectable (e.g., refined oils and sugars); and incidental additives, as described in 21 C.F.R. 101.100(a)(3). The Standard expressly exempts other foods and substances described below. The text box at the end of this section summarizes exclusions and exemptions from the Standard. Exemptions The Standard identifies five exemptions from disclosure. The 2016 Act explicitly identified two of these: food served at restaurants or similar retail food establishments, and food produced by very small food manufacturers. The act called for the Standard to set a third exemption: foods containing an amount of a bioengineered substance below a certain threshold. The final two exemptions are for foods derived from animals solely because they consumed bioengineered feed, and food certified under the USDA National Organic Program (NOP). Food Served in a Restaurant or Similar Retail Food Establishment The 2016 Act exempts from disclosure food served in a restaurant or similar retail food establishment . The Standard defines this term as follows: A cafeteria, lunch room, food stand, food truck, transportation carrier (such as a train or airplane), saloon, tavern, bar, lounge, other similar establishment operated as an enterprise engaged in the business of selling prepared food to the public, or salad bars, delicatessens, and other food enterprises located within retail establishments that provide ready-to-eat foods that are consumed either on or outside of the retailer's premises. Very Small Food Manufacturers The 2016 Act exempts from disclosure food produced by a very small food manufacturer . The Standard defines this term as "any food manufacturer with annual receipts of less than $2,500,000." Foods with Unintentional Bioengineered Ingredients Under a Presence Threshold The 2016 Act called for USDA to "determine the amounts of a bioengineered substance that may be present in food, as appropriate, in order for the food to be a bioengineered food." The Standard exempts "food in which no ingredient intentionally contains a bioengineered (BE) substance, with an allowance for inadvertent or technically unavoidable BE presence of up to five percent (5%) for each ingredient." Foods Derived from Animals That Consumed Bioengineered Feed The 2016 Act specified that the Standard should not consider food derived from animals to be bioengineered food solely because those animals consumed bioengineered feed. The Standard exempts such foods. Food products such as meat, eggs, or milk derived from animals that consumed bioengineered feed do not require disclosure solely because the animals consumed bioengineered feed. Foods Certified Under NOP The 2016 Act specified that NOP certification "shall be considered sufficient to make a claim regarding the absence of bioengineering in the food, such as 'not bioengineered,' 'non-GMO,' or another similar claim." The Standard explicitly exempts foods certified under NOP. NOP is a voluntary food labeling program managed by AMS and operated as a public-private partnership. NOP certifies that agricultural products have been produced using approved organic methods listed in statute. Among NOP's diverse criteria, genetic engineering is an excluded method: NOP-certified products may not be produced or handled with genetic engineering. Thus, such products are not bioengineered and are exempted from the Standard. List of Bioengineered Foods The 2016 Act directed USDA to establish "such requirements and procedures as the Secretary [of Agriculture] determines necessary to carry out the standard." During rulemaking, AMS requested public comment on the utility of maintaining a list of potentially regulated foods, for entities to consult when determining whether a food is subject to disclosure. The final Standard includes a List of Bioengineered Foods (the List), that identifies foods that are available in a bioengineered form. While there are bioengineered and non-bioengineered versions of all foods on the List, only the bioengineered versions may require disclosure. The final rule details how AMS considered including on the List, but ultimately did not include, enzymes, yeasts, and other microorganisms produced in controlled environments. The rule states that regulated entities would need to make determinations on whether these substances require recordkeeping or disclosure on a case-by-case basis. AMS also publishes the List and associated details on its website. Beginning in early 2020, AMS plans to update the List annually, with associated opportunities for public comment. AMS plans to notify the public of the review via the Federal Register and the AMS website. If needed, AMS plans to update the List through the federal rulemaking process. See the text box below for foods on the List as of January 2020. Public Response to Applicability Provisions of the Standard The Standard's definition of bioengineered food , and what it applies to, remains controversial. Some areas of disagreement among stakeholders include the use of bioengineered rather than alternative terms, the definition's treatment of gene editing and new genetic technologies, the definition's treatment of refined food products, and the disclosure threshold for inadvertent or technically unavoidable presence of GE ingredients. Some farmer and industry groups have praised the Standard, contending that it provides consumers and regulated entities with needed consistency and transparency. Some advocates of stricter GE labeling argue that it is too permissive because many foods they consider genetically engineered do not require disclosure. These issues are addressed below. Alternative terms. The terminology used in the Standard has been a point of contention. While USDA had statutory authority to use alternative terms to bioengineered , it did not do so . Some stakeholder groups argue that most consumers are unfamiliar with the term bioengineered . They assert that using other terms, such as GMO , genetically modifi ed organism , or genetically engineered , would be less confusing for consumers. Other groups contend that the Standard's language is precise. Gene editing and n ew genetic technologies. The Standard's definition of bioengineered food does not identify specific technologies used to create such foods. AMS states that the Standard's definition "focuses primarily on the products of technology, not the technology itself." During rulemaking, some stakeholders had called for the Standard to explicitly address the status of foods derived from new genetic technologies that may not meet the statutory definition of bioengineering . For example, foods derived from gene editing may not meet the statutory definition of bioengineering if (a) they do not contain recombinant DNA or (b) AMS considers that that their modifications could be achieved through conventional breeding or found in nature. Other new genetic technologies may arise that do not meet the Standard's definition of bioengineering for these or other reasons. Because the Standard does not address specific technologies, consumers and regulated entities may lack clarity about whether or not foods derived from new genetic technologies must be disclosed under the Standard. In the absence of this information, many have interpreted the bioengineering definition as broadly excluding foods derived from gene editing. Under this interpretation, gene-edited foods would not require disclosure. Other interpretations of the Standard simply note that the final rule does not explicitly address gene editing or other new genetic technologies. Advocates of stricter GE labeling requirements contend that even though gene-edited foods seem to be excluded from the Standard's definition of bio engineering , such foods meet the common understanding of genetic engineering and therefore should be required to bear disclosures. R efined foods exclusion. The Standard excludes refined food products that do not contain detectable amounts of modified DNA from required disclosure. Food without detectable modified genetic material does not meet the statutory definition of bioengineered . Examples include soybean oil, canola oil, and refined sugar. The Standard does not require regulated entities to test every product for the presence of detectable modified genetic material. Rather, manufacturers, importers, and retailers can demonstrate the absence of modified genetic material with records of a validated refining process. Some groups that favor a more expansive definition of bioengineered foods argue that consumers want to know whether the foods they eat derive from GE plants and animals, and thus the Standard should have required disclosures for these refined foods. In contrast, some industry groups, including the Consumer Brands Association (formerly the Grocery Manufacturers Association), commended the Standard for providing regulated entities with the option to voluntarily disclose such foods if desired. Disclosure threshold. The Standard does not require disclosures for foods with up to 5% presence, per ingredient, of unintentional or technically unavoidable bioengineered substances. In comparison, the European Union applies a threshold of 0.9% per ingredient, and Australia and New Zealand use a threshold of 1% per ingredient. Foods in Japan must be labeled if a GE ingredient is among the top three ingredients and accounts for more 5% of the total product by weight. AMS selected the 5% threshold for the Standard to "appropriately balance providing disclosure to consumers with the realities of the food supply chain." Some advocates of stricter GE labeling, such as OTA, argue that the threshold in the Standard is too high and is "inconsistent with accepted private standards, most of our major global trading partners and unacceptable to consumers." Disclosure Options The Standard identifies permissible options for on-package disclosure of bioengineered foods. All disclosures must be "of sufficient size and clarity to appear prominently and conspicuously on the label, making it likely to be read and understood by the consumer under ordinary shopping conditions." Regulated entities must place the disclosure in one of three places: within the information panel close to details about the manufacturer, on the principle display panel, or on another panel the consumer is likely to see. In most cases, only one form of disclosure is required per package. Some disclosure options are available to all regulated entities for required disclosures (text, symbol, electronic or digital link, and/or text message), while others are available only to small food manufacturers (telephone number or website address) or in cases of voluntary disclosure (voluntary version of the BE disclosure symbol). Each option is described below. Standard Disclosure Options The 2016 Act specified that the Standard should provide several types of disclosure options. The final rule gives additional detail to their implementation. Text. "Bioengineered food" is the required text to disclose foods for which all ingredients either meet the definition of bioengineered food or lack records that indicate whether or not they are bioengineered. "Contains a bioengineered food ingredient" is the text required to disclose multi-ingredient foods for which some ingredients are not bioengineered while others are bioengineered or are of undetermined status. For foods distributed solely within a U.S. territory where the predominant language is not English, the appropriate text disclosure may be displayed in the territory's predominant language. Symbol. Regulated entities may use color or black-and-white versions of the disclosure symbols shown in Figure 1 . The symbol that incorporates the word bioengineered is for products that require disclosure. The symbol that incorporates the phrase derived from bioengineering may be placed voluntarily on packages of food that do not meet the bioengineered food definition but contain food that is derived from bioengineered food (such as refined foods without detectable modified DNA). Disclosures must not be false or misleading. Entities that are exempt from mandatory disclosure (e.g., very small food manufacturers and restaurants) may make voluntary disclosures using the appropriate symbol. Electronic or digital link . Entities may disclose bioengineered food via electronic or digital links, which are codes that consumers can scan to access more information. Current examples include Quick Response (QR) codes and digital watermarks that consumers may scan with a smart phone or in-store scanner. The code may embed product information or a link to a website with this information presented on the first webpage. The 2016 Act and the Standard require that any electronic or digital link disclosure on a package must be accompanied by the text "Scan here for more food information" or equivalent language consistent with technological changes. They also require that such disclosures be accompanied by a telephone number that consumers may call to receive additional information. Providing disclosure via these technologies was among the most controversial aspects of the 2016 Act. In the 2016 Act, Congress required USDA to solicit public comment and conduct a study to determine if electronic or digital links would provide consumers with sufficient access to information while shopping. If USDA were to determine that these disclosure methods were insufficient in this regard, then the Standard would need to provide additional disclosure options. AMS contracted with Deloitte Consulting to conduct the study. The resulting report identified several challenges that would need to be overcome for consumers to access information through digital or electronic link disclosures. AMS determined that the Deloitte study indicated that electronic and digital links would not provide consumers with sufficient access to this information. Text message . In response to public comments and the results of the Deloitte study, the Standard adopts disclosure by text message as an option in addition to those identified in the 2016 Act. Regulated entities choosing this option must include a clear statement on the food package describing how to receive a text message. Disclosure Options for Small Food Manufacturers The Standard defines a small food manufacturer as one with annual receipts of between $2.5 million and $10 million. As directed in the 2016 Act, the Standard allows small food manufacturers to select from additional disclosure options. These consist of providing a telephone number or an internet website address to allow consumers to access more information. Such disclosures must be accompanied by the text "Call [number] for more food information" or "Visit [Uniform Resource Locator of the website] for more food information." Alternative Disclosure Options for Specific Circumstances The Standard specifies additional considerations for small and very small packages as well as food sold in bulk containers. The additional disclosure options for small packages mirror the standard options but allow for abbreviated on-package text: "Scan for info," "Text [number] for info," and "Call [number] for info." For very small packages, regulated entities may use a label's preexisting telephone number or website address in lieu of other disclosures. Retailers are responsible for disclosures for food sold in bulk containers (e.g., display case, bin, carton, and barrel), and they must use the primary disclosure options. Voluntary Disclosure The Standard allows for voluntary disclosure in some cases. Exempt entities (very small food manufacturers and restaurants and similar retail food establishments) may voluntarily disclose bioengineered foods and food ingredients using any of the options provided. Additionally, the Standard permits both regulated and exempt entities to voluntarily disclose foods that do not require mandatory disclosure. Such foods include refined foods that derive from bioengineered foods but do not have detectable modified DNA. Voluntary disclosures should indicate that ingredients are "derived from bioengineering" rather than "bioengineered." The Standard does not permit voluntary disclosure in most other circumstances. Public Response to Disclosure Options of the Standard During the rulemaking process for the Standard, some advocates for strict GE labeling provisions were seeking a single, easily identifiable, on-package disclosure. These respondents have criticized the disclosure options in the Standard as confusing and uninformative. In contrast, some other groups sought flexible disclosure options that regulated entities could adapt easily to different circumstances. Such industry groups have supported the disclosure options in the Standard as informative and flexible enough for manufacturers to meet. Among critics, the Organic Trade Association (OTA) argued that the Standard does not provide for meaningful disclosure. It stated that the Standard "allows for the option of digital/electronic disclosures rather than requiring on-pack plain English text disclosure" and that the "stylized GMO symbol with a four-pointed starburst does not reflect a neutral symbol as Congress intended and is misleading." The Center for Food Safety (CFS) found that "both disclosure methods [electronic and digital disclosure], as well as 800 numbers, are unwieldy, time-consuming, and clearly designed to inhibit rather than facilitate access to GE content information." The International Dairy Foods Association (IDFA) provided a mixed reaction, approving of some aspects of the Standard while further stating, "the rule does not provide the level of transparency IDFA and consumers were hoping for." Among other perceived limitations, IDFA added that the Standard does not require disclosure of highly refined ingredients deriving from GE foods, although it allows for voluntary disclosure of these products. Among supporters of the Standard, the Food Marketing Institute and the National Corn Growers Association welcomed the disclosure consistency that the Standard provides. The Standard's inclusion of a voluntary disclosure option elicited mixed responses. While the Consumer Brands Association praised this option, the Center for Science in the Public Interest (CSPI) commented that voluntary disclosure could introduce confusion. CSPI identified the potential for consumers to encounter a single type of product, derived from bioengineering, that one company chose to voluntarily disclose and another company did not. OTA called on food companies to voluntarily disclose all foods produced with genetic engineering. Administrative Provisions Stakeholders have also focused on the administrative provisions of the Standard. Key administrative issues include the speed at which regulated entities must comply with the Standard, recordkeeping requirements and burdens, and the enforceability of the Standard. These topics are addressed below. Compliance Deadline The 2016 Act did not specify compliance dates for the Standard. The final rule allows for phased implementation before requiring all regulated entities to comply with the Standard (see Table 1 ). It sets January 1, 2020, as the date on which most regulated entities may begin implementation. Small food manufacturers have an additional year to begin implementation, with a start date of January 1, 2021. All regulated entities must fully comply with the Standard by January 1, 2022. Recordkeeping In the RIA, AMS commented that it provides the List of Bioengineered Foods to "simplify and minimize analysis and recordkeeping burden on regulated entities." The Standard requires regulated entities that sell foods on the List, including both bioengineered and non-bioengineered versions, to maintain records documenting whether or not those foods or their ingredients are bioengineered. The Standard does not require potentially regulated entities to maintain records for foods that are not on the List unless they know that a food is bioengineered. This situation could occur if AMS has not yet identified the food as commercially available and has not yet added the food to the List. In such cases, the entity must disclose the food and must maintain records. Regulated entities may determine what records to keep and how to manage them, as long as they contain sufficient detail for AMS to understand and audit them under the Standard. Entities must maintain these records for two years after sale or distribution of the food. Enforcement Failure to make a required disclosure is prohibited under the 2016 Act. However, the act limited the scope of potential enforcement mechanisms and remained silent on others. The 2016 Act explicitly prohibited USDA from recalling food for known or suspected violations of the Standard. It did not address or authorize potential civil penalties for violations. The act allowed USDA to enforce compliance through records audits, examinations, hearings, and public disclosure of findings. The Standard identifies procedures for carrying out these enforcement mechanisms. AMS does not continuously and proactively verify compliance with the Standard. Rather, the Standard creates a mechanism for the public to file statements or complaints to the AMS Administrator about possible violations of the Standard, and it outlines how AMS may respond to these written statements or complaints. If AMS determines that a complaint warrants further investigation, AMS may audit or examine the records of the entity responsible for disclosure and make its findings available to the entity. The entity may then request a hearing if it objects to the findings. The Standard allows for AMS to revise the findings if warranted and provides that AMS will make the final results of the investigation publicly available. Public Response to Administrative Provisions of the Standard While most stakeholder responses to the final Standard have focused on applicability and disclosure options, some interested groups have commented on its administrative provisions. Before release of the Standard, advocates of strict GE labeling had called for an early start to the mandatory compliance period. However, some industry groups supported the delay of mandatory compliance, citing the need to allow sufficient time for regulated entities to adjust labels and recordkeeping procedures. Echoing comments that AMS received during the federal rulemaking process, some critics of the Standard have continued to assert that its enforcement mechanisms are weak. Other GE Labeling Approaches The National Bioengineered Food Disclosure Standard was developed within a broader societal context. State-level approaches to GE labeling predated the federal 2016 Act. These were driven by public interest in knowing the GE status of their foods. In addition, some private and federal voluntary labeling programs that provide information on the GE status of foods are expected to continue after implementation of the Standard. Public Opinion and State-Level GE Labeling Before the Standard When foods containing GE ingredients were first introduced in the 1990s, some members of the public called for banning them based on concerns about potential harm to human health. Research has repeatedly found no difference between foods developed with and without genetic engineering, in terms of the health and safety of the people consuming them. Even so, some consumers remain concerned about genetic engineering, citing health, personal preference, religious, economic system, and other objections. Moving on from calls to ban GE foods for human health reasons, many consumers began to demand a government role in making GE foods easily identifiable via GE labeling. Before establishment of the Standard, some surveys reported that the majority of consumers wanted GE foods to be labeled. Various proposed GE labeling laws and initiatives at the state and federal levels provided for mandatory or voluntary labeling. Mandatory labeling requires companies to disclose the presence of GE ingredients. Voluntary labeling can allow companies to certify the absence of GE ingredients (as discussed in " Continuing Voluntary Labeling Programs and GE-Absence Claims ") or to disclose the presence of GE ingredients. The 2016 Act preempted state laws and initiatives and instituted mandatory labeling of the presence of GE ingredients in foods. In the years preceding the introduction and passage of the 2016 Act, state laws and ballot initiatives on GE labeling began to proliferate. In 2014, Vermont became the first state to enact a mandatory GE labeling law, with an effective date of July 1, 2016. Other states enacted similar laws, while others still considered similar legislation or voted on state ballot initiatives. Michigan and North Dakota enacted legislation urging the U.S. Congress to pass a uniform GE labeling standard. Most GE labeling proponents strongly supported mandatory labeling standards, citing consumers' right to know, even if safety were not an issue. Some GE labeling opponents argued that no scientific basis existed for requiring mandatory GE labeling, and that such labeling may unnecessarily introduce doubt about the quality or safety of labeled foods and could cause costly and unnecessary market disruption. Before the 2016 Act, some GE labeling proponents and opponents called for a federal law to preempt development of an uncertain and confusing patchwork of state laws with different GE labeling requirements. In the absence of federal legislation in 2015, USDA experimented with adapting an existing voluntary USDA labeling program to meet consumer and producer interests in GE labeling. That year, AMS used its Process Verified Program (PVP) to certify the absence of GE ingredients in food products from a single company, which had requested this service. Some anticipated that this would lead to a voluntary USDA program to certify the absence of GE ingredients in foods. GE-labeling proponents responded that, although this would be a step in the right direction, a voluntary program would fail to meet consumer demands, and only mandatory labeling would do so. This application of PVP to certify the absence of GE ingredients in foods did not expand beyond a single company. Continuing Voluntary Labeling Programs and GE-Absence Claims Voluntary labeling programs that identify the absence of GE ingredients predate legislation to require mandatory labels on foods that contain GE ingredients. On-package symbols from these private and public-private programs indicate to consumers that foods do not contain GE ingredients. They may either make a direct GE-absence claim (certifying that the food does not contain GE ingredients) or indicate that the food was produced with processes that do not include genetic engineering (e.g., certified organic production methods). Food producers and manufacturers may choose to opt into these programs and to bear associated costs. One example is the Non-GMO Project, which a non-profit organization manages to provide third-party verification for processed foods that do not contain GE ingredients. Companies sign agreements with the Non-GMO Project to have their processes reviewed and to have any high-risk products tested by third-party laboratories. Once the Non-GMO Project verifies a company's processes and products, the company can display the Non-GMO Project Verified symbol on its food packaging. This symbol on food packaging makes a GE-absence claim. Another example is the USDA National Organic Program (NOP), a public-private program for voluntary labeling that, among other things, indicates the absence of GE ingredients. NOP, which is administered by AMS, certifies that agricultural products have been produced using approved organic methods listed in statute. Genetic engineering is an excluded method: NOP-certified products may not be produced or handled with genetic engineering. The NOP symbol indicates that a food meets diverse criteria, including production methods that exclude genetic engineering. These voluntary labeling programs are expected to continue after implementation of the Standard. They differ from the Standard's voluntary disclosure option , which permits voluntary disclosure of foods that derive from bioengineering yet no longer have the characteristics of bioengineered foods, and is discussed in this report's section on " Voluntary Disclosure ." The voluntary labeling programs provide opportunities to identify foods that affirmatively do not derive from bioengineering. The Standard does not address GE-absence claims, and the final rule states that FDA (and the USDA Food Safety and Inspection Service, depending on the food at issue) "retain authority over absence claims." Select Considerations for Congress Implementation of the Standard over the next two years and beyond will affect consumers, regulated entities, and AMS. Many potential issues arising from the Standard will become clear only as implementation continues. The below text summarizes potential and stated concerns related to applicability, disclosure options, administrative provisions, and other issues. Congress may choose to monitor the new Standard's implementation in accordance with its oversight responsibilities. A key question for Congress is whether AMS's implementation of the 2016 Act meets congressional intent regarding the scope of applicability and the degree of disclosure required. In the final rule, AMS asserted that it balanced flexibility for regulated entities and information to consumers regarding the bioengineered status of their foods. Stakeholders who question AMS's decisions in the rulemaking process, as described above, may question the extent to which AMS's implementation aligns with congressional intent. Applicability. Groups that have criticized the definition of bioengineered in the 2016 Act may call on Congress to amend the definition to include highly refined products derived from GE organisms and/or include products that do not meet the current definition, such as those derived from gene editing and other new technologies. Other interested groups may continue to advocate for a definition that restricts the number and types of foods to which the definition applies. AMS has committed to maintaining and updating the List through annual public reviews, and on an interim basis as needed. Such reviews can provide opportunities to add to the List any bioengineered food products that have entered commerce. Additionally, during these reviews, stakeholders with differing views may encourage the agency to adopt either a more expansive or a more restrictive listing of bioengineered foods. Disclosure. Another issue in the context of disclosure is the degree of familiarity with the required labels that consumers may have. Consumers unfamiliar with the term bioengineered may have questions about what this means on foods bearing disclosure. Public reaction to implementation of the various types of disclosure may generate calls for these options to be revised based on their success or failure to provide consumers with easily accessible and useful information. Administrative provisions. An issue for potential consideration is the extent to which additional federal resources will be required to implement the Standard in both the voluntary and mandatory compliance periods. In its regulatory impact analysis (RIA), AMS broadly estimated that it may need $2 million annually to implement the Standard, without differentiating potential expenses during the voluntary and mandatory compliance periods. AMS proposed that it would use such funds to update the List; conduct audits and hearings; manage complaints and inquiries; and provide training, education, outreach and programmatic support. AMS may need to assign staff and develop new processes to implement the Standard's provisions related to audits, examinations, hearings, and publications of findings. Congress may be asked to consider allocating new resources to support continued implementation of the new Standard. In addition, Congress may assess the cost and administrative overhead that regulated entities expend to identify and maintain records on foods subject to disclosure and to adjust labels on food packaging. Estimates for administrative costs to regulated entities, which AMS presents in its RIA, range from a lower bound of $459 million to an upper bound of nearly $3.6 billion for the first year. AMS anticipates that these costs will greatly reduce in subsequent years as potentially regulated entities replace bioengineered ingredients with non-bioengineered ingredients. Regarding enforcement, the rule largely relies on a public notification mechanism to influence the compliance of regulated entities and correct violations of the Standard. Stakeholders may or may not view this mechanism as successful, depending on the extent and frequency of any such violations. Interested parties may petition Congress to strengthen existing enforcement mechanisms or identify new ones to enhance compliance with the new Standard. Market demand for bioengineered versus non-bioengineered products . In the RIA, AMS indicates that it cannot accurately predict how consumers will react to bioengineered disclosures on food labels. Consumers may avoid foods labeled as bioengineered, they may prefer them, or such labels may make no difference to consumer purchasing behaviors. In the RIA, AMS assumes that manufacturers will avoid labeling 20% of their products as bioengineered, by replacing bioengineered with non-bioengineered ingredients, due to potential consumer reactions. AMS selected 20% for purposes of estimating costs and benefits in the RIA following consideration of existing studies and surveys of consumer behavior and consideration of the requirements of the Standard. Depending on how consumers respond, implementation of the Standard may influence manufacturer and retailer demand for bioengineered and non-bioengineered foods. Congress may respond to stakeholder concerns about any market shifts resulting from the Standard. Interactions with international trade. Unexpected issues may arise as implementation begins. For example, AMS states that it does not expect the Standard to impact foreign trade. However, it also notes that the USDA Foreign Agriculture Service is prepared to work closely with foreign countries that export food and agricultural products to the United States, to facilitate their understanding of the Standard. If trade issues arise, Congress may choose to address harmonization of labeling requirements with foreign trading partners by amending applicability, disclosure, or administrative requirements in the 2016 Act, or by other means. Appendix. Glossary of Select Scientific and Related Terms Many terms are used when describing human alterations of plants and animals over time. Unless otherwise noted, the definitions in this glossary derive from USDA's online Agricultural Biotechnology Glossary and are used for the purposes of this report. Agricultural b iotechnology. A range of tools, including traditional breeding techniques, that alter living organisms, or parts of organisms, to make or modify products; improve plants or animals; or develop microorganisms for specific agricultural uses. Modern biotechnology today includes the tools of genetic engineering. Conventional breeding. Undefined in USDA's Agricultural Biotechnology Glossar y. USDA defines the similar term, traditional breeding , as "modification of plants and animals through selective breeding. Practices used in traditional plant breeding may include aspects of biotechnology such as tissue culture and mutational breeding." Gene editing. A technique that allows researchers to alter the DNA of organisms to insert, delete, or modify a gene or gene sequences to silence, enhance, or otherwise change an organism's specific genetic characteristics. GE labeling. On-package disclosure of genetically engineered foods or food ingredients. Genetically engineered (GE) . Produced through genetic engineering. Genetic engineering. Manipulation of an organism's genes by introducing, eliminating or rearranging specific genes using the methods of modern molecular biology, particularly those techniques referred to as recombinant DNA techniques. Genetic modification. The production of heritable improvements in plants or animals for specific uses, via either genetic engineering or other more traditional methods. Some countries other than the United States use this term to refer specifically to genetic engineering. Genetically modified organism ( GMO). An organism produced through genetic modification. Recombinant DNA. A molecule of DNA formed by joining different DNA segments using recombinant DNA technology. Recombinant DNA technology. Procedures used to join together DNA segments in a cell-free system (e.g., in a test tube outside living cells or organisms). Under appropriate conditions, a recombinant DNA molecule can be introduced into a cell and copy itself (replicate), either as an independent entity (autonomously) or as an integral part of a cellular chromosome. Selective breeding . Making deliberate crosses or matings of organisms so the offspring will have particular desired characteristics derived from one or both of the parents. Transgenic organism. An organism resulting from the insertion of genetic material from another organism using recombinant DNA techniques. Variety. A subdivision of a species for taxonomic classification also referred to as a "cultivar." A variety is a group of individual plants that is uniform, stable, and distinct genetically from other groups of individuals in the same species.

In July 2016, Congress enacted P.L. 114-216 (2016 Act), comprehensive legislation to govern the labeling of bioengineered foods. The 2016 Act required the U.S. Department of Agriculture (USDA) to establish the National Bioengineered Food Disclosure Standard ( the Standard ) . The Standard regulates labeling of bioengineered foods, a term defined in the 2016 Act. The act does not address or define other terms that some members of the public might associate with bioengineered foods, such as genetically engineered (GE), genetically modified , and genetically modified organism (GMO). The Standard guides the mandatory labeling of foods to indicate the presence of GE ingredients. As such, foods meeting requirements identified in the Standard must bear a bioengineered disclosure. Implementation began on January 1, 2020, and mandatory compliance begins on January 1, 2022. The Standard provides details under the three key issues of applicability, disclosure options, and administrative provisions: Applicability discusses the definition of bioengineered food and the USDA-maintained List of Bioengineered Foods (List). The Standard applies to foods that are or may be derived from bioengineered ingredients, with some exclusions and exemptions. It does not apply to refined products, such as oils or sugars, that derive from GE plants but no longer contain detectable modified deoxyribonucleic acid (DNA). Many groups interpret the Standard as not applying to foods derived from gene editing and other new technologies that do not use recombinant DNA. The Standard exempts from disclosure foods served in restaurants. Some have endorsed such exclusions and exemptions, and others have criticized them. Disclosure Options outlines acceptable disclosure options for regulated entities, as well as additional options available for specific entities and types of food packages. Most regulated entities may disclose by text, symbol (pictured above), electronic or digital link, or text message. In some cases, a telephone number or website address may be acceptable. Some groups have praised the flexibility that this range of options provides regulated entities, while others have criticized these options as confusing. Administrative Provisions reviews compliance dates, recordkeeping requirements, and enforcement mechanisms, which include audits, examinations, hearings, and release of public findings. The 2016 Act provided few enforcement mechanisms to promote compliance. The Standard establishes how USDA may investigate accusations of non-compliance and how it may publicly release its findings. The Standard does not affect how foods derived from biotechnology are regulated for safety and approval for human consumption. The Coordinated Framework for Regulation of Biotechnology , a policy the White House issued in 1986, continues to govern how federal agencies, including USDA, evaluate and approve products developed using modern biotechnology. More generally, USDA and the U.S. Food and Drug Administration (FDA) continue to ensure that foods sold in the United States are safe and properly labeled. USDA's Agricultural Marketing Service (AMS) developed the Standard within a broader societal context. Before the 2016 Act, some members of the public had demanded mandatory labeling of the presence of GE ingredients in foods, based on the consumer's right to know. Other members of the public had opposed any GE labeling because of the scientific consensus that GE foods are safe to eat and concern that labeling may introduce unwarranted doubts about food safety. Before the 2016 Act, several states had enacted GE labeling laws, creating concerns among industry and consumer groups. In response, Congress debated this and other federal GE labeling legislation. GE labeling programs may be voluntary or mandatory and may indicate the presence or absence of GE ingredients. Several voluntary labeling programs predate the Standard's mandatory labeling requirements. Public and private programs for the voluntary labeling of foods continue to indicate the absence of GE ingredients in foods. These include the Non-GMO Project and the USDA National Organic Program. Future considerations for Congress may include ongoing questions consumers may have concerning what it means for a food to be labeled as bioengineered , how regulated entities will respond to the Standard's new requirements, how USDA will implement its responsibilities under the Standard, potential market impacts as demand for GE versus non-GE foods may change, and how the Standard aligns with international labeling requirements. Congress may choose to monitor implementation of the new Standard in accordance with its oversight responsibilities.

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Introduction This report provides background on Department of Defense's legacy Electronic Health Record (EHR) systems, reviews previous EHR modernization efforts, and describes DOD's process to acquire and implement a new EHR system known as MHS Genesis . DOD's new EHR system presents several potential issu es for Congress, including how to conduct oversight on a program that spans three federal departments, how to ensure an adequate governance structure for the program, and how to monitor the program's cost and effectiveness. Although this report mentions EHR modernization efforts by the Department of Veterans Affairs (VA) and U.S. Coast Guard (USCG), as well as DOD's Joint Operational Medical Information System (JOMIS); it does not provide an in-depth discussion of these programs. Appendix A provides a list of acronyms used throughout this report. Background For decades, the Department of Defense (DOD) has developed, procured, and sustained a variety of electronic systems to document the health care services delivered to servicemembers, military retirees, and their family members. DOD currently operates a number of legacy EHR systems and is, at the direction of Congress, in the process of implementing a new EHR called MHS Genesis. DOD's new EHR system is to be integrated with other EHR systems utilized by the VA, USCG, and civilian health care providers. DOD operates a Military Health System (MHS) that delivers to military personnel, retirees, and their families certain health entitlements under chapter 55 of Title 10, U.S. Code. The MHS administers the TRICARE program, which offers health care services worldwide to over 9.5 million beneficiaries in DOD hospitals and clinics – also known as military treatment facilities (MTFs) – or through participating civilian health care providers (i.e., TRICARE providers). There are currently 723 MTFs located in the United States and overseas that provide a range of clinical services depending on size, mission, and level of capabilities. Health care services delivered in MTFs or by TRICARE providers are documented in at least one of the following components of the DOD health record: service treatment record (STR) – documentation of all medical and dental care received by a servicemember through their military career; nonservice treatment record (NSTR) – documentation of all medical and dental care received by a nonservicemember beneficiary (i.e., military retiree, family member); and occupational health civilian employee treatment record (OHTR) – documentation of all occupational-related care provided by DOD (typically to DOD civilian or contractor employees). DOD maintains numerous legacy EHR systems that allow health care providers to input, share, and archive all documentation required to be in a beneficiary's health record. MTF or TRICARE providers can document medical and dental care directly in a DOD legacy EHR system, or can scan and upload paper records. Servicemembers and their families frequently change duty stations; the DOD health record can be accessed at most MTFs. However, sometimes beneficiaries are relocated to an area that lacks access to DOD's legacy EHR systems. In such cases, beneficiaries are required to maintain a paper copy of the health record. Brief History of DOD's Electronic Health Record (EHR) Since 1968, DOD has used various electronic medical information systems that automate and share patient data across its MTFs. Between 1976 and 1984, DOD invested $222 million to "acquire, implement, and operate various stand-alone and integrated health-care computer systems." Over the next three decades, DOD continued to invest and to implement numerous electronic medical information systems to allow health care providers to input and review patient data across all MTFs, regardless of military service or geographic location. In 1998, DOD began to incorporate a series of efforts to increase interoperability with the VA's EHR systems (see Figure 1 ). DOD Legacy EHR Systems DOD operates numerous legacy EHR systems as described below. Together, health care data documented and archived in the legacy EHR systems contribute to a beneficiary's overall medical and dental record, also known as the DOD health record. MHS Genesis is intended to replace these legacy systems and produce one comprehensive EHR. Composite Health Care System (CHCS) CHCS is a medical information system that has been in operation since 1993. CHCS primarily functions as the outpatient component of the EHR, with additional capabilities to order, record, and archive data for laboratory, radiology, and pharmacy services. Administrative functions such as patient appointment and scheduling, medical records tracking, and quality assurance checks, were also incorporated into CHCS. In March 1988, DOD awarded Science Applications International Corporation (SAIC) a contract to "design, develop, deploy, and maintain CHCS." SAIC continues to provide ongoing sustainment and technical support for CHCS. The estimated life-cycle cost of CHCS is $2.8 billion. Armed Forces Health Longitudinal Technology Application (AHLTA) After deploying CHCS, DOD identified a need for integrated health care data that could be portable and accessible at any MTF. CHCS was developed as a facility-specific system that archived its data using regional network servers. However, accessing data across each server became a "time- and resource-intensive activity." In 1997, DOD began planning for a new "comprehensive, lifelong, computer-based health care record for every servicemember and their beneficiaries." The program would be known as CHCS II, later renamed the Armed Forces Health Longitudinal Technology Application (AHLTA). DOD intended to replace CHCS with AHLTA and initially planned to deploy the new system in 1999. However, the program sustained several delays resulting from "failure to meet initial performance requirements" and changes to technical and functional requirements. The implementation plan was later revised to reflect AHTLA deployment from July 2003 to September 2007. In 2010, the Government Accountability Office (GAO) reported that DOD's AHLTA life-cycle cost estimate through 2017 would be $3.8 billion. Essentris Essentris is the inpatient component of the current EHR that has been used in certain military hospitals since 1987. As a commercial-off-the-shelf (COTS) product developed by CliniComp International, Inc. (CliniComp), Essentris allows health care providers to document clinical care, procedures, and patient assessments occurring in the inpatient setting, as well as in emergency departments. In 2009, DOD selected CliniComp to deploy Essentris at all military hospitals. This deployment was completed in June 2011. DOD maintains an ongoing contract with CliniComp and LOUi Consulting Group, Inc. to provide sustainment, technical and customer support, training, and ongoing updates for Essentris. Corporate Dental System (CDS) CDS, formerly named the Corporate Dental Application, is a web-based application that serves as DOD's current electronic dental record system. CDS allows DOD dental providers to document, review, and archive clinical information. The system also serves several administrative functions, such as tracking dental readiness of servicemembers, patient appointments and scheduling, and data reporting. CDS was initially developed as the Army's alternative dental solution to the AHLTA dental module. In 2000, all Army dental clinics implemented CDS. By 2016, Navy and Air Force dental clinics also transitioned to CDS as their electronic dental record system. In the same year, DOD awarded a four-year, $30 million contract to the Harris Corporation to sustain CDS. Paper Medical Records Paper medical records are another component of the DOD health record. While certain health care data are recorded and archived electronically, some administrative processes and clinical documentation exist only on paper forms. For example, clinical documentation from TRICARE providers, accession medical records, or medical evacuation records are usually in paper form. In such cases, DOD policy requires the scanning and archiving of paper medical records in an electronic repository called the Health Artifact and Image Management Solution (HAIMS). After being digitized, certain paper medical records are submitted to the National Archives and Records Administration while other documents are disposed of locally. Other DOD legacy systems document and archive various administrative and clinical data, such as: Referral Management System (RMS). An administrative information system that allows MTF staff to create and track referrals between health care providers. HAIMS. An electronic repository that stores DOD health care data, including digitally transmitted or scanned medical documentation. Data housed in HAIMS is also incorporated into a servicemember's official service treatment record , which is accessible to the VA. Medical Readiness Tracking Systems. Each military department utilizes an electronic information system that documents and tracks certain medical and dental readiness requirements, such as periodic health assessments, immunizations, dental exams, and laboratory tests. Theater Medical Information Program–Joint (TMIP-J). A suite of electronic systems, including modules for health care documentation and review, patient movement, and medical intelligence used in deployed or austere environments. Joint Legacy Viewer (JLV). A web-based, read-only application that allows DOD and VA health care providers to review certain real-time medical data housed in each department's EHR systems. Armed Forces Billing and Collection Utilization Solution (ABACUS). A web-based electronic system that allows MTFs to bill and track debt collection for health care services provided to certain beneficiaries. Developing an EHR Modernization Solution After Operation Desert Storm concluded in 1991, concern about deficient interoperability between DOD and VA health record systems began to grow. A number of committees and commissions issued reports highlighting the need for DOD and VA to standardize record-keeping; to improve health data sharing; and to develop a comprehensive, life-long medical record for servicemembers. Table 1 summarizes their recommendations. Between 1998 and 2009, DOD and VA established various methods to exchange limited patient health information across both departments, including: Federal Health Information Exchange (FHIE). Completed in 2004, the FHIE enables monthly data transmissions from DOD to VA comprised of patient demographics, laboratory/radiology results, outpatient pharmacy, allergies, and hospital admission data. Bidirectional Health Information Exchange (BHIE). Completed in 2004, the BHIE enables real-time, two-way data transmissions (DOD-to-VA and VA-to-DOD) comprised of FHIE information, additional patient history and assessments, theater clinical data, and additional inpatient data. Clinical Data Repository/Health Data Repository (CHDR). Completed in 2006, CHDR enables real-time, two-way data transmissions comprised of pharmacy and drug allergy information and a capability to add information to the patient's permanent medical record in the other department's repository. Virtual Lifetime Electronic Record (VLER). Initiated in 2009, the VLER enables real-time, health information exchange between DOD and VA, as well as certain civilian health care providers. While these information exchange systems enable DOD and VA health care providers to view or modify limited health care data, both departments continue to operate separate, disparate health record systems. Congress Mandates Interoperability In 2008, Congress began legislating mandates for DOD and VA to establish fully interoperable EHR systems that would allow for health care data sharing across departments. Section 1635 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2008 ( P.L. 110-181 ) directed DOD and VA to jointly: (1) "develop and implement electronic health record systems or capabilities that allow for full interoperability of personal health care information," and (2) "accelerate the exchange of health care information" between both departments. Additionally, Congress directed the establishment of an interagency program office (IPO) that would serve as a "single point of accountability" for rapid development and implementation of EHR systems or capabilities to exchange health care information. The FY2008 NDAA also directed the IPO to implement the following, no later than September 30, 2009: "…electronic health record systems or capabilities that allow for full interoperability of personal health care information between the Department of Defense and Department of Veterans Affairs, which health records shall comply with applicable interoperability standards, implementation specifications, and certification criteria (including for the reporting quality measures) of the Federal Government." In the conference report accompanying the Department of Defense Appropriations Act, 2008 ( H.Rept. 110-434 , P.L. 110-116 ), Congress also directed DOD and VA to "issue a joint report" by March 3, 2008, that describes the "actions being taken by each department to achieve an interoperable electronic medical record (EMR)." On April 17, 2008, the IPO was established with temporary staff from DOD and VA. On December 30, 2008, the Deputy Secretary of Defense delegated oversight authority for the IPO to the Under Secretary of Defense for Personnel and Readiness (USD[P&R]). The FY2008 NDAA also directed the Secretary of Defense (SECDEF) to appoint the IPO Director, with concurrence of the Secretary of Veterans Affairs (SECVA); and the SECVA to appoint the IPO Deputy Director, with concurrence of the SECDEF. Establishing Interoperability Goals To meet Congress's mandate on interoperability, the IPO established a mutual definition of interoperability. They posited it as the "ability of users to equally interpret (understand) unstructured or structured information which is shared (exchanged) between them in electronic form." Shortly after, both departments identified and adopted six areas of interoperability capabilities intended to meet the requirements and deadline established by Congress: Expand Essentris implementation across DOD. Demonstrate the operation of the Partnership Gateways in support of joint DOD and VA health information sharing. Enhance sharing of DOD-captured social history with VA. Demonstrate an initial capability for DOD to scan medical documents into the DOD EHR and forward those documents electronically to VA. Provide all servicemembers' health assessment data stored in the DOD EHR to the VA in such a fashion that questions are associated with the responses. Provide initial capability to share with the VA electronic access to separation physical exam information captured in the DOD EHR. As a result of each department's work on interoperable capabilities, DOD and VA reported to Congress in 2010 that all requirements for "full" interoperability were met. The Integrated EHR Initiative DOD and VA continued to work on integrating their respective EHR systems through individual initiatives, while considering a larger EHR modernization strategy. Three strategy options were considered: 1. develop a new, joint EHR; 2. upgrade and adopt an existing legacy system across both departments (i.e., AHLTA or VistA); or 3. pursue separate solutions that would have "common infrastructure with data interoperability." In March 2011, the SECDEF and SECVA agreed to work cooperatively to develop an integrated electronic health record (called the iEHR ) that would eventually replace each department's legacy systems. The IPO was assigned the oversight role for the iEHR initiative, which was then set to begin implementation no later than 2017. In February 2013, SECDEF and SECVA announced that they would no longer pursue the iEHR initiative. In making this decision, DOD and VA determined that the initial cost estimates for implementing the iEHR would be "significant," given the "constrained Federal Budget environment." After reevaluating their approach and considering alternatives, both departments decided to pursue other ongoing efforts to "improve data interoperability" and to preserve and develop separate EHR systems with a core set of capabilities that would allow for integrated sharing of health care data between DOD, VA, and private sector providers. Congressional Mandate for an EHR After DOD and VA announced their change to the iEHR strategy in 2013, Congress expressed its sense that both departments had "failed to implement a solution that allows for seamless electronic sharing of medical health care data." Given some Members' apparent frustration, Congress established a new deadline for both departments to deploy a new EHR solution. Section 713(b) of the NDAA for FY2014 ( P.L. 113-66 ) directed DOD and VA to implement an interoperable EHR with an "integrated display of data, or a single electronic health record" by December 31, 2016 (see text box below). The law also required DOD and VA to "jointly establish an executive committee" to support development of systems requirements, integration standards, and programmatic assessments to ensure compliance with Congress's direction outlined in Section 713(b). MHS Genesis Given Congress's new mandate for both departments to implement an interoperable EHR, DOD conducted a 30-day review of the iEHR program in order to "determine the best approach" to meeting the law. While conducting its review, DOD identified two EHR modernization options that would support healthcare data interoperability with the VA: (1) adopt VistA and (2) acquire a commercial EHR system. DOD Acquisition Strategy On May 21, 2013, the Secretary of Defense issued a memorandum directing the department's pursuit of "a full and open competition for a core set of capabilities for EHR modernization." The directive also delegated certain EHR responsibilities to various DOD leaders. Under Secretary of Defense for Acquisition, Technology, and Logistics (USD[AT&L]), whose office was later reorganized as the Under Secretary of Defense for Acquisition and Sustainment (USD[A&S]). Responsible for exercising milestone decision authority (MDA) and also holds technical and acquisition responsibilities for health records interoperability and related modernization programs; Under Secretary of Defense for Personnel and Readiness (USD[P&R]). Lead coordinator on DOD health care interactions with the VA. Assistant Secretary of Defense for Health Affairs (ASD[HA]). Responsible for functional capabilities of the EHR. Given the significant investments required to modernize DOD's EHR, MHS Genesis is a designated Defense B usiness S ystem (DBS). Because it is a DBS, certain decision reviews and milestones are required as part of the overall acquisition process. DBS programs are subject to significant departmental and congressional oversight activities. Requirements Development and Solicitation From June 2013 to June 2014, USD(AT&L) directed the Defense Healthcare Management Systems Modernization Program Management Office (DHMSM PMO) to oversee the EHR requirements development process, draft an acquisition strategy and request for proposal (RFP), and conduct activities required by DOD policy for DBS acquisitions. The ASD(HA) directed the Defense Health Agency (DHA) to establish various working groups to identify and develop the clinical and nonclinical functional requirements for the new EHR. The DHA led each working group, which included representatives from each military service medical department. Keeping in alignment with DOD's guiding principles for EHR modernization (see Figure 2 ), the working groups identified approximately 60 overarching capabilities to be required of a new EHR. An initial draft RFP incorporated functional capability requirements with certain technical requirements for interoperability, information security, and suitability with DOD infrastructure. The DHMSM PMO published three draft RFPs between January and June 2014 for interested contractors to review, provide comments, and submit questions for clarification on functional requirements. Additionally, the DHMSM PMO hosted four industry days that allowed interested contractors to "enhance their understanding of the DHMSM requirement," gain insight on DOD's requirements development process, and provide feedback on particular aspects of the draft RFP. These activities also allowed the DHMSM PMO to conduct market research that would inform further revision of MHS Genesis functional requirements or its overall acquisition strategy. Between June 2014 and August 2014, DOD leaders certified that certain acquisition milestones had been achieved, allowing DOD to proceed with the solicitation process, including finalizing and approving all user-validated function requirements, approving the overall acquisition strategy, and issuing an authority to proceed . On August 25, 2014, DOD issued its official solicitation for proposals. The solicitation period concluded on October 9, 2014. Source Selection Process The source selection process took place from October 2014 to July 2015. DOD reportedly had received five proposals during the solicitation period. Most of the proposals were from partnered vendors consisting of health information management, electronic medical records, information technology, and program management organizations. These partnerships included: Allscripts, Computer Sciences Corporation, and Hewlett-Packard; IBM and Epic Systems; Cerner, Leidos, and Accenture Federal; PricewaterhouseCoopers, General Dynamics, DSS, Inc., MedSphere; and InterSystems. Consistent with DOD source selection procedures, DOD experts were assigned to review and apply the evaluation criteria published in the RFP, to each proposal. Figure 3 illustrates a general overview of the evaluation and source selection process. Contract Award On July 29, 2015, DOD awarded the MHS Genesis contract to Leidos Partnership for Defense Health (LPDH) to replace its legacy EHR systems with a commercial-off-the-shelf (COTS) EHR system. The contract has a potential 10-year ordering period that includes a two-year base period, two three-year optional ordering periods, and an award term period of up to two years. The initial total award ceiling for MHS Genesis was $4.3 billion. On June 15, 2018, DOD approved a contract modification to increase the award ceiling by $1.2 billion. According to the Justification and Approval for Other than Full and Open Competition documentation, the purpose of this increase was to "support the incorporation of the United States Coast Guard (USCG) into the [DOD] MHS Genesis Electronic Health Record (EHR) implementation" and "establish a common standardized EHR baseline with the USCG and the [VA]." The current award ceiling for MHS Genesis is more than $5.5 billion. Leidos Partnership for Defense Health (LPDH) Leidos leads LPDH with its core partners: Accenture Federal Services, Cerner, and Henry Schein One. The full partnership, through sub-contracts of the core partners, is comprised of over 34 businesses (see Figure 4 ). Capabilities According to a redacted version of DOD's contract award documents, LPDH is required to meet the following overarching contract requirements: "unify and increase accessibility of integrated, evidence-based healthcare delivery and decision making"; "support the availability of longitudinal medical records for 9.6 million DoD beneficiaries and approximately 153,000+ MHS personnel globally"; "enable the application of standardized workflows, integrated healthcare delivery, and data standards for improved and secure electronic exchange of medical and patient data between the DoD and its external partners, including the [VA] and other Federal and private sector healthcare providers"; and "leverage data exchange capabilities in alignment with the [IPO] for standards-based health data interoperability and secure information sharing with external partners to include the VA." Additionally, there are over 95 specific capability requirements across four concepts of operations (i.e., health service delivery, health system support, health readiness, and force health protection) that MHS Genesis must support (see Appendix B ). Governance Ultimately, the Secretary of Defense is accountable for MHS Genesis. Various DOD entities, described below, have assigned responsibilities for MHS Genesis oversight, implementation, and sustainment (see Figure 5 ). While each entity has a separate chain of command, DOD chartered numerous governance groups to synchronize efforts across the department, delegate certain decisionmaking authorities, and provide direction on implementation and use of MHS Genesis. Program Executive Office, Defense Healthcare Management Systems (PEO DHMS) PEO DHMS was established in 2013. Its mission is to "transform the delivery of healthcare and advance data sharing through a modernized electronic health record for service members, veterans, and their families." It responsible for implementing MHS Genesis as the assigned acquisition authority and currently reports to the Under Secretary of Defense for Acquisition and Sustainment (USD[A&S]). Under the PEO DHMS, three program management offices (PMOs) are tasked with modernizing DOD's EHR system and ensuring health data interoperability with the VA. DOD Healthcare Management System Moderniza tion (DHMSM) PMO. "Oversees the deployment of MHS Genesis and the operations and sustain of the Joint Legacy Viewer." DOD/VA Interagency Program Office (IPO). "Oversees the efforts of the DOD and VA to implement national health data standards for interoperability." Joint Operational Medicine Information Systems (JOMIS) PMO. "Develops, deploys, and sustains MHS Genesis and other integrated operational medicine information systems to deployed forces." Defense Health Agency (DHA) In 2013, the Secretary of Defense established the DHA to manage the TRICARE program; execute appropriations for the Defense Health Program; coordinate management of certain multi-service health care markets and MTFs in the National Capital Region; exercise management responsibility for shared services, functions, and activities within the Military Health System; and support DOD's medical mission. DHA is a designated Combat Support Agency that is scheduled to soon administer and manage all MTFs. DHA serves as the lead entity for MHS Genesis requirements development, in coordination with the military service medical departments, and currently reports to the ASD(HA). Military Service Medical Departments The military service medical departments are established under each respective military department to organize, train, and equip military medical personnel, maintain medical readiness of the Armed Forces, and administer, manage and provide health care in MTFs. The medical departments are led by a Surgeon General, who also functions as the principal advisor to their respective military service secretary and service chief for all health and medical matters. The three service medical departments are the Army Medical Command (MEDCOM), the Navy Bureau of Medicine and Surgery (BUMED), and the Air Force Medical Service (AFMS). Each service medical department provides subject-matter expertise, functional support, and consultation to the DHMSM PMO. Senior Stakeholders Group (SSG) and the Configuration Steering Board (CSB) The SSG and the CSB are DOD-chartered working groups established to provide oversight, recommendations, and "direction on health-related acquisition programs," including those within PEO DHMS. The SSG is chaired by the USD(A&S) and is responsible for receiving updates on DHMS acquisition programs, ensuring adherence to DOD's EHR guiding principles, and providing recommendations and feedback on key EHR and interoperability decisions. The CSB is co-chaired by the USD(A&S) and the USD(P&R) and is specifically responsible for oversight on DHMSM and JOMIS programs. Figure 6 outlines the membership of each group. Executive Steering Board (ESB) The ESB, previously named the Functional Champion Leadership Group (FLCG), is a governance body led by the DHA's Chief Health Informatics Officer with representation from each service medical department. The ESB's role is to: consider changes to standardized clinical, business, or technical processes; serve as a forum to validate, prioritize, and recommend modifications or new functional requirements for MHS Genesis; and oversee numerous working groups of subject matter experts and end-users. Office of the Chief Health Informatics Officer (OCHIO) The OCHIO represents the "voice of the customer" to PEO DHMS. The office solicits input and recommendations from the ESB and coordinates with PEO DHMS to revise or modify MHS Genesis contract requirements. OCHIO is also responsible for "change management, early adoption activities, standardization of functional workflows, functional collaboration with the [VA], management of configuration changes to MHS Genesis, adjudication of functional trouble tickets, sustainment training, current state workflow assessments, and coordination of DHA policy to support the use of MHS Genesis." Deployment DOD is using a phased implementation strategy to deploy MHS Genesis. Deployment began with its initial operational capability (IOC) sites in 2017. After the IOC sites, MHS Genesis is to be deployed at over 600 medical and dental facilities, grouped geographically into 23 waves (see Appendix F ). DOD anticipates "full operational capability" and implementation of MHS Genesis at all MTFs by the end of 2024. Pre-Deployment Activities During the approximately 17 months between the July 2015 contract award date and Congress's December 2016 deadline to implement a new EHR system, DOD conducted certain pre-deployment activities (e.g., systems engineering, systems integration, and testing prior to deploying MHS Genesis). DOD acquisition policies and certain contract requirements mandate these activities. Some of the initial requirements include: contractor site visits to "analyze operations, infrastructure, and detailed information for EHR System design and testing"; gap analyses between existing site infrastructure, system requirements, and the contractor's system architecture; development of solutions to fill identified infrastructure gaps; testing interoperability with legacy systems; delivering various contractor plans to the government (e.g., integrated master plan, risk management plan, data management plan, disaster recovery plan, and cybersecurity vulnerability management plan); EHR system testing in government approved labs, including those conducted by the contractor, government independent testing and evaluation teams, and operational test agencies; and receiving authorization to proceed (ATP) with limited fielding at the IOC sites and to conduct an Initial Operational Test and Evaluation (IOT&E). Concurrently, the DOD Inspector General (DODIG) conducted a performance audit on the DHMSM PMO. The purpose of the audit was to determine if DOD had approved system requirements and if the MHS Genesis acquisition strategy was "properly approved and documented." The audit was conducted from June 2015 through January 2016, with a final report issued on May 31, 2016. Overall, the DODIG found that the MHS Genesis requirements and acquisition strategy were properly approved and documented. However, the report raised concerns about the program's execution schedule (i.e., implementation timeline) not being "realistic" to meet Congress's deadline. The DODIG recommended that the PEO DHMS conduct a "schedule analysis" to determine if IOC would be achievable by December 2016, and to continue monitoring program risks and report progress to Congress quarterly. In response to the DODIG's recommendation, the PEO DHMS asserted, "we remain confident we will achieve [IOC] later this year in accordance with the NDAA." Initial Deployment As part of the implementation strategy, DOD selected MTFs in the Pacific Northwest as its IOC sites (see Table 2 ). On February 9, 2017, MTFs at Fairchild Air Force Base, Washington, were the first sites to transition to MHS Genesis. The purpose of fielding MHS Genesis at the IOC sites before full deployment was to observe, evaluate, and document lessons-learned on whether the new EHR was usable, interoperable, secure, and stable. DOD used several evaluation methods to measure MHS Genesis success at the IOC sites, including the Health Information Management Systems Society's (HIMSS) Electronic Medical Record Adoption Models (EMRAM) and the DOD IOT&E. The results of these assessments would later inform PEO DHMS in its decision to proceed with further deployments. EMRAM Findings The EMRAM includes two commercially developed assessment tools that health systems and facilities can use to measure adoption of an electronic medical record (EMR) system. The general EMRAM is for inpatient facilities and O-EMRAM is for outpatient facilities. Both tools consist of a self-administered survey, which is then analyzed by HIMSS to produce an EMRAM score. The score, ranging from Stage 0 to Stage 7, describes the level of adoption and utilization of an EMR within a health care organization (see Appendix C ). Generally, Stage 0 indicates minimal or no EMR adoption in a health care facility or clinic, whereas Stage 7 indicates complete EMR adoption, including demonstrated data sharing capabilities and eliminated use of paper charts. Prior to the go-live dates at the IOC sites and while using its legacy systems, DOD's average score was 1.59 for the EMRAM and 2.38 for the O-EMRAM. After all IOC sites transitioned to MHS Genesis, DOD reassessed each IOC site and observed increased EMRAM scores (see Figure 7 and Figure 8 ). MTFs at Fairchild Air Force Base received a score of 6.13 on the O-EMRAM, whereas all other IOC sites scored 5.04. In comparison to U.S. civilian hospitals, the IOC sites scored higher than the national average for the EMRAM (2.00) and O-EMRAM (3.00). However, media reports on EMRAM scoring trends at the end of 2017 note that 66.7% of U.S. hospitals participating in the EMRAM reached "either Stage 5 or Stage 6." For the O-EMRAM, most participating outpatient facilities remained at Stage 1. IOT&E Findings DOD policy requires DBS programs to undergo an IOT&E to determine program or systems effectiveness and suitability. IOT&E findings provide the USD(A&S) and relevant acquisition or functional leadership with recommendations on whether a program, generally those with total contract values exceeding certain thresholds, should proceed with further implementation. Between September 2017 and December 2017, the Joint Interoperability Test Command (JITC) conducted an IOT&E at each IOC site, with the exception of Madigan Army Medical Center (MAMC). PEO DHMS postponed the MAMC IOT&E to 2018 in order to resolve issues identified at the other IOC sites. While at each site, the JITC conducted initial cybersecurity testing, evaluated interoperability data, observed MTF staff performing day-to-day tasks using MHS Genesis, and administered user surveys on performance and suitability. The Director of Operational Test and Evaluation (DOT&E) reviewed JITC's IOT&E findings and applied them to the following criteria: Does MHS Genesis provide the capabilities to manage and document health-related services? Do MHS Genesis interfaces support or enable accomplishment of mission activities and tasks? Does MHS Genesis usability, training, support, and sustainment ensure continuous operations? On April 30, 2018, DOT&E issued a partial IOT&E report asserting that MHS Genesis was "neither operationally effective nor operationally suitable." DOT&E found that: MHS Genesis is not operationally effective because it does not demonstrate enough workable functionality to manage and document patient care. Users successfully performed only 56 percent of the 197 tasks used as Measures of Performance. MHS Genesis is not operationally suitable because of poor system usability, insufficient training, and inadequate help desk support. Survivability is undetermined because cybersecurity testing is ongoing. See Appendix D for IOT&E summary results by measure of effectiveness and measure of performance evaluation. Based on these preliminary findings, DOT&E recommended to the USD(A&S) a delay in further deployment of MHS Genesis until a full IOT&E was completed and the DHMSM PMO corrected "outstanding deficiencies." Additional recommendations for the DHMSM PMO included: "Fix all Priority 1 and 2 [incident reports] with particular attention given to those that users identified as potential patient safety concerns, and verify fixes through operational testing. Improve training and system documentation for both users and Adoption Coaches. Increase the number of Adoption Coaches and leave them on site until users are more comfortable with the new processes. Complete cybersecurity operational testing and continue to fix known deficiencies. Work with users to document, reduce, and standardize operational workarounds. Improve interoperability, focusing on interfaces identified as problematic during IOT&E. Monitor reliability and availability throughout the system lifecycle. Work with the Defense Health Agency and DISA to isolate network communications problems and reduce latency. Conduct operational testing at MAMC to evaluate untested functionality and corrective actions taken by the [DHMSM] PMO. Conduct follow-on operational testing at the next fielding site to evaluate revised training and Go-Live process improvements." On November 30, 2018, DOT&E issued a final IOT&E report, incorporating results from delayed testing at MAMC. DOD has not made the final report publicly available. DOT&E acknowledges ongoing improvements, but maintains that MHS Genesis is "not yet effective or operationally suitable." A summary of the IOT&E released by the department describes several ongoing issue themes previously identified and described in the partial IOT&E report (e.g., continued incident reports, staff training, change management, and workflow adoption). With regard to cybersecurity, DOT&E described MHS Genesis as "not survivable in a cyber-contested environment." In conjunction with the IOT&E, DOD "successfully executed" three cyberspace test attacks against MHS Genesis, highlighting potential security gaps and vulnerabilities with the new EHR system. Notwithstanding DOT&E's findings and recommendations, the DOD Chief Information Officer issued a conditional Authorization to Operate , valid for 12 months. Additionally, PEO DHMS concurred with DOT&E's recommendation for a follow-on operational test and evaluation "at the next fielding to evaluate corrective actions and revised training, to inform future fielding decisions." Selected Initial Deployment Issues Since February 2017, DOD has documented numerous issues requiring mitigation strategies prior to deploying the first wave. Selected issues reported by various DOD entities, LPDH, MHS Genesis users, and media outlets are summarized below. Trouble Ticket Backlog During the initial deployment, DHMSM PMO established a single process for all IOC sites to identify, document, and report MHS Genesis issues. Users encountering system inconsistencies, technical errors, or clinical inaccuracies must submit a "trouble ticket" to a global service center (GSC). Users can also submit recommendations for changes to current workflows or system configurations to the GSC, as well as through their chain of command. The GSC is a contracted service that reviews, sorts, and assigns technical trouble tickets to LDPH or its sub-contractors for resolution. The GSC also assigns trouble tickets relating to functional capabilities, requirements, or workflows to DHMSM PMO or DHA for further review and adjudication. In April 2018, PEO DHMS reported that 1,000 of approximately 7,000 total trouble tickets generated by users throughout all IOC sites from January 2018 to that point had been resolved. Of the remaining trouble tickets, DHMSM PMO approved 2,000 for "work by the Leidos Partnership," while 2,500 were in review for further adjudication. CRS is unable to ascertain the status of the remaining 1,500 trouble tickets and the timeline in which they may have been resolved. In December 2018, PEO DHMS estimated that 3,607 open trouble tickets remained for resolution. As of October 14, 2019, PEO DHMS estimated 3,238 open trouble tickets from the IOC sites and 787 open trouble tickets from the first wave sites remained for resolution. Lengthy Issue Resolution Process MHS Genesis users at IOC sites described the issue resolution process as lengthy and lacking transparency. User concerns included: (1) tickets submitted to the GSC were resolved in a period of time that was "not acceptable for all issues"; (2) the length of time for decisionmakers to determine a solution; and (3) discovering that a solution had been implemented during a periodic system update, rather than being notified by DHMSM PMO, DHA, or LPDH. Unlike DOD's legacy systems, MHS Genesis is to be a standardized EHR platform across all military treatment facilities and is not customizable for each site. Technical or functional changes to MHS Genesis require DHA-led working groups and DHMSM PMO to review and approve such changes before directing LPDH to implement a solution. Changes exceeding the scope of the MHS Genesis contract require additional review, resourcing, and approval by the acquisition authority. Inadequate Staff Training Users reported that initial training provided four months prior to go-live was inadequate and did not allow super users to "absorb/fully grasp one role before being introduced to the next role." Staff members were required to complete computer-based training, followed by instructor-led courses. Course curricula varied by user roles (e.g., clinician, clinical support, administrative staff). Users reported that the LPDH training focused primarily on navigating the various modules and features of MHS Genesis and did not include training on clinical or administrative workflows. For example, primary care clinic nurses were trained on the applicable MHS Genesis modules that would likely be found in the primary care setting. They said they were not trained on accessing other modules that would typically be used outside of the primary care setting, as part of a patient assessment or development of a treatment plan. Capability Gaps and Limitations Users reported having little or no ability to track military medical and dental readiness requirements in MHS Genesis. Pre-built reports to monitor certain health care quality and access metrics were available to MTF staff. Users defaulted to developing local, "home-grown" work-around tools in Microsoft Office products in order to meet specific DOD and military service requirements for tracking medical and dental readiness. For example, certain dental data documented in MHS Genesis were not available for data-mining or viewing in legacy dental readiness reporting systems. To compensate for this, dental clinic staff at each IOC site transcribed or manually maintained dental readiness reports by reviewing dental data in both Dentrix (MHS Genesis' dental module) and CDS (the legacy dental system). Future Deployments In reviewing the experience and challenges documented during MHS Genesis deployment at the IOC sites, DOD noted that they "captured lessons learned, collaborated with our stakeholders, and optimized the system to enhance user adoption. Specific areas of improvement include network optimization, change management, and training enhancements." As such, DOD commenced the first wave of MHS Genesis deployments in September 2019. The deployment began with four MTFs in California and Idaho. Each wave is to last 18 months and is to include three major phases: pre-deployment planning with each MTF (3 months), deployment activities (12 months), and post go-live activities (3 months). As outlined in DOD's deployment schedule (see Appendix F ), a new wave is to begin every three months at designated MTFs through late 2022, with wave 23 scheduled to conclude in 2024. Issues for Congress Congressional Oversight Since mid-1980s, Congress has kept abreast of DOD's efforts to implement, sustain, or modernize its EHR systems. Previous congressional oversight activities have primarily focused on (1) understanding DOD's EHR modernization strategy and how the strategy would integrate interoperability and improve coordination with the VA, or (2) describing certain barriers that delayed previous modernization initiatives. Currently, 12 congressional committees may exercise oversight authority of the broader EHR modernization efforts taking place in DOD, VA and USCG. The committees include: House Appropriations Committee. House Armed Services Committee. House Committee on Oversight and Reform. House Committee on Transportation and Infrastructure. House Veterans Affairs Committee. Senate Appropriations Committee. Senate Armed Services Committee. Senate Committee on Commerce, Science, and Transportation. Senate Committee on Homeland Security and Governmental Affairs. Given the complexity, size, and timeline of DOD's EHR modernization effort, as well as parallel efforts by the USCG and VA, a coordinated oversight strategy may be necessary. Such a strategy could allow Congress to conduct a wide range of oversight activities without creating redundancies for committee staff and executive branch officials and could facilitate information-sharing among congressional stakeholders. Since the initial deployment of MHS Genesis, there have been no congressional oversight hearings held solely on DOD's EHR modernization effort. On June 20, 2018, the House Committee on Veterans' Affairs established the Subcommittee on Technology Modernization. The role of the new subcommittee is to "focus on conducting oversight of the EHR Modernization program and other major technology projects at the Department of Veterans Affairs." Both DOD and VA officials testified before the subcommittee at its June 2019 oversight hearing. Interagency Governance In September 2018, then-SECDEF James Mattis and current SECVA Robert Wilkie signed a joint statement (see Appendix G ) that outlined each department's commitment to "implementing a single, seamlessly integrated [EHR] that will accurately and efficiently share health data … and ensure health record interoperability with our networks of supporting community healthcare providers." On April 3, 2019, DOD announced plans to re-charter the IPO into the "Federal Electronic Health Record Modernization (FEHRM)" program office. The new office would serve as an interagency governance group that provides oversight on DOD and VA's EHR modernization efforts and would have the "authority to direct each Department to execute joint decisions for technical, programmatic, and functional functions." DOD stated that the FEHRM Director and Deputy Director will be appointed positions and will report to both the Deputy SECDEF and Deputy SECVA. While Congress directed the creation of the IPO in 2008, neither DOD nor VA has indicated if additional authorities, funding, or changes to current law are required to sustain the FEHRM program office. Congress may also examine the relationships between existing interagency governance groups (e.g., Joint Executive Committee), PEO DHMS, VA EHR Modernization Office, and the newly established FEHRM program office. Limited Competition in Future Procurement Because MHS Genesis is being deployed across all MTFs and all USCG sites, as well as VA sites transitioning to a Cerner-based EHR system, observers have noted that this is the "largest EHR undertaking in the country." Implementing a single EHR platform across three federal departments can produce certain economies of scale and standardization. However, the scale of these efforts can also result in future acquisition challenges particularly with conducting a full and open competition to procuring new requirements, or with follow-on contracts to sustain each EHR system. Congress may seek to understand how DOD and VA exercised their statutory authorities, provided through the Competition in Contracting Act of 1984 ( P.L. 98-369 ), to procure their EHR systems, as well as the possible impact of limited competition in future procurement activities needed to sustain both MHS Genesis and the VA's new EHR system. Generally, all federal departments procuring property, goods, or services are required to employ an acquisition process that allows for full and open competition. This process permits all potential vendors to "submit sealed bids or competitive proposals on the procurement." For MHS Genesis, DOD's initial acquisition process included full and open competition. However, the process was not employed for subsequent requirements that were discovered after the initial award to LPDH. These additional requirements included upgrading DOD network infrastructure; incorporating USCG-specific requirements and clinic sites; and establishing common standards among DOD, VA, and USCG. The estimated value of the additional requirements was over $1.2 billion. DOD exercised its statutory authority to award a sole source contract modification to LPDH, citing that contracting with any other vendor would potentially "create significant redundancies, inefficiencies, and other issues." DOD's acquisition strategy anticipates "one or more competitive follow-on contracts to sustain the EHR solution, for which the Government owns a perpetual license, at the conclusion of the performance of the basic contract." However, Cerner declined DOD's request to enter into negotiations regarding the rights of its intellectual property. If DOD does not retain certain intellectual property rights on MHS Genesis, the Department may be limited in what EHR vendors it can consider when it becomes necessary to solicit for an MHS Genesis sustainment contract. Appendix A. Acronyms Appendix B. MHS Genesis Functional Capability Requirements Appendix C. Stages of Electronic Medical Record Adoption and Utilization Appendix D. IOT&E Summary Results Appendix E. Methodology for CRS Focus Groups on MHS Genesis Background On July 8-13, 2018, analysts from the Congressional Research Service (CRS) participated in a congressional staff delegation visit to various DOD facilities in the Puget Sound area of Washington State. DOD facilities visited were Madigan Army Medical Center, Naval Hospital Bremerton, and the Puyallup Community Medical Home. The purpose of the visit was to: review milestones, achievements, and challenges associated with the implementation of MHS Genesis; and understand implementation and continuous improvement processes utilized at initial operational capability sites. Methodology At each site, CRS conducted numerous focus groups comprised of various MTF staff members. Each focus group was comprised of 5–15 staff members selected by the MTF commander or his/her designee. Madigan Army Medical Center Focus Group #1: Patient Administration Division, Managed Care and Scheduling, and Patient Satisfaction Department representatives Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Nurses Naval Hospital Bremerton Focus Group #1: Nurses Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Enlisted personnel Focus Group #4: Patient Administration, Referral Management, and Patient Relations representatives Puyallup Community Medical Home Focus Group #1: Health care providers, nurses, health care administrators, enlisted personnel Prior to each site visit, CRS provided each MTF with questions for discussion during each focus group. CRS documented the themes and responses to each of the following questions: What challenges have you experienced with implementing MHS Genesis? How have you locally mitigated these issues? Are the mitigation processes in place working? Have these challenges impacted force readiness, access to care, quality of care, cost of care, or patient experience? Appendix F. MHS Genesis Deployment Schedule Appendix G. DOD and VA EHR Joint Commitment Statement Background On July 8-13, 2018, analysts from the Congressional Research Service (CRS) participated in a congressional staff delegation visit to various DOD facilities in the Puget Sound area of Washington State. DOD facilities visited were Madigan Army Medical Center, Naval Hospital Bremerton, and the Puyallup Community Medical Home. The purpose of the visit was to: review milestones, achievements, and challenges associated with the implementation of MHS Genesis; and understand implementation and continuous improvement processes utilized at initial operational capability sites. Methodology At each site, CRS conducted numerous focus groups comprised of various MTF staff members. Each focus group was comprised of 5–15 staff members selected by the MTF commander or his/her designee. Madigan Army Medical Center Focus Group #1: Patient Administration Division, Managed Care and Scheduling, and Patient Satisfaction Department representatives Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Nurses Naval Hospital Bremerton Focus Group #1: Nurses Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Enlisted personnel Focus Group #4: Patient Administration, Referral Management, and Patient Relations representatives Puyallup Community Medical Home Focus Group #1: Health care providers, nurses, health care administrators, enlisted personnel Prior to each site visit, CRS provided each MTF with questions for discussion during each focus group. CRS documented the themes and responses to each of the following questions: What challenges have you experienced with implementing MHS Genesis? How have you locally mitigated these issues? Are the mitigation processes in place working? Have these challenges impacted force readiness, access to care, quality of care, cost of care, or patient experience?

Since 1968, the Department of Defense (DOD) has developed, procured, and sustained a variety of electronic systems to document the health care services delivered to servicemembers, military retirees, and their family members. DOD currently operates a number of legacy electronic health record (EHR) systems. Each system has separate capabilities and functions as a result of new or changing requirements over the past five decades. The primary legacy systems include the Composite Health Care System (CHCS), Armed Forces Health Longitudinal Technology Application (AHLTA), Essentris, and the Corporate Dental System. DOD also still uses paper medical records that are later scanned and digitally archived. Currently, only certain components of DOD's health records are accessible to the Department of Veterans Affairs (VA). In the early 1990s, concern grew about deficient interoperability between DOD and VA. This led to recommendations by various commissions on military and veterans health care calling for greater coordination and data sharing efforts between the two departments. Between 1998 and 2008, DOD and VA developed several capabilities to exchange patient health information across each department's EHR systems. However, Congress did not view these systems as an adequately integrated approach. This led to several congressional mandates being issued between 2008 and 2014, including for the development of an interoperable EHR (including a deadline to implement such system), for certain capability requirements, and for the creation of an interagency program office. After several strategy changes to meet Congress's mandates, DOD opted to acquire a commercial-off-the-shelf EHR product to replace its legacy EHR systems. The new system would be called MHS Genesis. In July 2015, DOD awarded the MHS Genesis contract to Leidos Partnership for Defense Health (LPDH). The contract includes a potential 10-year ordering period and an initial total award ceiling of $4.3 billion. DOD selected several MTFs in Washington to serve as Initial Operational Capability (IOC) sites and began fielding MHS Genesis in 2017. The designated IOC sites included: Madigan Army Medical Center, Fairchild Air Force Base, Naval Hospital Bremerton, and Naval Health Clinic Oak Harbor. The purpose of fielding MHS Genesis at the IOC sites before full deployment was to observe, evaluate, and document lessons-learned on whether the new EHR was usable, interoperable, secure, and stable. During initial deployment, DOD evaluators and IOC site personnel identified numerous functional and technical challenges. In particular, the Defense Department's Director of Operational Testing and Evaluation found that MHS Genesis was "not yet effective or operationally suitable." Technical challenges included cybersecurity vulnerabilities, network latency, and delayed equipment upgrades and operational testing. Functional challenges included lengthy issue resolution processes, inadequate staff training, and capability gaps and limitations. DOD acknowledged these issues, implemented follow-on testing ongoing corrective actions, and revised its training approach for future fielding. DOD plans to implement MHS Genesis at all military treatment facilities (MTFs) in 23 waves through 2024. Each wave spans 18 months, with a new wave commencing every three months at designated MTFs. The first deployment wave began in September 2019 at MTFs in California, Oregon, and Idaho. As DOD moves to fully implement MHS Genesis, Congress may choose to address various issues including: how oversight can be conducted on a program that spans three federal departments; what kind of interdepartmental governance structure is needed to implement the program; and how to ensure fair and open competition in future procurement decisions.

GAO_GAO-20-270T

Background Federal agencies have many programs that provide services and benefits to tribes and their members. For example, the Department of the Interior’s (Interior) Bureau of Indian Affairs (BIA) within the Office of the Assistant Secretary-Indian Affairs (Indian Affairs) administers programs in natural resources management, Indian child welfare, and economic development—among other responsibilities. One key BIA responsibility is to facilitate tribes’ development of energy resources on and beneath tribal lands by reviewing and approving leases, permits, and other documents required when the lands with Indian energy resources are held in trust or restricted status. The Bureau of Indian Education (BIE), also within Indian Affairs at Interior, administers education programs to approximately 41,000 students on or near Indian reservations at 185 schools around the country. The Indian Health Service (IHS) within the Department of Health and Human Services is charged with providing health care to approximately 2.6 million Indians through more than 600 IHS or tribally operated facilities as of 2019. When services are not available at these facilities, IHS may pay for services provided through external providers. In addition, as part of its disease prevention efforts, IHS provides technical and financial assistance to Indian tribes for the cooperative development and construction of drinking water and wastewater systems and support facilities. These and other federal programs may also be administered by tribal governments under a self-determination contract or self-governance compact under the Indian Self-Determination and Education Assistance Act of 1975, as amended. BIA and IHS are responsible for administering self-determination contracts that allow for tribal administration of specific government programs, including negotiating and approving each contract and its associated annual funding agreement and disbursing funds to the tribes. Each federally recognized tribe voluntarily decides whether, and to what extent, to pursue the administration of federal programs. According to a 2017 law journal article, by that year, nearly all tribes had used a self- determination contract or self-governance compact to take over the administration for one or more federal programs. In February 2017 we added federal management of programs that serve tribes and their members to our high-risk list of federal areas that are most vulnerable to fraud, waste, abuse, or mismanagement or that are in need of transformation to address economy, efficiency, or effectiveness challenges. In particular, we found numerous challenges facing BIE and BIA and IHS in administering education and health care services, that put the health and safety of American Indians served by these programs at risk. In addition, we reported that BIA mismanages Indian energy resources held in trust and thereby limits opportunities for tribes and their members to use those resources to create economic benefits and improve the well-being of their communities. Our recommendations identified in the high-risk area do not reflect the performance of programs administered by tribes nor are they directed at any tribally operated programs and activities. In our March 2019 high-risk update, we reported that the three agencies demonstrated progress to partially meet all five criteria for addressing high-risk issues: leadership commitment, capacity, action plan, monitoring, and demonstrated progress. We continue to monitor and report on progress made by the agencies in addressing issues in these three program areas. Federal Agency Capacity, Funding Constraints, and Budget Uncertainty Limit Effective Delivery of Some Federal Programs Serving Tribes We have previously reported that constraints in federal agency capacity, funding and budget uncertainty limit effective delivery of some federal programs for tribes and their members managed by Indian Affairs, BIA, BIE, IHS, and in other agencies’ tribal consultation activities as shown in the following examples: High staff vacancies. In November 2016, we found BIA had high vacancy rates at some agency offices and that the agency had not conducted key workforce planning activities to ensure its workforce resources are appropriately deployed. We recommended that BIA establish a documented process for assessing its workforce composition at agency offices taking into account BIA’s mission, goals, and tribal priorities. In response to our recommendation, BIA has taken initial steps to assess its workforce composition; however more work is needed from BIA to establish a process to regularly assess its workforce composition and ensure it meets BIA and tribes’ needs. In February 2017 when we added improving federal management of programs that serve tribes and their members to our high-risk list, we found that high vacancies or declining staff levels across all three designated high-risk areas—education, health care, and Indian energy resources programs. For example, we reported that IHS had over 1,550 vacancies for various health care positions nationwide in 2016, and IHS officials said that the agency’s insufficient workforce was the biggest impediment to providing timely primary care. IHS has made some progress in demonstrating it has the capacity necessary to address the program risks we identified in our reports. For example, among other actions, in January 2019, IHS established an Office of Quality which includes divisions for Enterprise Risk Management and Internal Controls, Quality Assurance, Innovation and Improvement, and Patient Safety and Clinical Risk Management. As of August 2019, the Office of Quality had filled 14 positions. However, there are still key positions in the agency not yet permanently filled, including the Director of the Office of Finance and Accounting and the Deputy Director for Management Operations. In our August 2018 report, we also found that IHS’s overall vacancy rate for clinical care providers was 25 percent. Additionally, in our March 2019 high risk update and testimony, we reported that about 50 percent of all BIE positions had not been filled, according to recent BIE documentation, for a variety of reasons, including difficulty recruiting qualified individuals. Insufficient staff skills or knowledge. We have also identified concerns about existing staff having the right skills and expertise to adequately perform job duties for effective implementation of Indian energy development programs. For instance, in November 2016, we found that BIA had not completed key workforce planning activities, such as an assessment of work skills gaps, that contributed to BIA’s inability to effectively support energy development. We recommended that BIA incorporate effective workforce planning standards by assessing critical skills and competencies needed to fulfill BIA’s responsibilities related to energy development and by identifying potential gaps. Interior agreed with this recommendation and in fiscal year 2019, BIA began identifying the skills and competencies necessary for select Indian energy-related occupations. BIA officials told us that, once complete, agency officials will be able to use the catalog of necessary skills and competencies to identify training needs for existing staff. Additionally, in our March 2019 report on tribal consultation, 47 of 100 tribes that provided comments to federal agencies in 2016 identified insufficient agency officials’ knowledge or training on tribal consultation as a key factor that hinders effective consultation. Several tribal officials we interviewed shared similar concerns, and officials from 9 of 21 agencies we spoke with (43 percent) identified staff knowledge or training as a factor that hinders effective consultation. Inadequate funding. We have previously reported on agency and tribal perspectives on the adequacy of funding and how it impacts federal programs and also examined spending levels of some programs. In May 2018, we reported that federal agencies provided about $370 million to develop, construct, or repair tribal drinking water and wastewater infrastructure projects to address tribes’ needs in fiscal year 2016. This amount is about 11 percent of the more than $3 billion in total existing tribal drinking water and wastewater infrastructure needs that IHS had identified that same year. Further, in January 2019, we found that funding shortfalls— estimated at 60 percent for one BIA program in a 2013 report to Congress— may limit tribal options for administering federal programs using self- determination contracts or self-governance compacts. Many tribal stakeholders told us that they supplement federal funding when there are funding shortfalls. As we have previously reported, when tribes financially supplement the federal program they take over, it diverts funds away from other economic development opportunities and other government functions and services they provide to their communities and citizens. In our March 2019 report on tribal consultation, according to tribal comments we reviewed and interviews with tribal officials we found tribes’ ability to participate in consultations is limited by availability of funding from the tribe, federal agencies, or other sources. Tribes and agencies both identified insufficient resources, including funding to support tribes’ participation in consultation activities, as a key factor hindering effective consultation. Effects of budget uncertainty. Budget uncertainty arises during continuing resolutions—temporary funding periods during which the federal government has not passed a budget—and during government shutdowns. Failure to enact annual appropriations for federal tribal programs in a timely manner may exacerbate the problem of limited resources. For example, in our September 2018 report examining advance appropriations authority for IHS, IHS officials and tribal representatives described several effects of budget uncertainty on their health care programs and operations. Among other things, we reported that effects of budget uncertainty include (1) exacerbated challenges related to recruitment and retention of staff, and (2) additional administrative burden and costs for both IHS and tribes involved in calculating revised allocations and modification of hundreds of tribal contracts each time a new continuing resolution is enacted. IHS officials and tribal representatives said that advance appropriation authority could mitigate the effects of this uncertainty because IHS could use this authority to ensure continuity of health care services during lapses in annual appropriations. Management Weaknesses at Federal Agencies Hinder Effective Delivery of Some Federal Programs Serving Tribes In our prior work, we have found a range of management weaknesses related to internal controls at Indian Affairs, BIA, BIE, and IHS that hinder effective delivery of some federal programs for tribes as shown in the following examples: Oversight weaknesses. In March 2016, we found that weaknesses in Indian Affairs oversight led to safety and health deficiencies at BIE school facilities that endangered students. We recommended that Indian Affairs ensure that all BIE schools are annually inspected for safety and health, as required by its policy, and that inspection information is complete and accurate. Indian Affairs has taken steps toward implementing our recommendations. For example, in April 2019 Indian Affairs provided documentation that it had assessed the quality of two fiscal year 2018 BIE safety inspection reports. However, Indian Affairs has not provided us with documentation that it has assessed the quality of BIE safety inspection reports for fiscal year 2019—the first year BIE was responsible for inspecting all of its schools. We believe it is important that the agency demonstrate that BIE is capable of inspecting all schools for safety in fiscal year 2019 and that they produce inspection reports for schools that are complete and accurate. As of November 2019, we have not received further updates from the agency on this recommendation’s status. Additionally, in March 2016, we reported on weaknesses in IHS’s oversight of the timeliness of patient care that led to long wait times at IHS facilities. We found that IHS had not set any agency-wide standards for patient wait times at IHS federally-operated facilities. We recommended that IHS (1) develop and communicate specific agency-wide standards for patient wait times in federally- operated facilities, and (2) monitor patient wait times and ensure corrective actions are taken when standards are not met. IHS agreed with our recommendations and implemented the first recommendation by publishing patient wait time standards as part of its Indian Health Manual website in August 2017. As of March 2019, IHS officials said that the agency was working to implement the second recommendation by developing system-wide monitoring capacity. We will continue to review IHS’s progress. Management weaknesses. In June 2015, we found shortcomings in BIA’s management of permits, and other approvals for energy development have led to lengthy review times and negatively impacted energy development on tribal lands. These lengthy review times have increased energy development costs for tribes, delayed projects, and led to lost revenue, among other impacts. For example, according to a tribal official, BIA took as long as 8 years to review some of its energy-related documents. In the meantime, the tribe estimates it lost $95 million in revenue that it could have earned from tribal permitting fees, oil and gas severance taxes, and royalties. We recommended that BIA develop a documented process to track its review and response times and enhance its data collection efforts. As of November 2019, the agency had taken initial steps toward implementing the recommendation by developing system enhancements to capture key dates during the review and approval process for energy-related documents. However, BIA needs to collect data from its system, develop time frames, and monitor agency performance to fully address these recommendations. In our January 2019 work on tribal self-governance, we reported that Interior’s process does not ensure that funds associated with self-determination contracts and self-governance compacts are disbursed in a timely manner, according to tribal stakeholders. These funding delays can therefore be a factor that hinders tribal use of these agreements. When funds are not disbursed in a timely manner, a tribal stakeholder told us that tribes may have to use funds from their general revenue accounts or seek other sources to cover federal program expenses. According to several tribal stakeholders, when a tribe has to use its own funds for the administration of federal programs—even temporarily—it can adversely affect the tribe in various ways. To help ensure that funds are disbursed in a timely manner, we recommended that Interior establish a process to track and monitor the disbursement of funds associated with self-determination contracts and self-governance compacts. Interior agreed with this recommendation, and as of November 2019, we are following up on its status. Weaknesses in planning. In May 2017, we found that Indian Affairs did not have a comprehensive capital asset plan to guide funding for construction projects to maintain, repair, or replace infrastructure at its 185 BIE schools. Specifically, although Indian Affairs had determined which 10 schools it planned to replace next, it did not have a long-term capital asset plan for the remaining 175 BIE schools. Many of the 175 schools were in poor condition and had safety hazards. We recommended Indian Affairs develop a comprehensive long-term capital asset plan that includes a prioritized list of projects with the greatest need of funding. Indian Affairs agreed with the recommendation. As of October 2018, Indian Affairs provided a list of deferred maintenance projects for 2018 and documentation of processes for prioritizing such projects, among other things, but as of November 2019 had not yet provided documentation that it had completed a comprehensive long-term capital asset plan. In conclusion, the resource constraints and management weaknesses in federal programs that serve tribes limit federal agencies’ effective delivery of programs to Native Americans. In many cases, we have made recommendations to agencies to take steps to address identified issues. While agencies have made some progress addressing recommendations to improve tribal programs identified in our high-risk and other areas, continued work to address these and other issues is needed. Sustained congressional attention to these issues and the relevant factors contributing to the disparities identified in the U.S. Civil Rights Commission’s report will help the federal government makes progress in addressing the needs of Native Americans. Chairman Gallego, Ranking Member Cook and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contacts and Staff Acknowledgments For further information regarding this testimony, please contact Anna Maria Ortiz at (202) 512-3841 or ortiza@gao.gov. If you or your staff have any questions about health care issues in this testimony or the related reports, please contact Jessica Farb at (202) 512-7114 or farbj@gao.gov. For questions about education, please contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov. For questions about energy resource development, please contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this statement include Lisa Van Arsdale (Assistant Director), Swati Thomas (Analyst-in-Charge), Edward Bodine, Kelly DeMots, Summer Lingard-Smith, Elizabeth Sirois, Jeanette Soares, Kiki Theodoropoulos and Leigh White. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

As Congress affirmed in the Indian Trust Asset Reform Act, the United States has undertaken a unique trust responsibility to protect and support Indian tribes and Indians. Thus, federal agencies have many programs that provide services to tribes. However, in 2018, the U.S. Commission on Civil Rights found that, due to a variety of reasons—including historical discriminatory policies, insufficient resources, and inefficient federal program delivery—Native Americans continue to rank near the bottom of all Americans in terms of health, education, and employment. In February 2017 GAO designated federal management of programs that serve tribes in education, health care and energy as high risk. This designation is neither reflective of the performance of programs administered by tribes nor directed at tribal activities. This testimony, which is based on reports GAO issued from June 2015 through March 2019 primarily related to education, health care, and energy development, provides examples of (1) capacity and funding constraints and budget uncertainty and (2) management weaknesses that limit the effective delivery of federal programs for tribes and their members. GAO previously reported that constraints in federal agency capacity and funding and budget uncertainty limit effective delivery of some federal programs and activities serving tribes. Key federal agencies serving tribes include the Department of the Interior's Bureau of Indian Affairs (BIA) and Bureau of Indian Education (BIE), and the Department of Health and Human Services' Indian Health Service (IHS). For example: High staff vacancies and insufficient staff capacity. In February 2017, GAO reported that IHS had over 1,550 vacancies for health care positions in 2016, and IHS officials said that the agency's insufficient workforce was the biggest impediment to providing timely primary care. In addition, GAO's March 2019 high-risk update reported that about 50 percent of all BIE positions had not been filled, according to recent BIE documentation. Inadequate funding. In January 2019, GAO reported on agency and tribal perspectives on the adequacy of funding and how it impacts federal programs. GAO found that inadequate program funding to meet tribal needs (e.g., BIA estimated a funding shortfall at 60 percent for one program in a 2013 report to Congress) may limit tribal options for administering federal programs using self-determination contracts or self-governance compacts. Many tribal stakeholders told GAO that they supplement federal funding when there are shortfalls, which diverts funding from economic development and services provided to their communities. Effects of budget uncertainty. Budget uncertainty arises during continuing resolutions—temporary funding periods during which the federal government has not passed a budget—and during government shutdowns. In a September 2018 GAO report, IHS officials and tribal representatives described the effects of budget uncertainty on their health care programs and operations. GAO reported that these effects include recruitment and retention of staff challenges and additional administrative burden and cost for both tribes and IHS. In GAO's prior reports and March 2019 high-risk update, GAO found that management weaknesses at some federal agencies limit the effective delivery of some federal programs serving tribes. For example: Oversight weaknesses. In March 2016, GAO found weaknesses in IHS's oversight of timeliness of patient care leading to long wait times at IHS facilities. GAO recommended that IHS develop standards for patient wait times, monitor these wait times, and take corrective action as needed. IHS has established wait times standards and is developing monitoring capacity. Management weaknesses . In June 2015, GAO found shortcomings in BIA's management of energy development permitting processes that led to lengthy reviews and negatively impacted energy development on tribal lands. Among other things, GAO recommended that BIA develop a process to track its review and response times. BIA has taken initial steps to develop system enhancements to capture key dates during the review and approval process for energy development documents.

GAO_GAO-20-259T

Improved CMS Oversight Is Needed to Better Protect Residents from Abuse In our June 2019 report, we found that, while abuse deficiencies cited in nursing homes were relatively rare from 2013 through 2017, they became more frequent during that time, with the largest increase in severe cases. Specifically, abuse deficiencies comprised less than 1 percent of the total deficiencies in each of the years we examined, which is likely conservative. Abuse in nursing homes is often underreported by residents, family, staff, and the state survey agency, according to CMS officials and stakeholders we interviewed. However, abuse deficiencies more than doubled—from 430 in 2013 to 875 in 2017—over the 5-year period. (See appendix II.) In addition, abuse deficiencies cited in 2017 were more likely to be categorized at the highest levels of severity— deficiencies causing actual harm to residents or putting residents in immediate jeopardy—than they were in 2013. In light of the increased number and severity of abuse deficiencies, it is imperative that CMS have strong nursing home oversight in place to protect residents from abuse; however, we found oversight gaps that may limit the agency’s ability to do so. Specifically, we found that CMS: (1) cannot readily access data on the type of abuse or type of perpetrator, (2) has not provided guidance on what information nursing homes should include in facility-reported incidents, and (3) has numerous gaps in its referral process that can result in delayed and missed referrals to law enforcement. Information on Abuse and Perpetrator Types Is Not Readily Available In our June 2019 report, we found that CMS’s data do not allow for the type of abuse or perpetrator to be readily identified by the agency. Specifically, CMS does not require the state survey agencies to record abuse and perpetrator type and, when this information is recorded, it cannot be easily analyzed by CMS. Therefore, we reviewed a representative sample of 400 CMS narrative descriptions—written by state surveyors—associated with abuse deficiencies cited in 2016 and 2017 to identify the most common types of abuse and perpetrators. From this review, we found that physical abuse (46 percent) and mental/verbal abuse (44 percent) occurred most often in nursing homes, followed by sexual abuse (18 percent). Furthermore, staff, which includes those working in any part of the nursing home, were more often the perpetrators (58 percent) of abuse in deficiency narratives, followed by resident perpetrators (30 percent) and other types of perpetrators (2 percent). (See appendix III for examples from our abuse deficiency narrative review.) CMS officials told us they have not conducted a systematic review to gather information on abuse and perpetrator type. Further, based on professional experience, literature, and ad hoc analyses of deficiency narrative descriptions, CMS officials told us they believe the majority of abuse is committed by nursing home residents and that physical and sexual abuse were the most common types. This understanding does not align with our findings on the most common types of abuse and perpetrators represented in CMS’s data on deficiencies cited as abuse. Without the systematic collection and monitoring of specific abuse and perpetrator data, CMS lacks key information and, therefore, cannot take actions—such as tailoring prevention and investigation activities—to address the most prevalent types of abuse or perpetrators. To address this, we recommended that CMS require state survey agencies to report abuse and perpetrator type in CMS’s databases for deficiency, complaint, and facility-reported incident data and that CMS systematically assess trends in these data. HHS concurred with our recommendation and stated that it plans to implement changes in response. As of November 2019, HHS had not implemented the recommendation. Facility-Reported Incidents Lack Key Information Despite federal law requiring nursing homes to self-report allegations of abuse and covered individuals to report reasonable suspicions of crimes against residents, in June 2019 we reported that CMS had not provided guidance to nursing homes on what information they should include in facility-reported incidents, contributing to a lack of information for state survey agencies and delays in their investigations. Specifically, officials from each of the five state survey agencies told us that the documentation they receive from nursing homes for facility-reported incidents can lack key information that affects their ability to triage incidents and determine whether an investigation should occur and, if so, how soon. For example, officials from two state survey agencies we interviewed said they sometimes have to conduct significant follow-up with the nursing homes to obtain the information they need to prioritize the incident for investigation—follow-up that delays and potentially negatively affects investigations. Incomplete incident reports from nursing homes are particularly problematic given that nearly half of abuse deficiencies cited between 2013 and 2017 were identified through facility-reported incidents, which is dramatically different than the approximately 5 percent of all types of deficiencies that were identified in this manner. Therefore, facility-reported incidents play a unique and significant role in identifying abuse deficiencies in nursing homes, making it critical that incident reports provided by nursing homes include the information necessary for state survey agencies to prioritize and investigate. To address this issue, we recommended that CMS develop and disseminate guidance— including a standardized form—to all state survey agencies on the information nursing homes and covered individuals should include on facility-reported incidents. HHS concurred with our recommendation and stated that it plans to implement changes in response. As of November 2019, HHS had not implemented the recommendation. Gaps Exist in CMS Process for State Survey Agency Referrals to Law Enforcement and MFCUs In June 2019, we identified gaps in CMS’s process for referring incidents of abuse to law enforcement and, if appropriate, to MFCUs. These gaps may limit CMS’s ability to ensure that nursing homes meet federal requirements for residents to be free from abuse. Specifically, we identified issues related to (1) referring abuse to law enforcement in a timely manner, (2) tracking abuse referrals, (3) defining what it means to substantiate an allegation of abuse—that is, the determination by the state survey agency that evidence supports the abuse allegation, and (4) sharing information with law enforcement. We made recommendations that CMS address each of these four gaps in the referral process, and HHS concurred with each recommendation and stated that it plans to implement changes in response. As of November 2019, HHS had not implemented these recommendations. One of the gaps in CMS’s process is related to referring abuse to law enforcement in a timely manner. For example, law enforcement investigations can be significantly delayed because CMS requires a state survey agency to make referrals to law enforcement only after abuse is substantiated—a process that can often take weeks or months. Officials from one law enforcement agency and two MFCUs we interviewed told us the delay in receiving referrals limits their ability to collect evidence and prosecute cases—for example, bedding associated with potential sexual abuse may have been washed, and a victim’s wounds may have healed. As such, we recommended that CMS require state survey agencies to immediately refer to law enforcement any reasonable suspicion of a crime against a resident. HHS concurred with our recommendation and stated that it plans to implement changes in response. As of November 2019, HHS had not implemented this recommendation. In conclusion, while nursing home abuse is relatively rare, our June 2019 report shows that abuse deficiencies cited in nursing homes are becoming more frequent, with the largest increase in severe cases. It is imperative that CMS have more complete and readily available information on abuse to improve its oversight of nursing homes. It is also essential that CMS require state survey agencies to immediately report incidents to law enforcement if they have a reasonable suspicion that a crime against a resident has occurred in order to ensure a prompt investigation of these incidents. Chairman Neal, Ranking Member Brady, and Members of the Committee, this concludes GAO’s statement for the record. GAO Contact and Staff Acknowledgments For further information about this statement, please contact John E. Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contact named above, key contributors to this statement were Karin Wallestad (Assistant Director), Sarah-Lynn McGrath (Analyst-in-Charge) and Summar C. Corley. Also contributing to the underlying report for this statement were Luke Baron, Julianne Flowers, Laurie Pachter, Vikki Porter, Kathryn Richter, and Jennifer Whitworth. Appendix I: Summary of GAO Reports on the Health and Welfare of the Elderly We have issued a number of reports reviewing the health and welfare of the elderly in multiple settings. For example, since January 2015, we have issued reports on the incidence of abuse in nursing homes and what is known about the incidence of abuse in assisted living facilities. Reports often included key recommendations. (See table 1.) Appendix II: Severity of Abuse Deficiencies Cited in Nursing Homes, 2013 through 2017 Appendix II: Severity of Abuse Deficiencies Cited in Nursing Homes, 2013 through 2017 CMS restructured its deficiency code system beginning on November 28, 2017. Due to these coding changes, we did not analyze CMS data cited by surveyors after the implementation of that change. Percentages may not add to 100 due to rounding. Appendix III: Examples from a Representative Sample of Nursing Home Abuse Deficiency Narratives, 2016-2017 Related GAO Reports Elder Abuse: Federal Requirements for Oversight in Nursing Homes and Assisted Living Facilities Differ. GAO-19-599. Washington, D.C.: August 19, 2019. Nursing Homes: Improved Oversight Needed to Better Protect Residents from Abuse. GAO-19-433. Washington, D.C.: June 13, 2019. Elder Justice: Goals and Outcome Measures Would Provide DOJ with Clear Direction and a Means to Assess Its Efforts. GAO-19-365. Washington, D.C.: June 7, 2019. Management Report: CMS Needs to Address Gaps in Federal Oversight of Nursing Home Abuse Investigations That Persisted in Oregon for at Least 15 Years. GAO-19-313R. Washington, D.C.: April 15, 2019. Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare is Needed. GAO-18-179. Washington, D.C.: January 5, 2018. Medicaid Managed Care: CMS Should Improve Oversight of Access and Quality in States’ Long-Term Services and Supports Programs. GAO-17- 632. Washington, D.C.: August 14, 2017. Medicaid Personal Care Services: CMS Could Do More to Harmonize Requirements across Programs. GAO-17-28. Washington, D.C.: November 23, 2016. Nursing Homes: Consumers Could Benefit from Improvements to the Nursing Home Compare Website and Five-Star Quality Rating System. GAO-17-61. Washington, D.C.: November 18, 2016. Elder Abuse: The Extent of Abuse by Guardians is Unknown, but Some Measures Exist to Help Protect Older Adults. GAO-17-33. Washington, D.C.: November 16, 2016. Skilled Nursing Facilities: CMS Should Improve Accessibility and Reliability of Expenditure Data. GAO-16-700. Washington, D.C.: September 7, 2016. Nursing Home Quality: CMS Should Continue to Improve Data and Oversight. GAO-16-33. Washington, D.C.: October 30, 2015. Antipsychotic Drug Use: HHS Has Initiatives to Reduce Use among Older Adults in Nursing Homes, but Should Expand Efforts to Other Settings. GAO-15-211. Washington, D.C.: January 30, 2015. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Nationwide, about 1.4 million elderly or disabled individuals receive care in more than 15,500 nursing homes. CMS, an agency within the Department of Health and Human Services (HHS), defines standards nursing homes must meet to participate in the Medicare and Medicaid programs. Nursing home residents often have physical or cognitive limitations that can leave them particularly vulnerable to abuse. Abuse of nursing home residents can occur in many forms—including physical, mental, verbal, and sexual—and can be committed by staff, residents, or others in the nursing home. Any incident of abuse is a serious occurrence and can result in potentially devastating consequences for residents, including lasting mental anguish, serious injury, or death. This statement summarizes GAO's June 2019 report, GAO-19-433 . Specifically, it describes: (1) the trends and types of abuse in recent years, and (2) CMS's oversight intended to ensure residents are free from abuse. It also includes a brief summary of findings and recommendations from this June 2019 report and prior GAO reports that examined the health and welfare of the elderly in multiple settings, and the status, as of November 2019, of HHS's efforts to implement the recommendations GAO made. The Centers for Medicare & Medicaid Services (CMS) is responsible for ensuring nursing homes meet federal quality standards, including that residents are free from abuse. CMS enters into agreements with state survey agencies to conduct surveys of the state's homes and to investigate complaints and incidents. GAO's June 2019 report found that, while abuse deficiencies cited in nursing homes were relatively rare from 2013 through 2017, they more than doubled during that time, increasing from 430 in 2013 to 875 in 2017, with the largest increase in severe cases. In light of the increased number and severity of abuse deficiencies, it is imperative that CMS have strong nursing home oversight in place to protect residents from abuse. However, GAO found oversight gaps that may limit the agency's ability to do so. Specifically, GAO found: (1) Information on abuse and perpetrator types is not readily available. CMS's data do not allow for the type of abuse or perpetrator to be readily identified by the agency. Specifically, CMS does not require the state survey agencies to record abuse and perpetrator type and, when this information is recorded, it cannot be easily analyzed by CMS. GAO made a recommendation that CMS require state survey agencies to submit data on abuse and perpetrator type and HHS concurred. As of November 2019, HHS had not implemented the recommendation. (2) Facility-reported incidents lack key information. Despite federal law requiring nursing homes to self-report allegations of abuse and covered individuals to report reasonable suspicions of crimes against residents, CMS has not provided guidance to nursing homes on what information they should include in facility-reported incidents, contributing to a lack of information for state survey agencies and delays in their investigations. GAO made a recommendation that CMS develop guidance on what abuse information nursing homes should self-report and HHS concurred. As of November 2019, HHS had not implemented the recommendation. (3) Gaps exist in the CMS process for state survey agency referrals to law enforcement. GAO found gaps in CMS's process for referring incidents of abuse to law enforcement. These gaps may limit CMS's ability to ensure that nursing homes meet federal requirements for residents to be free from abuse. Specifically, GAO identified issues related to (1) referring abuse to law enforcement in a timely manner, (2) tracking abuse referrals, (3) defining what it means to substantiate an allegation of abuse—that is, the determination by the state survey agency that evidence supports the abuse allegation, and (4) sharing information with law enforcement. GAO made four recommendations to address these gaps and HHS concurred. As of November 2019, HHS had not implemented these recommendations.

CRS_R45807

Overview India is a federal parliamentary republic and the world's most populous democracy, with more than 1.3 billion citizens. In the spring of 2019 the country held elections to seat its 17 th Lok Sabha (House of the People), the 545-seat lower chamber of parliament and locus of Indian political power. Results were announced on May 23, with the incumbent Bharatiya Janata Party (BJP, or Indian Peoples Party) winning a sweeping and repeat victory under Prime Minister Narendra Modi. Having in 2014 become the first party to attain a parliamentary majority (52%) in 30 years, the BJP was able to expand that majority to 56% in 2019, becoming the first party to win consecutive majorities since 1971. The dynastic Indian National Congress (hereinafter, Congress Party)—which had dominated the country's politics from 1947 to 1977 and led a national coalition government from 2004 to 2014—again failed to win the 10% minimum of seats required to officially lead the Lok Sabha opposition. Powerful regional and caste-based parties likewise posed no meaningful obstacles to the latest "BJP wave." The Administration of President Donald Trump is seeking to expand upon a "strategic partnership" with India formally launched in 2005. Progress is ongoing, most notably in the area of defense and security cooperation. The U.S. Congress has been supportive of efforts to expand and deepen the bilateral partnership, formally designating India as a "Major Defense Partner" of the United States in 2016. Areas of engagement are broad and include an array of economic and security initiatives. Recent bilateral frictions have arisen over trade practices, religious freedom, and India's relations with Russia and Iran. A State Department release congratulated Prime Minister Modi and his ruling National Democratic Alliance (NDA) coalition for their "decisive victory," and it applauded the Indian people for turning out in historic numbers and the Indian government for "exceptional execution of this massive undertaking." It went on to declare that The United States and India enjoy a strong strategic partnership that stands on a foundation of shared values, extensive people-to-people ties, and a commitment to a secure and prosperous Indo-Pacific region. We look forward to working with the newly elected government on a range of important issues…. We are confident that the strong and upward trajectory of our partnership will continue. The Chairman of the House Foreign Affairs Committee also issued a laudatory statement and, in June, several Members of Congress penned an open letter to President Trump to "highlight the continuing strategic importance of the U.S.-India relationship." Secretary of State Michael Pompeo met with Modi and other top Indian officials in New Delhi in June to express enthusiasm about America's "natural strategic partner." President Trump has yet to visit India, and high-level engagement occurs under the rubric of a "2+2 Ministerial Dialogue" inaugurated in September 2018. Nevertheless, many independent observers express concern about emergent frictions and indications that the partnership is becoming dissonant. A recent substantive overview of the relationship concluded that it "would benefit from some realism about its limitations." Officials in governments across the Indo-Pacific region expect the election results to bring general continuity in Indian policies. Given the instability and uncertainty that can accompany coalition governance, many likely regarded Prime Minister Modi's convincing reelection with some relief. Modi's internationalist orientation can be seen in his energetic pursuit of diplomacy with numerous major powers and regional governments. This includes though continued development of the U.S.-India strategic partnership, which is widely seen to be rooted in an array of mutually-held values and increasingly convergent visions for global order, lately conceived by Washington as a "shared vision for a free, open, and rules-based Indo-Pacific region." On the economic front, Modi's reputation as a reformer and liberalizer has met with mixed reviews. Five years in office realized no major land or labor reforms or meaningful efforts to address bad bank debt that were widely anticipated. The BJP leader's assumed electoral vulnerabilities—relatively lackluster economic expansion (averaging below 7% annually), joblessness, rising prices, and a widely panned 2016 "demonetization" initiative—did not end up degrading his impressive political support. Most market-oriented analysts are hopeful, but not entirely confident, that a "Modi 2.0" government will redouble efforts to implement the kinds of economic reforms sought by the U.S. and other governments and business interests. Election and Outcome India possesses a robust and competitive multiparty democratic system. Yet its politics also are described as "beset by corruption" by Freedom House, a think tank that ranks world countries on levels of political and civil liberties. In 2017, India had fallen 10 places on the Economic Intelligence Unit Democracy Index to 42 nd in the world, due in part to "a rise of vigilantism and violence against minority communities, particularly Muslims, as well as other dissenting voices." For 2018, India was ranked 41 st worldwide, but its overall score was unchanged, and it maintained its designation as a "flawed democracy" (as did the United States). The scale of India's national election presents daunting logistical challenges, and voting was completed in seven phases. As with each iteration, the event was history's largest democratic exercise: About 880 million people—one-ninth of the world's population—were eligible to cast ballots in the country's 29 states and 7 Union Territories, including some 84 million first-time voters. More than 600 million Indians participated, for a turnout rate of 67.4%. More than 8,400 candidates and a record 669 parties vied for the Lok Sabha's 543 elected seats; 36 parties won at least one seat, as did 4 independent candidates. In addition to being history's largest democratic undertaking, India's 2019 national election was also history's most expensive: participating parties and candidates spent an estimated $8.7 billion on the campaign, more than double the 2014 spending. The BJP reportedly received nearly three-quarters of all political donations. Such massive outlays raise concerns among many about fairness: there is little transparency in India's campaign finance system, the Modi government had lifted caps on corporate donations, and the Election Commission's oversight is criticized for ineffectiveness. In the lead-up to the 2019 voting, analysts debated whether the BJP's 2014 sweep was an anomaly in a decades-long era of coalition politics in New Delhi, or marked the beginning of a new period of single-party domination as was seen under the Congress Party prior to 1989. The BJP's unexpected and even stronger showing in 2019 suggests that India's national political stage has undergone qualitative change back toward a hegemonic national party. The BJP won by securing 303 seats with more than 37% of the aggregate vote, significantly exceeding the 272 seats required for majority status, and increasing the party's seat total from 282 in the previous Lok Sabha. Their closest competitors, the Congress Party, took 52 seats with 19.5% of the national vote, a net gain of 8 seats (see Table 1 ). According to Election Commission of India data, the BJP won a majority of votes cast in 10 states, as well as in the Delhi National Capital Territory. It also took 49.6% of the votes cast in Uttar Pradesh (UP), India's most populous state. No other party was able to garner a majority of votes in any single state. While the BJP's core support in India's western and north-central "Hindi belt" states remained strong, and the party succeeded in expanding its appeal in the country's east, it was shut out completely in seven states, including the major southern states of Andhra Pradesh and Tamil Nadu, where regional parties prevailed. In a sign of the Congress Party's historic collapse nationally, the party failed to win a single seat in 14 states, and nearly half of the seats the party did win (23) came from India's two southernmost states, Kerala and Tamil Nadu (see Figure 1 , "Map of Indian States"). The newly seated Lok Sabha is, on average, younger, wealthier, and better educated than its predecessor, and the number of female members has increased to 15% (see Text Box ). Upper-caste Hindus and political families continue to enjoy disproportionately high representation, and India's large and relatively marginalized Muslim minority community of about 190 million (about 14% of the total) suffers from a declining voice in Parliament: Muslim representation in the Lok Sabha peaked at 10% in 1980 and lingered at about 6% until dropping to 4% in 2014. A net gain of three Muslim members in 2019 only slightly raised that percentage. India's parliamentarians are also notable for the numbers who face formal criminal allegations. Notable Changes in Union Ministers The "Modi 2.0" cabinet includes some significant changes to the leadership of key Indian ministries. For the first time ever, a career diplomat, Subramanyam Jaishankar, is now External Affairs Minister, replacing BJP stalwart Sushma Swaraj. Jaishankar, until recently Foreign Secretary, is a former ambassador to both the United States and China, and is widely known in Washington as proponent and facilitator of closer U.S.-India ties. Another key new figure in the Modi cabinet is Home Minister Amit Shah, who succeeds senior BJP official Rajnath Singh, himself now holding the Defense Ministry portfolio. Also under new leadership is the Finance Ministry, where former Defense Minister Nirmala Sitharaman has become India's first female finance minister. Additionally, National Security Advisor Ajit Doval, a former intelligence chief in office since 2014 and considered a hardliner on Pakistan, was elevated to cabinet rank in 2019. Other Parties and Figures The Indian National Congress India's Congress Party had hoped in 2019 to reverse its general decline after 2014. It had led a United Progressive Alliance coalition government under Prime Minister Manmohan Singh from 2004 to 2014. Party president Rahul Gandhi—son of former Prime Minister Rajiv Gandhi and grandson of Indira Gandhi—had entered politics with apparent reluctance, winning the "family seat" in Amethi, UP, in 2004. Ten years later, Rahul oversaw Congress's worst electoral performance in history when the party took only 44 Lok Sabha seats, down from 206 previously. Gandhi's lackluster reputation took a new shine after the party's unexpectedly strong showing in the 2017 Gujarat state elections, and December 2018 Congress victories in three north-central states were a huge morale boost for the party, heartening potential Congress allies. During the 2019 campaign, Gandhi impressed many observers with what were described as creative policy proposals and a newly assured public speaking style. Still, going into the 2019 campaign, Congress had no significant presence in any of India's six most populous states and had shown an inability to recover in states where it had faltered. The party continued to struggle to both consolidate old alliances and to establish new ones. As put by one official from a BJP-allied regional party, the opposition had "neither a program, nor a leader, nor a narrative." Gandhi suffered an embarrassing upset loss in his family's Amethi district, and the party's 2019 defeat has led to new leadership crises. Regional and Caste-based Parties The BJP and Congress are India's only truly national parties—they together won roughly half of all votes cast in 2009 and 2014, and their combined share rose to 57% in 2019 (attributable to a 6-point boost for the BJP). The influence of regional and caste-based parties—although blunted by the BJP's outright majority victories—remains a crucial variable in Indian politics. Such parties now hold about one-third of Lok Sabha seats, but many of the most influential met with significant reversals in 2019. By early 2019, Narendra Modi had become the primary, if not sole target of his many electoral opponents, but no single challenger emerged. Still, the opposition's zeal to dislodge the incumbents had them ready to make unusual alliances, especially in Uttar Pradesh, where the effort failed conclusively. Other powerful regional parties experienced setbacks, most notably West Bengal's Trinamool Congress, led by Chief Minister Mamata Banerjee, which barely survived a surprise BJP surge in the key eastern state, winning 22 of 42 Lok Sabha seats to the BJP's 18 (up from 2 in 2014). Only in Odisha was a major regional party—in this case the Biju Janata Dal of popular Chief Minister Naveen Patnaik—able to withstand the BJP onslaught. Implications for U.S. Interests Because the BJP campaign was run largely on Narendra Modi's personal popularity rather than an explicit policy platform, it is unclear how Modi will use his mandate going forward. Since 2014, the Modi government arguably has realized some foreign policy successes compatible with U.S. interests: sustaining the partnership with the United States, solidifying the partnership with Japan, strengthening ties with Israel while making new outreach to key Persian Gulf states such as Saudi Arabia and the UAE, and articulating a vision for the Indo-Pacific region that tracks well with that of the United States. Modi has successfully projected India as the world's next big economic opportunity after China, but critics argue that he has mostly squandered an opportunity to move India into great power status, with a lack of strategic vision harming India's position vis-à -vis major powers and smaller neighbors, alike. Given India's myriad domestic problems, and still-limited capacity to project power, some American observers are skeptical about its near-term potential to play the role sought for it by the U.S. Congress and successive Administrations. The Modi/BJP victory has empowered the Indian leader domestically and this may provide Modi and India new opportunities on the global stage. Given Modi's reputation for favoring a "muscular" foreign policy, he may now be more willing to resist Chinese assertiveness and move closer to the United States. Yet troubles with the United States also could loom: Many Indian strategic thinkers say their country's national interests are well served by engaging not just with the United States but also with Russia and Iran, which could limit to New Delhi's willingness to abide what some Indian observers describe as "America's short-term impulses." While New Delhi generally welcomes the U.S. "free and open Indo-Pacific" (FOIP) strategy, Indian leaders continue to demur from confronting China. The United States and India also seek to cooperate on energy, climate change, and space issues, and have sometimes clashing views on immigration. Bilateral Trade and Economic Relations26 Trade and economic ties, an important and growing part of bilateral relations, have faced recent challenges. Prime Minister Modi's strong electoral mandate suggests India's mixed economic performance did not hurt his standing with the public, and the results may embolden the BJP to press ahead with its reform agenda with greater vigor (see Text Box , below). The Trump Administration takes issue with the U.S. trade deficit with India and "unfair" trade practices that restrict U.S. exports to and investment in India. Some U.S. policymakers and businesses have been disappointed that, during Modi's first term, India did not move forward with market-opening reforms as they had hoped, and instead increased tariffs and trade restrictions. For example, recent tariff hikes by New Delhi on cell phones and other products have elevated long-standing U.S. concerns about India's tariff regime, and President Trump has called India the "tariff king." Other U.S. concerns include inadequate intellectual property protection and enforcement, and restrictive new rules on e-commerce and localization of certain financial data flows—which affect major U.S. companies, such as Amazon, Walmart-owned Flipkart, Visa, and MasterCard. The United States and India also often have opposing stances on multilateral trade issues in the World Trade Organization. The outlook for bilateral trade relations is unclear. Both sides have taken decisive actions on simmering issues. President Trump terminated India's eligibility for the Generalized System of Preferences (GSP), effective on June 5, 2019, after determining that "India has not assured the United States that India will provide equitable and reasonable access to its markets." This decision followed a U.S. investigation into India's market access practices and petitions by U.S. dairy and medical technology industries. In 2018, India was the largest beneficiary of GSP, with over one-tenth ($6.3 billion) of U.S. goods imports from India entering duty-free under the program. India, which called the eligibility termination "unfortunate," announced soon after that it would impose higher retaliatory tariffs on 28 U.S. products, including almonds, apples, and walnuts, in response to U.S. Section 232 (national-security-based) steel and aluminum tariffs. During 2018, India repeatedly delayed applying retaliatory tariffs, in hopes of negotiating a resolution of bilateral trade issues. In late June, President Trump called India's 2019 imposition of retaliatory tariffs "unacceptable" and said they "must be withdrawn." At the June 2019 G-20 Summit, the two sides appeared to strike a more conciliatory tone. President Trump said a "very big" trade deal would be coming with India. According to India's foreign secretary, the "trade ministers of both countries would meet at an early date and would try to sort out these issues." Yet lack of progress in recent months reportedly is prompting the Administration to consider launching a Section 301 investigation of India's trade practices—this would make India the focus of the next major, in-depth investigation of unfair trade practices after China. On one hand, Section 301 could be a new way to address long-standing issues of U.S. concern with respect to India. On the other hand, it could raise the risk of protracted bilateral trade tensions and tit-for-tat escalation of tariffs across many economic sectors. Defense and Security Relations Continuity in India's leadership may lead to continued rapid development of U.S.-India security cooperation, with U.S. leaders hoping that increased Indian capabilities will provide greater net security regionally and worldwide (in spite of some U.S. concerns about New Delhi's ties with Moscow). President Obama and Congress recognized India as a "major defense partner" (MDP) in 2016, a unique designation allowing India to receive license-free access to dual-use American technologies. The MDP designation was created in large part to carry over a presumption of license approvals into the new U.S. administration. It was linked to India's joining the four major multilateral export control regimes to become eligible to receive licensing for the most advanced defense systems the United States exports. In mid-2018, India received Strategic Trade Authorization Tier-1 status, putting it on par with NATO allies, and the two countries concluded a long-sought Communications, Compatibility, and Security Agreement (COMCASA), a military-to-military "enabling agreement." The two governments also seek expanded collaboration via the Defense Technology and Trade Initiative, launched in 2012, which aims to facilitate greater defense trade and technology sharing. India participates in formalized "quadrilateral consultations" with the United States, Japan, and Australia while downplaying prospects that the "Quad" may become a security-related architecture. Defense trade is a leading facet of the bilateral partnership. India is now a major purchaser in the global arms market and a lucrative potential customer for U.S. companies. The two nations have signed defense contracts worth about $15 billion since 2008, up from $500 million in all previous years combined. Washington seeks to identify sales that can proceed under the technology-sharing and co-production model sought by New Delhi while also urging reform in India's defense offsets policy. Since 2002, the United States and India have held a series of increasingly complex combined bilateral exercises involving all military services—India now conducts more exercises and personnel exchanges with the United States than with any other country. A first-ever tri-service exercise is set for later in 2019. Bilateral intelligence and counterterrorism cooperation has accelerated over the past decade. In addition to intelligence sharing, homeland security cooperation has included growing engagement between respective law enforcement agencies, especially in the areas of mutual legal assistance and extradition, and on cyberterrorism and cybersecurity. Terrorist groups operating from Pakistani territory are of special interest. India broadly endorses the FOIP strategy pursued by Washington, and it benefits from the higher visibility this strategy provides for India's global role and for its immediate region. Yet India has not fully relinquished the "nonalignment" posture it maintained for most of the Cold War (more recently pursuing "strategic autonomy" or a "pragmatic and outcome-oriented foreign policy" ). Thus, Modi has articulated a vision of a free, open, and inclusive Indo-Pacific, and India remains wary of joining any nascent or potential security architectures that could antagonize Beijing. India's Other Foreign Relations India-China . Modi's win likely means a continuation of New Delhi's multilateralist/multipolar approach to international politics in Asia, as well as efforts to resist Chinese "assertiveness" in South Asia. India's relations with China have been fraught for decades, with signs of increasing enmity in recent years. Areas of contention include major border and territorial disputes, China's role as Pakistan's primary international benefactor, the presence in India of the Dalai Lama and a self-described Tibetan "government," and China's growing presence in the Indian Ocean region, which many Indians view as an encroachment in their neighborhood. New Delhi is ever watchful for signs that Beijing seeks to "contain" Indian influence both regionally and globally. China's BRI—with "flagship" projects in Pakistan—is taken by many in India (and elsewhere) as an expression of Beijing's hegemonic intentions. India-Pakistan . The United States has long sought to assist in reducing India-Pakistan conflict and its impact on developments in Afghanistan. A surge of Indian nationalism grew out of a February 2019 international crisis involving Pakistan. Coming just weeks before voting began in India, the confrontation was widely seen to have boosted Modi's electoral prospects. In contrast to his 2014 inauguration, when Pakistan's then-prime minister was an invited guest, Modi in 2019 omitted Pakistani Prime Minister Imran Khan from swearing-in festivities. It is unclear if the Indian leader will seek to use his political capital to launch a new peace initiative with Islamabad or will continue pursuing punitive policies that aim to isolate Pakistan internationally. Some analysts contend that Modi now has sufficient standing to change tack. Others, however, suggest that his reelection "will be projected as a vindication of his belligerent policy toward Pakistan." India-Russia . India maintained close ties with Russia throughout much of the Cold War and continues to rely on Moscow for the bulk of its defense imports. With the 2017 enactment of the Countering America's Adversaries Through Sanctions Act ( CAATSA, P.L. 115-44 ) in U.S. law , India's continued major arms purchases from Russia—most prominently a current multi-billion-dollar deal to purchase the Russian-made S-400 air defense system—could trigger U.S. sanctions. Although Congress subsequently provided for a national security waiver of these sanctions, the Administration has consistently counseled India to cancel the purchase and consider U.S.-supplied alternatives , while New Delhi insists that it will go forward in pursuit of its own national interest , a position possibly hardened with the BJP mandate . India-Iran . India has historically friendly relations with Iran, a country that lately has supplied about 30% of India's energy imports. It also opposes any potential acquisition of nuclear weapons by Iran and supports the Joint Comprehensive Plan of Action. Historically averse to unilateral (non-U.N.) sanctions, New Delhi until recently enjoyed exemption from U.S. efforts targeting Iran's energy sector. In April 2019, the Trump Administration ended such exemptions, and New Delhi has issued conflicting statements about its cessation of Iranian oil purchases while informing Washington that such cessation "comes at a cost." Continued tensions in the Persian Gulf and/or a longer-term boycott of Iranian oil could be disruptive to the Indian economy; Modi's strong mandate could place limits on his willingness to abide such disruption. Other Notable Relations . The Trump Administration's South Asia strategy has included calls for greater Indian involvement in Afghanistan, even as such engagement vexes Pakistan (New Delhi has committed about $3 billion to Afghan reconstruction to date). Islamabad is wary of the Indian presence in Afghanistan and accuses New Delhi of supporting anti-Pakistan groups there, a dynamic that can in turn affect U.S. efforts to sustain Pakistan's help in facilitating Afghanistan reconciliation. Many analysts expect India-Afghanistan ties to grow stronger with Modi's reelection, and New Delhi appears wary of any precipitous U.S. withdrawal from Afghanistan. Meanwhile, India's deepening "strategic partnership" with Japan is a major aspect of New Delhi's broader "Act East" policy and a key axis in the greater FOIP strategies broadly pursued by all three governments participating in a newly established U.S.-Japan-India Trilateral Dialogue. Prime Minister Modi appears to have a convivial personal relationship with his Japanese counterpart and bilateral ties are seen as likely to strengthen going forward. Human Rights Issues While Prime Minister Modi and his party have long sought to emphasize development and good governance, the 2019 election cycle revolved around nationalism and other emotive issues, with many observers arguing that Hindu majoritarianism is a threat both to India's religious minorities and to the country's syncretic traditions. According to the U.S. State Department and independent watchdogs, India is the site of numerous human rights violations, many of them serious and some perpetrated, or at least tolerated, by state actors. Many observers are concerned about the impact of growing religious bigotry and Hindu nationalism on human rights. The BJP is an openly Hindu nationalist party and Prime Minister Modi is a self-avowed Hindu nationalist. In 2005, Modi was denied a U.S. visa over concerns about his role in government during lethal anti-Muslim violence in 2002. Modi hit conciliatory notes in a national address three days after the 2019 election results were announced, vowing to seek the trust of minority groups and to work for the good of all Indians. Human rights nongovernmental organizations and social service groups have seen their Indian operations constrained in recent years, and observers are watching closely for signs that the Modi/BJP mandate will lead to renewed efforts toward Hindu nationalist goals. Some of these—including laws preventing religious conversions and cow slaughter—continue to cause sparks in U.S.-India relations, including explicit BJP criticism of the U.S. government for alleged "bias" against Modi. Future moves by the Modi government on other "Hindutva" policies could increase national divisions and lead to further international opprobrium.

India, a federal republic and the world's most populous democracy, held elections to seat a new lower house of parliament in April and May of 2019. Estimates suggest that more than two-thirds of the country's nearly 900 million eligible voters participated. The 545-seat Lok Sabha (People's House) is seated every five years, and the results saw a return to power of the Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi, who was chief minister of the west Indian state of Gujarat from 2001 to 2014. Modi's party won decisively—it now holds 56% of Lok Sabha seats and Modi became the first Indian leader to win consecutive majorities since Indira Gandhi in 1971. The United States and India have been pursuing an expansive strategic partnership since 2005. The Trump Administration and many in the U.S. Congress welcomed Modi's return to power for another five-year term. Successive U.S. Presidents have deemed India's growing power and influence a boon to U.S. interests in Asia and globally, not least in the context of balancing against China's increasing assertiveness. India is often called a preeminent actor in the Trump Administration's strategy for a "free and open Indo-Pacific." Yet there are potential stumbling blocks to continued development of the partnership. In 2019, differences over trade have become more prominent, and India's long-standing (and mostly commercial) ties to Russia and Iran may run afoul of U.S. sanctions laws. Additionally, India maintains a wariness of U.S. engagement with Pakistan and intentions in Afghanistan, with Islamabad presently facilitating a U.S.-Taliban dialogue and India counseling against a precipitous U.S. withdrawal from Afghanistan. Prime Minister Modi's return to power promises broad continuity, even with some notable changes to the federal cabinet. By many accounts, Modi's record as an economic reformer and liberalizer is mixed, and his reputation as a nationalist "watchman" has not always translated into effective foreign policy, according to some analysts. It is unclear if Modi will use his renewed domestic political mandate to pursue more assertiveness internationally, possibly in ways that challenge U.S. preferences. Still, most analysts contend that Modi and the BJP have been and will continue to be more open to aligning with U.S. regional strategy and more energetic in pursuing U.S.-favored economic reforms than would have been any alternative Indian leadership. The BJP is a Hindu nationalist party, born in 1980 of a larger social movement, and Narendra Modi is a self-avowed Hindu nationalist (India is roughly 79% Hindu and 14% Muslim). The 2019 Modi-BJP campaign was widely criticized for divisiveness, and nationalist fervor following a February India-Pakistan crisis may have benefitted the BJP at the polls. India's minority communities and the country's civil society are widely reported to be under increasing threats emanating from Hindu majoritarian policies and sentiment. These threats can take violent and repressive forms, at times with the involvement of Indian officials or political figures, as reported by the U.S. State Department and independent human rights watchdogs, and as criticized by some Members of Congress. This report reviews the recent Indian election process and results, the country's national political stage, and possible implications for U.S. interests in the areas of bilateral economic and trade relations, defense and security ties, India's other foreign relations, and human rights concerns.

GAO_GAO-20-28

Background VR&E Eligibility and Process To be entitled to VR&E services and related benefits, veterans generally must (1) have at least a 20 percent service-connected disability rating from VA and (2) be in need of rehabilitation because of an employment handicap. Entitled veterans may generally receive up to 48 months of vocational rehabilitation services and up to an additional 18 months of employment services, which include counseling, and placement and postplacement services. If a veteran is entitled to receive VR&E services and found to be employable, a counselor is to work with the veteran to identify a suitable employment goal, and to incorporate that goal and the needed services and benefits to achieve it into a vocational rehabilitation and employment plan (hereafter “employment plan”). To develop an employment plan, the counselor and veteran review labor market information for jobs within the veteran’s identified abilities, aptitudes, and interests that will not aggravate his or her service-connected disability or disabilities. After assessing obstacles to employment, they agree on a written employment plan that describes the employment goal and the services needed to achieve it. Common services provided by VR&E are funding for higher education, career counseling, and short-term employment services like job search assistance. Counselors have the authority to approve a wide variety of educational programs and may approve employment plans that have an annual cost of up to $25,000. VR&E Organization Within VA’s Veterans Benefits Administration (VBA), the VR&E central office is responsible for overseeing the VR&E program, including training staff and monitoring their work to ensure high performance and consistency. Among other elements, VR&E’s quality assurance efforts entail reviewing a subset of case files on a monthly basis to ensure that the entitlement decisions, development of plans, and delivery of services are performed and documented in accordance with VA regulations, VR&E’s operations manual, and other directives. VR&E services are provided by field staff at 56 regional offices and about 300 satellite locations. The satellite locations include college campuses to help veterans successfully complete their training and find employment, as well as military sites to help servicemembers with disabilities as they begin their transition to veteran status and the civilian workplace. VR&E field positions include (1) VR&E officers who manage the program and its staff in each region; (2) vocational rehabilitation counselors who work directly with veterans to assess their entitlement, develop their employment plans, and manage their progress; and (3) staff to support the administration of the program. As of June 2019, 1,394 field staff members were administering the VR&E program, of which nearly 75 percent (1,026) were counselors. From September 2013 to June 2019, VR&E’s total caseload peaked in fiscal year 2016 with almost 135,000 participants (see fig. 1). Over the same period, the number of counselors changed little until 2019. In 2019, the number increased after VA hired an additional 88 counselors in response to a provision in an appropriations law suggesting that the agency aim to serve 125 veterans or fewer per full-time equivalent counselor. The increase in staffing helped reduce the average caseload of 130-141 cases per counselor during fiscal years 2013 through 2016 to 113 cases in June 2019 (see fig. 2). Counselors Generally Considered Common Factors When Developing Veterans’ Plans but Noted Inconsistent Application of Those Factors Likely Occurs Counselors in Our Review Generally Considered a Set of Common Factors When Developing Plans VR&E counselors consider a set of common factors, including the veteran’s disability or disabilities, interests, and local labor market conditions, when developing and approving veterans’ employment plans. Program regulations require an assessment of some of these factors when the veteran is initially evaluated. VR&E quality review data from fiscal years 2016 through 2018 suggest that counselors generally documented certain plan considerations during the evaluation. For example, in 98 percent of the 1,080 cases VA reviewed for accuracy in fiscal year 2018, counselors documented the veteran’s service needs based on their functional limitations. In 95 percent of cases, counselors documented that they assessed the veteran’s abilities, aptitudes, and interests. Lastly, in nearly 99 percent of cases, counselors documented that the veteran was involved in vocational exploration activities such as career searches and labor market research. During our more focused review of how counselors developed plans for a non-generalizable sample of 34 VR&E case files, we found that counselors generally documented a set of common factors. Consistent with program guidance stipulating that counselors are to consider a veteran’s service needs, abilities, aptitudes, and interests, we identified common consideration factors including one’s functional limitation from disability, prior education, aptitude results, and career interests. Table 1 presents these factors and the number of files in which the factors were documented. Our case file review found that 30 of the 34 counselors also documented the estimated cost of VR&E employment plans. According to testimony from a veteran service organization, many VR&E participants are dissuaded by their counselor from pursuing education at a top tier university because of cost. VA’s VR&E operations manual states that if more than one local training or educational facility will meet a veteran’s needs, counselors must justify their decision to select a school that is more expensive than the least costly one. Counselors are not required to document all of the educational facilities that would serve a veteran’s needs; therefore, we could not determine the extent to which counselors chose the lowest cost facility. Counselors we interviewed in each of the three regional offices we visited said that while mindful of cost, they strive to develop employment plans that best meet the needs of the veteran. For example, counselors at one regional office described a situation in which a higher priced school was chosen because the school offered smaller class sizes that better suited the veteran’s particular mental health conditions. Of the 34 files we reviewed, the annual plan cost exceeded $25,000 in 3 cases. Counselors we interviewed said that they considered the veteran’s career interests but weighed these interests against other factors, such as the veteran’s functional limitations and information about the local labor market. All 34 plans we reviewed aligned with the veteran’s stated career goals, though in some cases the veteran’s goals evolved after talking with the counselor about alternative occupations. In a few instances among these cases, the final plan’s career goal was notably different from the initial goal that the veteran had stated on the program intake form. Table 2 presents examples of how a plan can evolve as a result of career exploration activities and conversations between the veteran and their counselor. Counselors in Our Review Stated They Strive to Develop Individualized Plans but Acknowledged That Some Unintended Differences in Plans for Similarly-Situated Veterans Likely Occurs Counselors we interviewed described how veterans’ employment plans are individually designed to suit a veteran’s needs and, as a result, may differ from one another even when veterans have similar goals, characteristics, and circumstances. In some instances two veterans may appear to be similar, but may actually differ in some critical respect that results in appropriate variation across plans. A common difference among veterans is the geographical location where they are seeking employment. Counselors described how a veteran may be encouraged to explore an occupation with many job opportunities within a specific region, while a veteran with similar characteristics and interests living in a different area may be dissuaded from pursuing the same occupation for a lack of job opportunities in the area for that occupation. Local labor markets may also drive the need for a certain type of educational credential. For example, counselors said that some veterans will be competitive in certain labor markets with a bachelor’s degree, while others living in a different region with a more educated population may need a master’s degree. Likewise, they said that certain occupations, such as certified public accountants or school teachers, may require different forms of credentialing in different states. Other characteristics of individual veterans may also cause counselors to develop different plans for veterans who appear to have similar circumstances. One counselor we interviewed described a scenario in which one veteran who received a high score on an aptitude test for reading comprehension skills might obtain a certain employment plan while another veteran who received a much lower score would be steered toward a different plan. If the veterans were to compare their final plans, but were unaware of the differences in their aptitude test scores, they could perceive inconsistent treatment. Counselors also described how conversations they have with veterans as they work to develop employment plans can reveal other character traits, such as interpersonal skills, which can lead them to suggest different plans to two otherwise similar veterans. The counselors said that such conversations play an important role towards the development of successful plans. However, counselors we interviewed in each of the three regional offices we visited acknowledged that unintended variation likely occurs across plans developed for similarly-situated veterans. They explained that the reasons for such potential inconsistency can include (1) the prominent role professional judgment plays in the program and the potential for unintended bias, (2) counselors’ different VR&E experience levels, and (3) variations in regional offices’ policies. Judgment and bias. The counseling role is inherently subjective and requires counselors to use their professional judgment in each case. The VR&E operations manual describes counselors’ responsibilities in broad terms, stating that counselors are to guide and assist the veteran in making an informed decision on an appropriate plan based on the veteran’s abilities, aptitudes, and interests. According to counselors we interviewed, professional judgment enables them to develop a plan that is best suited for the veteran’s unique needs, although it also introduces the potential for personal bias and inconsistent plans for veterans with similar circumstances. For example, a counselor we interviewed cited a case in which he saw the need to develop a plan that allowed for a school that was closer to a veteran’s home over other, less costly options because of his sensitivity to the veteran’s childcare responsibilities. Another counselor in the same office may not have seen the need for that accommodation. Further, counselors we interviewed said that some of their colleagues may be more comfortable suggesting that a veteran reconsider his or her career goal given circumstances such as the veteran’s disabling conditions or the local labor market. They explained that while some counselors would be hesitant to make the veteran unhappy, and possibly angry, other counselors would be more inclined to work through the conflict. Counselors said that they try to mitigate inconsistency by asking their fellow counselors to weigh in on these sorts of judgments, either informally, or at periodic information-sharing meetings. Counselor experience. Although all counselors have at least a master’s degree in rehabilitation counseling or a related field, differences in counselors’ levels of VR&E experience may affect their approach to plan development. Counselors at two regional offices noted that the focus of the VR&E program has oscillated between education and employment, with employment being the current primary focus. They said, as a result, a counselor’s general approach to plan development could be influenced by the prevailing focus that existed at the time he or she was hired. Counselors also said that, in general, counselors with more experience will tend to approach plan development differently than a less seasoned counselor because they will apply lessons learned from serving many other veterans. For example, one counselor said that, based on years of prior experience and observation, he has developed a better understanding of which local educational programs offer veterans the best chance for success and which do not. He said while he is able to apply his institutional knowledge and experience to do what is best for veterans, a less experienced counselor may not have the same level of knowledge, which could lead to inconsistent plans for veterans with similar circumstances. According to counselors we interviewed, because of the recent hiring of new counselors to meet caseload targets, differences in VR&E experience among counselors may be more pronounced at this time. Regional office variation. Differences in administrative policies specific to individual regional offices may also contribute to inconsistent plan development. For example, according to program officials, to ensure the soundness of employment plans in the local labor market, some regional offices require management to approve plans involving a master’s degree, while others do not. Counselors in one region told us that requiring management approval might dissuade a counselor from developing a plan focused on a master’s degree because of the time the extra step would require. They acknowledged that this sort of approval policy could cause inconsistency across counselors’ plans and also cause a discrepancy in the number of master’s degree programs being approved at one regional office versus another. In general, the large number of variables involved in the development of employment plans may complicate the ability to determine the extent to which differences among counselors lead to inconsistent plans among veterans. Counselors we interviewed said that given the subjective nature of the program, such inconsistency is likely. However, counselors cautioned against making the plan development process overly structured and formulaic. In their view, a more restrictive approach would eliminate the flexibility that they need to generate plans that suit each veteran’s unique needs. VA Trains Counselors and Monitors Their Performance but Does Not Monitor the Consistency of Employment Plans VA Trains Counselors to Develop Sound Employment Plans for Veterans VA trains counselors on developing sound and complete employment plans for veterans. New counselors receive a series of training courses that are developed and deployed through VR&E’s central office, and then receive additional courses and mentorship that are delivered through the regional offices. Course topics for new counselors include understanding vocational impairments, developing a rehabilitation plan, and documenting a narrative of the plan. The formal training emphasizes that plans should be individualized to accommodate the veteran’s rehabilitation needs, abilities, aptitudes, and interests. Collectively, these trainings take up to 80 hours. As of 2019, experienced counselors—those on the job for at least a year—take up to 20 hours of refresher training each year determined according to how they score on an annual assessment. The assessment evaluates counselors’ technical competencies such as knowledge of relevant regulations, vocational assessment and evaluation, and case management. If a counselor scores low on a particular topic, related courses are identified for the counselor to complete. In designing training for counselors, VA followed principles for strategically developing training that are consistent with a related guide for federal managers. For instance, VA obtained and considered input from multiple sources—including field advisory committees, quality assurance reviewers, and internal site visit auditors—to identify needs for counselor training. For example, questions and input from the field about a policy clarification led to a training about veterans’ entitlement to VR&E services. In addition, VA built flexibility into its training curricula for counselors so they could receive training on emerging topics such as implementing new policies throughout the year as needed. VA also has evaluated its training efforts in multiple ways. For example, it has evaluated training courses by surveying counselors to get immediate feedback and by checking with attendees and their supervisors to gauge improvements in skills and knowledge. VA Checks If Plans Are Complete but Does Not Monitor Consistency among Counselors VA monitors employment plans to ensure that they are complete, but does not check for consistency among counselors for veterans with similar circumstances. Quality reviews occur nationally as well as locally at each regional office. The purpose of the national reviews is to monitor the quality of regional offices’ work such as plan development, whereas the purpose of the local reviews is to help evaluate the performance of individual counselors. Nationally, a centralized quality assurance team monitors the completeness of regional offices’ VR&E entitlement decisions, employment plans, and service delivery by reviewing a randomly-selected subset of case files from each regional office on a monthly basis. Among other criteria, reviewers check whether a veteran’s plan identified goals and objectives, included an employment focus, and incorporated the veteran’s need for various services. Locally, VR&E officers or their designees are to review plans using the same criteria. Officers are supposed to review at least three cases per counselor per quality category (e.g., accuracy of evaluation, planning and rehabilitation services) per quarter. Reviewers do not check for consistency among counselors for similarly-situated veterans, at either the national or local levels. VR&E officials we interviewed identified challenges to completing and monitoring local reviews, but VA is addressing these challenges. According to the VR&E officer in each of the three regional offices we visited, it is difficult to complete local reviews given system limitations and their other job responsibilities such as implementing case management initiatives. They said that it is likely that some officers are not completing the required reviews while others are conducting them with varying degrees of thoroughness. Historically, VA has not identified the specific cases VR&E officers are supposed to review locally. Consequently, VA could not determine if VR&E officers conducted the requisite number of reviews or whether officers were selecting cases for quality review uniformly and fairly. In June 2019, during the course of our review, VA began a pilot in five regional offices to centrally and systematically identify the cases officers are to review to gauge individual counselors’ performance. The new process and system are intended to help officers conduct and track local reviews as well as to help VA monitor the completion of local reviews. VA plans to expand this process to all regional offices in fiscal year 2020. Although VA trains counselors to develop complete employment plans and reviews the completeness of some plans, it does not monitor the consistency of plans among different counselors. The code of professional ethics for rehabilitation counselors calls for counselors to be fair in the treatment of all clients and to provide appropriate services to all. In addition, one of the objectives of VR&E’s central office is to provide training and guidance to ensure high performance and consistency among field staff. Several veteran service organizations have testified at congressional hearings that VR&E is marked by inconsistent treatment of similarly-situated veterans. For example, one testimony cited veterans who allegedly received different plan approvals, such as access to graduate level education, merely on the basis of their counselor. Unlike for VA staff members who work on disability claim decisions, VA does not compare the output of VR&E counselors by, for example, analyzing responses to identical hypothetical cases for training or monitoring purposes. As a result, in addition to missing a training opportunity for counselors about employment plan development, VA does not know the degree to which inconsistency among counselors occurs. For example, the agency does not know the extent to which counselors would agree to a particular veteran’s pursuit of a master’s degree through VR&E. Moreover, VA cannot respond in an informed way—and take mitigating steps if warranted—to criticisms of subjectivity in the program. VR&E officials explained that the agency has not yet conducted such a comparative analysis because of other priorities, but agreed that it could do so particularly through its training efforts. Conclusions VA uses several training and monitoring practices to help ensure that VR&E counselors develop employment plans that help veterans with disabilities obtain and sustain employment. In approving these plans, VR&E counselors use their judgment and discretion fostered in part by their formal education and professional experience in vocational rehabilitation. While our review of a non-generalizable sample of 34 cases found that counselors generally considered common factors in developing employment plans, counselors we interviewed nevertheless acknowledged that counselors may apply the factors differently because of their varying backgrounds and experience levels. The variability of counselors’ experiences and veterans’ circumstances may make it difficult to determine the full extent of any inconsistency. However, taking steps to examine the prevalence and type of any inconsistency among counselors who, for example, consider the same hypothetical case, would better position VA to mitigate any unfair differences in plans for veterans with similar circumstances. An understanding of how effectively and consistently counselors assist veterans will be even more important in the coming years as VA fully integrates the new counselors hired to decrease the average caseload. Recommendation for Executive Action The Secretary of VA should ensure that the Director of VR&E assesses the consistency of VR&E plans among counselors and takes mitigating steps if results warrant. For example, as part of its training efforts, VA could have counselors respond to identical hypothetical veteran cases and, if unfair inconsistencies in plans result, the agency could enhance training on plan development. (Recommendation 1) Agency Comments We provided a draft of this report to VA for comment, and its written comments are reproduced as appendix I in this report. VA concurred with our recommendation and said that VBA will develop a consistency study of VR&E plan development. It emphasized that no two veterans are the same. It also provided technical comments which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. In addition, the report will be available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or curdae@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Appendix I: Comments from the Department of Veterans Affairs Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, Mark Glickman (Assistant Director), Joel Green (Analyst in Charge), and David Perkins made significant contribution to the report. In addition, Jennifer Cook, Holly Dye, Alex Galuten, Monica Savoy, Mimi Nguyen, Almeta Spencer, Jeff Tessin, Rosemary Torres Lerma, and Sonya Vartivarian made key contributions.

VA's VR&E program helps veterans with service-connected disabilities obtain and maintain suitable employment. VR&E participants work with vocational counselors to develop career goals and employment plans. However, some veteran service organizations have questioned the consistency with which participants are treated by counselors in developing these plans. GAO was asked to review how VR&E vocational counselors work with participants to select employment plans, and VA's efforts to ensure high quality and consistency. This report examines (1) the factors that vocational counselors considered when developing VR&E participants' plans and how consistently they applied those factors, and (2) the extent to which VA trains and monitors vocational counselors to ensure a consistent, high-quality approach to helping veterans develop plans. GAO analyzed VR&E quality review data from fiscal years 2016 through 2018; reviewed a random, non-generalizable sample of 34 VR&E case files from 2019; reviewed relevant federal laws, regulations, and VA policy; and interviewed VR&E counselors and other program officials. The Department of Veterans Affairs' (VA) Vocational Rehabilitation and Employment (VR&E) counselors in GAO's review generally considered a set of common factors when developing plans to help veterans with disabilities obtain employment, but counselors explained that inconsistent application of those factors likely occurs. These factors included the veteran's disability, his or her interests, and local labor market conditions. The 34 VR&E plans GAO reviewed showed that counselors' generally considered and documented these factors (see table). Counselors in each of the three regional offices GAO visited said that plans are individualized to suit the veteran's needs and as a result will differ because each veteran's case is unique. Nonetheless, these counselors acknowledged that some veterans with similar circumstances likely receive different types of plans given differences in counselor judgment and experience. VA trains and monitors counselors to develop complete VR&E plans but does not assess the consistency of plans across counselors for veterans with similar circumstances. VA's training for VR&E counselors emphasizes that plans should accommodate each veteran's individual needs, abilities, aptitudes, and interests. In designing training for counselors, VA followed principles identified by GAO for strategically developing training. VA monitors the completeness of VR&E plans through national and regional quality reviews that check, among other elements, whether plans have an employment focus and include needed services. However, these quality reviews do not assess the consistency of plans developed by different counselors. VR&E officials explained that the agency has not yet conducted such an analysis because of other priorities, but agreed that it could do so. One of the objectives of VR&E's central office is to provide training and guidance to help ensure consistency among field staff. Assessing consistency across counselors would better position VA to mitigate any unfair differences in plans for similarly-situated veterans.

GAO_GAO-19-647

Background When Mexico and the United States created the Mérida Initiative in 2007, the Mexican government pledged to tackle crime and corruption and the U.S. government pledged to address domestic drug demand and the illicit trafficking of firearms and bulk currency to Mexico. During the early years of the Mérida Initiative, much of the U.S. funding for the initiative was intended to purchase equipment to support Mexican federal security forces, including about $591 million for aircraft and helicopters from fiscal years 2008 through 2010. In 2011, U.S. and Mexican officials agreed to expand the scope of the initiative to prioritize institution building, and later increased the initiative’s focus on community engagement and human rights efforts. According to State, an Executive Order on TCOs issued in 2017 signaled that the focus of the Mérida Initiative would shift to countering TCOs’ illicit activities, such as drug production and the cross- border movement of drugs, cash, and weapons. State/INL and USAID are the lead U.S. agencies for developing the Mérida Initiative’s programming. In these roles, State/INL and USAID work with GOM officials to help outline Mérida Initiative projects’ plans, objectives, and intended impact. State/INL and USAID both manage and fund the Mérida Initiative with the support of a wide range of project implementers, including DOJ, DHS, DOD, contractors, nongovernmental organizations, and international organizations. All Mérida Initiative projects are currently funded through three appropriations accounts: the International Narcotics Control and Law Enforcement (INCLE) account administered by State/INL, the Economic Support Fund (ESF) account, from which the Mérida Initiative project funding is administered by USAID, and the Development Assistance (DA) account, also from which the Mérida Initiative project funding is administered by USAID. According to State/INL and USAID officials, GOM does not provide direct funding to Mérida Initiative projects. Instead, State/INL considers any GOM funding for justice, national security/defense, and public order and domestic security as indirectly supporting the goals of the Mérida Initiative. In addition, according to USAID data, Mexican nonprofit and private sector entities provided about $23 million in matching funds for USAID-funded Mérida Initiative projects active from fiscal year 2014 through 2018. State and USAID Allocated Over $700 Million for Mérida Initiative Projects from Fiscal Year 2014 through 2018 From fiscal year 2014 through 2018, State/INL and USAID allocated about $723 million for Mérida Initiative projects under the following five U.S. government–wide foreign assistance funding categories: Civil Society, Counternarcotics, Good Governance, Rule of Law and Human Rights, and Transnational Crime. U.S. agencies use these government- wide categories to broadly define foreign assistance programs for planning, budgeting, and reporting, which provides a common language to describe programs across agencies, countries, and regions. Over 80 percent of the funding, or $589 million, went toward Rule of Law and Human Rights, and Counternarcotics efforts. (See fig. 1.) Funding allocated for the Mérida Initiative has decreased over time from $178 million in fiscal year 2014 to $139 million in fiscal year 2018. Of the $723 million, State/INL allocated about $542 million and USAID allocated about $182 million. (See fig. 2.) 445 State and USAID Mérida Initiative Projects Were Active from Fiscal Year 2014 through 2018, Supporting a Wide Range of Efforts Four hundred and forty-five Mérida Initiative projects were active from fiscal year 2014 through 2018, with State/INL funding 388 projects and USAID funding 57 generally larger projects. State/INL and USAID each categorized their projects with greater specificity than the broad categories used for overall allocated funding. Both State/INL and USAID funded projects to assist Mexico’s transition to a newly reformed criminal justice system that includes oral arguments and the presumption of innocence, categorized by State/INL as “criminal justice” and by USAID as “rule of law.” In addition to projects related to criminal justice, most funding for State/INL projects was for those that focused on border and port security, professionalizing the police, and counternarcotics. For example, numerous State/INL projects provided training; technical assistance; and equipment—including for drug detection, border surveillance, and forensic drug laboratories—for Mexican law enforcement, border security, justice sector, and military officials. In addition to rule of law projects, most funding for USAID projects was for those that focused on crime and violence prevention, human rights, and transparency and accountability. Similar to State/INL, numerous USAID projects provided technical assistance to Mexican justice sector officials. Other USAID projects were designed to engage with civil society groups to address crime and violence, and corruption, and to promote trust in government. State/INL and USAID implemented these projects primarily through contracts, grants, cooperative agreements, interagency agreements, and agreements with international organizations. State/INL Mérida Initiative Projects Focused on Criminal Justice, Border and Port Security, Professionalizing the Police, and Counternarcotics State/INL-funded Mérida projects focused on criminal justice, border and port security, professionalizing the police, and counternarcotics. State/INL categorizes its Mérida Initiative projects under priority lines of effort developed by State/INL Mexico specifically for the Mérida Initiative. These lines of effort are defined in State/INL’s Mexico Country Plan: Advance Criminal Justice, Counternarcotics, Disrupt Illicit Finance, Professionalize the Police, and Secure Border and Ports. While State/INL uses these lines of effort to categorize State/INL-funded Mérida Initiative projects, these lines of effort also align with the broader U.S. government–wide foreign assistance funding categories outlined in figure 1 above. See table 1 for a description of State/INL’s lines of effort for the Mérida Initiative, and how these lines of effort align with the U.S. government– wide foreign assistance funding categories. The State/INL projects with the highest percentage of State/INL funding were those focused on Advancing Criminal Justice (28 percent) and Securing Borders and Ports (25 percent). Law enforcement related categories—Counternarcotics and Professionalize the Police—also constituted a substantial proportion (30 percent) of State/INL funding, as shown in figure 3. For a list of State/INL’s highest dollar value projects active from fiscal year 2014 through 2018 by these categories, see appendix I. Below are some examples of State/INL-funded Mérida Initiative projects supporting the agency’s five lines of effort in Mexico: Advance Criminal Justice. These 99 projects, with State/INL funding estimated at $241 million, focused on providing training, technical assistance, and equipment to Mexican justice sector and law enforcement officials as they transition to a new judicial system. These projects also provided tools and guidance to civil society to promote the rule of law and trust in government. For example: One DOJ project supported criminal investigations and prosecutions by providing training to GOM officials to improve their forensic laboratories, and by providing technical assistance to forensic scientists testifying as expert witnesses in criminal cases. Through another project, DOJ developed training materials and instructors to assist the GOM Attorney General’s office with the mechanics of Mexico’s judicial system reforms and to create a culture of professionalization within the Attorney General’s office. Some criminal justice projects engaged with civil society, such as a project that worked to promote a culture of lawfulness among Mexican children who attend elementary school in high-crime areas. Counternarcotics. These 76 projects, with State/INL funding estimated at $115 million, focused on assisting Mexican agencies countering the illicit drug trade in Mexico, primarily through technical assistance and equipment, including for forensic labs, drug detection, and surveillance. For example: Intelligence surveillance and reconnaissance technology has been provided to the Mexican Navy to expand its capacity to conduct counternarcotics operations. The Organization of American States implemented a project that expanded Mexico’s drug treatment courts, which offer rehabilitation services and other nonpunitive alternatives for drug offenders who would otherwise face time in prison. Disrupt Illicit Finance. These nine projects, with State/INL funding estimated at $17 million, provided equipment, training, and a public awareness campaign to assist the GOM in its efforts to address TCO’s money-laundering and other illicit financial activities. For example: One DOJ project provided anti–money laundering training to Mexican prosecutors at the state and federal levels. Another United Nations Office on Drugs and Crime project aims to combat money laundering through a public awareness campaign and complaint call center in Mexico. Professionalize the Police. Many of these 97 projects, with State/INL funding estimated at $144 million, provided training and technical assistance to Mexican law enforcement officials at all levels to improve their effectiveness, accountability, and adherence to the rule of law. An aspect of one project conducted surveys with law enforcement personnel and civil society to better inform effective police practices and to link these practices with levels of citizen trust. Two other projects supported tours to the United States for Mexican officials to study issues related to gender-based violence and women’s access to justice. Secure Borders and Ports. These 68 projects, with State/INL funding estimated at $217 million, focused on various efforts and equipment for GOM border and military officials—including equipment for biometrics, surveillance, and telecommunications—to secure Mexico’s air, land, and sea borders and ports. For example, DHS’s Customs and Border Patrol provided mentors and training to GOM border officials to improve their capacity to stem the northward flow of migrants entering Mexico along its southern border. USAID Mérida Initiative Projects Focused Primarily on Crime and Violence Prevention and Rule of Law USAID-funded Mérida Initiative projects focused on crime and violence prevention, rule of law, transparency and accountability, and human rights efforts. USAID categorizes its Mérida Initiative projects under the following development objectives developed by USAID Mexico and outlined in USAID’s Mexico Country Development Cooperation Strategy: Crime and Violence Prevention, Human Rights, Rule of Law, and Transparency and Accountability. Similar to State/INL’s Mérida Initiative lines of effort, USAID Mexico uses its development objectives to categorize USAID-funded Mérida Initiative projects. These objectives also align with the broader U.S. government–wide foreign assistance funding categories outlined in figure 1. See table 2 for a description of USAID’s development objectives for the Mérida Initiative, and how these objectives align with the U.S. government–wide foreign assistance funding categories. The USAID projects with the highest percentage of USAID funding were those focused on Rule of Law (39 percent) or Crime and Violence Prevention (22 percent) with Transparency and Accountability and Human Rights constituting slightly smaller percentages (15 percent and 14 percent, respectively). While funding for USAID projects was concentrated in the Rule of Law category, the number of USAID projects was spread relatively evenly among the categories of Crime and Violence Prevention, Human Rights, and Transparency and Accountability, as shown in figure 4. For a list of USAID’s highest dollar value projects active from fiscal years 2014 through 2018, see appendix II. Below are some examples of USAID-funded Mérida projects supporting the agency’s four development objectives in Mexico for the Mérida Initiative: Crime and Violence Prevention. These 20 projects, with USAID funding estimated at $70 million, worked with civil society, nongovernmental organizations, the private sector, and GOM officials to implement various activities, such as training, workshops, and outreach efforts, to mitigate crime and violence. A number of these projects focused on building the skills and knowledge of at-risk youth, such as those in high-crime areas or at risk of dropping out of school. For example, one project aimed to help at-risk youth in communities and detention centers return to school, gain employment, and improve life skills. Human Rights. These 15 projects, with USAID funding estimated at $46 million, worked to advance human rights through various activities that, for example, focused on protecting journalists and human rights defenders, preventing forced disappearances, and promoting freedom of expression. For example, one project supported the GOM’s efforts to implement its National Human Rights Plan by implementing clear procedures in line with international human rights standards. Rule of Law. These three projects, with USAID funding estimated at $126 million primarily provided technical assistance and outreach to assist Mexican officials as they transitioned to a new judicial system. For example, two large projects—one $68 million project and one $56 million project that has since closed—provided a wide range of technical assistance to GOM judges, public defenders, and attorneys general. Another smaller project worked with law schools to adapt their curricula to the new criminal justice system. Transparency and Accountability. These 15 projects, with USAID funding estimated at $49 million engaged with Mexican officials and civil society to address corruption and promote ethical behavior. Projects helped Mexican officials develop and implement anticorruption policies, strengthen transparency in their procurement processes, and implement GOM’s National Anti-Corruption System. For example, one project aimed to deter corruption and support transparency by improving the quality of investigative and data journalism in Mexico. State and USAID Primarily Use Contracts, Grants, and Interagency Agreements to Implement Mérida Initiative Projects State/INL and USAID implement Mérida Initiative projects primarily through contracts, grants, and agreements with international organizations, but State/INL also employs agreements with U.S. agencies (DOJ, DHS, and DOD). See tables 3 and 4 for the number of and funding for each type of State/INL and USAID funding mechanism, respectively. Agency Comments We provided a draft of this report to State and USAID for review and comment. State and USAID both provided technical comments, which we incorporated as appropriate. USAID also provided formal comments, which are reproduced in appendix III. In these comments, USAID noted that, with its support, the Mérida Initiative has been instrumental in advancing reforms to the Mexican criminal justice sector, promoting human rights, building strong and resilient communities, and improving integrity and accountability. We are sending copies of this report to the appropriate congressional committees, the Secretary of State, and the USAID Administrator. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix IV. Appendix I: Highest Dollar Value State/INL Mérida Initiative Projects, by Category, Active from Fiscal Year 2014 through 2018 This appendix provides a detailed list of the 10 highest dollar value Department of State, Bureau of International Narcotics and Law Enforcement Affairs (State/INL) Mérida Initiative projects active from fiscal year 2014 through 2018 by State/INL’s five lines of effort—Advance Criminal Justice, Counternarcotics, Disrupt Illicit Finance, Professionalize the Police, and Secure Border and Ports. State/INL provided the details in tables 5 to 9 below. Appendix II: Highest Dollar Value USAID Mérida Initiative Projects Active from Fiscal Year 2014 through 2018 This appendix provides a detailed list of the 10 highest dollar value United States Agency for International Development (USAID) Mérida Initiative projects active from fiscal year 2014 through 2018. USAID provided the details in table 10 below. Appendix III: Comments from the United States Agency for International Development Appendix IV: GAO Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, James Michels (Assistant Director), Teresa Heger (Analyst-in-Charge), Terry Allen, Ashley Alley, Lilia Chaidez, Martin DeAlteriis, Neil Doherty, Francisco Enriquez, John Hussey, and Andrew Kincare made key contributions to this report.

For more than a decade, the activities of transnational criminal organizations have led to increased crime, violence, and lawlessness in parts of Mexico. In October 2007, Mexico and the United States created the Mérida Initiative, a bilateral partnership to address crime and violence and enhance the rule of law in Mexico. State/INL and USAID are the lead U.S. agencies for developing programming for the Mérida Initiative. Both State/INL and USAID also manage and fund the Mérida Initiative with the support of a wide range of project implementers, including the Departments of Defense (DOD), Homeland Security (DHS), and Justice (DOJ); contractors; nongovernmental organizations; and international organizations. GAO was asked to describe funding and projects the United States has provided under the Mérida Initiative. This report describes (1) State/INL and USAID funding for the Mérida Initiative from fiscal year 2014 through 2018 and (2) the number and type of Mérida Initiative projects active during these years. GAO reviewed State and USAID documents and data, and interviewed officials from State, USAID, DOD, DHS, and DOJ in Washington, D.C., and Mexico City. From fiscal year 2014 through 2018, the Department of State's (State) Bureau of International Narcotics and Law Enforcement Affairs (State/INL) and the U.S. Agency for International Development (USAID) allocated about $723 million for the Mérida Initiative, which aims to mitigate the impact of the drug trade on the United States and reduce violence in Mexico. State/INL and USAID allocated this funding under the following government-wide foreign assistance funding categories: Civil Society, Counternarcotics, Good Governance, Rule of Law and Human Rights, and Transnational Crime. U.S. agencies use these categories to broadly define foreign assistance programs for planning, budgeting, and reporting across agencies, countries, and regions. Over 80 percent of the funding went toward Rule of Law and Human Rights, and Counternarcotics efforts. Of the $723 million, State/INL allocated about $542 million and USAID allocated about $182 million. There were 445 State/INL and USAID Mérida Initiative projects active from fiscal year 2014 through 2018. State/INL funded 388 of the projects and USAID funded 57, which tended to be larger with higher funding amounts than State/INL projects. State/INL projects generally focused on providing training and assistance to Mexican officials from the justice sector, border security, military, and law enforcement, as well as equipment, including for forensic drug laboratories, drug detection, and border surveillance. Many USAID projects were intended to engage with Mexican civil society organizations and the public to address corruption, promote trust in government, or prevent crime and violence, such as through skill-building for youth, efforts to advance human rights, or technical support for judicial system development. State/INL and USAID implemented their projects mainly through contracts, grants, and interagency agreements, as well as through agreements with international organizations, such as the United Nations Office on Drugs and Crime and the Organization of American States.

CRS_R45843

E ach term, the Supreme Court typically hears arguments in one or more cases concerning the rights and status of Indian tribes and their members. Prominent issues addressed by the Sup reme Court in recent terms have included (1) tribes' civil jurisdiction over nonmembers, (2) the scope of tribal sovereign immunity, and (3) termination of Indian parents' rights in adoption cases. The October 2018 term likewise featured several Indian law issues: the Court heard arguments in three significant cases, each of which implicated the complex relationships among tribal, state, and federal laws. In Washington State Department of Licensing v. Cougar Den , the Court upheld a Washington Supreme Court decision permitting a tribe to import fuel without paying state fuel taxes. The right to travel on public highways guaranteed by an 1855 treaty, the Court ruled, included the right to transport goods for sale on the reservation without paying additional taxes to do so. In Herrera v. Wyoming , the Court determined that neither Wyoming's admission into the Union nor the designation of the Bighorn National Forest abrogated an earlier treaty preserving tribal hunting rights. Thus, a tribe member's conviction for exercising those hunting rights in violation of Wyoming state law could not stand. Finally, in Carpenter v. Murphy , the Court reviewed whether Congress disestablished the Muscogee (Creek) reservation more than a century ago, with potential consequences for Oklahoma's ability to prosecute major crimes in the eastern half of the state. However, the eight Justices considering this case have not yet reached a decision, and the case is scheduled to be reargued in the October 2019 Supreme Court term. This report discusses each of these three cases in turn, focusing on analyses of the Supreme Court's interpretive rubric for treaties and relevant legislation, statements about the scope of legislative authority and discussions of legislative intent, and possibilities for future congressional action. Washington State Department of Licensing v. Cougar Den On March 19, 2019, the Supreme Court upheld a 2017 Washington Supreme Court decision defending a right-to-travel provision in an 1855 treaty (1855 Yakama Treaty) between the United States and the Yakama tribe against a state attempt to impose a motor fuels tax on a Yakama member. The treaty guaranteed the Yakamas the "right, in common with citizens of the United States, to travel upon all public highways." Cougar Den, Inc. (Cougar Den)—a business owned by a Yakama member—purchased and transported motor fuel into the state and resold it to on-reservation retailers. The Washington Supreme Court ruled that the treaty insulated Cougar Den from having to pay a Washington State motor fuels tax on that gasoline. The Supreme Court agreed, though in such a way that the limits of the right-to-travel provision in the 1855 Yakama Treaty may still not be perfectly clear. Nonetheless, this case could affect the interpretation of similar provisions in other treaties, and potentially impact state taxation of other activities both on- and off-reservation. Legal Backdrop: State Taxing Authority over Tribal Activity In general, states may tax off-reservation activities of Indian tribes unless an explicit federal law exempts those activities. In 1973, the Court decided Mescalero Apache Tribe v. Jones , holding that New Mexico could impose a gross receipts tax on a tribal ski resort operated on nonreservation land leased from the federal government. According to the Court in Mescalero , "[a]bsent express federal law to the contrary, Indians going beyond reservation boundaries have generally been held subject to nondiscriminatory state law otherwise applicable to all citizens of the State." Although Cougar Den involved a state tax imposed on off-reservation activity similar to the tax the Court upheld in Mescalero , the case arose against a backdrop of states having difficulty collecting taxes on tribal retailers selling goods to non-Indians on Indian reservations, even where courts had upheld the legality of those taxes. Collecting such taxes without tribal cooperation can be challenging because tribal sovereign immunity may defeat suits against a tribe absent tribal waiver or congressional consent. For example, in Moe v. Confederated Salish and Kootenai Tribes , the Supreme Court held that a state could impose record-keeping requirements on tribal retailers to facilitate collecting state taxes from on-reservation cigarette sales to non-Indians. However, in Washington v . Confederated Tribes of Colville Reservation , the Court later held that tribal sovereign immunity barred a state's enforcement action to compel a tribe to remit such taxes. And when Oklahoma later argued in Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma that "decisions such as Moe and Colville give . . . [states] a right [to levy a tax] without a remedy [to collect the tax]," the Court responded by suggesting that states could tax wholesalers, enter into agreements with tribes for collecting the taxes, or secure congressional legislation to require tribes to remit the taxes. Factual Background: Washington's Motor Fuels Tax and the 1855 Yakama Treaty A Washington statute imposes a motor fuels tax upon licensed importers who bring large quantities of fuel into the state by way of ground transportation. As of 2018, all 24 Indian tribes in Washington, other than the Yakamas, had negotiated fuel tax agreements under which they would pay the motor fuels tax to the state. The question before the Supreme Court in Cougar Den , then, was whether the 1855 Yakama Treaty forbade a similar tax from being imposed on fuel importation activities by Yakama members, on account of that treaty's protection of tribal members' right to travel off-reservation. Article III of the 1855 Yakama Treaty contains two clauses. The first clause states that "if necessary for the public convenience, roads may be run through the said reservation; and on the other hand, the right of way, with free access from the same to the nearest public highway, is secured to them." The second clause states that the Tribe also has "the right, in common with citizens of the United States, to travel upon all public highways." Some special canons of construction apply when courts interpret Indian treaties. According to the Supreme Court, courts must "give effect to the terms [of a treaty] as the Indians themselves would have understood them," considering "the larger context that frames the [t]reaty, including 'the history of the treaty, the negotiations, and the practical construction adopted by the parties.'" Partly because many such treaties (including the 1855 Yakama Treaty) were negotiated and drafted in a language other than the Indians' native language and often involved unequal bargaining power, the Supreme Court has stated that "any doubtful expressions in [treaties] should be resolved in the Indians' favor." However, courts must still take care not to extend treaty language beyond what it was intended to cover. Case Background: The Washington Supreme Court's Decision When considering whether the State of Washington could collect a motor fuels tax against Cougar Den, the Washington Supreme Court had to determine whether the right to travel conferred by the 1855 Yakama Treaty was implicated. Ultimately, a majority of that court held that it was: the State of Washington could not enforce its motor fuels tax against Yakama tribal members because that would infringe on the Tribe's treaty-protected right to travel. Specifically, the majority held that, "in this case, it was impossible for Cougar Den to import fuel without using the highway." Under the majority's view, the motor fuels tax constituted an impermissible burden or condition on tribal members' use of the highways to transport their goods, which violated the treaty. In reaching this decision, the majority relied heavily on a decision rendered by the U.S. Court of Appeals for the Ninth Circuit in United States v. Smiskin , which held that a Washington State law prohibiting the transportation and possession of unstamped cigarettes without prior notice to the state impermissibly restricted the right to travel protected by the 1855 Yakama Treaty. The Washington Supreme Court, reviewing the motor fuels tax, interpreted Ninth Circuit precedent to mean that the 1855 Yakama Treaty provision applied to "any trade, traveling, and importation that requires the use of public roads." By contrast, two dissenting state court justices read Ninth Circuit precedent narrowly. Because the fuel tax was directed against trade in a product, not the travel itself, the dissenting justices would have upheld the tax. The U.S. Supreme Court's Decision Washington appealed the Washington Supreme Court's decision to the U.S. Supreme Court, and the High Court granted review on June 25, 2018. In their arguments before the Court, the parties disagreed over the correct interpretation of the 1855 Yakama Treaty. Specifically, the parties disputed how the Yakama would have originally understood the right-to-travel provision. Citing another Ninth Circuit case, Cougar Den argued that the 1855 Yakama Treaty "guarantees the Yakama Nation and its members the ' right to transport goods to market without restriction .'" However, the Washington State taxing authority argued for a more literal and narrow interpretation of the treaty language, emphasizing that the right-to-travel provision contains no mention of taxes. In the state's view, because the fuel tax did not restrict tribe members' ability to travel on public highways, and because the 1855 Yakama Treaty "says nothing about a tax exemption at all," the Treaty did not preempt the tax's applicability to tribe members. The Supreme Court handed down its decision on March 19, 2019. By a 5-to-4 vote, the Court affirmed the Washington Supreme Court's decision, thereby prohibiting Washington from assessing its motor fuels tax against Cougar Den. However, there was no majority opinion; though five Justices voted to affirm, Justices Sotomayor and Kagan joined an opinion by Justice Breyer, while Justice Ginsburg joined a separate opinion by Justice Gorsuch. Justice Breyer's opinion noted that the treaty was not written in the tribe's native language, which Justice Breyer declared "put the Yakamas at a significant disadvantage." Justice Breyer contended that, based on precedent going back more than 100 years, courts interpreting an Indian treaty must "see that the terms of the treaty are carried out, so far as possible, in accordance with the meaning they were understood to have by the tribal representatives" at the time. Citing the historical record, Justice Breyer explained that the Yakamas would have understood the right to travel as including "the right to travel with goods for purposes of trade." Accordingly, because "to impose a tax upon traveling with certain goods burdens that travel," the motor fuels tax directly burdened Cougar Den's ability to travel with goods for purposes of trade, and thus impermissibly violated the 1855 Yakama Treaty. Justice Breyer also concluded that the tax at issue specifically burdened the type of travel the Yakamas had negotiated to protect: travel by public highway. (Washington's motor fuels tax was not assessed on distributors who imported fuel by pipeline or boat.) Justices Gorsuch, joined by Justice Ginsburg, took a somewhat shorter route to the same conclusion, noting "unchallenged factual findings" from an earlier federal district court case that the Yakamas "understood the right-to-travel provision to provide them 'with the right to travel on all public highways without being subject to any licensing and permitting fees related to the exercise of that right while engaged in the transportation of tribal goods.'" That factual finding, confirmed by a "wealth of historical evidence," in their view required a ruling for the Yakamas. While five Justices agreed that applying the fuel tax to Cougar Den would violate the 1855 Yakama Treaty, the Court's failure to render an opinion agreed upon by a majority of the Justices leaves some question as to how federal and state courts will construe and apply Cougar Den . To the extent that Justice Gorsuch's opinion rests on somewhat narrower grounds than Justice Breyer's, that may be deemed to be the controlling opinion of the Court. Because it relied on unchallenged evidence of the tribe's understanding of the right-to-travel provision, Justice Gorsuch's opinion leaves open the possibility that other, identical terms in other treaties could be interpreted differently, if there is different evidence about the relevant tribes' understanding. Chief Justice Roberts wrote an opinion on behalf of the four dissenting Justices, objecting that "the mere fact that a state law has an effect on the Yakamas while they are exercising a treaty right does not establish that the law impermissibly burdens the right itself." The Chief Justice's dissent went on to express concern that the plurality and concurring opinions could, for example, foreclose the applicability of "law[s] against possession of drugs or illegal firearms" by tribe members on public highways, because tribe members could invoke the treaty-protected right to travel when traveling with such items. The plurality responded to this concern by emphasizing that it did not "hold that the treaty deprives the State of the power to regulate to prevent danger to health or safety occasioned by a tribe member's exercise of treaty rights." Implications and Considerations for Congress The Court's decision in Cougar Den might prompt Congress to further consider the ability of states to enforce and collect valid state taxes from Indian tribes. Cougar Den involved a considerable amount of tax revenue; in December 2013, Washington assessed $3.6 million in taxes, penalties, and licensing fees against Cougar Den. And there are similar right-to-travel provisions in treaties with other tribes, including the Nez Percé Indians of Idaho and the Flathead, Kootenay, and Upper Pend d'Oreilles Indians of Montana. These similarly worded treaties could give rise to future challenges to state taxing authority over tribe members. Moreover, Congress could choose to act in the event legislators believe that Chief Justice Roberts's fears about health and safety laws are well-founded. Because of Congress's plenary authority over Indian matters, only Congress, not a state, could act to limit or eliminate a right granted by treaty. However, if Congress chooses to do so, its intention must be "clear and plain." Cougar Den also might prompt further reflection on the differences between state and federal tax exemptions for tribes. Relying on Supreme Court precedent upholding a tax exemption based on explicit language in the General Allotment Act, the Ninth Circuit, for example, has generally held that an exemption from a federal tax must be explicit. Accordingly, the Yakama tribe is currently not exempt from federal heavy vehicle and diesel fuel taxes or from the federal excise tax on manufactured tobacco products because the right-to-travel provision in the 1855 Yakama Treaty is not sufficiently explicit to exempt the tribe from federal taxes. Legislation could be drafted either to eliminate or to enshrine that different treatment. Herrera v. Wyoming In Herrera v. Wyoming , the Supreme Court resolved a disagreement about whether either Wyoming's admission into the Union or the later establishment of the Bighorn National Forest abrogated the Crow Tribe of Indians' treaty rights to hunt on "unoccupied lands of the United States." The Court concluded that neither event categorically affected those treaty rights. This decision was especially notable because the Supreme Court formally repudiated its 1896 ruling in Ward v. Race Horse , which had held that Wyoming's admission into the Union effectively abrogated a similar hunting-rights provision in a treaty between the United States and another Indian tribe. Race Horse had already appeared to be in considerable tension with the Court's decision over a century later in Minnesota v. Mille Lacs Band of Chippewa Indians , when the Court declared that "[t]reaty rights are not impliedly terminated upon statehood." However, it was not until Herrera that the tension was resolved; the Court stated that it was "formaliz[ing] what is evident in Mille Lacs itself. While Race Horse 'was not expressly overruled' in Mille Lacs , 'it must be regarded as retaining no vitality' after that decision." This rejection of Race Horse undermined other cases relying on it, causing a domino effect that ultimately led the Supreme Court to reverse the Wyoming state court decisions that had declined to recognize the Crow Tribe's treaty hunting rights. Case Background: the Wyoming State Court Decisions The Herrera case arose after the petitioner, a Crow Tribe member, tracked several elk beyond the Crow reservation's Montana borders into the Bighorn National Forest in Wyoming. Herrera and his hunting companions eventually killed three elk, and Herrera was criminally charged by Wyoming with violating its state hunting laws. Herrera moved to dismiss the charges, arguing that he was exercising subsistence hunting rights long protected by the 1868 Treaty of Fort Laramie (1868 Treaty) between the Crow Tribe and the United States. In exchange for ceding much of the territory that would eventually become Wyoming to the United States, the Crow Tribe received a guarantee of "the right to hunt on the unoccupied lands of the United States so long as game may be found thereon . . . ." According to Herrera, this treaty provision provided him with permission to hunt off-reservation in the Bighorn National Forest and prevented Wyoming from going forward with his prosecution under state law. Wyoming disagreed, contending that the hunting rights conferred to Crow Tribe members under the 1868 Treaty were abrogated following Wyoming's 1890 admittance into the Union or, alternatively, the 1897 establishment of the Bighorn National Forest. Rejecting Herrera's claim of treaty protection, the trial court determined it was bound by a 1995 United States Court of Appeals for the Tenth Circuit (Tenth Circuit) decision in Crow Tribe of Indians v. Repsis . That decision held that the 1868 Treaty's hunting-rights provisions had been abrogated for the same reasons as the similarly worded treaty provisions in Race Horse . Alternatively, the Tenth Circuit concluded that the establishment of the Bighorn National Forest in 1897 rendered those lands "occupied" and therefore no longer subject to the access rights given to Crow tribal members by the 1868 Treaty. According to the Wyoming court, principles of collateral estoppel prevented Herrera from "attempting to relitigate the validity of the off-reservation treaty hunting right that was previously held to be invalid" by the Tenth Circuit. After Herrera was convicted and denied appeal in a higher Wyoming state court, he sought review in the U.S. Supreme Court, which granted his request. Legal Backdrop: Court Decisions Interpreting Statehood's Effects on Tribal Treaty Rights A key issue in Herrera concerned the interplay of the Court's prior decisions considering statehood's effect on the continuing viability of treaties between the United States and Indian tribes located within a newly acceded state's territorial boundaries. In Race Horse , the Court had taken the view that Congress's legislative action in admitting a state to the Union abrogated earlier treaties conferring tribal rights to nonreservation lands within the new state's territory. This decision was partly premised on the equal footing doctrine—the idea that newly admitted states must enjoy sovereignty equal to that of existing states. In Race Horse itself, the Court held that a hunting right in a Shoshone-Bannock treaty—a provision with language identical to the 1868 Treaty—violated the equal footing doctrine and had been abrogated by legislation admitting Wyoming to the Union. The Supreme Court reasoned that Wyoming's admission to the Union must have impliedly abrogated the treaty right, because "all the states" have the power "to regulate the killing of game within their borders," and the language of the Shoshone-Bannock treaty would impermissibly limit Wyoming's power to do so relative to other states. In other words, the "two facts" of the treaty's hunting rights and of Wyoming's statehood were "irreconcilable, in the sense that the two, under no reasonable hypothesis, [could] be construed as co-existing." The fact that Congress made no express statement abrogating the Shoshone-Bannock treaty rights did not change that reasoning. As a potentially alternative basis for its decision, the Court explained that because the treaty had been enacted while the land had territory status, it necessarily made only an "essentially perishable . . . temporary and precarious" promise, "intended to be of a limited duration." The equal footing doctrine's primacy in federal Indian law was short-lived, however. In United States v. Winans , less than a decade after Race Horse , the Court upheld tribal fishing rights granted to the Yakama tribe under the 1855 Yakama Treaty. The Court specifically concluded that those treaty rights were not displaced by the State of Washington's admission into the Union. According to the Winans Court, The extinguishment of the Indian title, opening the land for settlement, and preparing the way for future states, were appropriate to the objects for which the United States held the territory. And surely it was within the competency of the [nation] to secure to the Indians such a remnant of the great rights they possessed as "taking fish at all usual and accustomed places." Nor does it restrain the state unreasonably, if at all, in the regulation of the right. In short, just as Congress had the power to extinguish tribal title to the land, it had the power to reserve fishing rights to the tribes on nonreservation land—and respecting that preservation of rights was a reasonable restraint on, rather a dramatic curtailment of, state sovereignty. But Race Horse 's holding was not explicitly overruled by Winans , and roughly a century later, Wyoming charged another Crow Tribe member with illegally hunting elk in the Bighorn National Forest (in a case called Crow Tribe of Indians v. Repsis , which predated Herrera's case, but involved similar factual circumstances). The Crow Tribe sought a declaratory judgment in federal court, hoping to resecure the 1868 Treaty hunting and fishing rights. The Tenth Circuit ruled against the tribe, concluding that because the relevant provision of the 1868 Treaty was virtually identical to the one abrogated by the Supreme Court in Race Horse , the Race Horse decision mandated that the treaty rights be considered abrogated by statehood. In so doing, the Tenth Circuit also emphasized Race Horse 's conclusion that the 1868 Treaty granted only "temporary and precarious" rights, such that Congress could not have intended them to be binding on a later-created state. A few years after Repsis , the Supreme Court decided Minnesota v. Mille Lacs Band of Chippewa Indians , which involved fishing rights under an 1837 tribal treaty in Minnesota. There, the Court declined to apply Race Horse and rejected its reasoning, at least in substantial part. The earlier decision's equal-footing holding rested on a "false premise," the Court said, and its language about "temporary and precarious" treaty rights was "too broad to be useful." Noting that courts "interpret Indian treaties to give effect to the terms as the Indians themselves would have understood them," the High Court explained that "Congress may abrogate Indian treaty rights, but it must clearly express its intent to do so." Since there was no "clear evidence" of Congress's intent to abrogate the tribal fishing rights at issue, those rights simply were not abrogated. In the view of the Court, "[t]reaty rights are not impliedly terminated upon statehood." Although highly critical of Race Horse , the Court majority in Mille Lacs did not expressly overrule the earlier decision (though Chief Justice Rehnquist, writing in dissent, accused the majority of overruling Race Horse " sub silentio ," via "a feat of jurisprudential legerdemain"). The Herrera Decision: the Impact of Statehood Thus, when Herrera came before the Supreme Court, the question of whether Race Horse would affect the outcome was a point of disagreement between the parties. Herrera argued that " Mille Lacs forecloses any suggestion that Wyoming's admission terminated the Tribe's treaty hunting rights." Wyoming disagreed, arguing that at least one aspect of Race Horse remained good law—namely, its recognition that rights conferred to tribal members by treaty may be only of a "temporary and precarious nature," so that the "the proper inquiry is whether Congress intended . . . [those] rights to be perpetual or to expire upon the happening of a clearly contemplated event, such as statehood." According to Wyoming, Mille Lacs did not disturb—and indeed, reaffirmed—this aspect of Race Horse , which allowed for the conclusion that statehood terminates such temporary rights. Ultimately, the Supreme Court rejected Wyoming's arguments by a 5-4 vote. Writing for the Court majority, Justice Sotomayor—joined by Justices Ginsburg, Breyer, Kagan, and Gorsuch—acknowledged that Race Horse "relied on two lines of reasoning"—namely the equal footing doctrine and the "temporary and precarious" nature of certain treaty rights. The Court determined that Mille Lacs had "undercut both pillars of Race Horse 's reasoning," and "methodically repudiated that decision's logic." "[T]he crucial inquiry for treaty termination analysis" established by Mille Lacs "is whether Congress has expressly abrogated an Indian treaty right or whether a termination point identified in the treaty itself has been satisfied." Unless the legislation granting statehood "demonstrates Congress's clear intent to abrogate a treaty" or statehood is mentioned in the treaty itself as a termination point, "[s]tatehood is irrelevant" to treaty termination analysis. Applying the Mille Lacs test to Herrera's case thus involved two questions: (1) Did the Wyoming Statehood Act "show that Congress intended to end the 1868 Treaty hunting right"? and (2) Was there any evidence "in the treaty itself that Congress intended the hunting right to expire at statehood"? The Supreme Court concluded that the answer to both questions was "No"—there was "simply . . . no evidence" in either the Wyoming Statehood Act or in the treaty itself that Congress intended the Crow Tribe's hunting rights to end at statehood. A Procedural Matter: Issue Preclusion Herrera faced an additional procedural hurdle at the Supreme Court: the parties disagreed over whether he should even be legally allowed to raise his arguments in the first place. The Wyoming state courts had ruled that the Tenth Circuit's 1995 decision in Repsis barred Herrera from even being able to litigate the question of whether the Crow Tribe retained any off-reservation hunting rights under the 1868 Treaty. In short, they said that question had already been answered. Thus, much of the briefing at the Supreme Court focused on issue preclusion, a doctrine that prevents parties from resurrecting an issue already directly decided in a previous case. Both Herrera and the United States as amicus curiae argued that preclusion should not apply when there had been an intervening change in the law, like the Supreme Court's Mille Lacs decision. Wyoming, however, maintained that Mille Lacs had not overruled Race Horse in its entirety, and that at least one line of its reasoning survived: in Wyoming's view, issue preclusion should at least attach to the Tenth Circuit's finding in Repsis that the 1868 Treaty rights were only temporary . In other words, Wyoming argued that Herrera should not be permitted to relitigate the issue of whether Congress intended the 1868 Treaty's hunting rights to be "temporary" rights that expired after statehood because the Tenth Circuit had already definitively answered that question. For the same reasons that the Supreme Court disagreed that statehood had necessarily abrogated Herrera's treaty rights, it likewise rejected Wyoming's claim of issue preclusion. Mille Lacs constituted a "change in law" that justified "an exception to preclusion in this case." "At a minimum," the Court said, "a repudiated decision does not retain preclusive force." The Herrera Decision: the Meaning of "Unoccupied Land"117 Having decided that the 1868 Treaty's hunting rights provision remained in effect even after Wyoming statehood, the Court then needed to decide whether the Bighorn National Forest should be considered "unoccupied" land under the terms of the treaty. The Tenth Circuit in Repsis had concluded that the establishment of the national forest in 1897 rendered the land "occupied" by the federal government because it was "no longer available for settlement," and the resources from the land could not be used "without federal permission." Wyoming similarly argued that "[c]reation of the Bighorn National Forest was an act of occupation, placing that land outside of the ambit of the Crow Treaty right"; in the state's view, because the national forest "is federal property, and the United States decides who may enter and what they may do," the national forest should constitute occupied land on which the 1868 Treaty would grant no special privileges. On the other hand, Herrera contended that the text and historical record of the 1868 Treaty demonstrate an understanding by the parties that "the term 'occupied' entailed actual, physical settlement of the land by non-Indian settlers." The United States, writing as amicus curiae, agreed. Herrera and the United States noted that, in other cases, the declaration of a national forest had led courts to declare the designated land "open and unclaimed." The Supreme Court reiterated that provisions of treaties with tribes must be interpreted as they would naturally have been understood by the tribes at the time those treaties were executed. In this case, the Supreme Court concluded "it is clear that the Crow Tribe would have understood the word 'unoccupied' to denote an area free of residence or settlement by non-Indians." That conclusion was based on analysis of the treaty's text, which used variations of the words "occupy" and "settle" at various points, and supported by both contemporaneous dictionary definitions and historical evidence from the time of the treaty negotiation and signing. Accordingly, "President Cleveland's proclamation creating Bighorn National Forest did not 'occupy' that area within the treaty's meaning. To the contrary, the President 'reserved' the lands 'from entry or settlement.'" The Herrera Decision: Dissent and Limitations The majority opinion in Herrera noted that its scope was limited in two distinct ways. First, the majority held only "that Bighorn National Forest is not categorically occupied, not that all areas within the forest are unoccupied." This leaves open the possibility that some parts of the Bighorn National Forest contain enough indicia of settlement to be considered "occupied," even though the rest of the forest is not—which would preclude exercise of Crow tribal hunting rights in those areas. Second, the Supreme Court declined to consider arguments that Wyoming could regulate the exercise of hunting rights to promote conservation purposes. Because those arguments were not considered by the state appellate court, the Supreme Court did "not pass on the viability of those arguments" in its opinion. That may leave open another avenue by which Wyoming could limit the exercise of tribal hunting rights within its borders. A dissent written by Justice Alito was joined by the remaining three members of the Court. The four dissenting Justices would have determined that the Tenth Circuit's decision in Repsis ("holding that the hunting right conferred by [the 1868 Treaty] is no longer in force") was still binding, such that "no member of the Tribe will be able to assert the hunting right that the Court addresses." In other words, the dissent would have started with the parties' issue preclusion arguments, and would have determined that Herrera had no right to relitigate an issue that had already been settled by a court. More specifically, although the dissent expressed some doubt that Mille Lacs represented a sufficient change in the law to foreclose Repsis 's conclusion that Wyoming statehood abrogated the 1868 Treaty rights, it would not have reached that question. Instead, the dissent would have given preclusive effect to Repsis 's alternate legal conclusion, which it says existed independently of Race Horse —namely, that the Repsis court decided the Bighorn National Forest was not "unoccupied" within the treaty's meaning. Implications and Considerations for Congress Congress's plenary authority to govern interactions with Indian tribes remains clear. Congress may at any time expressly disavow any provision of the 1868 Treaty, or may plainly reaffirm its commitment to any Indian treaty that remains in effect. To the latter end, Congress could, if it wished, clarify that the Bighorn National Forest (or other national forests) should be treated as unoccupied lands for the purposes of construing Indian treaty rights. By contrast, Congress could also choose to broadly abrogate hunting and fishing rights in national forests or other areas, but Herrera reaffirms that if Congress does so, it must clearly state that intention. Carpenter v. Murphy In Carpenter v. Murphy , the Supreme Court is reviewing a decision by the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) concerning whether Oklahoma could legally charge and convict Patrick Murphy, a member of the Muscogee (Creek) Nation who was convicted of killing a fellow tribe member. The validity of Murphy's murder conviction may turn on whether his crime was committed within the boundaries of the Muscogee (Creek) reservation—a reservation that Oklahoma says ceased to exist in the early 1900s. Although the Oklahoma state courts rejected Murphy's efforts to overturn his conviction, the Tenth Circuit concluded that the crime did occur on reservation land, and that Oklahoma thus lacked authority to prosecute Murphy. Although the Supreme Court heard oral arguments in Carpenter v. Murphy at the end of 2018, it ordered the case restored to the calendar and set for reargument in the October 2019 term. Whether the Court will ultimately agree with the Tenth Circuit's decision is uncertain, but if it does, the decision could have significant consequences beyond Murphy's case. The land where the crime occurred would then be "Indian country" under federal law, which Oklahoma says would significantly limit its criminal jurisdiction over offenses committed by Indians on such land. Such a decision could prompt additional litigation concerning the status of other tribal lands within Oklahoma. The Major Crimes Act and "Indian Country" The parties have asked the Supreme Court to decide whether the land that was historically designated as belonging to the Muscogee (Creek) Nation constitutes "Indian country," and if so, whether Oklahoma has any criminal jurisdiction over crimes like Murphy's. The federal government (and Congress in particular) has long been recognized as having plenary authority over Indian affairs, so states generally cannot exercise criminal jurisdiction over Indians in "Indian country" without federal permission. A federal statute defines "Indian country" to mean (1) all land within an Indian reservation, (2) all dependent Indian communities, and (3) all Indian allotments that still have Indian titles. An area qualifies as Indian country if it fits within any of these three categories, meaning a formal designation of Indian lands as a "reservation" is not required . Federal law establishes parameters for when states may prosecute certain crimes committed within Indian country. Most relevant to this case, the Major Crimes Act reserves federal jurisdiction over certain serious crimes, like murder and kidnapping, when committed by an Indian within Indian country. Federal jurisdiction under the Major Crimes Act generally forecloses overlapping state (though not tribal) jurisdiction, though legislative exceptions permit some states to exercise jurisdiction over such crimes. The Tenth Circuit Decision The Supreme Court has explained that Congress alone has the power to change or erase reservation boundaries. Once land is designated as a reservation, it generally stays that way until Congress eliminates ("disestablishes") or reduces ("diminishes") it. Appealing his state murder conviction to the Tenth Circuit, Murphy contended that the Muscogee (Creek) reservation had never been disestablished and therefore constituted "Indian country," precluding state jurisdiction over his offense. The Tenth Circuit agreed. In its decision, the Tenth Circuit briefly described the history of the Muscogee (Creek) reservation. In the 1820s, the federal government forcibly relocated the tribe's members (and members of several other tribes) to what is now present-day Oklahoma. As part of that relocation, the government signed a series of treaties with the Muscogee (Creek) Nation, ultimately giving the tribe a vast area of land roughly equivalent to present-day Oklahoma. That tract of land was later reduced. The final reduction occurred after the Civil War, when the Treaty of 1866 required the Muscogee (Creek) Nation to transfer the western half of its new lands back to the United States. Though the Muscogee (Creek) Nation later experienced many changes in its relationship with the federal government—most notably related to tribal governance and a push for individual ownership of the land—the boundaries of the Muscogee (Creek) land remained generally unchanged until at least the early 1900s. At that point, the "unique history" of Oklahoma began to transition toward statehood, effectively merging eastern Indian lands and western non-Indian lands into a single geographic entity. To determine whether Congress intended to disestablish the Muscogee (Creek) reservation land, the Tenth Circuit applied a three-step analysis employed in the Supreme Court's 1984 decision, Solem v. Bartlett . Under this framework, courts examine (1) the language of the governing federal statute; (2) the historical circumstances of the statute's enactment; and (3) subsequent events such as Congress's later treatment of an affected area. Importantly, the Solem framework instructs courts to resolve any uncertainty in favor of the tribes: if the evidence is not clear, courts "are bound by our traditional solicitude for the Indian tribes to rule that diminishment did not take place and that the old reservation boundaries survived . . . ." Using this framework, the Tenth Circuit agreed with Murphy that his criminal conduct occurred in Indian country, and Oklahoma therefore lacked jurisdiction over it. Although Oklahoma referenced eight separate federal acts that it viewed as collectively disestablishing the Muscogee (Creek) reservation, the Tenth Circuit ruled that none of those statutes clearly referred to disestablishment, and in some instances reflected Congress's continued recognition of the reservation's borders. Oklahoma's evidence that Congress intended to change its governance over the Muscogee (Creek) reservation failed to convince the Tenth Circuit that Congress also intended to erase the reservation boundaries. Similarly, the Tenth Circuit concluded that events subsequent to legislation cited by Oklahoma insufficiently supported the argument that Congress intended the Muscogee (Creek) reservation to be disestablished. In sum, the Tenth Circuit did not find that Congress clearly intended to disestablish the Muscogee (Creek) reservation, so it concluded that Oklahoma lacked jurisdiction to convict Murphy for a murder occurring on those lands. Appeal to the Supreme Court Oklahoma petitioned for certiorari review of the Tenth Circuit's decision, which the Supreme Court granted on May 21, 2018. In its brief to the Court, Oklahoma claimed that no one has treated the relevant land like a reservation since Oklahoma became a state in 1906. It also argued that because Congress broke certain promises in the treaties that had established the reservation, Congress must have intended to disestablish it. According to Oklahoma, it "is inconceivable that Congress created a new State by combining two territories while simultaneously dividing the jurisdiction of that new State straight down the middle by leaving the former Indian Territory as Indian country." In other words, in Oklahoma's characterization of the matter, Congress could not have intended the state to lack jurisdiction over major crimes in half its land mass. Finally, Oklahoma contended that the Solem framework should be inapplicable in the unique context of Oklahoma statehood. The federal government made similar arguments in a brief it filed in support of Oklahoma. However, the federal government additionally claimed that Congress had elsewhere granted Oklahoma broad criminal jurisdiction over Indian country, which it said should enable prosecution of cases like Murphy's—regardless of whether his crime was committed in Indian country. More specifically, the United States argued that Congress had eliminated tribal jurisdiction and evinced an intent to have all crimes prosecuted by the same entity (whether committed by or against a tribal member or not) throughout the territory that became Oklahoma; in the United States' view, that intent should not be "implicitly" repealed by later statutes like the Major Crimes Act. Supplemental Briefing Ordered by the Supreme Court Following oral argument, the Supreme Court ordered both Oklahoma and Murphy to address whether or not Oklahoma would have criminal jurisdiction over cases like Murphy's if the crimes were found to have been committed in Indian country. It also asked the parties to address whether a reservation could ever not qualify as Indian country. These questions might be relevant if, for example, the Court sought additional information to clarify whether it would need to find that the Muscogee (Creek) reservation had been disestablished in order to conclude that Oklahoma could exercise jurisdiction over Murphy. In Murphy's supplemental brief, he began by stressing that Oklahoma had disavowed the argument that it could exercise criminal jurisdiction over him if the Muscogee (Creek) reservation endured. Murphy then argued that Congress has never given Oklahoma jurisdiction to prosecute crimes committed by Indians, and—anticipating the assertion that several statutes could be read together to implicitly accomplish that result—declared that "when Congress transfers jurisdiction to States, its statutes are bell-clear." None of the statutes mentioned by the United States in its briefing, Murphy argued, do anything like clearly grant criminal jurisdiction over tribes and tribal members to the State of Oklahoma. Oklahoma adopted the United States' view that it had jurisdiction to prosecute crimes regardless of the Muscogee (Creek) land's status, based on a series of laws passed by Congress between 1897 and 1907. However, the state asked the Court not to "leave open whether [Muscogee (Creek) and other historical territories] constitute Indian reservations today," arguing that such a decision "risks undermining the convictions of many federal prisoners" and "may also undermine federal and tribal authority currently exercised on restricted allotments and trust lands." Both Murphy and Oklahoma answered the Court's second question in the negative: they agreed, under current law a federally established reservation always constitutes "Indian country" under the governing statute. Anticipating the U.S. Supreme Court's Decision The Supreme Court heard oral arguments in this case on November 27, 2018. Justice Gorsuch was not present at oral arguments and is not slated to participate in deciding the case—presumably because he participated in earlier discussions about this case while he was still a judge on the Tenth Circuit. A decision was expected by the end of the Supreme Court's 2018 term, but on June 27, 2019, the Court ordered this case restored to the calendar for reargument in the next term. If the Supreme Court reverses the Tenth Circuit and finds that the Muscogee (Creek) reservation was disestablished, Murphy's conviction and death sentence would be reinstated, and Oklahoma would presumably continue to prosecute cases like Murphy's. But if the Supreme Court agrees with Murphy and the Tenth Circuit that the Muscogee (Creek) reservation has not been disestablished, the decision's ramifications for federal, state, and tribal jurisdiction in the eastern half of Oklahoma might be significant, and could extend well beyond the Muscogee (Creek) reservation. In addition to the Muscogee (Creek) Nation, several other tribes were forcibly relocated to Oklahoma under similar circumstances and under the same or similar treaties. The parties in Murphy filed a joint appendix containing several historical maps depicting reservation boundaries in Oklahoma in the early 1900s. Oklahoma has argued that, if those statutes did not disestablish the Muscogee (Creek) reservation, similar arguments could be maintained with respect to other lands comprising most of eastern Oklahoma. If the Supreme Court agrees with the Tenth Circuit that Congress never disestablished reservations like the one in this case, Oklahoma argues that its ability to prosecute many crimes in the eastern part of the state would be significantly narrowed. According to Oklahoma and some amici, the Tenth Circuit's decision "would create the largest Indian reservation in America today . . . . That revolutionary result would shock the 1.8 million residents of eastern Oklahoma who have universally understood that they reside on land regulated by state government, not by tribes." If a significant part of Oklahoma is Indian country, then the burden would shift to the federal and tribal governments to prosecute many offenses involving Indian offenders or victims —at least, absent other federal statutory authority allowing the state to prosecute. However, other amici have joined Murphy in arguing that the Tenth Circuit's decision should be upheld. Some, including the Muscogee (Creek) Nation, contend that recognition of the Muscogee (Creek) reservation's continued existence would leave intact most state and local functions on those lands. For example, the Muscogee (Creek) Nation argues that even on reservation land, state and local governments retain most civil jurisdiction, including taxing and zoning authority. The Supreme Court might also seek to avoid the question of whether the Muscogee (Creek) reservation still exists. For example, the Supreme Court could decide either to reassess the approach it endorsed in Solem , or—as suggested by Tenth Circuit Chief Judge Tim Tymkovich—conclude that the Solem framework is ill-suited to the unique circumstances surrounding Oklahoma's statehood. Alternatively, the Court could adopt the federal government's argument that Oklahoma had jurisdiction to prosecute Murphy because earlier statutes granted such jurisdiction, thereby rendering the Major Crimes Act inapplicable. Implications and Considerations for Congress Regardless of the Supreme Court's decision, the choice to disestablish a reservation still lies solely with Congress. If the Supreme Court agrees that the Muscogee (Creek) reservation still exists, a statute clearly disestablishing it would limit this case's applicability in the future. Congress could also pass a law expressly giving Oklahoma jurisdiction to prosecute major crimes in Indian country if the Supreme Court holds that no such law currently exists. If the Supreme Court disagrees with the Tenth Circuit and holds that the Muscogee (Creek) reservation no longer exists, Congress could—depending on the exact grounds of the ruling—countermand that decision by reestablishing or clarifying the continued existence of the Muscogee (Creek) reservation.

Each term, the Supreme Court typically hears arguments in one or more cases concerning the rights and status of Indian tribes and their members. Prominent issues addressed by the Supreme Court in recent terms have included (1) tribes' civil jurisdiction over nonmembers, (2) the scope of tribal sovereign immunity, and (3) termination of Indian parents' rights in adoption cases. The October 2018 term likewise featured several Indian law issues: the Court heard arguments in three significant cases, each of which implicated the complex relationships among tribal, state, and federal laws. In Washington State Department of Licensing v. Cougar Den , the Court upheld a Washington Supreme Court decision permitting a tribe to import fuel without paying state fuel taxes. The right to travel on public highways guaranteed by an 1855 treaty, the Court ruled, included the right to transport goods for sale on the reservation without paying additional taxes to do so. In Herrera v. Wyoming , the Court determined that neither Wyoming's admission into the Union nor the designation of the Bighorn National Forest abrogated an earlier treaty preserving tribal hunting rights. Thus, a tribe member's conviction for exercising those hunting rights in violation of Wyoming state law could not stand. Finally, in Carpenter v. Murphy , the Court reviewed whether Congress disestablished the Muscogee (Creek) reservation more than a century ago, with potential consequences for Oklahoma's ability to prosecute major crimes in the eastern half of the state. However, the eight Justices considering this case have not yet reached a decision, and the case is scheduled to be reargued in the October 2019 Supreme Court term.

CRS_R45782

Introduction The substantial burden of opioid abuse related to the current opioid epidemic in the United States has resulted in a disparity between the need for substance abuse treatment and the current capacity of the health care delivery system to meet that need. In 2017, over 47,600 people died of opioid-related drug overdoses in the United States. In that same year, an estimated 11.4 million people aged 12 and older misused opioids, including 11.1 million misusers of prescription pain relievers and 886,000 heroin users. The majority of individuals in need of treatment do not receive it. In 2016, one-fifth (21.1%) of those with any opioid use disorder (OUD) received specialty substance abuse treatment, including 37.5% of those with heroin use disorder and 17.5% of those with prescription pain reliever use disorders. Opioid Agonist Medication-Assisted Treatment Medication-assisted treatment (MAT) is the combined use of medication and other services to treat addiction. MAT is widely accepted as the most effective treatment for opioid use disorder. Three medications are currently used in MAT for opioid addiction: methadone, buprenorphine, and naltrexone (naloxone, a medication used to reverse opioid overdose, is not used to treat opioid use disorders). Methadone and buprenorphine are both opioids; their use to treat opioid use disorders is often called opioid agonist treatment (OAT), opioid agonist MAT , opioid substitution therapy , or opioid replacement therapy . Methadone or buprenorphine may be used both in the short term to mitigate the immediate withdrawal symptoms associated with discontinuing use of the opioid of abuse and over extended periods to maintain abstinence and prevent relapse. Descriptions of medication-assisted treatments for opioid use disorder and commonly used acronyms are included in the textbox below. As controlled substances, methadone and buprenorphine are regulated under the Controlled Substances Act (CSA; 21 U.S.C. §§801 et seq.). Under the CSA, methadone may be used to treat opioid addiction within an inpatient setting, such as a hospital, or in a federally certified opioid treatment program (OTP). Federally certified OTPs—often referred to as methadone clinics—offer opioid medications, counseling, and other services for individuals addicted to heroin or other opioids. With few exceptions, the use of methadone to treat opioid addiction is limited to OTPs. Treatment within an OTP may be in an inpatient or outpatient capacity, though typically it occurs on an outpatient basis. There are no federal limits on the number of patients that can be treated at an OTP. However, in 2016 HHS determined—through SAMHSA survey data—that an OTP could manage, on average, 262 to 334 patients at any given time. For more information on federal regulations regarding opioid treatments, see CRS In Focus IF10219, Opioid Treatment Programs and Related Federal Regulations , by Johnathan H. Duff. Buprenorphine may be used to treat opioid use disorder in two settings: (1) within an OTP and (2) outside an OTP pursuant to a waiver. A physician or other practitioner (e.g., physician assistant or nurse practitioner) may obtain a waiver to administer, dispense, or prescribe buprenorphine outside an OTP. This is commonly known as a DATA waiver, drawing its name from the law that established the waiver authority: the Drug Addiction Treatment Act of 2000 (DATA 2000). To qualify for a waiver, a practitioner must notify the Health and Human Services (HHS) Secretary of the intent to use buprenorphine to treat opioid use disorders and must certify that he or she is a qualifying practitioner; can refer patients for appropriate counseling and other services; and will comply with statutory limits on the number of patients that may be treated at one time. The patient limit is 30 individuals during the first year and may increase to 100 after one year or immediately if the practitioner holds additional credentialing or operates in a qualified practice setting. The patient limit may increase to 275 after one year under certain conditions specified in regulation. Practitioners are subject to state laws and regulations regarding prescribing privileges and therefore may not be eligible in all states. Similar to methadone treatment, MAT with buprenorphine typically takes place in an outpatient setting. For a more detailed account of the federal regulations related to buprenorphine, see CRS Report R45279, Buprenorphine and the Opioid Crisis: A Primer for Congress , by Johnathan H. Duff. Policy Considerations The federal government has taken steps to increase the availability of opioid agonist MAT in response to the escalation of opioid overdoses and deaths in recent years. Both Congress and the Administration have implemented policies intended to increase access to methadone and buprenorphine, such as changes to the DATA waivers. The Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198 ), for instance, provided qualifying nurse practitioners and physician assistants temporary eligibility to obtain DATA waivers. The SUPPORT for Patients and Communities Act ( P.L. 115-271 ), enacted in 2018, made the authority for qualifying nurse practitioners and physician assistants to obtain DATA waivers permanent and expanded the definition of "qualifying other practitioners" to include other midlevel providers such as clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives. The law also authorized programs to establish additional comprehensive opioid recovery centers that offer a "full continuum of treatment services" including all FDA-approved medications used in MAT as well as "regional centers of excellence in substance use disorder education" that would aim to improve health professional training in substance abuse treatment. Policy efforts to address the opioid epidemic have corresponded with increased MAT availability. The percentage of substance abuse treatment facilities providing buprenorphine treatment increased from 14% in 2007 to 29% of all facilities in 2017. Additionally, the number of DATA-waived physicians with a 30-patient limit increased nine-fold from 2003 to 2012—from 1,800 physicians to 16,095. Physicians with a 100-patient limit tripled in the latter half of that span—from 1,937 in 2007 to 6,103 in 2012. Despite this increase, access to substance abuse treatment has not kept pace with the mounting rates of opioid addiction in the United States. Additionally, while the capability to treat patients with buprenorphine has expanded through an increase in DATA waivers, practitioners with these waivers are not treating to capacity. A 2018 study by SAMHSA leadership found that the number of patients being treated by DATA-waived providers included in their study was substantially lower than the authorized waiver patient limit. The percentage of clinicians prescribing buprenorphine at or near the patient limit in the month prior to the study was 13.1%. Geographical Analysis Geography is essential to accurately evaluating opioid agonist MAT capacity. Treatment location may be especially relevant to understanding any discrepancy between need and capacity: where services are located may be more important than how many patients a practitioner is allowed to treat. According to the 2018 study on DATA-waived clinicians, the top reason practitioners cited for not prescribing buprenorphine was lack of patient demand. This suggests a discrepancy between OAT practitioners and patients in need. DATA-waived practitioners may not be in the areas with the most need for treatment, for instance. Other barriers may also exist that prevent patients from accessing services. Factors affecting the treatment gap may include health insurance coverage, reimbursement for treatment services, transportation, stigma, awareness of treatment options and availability, and motivation for recovery, among others. The current report identifies the geographic location of opioid agonist treatment providers in the United States. The analysis uses SAMHSA data to identify the number and location of (1) federally certified opioid treatment programs and (2) practitioners with DATA waivers. Data are displayed nationally as well as by county. The location of opioid agonist MAT providers does not necessarily equate to availability of treatment. Other aforementioned factors, such as treatment costs, demand for services, wait times, and awareness of options also affect treatment availability. The current report does not attempt to evaluate the availability, accessibility, or total capacity for treatment of any area. It also does not assess need for treatment services—an essential factor in classifying discrepancies between demand for treatment and capacity of services. Methodology The Substance Abuse and Mental Health Services Administration, a branch of HHS which oversees the certification of opioid treatment programs and the buprenorphine waiver program, provides the number and location of OTPs and daily updates on the number and location of DATA-waived practitioners. Using these data, CRS plotted 99% of OTP locations (1,652 OTPs) and 99% of publicly-available DATA-waived practitioner locations (40,016 practitioners) using the geospatial software ArcGIS. As of June 1, 2019, the number of federally certified OTPs in the United States was 1,674. The total number of DATA-waived providers with a 30-patient limit exceeded 50,000 and those with a 100-patient limit exceeded 12,000. The number of practitioners with a 275-patient limit totaled over 4,800. This provides the capacity for at least 4 million patients to be treated with buprenorphine through DATA-waived providers. CRS generated a series of maps to depict the distribution of DATA-waived providers and neighboring OTPs in 2018. There are two maps at the national level in Figure 1 and Figure 2 , and two for the Northeast and parts of the Midwest in Figure 3 . The latter maps shade in each county based on the number of DATA-waived providers in that county and demarcate each OTP with a purple dot. The shading of each county was determined using Jenks natural breaks optimization, a statistical method used to create "fair" categories. As a result, each level of shading does not follow a consistent range. The smallest shading category (1-32 DATA-waived practitioners in a county) is much smaller in range than the largest (446-871 DATA-waived practitioners in a county) on account of this method. The Northeast region of the United States is displayed in a separate map for greater visibility of the high number of OTPs within a relatively small geographic area. (Other areas experiencing highly clustered OTPs, such as California and Florida, are more easily discerned on the national map and are therefore not displayed in additional maps.) Parts of the Midwest are displayed in a regional map for greater visibility of areas disproportionately affected by the opioid crisis. These maps present location of OAT providers only. Geography is one indication of adequacy of treatment capacity but other factors—such as population density and the size of the affected populations in the area—are also relevant. This analysis only examines the geographic location of OAT providers. Results Results depicted in Figure 1 , Figure 2 , and Figure 3 show that opioid agonist medication-assisted treatment services are not evenly distributed across the country. The maps in Figure 2 and Figure 3 depict the location of federally certified OTPs and the number of DATA-waived practitioners in each county. Results from this analysis indicated that: 1,217 counties (39% of counties nationally)—populated by an estimated 17.5 million people (of 321 million nationally, or 5.5% of the population)—had no DATA-waived practitioners. Nearly 2,500 counties (80% nationally), populated by an estimated 77.5 million people (24% of the population), had no OTPs and 1,202 counties (38%), populated by 16.8 million people (5.2%), had neither an OTP nor a DATA-waived practitioner. Of the over 1,200 counties with no OAT providers, nearly half (45%) are classified as rural according to the U.S. Census. These counties are primarily located in the Midwest and South; Texas (13% of counties with no OTPs or DATA-waived practitioners), Georgia (6%), Kansas (6%), Nebraska (5%), Iowa (5%), and Missouri (5%) have the highest percentages of counties with no OTPs or DATA-waived providers. Twenty-five counties with no OTPs or DATA-waived practitioners had more than 50,000 residents. It is important to consider that county size and population are not necessarily indicators of substance abuse treatment need. Counties are also not equivalent in geographic area, shape, and popula tion size and therefore comparisons on treatment availability strictly across the county level may not be appropriate. Additionally, the absence of OAT providers does not necessarily equate to lack of access (adjacent counties may offer treatment for instance and patients may travel for inpatient treatment). Similarly, the presence of providers does not necessarily equate to treatment availability, particularly within counties that encompass large geographic areas. Policy Implications Federal lawmakers have sought to increase the capacity for opioid use disorder treatment with MAT to address the ongoing opioid epidemic. Thus far in the 116 th Congress, policymakers have introduced nearly a dozen bills explicitly pertaining to opioid use disorder treatment expansion. For example, one bill would remove some requirements for health providers to receive DATA waivers to administer buprenorphine, with the intention that more practitioners would then pursue these waivers. Identifying the location of OAT providers may be essential to increasing accessibility to treatment. Simply increasing capacity for treatment may not effectively increase availability (or decrease opioid-related overdoses) if treatment providers are not located in areas of need. While the current analysis does not evaluate need—by locating opioid-related overdose hospital admissions and deaths for instance—it does provide an initial step in assessing how treatment providers are dispersed geographically. Other factors, such as substance use treatment financing, may also affect OAT availability. Practitioners are also subject to state laws and regulations regarding prescribing privileges which affect the eligibility of providers for DATA waivers and, in turn, the availability of treatment. Congress may consider incorporating geographic factors in strategies designed to increase capacity and availability of treatment. For instance, policymakers may acknowledge the dispersion of treatment providers within small geographic units and the proximity of OTPs to DATA-waived practitioners when drafting legislation. Rural areas may not have the same volume of need for substance use disorder treatment as urban areas, yet they may possess additional barriers to care that make accessibility to treatment challenging. For example, patients traveling long distances to receive daily methadone at an OTP may face obstacles related to transportation or infrastructure that make continuity of treatment difficult. Additionally, DATA-waived providers alone may not have the resources to provide complementary services such as counseling and behavioral therapies, or housing and vocational services. Some individual states have sought to address geographical obstacles to care through treatment and policy strategies. Vermont, for example, operates a "hub-and-spoke" system, in which patients seeking treatment for OUD establish care at an OTP (the "hub") where they receive more intensive services, often during their initial entry to treatment when such concentration of services is more necessary. Once patients are stabilized, they transition to a DATA-waived provider in their community for maintenance treatment with buprenorphine (the "spoke"), and other services. If patients relapse, they may return to the OTP until they are ready to transition back to outpatient buprenorphine, and the cycle continues. Throughout their treatment, patients are followed by the same care management team who assist them in finding and accessing appropriate services. Vermont officials sought to ensure OTPs were distributed throughout the state (see Figure 3 ). A part of Vermont's hub and spoke strategy has been to divide resources geographically throughout the state to reduce the number of areas without treatment. Other states, such as New Jersey and Washington, addressed geographic barriers by operating mobile methadone units, known as "methadone vans," which travelled from OTPs to provide daily methadone medication to rural and other hard-to-reach patients. Other states have offered similar mobile services with buprenorphine. Increasing the quantity of treatment providers may only be effective in addressing the opioid epidemic if access to treatment is also addressed. Both examples provided above, for instance, seek to not only expand treatment capacity, but also enhance accessibility by attending to location of services in relation to the patient population. Geography alone is not the only barrier; stigma, financing, and patient willingness may also influence the amount and utilization of services. Congress may explore additional solutions, such as the use of telemedicine services where possible. Nevertheless, identifying the location of providers may be an important step for policymakers seeking to increase availability of treatment for opioid use disorder.

The substantial burden of opioid abuse related to the current opioid epidemic in the United States has resulted in a disparity between the need for substance abuse treatment and the current capacity. Methadone and buprenorphine are two medications used in medication-assisted treatment (MAT) for opioid use disorder (OUD). Methadone and buprenorphine are both opioids; their use to treat opioid use disorders is often called opioid agonist treatment or therapy (OAT) or opioid agonist MAT . As controlled substances, methadone and buprenorphine are subject to additional regulations. Methadone may be used to treat opioid addiction within federally certified opioid treatment programs (OTP)—often referred to as methadone clinics. Buprenorphine may be used to treat opioid use disorder in two settings: (1) within an OTP and (2) outside an OTP pursuant to a Drug Addiction Treatment Act (DATA) waiver. The federal government has taken steps to increase the availability of MAT in response to the escalation of opioid overdoses and deaths in recent years. Policy efforts to address the opioid epidemic have corresponded with increased treatment availability, yet access to substance abuse treatment has not kept pace with the increasing rates of opioid addiction in the United States. Geographic information is important in accurately evaluating treatment capacity. Treatment location may be especially relevant to understanding the discrepancy between need and capacity. The current report identifies the geographic location of MAT providers using methadone and buprenorphine (opioid agonist treatment) in the United States. The analysis uses Substance Abuse and Mental Health Services Administration (SAMHSA) data to identify the number and location of (1) federally certified opioid treatment programs and (2) practitioners with DATA waivers. The geographic location of OTPs and DATA-waived practitioners are displayed in several national and regional maps. Identifying the location of OAT providers may have utility in increasing accessibility to treatment. However, simply increasing capacity for treatment may not effectively increase availability (or decrease opioid-related overdoses) if treatment providers are not located in areas of need. The current analysis does not evaluate need—by locating opioid-related overdose hospital admissions and deaths for instance. It does, however, provide an initial step in assessing how treatment providers are dispersed geographically. Other factors, such as substance use treatment financing, stigma, and waiting periods for services may also affect OAT availability. Practitioners are subject to state laws and regulations regarding prescribing privileges which affect their eligibility for DATA waivers and, in turn, the availability of treatment. Congress may incorporate geographic factors in strategies designed to increase capacity and availability of treatment.

GAO_GAO-20-148

Background Organizational Roles and Responsibilities Numerous organizations have roles and responsibilities in formulating and executing the Marine Corps’ budget. Specifically: Office of Management and Budget. OMB directs federal agencies, including DOD and the military services, to develop, among other things, civilian personnel budget requests by calculating workload requirements, the time needed to complete the workload and the number of FTEs needed to perform the work for the upcoming fiscal year. Every year, OMB releases an update to OMB Circular A-11, which provides guidance for budget formulation for the upcoming fiscal year. OMB Circular A-11 states that federal agencies should take steps to assess, and as appropriate, restructure, retain, and resize their FTE counts to achieve missions as effectively and efficiently as possible. Office of the Under Secretary of Defense (Comptroller). OUSD(C) issues the DOD’s Financial Management Regulation for budget formulation and execution. The Financial Management Regulation directs statutory and regulatory financial management requirements, systems, and functions for all organizational entities within the DOD. Department of the Navy. According to Department of Navy budget officials, they provide annual budget formulation guidance to all of the budget submitting offices, including the Marine Corps, through the Program Budget Information System, the Navy’s Financial Management & Budget web portal. According to these officials, the guidance contains detailed instructions and updates for budget formulation, worksheets for checking the accuracy of submitted data, and points of contact for budget formulation questions. Marine Corps Deputy Commandant for Programs and Resources (DC P&R). DC P&R is the lead for determining and allocating civilian labor budgets. The DC P&R delegates this responsibility to the Fiscal Director who monitors major subordinate command and Headquarters Marine Corps labor budget execution to ensure compliance with Manage to Payroll budget controls. DC P&R sub-allocates the portion of the budget that will be executed against civilian labor by each major subordinate command and Headquarters Marine Corps. In order to hold the major subordinate commands and Headquarters Marine Corps accountable for exercising prudent Manage to Payroll authority, DC P&R monitors civilian labor execution and issues Mange to Payroll reports on a monthly basis. Marine Corps Director for Civilian Human Resources (DCHR). DCHR provides program direction, technical advice, guidance and assistance to major subordinate commands, Headquarters Marine Corps staff agencies, and servicing human capital resource offices in carrying out Manage to Payroll responsibilities, with regard to position classification. DCHR also holds individuals with delegated classification authority accountable for carrying out effective Manage to Payroll responsibilities, when it comes to classification of position descriptions. DOD Inspector General Report on Marine Corps Civilian Personnel Budget Development In June 2018, the DOD Inspector General reported that, among other things, the Marine Corps did not justify or fully provide supporting documentation for how it determined its civilian personnel pay requirements for the Marine Corps’ fiscal year 2017 budget request. The Department of the Navy concurred with a DOD Inspector General recommendation that the Department of Navy establish and implement controls for the civilian pay budget process. The Marine Corps stated in an unpublished written response that it is reviewing its current budget formulation and other metrics through the fiscal year 2020 budget formulation process, with a plan of implementing an updated budget documentation process for the fiscal year 2021 budget request. The DOD Inspector General also found that the Marine Corps did not determine civilian pay funding levels using FTEs calculated from projected hours to be worked, as required by OMB. As a result, the DOD Inspector General recommended that the Marine Corps determine its budgeted civilian pay funding levels using FTEs calculated based on projected hours to be worked, as required by OMB. In its unpublished written response to the DOD Inspector General report, the Marine Corps stated that it determines FTEs in accordance with OMB and is working to provide greater emphasis on FTEs in its budget documents. See appendix II for more details on the DOD Inspector General’s report. The Marine Corps Develops Its Civilian Personnel Budget Request Using Prior Fiscal Year Data with Adjustments from Various Sources The Marine Corps formulates its annual civilian personnel budget request using prior fiscal year budget execution data as a baseline, then makes adjustments for the upcoming fiscal year based on inputs from various sources like the Department of the Navy and OUSD(C). First, according to Marine Corps officials, the Marine Corps gathers information from several sources to start the budget formulation process including previous fiscal year budget information, information from the Program Objective Memorandum (POM) process, feedback from Marine Corps commands, OUSD(C) guidance, Department of Navy guidance, and the National Security Strategy. To develop its civilian personnel budget request for fiscal year 2020, the Marine Corps used fiscal year 2018 information as a starting point and incorporated changes made through the POM process and other inputs, according to Marine Corps Programs and Resources officials. Second, Marine Corps officials explained during the budget formulation process, the Department of the Navy publishes a Civilian Pricing Tool that financial management and budget officials use to evaluate civilian personnel pricing estimates. The Marine Corps has access to the Civilian Pricing Tool throughout the budget process. After all the inputs are included and the pricing calculations are completed, the Marine Corps officials explained, the Deputy Commandant, Programs and Resources presents the POM to the Commandant of the Marine Corps for approval and inclusion in the Department of the Navy’s overall budget request. Third, according to Department of Navy officials, they conduct a thorough analytic review of each line item’s dollar amount and FTE request in the Marine Corps’ budget request before submitting its total budget to OUSD(C). Once the Department of the Navy has reviewed and approved of the Marine Corps budget request, including its request for civilian personnel funding, the Department of the Navy sends the budget request to OUSD(C) for review. Fourth, according to Department of the Navy officials, OUSD(C) reviews the Marine Corps’ civilian personnel budget request as part of the Department of the Navy’s overall budget request submission, including any change in year-to-year FTE growth, to determine if the Marine Corps properly justified these changes. Once OUSD(C)’s review of the Department of the Navy’s budget submission is complete, the Navy’s budget request is submitted with the other military department’s budget requests to OMB for review. During this period, according to Department of the Navy officials, OMB has monthly conversations with the military departments, including the Department of the Navy, about its budget formulation process. OMB has the authority to raise concerns with a particular military department’s budget request during a passback period. Once the passback period with OMB is complete and the budget request is approved by OUSD(C), the entire Department of Navy budget is submitted to the Office of the Secretary of Defense. Finally, according to Department of the Navy officials, the Office of the Secretary of Defense makes adjustments to the Department of the Navy’s budget request according to DOD and OMB priorities, and after OUSD(C) provides feedback to each military service, the military services’ budget request, as modified, is incorporated into the President’s budget request. Marine Corps Manages Its Civilian Personnel Budget Process Based on Dollar Amount, which Has Benefits and Weaknesses Marine Corps Manages the Execution of Its Civilian Personnel Budget Execution Based on Dollar Amount, Not FTEs The Marine Corps manages the execution of its civilian personnel budget based on the dollar amount, not FTE workload forecasts, through an approach referred to as “Manage to Payroll.” Specifically, the Manage to Payroll approach places an emphasis on spending the amount of dollars or funding available for civilian personnel and not on executing a calculated full-time equivalent civilian personnel workload. Further, Marine Corps Order 12510.2D requires officials delegated Manage to Payroll authority to be accountable for establishing positions to accomplish the mission with maximum efficiency and productivity balanced against the civilian labor budget. The Manage to Payroll approach is comprised of three separate functions: (1) position management, (2) position classification, and (3) compensation management. Position management. The process of organizing and structuring organizations to accomplish their mission with maximum economy, efficiency, and productivity. Managers and supervisors determine the type of organizational structure needed to fulfill the functions assigned to a particular unit, how many positions are needed, how positions should be designed, and the most cost effective way of filling the requirement. Position classification. The function that assigns an individual position to the appropriate pay plan, occupational series, title, and grade. Compensation management. For positions where funding levels are prescribed by the Deputy Commandant for Programs and Resources, the major subordinate commands and Headquarters Marine Corps staffing agencies must ensure salary costs and other cost drivers (i.e. overtime, awards, incentives, etc.) do not exceed the civilian labor funding levels. To implement this approach, the Marine Corps’ Director for Civilian Human Resources, among other things, provides program direction, technical advice, guidance and assistance to the major subordinate commands, Headquarters Marine Corps staff agencies, and servicing human resources offices for carrying out Manage to Payroll responsibilities. In order to hold individuals with delegated classification authority accountable for carrying out effective Manage to Payroll responsibilities, the Director for Civilian Human Resources also conducts consistency reviews in coordination with the human resources offices to validate proper classification of positions. These reviews involve verifying positions are classified in accordance with Office of Personnel Management classification standards and within sound position management principles. Additionally, the Marine Corps Deputy Commandant for Programs and Resources is the lead for determining and allocating the Marine Corps’ civilian personnel budget and sub-allocates the portion of the budget that will be spent against civilian labor by each major subordinate command and Headquarters Marine Corps. Benefits and Weaknesses Exist with the Marine Corps’ Management of Its Civilian Personnel Budget Execution According to Marine Corps officials, there are benefits to using the Manage to Payroll approach for managing its civilian personnel budget execution. These benefits, according to Marine Corps officials, include: Flexibility in spending. This approach provides flexibility to the major subordinate commanders by allowing them the ability to prioritize their own current mission requirements and functions rather than spending their civilian personnel budget on workload requirements used to formulate a civilian personnel budget request during the previous fiscal year. Management of personnel requirements. The process allows commanders to manage their personnel requirements to fit with mission priority rather than adhering to the FTE-based workload requirements used to formulate their civilian personnel budget request. Visibility. This process enables officials at Marine Corps Programs and Resources and Headquarters Marine Corps to have direct control over and closely monitor the major subordinate commands’ civilian personnel budget execution. However, weaknesses exist with the Marine Corps’ Manage to Payroll approach to managing its civilian personnel budget execution. Our analysis of the Department of the Navy’s annual budget request, which includes Marine Corps civilian personnel FTE data, found that the number of civilian FTEs the Marine Corps reported does not match the number of civilian FTEs it requested. This discrepancy between the number of FTEs requested and the number of FTEs reported is a result of the Marine Corps managing civilian personnel to dollar amounts and not to FTEs. Specifically, funding provided by Congress annually for the Marine Corps to manage its civilian personnel is based on the number of FTEs the Marine Corps requested for a particular fiscal year. However, during the budget execution process, Headquarters Marine Corps distributes funding to the major subordinate commands by dollar amount and not by FTEs requested. The President’s budget request, which is the sole single document with budget information for the entire government, contains (1) a record of actual receipts and spending levels for the fiscal year just completed, (2) a record of current-year estimated receipts and spending, and (3) estimated receipts and spending for the upcoming fiscal year and 9 years beyond, as proposed by the President. Additionally, OMB Circular A-11 requires that current year FTE estimates should be consistent with previous year actuals, should be fully funded, and should be very close to the actual usage reported at the end of the fiscal year. For example, the estimates in the previous year’s budget should be very close to the actuals published in the current budget. Table 1 shows the difference between the Marine Corps FTEs estimates in its annual civilian personnel budget request and its reported usage of actual FTEs for the previous year’s budget execution contained in the budget requests from fiscal years 2013 through 2018. When asked about the difference between estimates and reported usage of actual FTEs, a Headquarters Marine Corps official stated that they were generally unaware of the importance of the budget data in measuring the degree to which an agency was exceeding or not reaching its requested FTEs. However, the official also acknowledged that a possible consequence of not managing to estimated FTEs could be a reduction in future funding for civilian personnel because budget data provided to Congress for civilian personnel is based on FTE workload and not the amount of dollars spent on civilian personnel. Therefore, a result of the Marine Corps managing to dollar amounts and not to FTEs may result in Congressional decision-making based on incorrect data, which may result in the major subordinate commands having to eliminate civilian positions. Department of the Navy officials confirmed this and told us that the Marine Corps’ use of Manage to Payroll puts Department of the Navy resources at risk of reduction. Additionally, according to Department of the Navy officials, the Navy’s financial management branch does not support the Marine Corps’ use of Manage to Payroll and recommends that the Marine Corps begin to manage its civilian personnel resources using the same process as the Navy’s other budget submitting offices, by formulating civilian personnel funding requests with estimated FTE requirements and then monitoring execution of the budget by actual FTEs. Additionally, by formulating and monitoring civilian personnel budgets by FTEs, there would be more transparency in how the Marine Corps is actually executing its civilian personnel budget. Our review of the Marine Corps’ policy for managing its civilian personnel budget execution found that it does not provide guidance for major subordinate commands to manage actual civilian FTEs to requested amounts. Specifically, Marine Corps Order 12510.2D provides budget execution requirements but does not include requirements on managing civilian FTEs. According to officials with Marine Corps Programs and Resources, Marine Corps Order 12510.2D is a Manpower and Reserve Affairs Department document that focuses on personnel actions rather than explicitly establishing cost controls. Specifically, the order states that individuals delegated Manage to Payroll authority are accountable for establishing positions to accomplish the mission with maximum efficiency and productivity balanced against the labor budget. Federal internal control standards state that management should document the organization’s internal control responsibilities in its policies at the appropriate level of detail to allow management to monitor the control activity effectively. Without updated guidance for major subordinate commands to formulate and execute its civilian personnel budget to estimated FTEs, the Marine Corps risks overspending or underspending on its personnel requirements. Additionally, decision makers may not have sufficient information to effectively and efficiently provide funding for Marine Corps civilian personnel. Internal Marine Corps Spending Data Does Not Align with Budget Request Data Our analysis of Marine Corps internal spending data found that the dollar amount the Marine Corps is projecting to spend on civilian personnel for fiscal year 2019 is $1,749,444,000, which is in line with the $1,750,500,000 provided in its budget request for managing civilian personnel. However, our analysis of 15 major subordinate commands found that four of them are either exceeding or not reaching their requested dollar amounts by $5 million dollars or more. For example, for fiscal year 2019, Marine Corps Systems Command is projected to overspend its requested civilian personnel dollar amount by $24.7 million and Marine Corps Cyber Command is projected to fall short of its requested civilian personnel dollar amount by $7.9 million dollars in fiscal year 2019. Table 2 shows the variation in projected dollar amount by major subordinate commands for fiscal year 2019. Marine Corps Programs and Resources officials stated that when a major subordinate command exceeds its requested dollar amount, the major subordinate command is not compensated from larger Marine Corps accounts, but the command must find additional funding from within its other accounts, which may mean a funding cut to another program to make up the difference. Our review of Marine Corps civilian personnel data also found that Marine Corps data on civilian FTEs is not consistent with data that OUSD(C) uses to formulate DOD’s request for civilian personnel FTEs in its annual budget submission. The Marine Corps uses a database called SABRS to maintain and track civilian personnel FTE data for fiscal years 2013 through 2019. To develop DOD’s defense-wide annual civilian personnel budget request, OUSD(C) uses data from the Program Resources Collection Process system. Our review of Marine Corps data maintained in SABRS found that it does not match the data DOD provided in its annual budget request submissions, which comes from OUSD(C)’s Program Resources Collection Process system, for fiscal years 2013 through 2018. Table 3 shows the difference between the Marine Corps’ internal civilian FTE data in SABRS and the civilian FTE data provided in the annual budget request. An OUSD(C) official told us that the two sources should match because all data, including civilian personnel dollar amounts and FTEs, should be submitted and processed through the Program Resources Collection Process system. Marine Corps officials explained that they were aware of the variations between their internal FTE data and the DOD budget request data. The officials further explained that one instance of variation in the data occurs because the Department of the Navy uses another database, the Work Year Personnel Cost system, to prepare its annual budget request, which includes the Marine Corps’ request for civilian personnel FTEs, before submitting the request to OUSD(C). According to the Marine Corps officials, the Work Year Personnel Cost system automatically deletes error transactions while SABRS does not, as error transactions in SABRS are manually edited. These types of error transactions occur because they did not pass one or more edits in SABRS, did not find the required matching transaction, or have some other issue that is keeping the transaction from processing. The Marine Corps corrects error transactions manually while errors transactions in the Work Year Personnel Cost System are deleted automatically without correction, which creates differences in the data between the two systems. Marine Corps officials stated that, as a result, the Work Year Personnel Cost database typically underestimates Marine Corps civilian FTEs, and that variations in actual FTE data between the SABRS and Work Year Personnel Cost databases explains why it appears the Marine Corps is not reaching its requested civilian personnel FTEs. The Marine Corps has not identified or reconciled differences between internal Marine Corps civilian personnel FTE data compared to data submitted in the annual budget request. Additionally, federal internal control standards state that management should use quality information to achieve the entity’s objectives; that reliable internal and external sources provide data that are reasonably free from errors and faithfully represent what they purport to represent; and that information is appropriate, current, complete, accurate, accessible, and provided on a timely basis. Congress and DOD leadership rely on information presented in an agency’s annual budget request to help determine policies and to make financial decisions. Our prior work has found that civilian FTEs, by themselves, may not be reliable measures of the cost of the civilian personnel workforce and changes in civilian FTEs may not achieve commensurate changes in monetary spending. However, in that report we also noted that, according to OUSD(C) officials, FTEs are typically the primary measure OUSD(C) uses in managing and reporting on DOD’s civilian workforce. Therefore, without reliable Marine Corps civilian personnel data, senior leaders in DOD and decision makers in Congress may not have sufficient and appropriate information to make informed planning and spending decisions and may risk funding not accurately tracking with actual needs. Conclusions To develop its annual civilian personnel budget request, the Marine Corps uses a process that relies on prior fiscal year budget execution data instead of calculating civilian personnel workload requirements and the number of FTEs needed to perform the work. Without updated guidance for the major subordinate commands to manage their respective civilian personnel budget execution to requested FTEs, the Marine Corps risks overspending or underspending on its personnel requirements. Further, assessments of Marine Corps civilian personnel FTE and DOD budget data found that the Marine Corps’ data does not match comparable data DOD reported in its annual budget request documentation. Congress and DOD leadership rely on FTE information presented in the Marine Corps’ annual budget request to help determine policies and to make financial decisions. Without civilian personnel data that are free from errors and are consistent with how the Marine Corps is managing its civilian personnel, senior leaders in DOD and decision-makers in Congress will not be able to make informed planning and spending decisions and may risk funding not accurately tracking with actual needs. As a result, the Marine Corps risks having its annual civilian personnel funding reduced. Recommendations for Executive Action We are making the following two recommendations to the Secretary of the Navy: The Secretary of the Navy should ensure that the Commandant of the Marine Corps updates the Marine Corps’ civilian personnel budget formulation and execution policies to include guidance for the major subordinate commands to manage civilian personnel to FTEs. (Recommendation 1) The Secretary of the Navy should ensure that the Commandant of the Marine Corps identifies and reconciles any differences between the Marine Corps’ internal civilian personnel data and the civilian personnel data the Department of the Navy uses to support its annual budget request. (Recommendation 2) Agency Comments We provided a draft of this report to DOD for review and comment. In written comments, DOD concurred with both recommendations and noted actions that the Marine Corps plans to take. DOD’s comments are reprinted in appendix III. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Navy, and the Commandant of the Marine Corps. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Scope and Methodology For our first objective, to determine how the Marine Corps develops its civilian personnel budget request, we obtained and reviewed Marine Corps, Department of Defense (DOD), Department of Navy, and Office of Management and Budget policies that guide the budget process in order to determine what requirements exist across each level of oversight and discussed these requirements with agency officials. To further analyze the Manage to Payroll process, we also obtained and reviewed Marine Corps Program Objective Memorandum requests, budget formulation and execution documents, budget analyses, financial spreadsheets, and budget presentations. We also interviewed responsible officials about these processes and requirements. For our second objective, to assess the Marine Corps’ management of its civilian personnel budget and FTEs, we reviewed the Marine Corps’ process for managing its civilian personnel budget and FTEs and compared it against Marine Corps orders and administrative messages. To examine Marine Corps policies for budget data entry, coordination, and management, we compared them to the Marine Corps Financial Management Standard Operating Procedure Manual. To determine how the Marine Corps manages its civilian personnel funding, how the Marine Corps measures budget execution by major subordinate command, and how the Marine Corps monitors and collects data on budget execution, we interviewed officials from Marine Corps Programs and Resources. To identify Manage to Payroll requirements and Marine Corps policies for managing its civilian personnel we interviewed officials from Marine Corps Manpower and Reserve Affairs. We also interviewed officials in the Marine Corps Programs and Resources office, Marine Corps Systems Command, Marine Corps Cyber Command, the Department of the Navy, and the Office of the Under Secretary of Defense (Comptroller) about their perceptions of the benefits and weaknesses of the Manage to Payroll process. To measure whether the Marine Corps exceeded or fell below its civilian personnel full-time equivalents (FTE) budget request, we compared the Marine Corps’ civilian personnel budget execution data to its budget request data from the same fiscal year to determine if Marine Corps actual FTEs matched this data from year to year. To measure whether the Marine Corps was consistently exceeding or falling below its FTE budget request at each major subordinate command, we reviewed Marine Corps budget execution spreadsheets displaying end-of-year budget and FTE projections. To provide a statistical measurement of the Marine Corps’ efforts to manage its civilian personnel budget, we obtained and analyzed fiscal year 2013-18 budget execution data from the Marine Corps’ Standard Accounting, Budgeting, and Reporting System (SABRS) that tracks both dollar amount and FTE allotment across the major subordinate commands. We also used SABRS data to determine how funds are allocated to the major subordinate commands within the Marine Corps. To determine if differences in reported FTE totals existed between the Marine Corps’ internal data and publically available data, we compared SABRS’ civilian personnel FTE actual data from fiscal year 2013-18 to its requested FTEs. To assess the reliability of the Marine Corps’ data, we reviewed policies and procedures related to data collection and entry, evaluated Marine Corps internal data reliability checks, and interviewed cognizant officials. Based on this, we determined that the data were sufficiently reliable for the purposes of our reporting objectives. We conducted this performance audit from November 2018 to August 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Department of Defense Inspector General Reports on Military Departments’ Civilian Pay Budgets In June 2018, the Department of Defense (DOD) Inspector General issued a report on the civilian personnel budget formulation process of the Department of the Navy, which included information on the Marine Corps. In its report, the DOD Inspector General found that the Marine Corps could not justify or support how it determined its civilian personnel pay requirements for fiscal year 2017’s Marine Corps budget request. Specifically, the report noted that Marine Corps budget officials could not fully explain the rationale for their civilian pay budget adjustments. According to the DOD Inspector General report, the Marine Corps did not maintain documentation to support these budget adjustments or material showing how it calculated average basic compensation amounts and benefit rates. The DOD Inspector General also reported that Marine Corps officials were unable to explain or provide support regarding the calculation of the civilian pay dollars and full-time equivalents (FTE) associated with these adjustments. In its unpublished written response to the DOD Inspector General’s report, the Marine Corps concurred with the DOD Inspector General’s recommendation that the Marine Corps determine budgeted civilian pay funding levels using full-time equivalents calculated based on projected hours to be worked, as required by Office of Management and Budget Circular A-11. The Marine Corps’ written response also acknowledged that having source data, assumptions, calculations, and better documentation related to budget formulation would provide for retention of institutional knowledge and would benefit budget officials formulating future budgets. The Marine Corps’ unpublished written response also stated that it is reviewing other command metrics within the department, which will be performed throughout the remainder of the present budget cycle with a plan of implementation during the next budget cycle. The DOD Inspector General’s report stated that the Marine Corps did not determine civilian pay funding levels using FTEs calculated from projected hours to be worked, as directed in Office of Management and Budget (OMB) Circular A-11. According to the DOD Inspector General’s report, in its fiscal year 2017 budget formulation, Marine Corps officials stated that they considered FTEs to be the same as end strength for budget formulation purposes, assuming that one person would be on board for an entire year even though these officials acknowledged that this was not expected to be the reality during budget execution. As a result, the DOD Inspector General recommended that the Marine Corps determine its budgeted civilian pay funding levels using FTEs calculated as required by OMB Circular A-11 requirements. In its unpublished written response to the DOD Inspector General’s report, the Marine Corps stated that it determines FTEs in accordance with OMB Circular A-11. Marine Corps Programs & Resources officials told us that they use cumulative hours paid in a fiscal year divided by the number of work hours in that fiscal year to generate the number of FTEs executed. These officials told us that they then divide the cumulative amount paid by the number of FTEs to receive the average work year cost for that fiscal year. Marine Corps officials stated that Programs & Resources budget officials then adjust the civilian personnel budget request during the Department of Navy pricing tool time frame, typically reducing FTEs by the recommendation provided by the tool, which uses 18 months of execution data. Marine Corps officials told us that, as result of the DOD Inspector General’s report, they are working to provide greater emphasis on FTEs in their budget formulation documents. Appendix III: Comments from the Department of Defense Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contact Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov. Staff Acknowledgments In addition to the contact named above, Vincent Balloon (Assistant Director), Timothy Carr, Brian Pegram, Clarice Ransom, Aaron Safer- Lichtenstein, Shari Nikoo, Michael Silver, Carter Stevens, John Van Schaik and Gregory Wong made key contributions to this report. Related GAO Products Defense Health Care: Additional Assessments Needed to Better Ensure an Efficient Total Workforce. GAO-19-102. (Washington, D.C.: Nov. 27, 2018). DOD Civilian and Contractor Workforces: Additional Cost Savings Data and Efficiencies Plan Are Needed. GAO-17-128. (Washington, D.C.: Oct. 12, 2016). Civilian and Contractor Workforces: Complete Information Needed to Assess DOD’s Progress for Reductions and Associated Savings. GAO-16-172. (Washington, D.C.: Dec. 23, 2015). Defense Headquarters: DOD Needs to Reassess Personnel Requirements for the Office of Secretary of Defense, Joint Staff, and Military Service Secretariats. GAO-15-10. (Washington, D.C.: Jan. 21, 2015). Human Capital: DOD Should Fully Develop Its Civilian Strategic Workforce Plan to Aid Decision Makers. GAO-14-565. (Washington, D.C.: July 9, 2014). Human Capital: Opportunities Exist to Further Improve DOD’s Methodology for Estimating the Costs of Its Workforces. GAO-13-792. (Washington, D.C.: Sept. 25, 2013). Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470. (Washington, D.C.: May 29, 2013).

The Marine Corps requested $1.81 billion to pay for approximately 16,000 civilian employees in its fiscal year 2020 budget request. The Office of Management and Budget directs federal agencies to develop civilian personnel budgets by calculating workload requirements, the time needed to complete the work, and the number of FTEs needed. The Marine Corps uses a unique budget formulation process that relies on prior fiscal year budget data to calculate FTE estimates for future civilian personnel budget requests. Senate Report 115-290, accompanying a bill for the DOD Appropriations Act, 2019, included a provision for GAO to review how the Marine Corps develops its civilian labor requirements for both FTEs and funding and examine the benefits and shortfalls of the Manage to Payroll process. This report (1) describes how the Marine Corps formulates its civilian personnel budget request and (2) assesses the Marine Corps' management of its civilian personnel budget and FTEs, including the benefits and weaknesses of the process. GAO reviewed DOD civilian personnel budget policies, analyzed fiscal years 2013 through 2018 Marine Corps budget data that tracks spending and FTE allotment, and compared 2013 through 2018 budget execution data to budget request data. The Marine Corps develops its civilian personnel budget request using prior fiscal year budget execution data with adjustments based on input from sources such as the Office of the Undersecretary of Defense (Comptroller) [OUSD(C)] and the Department of the Navy. As part of the Department of the Navy, the Marine Corps' budget request is added to the Navy's overall budget request, which is incorporated into the Department of Defense's (DOD) overall budget request. The Marine Corps manages its civilian personnel based on dollar amounts—not full-time equivalent (FTE) workload like the other military services—through an approach called Manage to Payroll. Specifically, while the Marine Corps requests a certain number of FTEs each year as required by policy, the Marine Corps distributes the funds it receives to its commands by dollar amount and not based on the FTEs requested. This approach has benefits, such as providing flexibility to employ civilians based on current mission requirements. However, under this approach, for fiscal year 2019, internal Marine Corps' data show that four of its commands are either exceeding or not reaching their requested dollar amounts. Marine Corps policy does not provide guidance to its commands to manage FTEs to requested amounts. Without such updated guidance the Marine Corps risks overspending or underspending on its personnel requirements. In addition, internal Marine Corps civilian FTE data for fiscal years 2013 through 2018 is not consistent with data that OUSD(C) used to formulate DOD's overall civilian personnel budget request, as shown in the figure below. The Marine Corps has not identified or reconciled differences between its internal data compared to data submitted in the annual budget request. If information in the Marine Corps' budget request does not reflect internal Marine Corps data, then Congress and DOD leadership may not have sufficient and appropriate information to make informed planning decisions.

GAO_GAO-19-414

Background U.S. international trade agreements that cover USG procurement include the GPA and bilateral and regional FTAs. The revised GPA has 20 parties (including the EU) covering 48 WTO member countries (including the 28 EU member countries). Another 33 WTO members are observers; of these, 10 are in the process of acceding to the agreement. In addition to the GPA, the United States has 14 FTAs with 20 countries, four of which (Canada, Israel, Singapore, and South Korea) are also parties to the GPA. Almost all of the FTAs to which the United States is a party include provisions covering government procurement. The GPA aims to mutually open government procurement markets for goods, services, and construction services among its parties, according to the WTO. Under the GPA, foreign suppliers are able to compete alongside with U.S. suppliers for USG contracts covered by the agreement, and U.S. suppliers are able to compete for covered foreign government contracts in accordance with the framework established by the GPA. According to the office of the United States Trade Representative (USTR), to implement U.S. obligations under the international agreements that cover government procurement, the United States—generally (and not always) — waives preferential purchasing requirements for goods and suppliers from other countries that are parties to the agreements in covered procurements over a certain threshold. For example, USTR has waived the Buy American Act and other preferential provisions for eligible products in acquisitions covered by various trade agreements. However, Commerce officials noted that small business set-aside requirements are not waived nor are the provisions of the Berry Amendment. Government Procurement Markets and the Procurement Opportunities That Parties to the GPA and FTAs Have Reported Opening to Foreign Firms As part of our body of work on international government procurement, we have previously reported the following: The U.S. and EU government procurement markets are comparable in size, and each is larger than those of all other GPA and U.S. FTA partner countries combined. Some other parties to the agreements also have large government procurement markets, including Japan, South Korea, Canada, Mexico, and Norway. The government procurement chapters of the GPA and selected U.S. FTAs that we reviewed generally have similarities in text and commitments, possibly because key parties negotiated multiple agreements concurrently. However, the revised GPA generally provides more comprehensive market access than the selected FTAs we reviewed. The United States reported opening more procurement opportunities covered by the GPA to foreign firms than had other parties to the agreement. Data for 2010 showed that the United States reported $837 billion in GPA covered procurement. This amount is about twice as large as the approximately $381 billion reported by the next five largest GPA parties combined—the EU, Japan, South Korea, Norway, and Canada—even though total U.S. procurement is less than that of the other five parties combined. Previously, we reported on the opportunities available to U.S. and foreign firms seeking to compete for covered government procurement contracts in the countries that are parties to the agreements. In the current report, we analyze the value and number of actual contract awards, reported in procurement databases, including contracts covered under the GPA and NAFTA and those not covered. Covered contracts can be awarded to domestic firms, to firms from countries that are parties to the GPA and U.S. FTAs, or to other non-U.S. firms. Additionally, the Buy American Act does not apply to products that are purchased for use outside the United States, nor to the acquisition of services. Therefore, such contracts can be awarded without the application of Buy American Act domestic preference conditions to bids from any firm, including firms from non-GPA and non-FTA countries. Two Types of Data Sources Used to Estimate Foreign Sourcing in Government Procurement To estimate foreign source procurement, we looked for information about where the goods and services that governments purchase are produced and the characteristics of the firms supplying those goods and services. We identified two types of primary data sources that could be analyzed to estimate foreign sourcing in government procurement: (1) government procurement databases to estimate direct cross-border central government procurement and (2) input-output tables merged with international trade data to estimate total procurement by all levels of government and the portion comprising imported goods and services. Data from Government Procurement Databases on Contracts Awarded by Central Governments Government procurement databases collect information on contracts awarded by government entities to firms supplying goods and services. Except for Japan, all the countries in our analysis maintain online government procurement databases that can serve as a primary data source to generate statistics on their foreign source central government procurement. The USG and the other six main parties to the GPA and NAFTA use these databases to report to the WTO their required procurement statistics under the GPA. While Japan does not have a government procurement database, Japan’s central government collects procurement data from various ministry sources and reports the aggregated data to the WTO. As table 1 shows, the U.S. Federal Procurement Data System-Next Generation (FPDS-NG) provides more data fields that can be used as proxies for measuring foreign source procurement than the non-U.S. databases provide. FPDS-NG contains data on four potential proxy measures of foreign sourcing—firm location, firm ownership, product and service origin, and place of performance. The database for the EU and Norway and the databases for Canada and Mexico all contain contract award data related to firm location. South Korea’s database and Japan’s WTO submission on its 2013 procurement contain data on source country of goods and services. Therefore, two data fields, one reflecting firm location and the other reflecting country of product and service origin, appear to provide reasonable proxy measures of foreign source procurement, although neither is available across all data sources. (For more information on the characteristics of each government procurement database, see app. II.) Information about how much goods and services a country imports provides the basis for another approach to estimating what portion of all government procurement in that country is imported. The WIOD provides such information, giving us a second type of data and an alternative analytical approach for estimating foreign source government procurement. The WIOD links data on an economy’s supply chain interdependencies to data on its import and export flows, thus providing a proxy estimate of the share of imports in procurement by all levels of government. We based our method for analyzing linked input-output tables on an approach used by the European Commission which examines import penetration of government procurement within Europe. Unlike the contract data we analyzed from government procurement databases, the WIOD data capture procurement by all levels of government. However, the input-output tables are organized by industry, which requires a decision as to which industries make up the government sector in any given country’s economy. Some industries, like “public administration”, can safely be assumed to be part of the governmental sector in every country. Other industries, like education or health care, vary across countries in the degree to which they are part of the government sector, if at all. While this analytical method based on input-output tables can provide broad estimates of how much governments are purchasing imported goods and services, it relies on some important assumptions that may affect the reliability of the results. For example, it assumes that the goods and services purchased by all levels of government are imported to the same extent as they are when purchased by other industries in the same country. This assumption, known as the “proportionality assumption”, recognizes that results from this method may overestimate the share of imports in government procurement to the extent that the analysis does not capture attempts by the government sector to limit foreign sourcing in its procurement. On the other hand, other aspects of this method may underestimate the share of imports in government procurement. For example, the input-output data include intermediate inputs but do not include purchases for investment, such as some government assets because, according to the authors of the European Commission study, input-output tables do not have the data to distinguish between investments by the private and public sectors. Thus, the input-output data could exclude investment made through construction services like those purchased to build highways, schools, or other assets that have long-term use, services that are included in covered procurement under both the GPA and NAFTA. The USG Likely Procured More Than Twice as Much from the Other Six Main Parties to the GPA and NAFTA as Vice Versa, but Exact Comparisons Are Not Possible The value of U.S. government (USG) contracts awarded to firms located in the other six main parties to the GPA and NAFTA likely exceeds twice the estimated value of contracts from those parties to U.S. firms, but exact comparisons are not possible. The USG awarded contracts valued at about $12 billion to foreign-located firms in fiscal year 2015, of which less than half went to firms located in the other six main parties. Conversely, the government procurement data we analyzed indicated the central governments of these parties awarded almost $7 billion to foreign sources, of which less than a third were awarded to firms located in the United States or for goods or services from the United States. Over three- quarters of these U.S.-sourced contracts were awarded by Canada and Mexico. Only the USG’s procurement database contains data on firm ownership. Analyzing these data, we found that the USG awarded more, by reported contract value, to foreign-owned firms located abroad, than it awarded to U.S.-based subsidiaries of foreign-owned firms. This was mostly U.S. Department of Defense (DOD) contracts in support of the U.S. military presence in those countries. Overall, while available contract data enable broad cross-country comparisons, these data allow only limited insight into the effects on the U.S. economy of foreign sourcing of USG procurement. This is principally because the contract data do not capture the economic roles of firms awarded contracts and thus do not allow for a definitive assessment of the economic implications of foreign sourcing, as we discuss later in this report. USG Contracts Valued at About $5 Billion Went to Firms Located in the Six Main Parties, out of About $12 Billion Awarded to All Foreign-Located Firms In 2015 the USG awarded about 511,000 contracts valued at about $290.9 billion. Out of this total, about 47,000 contracts valued at about $12.1 billion were awarded to firms located outside the United States (as shown in the data by firm location). Similarly, the USG awarded about 50,000 contracts valued at about $16.5 billion for foreign goods and services (as shown by country of product and service origin). See table 2. Of the USG foreign source procurement awarded to firms in the other six main parties to the GPA and NAFTA, firms located in the EU received more than half in terms of contract value and slightly less than half by number. In 2015 the USG awarded about 10,000 contracts valued at about $5.3 billion to firms located in the other six main parties to the GPA and NAFTA (see table 2 above). This $5.3 billion is about 40 percent of the total value of USG contracts awarded to foreign-located firms. Firms located in the EU received almost 5,000 USG contracts valued at $2.8 billion. Firms located in Japan, South Korea, and Canada were awarded most of the remaining aggregate USG contract value ($1.1, $0.8, and $0.6 billion, respectively) and number of contracts (about 1,500, 600, and 2,900, respectively) awarded to firms in the other six main parties to the GPA and NAFTA. Firms located in Mexico and Norway received less than 1 percent of the aggregate USG contract value and number of contracts awarded to firms in the other six main parties. However, as table 2 also shows, the majority of foreign-sourced USG procurement, in terms of both value and number of contracts, went to firms located in countries that are not among the other six main parties to the GPA and NAFTA. Germany, Japan, and South Korea are among the top five countries whose firms received the most USG contract value in fiscal year 2015. However, countries in the Middle East, including Afghanistan, United Arab Emirates, and Saudi Arabia, were also among the countries whose firms were main recipients of USG procurement in terms of aggregate contract value (see app. III for additional information on USG foreign source procurement by country). Finally, table 2 shows that FPDS-NG data are similar when we use, instead of firm location, the alternative measure of foreign sourcing based on country of product and service origin. For example, the aggregate value of contracts awarded by the USG for goods and services originating in countries of the other six main parties was about 43 percent of the overall value of USG foreign source procurement—the same proportion we found when using firm location as proxy measure of foreign sourcing. In addition, as with the results based on firm location, most of the USG’s foreign source procurement as measured by country of product and service origin went to countries outside the other six main parties to international procurement agreements. USG Awarded Less by Contract Value to U.S.- based Subsidiaries of Foreign-Owned Firms Than to Foreign-Owned, Foreign-Located Firms, Which Mainly Support DOD Operations Abroad Foreign-located firms can be either foreign-owned or U.S.-owned, just as U.S.-located firms can be either foreign-owned or U.S.-owned. Among the government procurement databases we used, only the FPDS-NG includes data on firm ownership. Some research on foreign sourcing in government procurement differentiates between direct and indirect cross- border procurement based on knowledge about both the location and ownership of the successful bidder: In direct cross-border procurement, the successful bidder is both foreign-owned and foreign-located. In indirect cross-border procurement, the successful bidder is a U.S.- based domestic subsidiary of a foreign-owned firm. According to a recent EU Commission study, between 2009 and 2015, the EU’s indirect cross-border government procurement was more than 5 times greater in terms of both value and number of contract awards than its direct cross-border government procurement. The study notes that indirect cross-border procurement is often high when direct cross-border procurement is low and suggests that may reflect actual or perceived barriers to cross-border bidding, which lead firms to rely on their locally based subsidiaries for cross-border sales. The study reported that indirect cross-border government procurement (foreign-owned, domestically located vendor) accounted for 21.9 percent of the number and 20.4 percent of the value of certain contract awards in the EU’s 28 countries, while direct cross-border government procurement (foreign-owned, foreign-located vendor) accounted for 1.7 percent of the number of contracts and 3 percent of contract value. In contrast to the findings of that EU Commission study, our analysis of FPDS-NG data shows that indirect cross-border procurement by the USG was smaller in terms of total award value and number of contracts than direct cross-border procurement. This indicates that foreign firms selling to the USG generally do not establish a local presence in the United States. Specifically, foreign-owned firms located in the United States (indirect cross-border procurement) received contracts valued at about $3.6 billion, or less than 1 percent of the value of all USG contracts. By contrast, firms that were both foreign-owned and foreign-located (direct cross-border procurement) received contracts valued at about $11.8 billion, or about 4 percent of the value of all USG contracts ($290.9 billion). Therefore, USG direct cross-border procurement was about three times greater than indirect cross border procurement for contracts awarded in fiscal year 2015. A possible explanation for this finding could be that foreign-owned and foreign-located firms are awarded more USG contracts in terms of value and number than U.S. subsidiaries of foreign-owned firms because those contracts are covered by international procurement agreements. Foreign- owned and foreign-located firms are awarded more USG contracts because they may bid for large-value GPA covered USG contracts at a higher rate than their U.S.-located counterparts, or they may generally be more competitive for such contracts. However, for contracts not covered under the GPA and NAFTA, the relative difference between the two groups of foreign-owned firms becomes smaller in terms of aggregate contract value. Therefore, the difference between direct and indirect cross-border procurement is likely not due to agreement coverage as one might expect. To better understand why the USG’s direct cross-border procurement was larger than its indirect cross-border procurement, we further analyzed the FPDS-NG data on firm location, firm ownership, and place of performance—where the services were performed or where the goods were produced. Based on firm location, as stated earlier, foreign-located firms were awarded about $12.1 billion in USG contracts. Measured by aggregate contract value, almost all of the USG contracts awarded to those firms were performed abroad (i.e., outside the United States)—$11.9 out of $12.1 billion or 98 percent. USG contracts performed abroad are commonly awarded to U.S.-located as well as to foreign-located firms. In 2015, the USG awarded contracts performed abroad valued at about $23.3 billion, of which about half was awarded to U.S.-located firms. In particular, as figure 1 suggests, while U.S.-located firms received contracts performed abroad valued at $11.4 billion, foreign-located firms were awarded USG contracts valued at $11.9 billion. Almost all of those USG contracts—$11.7 out of $11.9 billion or 98 percent—were awarded to firms that were foreign-owned as well as foreign-located (i.e., direct cross-border government procurement). The vast majority of the value of these USG contracts to foreign-owned, foreign-located firms was for DOD contracts performed abroad. In particular, DOD awarded about 84 percent of the value of USG contracts—$9.8 billion out of $11.7 billion— that were performed abroad and awarded to foreign-owned, foreign-located firms. The vast majority of those contracts ($7.5 billion or 77 percent) were covered under the GPA and NAFTA. (See app. III for a breakdown by agency of all USG contracts performed abroad and awarded in fiscal year 2015 to foreign-owned, foreign-located firms.) Foreign-owned firms located in six countries received the majority (57 percent) of DOD’s $9.8 billion in aggregate award value of contracts performed abroad. Specifically, firms located in three countries in the Middle East—Afghanistan, Saudi Arabia, and United Arab Emirates— together received 28 percent of that award value; firms in Japan and South Korea together received 18 percent; and firms in Germany received 11 percent. About a quarter of DOD’s $9.8 billion in aggregate award value were for purchases of fuel, oil, lubricant, and wax. About 9 percent were for education and training services, and about 7 to 8 percent each were for construction of buildings and housekeeping services. For example, fuel was the main product procured by DOD in United Arab Emirates, while in Saudi Arabia most DOD procurement was for education and training services. (See app. III for a breakdown of DOD contracts performed abroad and awarded to foreign-owned and foreign- located firms, by country.) Central Governments of the Other Six Main Parties Awarded Almost $2 Billion to U.S.-Located Firms or for U.S.-Made Products out of About $6.5 Billion in Foreign-Awarded Contracts Our analysis of available procurement contract data from 2015 shows that the central governments of the other six main parties to the GPA and NAFTA, apart from the USG, awarded contracts valued at about $170.5 billion. About 4,000 out of a total of 245,000 of these contracts with an estimated total value of about $6.5 billion were awarded to foreign sources, that is, to foreign-located firms or for imported products and services. Some of these contracts awarded by the other six main parties were covered by the GPA and NAFTA, while others were not. Furthermore, the central governments of the other six main parties awarded about 2,000 U.S.-sourced contracts worth about $1.8 billion (see fig. 2). U.S.-sourced contracts are contracts awarded to U.S.-located firms or for products made in the United States. Canada and Mexico awarded most of the U.S.-sourced contracts. Specifically, central government contracts awarded to U.S.-located firms by Canada and Mexico accounted for almost 80 percent of the value and number of all U.S.-sourced contracts. Over 60 percent of the value and number of U.S.-sourced contracts awarded by the central governments of the other six main parties were for the procurement of goods. In particular, Canada awarded more than 20 times more in contract value to purchase goods than it did to purchase services from U.S.-located firms. However, for contracts covered under trade agreements, the other six main parties collectively awarded more U.S.-sourced contracts for services than for goods; these contracts were awarded primarily by the EU and Mexico. U.S.-located firms were awarded virtually no construction services contracts. This result is consistent with our findings for procurement flows among all countries among the other six main parties to GPA and NAFTA and may be explained by the proxy measure used—firm location, which accounts only for direct cross-border procurement. For example, the EU commission paper cited previously finds that for construction works the share of direct cross-border procurement in the total value of awards was 1.7 percent compared with 12.3 percent for indirect cross-border procurement. While Available Contract Data Enable Broad Cross- Country Comparisons of Foreign Sourcing by Central Governments, They Allow Limited Assessment of Economic Implications Select Data Elements Available in Government Procurement Databases Allow for Broad Cross-Country Comparisons, but Not Precise Estimates The data available from the government procurement databases we analyzed provide relevant and useful information for assessing foreign sourcing in government procurement, but these data do not allow for precise cross-country comparisons based on the GPA provisions on rules of origin. Data and reporting on country of origin for goods and services is limited for a number of reasons. Most of the databases we analyzed contain fields on contract award value and type of contract, as well as fields on firm location or country of product or service origin—proxy measures of foreign sourcing that, as we have found, allow for broad cross-country comparisons. However, precise estimates from the available data are not possible because no single internationally accepted definition exists to distinguish procured goods and services that are “foreign” from those that are “domestic” and the information in government procurement databases is not uniform. There is no agreed- upon definition of the country of origin for goods and services for statistical reporting purposes in the GPA even though a similar term— country of production—is used in the 1994 GPA’s general principles on nondiscrimination. Instead, the GPA generally expresses that a party shall apply the rules of origin that it applies in the normal course of trade when determining the country of origin for goods and services in covered procurement. Another factor that limits cross-country comparisons of country of origin data by parties to the GPA is the recent revision to the GPA itself, which no longer requires the parties to provide country of origin statistics, as we previously reported. According to the 1994 GPA, parties were to provide statistics on the country of origin for products and services purchased by its entities, to the extent that such information is available. However, the revised GPA, which went into effect in 2014, does not require parties to report available information on the country of origin of purchased products or services. While all the GPA members included in our scope reported the amount of covered procurement to the WTO, only Japan (until 2013) reported statistics on the “nationality of the winning tenderer”. The WTO Committee on Government Procurement’s Work Programme on the Collection and Reporting of Statistical Data is currently examining the issues surrounding how countries define country of origin for the procurement of goods and services. Finally, while the United States collects a variety of relevant data on foreign sourcing, those data have certain limitations for cross-country comparisons since the data are collected for different purposes. While U.S. agencies collect country data on successful bidders and the country of origin of goods and services in response to the Buy American Act and report these in FPDS-NG, the agencies do not collect data on country of origin determinations in response to relevant provisions of the GPA or NAFTA. For example, the U.S. Federal Acquisitions Regulation (FAR), in implementing statutes including the Buy American Act, applies different tests to determine the country of origin of an end product and defines end products to include “domestic”, “foreign”, or “U.S.-made”. The test to determine country of origin for an end product under the Buy American Act is different from the test to determine country of origin in the procurement of an end product under trade agreements. According to the FAR, for manufactured products, the Buy American Act uses a two-part test to define a domestic end product: (1) the article must be manufactured in the United States, and (2) the cost of domestic components must exceed 50 percent of the cost of all the components. According to the FAR, for procurement under trade agreements, the test to determine “country of origin” is “substantial transformation”, (i.e., transforming an article into a new and different article of commerce, with a name, character, or use distinct from the original article). The substantial transformation test can also be used to determine whether a product is a U.S.-made end product. The FAR also defines a foreign end product as an end product other than a domestic end product. Therefore, under the FAR, contracting officers use different tests and different descriptors to designate country of origin. Since corresponding data fields for these descriptors are not available in FPDS-NG, the data do not allow for exact cross-country comparisons of foreign sourcing under the GPA and NAFTA. Available Procurement Contract Data Allow Limited Assessment of the Economic Implications of Foreign Sourcing In all countries included in this report, available contract data do not allow for a definitive assessment of the economic implications of foreign sourcing in government procurement, such as impacts on wages and profits. As figure 3 shows, using the United States for illustrative purposes, foreign versus domestic sourcing in government procurement could be viewed in four different ways —firm location, firm ownership, product and service origin, and place of contract performance. For example, FPDS-NG data shows that a task order under a DOD contract for facilities support performed in Iraq reports the United Arab Emirates as the country of product and service origin for safety and rescue equipment, while also reporting the firm location and ownership as the United States. FPDS-NG data showed that another task order under the same contract, for housekeeping services, reports the place of performance as Kuwait but reports the United States as the country of product and service origin, the firm location, and the country of firm ownership. As another example from FPDS-NG data, a contract awarded by the U.S. Agency for International Development for internet services performed in Malawi and awarded to a foreign-owned business reports the United States as the country of service origin but the United Kingdom as the firm location. Each of the various different ways relevant to the sourcing of USG contracts can be viewed on a continuum based on the extent of foreign involvement associated with the production and service delivery processes. Country of firm location. As found in the procurement databases, suppliers can be located, for example, domestically in the United States or abroad. However, the economic effects related to the country of firm location depend on what is produced in the country relative to what is produced elsewhere. For example, the supplier may be an end product manufacturer doing less skill-intensive assembly and packaging, a high technology and skill-intensive manufacturing firm that substantially transforms a product that is subsequently used as an input in the production process, or a broker providing unskilled labor for product distribution. In each of these examples, the country of firm location could experience different economic effects from the awarded contract. Country of firm ownership. Suppliers could be domestically or foreign owned, and who owns the firm determines who accrues the firm’s profits. However, determining ownership is challenging because a supplier awarded a contract may have various ownership structures. For example, the supplier may be a sole proprietor or a corporation with shareholdings, subsidiaries, ultimate owners, or may be a participant in a corporate group. The supplier may have established a presence in the United States through a foreign-owned subsidiary or may participate in a partnership such as a joint venture with a U.S. firm. Country of product or service origin. Goods and services purchased under government procurement contracts may be domestically produced or imported. In this case, the effects can be analyzed in the same way as trade flows in general. However, the country of product or service origin is more challenging to determine for government procurement contracts compared with general trade in goods and services, since government contracts typically cover more than one good or service. Therefore, the country of origin for certain goods included in a contract may be different from the country of origin for other goods under the same contract. Country of contract performance. USG contracts can be executed within the United States or outside the United States. For example, the country of contract performance may determine where the service is delivered as opposed to the location or ownership of the firm that delivers the service. The place of performance may lead to benefits and costs accruing to the location where the contract is performed. For example, if a service is delivered or the products are produced outside the United States, the contract likely employs local labor and therefore benefits the local labor market. Because available data in government procurement databases do not specify the supplier firm’s economic role, the economic effects of the awarded contract remain uncertain. The potential effects of the awarded contract on other firms, workers, the government, or consumers in the domestic and foreign economies may vary depending on the supplier firm’s economic role. Foreign Sourcing Is a Minor Share of Government Procurement, and Our Analysis Did Not Find a Consistent Relationship with Coverage under the GPA and NAFTA We estimate that foreign sourcing is generally a small share of government procurement for the United States and the other six parties to the GPA and NAFTA. Foreign sourcing by the USG and the other parties’ central governments, estimated by government procurement databases, varied in value from about 2 to 19 percent of overall central government procurement. Foreign sourcing by all levels of government, estimated by data on trade and public sector purchases by the United States and the other six main parties, shows that government imports ranged from about 7 to 18 percent of the goods and services purchased by these countries’ governments. In addition, our analysis of central government contract data found that foreign sourcing is sometimes but not always greater, in terms of value and number of contracts, for contracts covered by procurement agreements than for contracts not covered by those agreements. Foreign Source Procurement by Central Governments Estimated from Country Databases Varied in Value from 2 to 19 Percent of Overall Central Government Procurement Our analysis of available data on firm location from government procurement databases shows that foreign sourcing in 2015 ranged in value from 2 to 19 percent of overall central government procurement (see fig. 4). The central governments of the EU, Mexico, and the United States awarded less than 5 percent of the aggregate value of their procurement contracts to foreign-located firms. The proportions for Canada and Norway were about 11 and 19 percent, respectively. Both Canada and Norway can be characterized as small, open economies bordering much larger, open trading partners, which may contribute to their relatively larger shares of foreign sourcing in central government procurement. Canada’s central government awarded about 10 percent of the value of all its contracts to firms located in the United States. Similarly, Norway’s central government awarded about 19 percent of the value of all its contracts to firms located in the EU. Our analysis of available data on country of product and service origin shows that Japan procured less from foreign sources (2 percent) than both the United States (6 percent) and South Korea (3 percent). See figure 5. We obtained similar results in terms of number of foreign-sourced contracts. Less than 5 percent of the number of central government contracts was sourced from abroad in the EU, Japan, South Korea, and Mexico. For the United States, Norway, and Canada, the numbers of foreign-sourced contracts based on firm location comprise higher percentages (9, 8, and 13 percent, respectively). Canada’s central government awarded about 9 percent of the total number of contracts it awarded to firms located in the United States. Similarly, Norway’s central government awarded about 7 percent of the total number of contracts it awarded to firms located in the EU. Except for the United States, most of the central governments of the other six main parties to the GPA and NAFTA awarded few construction services contracts to foreign-located firms. One possible explanation is that, given the higher dollar value threshold of contracts in this sector, foreign-owned firms may have a greater incentive to establish a local presence through subsidiaries in the host countries. The data in the non- U.S. databases do not provide enough information to explore that hypothesis. However, FPDS-NG data show that construction services contracts are the main contract type awarded to foreign-located firms by the USG, which awarded about 3,090 construction services contracts worth $1.8 billion (or about 20 percent and 8 percent of all construction services contracts, respectively) to foreign-located firms. Less than 1 percent of these contracts’ award value was for contracts performed in the United States and over 70 percent of these contracts’ award value was for contracts covered by the GPA and NAFTA. In addition, the USG awarded a roughly equal share (about 4 percent of all contracts in terms of value) of goods and services contracts to the other six parties to the GPA and NAFTA. Canada, on the other hand, awarded a relatively large percentage of the value of all goods contracts (30 percent) to firms located abroad. Foreign Source Procurement Estimated by an Alternative Method Shows Import Percentages by All Levels of Government Range from 7 to 18 Percent of All Government Purchases We also assessed the degree of foreign sourcing in terms of government import percentages to identify patterns in government procurement that may differ from those based on the location of the supplier and origin of goods and services. Using linked input-output tables and an alternative analytical approach, we were able to broadly estimate the domestic and foreign sources of inputs to the government sector for the United States and the six main parties to the GPA and NAFTA. This alternative approach to estimating foreign source government procurement is based on macroeconomic data on trade flows of goods and services between countries and the types of goods and services purchased by the public sector. Unlike the approach above based on government procurement contract data, this approach allows us to calculate broad estimates of domestic and foreign sourcing in procurement by all levels of government—central, state, and local. Table 3 shows our broad estimates based on a narrow definition of the government sector, which includes only “public administration”. In the table, the columns are the purchasing countries or the EU. The rows indicate where the goods or services are being purchased from. As the table shows, for all the countries and the EU, foreign sourcing generally accounts for a small portion of all governmental purchases. For example: Out of the estimated $1.2 trillion that the central, state, and local governments in the United States purchased, $100 billion was imported from outside the United States—a total foreign source percentage of about 9 percent, including $26 billion (2 percent) from the EU. Out of the $460 billion that the EU governments at every level purchased, $36 billion was imported from outside the EU—a total foreign source percentage of about 8 percent, including $10 billion (2 percent) from the United States. Out of the $178 billion that governments in Japan purchased, $12 billion was imported from outside Japan—a total foreign source percentage of about 7 percent. In general, the smaller economies in terms of government purchases— Canada, South Korea, Mexico, and Norway—imported a relatively larger percentage of such purchases than the United States, EU, and Japan. Specifically, Canada, South Korea, and Norway imported about 9 to 13 percent of their governments’ purchases. Mexico imported a notably large share of about 18 percent. Of the estimated $24 billion in purchases by Mexico’s government sector, about 6 percent was from the United States and about 3 percent from the EU. This inverse relationship between the size of an economy and the relative percentage import share of government purchases has been noted by others that have used the input-output methodology. Basing estimates of foreign source government procurement on the narrow definition of the government sector may not be as appropriate in countries where the government plays a large role in various additional sectors. Figure 6 shows the size of the government sector under the narrow definition as well as two broader definitions which add additional industries. The “typical definition” as defined in the EU study also includes the education and health care sectors. The “broad definition” also includes a portion of the energy and the telecommunications sectors. The relative sizes of the parties change under the different definitions, as shown in the figure. For example, while the EU government sector is less than half the size of the U.S. government sector under the narrow definition ($460 billion for the EU compared with $1,159 billion for the United States), under the broad definition they are comparable in size ($2.4 trillion for the EU and $2.6 trillion for the United States). Figure 7 shows the estimated percentages of each country’s and the EU’s government sector purchases that are imported under the narrow, typical, and broad definitions as described above. Under all three definitions, the United States and EU have some of the smallest percentages of imported government purchases, between 8 and 10 percent. Mexico has one of the largest percentages, between 17 and 22 percent. Canada and Norway are in the middle, from about 12 to 16 percent. For South Korea and Japan, the estimated percentages of government sector purchases that are imported increased under the broad definition—from 7 percent to 17 percent for Japan, and from 9 percent to 22 percent for South Korea. Available Contract Data Indicate Foreign Sourcing Is Not Always Greater for Contracts Covered by the GPA and NAFTA Than for Other Contracts Our analysis of 2015 data from central government procurement databases finds evidence that foreign sourcing was sometimes, but not always, greater for contracts covered by the GPA and NAFTA than for contracts not covered by those agreements. Given the goals promoted by the GPA and NAFTA, one might expect that procurement covered by such agreements would likely result in a higher number or larger aggregate value of contracts awarded to foreign-located firms or for the purchase of foreign goods and services. For the United States and two of the other six main parties to the GPA and NAFTA—Mexico and South Korea—the results bore out that expectation: for all three, more central government foreign sourcing in terms of contract value occurred when procurement was covered by the agreements. However, our analysis also shows that for two other parties, Canada and Norway, the opposite was true; for the remaining two parties, the EU and Japan, we found little difference or could not calculate an estimate. Our previous work showed that only about a third of the estimated average annual government procurement at all levels of government from 2008 through 2012 was covered by the GPA and NAFTA ($1.5 out of $4.4 trillion). The available data from the government procurement databases that we analyzed show that the USG and the central governments of Mexico and South Korea awarded at least twice as much to foreign sources for contracts covered by international agreements—ranging from 2 to 6 percent of the value of covered contracts compared with less than 1 to 2 percent for non-covered contracts (see table 4). In particular, for contracts awarded by the USG, foreign-located firms received more than twice the value of covered compared with non-covered contracts—about $8.8 billion compared to $3.4 billion, respectively. Results for the USG are similar when looking at the amount of foreign source procurement based on product and service origin. Conversely, U.S.-located firms were awarded a higher aggregate value of non-covered contracts from the USG, compared with covered contracts. (See table 4.) For Canada and Norway, more central government foreign sourcing in terms of contract value occurred when procurement was not covered by trade agreements than when it was. For covered contracts, Canada’s central government awarded 1 percent of the value of all contracts to foreign-located firms compared with 10 percent of the value for non- covered contracts. Similarly, Norway awarded foreign-located firms more than 5 times more in non-covered than covered contracts as measured by aggregate contract value. For the EU and Japan, data on the value of foreign sourced contracts and their agreement coverage are either not available or incomplete. The available EU data have a significant number of foreign unclassified contracts and do not include contracts below the GPA threshold values, which limits the reliability of any comparison for covered versus non- covered contracts. In addition, Japan’s 2015 GPA submission of 2013 procurement data did not report on the amount of foreign source procurement broken out by covered and non-covered contracts, because, according to Japanese officials, this is not a GPA statistical reporting requirement. Therefore, we could not calculate a similar comparison of the value of covered versus non-covered procurement for Japan. Finally, with regard to the number of contracts awarded, our analysis of available data from country databases does not show a consistent relationship with international procurement agreement covered awards to foreign-located firms or for foreign-sourced goods or services. In South Korea and the United States, the number of contracts not covered by trade agreements and awarded for foreign sourced products was greater compared with covered contracts. Conversely, in Canada, EU, Mexico, and Norway, the number and share of contracts covered by trade agreements and awarded to foreign-located firms was greater compared with non-covered contracts. In percentage terms, foreign-located firms received the same share (9 percent) of covered and non-covered contracts awarded by the USG. Agency Comments We provided a draft of this product to USTR, Commerce, OMB, and GSA for comment. Commerce provided technical comments on this report, which we incorporated, as appropriate. USTR, OMB, and GSA did not comment on our draft report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the U.S. Trade Representative, the Secretary of Commerce, the Director of the Office of Management and Budget, the Administrator of the General Services Administration, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: Objectives, Scope and Methodology This report examines the extent of foreign sourcing in government procurement by the United States and the other six main parties to selected international procurement agreements. Under the World Trade Organization (WTO) Agreement on Government Procurement (GPA), the other main parties, besides the United States, are the European Union (EU), Japan, Canada, South Korea, and Norway. Under the North American Free Trade Agreement (NAFTA), the other main parties are Mexico and Canada. The report (1) provides alternative broad estimates of foreign sourcing by the U.S. government (USG) and the central governments of the other six main parties to the GPA and NAFTA, and (2) assesses foreign sourcing as a share of estimated central government procurement and of estimated procurement by all levels of government, and the extent to which central government contracts that are covered under the GPA and NAFTA are foreign-sourced. We analyzed data from two types of sources: (1) government procurement databases in Canada, the EU, South Korea, Mexico, Norway, and the United States, for 2015, and (2) 2014 trade data merged with data on the types of goods and services purchased by the public sector. Since Japan does not have a national procurement database, data for Japan were based on its WTO GPA submission for 2013, which is the last submission that contains information on its foreign sourcing in government procurement. We also interviewed cognizant government officials in Washington, D.C.; Ottawa, Canada; Mexico City, Mexico; Seoul, South Korea; and Tokyo, Japan, and reviewed available research literature to identify potential methods, sources, and data limitations. We also interviewed government officials at the EU mission in Washington, D.C. and exchanged information with officials knowledgeable of the EU government procurement database. Analysis of Data on Contracts Awarded from Government Procurement Databases We collected and analyzed data from the following five databases: for the United States, the Federal Procurement Data System-Next Generation (FPDS-NG); for the EU and Norway, Tenders Electronic Daily (TED); for Canada, Contract History; for Mexico, the Government of Mexico e-Procurement System CompraNet; and for South Korea, the South Korea ON-line E-Procurement System (KONEPS). Several of these government procurement databases included data on procurement at all levels of government—national, state, and local— while others did not. Therefore, we limited our analysis to data on central government procurement. For a detailed discussion of the characteristics of each database, see appendix II. To identify data fields that could be reasonably compared across databases, we followed a number of methodological steps: First, we looked for fields that capture the total award value of the contract at the time of award (2015); the type of contract in terms of goods, services, and construction services; the contract award date; the contract duration; and the type of tendering procedure. We took into account the following considerations: Units of analysis. We established appropriate units of analysis across databases. Several databases contained a number of fields that were potentially relevant to our work. Specifically, in FPDS-NG the unit of analysis is the contract award. The database contains data at the contract action level (contracts, task orders, and their modifications). We used contract awards for the number of reported contracts, but for certain data on indefinite delivery vehicles (IDVs) such as government-wide acquisition contracts, indefinite delivery contracts, and blanket purchase agreements, we relied on data for task orders awarded in fiscal years 2015 through July 2018 (see discussion of contract valuation and multiple-year, multiple-award contracts below) because they contained information on place of performance, country of product and service origin, and place of manufacture, which were the relevant fields for foreign sourcing. The TED database contains information on contract notices, contract award notices, and contract awards above certain thresholds set by relevant EU legislation. While the EU and Norway use contract award notices to estimate the value of covered procurement in their GPA statistical notifications, we used contract awards because they allowed us to estimate actual foreign sourcing. The databases for Canada, Mexico, and South Korea contain a contract identifier, which is the sole and unique unit of analysis that is available. Contract valuation. We established comparable fields across databases that represented the estimated maximum total value of a procurement awarded in 2015 over its entire duration. For FPDS-NG, we developed a methodology that is consistent with the methodology laid out in the revised GPA and avoids the inconsistencies of the revised U.S. methodology, which we previously reported. In particular, in October 2015, the Office of the U.S. Trade Representative (USTR) notified the WTO that the United States had revised its methodology for preparing GPA statistical reports on U.S. federal procurement. To more precisely reflect the value of the federal procurement market at the time of each report, the revised methodology presented the total amounts obligated under GPA covered contracts over a 6-year period—that is, the year the contract was awarded plus 5 years after the award. As we previously reported, the revised methodology has both advantages and disadvantages. It improves the accuracy of reporting but introduces a 6-year delay, whereas the revised GPA requires reporting within 2 years of the end of the reporting period. In addition, the revised valuation methodology is not consistent with the one used by other countries and creates an internal inconsistency: In measuring actual obligations for procurement contracts rather than the value at the time of award, the revised U.S. methodology is inconsistent with the methodology used by other large GPA members, such as the EU, Norway, Canada, and Mexico, which report contract values at the time of award rather than actual obligations or expenditures. The United States continues to report the number of covered contracts to the WTO based on their award value, which leads to an inconsistency between the reported numbers and values of reported U.S. government procurement contracts. The contracts comprising the reported value of covered procurement are determined at a later time under the revised methodology and can result in a different set of contracts being used to determine the reported value. Our current methodology uses base and all options value for all contracts awarded in fiscal year 2015 unless the contract was an IDV. For IDVs we used the base and all options value of task orders awarded in fiscal years 2015 through July 2018 under those IDVs to avoid overestimating the total value. We used the aggregate base and all options value for task orders under those contracts because the alternative—using the base and all options value on the base IDVs—is inflated due to problematic data entries for multiple awards. As a result, our methodology produces an estimate that is consistent with methods used by other parties, internally consistent, and in accordance with the methodology for valuation in the revised GPA. As we noted earlier, the result is close to the obligations value currently reported in the Trade Agreements Report used by USTR to report to the WTO. In TED, we used the contact award value field, because it captures the appropriate measure and according to EU documentation was corrected for errors in the data. For the EU and Norway, we found that for above-threshold procurement approximately 15 percent and 12 percent of the contract award values were missing, respectively. We took additional steps to address these missing values to generate estimates of the total contract award values. Specifically, we implemented a Predictive Mean Matching (PMM) multiple imputation methodology for the EU and used post-stratification estimation techniques for Norway. (See app. IV for more details on both methods.) However, we excluded the value of below-threshold procurement for the EU and Norway because it is reported on voluntary basis and suffers from missing and implausible values. In particular, for the EU, about 42 percent of the contract award values below threshold are missing and another 10 percent are below €1,000. For Norway, 80 percent of the contract award values below threshold are missing. Nevertheless, as a robustness check of the results from our analysis, we applied our imputation methodology discussed in appendix IV to the entire TED dataset and found that once those values are estimated, the amount of procurement awarded by the EU to U.S.- located firms increases by less than 10 percent. However, we do not consider the estimate sufficiently reliable to be included in our aggregate analysis. In Contract History, we used the contract value field because, according to Canadian officials, it includes the original total value of the contract at the time of the award. In addition, those officials noted that this field was used by Canada in its reporting of covered procurement for its WTO statistical notifications. In CompraNet, we used the contract amount field since, according to Mexican officials, this field reflects the total value of the contract award. In KONEPS, we used the total awarded value field, since it was the only field available for our analysis and contained the value awarded for a given year (see adjustments we made for multiple-year contracts below). Currency denomination. We converted contract values reported in different currencies in the databases into dollars using the period average exchange rate for 2015 as provided by the International Monetary Fund’s International Financial Statistics. Contract modifications or amendments. Since we defined the value of the award at the time of award, we selected contracts awarded in 2015 and excluded any subsequent modifications or amendments in all the databases. Contract types. We used the product and service classifications that each database used to group contracts by type. Different databases used different classification schemes, and we did not independently reclassify any contracts to a uniform classification system, since such a system does not exist and a concordance among all schemes is not possible. In FPDS-NG, we used the U.S. product and service codes to classify federal government contracts in product groups and categorized reported procurement as either goods, services, or construction services. In TED, we used the type of contract field, which categorized reported procurement as supplies, services, and works based on the EU common procurement vocabulary in TED. In Contract History, we used the grouping of goods, services, and construction, which Canadian officials provided to us based on the global shipment identification number codes and description in the database. In CompraNet, we used the type of contract field, which indicates if the contract is for goods, services, or public works. In KONEPS, the data on foreign procurement included goods only, and no classification scheme was available for foreign procurement contracts. Multiple-year, multiple-award contracts. Some countries’ procurement practices include contracts awarded for multiple years, and we accounted for the valuation of those contracts by estimating their total cumulative value over multiple years at the time of award in 2015. In FPDS-NG, we accounted for the value of multiple-award contracts by using the base and all options value of task orders awarded in fiscal years 2015 through 2018 for IDVs initially awarded in fiscal year 2015. In TED, available documents noted that member states can use alternative multiple-year tools such as framework agreements and dynamic purchasing systems for a certain time period or for repeat purchases, respectively. While the indicator field for these data in TED was not sufficiently populated for further analysis of those types of contracts, the contract valuation field we used had already accounted for the total value of the contract, and thus no further adjustment was warranted. Officials in Canada provided data on multiple-year contracts, including call-ups and standing offers. However, since the contract value field we used accounted for the total value of the contract, no further adjustment was needed. For Mexico, CompraNet contains information on framework agreements and multiple-year contracts, but since the contract value field indicated the total value of the contract award, no adjustment was needed. South Korea also uses multiple-year contracts, and we made several adjustments to estimate South Korea’s total value of 2015 awards. We identified multiple-year contracts in KONEPS in 2015; based on solicitation numbers, we then removed the value of contracts originally awarded in prior years, while adding the value of multiple year contracts with solicitations in 2015 and awards in 2016 and 2017. Type of tendering procedure. In all databases we included in our analysis contracts under open and limited tendering procedures. Second, we identified data fields among the five databases that could potentially be used as proxy measures of foreign sourcing in government procurement: contractor data related to firm location contractor data related to firm ownership data on country of product and service origin However, we did not identify a data field common to all five databases that could be used as a proxy measure of foreign sourcing. FPDS-NG contained data on all four measures listed above. TED, CompraNet, and Contract History contained contractor data related to firm location. KONEPS and Japan’s WTO submission on its 2013 procurement contained data on country of product and service origin. Therefore, two data fields—firm location and country of product and service origin—were available in two groups of countries as reasonable proxy measures of foreign source procurement. Finally, we analyzed the contract data from the government procurement databases by GPA coverage. Some databases contain a field for GPA coverage, the data for which we deemed to be reliable for our purposes; for the databases that did not, we developed a proxy measure for GPA coverage. FPDS-NG contains a field on trade agreement coverage, but we found it to be unreliable as reported in previous work; therefore, we constructed a method to identify GPA covered procurement using an approach that USTR confirmed is consistent with the steps applied by the USG in developing its GPA statistical notifications. TED contains an identifier for GPA covered procurement, and we used this field to estimate GPA covered procurement for Norway and the EU after taking steps to address missing values for this identifier using other information in the dataset. Contract History contains a field that lists all internal and international agreements applicable to a contract in Canada. Therefore, covered procurement includes all contracts covered under the GPA, NAFTA, and other Canadian international procurement agreements. For Mexico, CompraNet contains a data field on type of procedure, which indicates the eligible firms that can bid on a contract. The data in this field indicate that the contract is (1) open to national firms only; or (2) international procurement under trade agreements, that is, open to both national (Mexican) firms and foreign firms from FTA partner countries; or (3) international procurement open to national firms, foreign firms from FTA partners, and all other foreign bidders. We treated international procurement in CompraNet as a proxy for GPA covered procurement. We grouped all contracts awarded in 2015 into two categories: non-covered procurement, which includes contracts open to national firms only, and covered procurement, which includes contracts open to foreign bidders (i.e. all contracts in categories 2 and 3 described above). KONEPS does not have a data field that specifically identifies covered procurement. Therefore, we defined a proxy for covered procurement as procurement above the revised GPA thresholds by covered entities. However, we were unable to make an adjustment for goods and services excluded from the agreement, since KONEPS does not classify foreign procurement by product service codes. To analyze the extent to which central government contracts that are covered under the GPA and NAFTA are foreign-sourced, we compared the proportion of foreign-sourced award values for contracts covered under the GPA and NAFTA to the same proportion of foreign-sourced contracts, which are not covered by those agreements. Our analysis describing the relationships between trade agreement coverage and procurement award values did not account for additional factors and was limited due to the data available. As we previously reported, the countries within our scope represent over 90 percent of the GPA countries’ total government procurement. Moreover, we previously performed consistency checks across time periods for these countries and determined that covered procurement out of total central government procurement appeared relatively stable over time. However, a more robust test of the relationship between foreign sourcing and selected international agreement coverage would use a larger cross-section of data over time and control for factors such as types of goods and services procured, size of the economy, type of tendering procedure, and other specific details of each agreement, among others. To determine whether the procurement contract data from the five databases were reliable for our purposes, we identified in relevant countries the appropriate data sources used to prepare the countries’ and the EU’s submissions of statistical notifications to WTO and other government procurement reports. To ensure consistency between our methods for estimating foreign sourcing with the methods used by the countries and the EU in their estimates of covered procurement for their GPA statistical notifications, we discussed with government officials in Canada, Japan, Mexico, and South Korea their process and data used to create their statistical notifications and other WTO reports, and we took steps to replicate existing report totals of EU covered procurement. We performed a sensitivity check for the U.S. data in FPDS-NG, where more than one relevant data field was available, to determine whether the definitional differences in the data fields were likely to materially affect our results about foreign sourcing. The results were similar across all six fields that could be used as alternative proxy measures of foreign source procurement in FPDS-NG data (see app. III, tables 11 and 12). In addition, we conducted electronic tests of all five procurement databases to identify whether the data were complete and internally consistent. We determined that the country procurement databases were sufficiently complete and internally consistent after taking the additional steps for the EU and Norway as described earlier, related to missing contract award values (see app. IV). We also shared our analyses of the data with cognizant officials from the corresponding countries who were willing to verify our methodology and replicate our analysis. Procurement and trade officials and researchers in Canada, Mexico, South Korea and Japan answered our questions relevant to data quality including data collection, cross checks of data entries, access controls, internal reviews, primary users, completeness and updates to the data, missing values, reporting mistakes, electronic safeguards and procedures for follow-up if errors are found. In Canada and Mexico officials replicated and confirmed our methodology and results. Results for South Korea and Japan were consistent with alternative available official publications. The various limitations in the procurement contract data that we identified and addressed, to the extent possible, affected our ability to obtain precise estimates of foreign sourcing in government procurement, but they were not an impediment to using the data for broad comparisons of orders of magnitude. Such comparisons include the amount of foreign sourcing, measured using firm location and country of product and service origin, by the USG and central governments of the other six main parties to the GPA and NAFTA. The data also allowed broad comparisons of bilateral procurement flows among the parties, as well as comparisons by type of contract and agreement coverage, as available, for the seven parties to the GPA and NAFTA within our scope. Analysis of Trade Data Linked to Data on the Goods and Services Purchased by the Public Sector To obtain information on the aggregate levels and percentages of procurement by all levels of government that are imported, we relied on input-output tables from the World Input Output Database (WIOD) for 2014. The input-output tables have an industry by industry format, with each country’s industries listed separately. The data in each table are derived from publically available data from both national statistics agencies and international organizations such as the United Nations and the Organisation for Economic Co-operation and Development. We relied on the WIOD to ensure that the combined data from different countries was collected to be consistent. These data do not allow for distinctions between different levels of government. To assess the reliability of estimates based on the WIOD data, we first reviewed available documentation for the database. In cases where we had questions, we received written responses from WIOD officials. In addition, we compared estimates based on the WIOD to estimates based on other databases and found similar results. In general, we found that the data were sufficiently reliable for our purposes. To estimate the level and percent of procurement from the database, we took the following steps. First, we identified the industries associated with the governmental sector. Then, for that industry (or combination of industries), we obtained both the total level of purchases (or inputs), and the inputs that came from within that country, or other countries of interest. To obtain an estimate for the EU, we combined the purchases over the 28 member countries then in the EU. In general, we followed a procedure outlined in a 2017 paper produced by the European Commission. In this paper, the authors describe how input-output tables can be used to measure cross-border penetration in public sector procurement. An essential step in our method is defining which industries make up the government sector. Moreover, because the composition of the government sector and the patterns of government purchases vary by country, different measures of the government sector are more appropriate for different countries—since what goods and services the government provides or performs affects what it procures from the private sector. For example, for the EU, the government funds the majority of services in the area of public administration, defense, social security, education, and health care. In contrast, the USG funds a smaller share of health care services. We followed the model laid out in the European Commission paper and defined the government sector in three ways: 1. Narrowly Defined – (O84) Public administration and defense; compulsory social security 2. Typically Defined – (O84) Public administration and defense; compulsory social security (Q) Human health and social work activities 3. Broadly Defined – (O84) Public administration and defense; compulsory social security (Q) Human health and social work activities (D35) Electricity, gas, steam and air conditioning supply (E36) Water collection, treatment and supply (E37-E39) Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services (1/3) * (H49) Land transport and transport via pipelines (1/2) * (H53) Postal and courier activities (1/2) * (J61) Telecommunications However, our procedure deviated from the European Commission report with regard to an additional category of expenditure in the report, final consumption by government. As in our prior reports, we did not include this category. This category includes both spending on social benefits, health care, and education as well as spending on collective items such as defense. We did not include this category in prior reports partly due to data reliability concerns about consistency in measurement of spending on social benefits across countries. However, if we had included it, that would have caused our estimates of import penetration to be smaller, because the WIOD tables do not include any cross-border expenditures for this category. For example, the percentage for the United States would have changed from about 8 percent to about 4 percent. To construct consistent data from different countries over time, certain assumptions were made by the WIOD. An assumption that has important implications for our analysis is known as a “proportionality assumption,” which is typical in the construction of input-output tables. This assumption requires that the percentage of a product that is imported is constant across all industries. In the example provided by the WIOD: “If 20 percent of Czech absorption of electronics is sourced from Germany, then 20 percent of any Czech final or intermediate use of electronics is assumed to originate from Germany.” The WIOD has attempted to improve on the proportionality assumption by making it at a more disaggregated level, but according to the WIOD, the proportionality assumption remains a limitation of the data set and consequently of our analysis. Importantly for our analysis, the proportionality assumption implies that the results we obtained from this method may not capture attempts by the government sector to award a larger share of its procurement to domestic firms relative to other industries. Another important limitation for our analysis is the scope of the industry data reported by the WIOD. Specifically, the input-output data include intermediate inputs but exclude purchases by government for investment. Such purchases could include some government assets that would be considered procurement covered by the GPA and NAFTA. For example, the input-output data could exclude construction services like those government purchases to build highways or schools that have long-term use, which are procurements potentially covered by the GPA and NAFTA. Finally, while we followed a method described above that has been used to study procurement, there are alternative methods that could have also been used based on input-output data. For example, according to industry officials at the U.S. Bureau of Economic Analysis, the “Trade in Value Added” methodology is such a method, and such data are maintained by the Organisation for Economic Co-operation and Development. We conducted this performance audit from March 2017 to May 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Characteristics of Central Government Procurement Databases The following appendix contains descriptive comparative information about the five databases included in our review: for the United States, the Federal Procurement Data System-Next Generation (FPDS-NG); for the EU and Norway, Tenders Electronic Daily (TED); for South Korea, the South Korea ON-line E-Procurement System (KONEPS); for Mexico, the Government of Mexico e-Procurement System CompraNet; and for Canada, Contract History. For each database, we provide its formal name and function, contract and/or agency coverage, and data field(s) related to firm location, firm ownership, source country of goods or services, location of contract execution, contract valuation, trade agreement coverage, and type of contract in terms of goods, services or construction services. Appendix III: Additional Results Related to Foreign Sourcing by the U.S. Federal Government The following appendix provides supplemental information from our analysis of foreign sourcing by the United States in fiscal year 2015 based on data from the Federal Procurement Data System-Next Generation (FPDS-NG). FPDS-NG contains data on four potential proxy measures of foreign sourcing—firm location, firm ownership, product and service origin, and place of performance. The database contains six fields that correspond to these four proxy measures. See tables 11 and 12. For cross-country comparisons, we use two of the six measures—vendor country code (13QQ) and country of product and service origin (9E). We disaggregate the data by country and list the top 20 countries, which are recipients of USG contracts based on firm location. See tables 13 and 14. Since about 10 percent of USG contracts are performed outside the United States, we also provide a breakdown of those contracts that are awarded to foreign-owned and –located firms by agency. See table 15. Finally, since most of these contracts by contract value are awarded by the Department of Defense (DOD), we also provide a country breakdown of DOD contracts performed outside the United States and awarded to foreign-owned and –located firms. See table 16. Appendix IV: Methodology for Addressing Missing Contract Award Values in the Tenders Electronic Daily Database European Union To report on European Union (EU) procurement data in the Tenders Electronic Daily (TED) database for 2015, we took steps to address missing contract award values, which amounted to approximately 15.2 percent of the 38,233 in-scope contract award values. To address these missing contract award values, we implemented a multiple imputation methodology that imputes a range of values for each missing contract award value and allows for estimation of additional uncertainty induced by the imputation methodology. After determining that the data were likely to be conditionally missing at random, we used predictive mean matching (PMM) to address missing values as described below. We determined that using PMM was appropriate because it can provide more robust results when the relevant variable is not normally distributed; PMM, as a form of multiple imputation, allows us to assess the variability introduced through the process of addressing missing data; and PMM, when properly specified, does not distort averages or variance in the underlying data. As we discuss below, the method for addressing missing values used by the EU has none of these features. In PMM, a regression model is first fit to complete cases in the dataset to predict values for the variable of interest for the entire dataset (i.e., including complete and incomplete cases). These predicted values are used to identify complete observations (“donors”) that are close (a “match”) to a given observation that is missing a value for the variable of interest. The PMM model draws matches using the posterior predicted distribution of the regression model. When PMM is used in conjunction with multiple imputations, this process is repeated multiple (m) times for each missing value. As a result, each of m imputations may match to a different donor. The donor’s observed value for this variable is donated to fill the blank data cell—not the predicted value used to match to this donor. The strength of the predictive model used to identify these matches will affect variation in the set of m imputed values because a better predictive model will identify donors that have observed values more consistently close to their predicted values. In order to specify our PMM model, we first explicitly tested the Ordinary Least Squares regression model used to match donors as part of the process discussed above. We performed standard regression diagnostics, including an examination of the included variables and residuals to avoid overfitting. We found that our model was able to explain 86 percent of variation in contract award values and appeared to have well-behaved (homoscedastic) residuals. We drew m=30 imputed values for each missing observation using the PMM process described above, which allowed us to generate estimates of the total contract value amounts and measure the uncertainty induced in those estimates by the imputation methodology. We used these measures of uncertainty to construct 95 percent confidence intervals and express these values as a percentage relative to the estimate itself. To assess the quality and reliability of the multiple imputations that followed from this predictive model, we performed four main sensitivity checks, which are included in tables 17 and 18. 1. We examined the proportion imputed for each subset of the data that we planned to report. The column headed “Percent imputed contract awards” shows the proportion of the count of contracts in a given data subset that were imputed using the methodology described above. We looked to avoid any individual subset being substantially greater than the overall average of 15 percent imputed. In practice, we individually checked any subset exceeding 30 percent imputed. 2. We evaluated the level of uncertainty induced by the imputation methodology across important subgroups of the data. The column headed “95 percent confidence interval +/-” indicates the percent of the “Contract award value estimate” that, when added and subtracted to this estimate, forms the 95 percent confidence interval. The level of uncertainty expressed in the relative confidence interval results from between-imputation variance, which could indicate extreme or inconsistent matches. We looked for confidence intervals that were, in our judgment, narrow as a proportion of point estimates. In practice, nearly all of the subgroups we are choosing to report have confidence intervals smaller than plus or minus 3.5 percent of point estimates. 3. We evaluated the percent of imputed values across important subgroups of the data. “Percent of imputed value duplicates” is a diagnostic column to test for sparseness of imputation matches among the 30 imputed values for each imputed contract award. We determined the number of duplicate imputation draws among the 30 imputed values for each observation, which could indicate sparseness in the number of suitable matches or overfitting of the model. We intended to inspect any finding with more than about 5 out of 30 (17 percent) duplicated imputation draws; in practice, however, this threshold was not reached for any subsets of the data that we have chosen to report. 4. We compared estimates resulting from our imputation methodology to published EU reports across important subgroups of the data. “Alternative estimate (EU’s missing value methodology)” shows the results of replicating a methodology for correcting missing data described in EU documents and used for some EU reports. The EU methodology is based primarily on the average value of contracts that are present in the dataset. This provides a general point of comparison, allowing us to determine which subsets of the data are likely to be responsible for estimation differences with prior EU publications. This comparison methodology therefore provides a benchmark but not a diagnostic for the imputation models. There are several important differences between our imputation methodology and the EU’s methodology. a. Calculation of confidence intervals: The EU’s methodology results in the same value substituted for every contract award of a given type (construction goods, and services). As such, it is not possible to estimate confidence intervals for a given observation or group of observations using this methodology. In contrast, the multiple imputation models include estimates of uncertainty. b. Distortion of subgroup averages: The EU’s methodology is not sensitive to differences in group averages apart from contract type. As a result, it may distort subgroup averages. For example, if hypothetical Country A has services contracts that average $100 but the overall average for services contracts is $1,000, substituting the overall average into missing values for Country A as the EU methodology would have the effect of significantly distorting Country A’s characteristics. In contrast, the imputation models we used are designed to be sensitive to all significant reported differences in contract awards because we included all reported variables in our imputation models. Norway To report on Norway procurement data in the TED database for 2015, we needed to take steps to address missing contract award values (153 of 1,319 missing, or about 11.5 percent). The scale of the missing values is thus smaller than for the EU data, while the dataset as a whole is too small, in our judgment, to support correction through an imputation model. Our statistical tests found no evidence that contract award values were conditionally missing at random. Thus, we assume that the data are missing completely at random and corrected the missing data using post- stratification estimation techniques. To do so, we treated the database of contract awards as the full population of such contract awards, which provides the full joint distribution of contract attributes. We treated the complete observations (88.5 percent of the total) as our sample of this population. Post-stratification adjusts the sampling weights for this sample so that the joint distribution of post-stratifying variables, which we selected based on our reporting needs, matches the known population joint distribution. Based on the resulting confidence intervals, we determined that the post- stratification sampling results in data are sufficiently reliable for subsets defined by foreign status and contract type (see table 20) or by foreign status and GPA coverage (see table 21). Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Kimberly Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov. Staff Acknowledgments In addition to the contact named above, Adam R. Cowles (Assistant Director), Marisela Perez (Analyst-in-Charge), Gergana T. Danailova- Trainor, Ben Bolitzer, Andrew Kurtzman, and Julia Kennon made major contributions to this report. James Ashley, Peter Choi, David Dayton, Christopher Keblitis, Grace P. Lui, John Yee, and Timothy Young provided technical assistance.

Globally, government procurement constitutes about a $4 trillion market for international trade. However, little is known about foreign sourcing in government procurement—how much governments procure from foreign-located suppliers or how much they acquire in foreign-made goods. GAO was asked to review the extent of foreign sourcing in government procurement across countries. GAO focused on the United States and the other six main parties to the GPA and NAFTA, selected international agreements that open procurement markets on a reciprocal basis. This report, the fourth of a related series, (1) provides broad estimates of foreign sourcing by the U.S. government and central governments of the other six main parties, and (2) assesses foreign sourcing as a share of estimated central government procurement and of estimated procurement by all levels of government, and the extent to which central government contracts that are covered under selected international procurement agreements are foreign-sourced. GAO analyzed the most recent comparable data available from two sources: (1) government procurement databases used in Canada, the European Union, South Korea, Mexico, Norway, and the United States, for 2015, and (2) 2014 trade data merged with data on the types of goods and services purchased by the public sector. Since Japan does not have a government procurement database, data for Japan were based on its 2015 GPA submission of 2013 data. GAO also interviewed cognizant government officials in Washington, D.C.; Ottawa, Canada; Mexico City, Mexico; Seoul, South Korea; and Tokyo, Japan. The U.S. government awarded contracts valued at about $12 billion to foreign-located firms, of which about $5 billion went to firms with reported locations in the other six main parties to the World Trade Organization Agreement on Government Procurement (GPA) and the North American Free Trade Agreement (NAFTA) (see figure). Conversely, government procurement databases indicated the central governments of these parties awarded an estimated $7 billion to foreign sources, out of which about $2 billion was U.S.-sourced. Canada and Mexico awarded most of the U.S.-sourced contracts. GAO was able to determine that the U.S. government awarded more, by contract value, to foreign-owned firms located abroad than to foreign-owned, U.S.-located firms. Moreover, more than 80 percent of U.S. government contracts awarded to foreign-owned firms located abroad were Department of Defense contracts performed abroad. Overall, while available contract data enable broad cross-country comparisons, they do not necessarily show where the goods are produced, where the services are delivered, or where the profits go, among other economic effects. Foreign sourcing by the seven GPA and NAFTA parties within the scope of the study, using two alternative methods, is less than 20 percent of overall central government procurement. Foreign sourcing by central governments, estimated from government procurement databases of the United States and the other six main parties, varied in value by party from about 2 to 19 percent of overall central government procurement. Foreign sourcing by all levels of government, estimated from data on trade and public sector purchases, showed that the governments' imports likely ranged from about 7 to 18 percent of the goods and services the governments purchased. In addition, contract data show that U.S., South Korean, and Mexican central government foreign sourcing was greater in value under contracts covered by GPA and NAFTA than under noncovered contracts, but the opposite was true for Canada and Norway. For the European Union and Japan, GAO found little difference or could not calculate an estimate.

GAO_GAO-20-245

Background Federal Agencies’ Roles and Responsibilities for Processing Family Units After Border Patrol agents or OFO officers apprehend noncitizen family units, they are to interview each individual, using interpreters if needed, and collect personal information such as their names, countries of nationality, and age. Agents and officers also collect biometric information, such as photographs and fingerprints, from certain individuals, including those in family units. Border Patrol agents and OFO officers use fingerprints to run records checks against federal government databases to determine whether individuals have any previous immigration or criminal history. Agents and officers are to enter information about the individuals in the appropriate automated data system as soon as possible, in accordance with CBP policy. According to Border Patrol and OFO officials, if noncitizens are determined to be ineligible for admission into the United States, agents and officers must determine whether to place them, including those arriving in family units, into full or expedited immigration removal proceedings, consistent with the Immigration and Nationality Act. In full removal proceedings, individuals have the opportunity to present evidence to an immigration judge to challenge their removal from the country and apply for various forms of relief or protection, including asylum. In expedited removal proceedings, the government can order individuals removed without further hearing before an immigration judge unless they express the intent to apply for asylum or a fear of persecution or torture if returned to their home country. Most arriving family units are eligible to be placed into expedited removal proceedings, with certain exceptions, according to Border Patrol and OFO officials. A 2015 CBP policy requires CBP’s agents and officers to record such decisions for each family unit member in agency data systems. Further, Border Patrol agents and OFO officers print copies of the information they enter into data systems to create a paper file, known as an “A-file,” for each family unit member they apprehend. One of the key required DHS forms in the A-file is Form I-213, Record of Deportable/Inadmissible Alien (Form I-213). Among other things, this form captures biographic information and includes a narrative section for agents and officers to capture details about the circumstances of the apprehension. According to Border Patrol and OFO headquarters officials, each family unit member’s A-file is reviewed and approved by a supervisor. If CBP or ICE determines that a family separation is warranted, agents or officers process the child or children as UAC, according to Border Patrol, OFO, and ICE officials. ICE’s Office of Enforcement and Removal Operations is generally responsible for transferring these children, including those separated from a parent, as appropriate, to ORR. Under the Trafficking Victims Protection Reauthorization Act of 2008, children must be transferred to ORR within 72 hours after determining that they are UAC, except in exceptional circumstances. Table 1 provides additional details about DHS and HHS roles in processing family units. DHS officials told us that CBP typically holds family units together for a limited time before transferring them together to ICE, in accordance with CBP policy. During that time, agents and officers decide on a case-by- case basis whether to place each family unit in expedited or full immigration proceedings, according to Border Patrol and OFO officials. Individuals, including family unit members, placed in expedited removal proceedings and who express a fear of persecution or torture are generally subject to mandatory detention under the Immigration and Nationality Act pending a final credible fear determination. As a result, Border Patrol and OFO officials stated that its agents and officers typically determine whether ICE has space in its family residential centers before processing family units into expedited removal proceedings. From June 2014 through October 2019, ICE, during various periods, operated four family residential centers in Texas, Pennsylvania, and New Mexico for family units who may be subject to removal while they await the resolution of their immigration cases or who have been ordered removed from the United States. As of October 2019, ICE maintains three family residential centers—in Dilley, Texas; Karnes City, Texas; and Leesport, Pennsylvania—with a cumulative capacity of 3,326 beds. For information about these facilities, see table 2. Timeline of Family Separation Policies CBP has historically separated children apprehended in family units from their parent(s) in specific circumstances, such as if the parental relationship could not be confirmed, if there was reason to believe the adult was participating in human trafficking, or if the parent was otherwise a threat to the safety of the child. As we reported in October 2018, ORR officials began observing an increase in the percentage of children in its care who were separated from their parents beginning in 2017. ORR officials stated they saw a continued increase in separated children in their care in the first few months of calendar year 2018. In April 2018, the U.S. Attorney General directed federal prosecutors to implement a zero-tolerance policy along the southwest border for immigration offenses and to accept all improper entry cases referred for prosecution to the extent practicable. According to DHS officials, after the Attorney General’s April 2018 memo, CBP began referring a greater number of adults apprehended at the border to the Department of Justice for criminal prosecution, including parents who were apprehended with minor children. CBP generally then separated the family unit, and after processing the children as UAC, CBP transferred them to ORR custody. According to CBP headquarters officials, the goal of the zero tolerance policy was to deliver a consequence to those crossing the border illegally by charging and convicting them of a crime, specifically a criminal conviction for improper entry, which is generally a misdemeanor. This could then lead to escalating criminal consequences for subsequent apprehensions, since noncitizens—in this case, adults in family units— entering the United States illegally for a second time could be charged with illegal reentry after removal from the United States, a felony offense. On June 20, 2018, the President issued an executive order directing that alien families generally be detained together. On June 26, 2018, a federal judge ruled in the Ms. L. v. ICE case, which was filed by the American Civil Liberties Union on behalf of certain parents (referred to as class members) who had been separated from their children. The June 2018 court order stated that certain separated parents must be reunited with their minor children, barring certain disqualifying criteria. On June 27, 2018, the CBP Commissioner issued a policy memorandum to provide direction on complying with the court order, to include potential reasons why a family separation may still be warranted. Figure 1 describes key actions since the Attorney General’s April 2018 memo that have influenced how DHS determines when family separations are warranted. On July 10, 2018, the court approved reunification procedures for the class members covered by the June 2018 court order. At that time the approved class included those adult parents separated from their children by DHS whose children were in ORR custody as of June 26, 2018, barring certain disqualifying criteria. Subsequently, on March 8, 2019, the court ordered an expansion of the class members to include all adult parents, subject to the same disqualifying criteria, who entered the United States at or between designated ports of entry on or after July 1, 2017, and were separated from their children by DHS. As of January 15, 2020, the government provided to the plaintiffs 11 lists identifying a total of 1,556 children of potential expanded class members. This brought the total number of possible separated children of potential class members to 4,370. Number of CBP Apprehensions of Family Unit Members Was Greater in the First Two Quarters of Fiscal Year 2019 Than in All of Fiscal Year 2018 CBP data indicate that the number of CBP apprehensions of family unit members was greater in the first two quarters of fiscal year 2019 than in all of fiscal year 2018. In addition, apprehensions of family unit members increased from approximately 22 percent of all southwest border apprehensions in fiscal year 2016 to approximately 51 percent of all such apprehensions in the second quarter of fiscal year 2019. The data also indicate that the majority of CBP apprehensions of family unit members were Central American nationals and the majority of apprehensions of children in family units were for children under the age of 12. Further, the data indicate that CBP placed family unit members in full removal proceedings before immigration courts at an increasing rate, and most were released into the United States to await their immigration court proceedings. Finally, CBP data indicate that CBP separated at least 2,700 children from their parents from April 2018 through March 2019. CBP’s Apprehensions of Family Unit Members Increased to Approximately 51 Percent of All Southwest Border Apprehensions in Second Quarter Fiscal Year 2019 CBP data indicate that the number of apprehensions of family unit members along the southwest border increased from about 120,400 apprehensions in fiscal year 2016 to about 160,400 apprehensions in fiscal year 2018. Further, CBP apprehensions of family unit members reached about 213,400 during the first two quarters of fiscal year 2019 alone—approximately a 33 percent increase over the entire previous fiscal year. Cumulatively, along the southwest border, CBP apprehensions of family unit members reached about 599,000 apprehensions from fiscal year 2016 through the second quarter of fiscal year 2019 (see fig. 2). As shown in figure 3, CBP data indicate that apprehensions of family unit members grew from about 22 percent of total southwest border apprehensions in fiscal year 2016 to about 51 percent of such apprehensions during the first two quarters of fiscal year 2019. CBP data indicate that, during this period, OFO apprehensions of family unit members at U.S. ports of entry accounted for approximately 24 percent of all such CBP apprehensions. Border Patrol apprehensions of family unit members between ports of entry accounted for approximately 76 percent of all such CBP apprehensions. About 63 percent of CBP’s total family unit member apprehensions occurred in just three Border Patrol sectors in Texas and Arizona (see fig. 4). The Majority of CBP Apprehensions of Family Unit Members Were Central American Nationals, and the Majority of Children in Family Units Were under Age 12 CBP data indicate that most apprehensions of family unit members from fiscal year 2016 through the second quarter of fiscal year 2019 were of Central American nationals and that the majority of children in family units were under the age of 12. Figure 5 shows that from fiscal year 2016 through the second quarter of fiscal year 2019, the vast majority of these apprehensions—about 82 percent—were nationals of Guatemala, Honduras, or El Salvador. Additionally, about 10 percent of apprehensions of family unit members were of Mexican nationals and approximately 7 percent were nationals of other countries. From fiscal year 2016 through the first two quarters of fiscal year 2019, CBP apprehensions of children in family units totaled approximately 327,600. About 72 percent of these apprehensions were of children under the age of 12 when apprehended by CBP, and about 32 percent were under age 5 (see table 3). Border Patrol also maintains information in its data system that allowed us to analyze the composition of family units, that is, whether the family unit was headed by a male or female and how many children were in the family unit. Most family units apprehended by Border Patrol—about 85 percent—consisted of a single parent travelling with a single child. Most family units were led by a single female in fiscal year 2016; however, the number of households led by single males increased and, for the first two quarters of fiscal year 2019, accounted for almost half of the family units Border Patrol apprehended. Appendix II contains additional information about the composition of family units, including the immigration history of adult family members. CBP Placed Family Unit Members in Full Removal Proceedings before Immigration Court at an Increasing Rate and Most Were Released Into the United States to Await Proceedings From fiscal year 2016 through the first two quarters of fiscal year 2019, CBP placed an increasing percentage of family unit members into full removal proceedings. Specifically, CBP data indicate that around 46 percent of all apprehensions of family unit members in fiscal year 2016 resulted in the family unit members receiving Notices to Appear before an immigration court, which initiate full removal proceedings; around 88 percent received Notices to Appear during the first two quarters of fiscal year 2019. Conversely, CBP data indicate that CBP placed a decreasing percentage of all apprehensions of family unit members into expedited removal proceedings during this period. Specifically, the percentage declined from about 42 percent of all apprehensions of family unit members in fiscal year 2016 to about 6 percent during the first two quarters of fiscal year 2019. CBP officials stated that, since the volume of family units apprehended at the border increased in 2018, they have placed fewer family unit members into expedited removal proceedings, for which detention is generally mandatory, due to limited space for family units in ICE’s family residential centers. Department of Homeland Security’s (DHS) Migrant Protection Protocols In January 2019, DHS introduced the Migrant Protection Protocols, also referred to as the “Remain in Mexico” program, at selected ports of entry and, as of March 2019, within certain Border Patrol sectors. Under this policy, CBP issues eligible individuals, including family unit members, Notices to Appear before an immigration court, thereby initiating full removal proceedings. After CBP agents and officers complete processing duties, DHS officials stated that CBP returns the individuals to Mexico to await their court proceedings, rather than releasing them into the interior of the United States. According to CBP officials, through the end of fiscal year 2019, CBP processed approximately 44,200 individuals—among which about 30,100 individuals, or 68 percent, were family unit members—using the Migrant Protection Protocols. While ICE generally has the authority to detain individuals for the duration of their full removal proceedings, CBP and ICE officials stated that ICE faces constraints that typically prevents it from doing so for family units. Specifically, the limited amount of space at family residential centers is reserved for those family units placed in expedited removal. Therefore, according to ICE and CBP officials, with few exceptions, during the period of our review, family units placed into full removal proceedings were released into the United States to await their court proceedings. According to ICE officials, even if there was more detention space for family units, there are other constraints that would prevent ICE from detaining family unit members (placed into full removal proceedings at any point) for the duration of their court proceedings. Specifically, children may generally only be held in federal immigration detention for 20 days pursuant to the Flores Agreement. Due to the duration of full removal proceedings, most full removal proceedings take longer than 20 days. CBP Separated at Least 2,700 Children from Their Parents from April 2018 through March 2019 According to Border Patrol and OFO data, CBP separated at least 2,700 children from April 19, 2018, through the second quarter of fiscal year 2019. As we discuss later in this report, CBP may have separated additional children from their parents during this period and not recorded this information in its data systems. As a result, we are reporting approximate, rounded figures on family separations. Specifically: Border Patrol updated its data system to track family unit separations on April 19, 2018, and issued written guidance to its agents about these changes on May 7, 2018, and August 2, 2018. From April 19, 2018, through March 31, 2019, Border Patrol data indicate that agents separated at least 2,670 children. OFO updated its data system to track family unit separations on June 26, 2018, and issued guidance on these changes to its officers on June 29, 2018. From June 30, 2018, through March 31, 2019, OFO data indicate officers separated at least 30 children. As shown in table 4, CBP data indicate that the number of family unit separations was highest between April 19, 2018 and June 27, 2018, due to DHS’s response to the U.S. Attorney General’s April 2018 zero tolerance policy (see table 4). CBP data also indicate that a small percentage of all children that arrived in family units—fewer than 2 percent—were separated from their parents during these time frames. Appendix II provides additional information about the characteristics of family units separated by CBP. Border Patrol and OFO data indicate that the reasons for these family unit separations varied. Regarding Border Patrol, as of April 19, 2018, agents were able to record a family separation and select from options to explain the reason for it in Border Patrol’s automated data system. Border Patrol data indicate that the reasons that 97 percent of the adults and children separated from April 19 through June 27, 2018, were because agents referred the parent to the Department of Justice for criminal prosecution on charges for criminal history or other reasons, or due to a prior immigration violation(s) and a removal order. Table 5 shows the reasons for family separations indicated in Border Patrol data from April 19, 2018 through March 31, 2019. Regarding OFO, as of June 30, 2018, officers were to record the reason for any family unit separation with the child’s record in OFO’s automated data system. From June 30, 2018 to March 31, 2019, OFO data indicate that about 50 percent of adults and children were separated due to the criminal history of the adult or a child safety concern. Table 6 shows the reasons for family separations indicated in OFO data from June 30, 2018 through March 31, 2019. CBP Developed Some Policies and Procedures for Processing Family Units but Does Not Have Sufficient Controls to Ensure Effective Implementation Border Patrol and OFO Have Policies and Procedures for Collecting Data on Family Units, and OFO Is Updating Its Data System to Link Parents’ and Children’s Records Since 2015, Border Patrol and OFO have issued policies and updated procedures regarding the information to be collected about family units and family separations, increasing the amount of data collected for family units. For example, Border Patrol and OFO have updated their data systems to better track the number of individuals apprehended as part of family units and to record when and why family separations occur. Specifically, Border Patrol updated its data system in October 2015 to track whether individuals were apprehended as members of a family unit and again in 2018 to track family separations. On October 2, 2015, the Chief of the Border Patrol issued policy guidance requiring agents to process family units together in its data system with a unique identifier called a “family unit number,” which links the records of parents and children apprehended together. Border Patrol updated its system on April 19, 2018 and on August 2, 2018, to track the number of separated adults and children and the reasons for the separations, and issued guidance to its agents about these updates. New Border Patrol agents also receive mandatory training on, among other topics, recording information into agency data systems, including procedures specific to family units. OFO updated its data system to track whether children under the age of 18 arrived as part of a family unit and whether they were separated from a parent (or other family member) with whom they arrived. OFO headquarters officials stated the updates were made during fall 2015. On June 29, 2018, OFO issued a policy memorandum that, among other things, required officers to track family separations in OFO’s data system, and announced system updates to allow officers to select a separation reason. This and subsequent data system updates allowed officers to identify which separations were temporary (in which the family was reunited while still in OFO custody), and which were permanent (resulting in OFO referring a child to ORR), according to OFO officials. All OFO officers hired as of March 2011 receive mandatory training on certain processing procedures, including recording information into agency data systems. As of October 2019, OFO’s data system does not have the capability— such as by using a family unit number—to link the records of noncitizen parents and children apprehended together and thus cannot determine the total number of adults involved in family separations. OFO is implementing a new data system across all ports of entry that includes a function to link the records of parents and children in family units using a unique identifier. According to OFO officials, OFO began developing the new data system in August 2017 and, as of October 2019, has implemented it at 90 ports of entry, none of which are land ports of entry along the southwest border. In June 2019, OFO officials stated they planned to train OFO officers on the new data system at land ports of entry along the southwest border in late summer 2019, but as of October 2019 that timeline had been delayed due to the high volume of family units apprehended that summer. According to OFO headquarters officials, they expected to deploy the new system to locations along the southwest border on an ongoing basis as conditions allow. It is too soon to determine whether the new data system will enable OFO to link children apprehended at ports of entry to their parents and allow for OFO to track the total number of family members separated in its aggregated data. It is also too soon to determine whether the new system will provide OFO officers with more readily available information that could help reunify separated family units, if necessary. Border Patrol Updated Policy Documents for Processing Family Units in April 2019, but Border Patrol and OFO Training Materials Still Include Inconsistent Definitions of Family Units Since October 2015, some Border Patrol and OFO documents have included inconsistent guidance on how agents are to define a family unit for processing purposes. CBP’s 2015 policy defines a family unit to include one or more non-U.S. citizen juvenile(s) accompanied by his or her parent(s) or legal guardian(s), which Border Patrol agents confirmed is the agency’s official definition that should guide how its agents process family units. However, as shown in table 7, certain Border Patrol policy documents since October 2015 have also stated that “all members of the apprehended family unit must be non-criminal and/or non-delinquent and have no history of violence or substance abuse.” As a result, individuals in family units that Border Patrol considered criminal, delinquent, or to have a history of violence or substance abuse may not have been included in Border Patrol’s aggregated data on apprehended family units and family separations (once the agency began tracking separations in April 2018), because agents did not define and process them as family units. We raised these inconsistencies to Border Patrol headquarters officials in April 2019, and they acknowledged that certain policy and training documents contained inaccurate definitions and guidance, which could have led some agents to process certain parents and children separately, without a family unit number to link their records. Specifically, they stated that the language requiring that “all members of the family unit must be non-criminal and/or non-delinquent, and have no history of violence or substance abuse” should not be included in Border Patrol’s definition of a family unit. In addition, officials noted that any guidance directing agents to process a family unit separately in the data system, as a single adult and UAC rather than linked together with a family unit number, due to a planned prosecution referral is inconsistent with Border Patrol’s processing procedures. They stated this was an oversight and not an intentional change to the agency’s official definition as indicated in CBP’s 2015 policy. The Border Patrol headquarters officials were unsure of how often the inconsistent definitions and guidance may have led agents to incorrectly process family units. On the basis of our analysis of Border Patrol and ORR data, we found evidence that agents processed some family units separately, as single adults and UAC, without a family unit number or record of their separation. Specifically, for children apprehended from June 28, 2018 through March 31, 2019, we compared ORR numbers on UAC involved in family separations to Border Patrol apprehension data on separated children. During that period, ORR records indicated that DHS separated 396 children, while Border Patrol apprehensions data indicated that it separated 180 children. Border Patrol headquarters officials confirmed that the discrepancy we identified between Border Patrol data and ORR records may be attributable, in part, to the agents processing family units incorrectly and separately, without assigning them a family unit number. To better understand the discrepancy between the ORR and Border Patrol data, we selected a random, nongeneralizable sample of 40 ORR records for UAC involved in family separations from June 28, 2019 through March 31, 2019, and found matches for each of the children in Border Patrol apprehensions data. In 14 of the 40 selected ORR records, Border Patrol data indicated the agent had not recorded the child as a member of a family unit linked to a parent’s record with a family unit number. Thus, Border Patrol agents had not recorded the subsequent separation when agents referred the children to ORR as UAC. A Border Patrol headquarters official stated that it is also likely that some agents were processing family units separately, rather than linking them with a family unit number, from May to June 2018 when agents were referring parents for criminal prosecution in response to the April 2018 zero- tolerance policy. The official stated that agents may not have realized that assigning a family unit number was necessary to track the separation in the Border Patrol data. During the course of our audit, we discussed this issue with Border Patrol and, as a result, Border Patrol issued new guidance to its sectors in April 2019 with an updated definition of family units consistent with CBP policy. According to Border Patrol officials, Border Patrol also removed previous policy documents, with the incorrect definitions and guidance, from a website accessible to all Border Patrol agents. However, as of late November 2019, Border Patrol training materials still direct agents to process a parent and child separately, without a family unit number, if a family member has a history of criminality, delinquency, violence, or substance abuse, or if Border Patrol plans to prosecute the parent. This definition and guidance, inconsistent with CBP policy, has been included in training provided to all new agents at Border Patrol’s basic training program since at least October 2017. According to officials from the Border Patrol Academy, which is responsible for updating training materials in coordination with program officials, they plan to update the training materials in 2020. In the meantime, since September 2019, the Border Patrol Academy has been providing trainees with a handout that includes a definition of family units consistent with CBP policy. Regarding OFO, we also found that since 2012, training materials for new officers have included a definition of a family that is inconsistent with CBP and OFO policy. Specifically, OFO training materials issued in January 2012—and in use as of November 2019—define a “family group” as “a juvenile who is accompanied by closely related adults (parent, grandparent, brother, sister, or legal guardian)” and considers the juvenile to be UAC if “the juvenile is accompanied by relative(s) not closely related.” The training document does not include a definition for “family unit.” However, other key OFO policy documents issued subsequently define family units in a way that is consistent with CBP policy—namely, a February 2016 memo on processing family units in OFO’s data system and a June 2018 memo on tracking family separations. We raised the discrepancy in OFO’s training materials with OFO headquarters officials in June 2019. OFO officials were unsure whether this definition had led any officers to incorrectly process adults and children as family units when they did not meet CBP’s definition of a family. OFO headquarters officials stated the training materials were inconsistent with CBP and OFO policy, and officials from CBP’s Office of Training and Development stated they updated the training materials and provided them to OFO in late November 2019. However, as of December 2019, CBP had not provided us with the updated materials to verify that the revisions are consistent with CBP policy. Standards for Internal Control in the Federal Government states that management should design control activities, including by providing the right training tools to achieve operational success. In addition, in GAO’s Guide for Strategic Training and Development Efforts, we have reported that senior managers need to continually observe and assess how changes, such as in policies or practices, may affect the agency’s training needs. This is one way, among others, to help ensure that the agency has a framework to achieve its mission. Border Patrol and OFO officials acknowledged the need to update training materials with definitions and guidance, consistent with CBP policy; they explained that they had not yet done so due to the considerable time and coordination it requires. Issuing updated training materials that reflect CBP policy would help CBP ensure that Border Patrol agents and OFO officers are processing family units appropriately and tracking all separations. CBP Has Policies and Procedures to Address Concerns about the Validity of Family Unit Relationships but Does Not Have Sufficient Guidance to Ensure Cases Are Well Documented CBP has policies and procedures for assessing the validity of family units, but does not have written guidance to help ensure that these cases are well documented, as required by CBP policy. Assessing the Validity of Family Relationships CBP has policies and procedures for assessing the validity of family unit relationships. During processing, Border Patrol and OFO officials said that it is standard practice for agents and officers to assess whether (1) adults and children apprehended together meet CBP’s definition of a family unit and (2) whether agents and officers deem the claimed family relationships to be potentially invalid. A CBP policy issued on June 27, 2018, states that “fraudulent claims of family relationships” should be processed under “current CBP policies and procedures.” In practice, this means that agents and officers are to consider the validity of family relationships on a case-by-case basis with the information they have available at that time, according to Border Patrol and OFO headquarters officials. For example, these officials stated that agents and officers review any available documentation, such as birth certificates, presented by individuals; monitor interactions between adults and children to assess whether interactions are typical of that of a parent and child; and generally use their law enforcement training, such as interviewing skills, to help assess the validity of family relationships. Border Patrol and OFO officials noted that, in some instances, individuals have admitted to falsely posing as a family, while other times agents and officers have to make an assessment based on the totality of the information available to them. In accordance with CBP policy, Border Patrol and OFO are to generally hold individuals no longer than 72 hours, so Border Patrol and OFO officials stated they must assess the validity of the family units based on available information during the time they have individuals in custody. According to Border Patrol and OFO officials and documents, they have observed cases in which (1) a family unit claims a child is under 18 years of age, but agents suspect the child is older, and thus they do not meet CBP’s definition of a family unit, or (2) the adult claims to be the parent, but Border Patrol has concerns that the adult is another family relation, such as an aunt or older sibling, or the adult is not related to the child at all. In June 2019, the Acting Secretary of Homeland Security testified that CBP identified “almost 4,800 migrants this year” in family units that CBP agents and officers determined to be “fraudulent” in nature. In cases when Border Patrol agents or OFO officers, with approval from their respective supervisors, assess that the relationship of a family unit may not be valid, the child is to be processed as a UAC and transferred to ORR. Specifically, according to Border Patrol and OFO officials and documents, agents and officers are to indicate in their data systems that the adult and child were separated and the reason why, and then refer the child to ORR as a UAC. For Border Patrol, this process involves removing the family unit number linking their records. Border Patrol and OFO do not consider these cases to be family separations, since CBP assessed that the individuals may not be part of a valid family unit. According to CBP’s June 2018 policy, if a child arrives with an adult claiming to be the child’s parent, a supervisory-level OFO or Border Patrol official must give approval before an agent or officer transfers a child to ORR as a UAC. According to Border Patrol and OFO headquarters officials, if an adult wishes to appeal CBP’s assessment, the adult may raise the issue with ICE officers when transferred to an ICE detention facility. Border Patrol headquarters officials told us that its agents generally explain to the adults that Border Patrol is processing them separately from the children they arrived with due to concerns about the validity of the family relationship. OFO headquarters officials told us that OFO does not generally notify adults when processing the adults and children in potentially invalid family units because they stated they do not want to jeopardize the safety of the child if they suspect fraud, smuggling, or trafficking. According to Border Patrol and OFO officials, they may separate adults and children who they are concerned might not be valid family units to ensure the safety of the child—for example, if agents and officers cannot be certain that the child has not been a victim of trafficking by the accompanying adult. Further, Border Patrol, OFO, and ICE officials stated that ICE and ORR are better positioned to further investigate these cases if an adult refutes CBP’s assessment that the family unit was invalid, because CBP must generally hold individuals for a short period. In addition, ICE and ORR are the agencies most involved in reunifying family units, when appropriate. Documenting Cases of Potentially Invalid Family Relationships CBP began tracking the number of potentially invalid family units in 2018. On April 19 and June 29, 2018, Border Patrol and OFO, respectively, issued guidance about updates to agency data systems and issued guidance to enable agents and officers to record potentially invalid family units. That is, if the appropriate Border Patrol and OFO managers give approval, agents and officers separate potentially invalid family units, and record the separation and the reason for it in agency data systems, according to Border Patrol and OFO officials and documents. More specifically: Border Patrol agents are to delete the family unit number from the parents’ and children’s records, and indicate the reason from options that include “child is over the age of 18,” “no family relationship,” or “no family relationship–prosecuted.” OFO officers are to indicate that a child was separated from the adult with whom they arrived, and are to indicate the reason as “fraudulent relationship.” Border Patrol and OFO officials noted observing cases of potentially invalid family units, and Border Patrol data indicate an increase in the number since Border Patrol began tracking the cases in April 2018. Specifically, during our fall 2018 visits to ports of entry and border stations in Texas and California, Border Patrol and OFO officials stated they have observed suspected or confirmed cases of adults falsely claiming to be a child’s parent, including occasional instances of seeing the same child apprehended multiple times, but with different adults claiming to be their parents. From April 19, 2018 through March 31, 2019, CBP data indicate that CBP referred at least 921 children to ORR (918 by Border Patrol and 3 by OFO) due to CBP’s concerns that the family relationships were potentially invalid. During the same period, Border Patrol data also indicated that 2,245 adults were processed separately from the children with whom they were apprehended due to concerns about the validity of the family relationships. By comparison, Border Patrol data indicated that agents processed 256,743 adults and children in valid family units during this period. However, from July 1, 2018 through March 31, 2019, the number of individuals Border Patrol assessed as part of potentially invalid family units grew at a faster rate than the number of individuals apprehended in valid family units. Specifically, the average monthly increase in adults and children Border Patrol assessed to be in potentially invalid family units rose by about 70 percent per month, on average, during this period. Meanwhile, Border Patrol data indicate the rate of increase for adults and children in valid family units was about 53 percent per month, on average. However, some of the family units that CBP assessed to be potentially invalid are subsequently found to be valid, according to ORR and ICE officials. According to ORR officials and records of UAC involved in family separations from June 28, 2018 through June 28, 2019, ORR was aware of only 46 cases in which CBP referred a child to ORR care because CBP had assessed the family unit to be invalid. In at least 10 of those cases, the family was later determined to be valid and the child reunited with his or her separated parent, according to ORR officials, as of June 2019. Anecdotally, ICE headquarters officials stated that there are occasionally cases in which CBP referred a child to ORR because agents or officers assessed the family to be an invalid family unit, but ICE or ORR later determined the family was valid and eligible to be reunified. For example, ORR’s records on family separations included instances in which the validity of family relationships was determined through DNA testing. ICE officials stated that its officers are able to conduct additional research about the validity of family relationships, as needed, once an adult has been transferred to its custody and the child to ORR. However, ICE does not track how often potentially invalid family units are later assessed to be valid and reunited, and, therefore, could not provide an exact number of how often this has occurred. DHS and ICE officials have tracked the outcomes of some deployments of ICE officers to help CBP assess the validity of family relationships. Specifically, the Acting Secretary of Homeland Security testified before the Committee on Oversight and Government Reform in the House of Representatives on July 18, 2019 that CBP agents and officers referred 2,475 family unit members they suspected had invalid family relationships to go through an additional assessment by ICE officers who, among other training and skills, have specialized forensic interviewing skills. The ICE officers assessed 352 of the 2,475 individuals—approximately 14 percent—to be invalid family members. Additionally, an ICE official also testified before the Senate Committee on Homeland Security and Governmental Affairs on June 26, 2019, and described a May 2019 pilot that involved voluntary rapid DNA testing for some individuals. According to this official, 16 of the 84 family units tested, around 19 percent, proved not to be the parent of the child with whom they arrived. According to ICE officials, those family units it determined to have valid family relationships while still in CBP custody, based on the available evidence, remained together as a family unit and were not separated. On June 27, 2018, the CBP Commissioner issued a policy memorandum requiring that “fraudulent claims of parental or legal guardianship relationship” should be “well-documented to support such claims”; however, CBP does not have guidance to clarify how agents and officers are to fulfill that requirement. Border Patrol and OFO headquarters officials indicated that taking the aforementioned steps to record information in agency data systems meets the CBP policy requirement for documentation. In addition, according to Border Patrol and OFO officials, agents and officers also record details of the apprehension on the Form I- 213, which is required for all individuals. However, neither Border Patrol nor OFO has guidance about whether or what details about a family unit being assessed as potentially invalid should be included on the Form I- 213. Learning about the details of these cases and why CBP made its assessment is important to ICE officials in the event an adult refutes the assessment and ICE must take additional steps to determine the validity of the family relationship. ICE officials can view the information CBP agents and officers record on the Form I-213, since ICE officers can access the form in a database it shares with CBP. However, the headquarters official responsible for coordinating ICE’s family and juvenile programs stated that the level of detail included in the forms varies by location and the narrative often does not include details about the reason why CBP considered a family unit potentially invalid. ORR officials also stated this information would be helpful to ORR because it may be relevant to the decisions ORR staff make for UAC, such as selecting sponsors. ORR intake staff told us that the documents they receive from CBP accompanying UAC referrals typically do not contain narrative information about agents’ or officers’ concerns about potentially invalid family relationships. While CBP tracks cases on potentially invalid family units in its data systems, this tracking does not (1) document the circumstances to support the assessment of invalidity or (2) provide complete and timely information for ORR and ICE to help them to fulfill their responsibilities, including to review cases in which CBP initially determined a family to be invalid but further investigation is needed. Rather, CBP’s data systems only track the assessment of invalidity by allowing agents to select that as a reason from a set of options, but do not track the circumstances to support that assessment. However, CBP policy directs that these cases be “well-documented to support such claims.” Standards for Internal Control in the Federal Government state that management should use quality information to achieve the entity’s objectives. In doing so, management should identify the information needed to achieve objectives and address risks, and should consider the expectations of both internal and external users. Providing guidance on what narrative information Border Patrol agents and OFO officers are to document on a child’s and the accompanying adult’s Forms I-213 about potentially invalid family units could help better ensure that the events are well-documented to support such assessments, in accordance with CBP policy. Further, this could help ensure that ICE and ORR officials have relevant details they need to make decisions for adults and children in their custody, including reuniting valid family units, where appropriate, before adults are removed from the United States. CBP Developed Policies and Procedures for Family Separations, but Border Patrol and OFO Do Not Have Sufficient Controls to Ensure Information Is Accurately and Consistently Captured CBP, Border Patrol, and OFO have developed policies and procedures for those agents and officers responsible for recording and approving family separations; however, Border Patrol and OFO do not have sufficient controls to ensure (1) Border Patrol agents are accurately and consistently recording family separations in their data systems, (2) Border Patrol and OFO’s data systems accurately capture separation reasons that are consistent with CBP policy, and (3) required forms include sufficient details about the circumstances of the separations. Regarding policies and procedure for family separations, according to CBP’s June 2018 policy, a Border Patrol watch commander, or equivalent position, must approve every family separation. Border Patrol and OFO officials told us that higher-level officials, such as Border Patrol sector chiefs or Port Directors, are often involved in decisions to separate family units. A 2015 CBP policy requires that agents and officers record family separations in agency data systems. Further, after updating data systems to track family separations in 2018, as previously described, Border Patrol and OFO issued written guidance to agents and officers with specific instructions on how to record family separations in its data systems. For example, Border Patrol issued guidance about how to record family separations in its data system in May 2018, August 2018, and April 2019. In addition, Standards for Internal Control in the Federal Government state that management should use quality information to achieve the entity’s objectives, and identify the information needs to address risks. In doing so, managers should also consider the expectations of both internal and external users when collecting information. Further, changes in conditions affecting the entity and its environment often require managers to revise the internal control system, on a timely basis to maintain effectiveness. Recording Border Patrol’s Family Separations Our analysis of Border Patrol and ORR data indicates that Border Patrol agents have not accurately and consistently recorded family separations in the data systems. Specifically, we reviewed a random, nongeneralizable sample of 40 ORR records for UAC involved in family separations between June 28, 2018, and March 31, 2019 and found matches for all 40 of the children in Border Patrol apprehensions data. Among the 40 records, we identified cases in which agents had not documented the family separation in Border Patrol’s data system, as required by CBP and Border Patrol policy. Specifically, Border Patrol data indicated the agent had not processed the separation in the Border Patrol data system for 10 of the 40 UAC involved in family separations. That is, in these cases, Border Patrol agents processed the parents and children together with a family unit number, but did not take the necessary steps in the system to separate them and document the reason why the separation occurred. We shared the results of our analysis with Border Patrol officials, and these officials acknowledged that the discrepancy between Border Patrol and ORR data on family separations may be attributable, in part, to human error—that agents had not correctly recorded family separations in Border Patrol’s data system. However, the officials were unsure of the extent of the problem. Thus, it is unclear whether Border Patrol has accurate records of all separated parents and children in its automated data system. Border Patrol officials stated that data entry errors may have grown with increased processing demands and strained resources faced by Border Patrol as the volume of family units apprehended increased in fiscal years 2018 and 2019. However, as mentioned, federal internal control standards provide that changes in conditions—such as increased processing demands agents faced during periods of increased apprehensions of family units—often require managers to revise the internal control system. Developing and implementing additional controls to ensure that Border Patrol agents accurately record family separations in the data system, consistent with CBP and Border Patrol policies, would better enable Border Patrol to maintain complete and accurate information on all family separations. For example, an additional control could be to require Border Patrol or OFO managers conducting supervisory review of each apprehension to check that family separations have been accurately recorded in the data system. Recording Reasons for Family Separations in Border Patrol and OFO Systems CBP, Border Patrol, and OFO have policies and procedures in place for those agents and officers responsible for approving family separations and recording the reasons in agency data systems. On June 27, 2018, the CBP Commissioner issued a memorandum to the Chief of the Border Patrol and to the Executive Assistant Commissioner of OFO to provide direction on complying with the June 26, 2018, federal court order in Ms. L. v. ICE that generally prohibits the government from separating parents from their children, to include potential reasons that may warrant continued family separations. Specifically, the memorandum states that separations may occur only for the following reasons: (1) the parent has criminal convictions for violent misdemeanors or felonies, (2) CBP plans to refer the parent for a felony prosecution, (3) the parent poses a danger to the child, or (4) the parent has a communicable disease. On June 29, 2018, OFO issued a policy memorandum reiterating the potential separation reasons included in CBP’s June 27, 2018 policy memorandum. According to Border Patrol headquarters officials, Border Patrol did not issue any further implementing guidance. Border Patrol and OFO officials stated that agents and officers are to use all available information to determine whether a family separation is warranted. Such information may include available birth certificates, personal observations of the family unit’s behavior, results of background checks for criminal and immigration history, and results from available medical assessments. In some instances, Border Patrol and OFO officials stated that agents and officers may not always have complete information, such as when a database indicates a parent’s arrest but does not indicate whether he or she was convicted of the charge, but that agents and officers are to weigh the totality of the circumstances. For situations in which agents and officers are unsure whether to separate a family, CBP’s policy states that agents and officers should contact their local Office of Chief Counsel for guidance. Although Border Patrol and OFO data systems allow agents and officers to select among options to indicate the reason for a family separation, the reasons available in the systems do not fully align with CBP policy. For example, Border Patrol’s data system does not include an option that indicates the parent poses a danger to the child—one of the reasons articulated in the Commissioner’s June 2018 memorandum. Table 8 shows how the separation reasons available in Border Patrol and OFO data systems compared with the potential separation reasons established in CBP’s June 2018 family separations policy. Border Patrol and OFO headquarters officials stated they were unsure why the separation reasons available in the data systems do not fully align with CBP policy on family separations, but stated that the data system reasons have an implicit link to CBP policy. They stated that Border Patrol and OFO officials review and approve each family separation to ensure it meets CBP policy. In addition, OFO headquarters officials stated that it issued guidance in June 2018 that reiterated CBP’s policy on potential reasons for family separations. However, as illustrated in table 8, it is sometimes not clear how separation reasons in Border Patrol’s and OFO’s data systems align with CBP policy. For example, Border Patrol’s option for “family member prosecuted for other reasons” does not provide enough information to determine whether Border Patrol is referring a parent for the prosecution of a felony, as required by CBP policy. Both Border Patrol and OFO have previously changed separation reasons in agency data systems, and in June 2019 Border Patrol officials stated they continue to analyze the need for updates. As of October 2019, these officials stated that Border Patrol and OFO do not have any current plans to update the separation reasons in their data system. CBP officials who conduct supervisory review of files and approve family separations rely, in part, on the information agents and officers record in Border Patrol and OFO data systems, in conducting reviews and sharing information, according to Border Patrol and OFO officials. Updating Border Patrol’s and OFO’s data systems to ensure that options for separation reasons clearly align with CBP policy could help ensure that CBP makes decisions about family separations in accordance with CBP policy and that data CBP collects reflects that. Recording Information about Family Separations on Border Patrol’s Form I-213 CBP’s policies related to family separations do not include written requirements that agents and officers record a description of the family separation. However, Border Patrol and OFO officials stated that they expect agents and officers to record the circumstances surrounding family separations on a narrative section of each family member’s Form I-213. Yet we found that Border Patrol agents are not consistently recording detailed information about family separations on the Form I-213—the official record of the apprehension. Specifically, we analyzed a nongeneralizable sample of Forms I-213 for family units whom Border Patrol separated and found that, for most of the family separation cases, one or more of the selected forms had missing or inconsistent information in the narrative descriptions. Specifically, we reviewed a sample of Forms I-213 for 23 family separation cases, involving 27 children and 25 parents. These separations occurred across each of the Border’s Patrol’s nine southwest border sectors between June 28, 2018 and March 30, 2019. In particular, we assessed (1) whether the forms included a reason for the separation, (2) whether the descriptions of the cases provided enough information to determine whether or not the reason met CBP policy, and (3) whether the information recorded for each separation case was consistent across the parents’ and children’s forms. On the basis of our review of the forms, we found there was missing or inconsistent information on one or more of the family members’ forms for 18 of the 23 separated family units. Specifically, we found for three of the 23 family separations, there was no indication that a separation had occurred on one or more of the family members’ forms; for 20 of the 23 family separations, all of the family members’ forms included some indication of a family separation; Seven of the 25 parents’ forms and seven of the 27 children’s forms did not contain a narrative description explaining why the separation occurred; and 17 of the 25 parents’ forms included sufficient narrative information to determine whether the separation met CBP policy; 12 of the 27 children’s forms included enough information to make that determination. In addition, even among those forms with sufficient information to determine whether the reason met CBP policy, we found inconsistencies. For example: Three parents’ and four children’s forms included information that implied that the parent could potentially present a danger to the child, but the actual separation reason noted on the form was something different, such as the parents’ criminal history. For example, the criminal history information provided on one parent’s Form I-213 included information about an arrest for kidnapping, but did not include evidence that the arrest resulted in a conviction, making it difficult to determine whether the separation aligned with CBP policy and, in particular, what reason the separation would fall under. For nine of the 23 family separations, the separation reason was listed as the parent’s criminal history on one of the family member’s forms, but there was missing or inconsistent information on the other family members’ forms. For example, in one instance, the father’s Form I- 213 indicated he had been convicted of sexually assaulting a 12-year- old child, but there was no separation reason and no information about the parent’s criminal history provided on the child’s form. According to ICE officials responsible for monitoring family separations, and reunifying family units where necessary, the narrative information on the Form I-213 is ICE officers’ primary source of information about the circumstances of a family separation. ICE officers need detailed information, according to officials, to help conduct additional research to confirm whether a separation was warranted or respond to requests for information from ORR. In addition, ORR officials told us that they would benefit from CBP recording certain information on a child’s Form I-213— such as the type and timing of a parent’s criminal conviction or whether the parent may pose a danger to the child—and sharing that information, to better inform ORR’s decisions about where and with whom to place UAC when they leave ORR custody. However, CBP has not issued guidance on what descriptive details surrounding family separations agents and officers are to record on the Form I-213, based on our review of CBP documents. In addition, Border Patrol officials stated that they do not have written guidance for agents about what information should be captured on the Form I-213. Conversely, OFO issued guidance stating that the Form I-213 must be annotated with the reason for the family separation, the name of the approving manager, and, at a minimum, the biographical information and “A-number”—a unique identifier for noncitizens apprehended by CBP—of the parent(s) and children. Border Patrol and OFO headquarters officials acknowledged that the level of detail documented on the Form I- 213 about separations may vary by agent or officer, and rely on their supervisory review process to ensure that family separations are consistent with CBP policy. Border Patrol headquarters officials attributed missing separation reasons or inconsistent information about the circumstances of the family separations on the Forms I-213 to multiple factors. Specifically, they acknowledged that Border Patrol has not issued guidance specifying what descriptive details agents should include on the forms, and does not have, for example, specific information that supervisors check for during their review of each individual’s file. In addition, Border Patrol headquarters officials noted that there have been great demands placed on Border Patrol agents to expedite processing during periods of high numbers of family units apprehended and crowding at Border Patrol facilities. However, as noted previously, federal internal control standards state that changes in conditions affecting the entity and its environment— like an increase of family units apprehended along the southwest border—often require management to change the entity’s internal control system, as existing controls may not be effective for meeting objectives or addressing risks under changed conditions. As of October 2019, Border Patrol and OFO had no plans to (1) implement additional controls to ensure that reasons for family separations are included on individuals’ Form I-213 or (2) issue guidance to agents and officers about what descriptive information about family separations they should record on the forms. Developing and implementing additional controls to ensure that Border Patrol agents and OFO officers include a reason for the family separations on the parent’s and child’s Forms I-213 could help CBP ensure its agents and officers are separating family units in accordance with CBP policy. For example, an additional control could be to require the Border Patrol or OFO manager reviewing the information recorded on the Form I-213 to check that certain information, such as the specific separation reason with relevant details, has been included. In addition, without additional guidance on what specific details Border Patrol agents and OFO officers are to include in the narrative information about the family separation events on the parent’s and child’s Forms I-213, ICE and ORR do not have complete or consistent information to use in determining when it may be necessary to reunify family units in accordance with the Ms. L. v. ICE court order. ICE Developed Procedures for Processing Family Units, But Does Not Systematically Track ICE’s Family Unit Separations in Its Data System ICE Developed Procedures for Processing Family Units Referred from CBP ICE has procedures for processing family units whom CBP apprehended and for releasing family units from ICE custody (see fig. 6). Procedures for Taking Family Units into Custody from CBP According to ICE field office officials, upon referral by CBP, ICE officers generally review the family unit’s files to ensure that CBP agents and officers completed the forms sufficiently and, if not, ICE officers can return the case to CBP. For example, ICE officers typically ensure that the appropriate family unit member signed his or her copies of paperwork provided by CBP. Additionally, according to ICE field office officials, ICE officers have the discretion to decline the transfer of a family unit that they determine is not suitable for detention in a family residential center or for release. When ICE accepts CBP’s referral of a family unit and receives custody from CBP, ICE officers are to enter information about each family unit member in ICE’s data system, both for family units that ICE plans to detain and those it plans to release. ICE’s data system pulls some information from CBP’s data systems. For example, ICE officers can find basic biographic information about individual family unit members apprehended by Border Patrol by searching for an individual by his or her “A-number,” a unique identifier. In addition, ICE officers are to enter new information, such as the location(s) where officers detained or released the individual family unit members and the documents officers served to them, among other things. For information about the family unit members that ICE detained at its family residential centers, see appendix II. Procedures for Releasing Family Units from ICE Custody Family units placed into expedited removal by CBP and detained in ICE family residential centers—who express an intention to apply for asylum, a fear of persecution or torture, or a fear of return—undergo screenings conducted by an asylum officer. These screenings occur during detention and are to determine whether one or more family unit members have a credible fear of persecution or torture. The outcome of the screening (and review by an immigration judge, if requested after the screening) determines whether ICE will remove the family unit from the United States or release the family unit into the interior of the country to pursue immigration relief or protection in full immigration proceedings. Additionally, as stated previously, children may generally only be held in federal immigration detention for 20 days pursuant to the Flores Agreement. Thus, if members of the family unit do not receive a credible fear determination within 20 days, ICE generally releases the family unit into the interior of the United States with a notice to appear before an immigration court, which initiates full immigration proceedings. From fiscal year 2015 through fiscal year 2018, ICE data indicate that 99 percent of family unit members who were detained in one of ICE’s family residential centers were subsequently released by ICE into the interior of the United States. For additional information about the outcomes for family unit members detained in ICE family residential centers, see appendix II. According to ICE headquarters and field office officials, while a family unit is at a family residential center, ICE officers typically assist family units with their post-release plans by asking heads-of-household to identify contacts in the United States, such as relatives, that the family unit can stay with after leaving ICE custody. These contacts pay for the family unit’s travel expenses if the family cannot purchase bus tickets, for example, and ICE officers help coordinate these plans and typically drive the family unit to the bus station upon release, according to ICE officials. For family units who are not placed in a family residential center, ICE’s procedures for assisting them with their post-release plans have varied based on local conditions. ICE headquarters and field office officials explained that, prior to October 2018, when the volume of family units arriving at the southwest border began to increase significantly, ICE officers sometimes coordinated post-release plans for family units that did not stay at a family residential center. However, officials stated ICE has not had the resources to help family units with post-release plans since that time and instead has generally relied on nongovernmental organizations for this assistance. When ICE releases family units from its custody to await immigration court proceedings, ICE officers generally enroll the family unit’s head-of- household in its Alternatives to Detention program. The program uses technology, such as ankle monitoring devices, to track the movement of the adult family unit members. ICE field office officials stated that the availability of ankle monitoring devices and the volume of family units arriving at the southwest border can impact whether or not ICE enrolls a family head-of-household in its Alternatives to Detention program. In addition to ankle monitoring devices, most family units are also released on orders that require heads-of-household to report telephonically or in- person to ICE officers once they reach their destination in the United States. ICE officials stated the level of continued supervision by ICE officers is at the discretion of the ICE officer in charge of the family unit’s case and may also be dependent on a variety of factors, such as whether the family unit entered the United States at or between ports of entry, whether the family unit received a positive credible fear determination, and the head-of-household’s prior criminal and immigration record. ICE’s Automated Data System Does Not Track Family Unit Separations That Occur in ICE Custody ICE relies on a manual process to track family unit separations that occur in ICE custody, but does not systematically record this information in its data system. ICE officers are to report all separations that occur in ICE custody to the headquarters office responsible for coordinating family and juvenile programs. ICE headquarters officials in that office compile the information received from the field offices to populate a spreadsheet, which they use to track all separations that occur in ICE custody. In addition, according to ICE officials at headquarters, officers are to include narrative information about the separation and the approving official’s name in a comments field in the parent’s and children’s records in the data system. According to ICE officials, the narrative information in the comment field is not searchable within ICE’s data system and ICE does not have a mechanism, such as a drop-down menu, to systematically record a family unit separation or the reasons for any separations that occur in ICE custody. Thus, ICE cannot pull data from its system to track such separations. ICE headquarters officials stated that these methods are not an efficient and effective means to have readily available data on family separations that occurred in ICE custody. According to ICE policy for detained parents, detained parents maintain their parental rights during removal proceedings. In particular, if ICE is removing a parent from the United States, field office directors or their designees are to accommodate, to the extent practicable, the detained parent’s efforts to make arrangements for his or her minor child or children, including for the children to be removed with the parent. As such, before removing an adult from the United States, ICE officers are to check the individual’s paper A-file, and specifically the individual’s Form I- 213, for any indication the adult arrived with a child, according to ICE headquarters officials. In addition, according to ICE officials, ICE officers are to review the individual’s record in ICE’s data system where ICE officers would be alerted to whether the individual had ever been separated from a child. Given the limitations in ICE’s data system, officers would need to know to review the narrative information in the comments field within the individual’s records to determine whether he or she had been separated from a child in ICE custody; however, none of ICE’s guidance documents explain that officers are to look for such information in the narrative comments field. Further, ICE officials told us that officers are not required to check the spreadsheet maintained at ICE headquarters or contact headquarters officials prior to removing adults from the United States. As of November 2019, ICE headquarters officials stated they are working with the ICE data unit to create a new module that would enhance ICE’s ability to link and track family units in its data system, including capturing information on families that ICE separates. According to ICE officials, ICE has established a project team for this effort and hopes to deploy the updates in the fourth quarter of fiscal year 2020. However, ICE did not provide documentation with details, such as a project plan with time frames for deploying these system updates, to verify these plans. Standards for Internal Control in the Federal Government states that management designs the entity’s information system and related control activities to achieve objectives and respond to risks. Further, management designs the entity’s information system and the use of information technology by considering the defined information requirements for each of the entity’s operational processes. Given that ICE did not provide documentation with details about planned changes to ICE’s data system, it is too early to determine whether and when ICE’s planned system enhancements will include a mechanism that allows ICE officers to systematically track family separations that occur in ICE custody. Without a mechanism in its data system to systematically track the family units it separates, ICE is unable to ensure that separated parents who are subject to removal are able to make arrangements for their minor child or children (including being removed with them), as provided in ICE policy . DHS and HHS Have Interagency Agreements with Roles and Responsibilities Regarding UAC, but Long-Standing Information Sharing Gaps Remain DHS and HHS have developed interagency agreements for the transfer and placement of UAC between the two departments; however, information sharing gaps remain. In 2015, we reported that the interagency process to refer UAC from DHS to HHS was inefficient and vulnerable to errors because it relied on emails and manual data entry. In addition, each DHS component (Border Patrol, OFO, and ICE) submitted referrals for UAC to HHS’s ORR in a different way. To increase the efficiency and improve the accuracy of the interagency referral and placement process for UAC, we recommended the Secretaries of Homeland Security and Health and Human Services jointly develop and implement a documented interagency process with clearly defined roles and responsibilities for all agencies involved in the referral and placement of UAC in HHS shelters. DHS and HHS concurred with our recommendation. Since our 2015 report, DHS and HHS developed two documents to guide interagency procedures related to the processing of UAC. Specifically, in April 2018, HHS and DHS established a memorandum of agreement regarding information sharing for UAC. In addition, on July 31, 2018, DHS and HHS issued a Joint Concept of Operations to memorialize interagency policies, procedures, and guidelines related to the processing of UAC. According to the April 2018 memorandum of agreement, among other things ICE and CBP are to provide ORR with information at the time of the referral and documents when the child is transferred to ORR, including whether the child was traveling with other individuals and the Form I-213, so that ORR can make informed decisions for the child. Specifically, once a child has been transferred to ORR, the agency begins the process of identifying a potential sponsor for the child and, when a potential sponsor is identified, ORR requests information about that sponsor. At this step, according to the memorandum of agreement, ICE is to conduct a screening of the potential sponsor that includes, at a minimum, a biographic criminal check of national databases, a check for warrants of arrest, and an immigration status check. DHS is to provide HHS with information necessary to conduct suitability assessments for sponsors, including that which HHS would not otherwise have access. In addition, to the extent permitted by law, and consistent with policy, DHS is to report to ORR the results of any investigations it conducts that are relevant to ORR’s determinations concerning the care and placement of UAC. According to the July 2018 Joint Concept of Operations, ICE or CBP should use ORR’s data system to refer UAC to ORR whenever feasible. If ORR’s data system is not available, DHS may email ORR a referral form along with any supporting documentation. DHS is also to provide ORR with specific documents, including the Form I-213, when the child is transferred to ORR. In the event a child is separated from a parent or legal guardian, CBP or ICE is to enter this information into ORR’s data system, according to the Joint Concept of Operations. CBP or ICE is also to include contact information for parents, legal guardians, or adult relatives, as this information can assist in ORR’s reunification process, if needed. ORR is to contact the child’s family to, among other things, determine whether the child has a potential sponsor who resides in the United States, and to facilitate visitation and contact with family members, regardless of their immigration status. Finally, DHS is to preserve the unity of families during repatriation, according to the Joint Concept of Operations. The memorandum of agreement and Joint Concept of Operations state the roles and responsibilities of DHS and HHS and their components and describe some of the information to be shared between the agencies regarding the placement of UAC, among other things. However, DHS and HHS officials’ statements indicate that, in practice, they have not resolved long-standing differences in opinion about whether and how agencies are to share information, and what type of information is needed to inform decisions about the care and placement of UAC, including those processed as UAC after separation from a parent. We found that DHS has not consistently provided information and documents to ORR as specified in the memorandum of understanding and the Joint Concept of Operations. Further, ORR officials identified additional information they believe ORR needs from DHS at the time of referral (or soon thereafter) to inform their decisions about placing children with sponsors and reunifying separated families, when necessary. Information Sharing Processes as Described in the Interagency Agreements With regard to information sharing expectations established in the interagency agreements, as of September 2019, we found that certain documents were not being shared or mechanisms for sharing information were not being used consistently. For example, Border Patrol has taken steps since our 2015 report to improve its referral process, so that Border Patrol’s referral information is uploaded directly into ORR’s data system, in keeping with Joint Concept of Operations requirements. However, the referral screens in Border Patrol and ORR data systems do not fully align, which has required ORR headquarters staff to manually enter some required information into the ORR data system. That is, Border Patrol’s referral screen does not include many of the fields—areas to input specific information—included in ORR’s referral screen. Border Patrol and ORR officials offered different perspectives on why the information on the referral screens in the data systems do not align. Specifically, ORR officials stated that Border Patrol has not updated its referral screen to match updates that ORR has made. For example, in July 2018, ORR added a checkbox in its data system for DHS agencies to indicate whether a UAC had been separated from a parent, as necessary. Border Patrol took steps in October 2018 to similarly update its referral screen, so the indication of a family separation would be automatically uploaded to ORR’s data system with the referral. However, additional steps must be taken by ORR for its data system to upload the information, according to Border Patrol officials. Meanwhile, if ORR staff see some indication of a family separation in the Border Patrol referral form, such as in a narrative text field, ORR staff will typically add that information to the records in their data system manually. Border Patrol has not taken additional steps to update other parts of its system’s referral screen to align with ORR’s data system because ORR’s data system does not comply with DHS security standards, according to Border Patrol officials. ORR officials said they had not been made aware of any security concerns. However, concern about system security standards is a long-standing issue that we noted in our 2015 report. As of October 2019, Border Patrol and ORR did not have any plans to collaborate further to improve automated referrals for UAC. Further, as of October 2019, ORR officials told us that ICE and OFO officials are not consistently accessing the ORR data system to submit a referral for a UAC. Specifically, ICE and OFO officers in certain locations use ORR’s data system to submit a referral infrequently and instead use a form, which ORR last updated in 2013, that they attach to emails to refer UAC. However, ORR officials stated their expectation is that email referrals are to be used only occasionally, such as if DHS officials encounter technical problems using ORR’s data system. ICE and OFO stated that their officers only rarely make referrals to ORR and sometimes face constraints that prohibit them from using ORR’s data system to submit the referral. For example, ICE officials stated that officers generally use ORR’s data system for referrals, but that, on some occasions, the officer’s password to access ORR’s data system has expired due to infrequent use, and they must email the referral. In addition, OFO and ICE officials stated that their officers who have access to the ORR data system to make referrals are not always available, so in those instances, other officers must email a referral form to ORR. OFO and ICE headquarters officials were unsure how often their officers used email to send ORR referrals, rather than directly accessing ORR’s data system. ORR officials also stated that even when ICE and OFO use ORR’s data system to submit the referral, consistent with the Joint Concept of Operations, the officers are not consistently marking the separations checkbox in ORR’s data system for those children involved in family separations. As a result of these challenges, ORR officials said they must often manually enter referral information from ICE or OFO into the ORR data system, including any indication of a family separation or that the child was apprehended with an adult. ORR officials also stated that DHS—CBP and ICE—is not routinely submitting the child’s Form I-213 to ORR, as specified by both interagency agreements. Border Patrol and OFO headquarters officials stated they have concerns about sharing sensitive information, including in referral forms or on the Form I-213, with ORR headquarters or contracted shelter staff because they are not law enforcement officers. ORR headquarters officials stated that they have worked with other federal partners to ensure that only ORR officials with the proper authorization receive sensitive materials. These officials said they are interested in working with DHS to set up a similar process so ORR can receive the information it needs to make decisions for UAC. For example, ORR headquarters officials stated that they would explore options for updating DHS and HHS data systems so the child’s Form I-213 could be shared directly between data systems. This would help ensure that only ORR staff who have the proper authorization will have access to them, according to HHS officials. In addition, DHS and HHS provided different perspectives on the expected information sharing procedures included in the interagency agreements. For example, ORR headquarters officials stated they interpret existing interagency agreements to apply to information sharing on all UAC, regardless of whether they were apprehended alone or with an adult. By contrast, Border Patrol headquarters officials stated that the interagency agreements apply to UAC involved in family separations, but not those children referred to ORR after Border Patrol assessed a family relationship to be invalid. In addition, ICE headquarters officials stated that the interagency agreements were drafted to reflect the circumstances of children apprehended alone, not separated children or those CBP assesses to have invalid family relationships. ICE officials also stated they no longer believe the April 2018 memorandum of agreement is valid for any UAC, because it was developed to address a process ORR no longer requires. Additional Information Sharing Needs Identified by ORR ORR identified additional information sharing needs—some not covered by existing interagency agreements—to inform decisions regarding the care and placement of UAC. Specifically, this information includes details about the circumstances of family separations, and information about adults who were apprehended with children (who subsequently were designated as UAC). ORR officials stated that ORR and ICE require this information, collected by DHS, to (1) assess potential sponsors for placement of UAC and (2) to reunify eligible separated families. Assessing Potential Sponsors. ORR officials stated that ORR needs additional information about parents and other adults accompanying a child (who is later designated as a UAC) at the time of apprehension to assess all potential sponsors with whom UAC will be placed as they await immigration proceedings in the United States. However, the Joint Concept of Operations contains limited details about what information should be shared between DHS and HHS about relevant adults. For example, the agreement states that ICE and CBP will provide ORR with contact information for parents, legal guardians, or adult relatives. However, the agreement does not, for example, require DHS to share the details of an adult’s criminal history information to ORR. In addition, Border Patrol headquarters officials stated that agents typically would not alert ORR to any concerns about invalid family relationships, as they do not believe that information is relevant. ORR officials stated they need detailed information about an accompanying adult to assess whether they could potentially pose a danger to the child, and this is not addressed in the Joint Concept of Operations. However, ORR officials stated that this information is often not included in DHS’s referrals for UAC, and ORR sometimes learns about an accompanying adult from a child after placement in an ORR shelter. Reunifying Eligible Separated Family Units. To ensure compliance with the federal court injunction in the Ms. L. v. ICE litigation, ORR officials stated that they need to know enough details about (1) family separations or (2) situations in which CBP had concerns a family relationship was invalid, to determine whether there are any family units potentially eligible for reunification. If DHS and HHS determine that a parent will be reunified with a child, ORR is responsible for (1) verifying the validity of the family relationship and (2) determining whether the parent is fit or poses a danger to the child, according to ORR officials. For family unit reunifications, ORR has relied, in part, on the determinations made by DHS when the family was separated, according to these officials. However, ORR officials stated the information DHS provides about family separations is generally limited or provided inconsistently, often without enough detail for ORR to assess whether the family unit may be eligible for reunification. For example, the referral might state a family separation is due to the parent’s criminal history, but ORR must follow up with ICE to specify the charge, determine whether the adult was convicted, or learn the date of the event. In addition, ORR may conduct family reunifications in accordance with ORR policies and procedures in other situations. For example, there have been cases in which families were separated, but DHS later dropped criminal charges against a parent it planned to prosecute, or a parent has completed a hospitalization that required the parent to be separated from his or her child. According to ICE policy, when ICE is removing a parent from the United States, that parent has the right to determine whether a minor child will be removed with him or her. ORR officials stated that, according to ORR policies and procedures, if the child is to be removed with the parent, ORR must assess whether (1) the family relationship is valid and (2) whether the parent presents a danger to the child. However, ORR officials stated that if this information was not provided at the time of referral, they must reach out to ICE officials to collect it. Further, ORR headquarters officials stated that ICE has removed adults from the United States who wished to be removed with their child or children in ORR custody, before ORR could complete its assessment. However, neither ICE nor ORR could determine exactly how often that had occurred or in exactly what time frame these removals had occurred. DHS and HHS officials provided different perspectives on these information sharing challenges not covered within existing interagency agreements. ORR takes additional steps to collect information from ICE and CBP that ORR is not routinely receiving at the time of referral. This can extend the time that children spend in ORR custody, according to ORR officials. If ORR staff conducting intake duties have questions about UAC and any accompanying adults, ORR headquarters officials told us they typically first contact the local CBP officials who processed the apprehension. In April and August 2019, ORR officials said that some Border Patrol sectors are more responsive than others and that limited and inconsistent information sharing by DHS about separated children has led to delays in placement and release decisions for UAC. ORR staff also reach out to ICE’s field office juvenile coordinators or ICE headquarters officials responsible for juvenile and family management. For example, ORR and ICE headquarters coordinate on a weekly basis via email to assess whether family separations are in compliance with federal court orders in the ongoing Ms. L. v. ICE litigation. Specifically, since February 2019, ORR and ICE have shared a spreadsheet tracking UAC who may have been involved in a family separation, according to ORR and ICE headquarters officials. Further, ICE officials said they gather additional information, such as more details about the reason for a family separation from the Form I-213 or by reaching out to CBP officials. They provide some of this information to ORR, as ICE officials noted that they recognize ORR needs such information to assist in its decision-making for UAC. ICE headquarters officials noted that they have found ways to provide more detailed information to ORR without sharing sensitive law enforcement information. It is through this vetting process that ICE and ORR assess potential family separations to reach a confirmed number of cases and the reasons for them, according to ICE and ORR officials. ORR headquarters officials stated that, from their perspective, it would be more efficient if CBP or ICE provided this information directly into ORR’s data system at the time of referral, where possible, rather than sharing a spreadsheet via email. Specifically, ORR headquarters officials stated that they have experienced delays in releasing a child to a sponsor due to missing information about a parent or the inability to notify a parent in ICE detention about sponsorship decisions. By contrast, Border Patrol and OFO headquarters officials noted concerns about sharing sensitive information with ORR, particularly for adults apprehended with UAC. Border Patrol officials stated, for example, that Border Patrol does not share sensitive law enforcement information with a third party such as ORR. According to ICE headquarters officials, sometimes ICE officers conduct additional research after a child is referred to ORR, such as if CBP was unable to collect certain information before making a separation decision. ICE officials stated that, for their purposes, the current information sharing procedures in place are sufficient, but noted that ICE has added staff resources to keep up with the demands of current information sharing procedures. Specifically, until May 2019, there was one ICE headquarters official, 2in the juvenile and family management unit, responding to all of ORR’s requests, and that ICE added another staff person to assist in responding to ORR’s requests. As of October 2019, there were no plans to discuss further these information sharing concerns, according to ORR, CBP, and ICE officials. Leading practices of high-performing organizations include fostering collaboration both within and across organizational boundaries to achieve results. Further, agencies should work together to establish a shared purpose and goals; develop joint strategies or approaches that complement one another; and ensure the compatibility of policies, procedures, and other means to operate across agency boundaries. We have previously reported that written agreements, such as a memorandum of understanding or interagency agreements, can help facilitate collaboration by articulating roles and responsibilities, among other things. These types of written agreements are most effective when they are regularly updated and monitored, as we reported in 2012. While issuing the April 2018 memorandum of agreement and July 2018 Joint Concept of Operations were important steps toward addressing the weaknesses we identified in our 2015 report, additional actions are needed to fully address our recommendation and increase the efficiency and improve the accuracy of the interagency referral and placement process for all UAC. In addition, further DHS and HHS collaboration about information sharing methods and ways to enhance interagency agreements would better position ORR to make informed and timely decisions for UAC, including those separated from adults with whom they were apprehended. Conclusions As the number of CBP apprehensions of family units has risen markedly in recent years, DHS has developed policies and procedures for processing family units. For example, since 2015 CBP has introduced policies and procedures for collecting information about family units, which has increased the data it collects, including on family separations. However, DHS continues to face challenges in ensuring that it accurately and consistently tracks information about family units, including those it separates. Specifically, CBP training includes definitions of and guidance for processing family units that are inconsistent with CBP policy. Issuing updated training materials with correct definitions of and guidance for processing family units would help CBP ensure that its agents and officers are accurately tracking family units and, where applicable, family separations. In addition, CBP has policies and procedures related to concerns about the validity of a family unit, but it does not have written requirements about what information on these cases Border Patrol agents and OFO officers are to record. Without additional guidance about what details CBP agents and officers are to record on the required Form I-213, these cases will not be well documented, as required by CBP policy. Further, ICE and ORR officials do not have sufficient information to make decisions for the adults and children involved, including determining when reuniting valid family units is necessary. CBP has developed policies and procedures related to family separations, but additional controls would help Border Patrol and OFO ensure that information about these cases is accurately and consistently captured. By developing and implementing additional controls for tracking family separations—such as requiring checks during supervisory review that separations were documented properly—Border Patrol could better ensure it has accurate information about these cases, consistent with CBP and Border Patrol policies. Further, some of the options for separation reasons in Border Patrol’s and OFO’s data systems do not fully align with CBP policy. Without updating the reasons agents and officers have available to select from, CBP is not well positioned to determine whether its officials are separating family units for reasons consistent with CBP policy. In addition, during our review of selected Forms I-213 for a sample of separated family units, we found that agents did not always include the reason for the separation or include a detailed description of the circumstances of the case. Developing and implementing additional controls to check that Border Patrol agents document family separations and why they occurred on family unit members’ Forms I-213 could help Border Patrol ensure its agents are separating family units in accordance with CBP policy. Additionally, without additional guidance on what specific information about the circumstances of the family separations Border Patrol agents and OFO officers are to include on the parent’s and child’s Forms I-213, ICE and ORR do not have sufficient information to determine, among other things, when family reunifications are required. During our review of ICE’s policies and procedures for processing family units, we found that it does not systematically track the family units it separates in its data system. By updating its data system to do so, ICE would be better able to ensure that separated parents, who are subject to removal, are able to make arrangements for their minor child or children, including being removed with them, consistent with ICE policy. While DHS and HHS have developed written interagency agreements related to the transfer and care of UAC, as we recommended in 2015, we found that information sharing gaps between the two agencies remain. As such, continuing their efforts to address our prior recommendation to jointly develop and implement a documented interagency process for all agencies involved in the referral and placement of UAC could help DHS and HHS increase the efficiency and improve the accuracy of these processes for UAC. Moreover, additional DHS and HHS collaboration about information sharing would help provide ORR with additional information, including about accompanying adults, to make informed and timely decisions for UAC. Recommendations for Executive Action We are making a total of nine recommendations, including six to CBP and one each to ICE, DHS, and HHS. Specifically: The CBP Commissioner should issue updated Border Patrol and OFO training materials that reflect the correct definition of a family unit and guidance for recording that information. (Recommendation 1) The CBP Commissioner should provide written guidance to Border Patrol agents and OFO officers about what narrative information should be recorded on the child’s and the accompanying adult’s Forms I-213 to document cases in which CBP determines that a parent–child relationship may be invalid. (Recommendation 2) The CBP Commissioner should develop and implement additional controls to ensure that Border Patrol agents accurately record family unit separations in its data system. (Recommendation 3) The CBP Commissioner should update Border Patrol’s and OFO’s data systems to ensure data captured on family unit separation reasons clearly align with CBP policy. (Recommendation 4) The CBP Commissioner should develop and implement additional controls to ensure that Border Patrol agents include a narrative description of a family unit separation on the parent’s / legal guardian’s and child’s Forms I-213, including the reason for the separation. (Recommendation 5) The CBP Commissioner should provide guidance to Border Patrol agents and OFO officers on the narrative information they are to include about family unit separation events on the parent’s / legal guardian’s and child’s Forms I-213. (Recommendation 6) The ICE Director should develop and implement a mechanism to systematically track in its data system the family units ICE separates. (Recommendation 7) The Secretary of Homeland Security, jointly with the Secretary of Health and Human Services, should collaborate to address information sharing gaps identified in this report to ensure that ORR receives information needed to make decisions for UAC, including those apprehended with an adult. (Recommendation 8) The Secretary of Health and Human Services, jointly with the Secretary of Homeland Security, should collaborate to address information sharing gaps identified in this report to ensure that ORR receives information needed to make decisions for UAC, including those apprehended with an adult. (Recommendation 9) Agency Comments We provided a draft of this report to DHS and HHS for review and comment. DHS and HHS provided formal, written comments, which are reproduced in full in appendixes III and IV, respectively. DHS and HHS also provided technical comments on our draft report, which we incorporated, as appropriate. DHS concurred with our recommendations and described actions planned or underway to address them. For example, in response to several of our recommendations that CBP provide additional or revised guidance and training to agents and officers, DHS stated that Border Patrol issued a memo in January 2020 to clarify what information agents are to record for family unit members, potentially invalid family units, and subsequent separations, if applicable. DHS also described planned updates to OFO data systems to automatically record certain information in family unit members’ Form I-213, such as the names and identifying information of all family members apprehended together. Regarding our recommendation that CBP should update Border Patrol’s and OFO’s data systems to ensure the options for family separation reasons clearly align with CBP policy, DHS provided documentation of guidance that OFO and Border Patrol issued about data system updates. DHS requested that we consider the recommendation implemented. We will review the information and documents DHS provided to assess the extent to which CBP fully addressed this recommendation. Regarding our recommendation that ICE develop and implement a mechanism to track its separations in its data system, DHS stated that ICE has efforts underway to enable ICE officers to track separations and reunifications in its data system throughout ICE’s immigration enforcement process. DHS and HHS also both concurred with our recommendations that the agencies collaborate to address information sharing gaps identified in this report, and described plans to coordinate and reach agreement on information sharing practices. We will review the agencies’ actions and planned efforts, including any documentation provided by DHS and HHS, and the extent to which they address each of our nine recommendations. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from its issue date. At that time, we will send copies of this report to the appropriate congressional committees, the Acting Secretary of Homeland Security, and the Secretary of Health and Human Services. In addition, the report is available at no charge on the GAO website at https://gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Key contributors to this report are listed in appendix V. Appendix I: Objectives, Scope, and Methodology The objectives of this report were to examine (1) what U.S. Customs and Border Protection (CBP) data indicate about the numbers and characteristics of family units who have been apprehended along the southwest border, (2) the extent to which CBP has developed and implemented policies and procedures for processing family units apprehended along the southwest border, (3) the extent to which U.S. Immigration and Customs Enforcement (ICE) has developed and implemented policies and procedures for processing family units apprehended along the southwest border, and (4) how the Department of Homeland Security (DHS) shares information with the Department of Health and Human Services (HHS) about unaccompanied alien children (UAC), including those children who initially arrived with and were separated from their parents or other adults. To address these objectives and to observe agents and officers processing families, we conducted site visits at U.S. Border Patrol stations and Office of Field Operations (OFO) ports of entry in Arizona, California, and Texas, from July 2018 to October 2018. We also visited ICE family detention facilities, known as family residential centers, in Dilley and Karnes City, Texas in February 2019. Specifically, in Tucson, Arizona we visited Border Patrol’s Tucson sector headquarters and OFO’s Tucson Field Office headquarters and the Nogales port of entry. In the San Diego, California region, we visited Border Patrol’s San Diego sector headquarters and Imperial Beach station and the San Ysidro port of entry. In the Rio Grande Valley, Texas region, we visited CBP’s Central Processing Center, Border Patrol’s McAllen station, and the Hidalgo and Brownsville ports of entry. In the San Antonio, Texas region, we visited ICE’s San Antonio field office headquarters, South Texas Family Residential Center, and Karnes County Residential Center. During these site visits, we interviewed Border Patrol, OFO, and ICE officials, observed agents and officers processing families, and toured CBP and ICE facilities, among other activities. To select these locations, we reviewed CBP data on Border Patrol and OFO apprehensions along the southwest border, including family unit apprehensions, and identified specific locations that had the greatest increase in the number of apprehensions of individuals from fiscal year 2016 to 2017. We also considered the geographical proximity of multiple CBP and ICE facilities to maximize observations. Our observations during site visits are not generalizable to all Border Patrol, OFO, and ICE operations along the southwest border, but provided us the opportunity to learn more about how policies and procedures for processing families are conducted and how CBP and ICE coordinate their efforts. In addition, to address all of our objectives, we interviewed DHS and HHS officials. Specifically, we met with DHS officials from CBP’s Office of the Commissioner and Office of Chief Counsel; Border Patrol’s Law Enforcement Operations Directorate and Strategic Planning and Analysis Directorate; OFO’s Admissibility and Passenger Programs office; ICE’s Enforcement and Removal Operations (including the Juvenile Family and Residential Management Unit, Field Operations, Alternatives to Detention, and Law Enforcement Systems and Analysis) and ICE’s Office of the Principal Legal Advisor. We also interviewed HHS officials from the offices of the Assistant Secretary for Preparedness and Response and Office of Refugee Resettlement (ORR). To address our first objective and describe what CBP data indicate about the numbers and characteristics of family units who have been apprehended along the southwest border, we reviewed record-level apprehensions data from CBP’s Border Patrol and OFO for individuals determined to be inadmissible or potentially subject to removal. We collected data for fiscal year 2016 through the second quarter of fiscal year 2019 because Border Patrol and OFO began to systematically collect data on individuals apprehended as part of a family unit in fiscal year 2016. The second quarter of fiscal year 2019 was the most current data available at the time of our review. We used “number of apprehensions” rather than the “number of individuals or family unit members” as the unit of analysis we reported because an individual may have been apprehended multiple times in the same year. The data we report on apprehensions of family unit members include individuals in family units CBP later separated (for reasons other than concerns about validity of the family relationship) from April 19, 2018, when Border Patrol and OFO began collecting data on family separations, through the first two quarters of fiscal year 2019. The record-level data we analyzed are current as of the date Border Patrol or OFO provided it to us. Specifically, Border Patrol data for fiscal years 2016 through 2018 are current as of January 2019; Border Patrol data for the first two quarters of fiscal year 2019 and selected fields for all fiscal years are current as of April 2019. OFO data for fiscal years 2016 through 2018 are current as of February 2019; OFO data for the first two quarters of fiscal year 2019 are current as of June 2019. We grouped the ages of apprehended children in family units (e.g. ages 0–4, 5–11, and 12–17) according to key agency and court documents. While most of our analysis was conducted on the apprehensions of individuals in family units, we were also able to analyze the composition of family units (i.e., as a group rather than individuals) apprehended by Border Patrol. Specifically, Border Patrol uses a “family unit number” to link the records of adult(s) and children processed as a family unit. As a result, we analyzed whether the family unit was headed by an adult male or adult female and how many children were in the family unit. We could not conduct a similar analysis for the family units apprehended by OFO, because OFO does not assign family units unique identifying numbers to link family members in its data system. As a result, we were unable to report on the composition of family units that OFO encountered. As part of our analysis of CBP data, we determined the number of family unit members Border Patrol and OFO data indicated as separated from April 19, 2018 through March 31, 2019. We selected this time frame because Border Patrol began to systematically collect data on family separations in its data systems on April 19, 2018, and the second quarter of fiscal year 2019 was the most current data available at the time of our review. Our analysis of the reasons for family separations is based on the data recorded by agents and officers in Border Patrol’s and OFO’s data systems. During the period of our review, Border Patrol’s and OFO’s data systems included options for agents and officers to choose from to explain the reason for the separation, including, for example, “family member prosecuted – criminal history” and “family member prosecuted – other reasons.” These reasons, and the numbers of separations for each reason, reflect CBP data and may not match the information about separations (including numbers of, reasons for, and timeframes of separations) that DHS reported to a federal court in response to related litigation, such as Ms. L. v. ICE. According to court filings, the information provided in response to that litigation was based on a manual review of multiple federal datasets and reflect categories as required by the litigation. We excluded family separations indicated in CBP data as temporary from our analysis. We also reported separately on the number of adults and children who were apprehended together, but whom CBP assessed to have potentially invalid family relationships and thus processed separately, as CBP does not consider these family separations. To assess the reliability of CBP data, we completed a number of steps, including (1) performing electronic testing for obvious errors in accuracy and completeness, such as running logic tests; (2) reviewing existing information about the data and the systems that produced them, such as relevant training materials for Border Patrol agents and OFO officers who use agency data systems; and (3) discussing data entry issues and data limitations with Border Patrol and OFO officials. We also received demonstrations on the data systems from Border Patrol and OFO officials at headquarters. The limitations and determinations of reliability for the Border Patrol and OFO data are discussed in more detail below. Border Patrol data. We identified a small number of Border Patrol apprehension records that had the same date of apprehension and unique identifier, known as the “A-number.” It is possible that these apprehension records represented one apprehended individual that Border Patrol agents processed as two apprehensions. These records constituted less than 1 percent of the almost 2.4 million apprehension records we analyzed. We included these apprehension records in our analysis because Border Patrol considers them unique apprehensions and because their small number does not materially affect our analysis. We did not include a small number of records (less than 1 percent of apprehensions of family unit members) that had a family unit number but did not meet CBP’s definition of a family unit in our analysis of records of family unit members. For example, a small number of family unit member records did not include a date of birth, so we could not determine whether the individual was an adult or child (i.e., under or over the age of 18 years). For our analysis of the reasons for family separations, we found a small number (18) of Border Patrol records that included more than one separation reason, so we could not distinguish which reason led to a permanent family separation. Thus, we excluded these records from our analysis of the reasons for family separations. According to Border Patrol headquarters officials and documents, in situations in which only one of the adults in a two-parent family was separated, the child or children would remain with the other adult as an intact family unit (and the child would not be designated a UAC and transferred to the custody of ORR). As such, in these situations, we included the separated adults in our reported numbers of separated family unit members, but did not include associated remaining family units in our analysis of separated family units. We found 18 records for family units that included one adult and one child, with one of the family unit members separated. According to Border Patrol’s procedures, in the event a family separation occurs, both family unit members are to be processed in the data system as “separated.” We included these records in the number of family unit members, but did not include them in our analysis of separated family unit members, as it was unclear from the records whether or not the family unit was separated. We identified data reliability issues with Border Patrol’s data on family separations, as described in our report. When reporting these data, we rounded down to the nearest increment of five, and described relevant data using modifiers such as “at least” because of possible missing information. This enabled us to report on the Border Patrol data that we determined were sufficiently reliable for our purposes. OFO data. For the OFO data, we excluded approximately 11 percent of all apprehension records (including single adults, UAC, and parents and children that arrived as part of a family unit) from our analyses because we could not confirm an A-number, for those apprehensions. Among the apprehension records missing an A-number, 44 percent were cases in which OFO officers paroled the individuals and, according to OFO officials, officers are not required to assign an A-number to these individuals. In addition, 47 percent of the records with a missing A- number were cases that involved individuals withdrawing their applications for admission into the United States, in which OFO officers have discretion whether or not to assign an A-number. According to OFO officials, additional records with missing A-numbers may be due to human error during data entry or problems with the data system saving this information in the database that OFO used to pull the data. Finally, we collapsed 153,025 apprehension records into 71,986 apprehension records because we determined that they were duplicate records for the same individual and the same apprehension, based on factors such as A- number, birth date, and date and time of apprehension. As a result, we determined that we could not present precise figures for analyses that include OFO data and instead provided approximations throughout the report. We rounded all data and figures on OFO apprehensions, including where OFO’s data inform CBP-data and figures, down to the hundreds place. As an exception, for the much-smaller number of OFO family separations, as compared with total apprehensions, we rounded the figures by increments of five, and described relevant data using modifiers such as “at least” because of possible missing information. This enabled us to report on the OFO data that we determined were sufficiently reliable for our purposes. With the previously described modifications, we determined that the Border Patrol and OFO data were sufficiently reliable to generally describe the number and demographic characteristics of family units apprehended by CBP along the southwest border. To address the second objective, on the extent to which CBP has developed and implemented policies and procedures for processing family units—including how CBP defines family units, assesses the validity of family relationships, and determines whether family separations are warranted—we reviewed CBP, Border Patrol, and OFO policy documents, training materials, and other guidance documents in effect from October 2015 through December 2019. For example, we reviewed CBP’s 2015 National Standards on Transport, Escort, Detention, and Search policy, as well as Border Patrol’s data system processing guidance and Border Patrol and OFO policies and procedures on how agents are to record family separations in agency data systems, among other documents. We compared CBP, Border Patrol and OFO policies and procedures to Standards for Internal Control in the Federal Government related to identifying, analyzing, and responding to change; designing control activities to achieve objectives and identify risks; and using quality information to achieve objectives. We also compared Border Patrol definitions for family units, and processes and guidance for tracking family units, invalid family units, and family unit separations against CBP and Border Patrol policy. To evaluate how Border Patrol recorded information for family units apprehended from June 28, 2018 through March 31, 2019, we also selected a sample of ORR records for UAC involved in family separations and compared them to Border Patrol apprehensions data for the same children. Specifically, we selected a small, random, nongeneralizable sample of 40 ORR records for UAC involved in family separations. We then matched all 40 selected records to Border Patrol apprehensions data, using unique identifiers. Our findings are not generalizable due to the size of our sample, so we cannot use our findings to assess the magnitude of the issues we identified in Border Patrol data. We limited the records from which we selected our sample to those ORR records that included an A-number, a unique identifier, for the adult separated from the child in ORR custody, since Border Patrol tracks its separation reasons in the adult’s records. Finally, we compared this information with CBP’s October 2015 National Standards on Transport, Escort, Detention, and Search policy, which states that family separations must be documented in the appropriate data systems. We also assessed information against federal internal control standards, which call for management to identify and use quality information to achieve the entity’s objectives and address risks, among other control activities. To describe how Border Patrol agents document the reasons for and circumstances of each family separation case, we reviewed a nongeneralizable sample of the DHS Form I-213, Record of Deportable/Inadmissible Alien (Form I-213), which is a form that agents are required to complete for each individual CBP apprehends. Specifically, Border Patrol provided us with Forms I-213 for the adults and children involved in the three most recent instances of family separation from June 28, 2018 through March 30, 2019, in each of Border Patrol’s nine sectors along the southwest border. Two of the sectors only had one family separation during that period, so we reviewed the forms for a total of 23 family separations. We reviewed a sample of Forms I-213 prepared by Border Patrol agents, as Border Patrol separated approximately 95 percent of the family separations indicated in CBP data during the period we reviewed. We did not review a sample of Forms I-213 prepared by OFO officers, given the relatively smaller number of families separated by OFO. In addition, we reviewed a sample of forms for cases of family separations only, and did not review forms for cases in which Border Patrol determined the family relationship was invalid because Border Patrol officials told us that they do not record information about assessments of invalid family relationships on the Form I-213. Finally, we compared this information with a 2015 CBP policy that states that family separations must be documented in the appropriate data systems; a June 2018 CBP policy that includes potential reasons to warrant family separations; and federal internal control standards, which call for management to identify and use quality information to achieve the entity’s objectives and address risks, among other control activities. To address the third objective, and examine the extent to which ICE has developed and implemented policies and procedures for processing families apprehended along the southwest border, we reviewed ICE policy documents, training materials, and other guidance documents. For example, we reviewed ICE’s Juvenile and Family Residential Management Unit Field Office Juvenile Coordinator Handbook, ICE’s Family Residential Standards, ICE’s data system training manual, and ICE’s detained parent policy. We compared ICE’s processes against ICE policies and procedures and federal internal control standards, which call for management to design the entity’s information system and related control activities to achieve objectives and respond to risks. ICE data. To report on family members apprehended by CBP and detained in ICE family residential centers, we reviewed ICE detention data from June 2014, when ICE opened its first family residential center on the southwest border, through fiscal year 2018, the most current data available at the time of our review. The data for all fiscal years is current as of May 2019, when ICE provided us with record-level data to analyze. To assess the reliability of ICE’s data, we completed a number of data reliability steps, including (1) performing electronic testing for obvious errors in accuracy and completeness, such as running logic tests; (2) reviewing existing information about the data and the systems that produced them, such as relevant training materials for the ICE officers who use them; and (3) discussing data entry issues and data limitations with ICE officials. We also received demonstrations on ICE’s data system from officials at headquarters. We determined that the data were sufficiently reliable to describe the numbers and demographic characteristics of family members who were apprehended by CBP and detained by ICE at one of its family detention facilities. Additionally, we collected and reviewed data on the families whom ICE separated from July 2018 through September 2019. We selected this time frame because July 2018 is when ICE began to require its field offices to report all instance of family separations to headquarters, which tracks the information on a spreadsheet, and September 30, 2019, the end of the fiscal year. We reported the total number of family separations from the spreadsheet, but could not independently verify the number of separations in ICE’s spreadsheet because ICE does not track family separations systematically in its data system. As a result, we reported the total number of family separations, according to ICE, for context to demonstrate that most family separations occur when family units are in CBP custody. To describe how DHS shares information with HHS about UAC, including those involved in family separations, we reviewed DHS and HHS interagency agreements, including the April 2018 information sharing memorandum of agreement and July 2018 Joint Concept of Operations. Additionally, we interviewed DHS and HHS officials at headquarters and DHS officials at locations along the southwest border. We compared the information we gathered with DHS and HHS interagency agreements, which provide expectations for interagency information sharing and procedures for the care and custody of UAC. We also compared DHS and HHS information sharing practices to leading practices for collaboration among federal agencies. We conducted this performance audit from July 2018 to February 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: U.S. Customs and Border Protection (CBP) Apprehensions and U.S. Immigration and Customs Enforcement (ICE) Detentions of Family Units This appendix provides additional information about apprehensions of noncitizen family units by CBP’s U.S. Border Patrol and Office of Field Operations (OFO) at or between U.S. ports of entry from fiscal year 2016 through the second quarter of fiscal year 2019. It also provides additional information about family unit members who were apprehended by CBP and subsequently detained by U.S. Immigration and Customs Enforcement (ICE) at a family residential center at some point from fiscal year 2015 through fiscal year 2018. Demographic Information and CBP Processing Decisions for Family Units The following tables contain information on the demographics of CBP apprehensions of noncitizen family units and family unit members and the processing decisions that CBP agents and officers made for them. CBP data indicate that Border Patrol was responsible for the majority of the overall number of family unit member apprehensions by CBP from fiscal year 2016 through the second quarter of fiscal year 2019 (see table 9). CBP data indicate that family unit member apprehensions grew as a percentage of total CBP apprehensions from fiscal year 2016 through the second quarter of fiscal year 2019 (see table 10). For example, CBP data indicate that apprehensions of family unit members grew from about 22 percent of total southwest border apprehensions in fiscal year 2016 to about 51 percent of such apprehensions during the first two quarters of fiscal year 2019. CBP data indicate that most apprehensions of family unit members from fiscal year 2016 through the second quarter of fiscal year 2019 were nationals of Central American countries (see table 11). CBP data indicate that the majority of apprehensions of adult family unit members by CBP were females, while the majority of children were male (see table 12). Border Patrol’s data system collects information about the family units it apprehends. Border Patrol’s data indicate that family units that agents apprehended were generally headed by females, although the number of family units headed by males and two-parent family units increased from fiscal year 2016 through the first two quarters of fiscal year 2019 (see table 13). Border Patrol’s data indicate that most Border Patrol apprehensions of family unit members occurred in just three sectors (Rio Grande Valley, Texas; El Paso, Texas; and Yuma, Arizona) from fiscal year 2016 through the second quarter of fiscal year 2019 (see table 14). OFO data indicate that most OFO apprehensions of family unit members occurred in just four ports of entry (San Ysidro, California; El Paso, Texas; Hidalgo, Texas; and Nogales, Arizona) from fiscal year 2016 through the second quarter of fiscal year 2019 (see table 15). CBP data indicate that the majority of apprehensions of family unit members resulted in the family unit members being released into the interior of the United States with a notice to appear before an immigration court, which became increasingly common from fiscal year 2016 through the second quarter of fiscal year 2019 (see table 16). Family Units CBP Separated at the Border The following tables contain information on family units that CBP separated at the border. CBP data indicate that the majority of children that CBP separated from their parents from April 19, 2018 through March 31, 2019 were male (see table 17). CBP data indicate that CBP separated children that ranged in age from less than 1 year old to 17 years old from their parents from April 19, 2018 through March 31, 2019, and the majority of separated children were age 12 and over (see table 18). CBP data indicate that the majority of children that CBP separated from April 19, 2018, through March 31, 2019, were nationals from Central American countries and that more than half were Guatemalan nationals (see table 19). Border Patrol data indicate that the majority of family units that Border Patrol separated from April 19, 2018 through March 31, 2019 were headed by males who were apprehended with a single child (see table 20). Border Patrol data indicate that most adults that were separated from their children by Border Patrol from April 19, 2018, through March 31, 2019, had not been previously apprehended by CBP (see table 21). Demographic Information and ICE Processing Decisions for Family Units Detained at ICE Family Residential Centers The following tables and figures contain information about the noncitizen family unit members apprehended by CBP and detained by ICE at ICE’s family residential centers from fiscal year 2015 through fiscal year 2018. ICE data indicate that from fiscal year 2015 through fiscal year 2018, ICE detained 139,098 family unit members at its family residential centers (see table 22). ICE data indicate that most child family unit members (ages 0 to 17) detained in ICE detention facilities were under the age of 13 (see table 23). ICE data indicate that the majority of adults detained at ICE’s family residential centers were female, and the gender of children detained was relatively equal between male and female (see fig. 7). ICE data indicate that the majority of family unit members detained at ICE’s family residential centers were from El Salvador, Guatemala, and Honduras, as well as Mexico (see fig. 8). ICE data indicate that the vast majority of family unit members who were detained in one of ICE’s family residential centers were subsequently released by ICE into the interior of the United States (see table 24). Appendix III: Comments from the Department of Homeland Security Appendix IV: Comments from the Department of Health and Human Services Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Kathryn Bernet (Assistant Director), Leslie Sarapu (Analyst in Charge), Hiwotte Amare, James Ashley, Kathleen Donovan, Michele Fejfar, Cynthia Grant, Michael Harmond, Eric Hauswirth, Stephanie Heiken, Jan Montgomery, Heidi Nielson, Kevin Reeves, and Jonathan Still made key contributions to this report.

In fiscal year 2019, CBP reported apprehending more than 527,000 noncitizen family unit members at or between U.S. ports of entry along the southwest border—a 227 percent increase over fiscal year 2018. In April 2018, the U.S. Attorney General issued a memo on criminal prosecutions of immigration offenses, which DHS officials said led to an increase in family separations. GAO was asked to review issues related to DHS's processing of family units. This report examines (1) CBP data on apprehended family unit members; the extent to which (2) CBP and (3) ICE developed and implemented policies and procedures for processing family units; and (4) how DHS and HHS share information about UAC. GAO analyzed record-level DHS and HHS data and documents; interviewed DHS and HHS officials; and visited DHS locations in California and Texas where CBP apprehensions of family units increased in 2017. Data from the Department of Homeland Security's (DHS) U.S. Customs and Border Protection (CBP) indicate that apprehensions of family unit members (noncitizen children under 18 and their parents or legal guardians) grew from about 22 percent of total southwest border apprehensions in fiscal year 2016 to about 51 percent of such apprehensions during the first two quarters of fiscal year 2019—the most current data available. During this period, CBP data indicated that most apprehensions of family units—about 76 percent—occurred between ports of entry by the U.S. Border Patrol (Border Patrol). With regard to family separations, from April 2018 through March 2019, CBP data indicate it separated at least 2,700 children from their parents, processing them as unaccompanied alien children (UAC) and transferring them to the Department of Health and Human Services (HHS). CBP developed some policies and procedures for processing family units but does not have sufficient controls to ensure effective implementation. For example, CBP policy requires that Border Patrol agents and officers track apprehended family unit members and, if applicable, subsequent family separations in agency data systems. GAO's analysis of Border Patrol documents and data indicates that its agents have not accurately and consistently recorded family units and separations. Specifically, GAO examined a nongeneralizable sample of 40 HHS records for children involved in family separations between June 2018 and March 2019 and matched them to Border Patrol apprehensions data for these children. GAO found Border Patrol did not initially record 14 of the 40 children as a member of a family unit (linked to a parent's record) per Border Patrol policy, and thus did not record their subsequent family separation. GAO found an additional 10 children among the 40 whose family separations were not documented in Border Patrol's data system as required by CBP policy during this period. Border Patrol officials were unsure of the extent of these problems, and stated that, among other things, data-entry errors may have arisen due to demands on agents as the number of family unit apprehensions increased. Thus, it is unclear the extent to which Border Patrol has accurate records of separated family unit members in its data system. Further, Border Patrol agents inconsistently recorded information about the reasons for and circumstances surrounding family separations on required forms. Developing and implementing additional controls would help Border Patrol maintain complete and accurate information on all family separations. DHS's U.S. Immigration and Customs Enforcement (ICE) is, among other things, responsible for detaining and removing those family units apprehended by CBP. ICE officers are to determine whether to accept or deny a referral of a family unit from CBP for detention in one of ICE's family residential centers, release family unit members into the interior of the United States, or remove family unit members (who are subject to final orders of removal) from the United States. ICE has procedures for processing and releasing family units from ICE custody. However, with regard to family unit separations, ICE relies on a manual process to track separations that occur in ICE custody (generally at one of ICE's family residential centers) and does not systematically record this information in its data system. Without a mechanism to do so, ICE does not have reasonable assurance that parents whom ICE separated from their children and are subject to removal are able to make arrangements for their children, including being removed with them, as provided in ICE's policy for detained parents. In 2018, DHS and HHS developed written interagency agreements regarding UAC. However, DHS and HHS officials stated they have not resolved long-standing differences in opinion about how and what information agencies are to share related to the care and placement of those children, including those referred to HHS after a family separation. GAO found that DHS has not consistently provided information and documents to HHS as specified in interagency agreements. HHS officials also identified additional information they need from DHS, about those adults apprehended with children and later separated, to inform their decisions about placing children with sponsors and reunifying separated families, when necessary. Increased collaboration between DHS and HHS about information sharing would better position HHS to make informed and timely decisions for UAC.

GAO_GAO-19-306

Background Private health insurance is the leading source of health coverage in the United States. Small and large employers may offer fully insured group plans (by purchasing coverage from an issuer) or self-funded group plans (by setting aside funds to pay for employee health care). Most small employers purchase fully insured plans, while most large employers self- fund at least some of their employee health benefits. While the majority of health insurance coverage is provided through the small or large group market, Americans without access to group health coverage, such as those with employers that do not offer health coverage, may choose to purchase it directly from an issuer through the individual market. (See fig. 1 for total covered life-years reported by issuers to CMS in the individual and fully insured small and large group markets.) We previously identified several factors that can affect concentration in health insurance markets. High concentration levels have often been the result of consolidation—mergers and acquisitions—among existing issuers. In addition, concentration can persist because of the difficulty for new issuers to enter the market. For example, new issuers that do not yet have large numbers of enrollees may have greater challenges negotiating discounts with health care providers. PPACA contains provisions that may affect market concentration and competition among health issuers, such as the establishment of health insurance exchanges within each state’s overall individual and small group markets. One goal of the exchanges is for issuers to have an incentive to compete with one another on price and value because consumers can visit a website to compare and select among health plans participating in the exchanges. Issuer participation in the exchanges is a key factor in assuring that consumers have a choice of health plans. While PPACA does not require issuers offering coverage in an overall market to participate in the exchanges, issuers have an incentive to do so in order to access additional consumers. For example, certain consumers earning from 100 to 400 percent of the federal poverty level are eligible to receive premium tax credits that can reduce premium costs, but only for plans purchased through an exchange. The federal government and some states have also instituted other provisions to encourage issuers to participate in the exchanges. For example, PPACA required the establishment of the Consumer Oriented and Operated Plan (CO-OP) program, which provided loans to new consumer-governed, nonprofit issuers that are required to offer health plans in the individual and small group exchanges. In addition, in Maryland, certain issuers that offered plans outside of the exchange are also required to offer plans through the exchange. PPACA also established other key market reforms that apply both within and outside of the exchanges, such as requiring that issuers offer coverage to all individuals regardless of health status and limiting the ability of issuers to deny coverage or charge higher premiums to individuals and small groups based on health risks or certain other factors. Since the enactment of PPACA in 2010, there have been additional federal policy changes that may influence an issuer’s decision about whether to participate in health insurance markets. For example, in 2014, HHS announced that a program that made payments to issuers whose losses exceeded a certain threshold—known as risk corridor payments—would be budget neutral, which resulted in reduced payments for some issuers. One issuer told us that this lower than expected funding was one of multiple factors that contributed to its decision to reduce the number of insurance markets in which it participated. Overall Individual Health Insurance Markets and Exchanges Generally Remained Concentrated in Recent Years, with Increasing Concentration in Many States’ Exchanges Overall Individual Health Insurance Markets Generally Remained Concentrated in Recent Years States’ overall individual health insurance markets were generally concentrated in 2015 and 2016, similar to what we reported for previous years. Individual market exchanges—representing 57 percent of the overall individual market nationally in 2016—were also concentrated in most states and in many cases became more concentrated in recent years. States’ overall individual health insurance markets were generally concentrated among a small number of issuers in 2015 and 2016. On average, there were 16 issuers participating in each state in 2016. However, that same year, the 3 largest issuers cumulatively held 80 percent or more of the market—an indicator of high concentration—in 37 of 51 states, generally consistent with what we previously reported for years 2011 through 2014 (see fig. 2). The remaining issuers in each state often had significantly smaller market shares—on average, 12 of the 16 issuers in each state held less than 5 percent market share. We also found that in over half of states in 2016, a single issuer held at least 50 percent of the market, consistent with prior years. Specifically, a single issuer held at least 50 percent market share in 28 states in 2016. Of these states, a single issuer held between 80 and 90 percent market share in 5 states, and more than 90 percent market share in 2 states. For example, although West Virginia had 15 issuers in 2016, a single issuer, Highmark, held 91 percent market share. This largest issuer position was held by the same company in both 2015 and 2016 in 45 states; in 35 of these states, the largest issuer had been the same since 2011. While states’ overall individual markets generally remained concentrated, they experienced fluctuations in the extent of concentration in recent years. Specifically, from 2014—the last year of data on which we previously reported—to 2016, the market share of the three largest issuers increased in 30 states (with a median increase of 4 percentage points) and decreased in 21 states (with a median decrease of 6 percentage points). (See fig. 3.) However, despite these changes, states that were highly concentrated in 2014—that is, where the market share of the three largest issuers was at least 80 percent—generally remained highly concentrated in 2016. States’ Individual Market Exchanges Were Generally Concentrated, and Many Became More Concentrated from 2015 to 2017 Our analyses found that states’ individual market exchanges—collectively representing 57 percent of enrollment in the overall individual market nationally in 2016—were generally concentrated among a small number of issuers from 2015 to 2017. Each year during this time period, for the 49 states for which we had complete data, on average, between 3 and 5 issuers participated in the individual market exchanges across the states’ rating areas. Further, each year, the three largest issuers held 80 percent or more of the exchange market, on average, across the states’ rating areas, in at least 46 states. For example, in Wisconsin in 2017, the market share of the three largest issuers ranged from 75 percent in 2 of the state’s 16 rating areas to 100 percent in 6 rating areas; on average, the three largest issuers held 92 percent market share across the 16 rating areas. While the number of states meeting this 80 percent average threshold for high concentration remained relatively constant from 2015 through 2017, market share was increasingly concentrated among a smaller number of issuers in many states, as fewer issuers participated in the exchanges by 2017. The number of states with three or fewer issuers, on average, in their rating areas—and where the issuers therefore held, on average, 100 percent or nearly 100 percent market share—increased from 16 states in 2015 to 32 states in 2017. (See fig. 4.) Further, we found that in at least 35 states each year from 2015 through 2017, the average market share of the largest individual market exchange issuer across the states’ rating areas was at least 50 percent. For example, although Kansas had up to three participating exchange issuers in each of its rating areas in 2017, the largest issuer in each rating area— generally Blue Cross and Blue Shield of Kansas—had at least 88 percent market share. We also found that many states’ individual market exchanges became more concentrated from 2015 to 2017. In 32 of the 49 states, the average market share of the largest exchange issuer across the states’ rating areas increased between 2015 and 2017, with a median increase of 13 percentage points. (See fig. 5.) For example: In Arizona, the average market share of the largest exchange issuer across the state’s rating areas increased by about 60 percentage points, from 39 percent in 2015 to 98 percent in 2017. This increase corresponded with a decrease in issuer participation in the exchange; the state’s seven rating areas had between 7 and 12 issuers in 2015, but by 2017 had only 1 or 2 issuers. In 2015, a CO-OP, Compass Cooperative Health Plan, Inc., had 29 percent of the total exchange market share statewide in Arizona and was among the largest issuers in three rating areas, but it exited the exchange after that year. Other, smaller issuers also exited the exchange after 2015 and 2016, and, in 2017, Blue Cross Blue Shield of Arizona was left as the only issuer in five of the state’s rating areas. In South Carolina, the average market share of the largest exchange issuer increased by 41 percentage points, from 59 percent in 2015 to 100 percent in 2017. As in Arizona, the increase corresponded with a decrease in issuer participation in the exchange, from 2 to 4 issuers in the state’s 46 rating areas in 2015 to only 1 issuer—BlueCross BlueShield of South Carolina—in each rating area in 2017. In addition, a CO-OP, Consumers’ Choice Health Insurance Company, had 43 percent of the total exchange market share statewide and was the largest issuer in nearly half of the state’s rating areas in 2015, but it exited the exchange after that year. In contrast, BlueCross BlueShield of South Carolina had 42 percent of the total exchange market share statewide and was the largest issuer in about half of the rating areas in 2015, and by 2017 was the only remaining issuer in the state. In the remaining 17 states, the average market share of the largest exchange issuer across the states’ rating areas decreased between 2015 and 2017, with a median decrease of 12 percentage points. For example: In Maine, the average market share of the largest exchange issuer decreased by 39 percentage points, from 81 percent in 2015 to 42 percent in 2017. Maine Community Health Options, a CO-OP, remained the largest issuer in each of the state’s four rating areas during this period. However, the other two issuers in these rating areas captured more market share. For instance, Harvard Pilgrim Health Care Group had 1 percent or less market share in each rating area in 2015, but as much as 32 percent market share in one of the state’s rating areas in 2017. In Delaware—which only had one rating area—the market share of the largest exchange issuer decreased by 37 percentage points, from 92 percent in 2015 to 55 percent in 2017. Although the state had the same two issuers, Aetna Group and Highmark Group, throughout this time period—and Highmark Group was the largest issuer each year— Aetna Group’s market share increased from 8 percent in 2015 to 45 percent in 2017. Overall Small Group Health Insurance Markets and Exchanges Generally Remained Concentrated in Recent Years The Overall Small Group Market Remained Concentrated in Recent Years Our analyses found that the overall small group health insurance market remained concentrated in recent years, similar to our prior report. Small group exchanges often had low enrollment—typically less than 1 percent of the overall small group market—and also remained concentrated in recent years. State small group health insurance markets were concentrated among a small number of issuers in 2015 and 2016. On average, there were 8 issuers participating in each state in 2016. However, in that same year the 3 largest issuers cumulatively held 80 percent or more of the market—an indicator of high concentration—in about three-quarters of states, generally consistent with what we previously reported for years 2011 through 2014 (see fig. 6). The remaining issuers in each state often had significantly smaller market shares—on average, 5 of the 8 issuers in each state held less than 5 percent market share. Further, we found that the largest issuers held 50 percent or more of the market in 30 states in 2016. For example, though Louisiana had 6 issuers in 2016, the largest issuer held 76 percent market share. Overall, a single issuer held between 80 and 90 percent market share in 10 states, and more than 90 percent market share in 1 state. This largest issuer position was held by the same company in both 2015 and 2016 in 46 states; in 40 of these states, the largest issuer had been the same since 2011. While states’ overall small group markets remained concentrated, they experienced fluctuations in concentration in recent years. From 2014 through 2016, the market share of the 3 largest issuers increased in 35 states (with a median increase of 3 percentage points), remained the same in 1 state, and decreased in 15 states (with a median decrease of 1 percentage point). (See fig. 7.) However, despite these changes, states that were highly concentrated in 2014—that is, where the market share of the three largest issuers was at least 80 percent—generally remained highly concentrated in 2016. Small Group Exchanges Were Concentrated in a Few Issuers between 2015 and 2017 Our analyses found that states’ SHOP exchanges remained concentrated from 2015 to 2017, with only slight overall changes in issuer participation or market share. Further, as a proportion of the overall small group market, SHOP exchanges in most states had little enrollment. (See sidebar.) Small Group Health Options Program (SHOP) Enrollment as a Proportion of the Overall Small Group Market As a proportion of the overall small group market, SHOP exchanges in most states had little enrollment—that is, typically less than 1 percent of the overall small group market. For example, in 2016, Alaska’s small group market had 17,257 covered life-years, while its SHOP exchange had 96 covered life-years (0.6 percent). The District of Columbia, Rhode Island, and Vermont were the only states where the SHOP exchange was more than 3 percent of the overall small group market. The District of Columbia and Vermont require all small group plans to be purchased through the state’s SHOP exchange. (See app. III.) In each year, more than 31 of the 46 states for which we had data had three or fewer issuers in the SHOP exchange; therefore between one and three issuers held 100 percent of the market share for the state. Among states with four or more issuers, the market share of the three largest issuers was typically at least 80 percent. For example, California had 6 participating issuers from 2015 through 2017 in the SHOP exchange, and the market share for the three largest issuers in that state ranged from 92 to 93 percent across the 3 years. (See fig. 8.) On average, the number of participating issuers in the SHOP exchange decreased slightly from 2015 through 2017. However, in a few states, there were larger changes in issuer participation and concentration. For example, Ohio’s SHOP exchange had 7 participating issuers in 2015, decreasing to 4 issuers in 2017. Across this time period, the market share of the three largest issuers in Ohio’s SHOP exchange increased from 59 percent to 98 percent. Conversely, New York’s SHOP exchange had 10 issuers in 2015, decreasing to 8 issuers in 2017; but the market share of the three largest issuers decreased by almost 7 percentage points within that time. Further, we found that in at least 38 of 46 states each year from 2015 through 2017, the largest issuer held at least 50 percent of the SHOP exchange market share. In 23 states, the market share of the largest issuer increased during this period, with a median increase of 11 percentage points, and in 6 additional states the largest issuer was the only issuer in the SHOP exchange and thus held 100 percent market share for all 3 years. (See fig. 9.) For example: In Kentucky, the market share of the largest issuer in the SHOP exchange increased by 56 percentage points, from 42 percent in 2015 to 98 percent in 2017. In 2015, the largest issuer was Kentucky Health Cooperative, a CO-OP that exited the SHOP exchange after 2016. The second largest issuer in 2015, Wellpoint Inc. Group, increased market share over this time period, from 33 percent in 2015 to 98 percent in 2017, becoming the largest issuer. The market share of the other remaining issuer in Kentucky’s SHOP exchange, Baptist Health Plan, Inc., decreased from 19 percent in 2015 to 1 percent in 2017. In Ohio, the market share of the largest issuer in the SHOP exchange increased by 54 percentage points, from 29 percent in 2015 to 83 percent in 2017. Across this time period, the largest issuer changed from Medical Mutual of Ohio (which had 29 percent market share in 2015 and 8 percent in 2017) to Wellpoint Inc. Group (which had 12 percent market share in 2015 and 83 percent in 2017). This increase in the largest issuer’s market share corresponded with a decrease in issuer participation. The state had 7 participating issuers in 2015, decreasing to 4 in 2017. The market share of the 3 issuers that left ranged from 9 to 16 percent. In the remaining 17 states, the market share of the largest issuer decreased between 2015 and 2017, with a median decrease of 7 percentage points. In some states, these decreases were significant. For example, in Maine, the market share of the largest issuer, Maine Community Health Options—a CO-OP—decreased by 40 percentage points, from 89 percent in 2015 to 49 percent in 2017. During this time period, while Maine Community Health Options remained the largest issuer, the other two participating issuers gained additional market share. For example, Harvard Pilgrim Health Care Group increased market share from 6 percent in 2015 to 38 percent in 2017. Overall Large Group Health Insurance Markets Remained Concentrated in Recent Years In 2015 and 2016, states’ overall large group health insurance markets remained concentrated, as in prior years. On average, there were 10 participating issuers in each state in 2016. However, in that same year the 3 largest issuers held at least 80 percent market share in 43 of 51 states, which is generally consistent with prior years. (See fig. 10.) In 2016, 3 issuers held 99 or 100 percent of the large group market in 7 states—Alabama, Alaska, Mississippi, Nebraska, North Dakota, South Carolina, and Vermont. The remaining issuers in each state often had significantly smaller market shares—on average, 6 of the 10 participating issuers in each state held less than 5 percent market share. In more than 30 states in 2015 and 2016, market share was not only concentrated among a small number of issuers, but a single issuer held at least 50 percent of the overall large group market, as in prior years. A single issuer held at least 50 percent market share in 33 states in 2016, with significantly higher levels of concentration by the largest issuer in some states. For example, in 2016, a single issuer held at least 90 percent of the market in Alabama and at least 80 percent of the market in 5 other states (Alaska, Mississippi, Montana, South Carolina, and Vermont). Further, this largest issuer position was held by the same company in 2015 and 2016 in 49 states; and, in 47 of those states, the largest issuer position has been held by the same company since 2011. The extent of concentration in the overall large group market remained relatively constant when comparing 2014—the last year of data on which we previously reported—to 2016. The market share of the 3 largest issuers increased in 24 states and decreased in 24. (See fig. 11.) The largest increase was in Wisconsin, where the market share of the 3 largest issuers increased from 38 percent in 2014 to 44 percent in 2016, and the largest decrease was in New York, where the market share of the 3 largest issuers decreased from 55 percent in 2014 to 47 percent in 2016. Agency Comments We provided a draft of this report to HHS for review and comment. The department provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate Congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. Appendix I: Individual Market Health Insurance Exchange Enrollment as a Proportion of the Overall Market, 2016 This table presents covered life-years in each state’s individual market health insurance exchange as a proportion of total covered life-years in each state’s overall individual market in 2016. Appendix II: Number and Market Share of Issuers in Each State’s Individual Market Health Insurance Exchange, 2015-2017 The four tables below present information on the number of participating issuers and market share of the largest issuers in each state’s individual market exchange from 2015 through 2017. Specifically, Table 2 presents the total number of exchange issuers in each state. Table 3 presents the average number of exchange issuers across each state’s rating areas. Table 4 presents the names and market shares of the single largest exchange issuer, and market share of the largest three issuers, for each state. Table 5 presents the average market share of the largest issuer across each state’s rating areas. Appendix III: Small Group Health Insurance Exchange Enrollment as a Proportion of the Overall Market, 2016 This table presents covered life-years in each state’s Small Business Health Options Program (SHOP) exchange as a proportion of total covered life-years in each state’s overall small group market in 2016. Appendix IV: Number and Market Share of Issuers in Each State’s Small Group Health Insurance Exchange, 2015-2017 The two tables below present information on the participation of issuers in each state’s small group health insurance exchange from 2015 to 2017 and the market share of the largest and three largest issuers from 2015 to 2017. Appendix V: Number and Market Share of Largest Issuers Participating in Each State’s Overall Individual Market The two tables below present information on the participation of issuers in each state’s overall individual health insurance market from 2011 to 2016, and the market share of the largest and three largest issuers from 2014 to 2016. Appendix VI: Market Share for Consumer Operated and Oriented Plans That Participated in the Exchanges Table 11 provides market share for the 23 consumer operated and oriented plans (CO-OPs) participating in state individual market and Small Business Health Options Program exchanges for 2015 through 2017. CO- OPs are new consumer-governed, nonprofit issuers created under the Patient Protection and Affordable Care Act. Out of the 23 CO-OPs originally operating in 2014, all but four, operating in five states, had ceased operations by the end of 2017. Appendix VII: Number and Market Share of Largest Issuers Participating in Overall Small Group Health Insurance Market The two tables below present information on the participation of issuers in each state’s overall small group health insurance market from 2011 to 2016 and the market share of the largest and three largest issuers from 2014 to 2016. Appendix VIII: Number and Market Share of Largest Issuers Participating in Each State’s Overall Large Group Health Insurance Market The two tables below present information on the participation of issuers in each state’s overall large group health insurance market from 2011 to 2016 and the market share of the single largest and three largest issuers from 2014 to 2016. Appendix IX: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, William D. Hadley, Assistant Director; Katherine L. Amoroso, Analyst-in-Charge; Priyanka Sethi Bansal; Giselle Hicks; John Lalomio; and Sarah-Lynn McGrath made key contributions to this report. Also contributing were Yesook Merrill; Laurie Pachter; Vikki Porter; Oliver Richard; and Emily Wilson.

A highly concentrated health insurance market may indicate less competition and could affect consumers' choice of issuers and the premiums they pay. In 2014, PPACA required the establishment of health insurance exchanges—a new type of marketplace where individuals and small groups can compare and select among insurance plans sold by participating issuers—and the introduction of other reforms that could affect market concentration and competition among issuers. GAO previously reported that enrollment through these newly established exchanges was also generally concentrated. PPACA included a provision for GAO to study market concentration. This report describes changes in the concentration of enrollment among issuers in (1) overall individual, small group, and large group markets, and (2) individual and small group exchanges. GAO determined market share in the overall markets using enrollment data from 2015 and 2016 that issuers are required to report annually to the Centers for Medicare & Medicaid Services (CMS) and compared that data to 2011 through 2014 enrollment data GAO analyzed in previous reports. GAO determined market share in the exchanges from 2015 through 2017 using other sources of enrollment data from CMS and states. For all data sets, GAO used the most recent data available. Enrollment in private health insurance plans continued to be concentrated among a small number of issuers in 2015 and 2016. In the overall large group market (coverage offered by large employers), small group market (coverage offered by small employers), and individual market (coverage sold directly to individuals), the three largest issuers held 80 percent of the market or more in at least 37 of 51 states. This is similar to what GAO previously reported for 2011 through 2014. GAO also found that within the overall individual and small group markets in each state, the health insurance exchanges established by the Patient Protection and Affordable Care Act (PPACA) were also concentrated from 2015 to 2017. For the individual market exchanges, in each year, three or fewer issuers held 80 percent or more of the market, on average, in at least 46 of the 49 state exchanges for which GAO had data. Further, the largest issuers increased their market share in about two-thirds of exchanges. The number of issuers participating in a market and their market shares can affect concentration, and many individual exchanges generally had a decreasing number of participating issuers over time. For the small group market exchanges, in each year, three or fewer issuers held 80 percent or more of the market in at least 42 of the 46 state exchanges for which GAO had data. The small group exchanges also had slight changes in issuer participation and market share over this time period. GAO received technical comments on a draft of this report from the Department of Health and Human Services and incorporated them as appropriate.

GAO_GAO-19-588T

Background As shown in table 1 the cost of counting the nation’s population has been escalating with each decade. The 2010 Census was the most expensive in U.S. history at about $12.3 billion, and was about 31 percent more costly than the $9.4 billion 2000 Census (in 2020 dollars). According to the Bureau, the total cost of the 2020 Census in October 2015 was estimated at $12.3 billion and in October 2017 that cost estimate grew to approximately $15.6 billion, approximately a $3 billion increase. Additionally, Bureau officials told us that while the estimated cost of the census had increased to $15.6 billion, it was nevertheless managing the 2020 Census to a lower cost of $14.1 billion. Bureau officials explained that the $14.1 billion includes all program costs and contingency funds to cover risks and general estimating uncertainty. The remaining $1.5 billion estimated cost is additional contingency for “unknown unknowns”—that is, low probability events that could cause massive disruptions—and several what-if scenarios such as an increase in the wage rate or additional supervisors needed to manage field operations. Moreover, as shown in figure 1, the average cost for counting a housing unit increased from about $16 in 1970 to around $92 in 2010 (in 2020 constant dollars). At the same time, the return of census questionnaires by mail (the primary mode of data collection) declined over this period from 78 percent in 1970 to 63 percent in 2010. Declining mail response rates have led to higher costs because the Bureau sends temporary workers to each non-responding household to obtain census data. Achieving a complete and accurate census has become an increasingly daunting task, in part, because the population is growing larger, more diverse, and more reluctant to participate in the enumeration. In many ways, the Bureau has had to invest substantially more resources each decade to conduct the enumeration. In addition to these external societal challenges that make achieving a complete count a daunting task, the Bureau also faces a number of internal management challenges that affect its capacity and readiness to conduct a cost-effective enumeration. Some of these issues—such as acquiring and developing IT systems and preparing reliable cost estimates—are long-standing in nature. At the same time, as the Bureau looks toward 2020, it has faced emerging and evolving uncertainties. For example, on March 26, 2018, the Secretary of Commerce announced his decision to add a question to the decennial census on citizenship status which resulted in various legislative actions and legal challenges. Ultimately, the case was heard by the U.S. Supreme Court, which, in a June 26, 2019, ruling, prevented the addition of the question because the Court found that the evidence Commerce provided in the case did not match the Secretary’s explanation. In addition, the Fourth Circuit Court of Appeals remanded other legal challenges to the district court on June 24, 2019, for further legal action, which is yet to be resolved. According to Bureau officials, on June 28, 2019, Commerce asked the Bureau to put its scheduled July 1 start date for printing questionnaires on hold while it considered legal implications of the Supreme Court ruling. On July 2, 2019, Commerce told the Bureau to proceed with printing questionnaires and other materials without the citizenship question on them. As of July 5, 2019, the Department of Justice (DOJ) indicated that, although printing was continuing without the citizenship question, DOJ was evaluating legal options to include the question. On July 11, 2019, the President announced that instead of collecting this information from the census questionnaire, he ordered all federal agencies to provide data on citizenship status to Commerce using legally available federal records. We have not analyzed this decision or its implications, if any, for how the Bureau will tabulate its official counts. We will continue to monitor developments for Congress. The Bureau also faced budgetary uncertainties that, according to the Bureau, led to the curtailment of testing in 2017 and 2018. However, the Consolidated Appropriations Act, 2018 appropriated for the Periodic Censuses and Programs account $2.544 billion, which more than doubled the Bureau’s request in the President’s Fiscal Year 2018 Budget of $1.251 billion. According to the explanatory statement accompanying the act, the appropriation, which is available through fiscal year 2020, was provided to ensure the Bureau has the necessary resources to immediately address any issues discovered during operational testing, and to provide a smoother transition between fiscal year 2018 and fiscal year 2019. The availability of those resources enabled the Bureau to continue preparations for the 2020 Census during the 35 days in December 2018 to January 2019 when appropriations lapsed for the Bureau and a number of other federal agencies. Moreover, the Consolidated Appropriations Act, 2019 appropriated for the Periodic Censuses and Programs account $3.551 billion. According to Bureau officials, this level of funding for fiscal year 2019 is sufficient to carry out 2020 Census activities as planned. Importantly, the census is conducted against a backdrop of immutable deadlines. In order to meet the statutory deadline for completing the enumeration, census activities need to take place at specific times and in the proper sequence. Thus, it is absolutely critical for the Bureau to stay on schedule. Figure 2 shows some dates for selected decennial events. The Bureau Has Begun Opening Offices and Hiring Temporary Staff The Bureau has begun to open its area census offices (ACO) for the 2020 Census. It has signed leases for all 248 ACOs, of which 39 of the offices will be open for the address canvassing operation set to begin in August 2019 where staff verifies the location of selected housing units. The remaining 209 offices will begin opening this fall. In 2010 the Bureau opened 494 census offices. The Bureau has been able to reduce its infrastructure because it is relying on automation to assign work and to record payroll. Therefore there is less paper—field assignments, maps, and daily payroll forms—to manually process. For the 2020 Census, the Bureau is refining its recruiting and hiring goals, but tentatively plans to recruit approximately 2.24 million applicants and to hire over 400,000 temporary field staff from that applicant pool for two key operations: address canvassing, and nonresponse follow-up, where they visit households that do not return census forms to collect data in person. In 2010 the Bureau recruited 3.8 million applicants and hired 628,000 temporary workers to conduct the address canvassing and nonresponse follow-up field operations. According to Bureau officials, it has reduced the number of temporary staff it needs to hire because automation has made field operations more efficient and there is less paper. As of June 2019, the Bureau reported that for all 2020 Census operations it had processed about 430,000 applicants. In addition, the Bureau was seeking to hire approximately 1,500 partnership specialists by the end of June 2019 to help increase census awareness and participation in minority communities and hard-to-reach populations. As of July 9, 2019, the Bureau’s latest biweekly reporting indicated that it had hired 813 partnership specialists as of June 22, 2019. Moreover, as of July 10, 2019, Bureau officials told us that another 830 applicants were waiting to have their background checks completed. According to Bureau officials, hiring data are based on payroll dates generated biweekly, while background check data are tracked internally. Therefore, according to Bureau officials, more current hiring data were not available as of July 10, 2019 to indicate whether the Bureau had met its June 30 hiring goal. Among other things, partnership specialists are expected to either provide or identify partners to help provide supplemental language support to respondents locally in over 100 different languages. We will continue to monitor the Bureau’s progress in meeting its partnership specialist staffing goals and addressing any turnover that takes place. Hiring partnership specialists in a timely manner and maintaining adequate partnership specialist staffing levels are key to the Bureau’s ability to carry out its planned outreach efforts, especially to hard-to-count communities. Moreover, Bureau officials also stated that the current economic environment (i.e., the low unemployment rate compared to the economic environment of the 2010 Census) has not yet impacted their ability to recruit staff. The Bureau will continue to monitor the impact of low unemployment on its ability to recruit and hire at the local and regional levels. The Bureau Plans to Rely Heavily on IT for the 2020 Census For the 2020 Census, the Bureau is substantially changing how it intends to conduct the census, in part by re-engineering key census-taking methods and infrastructure, and making use of new IT applications and systems. For example, the Bureau plans to offer an option for households to respond to the survey via the internet and enable field-based enumerators to use applications on mobile devices to collect survey data from households. To do this, the Bureau plans to utilize 52 new and legacy IT systems, and the infrastructure supporting them, to conduct the 2020 Census. A majority of these 52 systems have been tested during operational tests in 2017 and 2018. For example, the Bureau conducted its 2018 End-to- End test, which included 44 of the 52 systems and was intended to test all key systems and operations in a census-like environment to ensure readiness for the 2020 Census. Nevertheless, additional IT development and testing work needs to take place before the 2020 Census. Specifically, officials from the Bureau’s Decennial Directorate said they expect that the systems will need to undergo further development and testing due to, among other things, the need to add functionality that was not part of the End-to-End test, scale system performance to support the number of respondents expected during the 2020 Census, and address system defects identified during the 2018 End-to-End test. To prepare the systems and technology for the 2020 Census, the Bureau is also relying on substantial contractor support. For example, it is relying on contractors to develop a number of systems and components of the IT infrastructure, including the IT platform that is intended to be used to collect data from households responding via the internet and telephone, and for non-response follow-up activities. Contractors are also deploying the IT and telecommunications hardware in the field offices and providing device-as-a-service capabilities by procuring the mobile devices and cellular service to be used for non-response follow-up. In addition to the development of technology, the Bureau is relying on a technical integration contractor to integrate all of the key systems and infrastructure. The contractor’s work is expected to include, among other things, evaluating the systems and infrastructure and acquiring the infrastructure (e.g., cloud or data center) to meet the Bureau’s scalability and performance needs; integrating all of the systems; and assisting with technical, performance and scalability, and operational testing activities. 2020 Census Identified by GAO as a High-Risk Area In February 2017, we added the 2020 Decennial Census as a high-risk area needing attention from Congress and the executive branch. This was due to significant risks related to, among other things, innovations never before used in prior enumerations, the acquisition and development of IT systems, and expected escalating costs. Among other things, we reported that the commitment of top leadership was needed to ensure the Bureau’s management, culture, and business practices align with a cost-effective enumeration. We also stressed that the Bureau needed to rigorously test census-taking activities; ensure that scheduling adheres to best practices; improve its ability to manage, develop, and secure its IT systems; and have better oversight and control over its cost estimation process. Our experience has shown that agencies are most successful at removal from our High-Risk List when leaders give top level attention to the five criteria for removal and Congress takes any needed action. The five criteria for removal that we identified in November 2000 are as follows: Leadership Commitment. The agency has demonstrated strong commitment and top leadership support. Capacity. The agency has the capacity (i.e., people and resources) to resolve the risk(s). Action Plan. A corrective action plan exists that defines the root causes and solutions, and that provides for substantially completing corrective measures, including steps necessary to implement solutions we recommended. Monitoring. A program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. Demonstrated Progress. The agency has demonstrated progress in implementing corrective measures and in resolving the high-risk area. These five criteria form a road map for efforts to improve, and ultimately address, high-risk issues. Addressing some of the criteria leads to progress, while satisfying all of the criteria is central to removal from the list. As we reported in the March 2019 high-risk report, the Bureau’s efforts to address the risks and challenges for the 2020 Census had fully met one of the five criteria for removal from the High-Risk List—leadership commitment—and partially met the other four, as shown in figure 3. Additional details about the status of the Bureau’s efforts to address this high-risk area are discussed later in this statement. The 2020 Census Remains High Risk Due to Challenges Facing the Enumeration The 2020 Census is on our list of high-risk programs because, among other things, (1) innovations never before used in prior enumerations are not expected to be fully tested, (2) the Bureau continues to face challenges in implementing IT systems, (3) the Bureau faces significant cybersecurity risks to its systems and data, and (4) the Bureau’s cost estimate for the 2020 Census was unreliable. If not sufficiently addressed, these risks could adversely impact the cost and quality of the enumeration. Moreover, the risks are compounded by other factors that contribute to the challenge of conducting a successful census, such as the nation’s increasingly diverse population and concerns over personal privacy. Key Risk #1: The Bureau Redesigned the Census to Control Costs, and Will Need to Take Several Actions to Better Manage Risks The basic design of the enumeration—mail out and mail back of the census questionnaire with in-person follow-up for non-respondents—has been in use since 1970. However, a lesson learned from the 2010 Census and earlier enumerations is that this traditional design is no longer capable of cost-effectively counting the population. In response to its own assessments, our recommendations, and studies by other organizations, the Bureau has fundamentally re-examined its approach for conducting the 2020 Census. Specifically, its plan for 2020 includes four broad innovation areas: re-engineering field operations, using administrative records, verifying addresses in-office, and developing an internet self-response option (see table 2). If they function as planned, the Bureau initially estimated that these innovations could result in savings of over $5 billion (in 2020 constant dollars) when compared to its estimates of the cost for conducting the census with traditional methods. However, in June 2016, we reported that the Bureau’s initial life-cycle cost estimate developed in October 2015 was not reliable and did not adequately account for risk. As discussed earlier in this statement, the Bureau has updated its estimate from $12.3 billion and now estimates a life-cycle cost of $15.6 billion, which would result in a smaller potential savings from the innovative design than the Bureau originally estimated. According to the Bureau, the goal of the cost estimate increase was to ensure quality was fully addressed. While the planned innovations could help control costs, they also introduce new risks, in part, because they include new procedures and technology that have not been used extensively in earlier decennials, if at all. Our prior work has shown the importance of the Bureau conducting a robust testing program, including the 2018 End-to-End test. Rigorous testing is a critical risk mitigation strategy because it provides information on the feasibility and performance of individual census-taking activities, their potential for achieving desired results, and the extent to which they are able to function together under full operational conditions. To address some of these challenges we have made numerous recommendations aimed at improving reengineered field operations, using administrative records, verifying the accuracy of the address list, and securing census responses via the internet. The Bureau has held a series of operational tests since 2012, but according to the Bureau, it scaled back its most recent field tests because of funding uncertainties. For example, the Bureau canceled the field components of the 2017 Census Test including non-response follow-up, a key census operation. In November 2016, we reported that the cancelation of the 2017 Census Test was a lost opportunity to test, refine, and integrate operations and systems, and that it put more pressure on the 2018 End-to-End test to demonstrate that enumeration activities will function under census-like conditions as needed for 2020. However, in May 2017, the Bureau scaled back the operational scope of the 2018 End-to-End test and, of the three planned test sites, only the Rhode Island site would fully implement the 2018 End-to-End test. The Washington and West Virginia sites would test just one field operation. In addition, due to budgetary concerns, the Bureau delayed ramp up and preparations for its coverage measurement operation (and the technology that supports it) from the scope of the test. However, removal of the coverage measurement operation did not affect testing of the delivery of apportionment or redistricting data. Without sufficient testing, operational problems can go undiscovered and the opportunity to improve operations will be lost, in part because the 2018 End-to-End test was the last opportunity to demonstrate census technology and procedures across a range of geographic locations, housing types, and demographic groups under decennial-like conditions prior to the 2020 Census. We reported on the 2018 End-to-End test in December 2018 and noted that the Bureau had made progress addressing prior test implementation issues but still faced challenges. As the Bureau studies the results of its testing to inform the 2020 Census, it will be important that it addresses key program management issues that arose during implementation of the test. Namely, by not aligning the skills, responsibilities, and information flows for the first-line supervisors during field data collection, the Bureau limited its role in support of enumerators within the re-engineered field operation. The Bureau also lacked mid-operation training or guidance, which, if implemented in a targeted, localized manner, could have further helped enumerators navigate procedural modifications and any commonly encountered problems when enumerating. It will be important for the Bureau to prioritize its mitigation strategies for these implementation issues so that it can maximize readiness for the 2020 Census. The Bureau Has Developed Hundreds of Risk Mitigation and Contingency Plans, but Those We Reviewed Were Missing Key Information To manage risk to the 2020 Census the Bureau has developed hundreds of risk mitigation and contingency plans. Mitigation plans detail how an agency will reduce the likelihood of a risk event and its impacts, if it occurs. Contingency plans identify how an agency will reduce or recover from the impact of a risk after it has been realized. In May 2019, we reported that the Bureau had identified 360 active risks to the 2020 census as of December 2018—meaning the risk event could still occur and adversely impact the census. Of these, 242 met the Bureau’s criteria for requiring a mitigation plan and, according to the Bureau’s risk registers, 232 had one (see table 3). In addition, 146 risks met the Bureau’s criteria for requiring a contingency plan and, according to the Bureau’s risk registers, 102 had one. Bureau guidance states that these plans should be developed as soon as possible after a risk is added to the risk register, but it does not establish a clear time frame for doing so. Consequently, some risks may go without required plans for extended periods. We found that, as of December 2018, some of the risks without required plans had been added to the Bureau’s risk registers in recent months, but others had been added more than 3 years earlier. We reviewed the mitigation and contingency plans in detail for six risks which the Bureau identified as among the major concerns that could affect the 2020 Census. These included cybersecurity incidents, late operational design changes, and integration of the 52 systems and 35 operations supporting the 2020 Census. We found that the plans did not consistently include key information needed to manage the risk. For example, the Bureau’s contingency plan for late operational design changes did not include activities specific to the three most likely late operational design changes—including removal of the citizenship question as a result of litigation or congressional action—that the Bureau could carry out to lessen their adverse impact on the enumeration, should they occur. We found that gaps stemmed from either requirements missing from the Bureau’s decennial risk management plan, or that risk owners—the individuals assigned to manage each risk—were not fulfilling all of their risk management responsibilities. Bureau officials said that risk owners are aware of these responsibilities but do not always fulfill them given competing demands. Bureau officials also said that they are managing risks to the census, even if not always reflected in their mitigation and contingency plans. However, if such actions are reflected in disparate documents or are not documented at all, then decision makers are left without an integrated and comprehensive picture of how the Bureau is managing risks to the census. We made seven recommendations to improve the Bureau’s management of risks to the 2020 Census, including that the Bureau develop mitigation and contingency plans for all risks that require them, establish a clear time frame for plan development, and ensure that the plans have the information needed to manage the risk. Commerce agreed with our recommendations and said it would develop an action plan to address them. Key Risk #2: The Bureau Faces Challenges in Implementing IT Systems We have previously reported that the Bureau faces challenges in managing and overseeing IT programs, systems, and contractors supporting the 2020 Census. Specifically, we have noted challenges in the Bureau’s efforts to manage, among other things, the schedules and contracts for its systems. As a result of these challenges, the Bureau is at risk of being unable to fully implement the systems necessary to support the 2020 Census and conduct a cost-effective enumeration. The Bureau Has Made Initial Progress against Its Revised Development and Testing Schedule, but Risks Missing Near-term Milestones To help improve its implementation of IT for the 2020 Census, the Bureau revised its systems development and testing schedule. Specifically, in October 2018, the Bureau organized the development and testing schedule for its 52 systems into 16 operational deliveries. Each of the 16 operational deliveries has milestone dates for, among other things, development, performance and scalability testing, and system deployment. According to Bureau officials in the Decennial Directorate, the schedule was revised, in part, due to schedule management challenges experienced, and lessons learned, while completing development and testing during the 2018 End-to-End test. The Bureau has made initial progress in executing work against its revised schedule. For example, the Bureau completed development of the systems in the first operational delivery—for 2020 Census early operations preparations—in July 2018, and deployed these systems into production in October 2018. However, our current work has determined that the Bureau is at risk of not meeting several near-term systems testing milestones. As of June 2019, 11 systems that are expected to be used in a total of five operational deliveries were at risk of not meeting key milestones for completing system development, performance and scalability testing, and/or integration testing. These 11 systems are needed for, among other things, data collection for operations, business and support automation, and customer support during self-response. Figure 4 presents an overview of the status for all 16 operational deliveries, as of June 2019. The at-risk systems previously discussed add uncertainty to a highly compressed time frame over the next 6 months. Importantly, between July and December 2019, the Bureau is expected to be in the process of integration testing the systems in 12 operational deliveries. Officials from the Bureau’s integration contractor noted concern that the current schedule leaves little room for any delays in completing the remaining development and testing activities. In addition to managing the compressed testing time frames, the Bureau also has to quickly finalize plans related to its IT infrastructure. For example, as of June 2019, the Bureau stated that it was still awaiting final approval for its Trusted Internet Connection. Given that these plans may impact systems being tested this summer or deployed into production for the address canvassing operation in August 2019, it is important that the Bureau quickly addresses this matter. Our past reporting noted that the Bureau faced significant challenges in managing its schedule for system development and testing that occurred in 2017 and 2018. We reported that, while the Bureau had continued to make progress in developing and testing IT systems for the 2020 Census, it had experienced delays in developing systems to support the 2018 End-to-End test. These delays compressed the time available for system and integration testing and for security assessments. In addition, several systems experienced problems during the test. We noted then, and reaffirm now, that continued schedule management challenges may compress the time available for the remaining system and integration testing and increase the risk that systems may not function or be as secure as intended. The Bureau has acknowledged that it faces risks to the implementation of its systems and technology. As of May 2019, the Bureau had identified 17 high risks related to IT implementation that may have substantial technical and schedule impacts if realized. Taken together, these risks represent a cross-section of issues, such as schedule delays for a fraud-detection system, the effects of late changes to technical requirements, the need to ensure adequate time for system development and performance and scalability testing, contracting issues, privacy risks, and skilled staffing shortages. Going forward, it will be important that the Bureau effectively manages these risks to better ensure that it meets near-term milestones for system development and testing, and is ready for the major operations of the 2020 Census. Key Risk #3: The Bureau Faces Significant Cybersecurity Risks to Its Systems and Data The risks to IT systems supporting the federal government and its functions, including conducting the 2020 Census, are increasing as security threats continue to evolve and become more sophisticated. These risks include insider threats from witting or unwitting employees, escalating and emerging threats from around the globe, and the emergence of new and more destructive attacks. Underscoring the importance of this issue, we have designated information security as a government-wide high-risk area since 1997 and, in our most recent biennial report to Congress, ensuring the cybersecurity of the nation was one of nine high-risk areas that we reported needing especially focused executive and congressional attention. Our prior and ongoing work has identified significant challenges that the Bureau faces in securing systems and data for the 2020 Census. Specifically, the Bureau has faced challenges related to completing security assessments, addressing security weaknesses, resolving cybersecurity recommendations from DHS, and addressing numerous other cybersecurity concerns (such as phishing). The Bureau Has Made Progress in Completing Security Assessments, but Critical Work Remains Federal law specifies requirements for protecting federal information and information systems, such as those systems to be used in the 2020 Census. Specifically, the Federal Information Security Management Act of 2002 and the Federal Information Security Modernization Act of 2014 (FISMA) require executive branch agencies to develop, document, and implement an agency-wide program to provide security for the information and information systems that support operations and assets of the agency. In accordance with FISMA, National Institute of Standards and Technology (NIST) guidance, and Office of Management and Budget (OMB) guidance, the Bureau’s Office of the Chief Information Officer (CIO) established a risk management framework. This framework requires system developers to ensure that each of the Bureau’s systems undergoes a full security assessment, and that system developers remediate critical deficiencies. According to the Bureau’s risk management framework, the systems expected to be used to conduct the 2020 Census will need to have complete security documentation (such as system security plans) and an approved authorization to operate prior to their use. As of June 2019, according to the Bureau’s Office of the CIO: Thirty-seven of the 52 systems have authorization to operate, and will not need to be reauthorized before they are used in the 2020 Census Nine of the 52 systems have authorization to operate, and will need to be reauthorized before they are used in the 2020 Census Five of the 52 systems do not have authorization to operate, and will need to be authorized before they are used in the 2020 Census One of the 52 systems does not need an authorization to operate. Figure 5 summarizes the authorization to operate status for the systems being used in the 2020 Census, as reported by the Bureau in June 2019. As we have previously reported, while large-scale technological changes (such as internet self-response) increase the likelihood of efficiency and effectiveness gains, they also introduce many cybersecurity challenges. The 2020 Census also involves collecting personally identifiable information (PII) on over a hundred million households across the country, which further increases the need to properly secure these systems. Thus, it will be important that the Bureau provides adequate time to perform these security assessments, completes them in a timely manner, and ensures that risks are at an acceptable level before the systems are deployed. We have ongoing work examining how the Bureau plans to address both internal and external cyber threats, including its efforts to complete system security assessments and resolve identified weaknesses. The Bureau Has Identified a Significant Number of Corrective Actions to Address Security Weaknesses, but Has Not Always Been Timely in Completing Them FISMA requires that agency-wide information security programs include a process for planning, implementing, evaluating, and documenting remedial actions (i.e., corrective actions) to address any deficiencies in the information security policies, procedures, and practices of the agency. Additionally, the Bureau’s framework requires it to track security assessment findings that need to be remediated as a plan of action and milestones (POA&M). These POA&Ms are expected to provide a description of the vulnerabilities identified during the security assessment that resulted from a control weakness. As of the end of May 2019, the Bureau had over 330 open POA&Ms to remediate for issues identified during security assessment activities, including ongoing continuous monitoring. Of these open POA&Ms, 217 (or about 65 percent) were considered “high-risk” or “very high-risk.” While the Bureau established POA&Ms for addressing these identified security control weaknesses, it did not always complete remedial actions in accordance with its established deadlines. For example, of the 217 open “high-risk” or “very high-risk” POA&Ms we reviewed, the Bureau identified 104 as being delayed. Further, 74 of the 104 had missed their scheduled completion dates by 60 or more days. According to the Bureau’s Office of Information Security, these POA&Ms were identified as delayed due to technical challenges or resource constraints to remediate and close them. We previously recommended that the Bureau take steps to ensure that identified corrective actions for cybersecurity weaknesses are implemented within prescribed time frames. As of late May 2019, the Bureau was working to address our recommendation. Until the Bureau resolves identified vulnerabilities in a timely manner, it faces an increased risk, as continuing opportunities exist for unauthorized individuals to exploit these weaknesses and gain access to sensitive information and systems. The Bureau Is Working with DHS to Improve Its 2020 Census Cybersecurity Efforts, but Lacks a Formal Process to Address DHS’s Recommendations The Bureau is working with federal and industry partners, including DHS, to support the 2020 Census cybersecurity efforts. Specifically, the Bureau is working with DHS to ensure a scalable and secure network connection for the 2020 Census respondents (e.g., virtual Trusted Internet Connection with the cloud), improve its cybersecurity posture (e.g., risk management processes and procedures), and strengthen its response to potential cyber threats (e.g., federal cyber incident coordination). Federal law describes practices for strengthening cybersecurity by documenting or tracking corrective actions. As previously mentioned, FISMA requires executive branch agencies to establish a process for planning, implementing, evaluating, and documenting remedial actions to address any deficiencies in their information security policies, procedures, and practices. Standards for Internal Control in the Federal Government calls for agencies to establish effective internal control monitoring that includes a process to promptly resolve the findings of audits and other reviews. Specifically, agencies should document and complete corrective actions to remediate identified deficiencies on a timely basis. This would include correcting identified deficiencies or demonstrating that the findings and recommendations do not warrant agency action. Since January 2017, DHS has been providing cybersecurity assistance (including issuing recommendations) to the Bureau in preparation for the 2020 Census. Specifically, DHS has been providing cybersecurity assistance to the Bureau in five areas: management coordination and executive support, including a cybersecurity threat intelligence and information sharing enhancement through, among other things, a DHS cyber threat briefing to the Bureau’s leadership; network and infrastructure security and resilience, including National Cybersecurity Protection System (also called EINSTEIN) support; incident response and management readiness through a Federal Incident Response Evaluation assessment; and risk management and vulnerability assessments for specific high value assets provided by the Bureau. In the last 2 years, DHS has provided 42 recommendations to assist the Bureau in strengthening its cybersecurity efforts. Among other things, the recommendations pertained to strengthening cyber incident management capabilities, penetration testing and web application assessments of select systems, and phishing assessments to gain access to sensitive PII. Of the 42 recommendations, 10 recommendations resulted from DHS’s mandatory services for the Bureau (e.g., risk management and vulnerability assessments for specific high value assets). The remaining 32 recommendations resulted from DHS’s voluntary services for the Bureau (e.g., Federal Incident Response Evaluation assessment). Due to the sensitive nature of the recommendations, we are not identifying the specific recommendations or specific findings associated with them in this statement. In April 2019, we reported that the Bureau had not established a formal process for documenting, tracking, and completing corrective actions for all of the recommendations provided by DHS. Accordingly, we recommended that the Bureau implement a formal process for tracking and executing appropriate corrective actions to remediate cybersecurity findings identified by DHS. As of late May 2019, the Bureau was working to address our recommendation. Until the Bureau implements our recommendation, it faces an increased likelihood that findings identified by DHS will go uncorrected and may be exploited to cause harm to agency’s 2020 Census IT systems and gain access to sensitive respondent data. Implementing a formal process would also help to ensure that DHS’s efforts result in improvements to the Bureau’s cybersecurity posture. The Bureau Faces Several Other Cybersecurity Challenges in Implementing the 2020 Census The Bureau faces other substantial cybersecurity challenges in addition to those previously discussed. More specifically, we previously reported that the extensive use of IT systems to support the 2020 Census redesign may help increase efficiency, but that this redesign introduces critical cybersecurity challenges. These challenges include those related to the following: Phishing. We have previously reported that advanced persistent threats may be targeted against social media web sites used by the federal government. In addition, attackers may use social media to collect information and launch attacks against federal information systems through social engineering, such as phishing. Phishing attacks could target respondents, as well as Bureau employees and contractors. The 2020 Census will be the first one in which respondents will be heavily encouraged to respond via the internet. This will likely increase the risk that cyber criminals will use phishing in an attempt to steal personal information. According to the Bureau, it plans to inform the public of the risks associated with phishing through its education and communication campaigns. Disinformation from social media. We previously reported that one of the Bureau’s key innovations for the 2020 Census is the large-scale implementation of an internet self-response option. The Bureau is encouraging the public to use the internet self-response option through expanded use of social media. However, the public perception of the Bureau’s ability to adequately safeguard the privacy and confidentiality of the 2020 Census internet self-responses could be influenced by disinformation spread through social media. According to the Bureau, if a substantial segment of the public is not convinced that the Bureau can safeguard public response data against data breaches and unauthorized use, then response rates may be lower than projected, leading to an increase in cases for follow-up and subsequent cost increases. To help address this challenge, the Bureau stated that it plans to inform the public of the risks associated with disinformation from social media through its education and communication campaigns. Ensuring that individuals gain only limited and appropriate access to 2020 Census data. The Bureau plans to enable a public- facing website and Bureau-issued mobile devices to collect PII (e.g., name, address, and date of birth) from the nation’s entire population— estimated to be over 300 million. In addition, the Bureau is planning to obtain and store administrative records containing PII from other government agencies to help augment information that enumerators did not collect. The number of reported security incidents involving PII at federal agencies has increased dramatically in recent years. Because of these challenges, we have recommended, among other things, that federal agencies improve their response to information security incidents and data breaches involving PII, and consistently develop and implement privacy policies and procedures. Accordingly, it will be important for the Bureau to ensure that only respondents and Bureau officials are able to gain access to this information, and enumerators and other employees only have access to the information needed to perform their jobs. Ensuring adequate control in a cloud environment. The Bureau has decided to use cloud solutions as a key component of the 2020 Census IT infrastructure. We have previously reported that cloud computing has both positive and negative information security implications and, thus, federal agencies should develop service-level agreements with cloud providers. These agreements should specify, among other things, the security performance requirements—including data reliability, preservation, privacy, and access rights—that the service provider is to meet. Without these safeguards, computer systems and networks, as well as the critical operations and key infrastructures they support, may be lost; information—including sensitive personal information—may be compromised; and the agency’s operations could be disrupted. Commerce’s Office of the Inspector General recently identified several challenges the Bureau may face using cloud-based systems to support the 2020 Census. Specifically, in June 2019, the Office of the Inspector General identified, among other things, unimplemented security system features that left critical 2020 Census systems vulnerable during the 2018 End-to-End Test and a lack of fully implemented security practices to protect certain data hosted in the 2020 Census cloud environment. Officials from the Bureau agreed with all eight of the Office of Inspector General’s recommendations regarding 2020 Census cloud-based systems and identified actions taken to address them. Ensuring contingency and incident response plans are in place to encompass all of the IT systems to be used to support the 2020 Census. Because of the brief time frame for collecting data during the 2020 Census, it is especially important that systems are available for respondents to ensure a high response rate. Contingency planning and incident response help ensure that, if normal operations are interrupted, network managers will be able to detect, mitigate, and recover from a service disruption while preserving access to vital information. Implementing important security controls, including policies, procedures, and techniques for contingency planning and incident response, helps to ensure the confidentiality, integrity, and availability of information and systems, even during disruptions of service. Without contingency and incident response plans, system availability might be impacted and result in a lower response rate. The Bureau’s CIO has acknowledged these cybersecurity challenges and is working to address them, according to Bureau documentation. In addition, we have ongoing work looking at many of these challenges, including the Bureau’s plans to protect PII, use a cloud-based infrastructure, and recover from security incidents and other disasters. Key Risk #4: The Bureau Will Need to Control Any Further Cost Growth and Develop Cost Estimates That Reflect Best Practices Since 2015, the Bureau has made progress in improving its ability to develop a reliable cost estimate. We have reported on the reliability of the $12.3 billion life-cycle cost estimate released in October 2015 and the $15.6 billion revised cost estimate released in October 2017. In 2016 we reported that the October 2015 version of the Bureau’s life-cycle cost estimate for the 2020 Census was not reliable. Specifically, we found that the 2020 Census life-cycle cost estimate partially met two of the characteristics of a reliable cost estimate (comprehensive and accurate) and minimally met the other two (well-documented and credible). We recommended that the Bureau take specific steps to ensure its cost estimate meets the characteristics of a high-quality estimate. The Bureau agreed and has taken action to improve the reliability of the cost estimate. In August 2018 we reported that while improvements had been made, the Bureau’s October 2017 cost estimate for the 2020 Census did not fully reflect all the characteristics of a reliable estimate. (See figure 6.) In order for a cost estimate to be deemed reliable as described in GAO’s Cost Estimating and Assessment Guide and thus, to effectively inform 2020 Census annual budgetary figures, the cost estimate must meet or substantially meet the following four characteristics: Well-Documented. Cost estimates are considered valid if they are well-documented to the point they can be easily repeated or updated and can be traced to original sources through auditing, according to best practices. Accurate. Accurate estimates are unbiased and contain few mathematical mistakes. Credible. Credible cost estimates must clearly identify limitations due to uncertainty or bias surrounding the data or assumptions, according to best practices. Comprehensive. To be comprehensive an estimate should have enough detail to ensure that cost elements are neither omitted nor double-counted, and all cost-influencing assumptions are detailed in the estimate’s documentation, among other things, according to best practices. The 2017 cost estimate only partially met the characteristic of being well- documented. In general, some documentation was missing, inconsistent, or difficult to understand. Specifically, we found that source data did not always support the information described in the basis of estimate document or could not be found in the files provided for two of the Bureau’s largest field operations: Address Canvassing and Non- Response Follow-Up. We also found that some of the cost elements did not trace clearly to supporting spreadsheets and assumption documents. Failure to document an estimate in enough detail makes it more difficult to replicate calculations, or to detect possible errors in the estimate; reduces transparency of the estimation process; and can undermine the ability to use the information to improve future cost estimates or even to reconcile the estimate with another independent cost estimate. The Bureau told us it would continue to make improvements to ensure the estimate is well- documented. Increased Costs Are Driven by an Assumed Decrease in Self- Response Rates and Increases in Contingency Funds and IT Cost Categories The 2017 life-cycle cost estimate includes much higher costs than those included in the 2015 estimate. The largest increases occurred in the Response, Managerial Contingency, and Census/Survey Engineering categories. For example, increased costs of $1.3 billion in the response category (costs related to collecting, maintaining, and processing survey response data) were in part due to reduced assumptions for self- response rates, leading to increases in the amount of data collected in the field, which is more costly to the Bureau. Contingency allocations increased overall from $1.35 billion in 2015 to $2.6 billion in 2017, as the Bureau gained a greater understanding of risks facing the 2020 Census. Increases of $838 million in the Census/Survey Engineering category were due mainly to the cost of an IT contract for integrating decennial survey systems that was not included in the 2015 cost estimate. Bureau officials attribute a decrease of $551 million in estimated costs for Program Management to changes in the categorization of costs associated with risks. Specifically, in the 2017 version of the estimate, estimated costs related to program risks were allocated to their corresponding work breakdown structure (WBS) element. Figure 7 shows the change in cost by WBS category for 2015 and 2017. More generally, factors that contributed to cost fluctuations between the 2015 and 2017 cost estimates include: Changes in assumptions. Among other changes, a decrease in the assumed rate for self-response from 63.5 percent in 2015 to 60.5 percent in 2017 increased the cost of collecting responses from nonresponding housing units. Improved ability to anticipate and quantify risk. In general, contingency allocations designed to address the effects of potential risks increased overall from $1.3 billion in 2015 to $2.6 billion in 2017. An overall increase in IT costs. IT cost increases, totaling $1.59 billion, represented almost 50 percent of the total cost increase from 2015 to 2017. More defined contract requirements. Bureau documents described an overall improvement in the Bureau’s ability to define and specify contract requirements. This resulted in updated estimates for several contracts, including for the Census Questionnaire Assistance contract. However, while the Bureau has been able to better quantify risk; in August 2018 we also reported that the Secretary of Commerce included a contingency amount of about $1.2 billion in the 2017 cost estimate to account for what the Bureau refers to as “unknown unknowns.” According to Bureau documentation these include such risks as natural disasters or cyber attacks. The Bureau provides a description of how the risk contingency for “unknown unknowns” is calculated; however, this description does not clearly link calculated amounts to the risks themselves. Thus, only $14.4 billion of the Bureau’s $15.6 billion cost estimate has justification. According to Bureau officials, the cost estimate remains at $15.6 billion; however, they stated that they are managing the 2020 Census at a lower level of funding—$14.1 billion. In addition, they said that, at this time, they do not plan to request funding for the $1.2 billion contingency fund for unknown unknowns or $369 million in funding for selected discrete program risks for what-if scenarios, such as an increase in the wage rate or additional supervisors needed to manage field operations. Instead of requesting funding for these contingencies upfront the Bureau plans to work with OMB and Commerce to request additional funds, if the need arises. According to Bureau officials they anticipate that the remaining $1.1 billion in contingency funding included in the $14.1 billion will be sufficient to carry out the 2020 Census. In June 2016 we recommended the Bureau improve control over how risk and uncertainty are accounted for. This prior recommendation remains valid given the life-cycle cost estimate still includes the $1.2 billion unjustified contingency fund for “unknown unknowns”. Moreover, given the cost growth between 2015 and 2017 it will be important for the Bureau to monitor cost in real-time, as well as, document, explain and review variances between planned and actual cost. In August 2018 we reported that the Bureau had not been tracking variances between estimated life-cycle costs and actual expenses. Tools to track variance enable management to measure progress against planned outcomes and will help inform the 2030 Census cost estimate. Bureau officials stated that they already have systems in place that can be adapted for tracking estimated and actual costs. We will continue to monitor the status of the tracking system. According to Bureau officials, the Bureau planned to release an updated version of the 2020 Census life-cycle estimate in the spring of 2019; however, they had not done so as of June 28, 2019. To ensure that future updates to the life-cycle cost estimate reflect best practices, it will be important for the Bureau to implement our recommendation related to the cost estimate. Continued Management Attention Needed to Keep Preparations on Track and Help Ensure a Cost- Effective Enumeration 2020 Challenges Are Symptomatic of Deeper Long-Term Organizational Issues The difficulties facing the Bureau’s preparation for the decennial census in such areas as planning and testing; managing and overseeing IT programs, systems, and contractors supporting the enumeration; developing reliable cost estimates; prioritizing decisions; managing schedules; and other challenges, are symptomatic of deeper organizational issues. Following the 2010 Census, a key lesson learned for 2020 that we identified was ensuring that the Bureau’s organizational culture and structure, as well as its approach to strategic planning, human capital management, internal collaboration, knowledge sharing, capital decision- making, risk and change management, and other internal functions are aligned toward delivering more cost-effective outcomes. The Bureau has made improvements over the last decade, and continued progress will depend in part on sustaining efforts to strengthen risk management activities, enhancing systems testing, bringing in experienced personnel to key positions, implementing our recommendations, and meeting regularly with officials from its parent agency, Commerce. Going forward, we have reported that the key elements needed to make progress in high-risk areas are top-level attention by the administration and agency officials to (1) leadership commitment, (2) ensuring capacity, (3) developing a corrective action plan, (4) regular monitoring, and (5) demonstrated progress. Although important steps have been taken in at least some of these areas, overall, far more work is needed. We discuss three of five areas below. The Secretary of Commerce has successfully demonstrated leadership commitment. For example, the Bureau and Commerce have strengthened this area with executive-level oversight of the 2020 Census by holding regular meetings on the status of IT systems and other risk areas. In addition, in 2017 Commerce designated a team to assist senior Bureau management with cost estimation challenges. Moreover, on January 2, 2019, a new Director of the Census Bureau took office, a position that had been vacant since June 2017. With regard to capacity, the Bureau has improved the cost estimation process of the decennial when it established guidance including: roles and responsibilities for oversight and approval of cost estimation processes, procedures requiring a detailed description of the steps taken to produce a high-quality cost estimate, and a process for updating the cost estimate and associated documents over the life of a project. However, the Bureau continues to experience skills gaps in the government program management office overseeing the $886 million contract for integrating the IT systems needed to conduct the 2020 Census. Specifically, as of June 2019, 14 of 44 positions in this office were vacant. For the monitoring element, we found to track performance of decennial census operations, the Bureau relied on reports to track progress against pre-set goals for a test conducted in 2018. According to the Bureau, these same reports will be used in 2020 to track progress. However, the Bureau’s schedule for developing IT systems during the 2018 End-to-End test experienced delays that compressed the time available for system testing, integration testing, and security assessments. These schedule delays contributed to systems experiencing problems after deployment, as well as cybersecurity challenges. In the months ahead, we will continue to monitor the Bureau’s progress in addressing each of the five elements essential for reducing the risk to a cost-effective enumeration. Further Actions Needed on Our Recommendations Over the past several years we have issued numerous reports that underscored the fact that, if the Bureau was to successfully meet its cost savings goal for the 2020 Census, the agency needed to take significant actions to improve its research, testing, planning, scheduling, cost estimation, system development, and IT security practices. As of June 2019, we have made 106 recommendations related to the 2020 Census. The Bureau has implemented 74 of these recommendations, 31 remain open, and one recommendation was closed as not implemented. Of the 31 open recommendations, 9 were directed at improving the implementation of the innovations for the 2020 Census. Commerce generally agreed with our recommendations and is taking steps to implement them. Moreover, in April 2019 we wrote to the Secretary of Commerce, providing a list of the 12 open 2020-Census-related recommendations that we designated as “priority.” Priority recommendations are those recommendations that we believe warrant priority attention from heads of key departments and agencies. We believe that attention to these recommendations is essential for a cost-effective enumeration. The recommendations included implementing reliable cost estimation and scheduling practices in order to establish better control over program costs, as well as taking steps to better position the Bureau to develop an internet response option for the 2020 Census. In addition to our recommendations, to better position the Bureau for a more cost-effective enumeration, on March 18, 2019, we met with OMB, Commerce, and Bureau officials to discuss the Bureau’s progress in reducing the risks facing the census. We also meet regularly with Bureau officials and managers to discuss the progress and status of open recommendations related to the 2020 Census, which has resulted in Bureau actions in recent months leading to closure of some recommendations. We are encouraged by this commitment by Commerce and the Bureau in addressing our recommendations. Implementing our recommendations in a complete and timely manner is important because it could improve the management of the 2020 Census and help to mitigate continued risks. In conclusion, while the Bureau has made progress in revamping its approach to the census, it faces considerable challenges and uncertainties in implementing key cost-saving innovations and ensuring they function under operational conditions; managing the development and testing of its IT systems; ensuring the cybersecurity of its systems and data; and developing a quality cost estimate for the 2020 Census and preventing further cost increases. For these reasons, the 2020 Census is a GAO high-risk area. Going forward, continued management attention and oversight will be vital for ensuring that risks are managed, preparations stay on track, and the Bureau is held accountable for implementing the enumeration, as planned. Without timely and appropriate actions, the challenges previously discussed could adversely affect the cost, accuracy, schedule, and security of the enumeration. We will continue to assess the Bureau’s efforts and look forward to keeping Congress informed of the Bureau’s progress. Chairman Johnson, Ranking Member Peters, and Members of the Committee, this completes our prepared statement. We would be pleased to respond to any questions that you may have. GAO Contacts and Staff Acknowledgments If you have any questions about this statement, please contact Robert Goldenkoff at (202) 512-2757 or by email at goldenkoffr@gao.gov or Nick Marinos at (202) 512-9342 or by email at marinosn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other key contributors to this testimony include Ty Mitchell (Assistant Director); Lisa Pearson (Assistant Director); Jon Ticehurst (Assistant Director); Emmy Rhine Paule (Analyst in Charge); Christopher Businsky; Jackie Chapin; Jeff DeMarco; Rebecca Eyler; Adella Francis; Scott Pettis; Lindsey Pilver; Kayla Robinson; Robert Robinson; Cindy Saunders; Sejal Sheth; Kevin R. Smith; Andrea Starosciak; and Umesh Thakkar. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The Bureau is responsible for conducting a complete and accurate decennial census of the U.S. population. The decennial census is mandated by the Constitution and provides vital data for the nation. A complete count of the nation's population is an enormous undertaking as the Bureau seeks to control the cost of the census, implement operational innovations, and use new and modified IT systems. In recent years, GAO has identified challenges that raise serious concerns about the Bureau's ability to conduct a cost-effective count. For these reasons, GAO added the 2020 Census to its High-Risk list in February 2017. GAO was asked to testify about the reasons the 2020 Census remains on the High-Risk List and the steps the Bureau needs to take to mitigate risks to a successful census. To do so, GAO summarized its prior work regarding the Bureau's planning efforts for the 2020 Census. GAO also included preliminary observations from its ongoing work examining the IT systems readiness and cybersecurity for the 2020 Census. This information is related to, among other things, the Bureau's progress in developing and testing key systems and the status of cybersecurity risks. The 2020 Decennial Census is on GAO's list of high-risk programs primarily because the Department of Commerce's Census Bureau (Bureau) (1) is using innovations that are not expected to be fully tested, (2) continues to face challenges in implementing information technology (IT) systems, and (3) faces significant cybersecurity risks to its systems and data. Although the Bureau has taken initial steps to address risk, additional actions are needed as these risks could adversely impact the cost, quality, schedule, and security of the enumeration. Innovations. The Bureau is planning several innovations for the 2020 Census, including allowing the public to respond using the internet. These innovations show promise for controlling costs, but they also introduce new risks, in part, because they have not been used extensively, if at all, in earlier enumerations. As a result, testing is essential to ensure that key IT systems and operations will function as planned. However, citing budgetary uncertainties, the Bureau scaled back operational tests in 2017 and 2018, missing an opportunity to fully demonstrate that the innovations and IT systems will function as intended during the 2020 Census. To manage risk to the census, the Bureau has developed hundreds of mitigation and contingency plans. To maximize readiness for the 2020 Census, it will also be important for the Bureau to prioritize among its mitigation and contingency strategies those that will deliver the most cost-effective outcomes for the census. Implementing IT systems. The Bureau plans to rely heavily on IT for the 2020 Census, including a total of 52 new and legacy IT systems and the infrastructure supporting them. To help improve its implementation of IT, in October 2018, the Bureau revised its systems development and testing schedule to reflect, among other things, lessons learned during its 2018 operational test. However, GAO's ongoing work has determined that the Bureau is at risk of not meeting near-term IT system development and testing schedule milestones for five upcoming 2020 Census operational deliveries, including self-response (e.g., the ability to respond to the 2020 Census through the internet). These schedule management challenges may compress the time available for the remaining system development and testing, and increase the risk that systems will not function as intended. It will be important that the Bureau effectively manages IT implementation risk to ensure that it meets near-term milestones for system development and testing, and that it is ready for the major operations of the 2020 Census. To its credit, the Bureau is also working with the Department of Homeland Security (DHS) to support its 2020 Census cybersecurity efforts. For example, DHS is helping the Bureau ensure a scalable and secure network connection for the 2020 Census respondents and to strengthen its response to potential cyber threats. During the last 2 years, as a result of these activities, the Bureau has received 42 recommendations from DHS to improve its cybersecurity posture. GAO recently recommended that the Bureau implement a formal process for tracking and executing appropriate corrective actions to remediate cybersecurity findings identified by DHS. Implementing the recommendation would help better ensure that DHS's efforts result in improvements to the Bureau's cybersecurity posture. In addition to addressing risks which could affect innovations and the security of the enumeration, the Bureau has the opportunity to improve its cost estimating process for the 2020 Census, and ultimately the reliability of the estimate itself, by reflecting best practices. In October 2017, the 2020 Census life-cycle cost estimate was updated and is now projected to be $15.6 billion, a more than $3 billion (27 percent) increase over its earlier estimate. GAO reported in August 2018 that although the Bureau had taken steps to improve its cost estimation process for 2020, it needed to implement a system to track and report variances between actual and estimated cost elements. According to Bureau officials, they planned to release an updated version of the 2020 Census life-cycle estimate in the spring of 2019; however, they had not done so as of June 28, 2019. To ensure that future updates to the life-cycle cost estimate reflect best practices, it will be important for the Bureau to implement GAO's recommendation related to the cost estimate. Over the past decade, GAO has made 106 recommendations specific to the 2020 Census to help address these risks and other concerns. The Department of Commerce has generally agreed with these recommendations and has taken action to address many of them. However, as of June 2019, 31 of the recommendations had not been fully implemented. While all 31 open recommendations are important for a high-quality and cost-effective enumeration, 9 are directed at managing the risks introduced by the Bureau's planned innovations for the 2020 Census. To ensure a high-quality and cost-effective enumeration, it will be important for the Bureau to address these recommendations.

GAO_GAO-19-581T

Background VHA’s Family Caregiver Program is designed to provide support and services to family caregivers of post-9/11 veterans who have a serious injury that was incurred or aggravated in the line of duty. The program provides approved primary family caregivers with a monthly financial stipend as well as training and other support services, such as counseling and respite care. The Family Caregiver Program has a series of eligibility requirements that must be satisfied in order for family caregivers to be approved. To meet the program’s initial eligibility criteria, the veteran seeking caregiver assistance must have a serious injury that was incurred or aggravated in the line of duty on or after September 11, 2001. According to the program’s regulations, a serious injury is any injury, including traumatic brain injury (TBI), psychological trauma, or other mental disorder, that has been incurred or aggravated in the line of duty and renders the veteran or servicemember in need of personal care services. The veteran must be in need of personal care services for a minimum of 6 continuous months based on any one of the following clinical eligibility criteria: (1) an inability to perform one or more activities of daily living, such as bathing, dressing, or eating; (2) a need for supervision or protection based on symptoms or residuals of neurological or other impairment or injury such as TBI, post-traumatic stress disorder, or other mental health disorders; (3) the existence of a psychological trauma or a mental disorder that has been scored by a licensed mental health professional, with a Global Assessment of Functioning score of 30 or less, continuously during the 90-day period immediately preceding the date on which VHA initially received the application; or (4) the veteran has been rated 100 percent service connected disabled for a qualifying serious injury and has been awarded special monthly compensation that includes an aid and attendance allowance. To be considered competent to care for the veteran, family caregivers must meet certain requirements including (1) having the ability to communicate and follow details of the treatment plan and instructions related to the care of the veteran; (2) not determined by VA to have abused or neglected the veteran; (3) being at least 18 years of age; and (4) either being a family member—such as a spouse, son or daughter, parent, step-family member, or extended family member— or an unrelated person who lives or will live full-time with the veteran. Family caregivers must also complete required training before being approved for the program. Family Caregiver Program Organizational Structure VHA’s Caregiver Support Program office is responsible for developing policy and providing guidance and oversight for the Family Caregiver Program. It also directly administers the program’s stipend, provides support services such as a telephone hotline and website, and arranges coverage through the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) for eligible caregivers if they have no other coverage. Further, the office provides funding to VAMCs to cover certain program costs. These costs may include the salaries of the caregiver support coordinators (CSC), who implement and administer the Family Caregiver Program at the local VAMC level, and the costs VAMCs incur for having their clinical staff, such as nurses, conduct the program’s required in- home visits to approved caregivers and their veterans. CSCs are generally licensed social workers or registered nurses, and they have both clinical and administrative responsibilities. Their clinical responsibilities may include identifying and coordinating appropriate interventions for caregivers or referrals to other VA or non-VA programs, such as mental health treatment, respite care, or additional training and education. Their administrative responsibilities may include responding to inquiries about the program, overseeing the application process, entering information about applications and approved caregivers into IT systems, and facilitating the processing of appeals. As of May 2014, there were 233 CSCs assigned to 140 VAMCs or health care systems across the country. Additionally, each regional VISN office has a VISN CSC lead for the program, who provides guidance to CSCs and helps address their questions or concerns. GAO Has Previously Reported on the Family Caregiver Program IT System Limitations CAT, which was deployed in May 2011, is a web-based system that was designed to facilitate the exchange of information about approved caregivers between VAMCs and other VHA entities. Such entities include the Health Administration Center, which processes the caregiver stipend payments and administers CHAMPVA. In 2014, we reported that the Caregiver Support Program office was not able to easily retrieve data from CAT that would allow officials to better assess workload trends at individual VAMCs—such as the length of time applications are delayed or the timeliness of home visits—even though these data were already captured in the system. Caregiver Support Program officials only retrieved workload data on an ad hoc, as-needed basis, which limited their ability to assess the scope and extent of workload problems comprehensively at individual VAMCs and on a system-wide basis. Program officials also expressed concern about the reliability of the system’s data. As we noted in our report, program officials also identified the need for a more capable and flexible system that could interface with other departmental systems. The officials told us that they had taken initial steps to obtain another IT system to support the Family Caregiver Program; however, the officials were not sure how long it would take to implement the system. Accordingly, we recommended that VA expedite the process for identifying and implementing a system that would fully support the Family Caregiver Program. VA concurred with our recommendation and subsequently began taking actions in 2015 to implement a replacement system. These actions included taking steps toward implementing short-term improvements to CAT that were to be followed by the implementation of a long-term replacement system. The recommendation continues to remain open. Statute Directs VA to Implement an IT System to Support the Family Caregiver Program The John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act), which was enacted in June 2018, included provisions directing VA to implement an IT system to support the Family Caregiver Program and the incremental expansion of program eligibility. Specifically, the act required VA to implement an IT system to fully support the Family Caregiver Program by October 1, 2018. According to the act, the system is to allow for data assessment and comprehensive monitoring of the program. In particular, the system is to have, among other things, the ability to (1) retrieve data to monitor workload trends at the medical center and aggregate levels; (2) manage an increased number of caregivers as the program expands; and (3) integrate with other relevant IT systems at VHA. The act also stated that VA was to submit an initial report to Congress regarding the status of the planning, development, and deployment of this system within 90 days of enactment of the VA MISSION Act, and that the department is to submit a final report to Congress by October 1, 2019. The final report is to include a certification by the VA Secretary that the system has been implemented, along with a description of how the Secretary is using the system to monitor the workload of the program. VA Has Not Yet Implemented an IT System That Effectively Supports the Family Caregiver Program Although we previously recommended that VA expedite implementation of a replacement for CAT, and the MISSION Act directed the department to implement an IT system to support the Family Caregiver Program, VA has not yet been successful in its multiple efforts to implement such a system. Specifically, VA has faced a number of difficulties in developing and implementing short-term improvements as well as a long-term replacement system for CAT. In July 2015, VHA and the Office of Information and Technology (OIT) initiated a joint acquisition project, called CAT Rescue, to update CAT and improve the system’s data reliability. However, the department reported in January 2017 that this project had experienced delays and identified a large number of defects during system testing. VA terminated the project in April 2018 before any new system capabilities were implemented. A companion project to CAT Rescue that VA initiated in September 2015 was to develop the Caregivers Tool (CareT), a new system intended to be a long-term replacement for CAT. As envisioned, this system was to use the improved data from CAT Rescue while also adding new system capabilities. However, the user acceptance testing of CareT identified the need for the department to develop more system capabilities than originally planned. Further, the department determined that the time period needed to perform additional system development would have extended beyond the term of the development contract, which ended in April 2017. VA subsequently awarded a new CareT development contract in July 2017. However, after additional system development, the department determined during user acceptance testing that the system was not performing as expected and implementation of CareT was further delayed. In October 2018, the department reported to congressional committees that implementing a system to fully support the Family Caregiver Program by the VA MISSION Act deadline was not feasible. Subsequently, the department determined that CareT was not a viable solution and VHA and OIT terminated work on the system in February 2019. VHA and OIT began a third effort in March 2019 to acquire a replacement system that is to be based on an existing commercial product. According to OIT officials, the new IT solution, referred to as the Caregiver Record Management Application (CARMA), is intended to replace CAT. However, the department has not yet established a date for completing CARMA. Thus, VA’s efforts to implement an IT system that supports the Family Caregiver Program have been continuing with no end in sight. We have ongoing work to further evaluate the status and progress of the department’s efforts to implement a system to support the Family Caregiver Program consistent with the VA MISSION Act requirements. Figure 1 provides a timeline of the various IT projects that VA has undertaken to support the program. Critical Factors Underlying Successful IT Acquisitions Our prior work has determined that successfully overcoming IT acquisition challenges can best be achieved when critical success factors are applied. Specifically, we reported in 2011 on common factors critical to the success of IT acquisitions, based on seven agencies having each identified the acquisition that best achieved the agency’s respective cost, schedule, scope, and performance goals. These factors remain relevant today and can serve as a model of best practices that agencies can apply to enhance the likelihood that the acquisition of an IT system such as CARMA will be successfully achieved. Among the agencies’ seven IT investments, agency officials identified nine factors as having been critical to the success of three or more of the seven investments. These nine critical success factors are consistent with leading industry practices for IT acquisition. The factors are: Active engagement of program officials with stakeholders. Qualified and experienced program staff. Support of senior department and agency executives. Involvement of end users and stakeholders in the development of requirements. Participation of end users in testing system functionality prior to formal end user acceptance testing. Consistency and stability of government and contractor staff. Prioritization of requirements by program staff. Regular communication maintained between program officials and the prime contractor. Sufficient funding. Officials for all seven selected investments cited active engagement with program stakeholders—individuals or groups (including, in some cases, end users) with an interest in the success of the acquisition—as a critical factor to the success of those investments. Agency officials stated that stakeholders, among other things, reviewed contractor proposals during the procurement process, regularly attended program management office sponsored meetings, were working members of integrated project teams, and were notified of problems and concerns as soon as possible. Further, officials from two investments noted that actively engaging with stakeholders created transparency and trust, and increased the support from the stakeholders. Additionally, officials for six of the seven selected investments indicated that the knowledge and skills of the program staff were critical to the success of the program. This included knowledge of acquisitions and procurement processes, monitoring of contracts, large-scale organizational transformation, Agile software development concepts, and areas of program management such as earned value management and technical monitoring. Finally, officials for five of the seven selected investments identified having the end users test and validate the system components prior to formal end user acceptance testing for deployment as critical to the success of their program. Similar to this factor, leading guidance recommends testing selected products and product components throughout the program life cycle. Testing of functionality by end users prior to acceptance demonstrates, earlier rather than later in the program life cycle, that the functionality will fulfill its intended use. If problems are found during this testing, programs are typically positioned to make changes that would be less costly and disruptive than ones made later in the life cycle. In conclusion, VA has invested considerable time in multiple efforts toward improving and replacing its IT system to better serve the Family Caregiver Program. However, even with these efforts, the department has not yet implemented a system and the program is not prepared for expansion. Going forward, it is important that VA take steps to improve its efforts to implement a replacement IT system for the Family Caregiver Program. In this regard, the department could benefit from applying critical success factors we previously reported as leading to successful federal IT acquisitions. These factors can serve as a model of best practices that the department can apply to enhance the likelihood that its effort to replace the IT system for the Family Caregiver Program will be successful. Chairs Lee and Brownley, Ranking Members Banks and Dunn, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have. GAO Contact and Staff Acknowledgments If you or your staffs have any questions about this testimony, please contact Carol C. Harris, Director, Information Technology Management Issues, at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony statement. GAO staff who made key contributions to this testimony are Mark Bird (Assistant Director), Rebecca Eyler, Jacqueline Mai, Monica Perez-Nelson, Scott Pettis, and Jennifer Stavros-Turner (Analyst in Charge). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

To provide greater support for caregivers of post-9/11 veterans, Congress and the President enacted legislation requiring VA to establish a program to assist caregivers with the rigors of caring for seriously injured veterans. In May 2011, the Veterans Health Administration (VHA), which operates VA's health care system, established the Family Caregiver Program at each of its VA medical centers across the United States. At that time, the department implemented an IT system, called CAT, to help support the program. Subsequently, the VA MISSION Act was enacted in June 2018, requiring VA to implement an IT system to fully support the Family Caregiver Program by October 1, 2018. Further, VA's Secretary is to certify the system by October 1, 2019. GAO was asked to discuss its September 2014 report that examined how VHA is implementing the Family Caregiver Program. In addition, the statement includes relevant information VA provided on its actions toward addressing GAO's prior recommendation. The statement also discusses critical success factors related to IT acquisitions as identified in GAO's prior work. The reports cited throughout this statement include detailed information on the scope and methodology of GAO's prior reviews. In September 2014, GAO reported on the Department of Veterans Affairs' (VA) Program of Comprehensive Assistance for Family Caregivers (Family Caregiver Program) and found that the program office had limitations with its information technology (IT) system—the Caregiver Application Tracker (CAT). Specifically, the program did not have ready access to workload data that would allow it to monitor the effects of the program on VA medical centers' resources. VA has initiated various projects since 2015 to implement a new system, but has not yet been successful in its efforts. (See figure.) Specifically, in July 2015 VA initiated a project to improve the reliability of CAT's data, called CAT Rescue. However, the department reported in January 2017 that it had identified numerous defects during system testing. The project ended in April 2018 before any new system capabilities were implemented. A companion project was initiated in September 2015 to develop the Caregivers Tool (CareT), a new system intended to replace CAT. The CareT project was expected to use improved data from CAT Rescue, while also adding new system capabilities. However, the user acceptance testing of CareT identified the need for the department to develop more system capabilities than originally planned. Further, VA reported that implementing a system by October 1, 2018, as specified in the Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (MISSION Act), was not feasible. Subsequently, VA terminated CareT in February 2019. The department initiated another project in March 2019 to implement a new system, the Caregiver Record Management Application (CARMA). GAO has ongoing work to evaluate the department's efforts to implement an IT system to support the Family Caregiver Program as required by the MISSION Act. GAO's prior work has determined that successfully overcoming IT acquisition challenges can best be achieved when critical success factors are applied. These factors can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of a replacement IT system for the Family Caregiver Program will be successfully achieved. Examples of these critical success factors include, maintaining active engagement of program officials with stakeholders, involving end users and stakeholders in the development of requirements, and ensuring participation of end users in testing system functionality prior to formal end user acceptance testing.

GAO_GAO-19-716T

Background The NASA Authorization Act of 2010 directed NASA to develop SLS, to continue development of a crew vehicle, and to prepare infrastructure at Kennedy Space Center to enable processing and launch of the launch system. To fulfill this direction, NASA formally established the SLS launch vehicle program in 2011. Then, in 2012, NASA aligned the requirements for the Orion program with those of the newly created SLS and EGS programs. Figure 1 provides details about each SLS hardware element and its source as well as identifies the major portions of the Orion spacecraft. History of Program Cost and Schedule Changes In order to facilitate Congressional oversight and track program progress, NASA establishes an agency baseline commitment—the cost and schedule baselines against which the program may be measured—for all projects that have a total life cycle cost of $250 million or more. NASA refers to these projects as major projects or programs. When the NASA Administrator determines that development cost growth within a major project or program is likely to exceed the development cost estimate by 15 percent or more, or a program milestone is likely to be delayed from the baseline’s date by 6 months or more, NASA replans the project and submits a report to this committee—the Committee on Science, Space, and Technology of the House of Representatives—and the Committee on Commerce, Science, and Transportation of the Senate. Should a major project or program exceed its development cost baseline by more than 30 percent, the program must be reauthorized by the Congress and rebaselined by NASA in order for the contractor to continue work beyond a specified time frame. NASA tied the SLS and EGS program cost and schedule baselines to the uncrewed first mission—known now as Artemis-1—originally planned for November 2018. The Orion program’s cost and schedule baselines are tied to a crewed second mission—known as Artemis-2—planned for April 2023. In April 2017, we found that given combined effects of ongoing technical challenges in conjunction with limited cost and schedule reserves, it was unlikely that these three programs would achieve the originally committed November 2018 launch readiness date. Cost reserves are for costs that are expected to be incurred—for instance, to address project risks—but are not yet allocated to a specific part of the project. Schedule reserves are extra time in project schedules that can be allocated to specific activities, elements, and major subsystems to mitigate delays or address unforeseen risks. We recommended that NASA confirm whether the November 2018 launch readiness date was achievable and, if warranted, propose a new, more realistic Artemis-1 date and report to Congress on the results of its schedule analysis. NASA agreed with both recommendations and stated that it was no longer in its best interest to pursue the November 2018 launch readiness date. Subsequently, NASA approved a new Artemis-1 schedule of December 2019, with 6 months of schedule reserve available to extend the date to June 2020, and revised the costs that it expects to incur (see table 1). Cost and Schedule Status of NASA’s Human Spaceflight Programs In June 2019, we found that within 1 year of announcing a delay for the first human spaceflight mission, senior NASA officials acknowledged that the revised Artemis-1 launch date of December 2019 was unachievable and the June 2020 launch date (which takes into account schedule reserves) was unlikely. These officials estimated that there were 6 to 12 months of schedule risk associated with this later date, which means the first launch may occur as late as June 2021 if all risks are realized. As we found in June 2019, this would be a 31-month delay from the schedule originally established in the programs’ baselines. Officials attributed the additional schedule delay to continued production challenges with the SLS core stage and the Orion crew and service modules. NASA officials also stated that the 6 to 12 months of risk to the launch date accounts for the possibilities that SLS and Orion testing and final cross-program integration and testing at Kennedy Space Center may result in further delays. As we noted in our report, these 6 to 12 months of schedule risk do not include the effects, if any, of the federal government shutdown that occurred in December 2018 and January 2019. In commenting on our June 2019 report, NASA stated that its Lunar 2024 planning activities would include an Artemis-1 schedule assessment. However, in July 2019, NASA reassigned its senior leaders responsible for human spaceflight programs. The NASA Administrator stated in August 2019 that, as a result, the agency does not plan to finalize schedule plans for Artemis-1 until new leadership is in place at the agency. Additional details follow on the status of each program, including cost, schedule, and technical challenges. SLS. As we found in June 2019, ongoing development issues with the SLS core stage—which includes four main engines and the software necessary to command and control the vehicle—contributed to the SLS program not being able to meet the June 2020 launch date. Officials from the SLS program and Boeing, the contractor responsible for building the core stage, provided several reasons for the delays. These reasons include the underestimation of the complexity of manufacturing and assembling the core stage engine section—where the RS-25 engines are mated to the core stage—and those activities have taken far longer than expected. Since our June 2019 report, based on our review of the program’s most recent status reports, NASA has reported progress across many parts of the SLS program. For example, NASA has delivered the four RS-25 engines to Michoud Assembly Facility. NASA has also completed qualification testing of all components of the boosters and reports that there is schedule margin remaining for the booster deliverables. In addition, NASA reports that Boeing has made continued progress and expects that the core stage will be complete and ready for testing in December 2019. Completion of the core stage will represent a significant milestone for the program. In June 2019, we found that that SLS program has been underreporting its development cost growth since the December 2017 replan. This underreporting is because of a decision to shift some costs to future missions while not adjusting the baseline costs downward to reflect this shift. The SLS development cost baseline established in August 2014 for Artemis-1 includes cost estimates for the main vehicle elements—stages, liquid engines, boosters—and other areas. According to program officials, because of the December 2017 replan process, NASA decided that costs included as part of the SLS Artemis-1 baseline cost estimate would be more appropriately accounted for as costs for future flights. Thus, NASA decided not to include those costs, approximately $782 million, as part of the revised SLS Artemis-1 cost estimate. However, NASA did not lower the $7 billion SLS development cost baseline to account for this significant change in assumptions and shifting of costs to future flights. This decision presents challenges in accurately reporting SLS cost growth over time. NASA’s decision not to adjust the cost baseline downward to reflect the reduced mission scope obscures cost growth for Artemis-1. In June 2019, we found that NASA’s cost estimate as of fourth quarter fiscal year 2018 for the SLS program indicated development cost growth had increased by $1 billion, or 14.7 percent. However, our analysis showed that development cost growth actually increased by $1.8 billion or 29.0 percent, when the development baseline is lowered to account for the reduced mission scope. Essentially, NASA is holding the baseline costs steady, while reducing the scope of work included in current cost estimates (see figure 2). As NASA determines its new schedule for the first mission, it is likely this cost growth will increase as additional time in the schedule leads to additional costs. In our June 2019 report, we recommended that the SLS program calculate its development cost growth using a baseline that is appropriately adjusted for scope and costs NASA has determined are not associated with the first flight, and determine if the development cost growth has increased by 30 percent or more. NASA agreed with the recommendation and NASA officials stated that they plan to implement the recommendation when new leadership is in place for the human space exploration programs. Looking ahead, based on our review of the program’s most recent status reports, completing core stage manufacturing and integration and green run testing will be the critical path—the path of longest duration through the sequence of activities in the schedule—for the SLS program. During green run testing, NASA will fuel the completed core stage with liquid hydrogen and liquid oxygen and fire the integrated four main engines for about 500 seconds. The green run test carries risks because it is the first time that several things are being done beyond just this initial fueling. For example, it is also the first time NASA will fire the four main engines together, test the integrated engine and core stage auxiliary power units in flight-like conditions, and use the SLS software in an integrated flight vehicle. In addition, NASA will conduct the test on the Artemis-1 flight vehicle hardware, which means the program would have to repair any damage from the test before flight. Orion. While the Orion program’s schedule performance is measured only to the Artemis-2 mission, we found in June 2019 that the program was not on schedule to support the June 2020 launch date for the first mission. This was due to delays with the European Service Module and component issues for the avionics systems for the crew module, including issues discovered during testing. We found that these specific problems were resolved by the time of our report, but had already contributed to the inability of the program to meet the June 2020 launch date. Since we last reported, as of August 2019, the Orion program has completed significant events including completing the crew module and the service module prior to integration and conducting a test to demonstrate the ability to abort a mission should a life-threatening failure occur during launch. The program is tracking no earlier than October 2020 for an Artemis-1 launch date but that does not reflect the ongoing agency-wide schedule assessment noted above. In June 2019, we found that the Orion program has reported development cost growth but is not measuring that growth using a complete cost estimate. In summer 2018, the Orion program reported development cost growth of $379 million, or 5.6 percent above its $6.768 billion development cost estimate. Program officials explained that the major drivers of this cost growth were the slip of the Artemis-1 launch date, which reflected delays in the delivery of the service module; Orion contractor underperformance; and NASA-directed scope increase. However, during our review, Orion program officials originally stated that this cost estimate assumes an Artemis-2 launch date of September 2022, which is 7 months earlier than the program’s agency baseline commitment date of April 2023 that forms the basis for commitments between NASA, the Congress, and Office of Management and Budget. Subsequently, during the review, program officials told us that its cost projections fund one of those 7 months. In either case, NASA’s current cost estimate for the Orion program is not complete because it does not account for costs that NASA would incur through April 2023. As of September 2019, the program was targeting October 2022 for the Artemis-2 launch. In June 2019, we recommended that the Orion program update its cost estimate to reflect its committed Artemis-2 baseline date of April 2023. In its response, NASA partially agreed with our recommendation. NASA stated that providing the estimate to the forecasted launch date— September 2022—rather than to the committed baseline date of April 2023 is the most appropriate approach. However, by developing cost estimates only to the program’s goals and not relative to the established baseline, the Orion program is not providing NASA or the Congress the means of measuring progress relative to the baseline. We continue to believe that NASA should fully implement this recommendation. Looking ahead, based on our review of the program’s most recent status reports, there is an emerging issue that may delay schedule further for the first mission. Namely, there is the risk of damage to the Orion capsule during travel to and from integrated testing at Plum Brook Station in Ohio. The program office is studying whether it will be able to safely transport the integrated crew and service modules via the Super Guppy airplane as planned or if it will have to use an alternate airplane. We will continue to monitor this effort. Beyond Artemis-1, the Orion program must also complete development efforts for future missions. For example, the Artemis-2 crew module will need environmental control and life support systems, system updates from Artemis-1, and updated software to run these new elements. EGS. At the time of our June 2019 report, the EGS program was expecting to have facilities and software ready by the planned June 2020 launch date. We found that the program had overcome many challenging development hurdles that led to previous schedule delays. These hurdles included completing and moving the Mobile Launcher—a platform that carries the rocket to the launch pad and includes a number of connection lines that provide SLS and Orion with power, communications, coolant, fuel, and stabilization prior to launch—into the Vehicle Assembly Building for the multi-element verification and validation processes. Since our June 2019 report, the program is now targeting an Artemis-1 launch date of August 2020. According to NASA officials, the delay is primarily driven by challenges encountered installing ground support equipment on the Mobile Launcher and developing software, and does not reflect the ongoing agency-wide schedule assessment. The program has operated within the costs established for the June 2020 launch date, $3.2 billion, but officials stated that NASA is reevaluating the program’s development cost performance and will establish an updated baseline when new leadership is in place. Moving forward, based on our review of the program’s most recent status reports, the program has to complete the multi-element verification and validation process for the Mobile Launcher and Vehicle Assembly Building and complete its two software development efforts. Additionally, the EGS program is responsible for the final integration of the three programs. NASA officials stated that the 6 to 12 months of risk to the June 2020 launch date includes risk associated with EGS completing this integration that includes test and checkout procedures after SLS and Orion components arrive. Officials explained that the EGS risk is based on a schedule risk analysis that considered factors such as historical pre- launch integrated test and check out delays and the learning curve associated with a new vehicle. As previously stated, our prior work has shown that the integration and test phase often reveals unforeseen challenges leading to cost growth and schedule delays. Lessons that NASA Can Apply to Better Manage its Human Spaceflight Acquisitions NASA is currently embarking on an aggressive goal to return humans to the lunar surface in 2024. To achieve this goal, NASA not only needs SLS, Orion, and EGS to have completed their first two test missions, but is also developing several new systems. These new systems include a Lunar Gateway that will orbit the moon, landers that will transport astronauts from the Gateway to the lunar surface, and new space suits. Human spaceflight projects face inherent technical, design, and integration risks because they are complex, specialized, and are pushing the state of the art in space technology. Moreover, these programs can be very costly and span many years, which means they may also face changes in direction from Administrations and the Congress. Meeting the 2024 goal will also be challenging given the effort needed to better manage SLS, Orion, and EGS, coupled with the addition of the new programs, which are likely to compete for management attention and resources. Nevertheless, our past work has identified a range of actions that NASA can take to better position its human spaceflight programs for success. Today I would like to highlight three lessons from the SLS, Orion, and EGS programs that NASA can apply to improve the management of its human spaceflight programs. Enhance Contract Management and Oversight to Improve Program Outcomes. Over the past several years, we and the NASA Office of the Inspector General have identified shortcomings related to NASA’s management and oversight of its human spaceflight contracts. These shortcomings have left NASA ill-positioned to identify early warning signs of impending schedule delays and cost growth, reap the potential benefits of competition, and achieve desired results through contractor incentives. In July 2014, we found that NASA allowed high-value modifications to the SLS contracts to remain undefinitized for extended periods—in one instance a modification remained undefinitized for 30 months. Undefinitized contract actions such as these authorize contractors to begin work before reaching a final agreement with the government on terms and conditions. We have previously found that while undefinitized contract actions may be necessary under certain circumstances, they are considered risky in part because the government may incur unnecessary costs if requirements change before the contract action is definitized. Because lack of agreement on terms of the modification prolonged NASA’s timeframes for definitizing, the establishment of contractor cost and schedule baselines necessary to monitor performance was delayed. Specifically, we found in July 2014 that, in most cases, the SLS program did not receive complete earned value management data derived from approved baselines on these SLS contracts. Earned value, or the planned cost of completed work and work in progress, can provide accurate assessments of project progress, produce early warning signs of impending schedule delays and cost overruns, and provide unbiased estimates of anticipated costs at completion. In July 2014, we also found the SLS program could be in a favorable position to compete contracts for the exploration upper stage, the upper stage engine, and advanced boosters that it expected to use on future variants of the launch vehicle. At that time, except for the RS- 25 engines, NASA’s contracting approach for the SLS program did not commit the program beyond the hardware needed for the second mission, and we found that moving forward the agency would be in a position to take advantage of the evolving launch vehicle market. We found that an updated assessment of the launch vehicle market could better position NASA to sustain competition, control costs, and better inform the Congress about the long-term affordability of the program. We recommended that before finalizing acquisition plans for future capability variants, NASA should assess the full range of competition opportunities and provide to the Congress the agency’s assessment of the extent to which development and production of future elements of the SLS could be competitively procured. NASA agreed with the recommendation, which we have identified as among those that warrant priority attention. Since we made that recommendation, NASA has awarded a sole- source contract for the upper stage engine and agency officials told us in July 2018 that they planned to incorporate additional booster development under the existing contract. This further limits an opportunity for competition for the program. Our body of work on contracting has shown that competition in contracting is a key element for achieving the best return on investment for taxpayers. We have found that promoting competition increases the potential for acquiring quality goods and services at a lower price and that noncompetitive contracts carry the risk of overspending because, among other reasons, they have been negotiated without the benefit of competition to help establish pricing. In July 2016, we found that the lack of earned value management data for the SLS Boeing core stage contract persisted. Without this information, some 4.5 years after contract award, the program continued to be in a poor position to understand the extent to which technical challenges with the core stage were having schedule implications or the extent to which they may have required reaching into the program’s cost reserves. In October 2018, the NASA Office of Inspector General reported that NASA does not require Boeing to report detailed information on development costs for the two core stages and exploration upper stage, making it difficult for the agency to determine if the contractor is meeting cost and schedule commitments for each deliverable. The NASA Office of Inspector General found that given the cost-reporting structure, the agency is unable to determine the cost of a single core stage. Internally, Boeing tracks all individual costs but submits a combined statement of labor hours and material costs through the one contract line item for all its development activities. NASA approximates costs based on numerous monthly and quarterly reviews with the contractor to track the progress of each individual deliverable. The NASA Office of Inspector General made a number of recommendations aimed at improving reporting relative to the core stage contract. Among these was a specific recommendation to separate each deliverable into its own contract line item number for tracking performance, cost, and award fees. NASA concurred with this recommendation and is currently renegotiating the core stage contract with Boeing. In June 2019, we found that NASA’s approach to incentivizing Boeing for the SLS stages and Lockheed Martin for the Orion crew spacecraft have not always achieved overall desired program outcomes. NASA paid over $200 million in award fees from 2014-2018 related to contractor performance on the SLS stages and Orion spacecraft contracts, but the programs continue to fall behind schedule and incur cost overruns. For example, in its December 2018 award fee letter to Boeing in which the contractor earned over $17 million in award fees, NASA’s fee determination official noted that the significant schedule delays on this contract have caused NASA to restructure the flight manifest for SLS. For the Lockheed Martin Orion contract, the contractor earned over $29 million for the award fee period ending April 2017. NASA noted that Lockheed Martin was not able to maintain its schedule for the crew service module and that the contractor’s schedule performance had decreased significantly over the previous year. In June 2019, we reported that our past work shows that when incentive contracts are properly structured, the contractor has profit motive to keep costs low, deliver a product on time, and make decisions that help ensure the quality of the product. Our prior work also shows, however, that incentives are not always effective tools for achieving desired acquisition outcomes. We have found that, in some cases, there are significant disconnects between contractor performance for which the contractor was awarded the majority of award fees possible without achieving desired program results. Additionally, we have found that some agencies did not have methods, data, or performance measures to evaluate the effectiveness of award fees. As part of our June 2019 report, we recommended that NASA direct the SLS and Orion programs to reevaluate their strategies for incentivizing contractors and determine whether they could more effectively incentivize contractors to achieve the outcomes intended as part of ongoing and planned contract negotiations. NASA agreed with the intent of this recommendation and stated that the SLS and Orion program offices reevaluate their strategies for incentivizing contract performance as part of contracting activities including contract restructures, contract baseline adjustments, and new contract actions. We will continue to follow-up on the actions the agency is taking to address this recommendation after its ongoing contract negotiations are complete. Minimize Risky Programmatic Decisions to Better Position Programs for Successful Execution. Through our reviews of NASA’s human spaceflight programs, we have found that NASA leadership has approved programmatic decisions that compound technical challenges. These decisions include approving cost and schedule baselines that do not follow best practices, establishing insufficient cost and schedule reserves, and operating under aggressive schedules. As a result, these programs have been at risk of cost growth and schedule delays since NASA approved their baselines. In July 2015, we found that NASA generally followed best practices in preparing the SLS cost and schedule baseline estimates for the limited portion of the program life cycle covered through launch readiness for the first test flight of SLS. However, we could not deem the cost estimate fully reliable because it did not fully meet the credibility best practice. While an independent NASA office reviewed the cost estimate developed by the program and as a result the program made some adjustments, officials did not commission the development of a separate independent cost estimate to compare to the program cost estimate to identify areas of discrepancy or difference. In addition, the program did not cross-check its cost estimate using an alternative methodology. The purpose of developing a separate independent cost estimate and cross-checking the estimate is to test the program’s cost estimate for reasonableness and, ultimately, to validate the cost estimate. In July 2016, we found that the Orion program’s cost and schedule estimates were not reliable based on best practices for producing high-quality estimates. For example, the cost estimate lacked necessary support and the schedule estimate did not include the level of detail required for high-quality estimates. Therefore, we recommended that NASA perform an updated joint cost and schedule confidence level analysis including updating cost and schedule estimates in adherence with cost and schedule estimating best practices, which we have identified as among those recommendations that warrant priority. NASA officials have stated that they have no plans to implement our recommendation. In commenting on the July 2016 report, NASA stated that the agency reviewed, in detail, the Orion integrated cost/schedule and risk analysis methodology and determined the rigor to be a sufficient basis for the agency commitments. However, without sound cost and schedule estimates, decision makers do not have a clear understanding of the cost and schedule risk inherent in the program or important information needed to make programmatic decisions. We continue to believe that NASA should fully implement our recommendation. In our 2017 High-Risk Report, we highlighted concerns that all three programs—SLS, Orion, and EGS—were operating with limited cost reserves, limiting each program’s ability to address risks and unforeseen technical challenges. For example, we found in July 2016 that the Orion program was planning to maintain low levels of cost reserves until later in the program. The lack of cost reserves at that time had caused the program to defer work to address technical issues to stay within budget. Also in our 2017 High-Risk Report, we highlighted concerns regarding each program managing to an aggressive internal NASA launch readiness date. This approach creates an environment for programs to make decisions based on reduced knowledge to meet a date that is not realistic. For example, the EGS program had consolidated future schedule activities to prepare the Mobile Launcher—the vehicle used to bring SLS to the launch pad—to meet its internal goal. The program acknowledged that consolidating activities—which included conducting verification and validation concurrent with installation activities—increased risk because of uncertainties about how systems not yet installed may affect the systems already installed. Officials added, however, that this concurrency is necessary to meet the internal schedule. Subsequently, as discussed above, NASA delayed its committed launch readiness date. Improve Transparency into Costs for Long-term Plans. As we previously reported, a key best practice for development efforts is that requirements need to be matched to resources (for example, time, money, and people) at program start. In the past, we have found that NASA programs, including the Constellation Program, did not have sufficient funding to match demanding requirements. Funding gaps can cause programs to delay or delete important activities and thereby increase risks. In addition, since May 2014, we have found there has been a lack of transparency into the long-term costs of these human spaceflight programs. As discussed above, the EGS and SLS programs do not have a cost and schedule baseline that covers activities beyond the first planned flight. In addition, as previously noted, the Orion program does not have a baseline beyond the second planned flight. As a result, NASA is now committing to spend billions of taxpayer dollars for missions that do not have a cost and schedule baseline against which to assess progress. To that end, we have made recommendations in the past on the need for NASA to baseline these programs’ costs for capabilities beyond the first mission; however, a significant amount of time has passed without NASA taking steps to fully implement these recommendations. Specifically, among those recommendations that we have identified as warranting priority attention, in May 2014, we recommended that, to provide Congress with the necessary insight into program affordability, ensure its ability to effectively monitor total program costs and execution, and to facilitate investment decisions, NASA should: Establish a separate cost and schedule baseline for work required to support the SLS for the second mission and report this information to the Congress through NASA’s annual budget submission. If NASA decides to fly the SLS configuration used in the second mission beyond that mission, we recommended that it establish separate life cycle cost and schedule baseline estimates for those efforts, to include funding for operations and sustainment, and report this information annually to Congress via the agency’s budget submission. Establish separate cost and schedule baselines for each additional capability that encompass all life cycle costs, to include operations and sustainment. This is important because NASA intends to use the increased capabilities of the SLS, Orion, and EGS well into the future. As part of the latter recommendation, we stated that, when NASA could not fully specify costs due to lack of well-defined missions or flight manifests, the agency instead should forecast a cost estimate range— including life cycle costs—having minimum and maximum boundaries and report these baselines or ranges annually to Congress via the agency’s budget submission. In its comments on our 2014 report, NASA partially concurred with these two recommendations, noting that much of what it had already done or expected to do would address them. For example, the agency stated that establishing the three programs as separate efforts with individual cost and schedule commitments met the intent of our recommendation. NASA also stated that its plans to track and report development, operations, and sustainment costs in its budget to Congress as the capabilities evolved would also meet the intent of the recommendation. In our response, we stated that while NASA’s prior establishment of three separate programs lends some insight into expected costs and schedule at the broader program level, it does not meet the intent of the two recommendations because cost and schedule identified at that level is unlikely to provide the detail necessary to monitor the progress of each block against a baseline. Further, we stated that reporting the costs via the budget process alone will not provide information about potential costs over the long term because budget requests neither offer all the same information as life-cycle cost estimates nor serve the same purpose. Life-cycle cost estimates establish a full accounting of all program costs for planning, procurement, operations and maintenance, and disposal and provide a long-term means to measure progress over a program’s life span. We continue to believe that NASA should fully implement these recommendations. As NASA considers these lessons, it is important that the programs place a high priority on quality, for example, holding suppliers accountable to deliver high-quality parts for their products through such activities as regular supplier audits and performance evaluations of quality and delivery. As we found in June 2019, both the SLS and Orion programs have struggled at times with the quality of parts and components. For example, the Orion contractor has had a number of issues with subcontractor-supplied avionics system components failing during testing that have required time to address. NASA has highlighted concerns over the contractor’s ability to manage its subcontractors and the resulting significant cost, schedule, and technical risk impacts to the program. And the SLS program faced setbacks after its contractor did not verify the processes that its vendors were using to clean the fuel lines, resulting in delays to resolve residue and debris issues. Chairwoman Horn, Ranking Member Babin, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any question that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Contracting and National Security Acquisitions at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; John Warren; Sylvia Schatz; Ryan Stott; and Chad Johnson. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

NASA is undertaking a trio of closely related programs to continue human space exploration beyond low-Earth orbit. These three programs include a launch vehicle, a crew capsule, and the associated ground systems at Kennedy Space Center. All three programs are working towards a launch readiness date of June 2020 for the first mission. NASA then plans for these systems to support future human space exploration goals, which include seeking to land two astronauts on the lunar surface. GAO has a body of work highlighting concerns over NASA's management and oversight of these programs. This statement discusses (1) the cost and schedule status of NASA's human spaceflight programs and (2) lessons that NASA can apply to improve its management of its human spaceflight programs. This statement is based on eight reports issued from 2014 to 2019 and selected updates as of September 2019. For the updates, GAO analyzed recent program status reports on program progress. The National Aeronautics and Space Administration's (NASA) three related human spaceflight programs are in the integration and test phase of development, a phase of the acquisition process that often reveals unforeseen challenges leading to cost growth and schedule delays. Since GAO last reported on the status of these programs in June 2019, each program has made progress. For example, the Orion program conducted a key test to demonstrate the ability to abort a mission should a life-threatening failure occur during launch. As GAO found in June 2019, however, the programs continue to face significant schedule delays. In November 2018, within one year of announcing an up to 19-month delay for the three programs—the Space Launch System (SLS) vehicle, the Orion crew spacecraft, and Exploration Ground Systems (EGS)—NASA senior leaders acknowledged the revised launch date of June 2020 is unlikely. In addition, any issues uncovered during integration and testing may push the date as late as June 2021. Moreover, GAO found that NASA's calculations of cost growth for the SLS program is understated by more than 750 million dollars. GAO's past work has identified a number of lessons that NASA can apply to improve its management of its human spaceflight programs. For example, NASA should enhance contract management and oversight to improve program outcomes. NASA's past approach in this area has left it ill-positioned to identify early warning signs of impending schedule delays and cost growth or reap the benefits of competition. In addition, NASA's approach to incentivizing contractors through contract award fees did not result in desired outcomes for the SLS and Orion programs. Further, NASA should minimize risky programmatic decisions to better position programs for successful execution. This includes providing sufficient cost and schedule reserves to, among other things, address unforseen risk. Finally, realistic cost estimates and assessments of technical risk are particularly important at the start of an acquisition program. But NASA has historically provided little insight into the future cost of these human spaceflight programs, limiting the information useful to decision makers.

GAO_GAO-19-508

Background Effective communication is vital for first responders’ ability to respond to emergencies, ensure the safety of both their personnel and the public, and protect public and private property. For example, first responders use public safety communications systems to gather information, coordinate a response, and, if needed, request resources and assistance from neighboring jurisdictions and the federal government. First responders use several types of communications systems, such as LMR systems, commercial wireless services, and the FirstNet network. LMR systems. These systems are the primary means for first responders to use voice communications to gather and share information while conducting their daily operations and coordinating their emergency response efforts. LMR systems are intended to provide secure, reliable voice communications in a variety of environments, scenarios, and emergencies. Commercial wireless services. Public safety entities often pay for commercial wireless services to send data transmissions such as location information, images, and video. FirstNet network. FirstNet is working to establish a nationwide, dedicated broadband network for public safety use that is intended to foster greater interoperability among first responders, support important voice and data transmissions, and meet public safety officials’ reliability needs on a priority basis, including call “preemption.” FirstNet’s network is intended to complement LMR systems with broadband capabilities and does not serve as a substitute for mission-critical voice needs. Communications systems must work together, or be interoperable, to ensure effective communication. Emergency communications interoperability refers to the ability of first responders and public safety officials to use their radios and other equipment to communicate with each other across agencies and jurisdictions when needed and as authorized. First responders’ LMR systems operate by transmitting voice communications through radio waves at specific frequencies and channels within the electromagnetic spectrum. FCC is responsible for allocating spectrum for various purposes and assigning spectrum licenses in a specific area and to a specific entity such as a police department or a telecommunications company. As previously noted, an auction is one mechanism that FCC may use to assign spectrum licenses. According to FCC officials, due to certain restrictions in the Communications Act, FCC has used administrative procedures, not auctions, to assign licenses for public safety and non-commercial educational broadcast stations. Over the years, spectrum for public safety has expanded to new frequency bands, as previously available frequencies became congested and public safety needs for spectrum increased. As we have previously reported, congestion results from growth in the overall number of users and demand for spectrum dependent technologies and services. Because of the increased demand for spectrum, in 1971 FCC authorized public safety and business-industrial users to share a portion of the T- Band spectrum (470 to 512 megahertz) with television broadcast stations in 11 metropolitan areas. The 11 metropolitan areas, which are identified in figure 1, include almost all the most populous metropolitan areas in the United States. The entire T-Band is not available for public safety and business users in these 11 metropolitan areas to build and operate LMR systems, and the amount of spectrum varies in each area. FCC rules allow “base station transmitters”—the equipment that emits radio signals to communicate with mobile units—to be located within 50 miles from the geographic center of each metropolitan area, as shown in figure 1. In 2012, as part of the Middle Class Tax Relief and Job Creation Act of 2012 (the Act), FCC was required by statute to reallocate the T-Band spectrum currently used by public safety and commence the process for an auction by February 22, 2021. As part of the reallocation of the T- Band for the 11 metropolitan areas listed above, the proceeds from the required auction shall be available to NTIA to make grants to cover relocation costs for the relocation of public safety entities. The grants are to be funded by the auction proceeds for the purpose of helping cover these users’ relocation costs. According to FCC officials, the Act does not address the hundreds of business-industrial users also using the T- Band and does not set aside or identify replacement spectrum for public safety users. DHS officials told us that the Act does not provide a formal role for DHS in the T-Band spectrum auction or relocation of public safety users. While one purpose of spectrum auctions is to recover the public portion of the value of spectrum, FCC officials told us that the Act and its legislative history do not explain the purpose of the T-Band auction and relocation, and we confirmed the absence of legislative history for the auction mandate. According to FCC officials, there are approximately 925 public safety entities with licenses in the T-Band. Each of these entities holds at least one license, but in some cases may hold many licenses. For example, the State of Texas holds one public safety license in the T-Band in the Houston metropolitan area, while the New York City Police Department has 180 licenses in the New York City metropolitan area. The number of licenses held by each entity depends on the demand for the spectrum for LMR systems and the availability of spectrum in other bands allocated for public safety use. FCC estimates that public safety entities have approximately 3,000 stations within the T-Band. Additionally, FCC said that the T-Band also contains approximately 700 business-industrial users that occupy about 1,700 stations. T-Band Relocation Poses Significant Challenges, Including Uncertainty of Available Spectrum, High Cost, and Interoperability Concerns Lack of Available Alternative Spectrum in Major Metropolitan Areas Public safety officials in three of our four selected metropolitan areas— Boston, Los Angeles, and New York City—told us that they have not been able to identify alternative spectrum to relocate from the T-Band, a situation that raises questions about the feasibility of the auction and relocation. For example, all of the officials we interviewed from New York City police, fire, and emergency management departments said there is no spectrum available for them to relocate to. The officials noted that the New York City Police Department is the largest municipal police department in the country and that it relies on the T-Band to dispatch police for 911 calls. Additionally an official from Pasadena in the Los Angeles metropolitan area said that the spectrum allocated for public safety in the region is already crowded and that officials are unsure of where to relocate their emergency communication operations. Public safety officials from Boston, Los Angeles, and New York City metropolitan areas also said that FCC has not provided a plan or identified alternative spectrum for relocation. In 2013, in anticipation of the mandatory T-Band auction, FCC published a notice and solicited public comment to gather information on when, how, and under what circumstances to relocate public safety and business-industrial users of the T-Band. At that time, FCC asked commenters what alternative spectrum bands were potentially available for relocation of T-Band’s public safety users, and whether these users could relocate to other public safety bands including the 700 and 800 MHz bands. In response to FCC’s request for comment, NPSTC conducted an analysis and reported in 2013 that the 11 different metropolitan areas would face different likelihoods of relocating to alternative spectrum. NPSTC analyzed FCC data on T-Band licenses to determine the number of public safety licenses that would need to be relocated, and then compared the need for licenses to the available licenses in other spectrum bands that FCC has allocated for public safety use. Based on that analysis NPSTC concluded the following. In five of the 11 metropolitan areas, relocating public safety users from the T-Band would not be possible. Specifically, in addition to identifying the three metropolitan areas we discuss above (Boston, Los Angeles and New York City), NPSTC concluded that at least two other metropolitan areas (Chicago and Philadelphia) lacked sufficient spectrum in any band to relocate public safety’s existing T-Band operations. For the other six metropolitan areas (Pittsburgh, San Francisco, Washington, D.C., Dallas-Fort Worth, Houston, and Miami) NPSTC’s analysis found that these areas might have sufficient spectrum to relocate T-Band users, with the 700 MHz narrowband offering the greatest potential. These metropolitan areas have fewer public safety T-Band licensees needing to relocate. Representatives from a trade organization that represents business-industrial users of the T-Band told us that in five of these six metropolitan areas, business-industrial users hold more than half of T-Band licenses. Specifically, the representatives noted that approximately 95 percent of T-Band users in the Houston metropolitan area are business-industrial users and that in Pittsburgh, Washington, D.C., Dallas-Fort Worth, and Miami metropolitan areas more than 50 percent of the T-Band users are business-industrial users. Our interviews with selected local officials confirmed that public safety users in Dallas-Fort Worth (our fourth selected metropolitan area) have had success transitioning off the T-Band. Two of the three public safety licensees we talked with told us they had already transitioned off the T- Band and noted that it was unrelated to the required T-Band auction. For example, an official from the City of Dallas, which holds one public safety license in the T-Band, told us that in 2012 the city began replacing existing radios with new radios that did not operate on the T-Band. The official said the city stopped operating on the T-Band in 2013 and relocated operations onto another spectrum band where most of the city’s public safety communications operated. Another T-Band public-safety licensee from the Dallas-Fort Worth metropolitan area told us that although it has active licenses they were unaware of the required auction or need to relocate from the T-Band. FCC and DHS officials told us the analysis conducted by NPSTC was a good source of information about the potential negative effects of the T- Band auction on public safety users, including numbers related to licensing and potential cost. DHS officials told us that NPSTC has broad expertise in emergency communications, noting that it is a member of two federally supported organizations that promote the interoperability of emergency communications—the Public Safety Advisory Committee and SAFECOM. Additionally, SAFECOM worked with another federally supported emergency communications advisory group—the National Council of Statewide Interoperability Coordinators—to create a publicly available document on the T-Band auction and the potential effects on public safety and cited the NPSTC’s report in the assessment. The document, notes that insufficient spectrum alternatives leave few options for identifying replacement spectrum in several major metropolitan areas. Selected representatives from industry groups whose members are business-industrial T-Band users in the 11 T-Band metropolitan areas, such as the American Petroleum Institute and the Utilities Technology Council, also said they anticipate that there would not be alternative spectrum available if required to relocate. For example, representatives with the American Petroleum Institute said that there are staff at major refineries that use the T-Band on a daily basis for all plant operations including emergency response (firefighters and hazardous materials), control room, engineering, and maintenance, and that relocating to new spectrum would be challenging given the lack of available spectrum. These representatives noted that most of the refineries that use the T- Band are located in Houston, but there are also some facilities in the San Francisco, Los Angeles, and Philadelphia metropolitan areas. Relocation Costs Could be in the Billions of Dollars Public safety officials in Boston, Los Angeles, and New York City agreed that relocating LMR operations from one spectrum band to another can be costly, complicated, and time intensive given infrastructure and equipment needs. These officials told us that transitioning from the T- Band requires identifying and acquiring new sites to build towers, purchasing new radios, testing new systems, building other infrastructure, and training personnel on the new systems. NPSTC calculated in its 2013 report that the cost to relocate public safety operations in the 11 metropolitan areas would be approximately $5.9 billion. Their calculation includes the costs for the total estimated number of new towers, cables, antennas, and mobile, portable, and vehicular radios. In 2016, after updating its analysis, NPSTC’s second report confirmed that the conclusions from the 2013 report remain valid. According to FCC officials, in early 2019 they analyzed the costs for relocating public safety users from the T-Band and estimated the total cost would be between $5 and $6 billion. Officials from nearly all of the public safety entities we interviewed in the Boston and New York City metropolitan areas cited the NPSTC reports as the best source of publicly available cost calculations for relocating public safety users from the T-Band. Officials from nearly all of the public safety entities we interviewed in Boston, Los Angeles, and New York City told us that estimating relocation costs is and will remain difficult until alternative spectrum is identified. However a few selected public safety users provided us with high-level cost estimates for replacing LMR system components. For example, an official in Pasadena said a conservative estimate for those components would be $13 to $14 million; while public safety officials in New York City estimated component costs would be at least $1.8 billion. According to public safety officials in Morris County, New Jersey, and Yonkers, New York, the financial burden may be greater for less populated areas, despite the higher anticipated actual cost for more populated areas. For instance, public safety officials in Morris County, New Jersey, told us they estimated $30 million in relocation costs, which exceeds the county’s total annual capital project budgets (approximately $20 to 25 million). According to public safety users in the Boston, Los Angeles, and New York City metropolitan areas, costs for relocating LMR systems from the T-Band depend on a variety of factors including (1) equipment, (2) infrastructure, and (3) real estate. 1. Equipment. Transitioning to another spectrum band could require public safety users to purchase new equipment such as radios. Some radios can only operate on one spectrum band, so moving to a new band requires purchasing new radios that can operate on that band. Alternatively, users could purchase multi- band radios, which can operate on more than one radio frequency band. According to public safety officials we spoke with, multi-band radios might be the best option since it is not clear which frequencies they will ultimately be relocated to. However, they also noted that multi-band radios are substantially more expensive than single band radios. For example, officials with the Boston Fire Department told us a regular radio costs approximately $5,000 each while multi-band radios cost up to $8,000. These officials told us that relocating from the T-Band would mean replacing approximately 1,800 radios with multi-band units, meaning that just replacing the Boston Fire Department’s handheld and portable radios could cost more than $14 million. Additionally, public safety officials in Boston and New York City added that local building codes in those areas require buildings of a certain size to install equipment that amplifies wireless signals throughout a building and improves coverage. These systems help first responders, such as police and firefighters, communicate with each other in large buildings. 2. Infrastructure. Infrastructure costs could include new radio towers and antennas and fiber-optic cable systems. Because different radio frequencies have different characteristics and can cover different distances, depending on to which spectrum band public safety users are relocated, circumstances may require more radio towers and antennas. For example, officials with the Boston Fire Department told us that if space were available and they were to relocate from the T- Band to the 800 MHz public safety band, they would need additional radio towers. Specifically, these officials said their current system consists of 42 receivers and five transmitting sites and estimated that a system in the 800 MHz band would likely require up to 60 receivers and five-to-nine transmit sites. FCC officials told us that based on the characteristics of other spectrum bands allocated to public safety, users may need to build between two and three times as much infrastructure to provide the same coverage. The officials noted this would substantially increase relocation costs. Additionally, public safety officials in Boston and New York City told us they are able to use the T-Band to communicate in the tunnels beneath each city because of infrastructure investments like the T-Band specific radiating cables, which allow first responder’s radios to work underground. Officials from New York City police, fire, emergency- management department and the mayor’s office said that relocating to a new spectrum would require installing a new radiating cable system in hundreds of miles of subway, train, and vehicle tunnels. These officials estimated that replacing the radiating cable infrastructure alone would take at least a decade and cost over $1 billion. Officials added that replacing the infrastructure would involve closing subway lines for extended periods of time as the new cables are installed. 3. Real estate. Costs associated with buying or leasing new real-estate sites for towers and other radio equipment will also affect the cost estimate for public safety users. Officials from Boston, Los Angeles, and New York City told us that because of the characteristics of different spectrum bands, building a replacement system might require additional sites. Additionally, officials with New York City told us that identifying locations and negotiating leases for radio towers and spaces for other equipment including radio cabinets would likely be difficult due to the scarcity of and high costs of appropriate sites in New York City. Public safety officials in Boston, Los Angeles, and New York City added that relocating from the T-Band would require building and operating parallel systems to avoid disrupting emergency communications. This project would require some duplication of investments—for example, radio towers, radio cabinets, and antennas, among other equipment and infrastructure—during the transition. For example, officials in New York City police, fire, and emergency-management departments told us they would need to build a dual system that could require at least twice as much space for equipment. They also noted that the current sites are rent free because of existing arrangements, but they believe that it is unlikely that landlords will provide additional space rent free. These officials told us that even if FCC identified available spectrum for them to relocate to, they would be unable to build and test the systems in the 2-year time frame required by statute. For example, New York City officials estimated buildout and testing could take over a decade, which they indicated would also substantially increase the city’s cost. Public safety stakeholders in the Boston, Los Angeles, and New York City metropolitan areas told us that it is difficult to estimate the time needed to build new LMR systems, but estimates ranged from 2 to more than 10 years from the time that alternative spectrum was identified. They noted that these time frames would also depend on the availability of funding and on the complexity of the new systems to be designed, built, and tested. FCC officials also told us that the time and expense of relocating hundreds of licensees at thousands of sites is difficult to predict due to many local factors. For instance, FCC officials cited their ongoing experience relocating public safety licensees within the 800 MHz band which was originally estimated to take 3 years. However, based on certain factors such as the geographic location and interdependencies of communications systems, this relocation effort remains incomplete after 14 years. Potential Difficulties in Maintaining Interoperability and Reliability of Emergency Communications on Alternative Spectrum Public safety stakeholders we talked to told us that the T-Band is important for the interoperability of public safety equipment and said that maintaining interoperability on alternative spectrum would be a challenge. Boston officials told us interoperability is vital for public safety and the T- Band is the key for their interoperability capabilities. For example, these officials said the LMR systems that allow almost 170 local, county, state, and federal law enforcement agencies to communicate with each other use the T-Band. The officials said this network of LMR systems is the only way for all these entities to communicate on a daily basis and is also used for command and control for crisis response at major events such as the Boston Marathon. These officials credited this system on the T-Band for the successful response to the 2013 Boston Marathon bombing. Officials said the LMR system allowed first responders in neighboring jurisdictions to provide additional communication equipment and personnel during the ensuing manhunt. Similarly, officials from New York City told us the T- Band now provides the foundation for all first responder communications in the area. Officials said the September 11, 2001, terrorist attacks demonstrated the loss of life that can occur when first responders are unable to communicate with each other because there was no system in place to allow police, fire, and emergency medical services to easily communicate. As a result, officials said New York City has spent countless hours and millions of dollars to improve interoperability, and that the interoperable system currently in place is based on the T-Band. In December 2018, we reported that it is vital for first responders—such as police officers and firefighters—to have (1) timely communications; (2) sufficient capacity to handle the communications; and (3) interoperable communications systems that enable first responders to connect with their counterparts in other agencies and jurisdictions, even if their counterparts’ systems or equipment vendors differ. As noted previously, public safety users rely on LMR systems as their primary means to gather and share information. For public safety users that rely on the T-Band for interoperable communications and that lack alternative spectrum to build new interoperable systems, losing access to the T-Band would mean public safety officials in multiple large metropolitan areas would be unable to communicate with first responders within their community, neighboring jurisdictions, and the federal government. Public safety officials in Boston, Los Angeles, and New York City told us that the characteristics of the T-Band spectrum are ideal for reliable emergency communications and that moving to another spectrum band may present a challenge to reliability. Since different frequencies of radio waves have different characteristics, jurisdictions typically use the spectrum that is best suited for their particular location. The officials told us that the T-Band’s characteristics allow radio signals to penetrate buildings and across varied terrain and require less infrastructure investments, such as radio towers, than other frequency bands assigned for public safety use. Los Angeles County officials cited the characteristics of the T-Band as the primary advantage the current radio system has over other systems operating on other spectrum bands. They explained that the characteristics make it more suitable for challenging terrain on the forested, mountainous, and coastal areas of the county, than similarly equipped radio systems operating in other frequency bands. FCC Has Taken Limited Actions to Help Facilitate the Mandated Spectrum Auction and Address Relocation Challenges; NTIA Is Awaiting FCC Action before Designing a Grant Program FCC Has Taken Some Preliminary Steps to Prepare for the Auction but Has Not Taken Additional Action FCC has taken some preliminary steps to help facilitate the mandated relocation of public safety users from the T-band, such as imposing a T- Band license freeze, requesting public comments, and creating a fact sheet to notify stakeholders of the spectrum auction and prepare for the auction. In April 2012, FCC froze the processing of applications for new or expanded T-Band radio operations in an effort to avoid adding to the cost and complexity of the mandated public safety relocation. Affected applications included those seeking: (1) new T-Band licenses; (2) modifications to existing licenses by adding or changing frequencies or locations within the T-Band; (3) modifications to existing licenses by changing technical parameters—such as increases in bandwidth, power level, antenna height, or area of operation—in a manner that expands the station’s spectral or geographic footprint; and (4) any other modification that could increase the degree to which the 470–512 MHz band currently is licensed. Both public safety and business-industrial users we interviewed expressed concerns about the license freeze and said it has caused some uncertainty and in limited cases has affected their ability to maintain existing systems. For example, public safety officials from one department we interviewed in the Boston metropolitan area said the freeze has affected users’ ability to replace aging equipment, which has led to poor communications in the area. Additionally, representatives from one business-industrial user told us that Hurricane Harvey destroyed one of its LMR sites and that the entity was having trouble rebuilding a site elsewhere since FCC considers this action a major change and thus affected by the license freeze. FCC staff told us that the public notice announcing the license freeze specifically advised affected parties that they could request a waiver in unusual circumstances where the public interest so warrants, and that that no such request appears to have been filed in this instance. In addition, as discussed earlier, FCC sought public comment in February 2013 to gather information and specific proposals for reallocating and auctioning the T-Band. FCC officials said they continue to evaluate auction proposals from these comments. In October 2014, FCC released a report and order making 24 channels in the 700 MHz narrowband, previously held in reserve, available for public safety users. FCC concluded that given the significant increase in demand for 700 MHz narrowband spectrum, particularly in urban areas, these channels should be made available for use. Public safety users of the T-Band were given priority to these new channels if they committed to return an equal amount of T-Band channels and obtained the concurrence of the relevant regional-planning committees. According to NPSTC’s 2016 report, these 24 additional channels are beneficial but insufficient to relocate all current users of the T-Band. The report notes that channel insufficiency is particularly challenging in the five metropolitan areas where T-Band usage is the highest—Boston, Chicago, Los Angeles, New York City, and Philadelphia. Furthermore, one public safety official in the Los Angeles metropolitan area raised concerns about potential radio interference if relocated to another frequency. The official said that currently, because the T-Band is not used by neighboring jurisdictions, the city does not currently have to worry about frequency interference. By contrast, the 700 and 800 MHz band is currently occupied by public safety in neighboring Riverside and San Diego Counties. This means, according to the official, that building a new system operating in the 700-800 MHz band could potentially introduce interference issues. FCC also created a fact sheet in July 2016 with basic information on the statutory relocation requirement. The T-Band fact sheet states that the relocation shall be completed within 2 years of the auction’s completion date: the exact timing of the relocation deadline will depend on when the auction concludes. FCC officials told us the T-Band fact sheet is the only formal T-band auction guidance that they have provided. However, officials said that they have also met with several licensees to discuss T- Band issues. For example, according to officials, FCC has met with public safety entities from areas such as Los Angeles, Chicago, Boston, and New York City. DHS officials told us that while they have no formal role in the T-Band auction and relocation of public safety users, they provide this fact sheet when they are asked for details about the T-Band auction as a way to help raise awareness about the auction and relocation requirements. Although FCC has made efforts to provide guidance and information to T-band users regarding the mandated auction, as we discuss earlier in the report, we found that not all T-Band users we interviewed are aware of the upcoming auction or the need to relocate from the T-Band. FCC has not set a timeline for initiating the auction but has stated that it is committed under any scenario to ensure the continuity of T-Band licensee’s public safety mission-critical communications. According to FCC officials, as of March 2019, almost all T-Band licensees continue to operate on the T-Band spectrum, and FCC officials cited multiple factors for the limited progress in preparing for the T-Band auction: FCC has not determined how to address challenges stakeholders identified in response to FCC’s 2013 request for public comment, including the lack of available spectrum to relocate and the cost. For example, officials told us that they are taking a wait-and-see approach to see how many T-Band licensees relocate prior to the auction. However, as noted previously, FCC officials told us their analysis of other spectrum bands shows insufficient spectrum for relocating public safety entities from the T-Band. The officials told us that public safety operates on the T-Band in large metropolitan areas where other public safety spectrum is heavily used and that this reason is why the T-Band was allocated for LMR in these areas in the first place. The T-Band auction has raised complicated relocation questions. For example, select industry groups we spoke to whose members are business-industrial T-Band users expressed concern about the uncertainty of the spectrum auction requirements, since the Act was silent on business-industrial users, but they are constrained by the license freeze from replacing aging equipment. FCC previously told us that it had not determined whether business-industrial users would be required to relocate. However, in April 2019, FCC officials told us that it intends to implement the auction following the statute’s language. FCC officials stated that the Act does not expressly require it to auction spectrum licensed to business-industrial users, but officials also stated that FCC may decide that it has the authority to auction that spectrum under a different statutory provision. Before conducting the auction, FCC must issue a notice, which includes a public comment period, to determine the auction procedures and requirements. FCC officials told us they have not progressed beyond the preliminary conceptual stages and do not have a precise timeline for the pre-auction process or auction. The officials explained that if business-industrial users relocate, they would face similar relocation challenges to that of public safety users and the Act does not mention them as eligible for relocation grants. According to FCC officials, licenses for business-industrial users outnumber those of public safety users on the T-Band in some areas. According to FCC officials and a FirstNet official, public safety users on the T-Band may subscribe to services on FirstNet’s nationwide public safety broadband network, which offers some voice functionality. However, officials said the network currently does not accommodate the need of public safety users for mission-critical voice functionality. For example, FCC officials told us that FirstNet’s network is not a substitute for mission critical voice systems operated by public safety licensees in the T-Band because the network does not support such capabilities and because there is no plan or schedule in place for the network to begin offering such services. According to an official at FirstNet, this network is intended to complement LMR systems with broadband capabilities, not replace LMR systems in the near future. In the interim, public safety users electing to use FirstNet’s broadband network will need to continue to use LMR networks for their mission critical voice needs while evaluating whether their future voice needs require continued maintenance of their LMR networks or whether FirstNet broadband services could fulfill their wireless communications requirements. FCC Officials Said That T- Band Spectrum Has Potentially Low Auction Value; NTIA Is Awaiting FCC Action The amount of proceeds that may be generated from the T-Band auction—which are, according to FCC, expected to be the sole source of federal funding to help cover the relocation costs incurred by public safety entities—is likely to be less than the total relocation costs. FCC officials told us the T-Band has potentially low value because of limited demand by potential bidders in the auction. For example, FCC officials estimated that revenue for the entire T-Band would not exceed $2 billion. To reach this amount would require public safety and business-industrial users to relocate from the T-Band, which according to FCC estimates could cost between $9 and $10 billion. As discussed previously, representatives from a trade organization told us that in five of 11 metropolitan areas where public safety uses the T-Band, business-industrial users hold more than half of T-Band licenses. Because of the high numbers of business- industrial users in the T-Band, there may be less spectrum to auction than perhaps initially contemplated when the Act was passed, which would ultimately affect auction proceeds. If FCC were to decide that it has the authority to auction spectrum utilized by business industrial users under a different statutory provision, as explained above, proceeds would be higher. As discussed above, NTIA is to make grants to cover relocation costs for the relocation of public safety entities in accordance with the Middle Class Tax Relief Act. However, NTIA officials told us that the agency has no dedicated funding to administer such a program and must wait for auction proceeds to stand one up. The officials also said that only when the auction concludes will NTIA know the total amount available and how best to disburse those funds for relocating agencies. Thus, designing a grant program, notifying eligible parties of available grants, evaluating applications, and issuing awards must all take place during the statutory 2-year relocation period. If agencies require the funds before they can move to other frequencies, it is unlikely that this migration can meet the two-year deadline. NTIA officials also stated that until they design the grant program, they do not have any relevant information to provide public safety stakeholders. NTIA officials said they would provide information on the grant program and begin making grants as soon as possible given the statutory requirement for public safety users to relocate within 2 years of the auction’s conclusion. According to NTIA officials, because the requirements for NTIA’s grant program for public safety relocation costs have not yet been specified, it is unclear what expenses will be covered. As previously discussed, FCC and NPSTC each calculated the cost for relocating public safety users in the 11 metropolitan areas and each arrived at an estimate between $5 and $6 billion. FCC officials said because of the high relocation costs and likely low value of the T-Band’s being auctioned, there is a strong likelihood auction proceeds would not cover public safety relocation costs. Although the Act stipulates that auction proceeds shall be made available through grants in such sums necessary to cover costs for the relocation of public safety entities from the T-Band spectrum, FCC officials said the Act did not address what would happen if the auction generated insufficient funds to cover relocation costs. Consequently, public safety stakeholders from Boston, Los Angeles, and New York City expressed concern about moving forward with relocating. These stakeholders identified the uncertainty of what spectrum would ultimately be auctioned as one of the main reasons they were concerned they would be unable to fully cover their relocation costs. FCC Plans to Proceed with the T-Band Auction Unless There Is a Statutory Change FCC officials stated that they recognize that the T-Band auction and relocation requirement present challenges for FCC and public safety entities—and potentially business-industrial users—particularly since spectrum for relocating all public safety users is limited to non-existent. However, these officials said they will design and conduct the spectrum auction, as required, unless the law is changed. In this case, FCC officials told us they provided Congress with information on the challenges associated with the auction. While FCC provided information to Congress, it did not suggest changes to law in this instance. As such, officials told us in March 2019 they were in the process of briefing key congressional committees on the challenges associated with the T-Band auction based on FCC analysis. According to this analysis, all T-Band auction scenarios would fail. FCC ran auction scenarios that looked at different options for relocating users and auctioning the T-Band used by public safety. These scenarios included relocating only public safety users, relocating public safety and business-industrial users, relocating public safety users, and reorganizing business-industrial users within the T-Band. In 2018, bills were introduced in both the House of Representatives and the Senate to repeal the requirement for FCC to reallocate and auction the T-Band. These bills were not enacted and expired at the end of the 115th Congress. However, in January 2019, a bill was introduced—and subsequently referred to a House subcommittee—to repeal the T-Band relocation and auction requirements. As of June 2019, no further action has taken place on the legislation. According to FCC’s strategic plan, one of FCC’s priorities is to protect public safety, and in particular, take steps to assist and safeguard the communications of our nation’s law enforcement officers and first responders. However, auctioning the T-Band spectrum, as FCC has been mandated to do, could hamper its ability to safeguard these communications. As mentioned above, the Act and its legislative history do not discuss the purpose of the T-Band auction. Public safety stakeholders in Boston, Los Angeles, and New York City told us they believe that there may have been an assumption the FirstNet network could absorb public safety users, but at this time the network does not support mission-critical voice capabilities first responders need. According to stakeholders in the Boston and New York City metropolitan areas, if the provision requiring the auction of public safety users’ T-band spectrum remains in effect and if the auction takes place, they could experience substantial harmful effects on their ability to maintain continuous and effective communications during an emergency. Officials representing seven public safety entities told us they favored Congress’ repealing the required T- Band auction for this very reason. For example, public safety officials in New York City said they believe the T-Band auction would severely negatively affect their ability to respond to emergencies and could lead to the loss of lives. In addition, officials with the Boston police department told us the T-Band is the lifeblood of police communications and the only way for almost 170 law enforcement departments in the Boston metropolitan area to communicate with one another on a daily basis and during major events. These officials said that auctioning the T-Band and forcing them to relocate and build a new system over several years would disrupt critical public safety communications and be disastrous. Conclusions Since the passage of legislation requiring the relocation of public safety users from, and auction of, the T-band radio spectrum, the potential consequences of these actions have become far more apparent. If FCC conducts such an auction, it is unclear that all public safety users in the affected areas will be able to relocate. If alternative spectrum is not available, public safety would be jeopardized in some of the nation’s largest metropolitan areas. Even if alternate available spectrum can be found, public safety users are likely to bear significant costs associated with relocating and reestablishing interoperability. These costs could go well beyond the revenue produced by such an auction. Matter for Congressional Consideration Congress should consider legislation allowing public safety users continued use of the T-Band radio spectrum. (Matter for Consideration 1) Agency Comments We provided a draft of this report to the Department of Commerce, DHS, and FCC for review and comment. DHS and FCC provided technical comments, which we incorporated as appropriate. The Department of Commerce indicated that it did not have comments. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Commerce and Homeland Security, and the Chairman of FCC. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix II. Appendix I: List of Interviewees Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the individual named above, David Sausville (Assistant Director); Aaron Kaminsky (Analyst in Charge); Camilo Flores; Ray Griffith; Delwen Jones; Josh Ormond; Kelly Rubin; and Jessica Walker made key contributions to this report.

First responders and others in 11 large metropolitan areas use radio systems operating in the T-Band since spectrum is limited in other bands. In 2012, FCC was required by statute to begin an auction of this T-Band public safety spectrum by February 2021 and to make the proceeds available to the National Telecommunications and Information Administration (NTIA) to develop and administer a grant program to help cover costs associated with relocating public safety users' radio systems. GAO was asked to review issues related to the required T-Band auction. This report examines, among other things: (1) the challenges selected first responders and local governments anticipate facing in relocating public safety communications from the T-Band and (2) the actions FCC has taken both to help facilitate the required T-Band relocation and to address identified challenges. GAO reviewed FCC's March 2019 congressional briefing and analysis on T-Band spectrum and conducted case studies in four cities selected based on the number of public safety licenses in each area, among other things. GAO reviewed relevant statutes and regulations, FCC documents, and T-Band studies conducted by a public safety organization. GAO interviewed FCC officials and other stakeholders, including first responders in case study cities. Public safety officials, such as police and fire fighters, in 11 metropolitan areas rely on radio systems that use the portion of spectrum known as the T-Band for mission critical voice communications. Selected stakeholders GAO interviewed, including first responders and officials in three of four areas selected as case studies, anticipate significant challenges in relocating public safety communications from the T-Band. For example, stakeholders in Boston, Los Angeles, and New York said the Federal Communications Commission (FCC) has not identified sufficient alternative spectrum. Additionally, two studies conducted by a public safety organization concluded these three areas and others may also have insufficient alternative spectrum (see figure below). Moreover, a recent FCC analysis showed that relocation options for public safety users are limited or nonexistent. Further, costs for relocating public safety users from the T-Band were calculated by FCC to be $5-to-$6 billion. Selected stakeholders said relocating their communication systems would require such things as new towers and radios as well as other infrastructure. FCC has taken limited actions to address challenges and assist public safety users of the T-Band with the mandatory relocation. For example, FCC has taken steps to notify stakeholders, but officials told GAO they have not begun planning the auction. FCC officials acknowledged challenges the auction and relocation requirements present. FCC officials explained that public safety entities were licensed to operate on the T-Band in large metropolitan areas because other public safety spectrum was already heavily used. In March 2019, FCC briefed Congress on the auction's challenges and concluded that all T-Band auction scenarios would fail. Nonetheless, FCC officials said the agency will conduct the auction unless the law is amended. While FCC provided information to Congress, it did not suggest changes to law in this instance. Stakeholders in two metropolitan areas said the auction could result in substantial harmful effects on their ability to maintain continuous and effective communications during an emergency.

GAO_GAO-20-99

Background U.S. Missions in Afghanistan The United States currently has two primary missions in Afghanistan: the U.S-led counterterrorism mission and the NATO-led Resolute Support mission to train, advise, and assist the ANDSF. For U.S. purposes, both of these missions are a part of Operation Freedom’s Sentinel, commanded by U.S. Forces-Afghanistan. Combined Security Transition Command-Afghanistan is the command under NATO’s Resolute Support mission that conducts the train, advise, and assist mission in Afghanistan. These efforts are carried out via the regional Train Advise Assist Commands (TAACs) that collectively cover all of Afghanistan. Specifically, Train Advise Assist Command–Air (TAAC-Air) focuses on developing and advising the Afghan Air Force. The Afghanistan Security Forces Fund The ASFF is generally a 2-year appropriation that is used to provide assistance, with the concurrence of the Secretary of State, to the security forces of Afghanistan, including the provision of equipment, supplies, services, training, facility and infrastructure repair, renovation, construction, and funding. The ASFF presently comprises four budget activity groups: Afghan National Army, Afghan National Police, Afghan Air Force, and Afghan Special Security Forces. Each budget activity group includes four sub-activity groups: sustainment, infrastructure, equipment and transportation, and training and operations. According to officials, the training and operations sub-activity group encompasses most of CSTC- A’s efforts to train the ANDSF, including the Afghan National Army. DOD Processes for Identifying Afghan National Army Training Needs and Associated Funding Requirements CSTC-A has established processes to identify capability gaps within the ANDSF, develop and select training needed to address those gaps, and identify associated funding requirements. To do so, CSTC-A works with various requiring activities—partner organizations, such as the Train Advise Assist Commands—to identify ANDSF training needs. CSTC-A then incorporates these needs and associated funding requirements into the ASFF budget request, typically a year or more before the training is initiated. CSTC-A Works with Its Partner Organizations to Identify ANDSF Capability Gaps and Training Needs CSTC-A has established processes to identify capability gaps within the ANDSF, develop and select training needed to address those gaps, and identify associated funding requirements for inclusion in ASFF budget justification documentation. To help execute these processes, CSTC-A has developed standard operating procedures and other guidance for planning, resourcing, and executing the ASFF. These procedures and other guidance include information on processes to validate training requirements and associated resources. CSTC-A works with various partner organizations—referred to as “requiring activities”—to identify capability gaps and training needs for the ANDSF. Requiring activities are the organizations that request the resourcing of ANDSF capability needs through ASFF. They include CSTC-A, the TAACs, and other U.S. or NATO organizations partnered with the ANDSF. According to DOD officials, a partner organization can identify capability gaps in a number of ways. For example, Train Advise Assist Command– Air, which develops and advises the Afghan Air Force, works with subject matter experts from the relevant U.S. military services and other organizations to identify potential Afghan Air Force capability gaps. Additionally, according to DOD officials, in 2015 DOD tasked the MITRE Corporation to conduct a study of Afghan Air Force capabilities. According to DOD officials, MITRE’s November 2015 study highlighted capability gaps within the cadre of Afghan Air Force fixed- and rotary-wing pilots and maintenance personnel. Further, officials stated that the study concluded that the training of additional pilots constituted a critical need for the Afghan Air Force. Once a capability gap has been identified, the requiring activity develops potential courses of action to address it, such as proposals to train the ANDSF to develop needed capabilities. Through CSTC-A’s procedures these proposals are validated, along with associated resources. The validation process is intended to ensure that a transparent and accountable process is followed when allocating ASFF resources to emerging requirements. For example, as part of the fiscal year 2018 budget process, TAAC-Air identified a capability gap within the Afghan Air Force and then worked with various subject matter experts to develop courses of action to address the gap. Specifically, TAAC-Air worked with personnel from the Program Executive Office for Simulation, Training, and Instrumentation (PEO-STRI), which provides simulation, training, and testing solutions for the Army and joint community. Subject matter experts from PEO-STRI provided details regarding various options for addressing the capability gap. PEO-STRI officials noted that they also provided cost estimates for delivering the solution based on historical data. According to PEO-STRI officials, this was a highly interactive process entailing frequent formal and informal discussions among multiple organizations to develop the most effective solution for pilot training for the Afghan Air Force. Once details and cost estimates were solidified, the requirement owner presented them to a Council of Colonels, an officer group responsible for requirement validation for training needs, among other capability needs. The requirement was then taken to the General Officer Steering Committee, which votes to validate the requirement and approve the proposed solution. CSTC-A Process Incorporates Validated Training Needs into ASFF Budget Request CSTC-A’s process incorporates validated training needs and their associated funding requirements as part of DOD’s annual budget process. DOD’s planning, programming, budgeting, and execution (PPBE) process, which is governed in part by DOD Directive 7045.14, along with other DOD guidance, is conducted under four phases (see figure 1). Specifically, DOD uses the PPBE process to determine and prioritize requirements and allocate resources to provide capabilities necessary to accomplish the department’s missions. According to officials, as part of this process, CSTC-A provides inputs, including training requirements and associated funding needs, and later works with various contracting commands to execute appropriated funds. In the case of ASFF, CSTC-A’s guidance indicates that a proposed activity (for example, fixed-wing pilot training classes) should generally be included in the ASFF budget justification book in order to later use ASFF funds for that activity. To do so, CSTC-A’s Program and Analysis Division develops and incorporates the requests from requirement owners for funding for the operations, sustainment, and development of the ANDSF into the ASFF budget request and associated budget justification materials. The Program and Analysis Division works with the requirement owners to write a narrative describing their proposed activity and associated cost estimate for delivering the activity. The division then works with the OUSD-Comptroller to consolidate requirements for all budget activities and sub-activity groups into a single draft budget justification book. One significant aspect of this process is that many of the key decisions, and associated cost assumptions, on how CSTC-A and TAAC-Air (in the case of Afghan pilot training) intend to carry out ASFF training efforts are proposed 18-24 months before the training will occur. For example, as shown in figure 2, preparation of the ASFF budget justification book for fiscal year 2019 began in the summer of 2017. In turn, the budget justification book was subsequently submitted to the OUSD-Comptroller in December 2017, and funds were not available for use until the start of the new fiscal year, in October 2018. These time frames can present a challenge in developing accurate cost estimates for CSTC-A, given that situations in Afghanistan can change significantly in the time between CSTC-A’s developing a proposed capability requirement and associated cost estimate for inclusion in the ASFF budget justification book and the execution of that requirement, according to officials. If conditions change, officials noted, the proposed actions and associated cost estimates for a given requirement may no longer be appropriate or accurate. For example, the Special Inspector General for Afghanistan Reconstruction reported in January 2019 that CTSC-A may have overestimated the cost for UH-60 Blackhawk rotary- wing pilot training by as much as $1 billion over a 7-year period— attributing the overestimation mainly to unrealistic assumptions regarding student or pilot attrition and the English language program. In the case of initial entry fixed-wing pilot training classes, CSTC-A’s original proposal, as reflected in its budget justification book was to have classes of 25 students. However, during the implementation of this training, the class size fell to 12 students because not all 25 students achieved the required English language proficiency, and one student had dropped out of the program. Consequently, the resulting class was half the projected size underlying the estimated funding requirement, which resulted in funds being excess to CSTC-A’s actual need. CSTC-A officials acknowledged the challenges they faced in filling classes with the expected number of students, adding that they had purposely built in significant flexibility in the training approach to be able to adjust to the realities of the ANDSF’s ability to generate qualified students. According to CSTC-A officials, the number of English-proficient Afghan student candidates varies from year to year. For cases like these, where CSTC-A requested more funding than it ultimately obligated, in some circumstances DOD may reprogram the unobligated amounts within the same appropriation account, or may transfer it to other appropriation accounts, if there is authority to do so. Otherwise, time-limited appropriations, such as the ASFF, expire after their period of availability and are unavailable for new obligations. According to CSTC-A officials, in cases where they have unobligated funding due to changing conditions such as smaller-than-expected class sizes, they try to reprogram that money for related needs within the same sub-activity group in the ASFF budget prior to expiration. For example, if certain Afghan Air Force training costs are lower than expected, the money could be reprogrammed for other efforts within the Afghan Air Force training and operations sub-activity group. CSTC-A’s Process for Developing and Overseeing ASFF Training Contracts ASFF-funded training contracts for the ANDSF are developed and executed through a process that is modeled on the U.S. government’s foreign military sales process. Until April 2019, ASFF-funded orders to train the Afghan National Army were generally filled under a contract with a single provider. At that point, DOD began to transition to an approach using several contracts, including one with multiple providers. ASFF-Funded Training Contracts Are Developed and Executed Under a Process Modeled on the Foreign Military Sales Program ASFF-funded training contracts are developed and executed under a process modeled on the U.S. government’s foreign military sales (FMS) program, referred to as “pseudo-FMS.” As indicated by CSTC-A guidance, these pseudo-FMS procurements are FMS-like cases and use U.S. funds to purchase items, services, and training for ANDSF capability requirements. The process is outlined in the Security Assistance Management Manual, which provides DOD-wide guidance to DOD components engaged in the management or implementation of DOD security assistance and security cooperation programs over which the Defense Security Cooperation Agency has responsibility. We have previously reported that while the many steps of the process used for FMS and pseudo-FMS cases can be grouped in different ways, they fall into five general phases: assistance request, agreement development, acquisition, delivery, and case closure. First, CSTC-A works with the resource coordinator, requirement owner, and other elements to develop a Memorandum of Request, and it submits that memorandum to the implementing agency and the Defense Security Cooperation Agency, requesting assistance to contract for ANDSF needs using ASFF funds. For example, when developing the Memorandum of Request for initial entry fixed-wing pilot training, CSTC-A worked with TAAC-Air, the requirement owner, to identify details regarding the agreed- upon training solution. Officials noted that CSTC-A also worked with the subject matter experts from PEO-STRI to develop the independent government cost estimate. Second, as described by officials, the agreement development phase begins with the Defense Security Cooperation Agency’s receiving the Memorandum of Request. The Defense Security Cooperation Agency opens a case and assigns it to an implementing agency—that is, the military department or defense agency responsible for overall management of the actions that will result in the delivery of materials or services. According to contracting officials, the implementing agency for training foreign military ground and air forces outside of the United States—such as the Afghan National Army—is the U.S. Army Security Assistance Command. The implementing agency then works with the appropriate Program Executive Office to develop the Letter of Offer and Acceptance—which serves to document the transfer of articles and services to the U.S. government requesting authority. For example, for the out-of-country fixed-wing pilot training requirement, contractors delivered the training, and the appropriate implementing agency was PEO-STRI, according to officials. Once the Letter of Offer and Acceptance is completed and signed by the implementing and requesting agencies, it is reviewed and approved by the Defense Security Cooperation Agency and Department of State, as appropriate. Third, the Program Executive Office works with the appropriate contracting command to acquire the requested defense goods or services as part of the acquisition phase. According to contracting officials, the contracting command solicits and receives bids from contractors and selects the best value option (including price plus deliverables). Fourth, the contractor delivers the required good or service. According to officials, the relevant Program Executive Office is responsible for monitoring the contractor’s performance by ensuring compliance with applicable contract clauses. Fifth, following contract completion and payment of outstanding obligations, the implementing agency initiates case closure with the Defense Security Cooperation Agency. Training Requirements for the Afghan National Army Were Generally Provided by a Single Vendor Prior to April 2019, but Are Now Provided by Multiple Vendors Prior to April 2019, ASFF-funded training requirements for the Afghan National Army, including out-of-country fixed- wing pilot training, were generally executed under a single award indefinite delivery, indefinite quantity contract known as the Warfighter Field Operations Customer Support (WFF) contract. The WFF contract provided integrated training system sustainment and training services world-wide for the U.S. Army, Marine Corps, Navy, Air Force, and Special Operations Command. According to Army contracting officials, WFF was the most expedient way to contract for various types of training for the Afghan National Army due to the contract’s broad scope and $11.2 billion ceiling. These officials said it provided the capacity and flexibility needed to fulfill the Afghan National Army’s requirements and time frames in a streamlined way because the competition and award process had already occurred, enabling officials to move directly to awarding task orders for support. However, while the single award indefinite delivery, indefinite quantity contract streamlined the process for contracting ANDSF training, it limited DOD’s ability to negotiate some costs. According to contracting officials, only certain types of costs could be negotiated, such as those associated with housing, travel, and the number of advisors supporting the training. The officials stated that other costs were established as a per-unit cost at the time of the contract award. In addition, various administrative fees were established when the WFF contract was awarded in 2007 and could not be renegotiated, according to contracting officials. As a result, any task orders under this contract, including those to train the Afghan National Army, had to include these administrative fees and established labor wages. To illustrate the various costs associated with the Afghan Air Force training program, we reviewed documentation associated with training provided under the WFF contract. One training program cost $12.1 million for the delivery of an 86-week fixed-wing pilot training course (from February 2018 through September 2019) for 13 Afghan Air Force students at the Fujairah Aviation Academy in the United Arab Emirates. The pilot training was conducted by contractors and comprised aviation English language training, theory of flight, basic and advanced instrument ground school, advanced flight instrumentation, and simulation training for the Afghan Air Force Cessna C-208 Caravan aircraft. The $12.1 million total included amounts paid to the contractor and administrative charges to cover the costs of entities within the U.S. government. The costs associated with the training are shown in figure 3 below. The largest cost factor in this task order was the cost of the flight school itself, which accounted for 68.4 percent (or $8.2 million) of the total cost, according to contracting officials. The flight school included ground school, simulation, advanced instruments, and flying hours training, and it represented a cost per each of the 13 students who actually attended the training. The flight school also included the cost of housing, electronic books / manuals, and campus security, some of which costs were negotiable, according to officials. Other costs, such as the Defense Security Cooperation Agency 3.5 percent surcharge and contract administration services 1.2 percent surcharge, were established based upon rates current at the time of the letter of offer and acceptance. According to officials, the contractor’s profit was established at the time of award of the contract in 2007. Officials stated that the costs that could be negotiated were limited and included costs associated with travel, lodging, and adding more advisors to augment the training. According to contracting officials, these limitations were not unique to this ASFF training but applied broadly to all ASFF training task orders they executed under WFF. In 2018 DOD decided to replace WFF, which was nearing expiration, with a series of new contracts. DOD has begun to transition work previously performed under WFF to these new contracts, the first of which was awarded in 2018. According to contracting officials, ASFF-funded training efforts are expected to be executed primarily under two of the new contracts – the Enterprise Training Services Contract and the Training, Instructor Operator Support Services Contract. The Enterprise Training Services Contract is a multiple award indefinite delivery, indefinite quantity contract with a total contract ceiling of $2.4 billion that was awarded to multiple contractors in June 2018. According to officials, the Training, Instructor Operator Support Services Contract is a single award indefinite delivery, indefinite quantity contract with a ceiling of $197.6 million that was awarded in July 2018. According to Army contracting officials, the contracting process for ASFF training services will include competition among multiple contractors for each task order under the Enterprise Training Services Contract. Army contracting officials stated that under a multiple-award contract, each contract holder is to be provided a fair opportunity to compete for each task order, in part to use competition to ensure that the proposed prices are fair and reasonable. According to Army contracting officials, the Enterprise Training Services Contract also affords the opportunity to negotiate more elements than previously under the WFF contract, such as labor rates or travel costs associated with training. The first training task order under the Enterprise Training Services Contract in support of Afghan forces was issued in April 2019. As this task order has only recently been issued, it is too early for us to comment on the efficacy of these contracts. DOD Processes to Provide Visibility over ASFF-Funded Training Contracts DOD has varying degrees of visibility over ASFF-funded training contracts. At the broadest level, OUSD-Comptroller and contracting officials stated that they have visibility of the overall execution of the ASFF budget, including funding associated with Afghan National Army training. For example, OUSD-Comptroller tracks and reports ASFF obligations and disbursements in monthly status-of-funds reports, known as Defense Financial and Accounting Services 1002 Reports. In addition, the Special Inspector General for Afghanistan Reconstruction tracks and reports ASFF obligations and disbursements via its Overseas Contingency Operations quarterly reports to Congress. At the individual contract level, the military services’ contracting commands, such as PEO-STRI and Army Contracting Command, develop and maintain contract files for individual ASFF-funded contracts and task orders. However, according to officials, DOD does not have a centralized system or reporting mechanism for tracking all ASFF training contracts, because the systems used by the services for managing funding and those used for contract management do not interface with each other. According to OUSD-Comptroller officials, the systems used for financial management were not designed or intended to identify ASFF funds specifically obligated for training contracts because there is no requirement for them to do so. Officials said that consequently, in the single instance in which they have had to develop a comprehensive list of all ASFF-funded training contracts, they had to work with the contracting commands at the respective military services to gather this information. For example, to respond to congressional direction related to contracts funded with ASFF, OUSD-Policy contacted all of the military services to request a list of all training contracts funded through the ASFF under the respective services’ responsibilities, according to OUSD officials. In turn, Army contracting officials stated that they identified the requested information by using the lines of accounting fields in their contract management systems to identify those training contracts funded with ASFF. OUSD-Policy officials provided us with the resulting list of 40 contracts and task orders, totaling over $483 million in estimated contract value, but they acknowledged that the list was likely incomplete. OUSD-Policy officials who compiled the list of training contracts told us that the precision of the list was affected by inconsistent interpretations among the services of what constitutes a training contract. According to these officials, training for the Afghan National Army can also occur under procurement or maintenance contracts that have embedded training components. For example, according to officials, the Army’s National Maintenance Strategy contract provides logistic support to the Afghan National Army and includes a training component. Similarly, the Navy’s ASFF-funded ScanEagle unmanned aerial vehicle reconnaissance procurement contract includes a training component. Because these contracts are not primarily training-oriented, according to contracting officials, they were not identified under the training and operations subactivity group in the ASFF budget, and therefore would not be easily identifiable as ASFF training contracts. Despite these limitations, DOD officials stated that, given their existing systems and processes and their ability to reach out to contracting officials to obtain additional data when needed, they believe they have sufficient tools to identify most ASFF- funded training contracts. Additionally, DOD officials stated that the congressional direction associated with ASFF-funded training was a one- time request, not a recurring task. Agency Comments We provided a draft of this report to DOD, and DOD responded that it would not be providing formal comments. DOD also provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and to the Secretary of Defense. In addition, the report is available at no charge on our website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Cary Russell at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in the appendix. Appendix I: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, James A. Reynolds, Assistant Director, and Jerome Brown, William Chatlos, Alfonso Garcia, Steve Pruitt, Michael Shaughnessy, McKenna Stahl, and Cheryl Weissman made key contributions to this report.

The United States has made a commitment to building Afghanistan's security and governance structure in order to counter terrorist threats and create sustainable security and stability in Afghanistan. Since 2005 Congress has appropriated more than $78.8 billion for the ASFF to build, equip, train, and sustain the Afghan National Defense and Security Forces. Over that period, nearly $4.3 billion has been expended to support the training and operations of the Afghan National Army. Training requirements are primarily fulfilled through contracts. In recent years, concerns have been raised in Congress about the high costs of some of these training contracts. The Joint Explanatory Statement accompanying the Consolidated Appropriations Act, 2018, included a provision for GAO to examine the ASFF training contracts. This report describes DOD's processes to (1) identify Afghan National Army training needs and associated funding requirements; (2) develop and execute ASFF training contracts; and (3) provide visibility over ASFF training contracts. GAO reviewed DOD guidance for identifying and executing training needs, and interviewed DOD officials. GAO also reviewed documentation associated with task orders issued against an indefinite delivery, indefinite quantity contract for training completed in fiscal years 2017 through 2019 for the Afghan National Army. Combined Security Transition Command-Afghanistan (CSTC-A) has established processes to identify capability gaps within the Afghan National Defense and Security Forces (ANDSF), develop and select training needed to address those gaps, and identify associated funding requirements. CSTC-A generally includes these requirements in the Afghanistan Security Forces Fund (ASFF) budget justification book. Many of the key decisions and associated cost assumptions on how CSTC-A and Train Advise Assist Command–Air (in the case of Afghan pilot training) intend to carry out ASFF training efforts are proposed 18-24 months before the training will occur (see figure). ASFF-funded training contracts are developed and executed under a process modeled on the U.S. government's foreign military sales program. Prior to April 2019, most ASFF-funded training requirements were filled under a single-award indefinite delivery, indefinite quantity (IDIQ) contract that supported a wide range of DOD training needs. An IDIQ contract provides for an indefinite quantity, within stated limits, of supplies or services during a fixed period. The government places orders for individual requirements. According to an Army official, that contract's broad scope and high contract value ceiling made it a highly expedient way to contract for various types of training for the ANDSF. However, contracting officals stated that using a single-award contract limited DOD's ability to negotiate some costs. At that point, DOD began to transition to an approach using several contracts, including one with multiple providers. Given that DOD executed its first task order under these new contracts in April 2019, it is too early for GAO to comment on the efficacy of this new approach. DOD has varying degrees of visibility over ASFF-funded contracts. DOD officials stated that they have visibiliity at the broadest level of the overall execution of the ASFF budget, including funding associated with Afghan National Army training. At the individual contract level, the military services' contracting commands maintain contract files, but the services' systems do not interface with one another. According to DOD officials, although DOD can obtain visibility over ASFF training contracts in the aggregate, the department must work with the contracting commands at the respective military services to gather information specific to training contracts.

GAO_GAO-20-385

Background USPS has the mission of providing prompt, reliable, and efficient universal postal service, and federal law requires USPS to “provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.” USPS is required to serve, as nearly as practicable, the entire population of the United States. USPS has a number of key stakeholders, each with different interests in USPS and its operations (see fig. 1). USPS is a key part of the mailing industry, and over time, it has become both a competitor and partner to private companies that also operate in the broader mail and delivery industries. For example, although United Parcel Service (UPS) and FedEx both pay USPS to deliver packages that they enter into USPS’s system at local post offices where carriers pick up their mail, they also compete with USPS for end-to-end package delivery business, such as moving packages from the retailer to the purchaser. Similarly, FedEx is USPS’s largest contractor, providing air transportation for Priority Mail Express (formerly Express Mail), Priority Mail, and First-Class Mail. UPS is also one of USPS’s largest contractors, providing long-distance mail transportation. Over the years, legislation has changed key aspects of the business model used to provide the nation’s postal services. Until 1970, the federal government provided postal services via the U.S. Post Office Department, a government agency that received annual appropriations from Congress. At that time, Congress was involved in many aspects of the department’s operations, such as selecting postmasters and setting postal rates and wages. In addition, the President controlled the hiring and firing of Postmasters General, as it was a cabinet-level position. By the late 1960s, the department had several major problems including financial losses, management problems, service breakdowns, and low productivity. Because key postal business decisions were made by Congress through the legislative process, postal management had limited ability to plan and finance department operations and capital investments in accordance with postal needs. In order to improve and modernize postal services, the Postal Reorganization Act (PRA) was enacted in 1970 and replaced the U.S. Post Office Department with USPS, an independent establishment of the executive branch of the government of the United States. Congress designed USPS to be a self-sustaining, business-like entity headed by a Board of Governors that would cover its operating costs primarily with revenues generated through the sales of postage and postal-related products and services. However, by the early 2000s, USPS faced a bleak financial outlook that put its mission of providing universal postal service at risk, according to the 2003 Presidential Commission on the United States Postal Service. The Commission evaluated USPS’s business model and concluded that USPS must have greater flexibility to operate in a business-like fashion, but that this latitude required enhanced transparency to enable effective management and congressional oversight. The Postal Accountability and Enhancement Act (PAEA) was enacted in 2006. PAEA provided USPS additional pricing flexibility for mail products, but with provisions for increased transparency, oversight, and accountability, among other things. Specifically, PAEA gave USPS broader latitude to change postal rates in a more streamlined process that included review by the newly created Postal Regulatory Commission (PRC). The PRC, which replaced the former Postal Rate Commission, is an independent establishment of the executive branch responsible for regulating USPS. PRC is required to make annual determinations of USPS’s compliance with mail delivery standards and postal rate requirements. If PRC finds noncompliance, it is required to specify USPS actions to restore compliance. USPS Cannot Become Financially Self-Sustaining under Its Current Business Model due to Three Key Challenges USPS’s current business model is not financially sustainable due to declining mail volumes, increased compensation and benefits costs, and increased unfunded liabilities and debt. USPS’s costs continue to rise faster than its revenues, and although USPS has made changes over the years to address these challenges, its efforts have been limited by stakeholder opposition and statutory requirements. Declining Mail Volumes As online communication and payments have expanded, USPS continues to face decreases in mail volume, its primary revenue source. First-Class Mail volume has declined 44 percent since fiscal year 2006, the year that total mail volume peaked. The long-term decline of First-Class Mail volume, which USPS has stated was exacerbated by the Great Recession and expects to continue for the foreseeable future, has fundamental implications for USPS’s business model because First-Class Mail is USPS’s most profitable class of mail. USPS Marketing Mail— which comprises most other mail volume—declined 27 percent from fiscal year 2007 to fiscal year 2019, in part due to electronic advertising alternatives. The volume of USPS competitive products more than tripled since fiscal year 2007. This volume, however, began to decline in the second half of fiscal year 2019 due to growing competition for package delivery. USPS has taken steps to right size its operations in response to declining mail volumes. For example, in both 2009 and 2011, USPS announced plans to close several thousand USPS retail facilities. However, due to stakeholder opposition—including from members of Congress, postal unions, and local communities, among others—USPS instead closed a few hundred retail facilities. USPS also expanded the alternative options for customers to access retail postal products and services outside of USPS-operated postal facilities—such as self-service kiosks and partnerships with other retailers such as contract postal units. According to USPS, as a compromise effort to right size the retail network and due in part to USPS’s efforts to expand retail alternatives, USPS began reducing retail hours at selected post offices in 2012, ultimately decreasing retail hours at approximately 13,000 post offices. Another major cost-cutting effort was its 2011 Network Rationalization Initiative, a multi-part plan to consolidate its mail processing network. USPS consolidated more than 160 mail processing facilities, but did not fully implement this initiative following opposition from various stakeholders. In addition to stakeholder opposition to changing postal services, federal laws also factor into USPS’s limited ability to respond to declining mail volumes. For example, federal laws define the level of postal services USPS is to provide, postal products, and pricing. Postal services to be provided: USPS has limited ability to make changes in the postal services it provides. Specifically, USPS is required to provide 6-days-a-week delivery and to operate postal facilities across the country. Federal law requires USPS to provide the maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self- sustaining. Federal law also limits USPS’s ability to close retail facilities. For example, USPS cannot close a small post office solely because it is unprofitable. As of the end of fiscal year 2019, there were approximately 34,600 postal retail outlets nationwide, including approximately 31,300 USPS-managed post offices, branches, and stations, and, as we recently reported, USPS’s analysis showed that about 36 percent of its retail facilities were unprofitable in fiscal year 2018. Postal products and pricing: USPS’s pricing flexibility is limited by a price cap on market-dominant products that generally limits rate increases for these products to a common measure of inflation. Each competitive product is required to cover its attributable costs; competitive products collectively are required to recover their attributable costs; and competitive products collectively are required to cover a PRC-specified minimum of USPS’s institutional costs. In addition, USPS is prohibited from providing new nonpostal products and services. Such requirements affect USPS’s ability to increase revenues. Increased Compensation and Benefits Costs While mail volumes have decreased, USPS’s compensation and benefits costs for current employees have been increasing since 2014, despite USPS’s efforts to control these costs. Although USPS reduced its total workforce (career and non-career employees) from 785,900 in fiscal year 2007, to 617,700 in fiscal year 2013, its workforce increased to about 630,000 in fiscal year 2019. Similarly, as we previously reported, recent trends show total work hours increased from a combination of new hiring and increased work hours for current employees. Specifically, we reported that from fiscal years 2014 through 2018, work hours increased by 5.4 percent. The number of work hours associated with higher costs— overtime and penalty overtime—have also been increasing. According to USPS, total compensation and benefits costs increased by almost $1 billion in fiscal year 2019 alone. USPS has implemented changes to help control employee compensation and benefits costs, including lowering pay for new career employees and increasing use of non-career employees. For example, as we previously reported, starting about 10 years ago, USPS’s collective bargaining agreements have included the ability to hire up to 20 percent of the workforce as non-career employees. Non-career employees are less costly because they generally have lower pay rates and are not entitled to the full federal benefits received by career employees. According to USPS officials, non-career employees are also “more flexible” because there are fewer restrictions on their tasks and schedules. We recently reported that our analysis estimated that USPS likely saved about $6.6 billion from fiscal years 2016 through 2018 from increased use of non- career employees. USPS has recognized trade-offs in increasing the use of non-career employees in entry-level positions, such as a high turnover rate, as would be expected for almost any entry-level position in the private sector. With respect to benefits costs for current postal employees, we have recently reported that USPS has also achieved savings by gradually decreasing its contribution percentage for employee health insurance premiums over the past decade, with corresponding increases in the contribution percentage paid by employees. These changes were negotiated with the four major postal labor unions and were included in successive collective bargaining agreements, each of which covered a multi-year period. We found that the reduction in USPS health insurance contributions generated estimated savings of about $1.4 billion for fiscal years 2016 through 2018. A number of restrictions limit USPS’s ability to control employee compensation and benefits costs. As we recently reported, USPS compensation and benefits costs—which represent about three-fourths of its total costs—are driven by a mix of USPS contracts and policies, including collective bargaining agreements negotiated with unions representing 92 percent of USPS employees, and statutory requirements governing USPS employee pay and benefits. When USPS and its unions are unable to agree, the parties are required to enter into binding arbitration by a third-party panel. USPS’s collective bargaining agreements with these labor unions, some of which were established through binding arbitration, have established salary increases and cost- of-living adjustments and, as mentioned above, have also capped the number of non-career employees at approximately 20 percent of the number of employees covered by the agreements. Federal law requires USPS to participate in the Federal Employees Health Benefits Program (FEHBP), which covers current employees and retirees, as well as federal pension and workers’ compensation programs. Further, USPS must provide fringe benefits that, as a whole, are no less favorable than those in effect when the Postal Reorganization Act of 1970 was enacted. Increased Unfunded Liabilities and Debt USPS’s unfunded liabilities and debt, which consist mostly of unfunded liabilities for retiree health and pension benefits, have become a significant financial burden, increasing from 99 percent of USPS’s annual revenues at the end of fiscal year 2007 to 226 percent of its fiscal year 2019 revenues. At the end of fiscal year 2019, USPS’s unfunded liabilities and debt totaled approximately $161 billion. However, it has begun paying down this debt in recent years, leaving a balance of $11 billion at the end of fiscal year 2019 (see fig. 2). Total unfunded liabilities have risen in part due to USPS not making payments to fund its retiree health and pension benefits. USPS has stated that it prioritizes its “primary universal service mission” when it is unable to fulfill all of its financial obligations, and that it therefore did not make payments to fund its postal retiree health benefits and pensions to minimize the risk of running out of cash. In doing so, USPS cited its precarious financial condition and the need to cover current and anticipated costs and any contingencies. It has not paid $55.4 billion in required payments for funding these benefits through fiscal year 2019, including $47.2 billion in missed funding payments for retiree health benefits since fiscal year 2010, and $8.2 billion for funding pension benefits since fiscal year 2014. In addition, for many years, USPS had been at its statutory debt limit of $15 billion; however, it has begun paying down this debt in recent years, leaving a balance of $11 billion at the end of fiscal year 2019. A number of federal laws define the requirements for USPS’s retiree health and pension benefits that comprise most of its unfunded liabilities. Retiree health benefits: Federal law establishes certain requirements for postal retiree health benefits, including basic requirements for coverage eligibility and contributions. In administering the FEHBP, the Office of Personnel Management (OPM) negotiates with the insurance providers to establish the level of benefits provided to beneficiaries. USPS is required to prefund its share of health benefits for its retirees. Under PAEA, the first 10 years of prefunding payments were fixed—ranging from $5.4 billion to $5.8 billion annually from fiscal years 2007 to 2016. From fiscal years 2007 through 2016, USPS was also required to continue “pay-as-you-go” payments for its share of premiums for current retirees. The permanent schedule for USPS payments to prefund postal retiree health benefits under PAEA required USPS to make annual payments starting in fiscal year 2017. Currently, USPS no longer makes payments for retiree health benefits premiums. Starting in 2016, these premiums are paid out of the RHB Fund until it is depleted, whereupon USPS will resume paying premiums on a pay-as-you-go basis. As we previously reported, survey data we reviewed indicated that most companies do not offer retiree health benefits and that the number of companies providing such benefits is decreasing over time. Many companies that have retained their retiree health benefits have done so by making changes to control costs, including tightening eligibility and restructuring benefits. However, all approaches we identified have different potential effects and would require congressional action. Pension benefits: Federal law also requires USPS to finance its pension benefits under the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) and contains specific provisions defining USPS’s required contribution level to fund these benefits. USPS’s payments consist of a rolling 30-year amortization schedule to address unfunded FERS liabilities, an amortization schedule to address unfunded CSRS liabilities by 2043, and the normal costs of FERS benefits for current employees. Selected Domestic Companies and Foreign Posts Took Key Steps to Address Major Challenges The large domestic companies we selected in the airline, auto, and railroad industries took actions over a number of years to address major business challenges. Airlines such as Delta, American, and United faced competition from low-cost airlines, downward pressure on airfares, and rising compensation, benefits, and volatile fuel costs. These challenges were exacerbated by the economic downturn that began in 2000, the terrorist attacks of September 11, 2001, and the Great Recession that began in December 2007, all of which temporarily depressed demand for airline travel. Similarly, General Motors (GM) and Ford Motor Company (Ford) faced competition from lower cost competitors, the Great Recession, a workforce and networks too large to be supported by smaller sales volumes, and other changes in the market. Likewise, large U.S. railroads competed for freight and passengers from other transportation modes, such as the trucking and airline industries that operated over publicly provided infrastructure, while railroads had to invest in their own infrastructure. Based on our review of the selected companies’ annual reports and statements to the SEC as well as selected federal laws, and GAO, CRS, and other organizations’ reports, books, and academic articles, among other sources, we found that selected companies made changes to (1) products and services, (2) financial self-sustainment, and (3) use of the bankruptcy process. While some of the selected businesses restructured through a bankruptcy proceeding, other businesses took similar actions outside of the bankruptcy process. Mergers also played an important role for the airlines and railroads. Actions Taken by Companies to Address Challenges Actions Regarding Products and Services The selected companies made multiple changes to their products and services. Specifically: Airlines: Selected airlines altered pricing by changing route structure to focus on more profitable routes and adding fees, such as for checked baggage. In addition, all three selected airlines merged with other major airlines, thereby broadening their routes and revenues. Automakers: Selected automakers focused on producing more profitable brands and models, discontinuing some models and introducing others. For example, during its financial difficulties about a decade ago, GM discontinued a number of unprofitable brands. In 2018, after years of declining car sales, Ford said it would eliminate some of its most well-known cars in North America, allowing it to devote more resources to sport utility vehicles and trucks. Railroads: Large railroads focused on more profitable routes and abandoned unprofitable routes or sold them to other railroads. For example, the federal government created a new freight railroad, Conrail, by merging several bankrupt railroads in the Northeast and Midwest. As we have reported previously, federal government deregulation of railroad pricing and contracts after 1980 also helped Conrail to reach profitability and increase capital investment. Actions Regarding Financial Self-Sustainment Cost reduction was a major theme for the selected businesses in the airline, automotive, and rail industries, particularly with respect to compensation, benefits, and infrastructure costs. Specifically: Airlines: The three selected airlines negotiated wage cuts and work rule changes with their unions; made workforce reductions, in part by outsourcing work; and cut pension and retiree health benefit programs. Wage cuts included all levels of employees, such as management, pilots, flight attendants, and mechanics. Benefit cuts involved reducing the level of pensions and retiree health benefits and transitioning pension programs from defined benefits plans to defined contribution plans that were structured to be less costly. Airlines also reduced infrastructure costs by eliminating some hubs, reducing the total number of aircraft, and changing the mix of aircraft in their fleet to save on maintenance and fuel costs. The airlines further cut costs by restructuring debt, reducing facility leasing costs, and renegotiating aircraft leases and vendor contracts. While in bankruptcy, the airlines took major actions to reduce their costs. For example, United implemented steep pay cuts, cut retiree health benefits, and terminated its defined benefit pension plans, resulting in the Pension Benefit Guaranty Corporation (PBGC) assuming responsibility for some of its pension payments, and a reduction in benefits for the plan’s participants. United also cut its workforce size by 31 percent, reduced the number of airplanes by 19 percent, and reduced the total number of flights by 13 percent. Delta and American also reduced pay and pension benefits while in bankruptcy, and the PBGC assumed responsibility for some of Delta’s pension liabilities. Automakers: The two selected automakers negotiated pay cuts, lower wages for entry-level employees, and changes to work rules designed to increase competitiveness; cut the workforce size in about half; made changes to employee benefits; closed many auto plants and dealerships; eliminated some vehicle brands and models; and changed the production process to increase efficiency. Specifically, The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) agreed to cuts in compensation for the automakers’ employees to levels paid by GM and Ford’s competitors. UAW also agreed to move retiree health care benefits into a private Voluntary Employee Beneficiary Association (VEBA) for current and former UAW-represented employees in 2007; the VEBA took over health benefits for retirees starting in 2010. The automakers also closed defined benefit pension plans to new participants and moved to defined contribution pension plans for eligible new employees. Railroads: The Staggers Rail Act of 1980 was enacted to improve the financial stability of the railroad system. Subsequently, railroads improved their financial health through, among other things, cost reduction measures such as reducing their workforce through layoffs and federal buyouts agreed to by unions, and abandoned or sold off unprofitable rail lines to reduce infrastructure and operating costs. Overall railroad employment fell greatly as railroads consolidated, reduced service, and changed work rules. For example, Conrail reduced its workforce from about 82,000 employees in 1977 to about 21,000 in 1996. Congress specifically facilitated Conrail’s downsizing by passing the Northeast Rail Service Act of 1981, which among other things, directed a $200 million a year reduction in labor costs and authorized Conrail to terminate employees. The U.S. government provided assistance to selected companies in various forms, including appropriated funds, loans, and other actions that helped enable companies to reduce their expenses. For example: Automakers: The federal government committed $49.5 billion in funding to help GM continue to operate while restructuring. After the government became the majority owner of the GM that emerged from bankruptcy, the Administration laid out core principles that included managing its ownership in a hands-off manner and voting as a shareholder only on core governance issues. Airlines: Under the 2001 Air Transportation Safety and System Stabilization Act, the federal government provided nearly $5 billion in compensation to airlines for losses due to the September 11, 2001 terrorist attacks, including $856 million for American, $668 million for Delta, and $782 million for United. Additionally, under the Emergency Wartime Supplemental Appropriations Act, $2.4 billion was appropriated to the Transportation Security Administration to compensate airlines for certain security expenses and fees, including $358 million to American, $411 million to Delta, and $300 million to United. Railroads: The federal government spent about $8 billion creating, subsidizing, and preparing Conrail for sale to the private sector. This funding included $7 billion through 1988 for purchasing properties of bankrupt railroads, operating subsidies, and capital improvements and employee buyouts. Amtrak, the national passenger railroad, took over money-losing intercity and commuter passenger rail services and funded federal payments of up to $25,000 for each laid-off employee as authorized by legislation. Use of Bankruptcy Some airlines, automakers, and railroads made changes through the bankruptcy process. Specifically: Airlines: All three selected airlines went through bankruptcy proceedings—United in December 2002, Delta in September 2005, and American in November 2011. The actions these airlines took to reduce costs while in bankruptcy are discussed above. Automakers: GM declared bankruptcy in June 2009 to implement its restructuring plan. The federal government became GM’s majority shareholder and continued to provide financial assistance while GM was in bankruptcy. The bankruptcy court approved the sale of substantially all of old GM’s assets to a newly formed company (“new GM”) in June 2009 as well the old GM’s amended bankruptcy plan in March 2011, and its assets and liabilities were transferred to liquidating trusts. These actions and the restructuring—which included major cost reductions described above—helped enable GM to report positive net income in every year from 2010 through 2019. Railroads: In 1970, the Penn Central Railroad, one of the largest in the country at the time, filed for bankruptcy. As Penn Central’s losses continued while in bankruptcy, the value of whatever assets that might have been available to satisfy its creditors’ claims was further eroded. Therefore, the bankruptcy proceeding was initiated to liquidate the railroad to meet the demands of its creditors. Faced with the potential cessation of railroad service for an entire section of the country, the federal government created Conrail to take over and operate specified portions of Penn Central as well as several other bankrupt railroads in the Northeast United States. Legislation was enacted that, combined with Conrail actions described above, enabled Conrail to become profitable. Foreign Governments and Foreign Posts Took Actions to Address Challenges In the countries we selected, foreign governments also took actions to develop goals for their postal operators that enabled changes in the postal operators’ institutional structures and actions to address competitive pressures, economic downturns, and market changes. Based on our review of the selected countries’ government reports, including summaries of postal reform legislation, annual reports from foreign posts, and interviews with foreign government officials and representatives of foreign posts, we found that changes were made to foreign posts’: (1) products and services; (2) financial self-sustainment; and (3) institutional structure. Some of these actions were authorized by legislation that changed the status and duties of the postal operators; others were taken over a lengthy period that predated passage of key legislation. Some foreign posts also diversified into nonpostal products and services; however, postal-specific challenges and changes are the focus of this discussion. Actions Regarding Products and Services The selected foreign posts made multiple changes to their products and services. We found that, when transforming their postal operations, selected countries determined the level of postal services they deemed necessary to adequately serve the public. The main product changes involved expansion of their package delivery business by enhancing service and investing in facilities and sorting equipment dedicated to handling packages. Large increases in their package volumes and revenues helped offset declining letter mail volume and revenues. Two of the selected foreign posts reduced service levels to help control costs. For example, according to New Zealand Post officials, in response to reduced mail volume, New Zealand Post reduced its required frequency of mail delivery in urban areas from 5 to 3 days while maintaining 5-day delivery in rural areas with the stated goal of ensuring that postal service remained viable without government subsidization. Australia Post revised the service standards it provided for delivery of letter mail in 2016, resulting in slower delivery of some mail. In addition, the main pricing changes have involved price increases for all mail, as well as the introduction of discounted postal rates for letter mail entered at processing facilities that generally were closer to the final destination of the mail. For example, Royal Mail raised postal rates above the rate of inflation after relaxation of its price cap. In France, the postal regulator established a price cap in 2015 of 3.5 percent per year (in addition to inflation) and established a new cap in 2018 of 5 percent annual rate increases (including inflation) for 2019 through 2022 for letter mail and packages considered part of universal postal service. The 2018 price cap allows La Poste more price flexibility than the previous one. Likewise, Australia Post implemented an above-inflation rate increase in January 2020, citing the need to generate revenues to offset growing financial pressures from declining letter mail volume. Actions Regarding Financial Self-Sustainment Cost reduction was a major theme for the selected foreign posts, particularly with respect to compensation, benefits, and infrastructure costs. These actions were stimulated in part by reductions in mail volume and the associated revenues and workload, and in part by legislative or regulatory changes that allowed greater competition and created incentives, such as privatization, which resulted in shareholder pressure to enhance or encourage organizational profitability and efficiency. Because postal operations are labor-intensive, actions to address workforce costs were particularly important to improving financial results. These often went hand in hand with outsourcing, network restructuring, reductions in service levels to better align service with demand, and other changes to increase productivity and achieve cost savings. The governments and the postal operators of selected countries also considered the effects on stakeholders when making postal reform decisions. Specific changes varied from one foreign post to another. Workforce: In Germany, Deutsche Post officials told us that its employees hired after 1990 were designated private sector employees with lower pay and benefits than postal employees who were previously hired as civil servants. In France, La Poste officials told us that La Poste likewise transitioned its workforce in the 1990s from civil servants to private employees and ended recruitment of civil servants in 2000. They also said that this transition provided La Poste with a more flexible workforce and reduced its pension liability. Australia Post closed its defined benefit pension plan to new employees in 2012, while Royal Mail is transitioning to a defined contribution pension plan that it introduced in 2018. Royal Mail and New Zealand Post also have reduced the size of their workforce in recent years. Infrastructure: Some selected foreign posts consolidated their mail processing networks to reduce costs. For example, following the reunification of Germany, Deutsche Post replaced more than 320 mail processing facilities with 82 such facilities. Royal Mail and La Poste reduced the number of mail sorting centers by about 40 percent over the past two decades. In addition, all five selected postal operators have made changes to reduce retail network costs. As we reported in 2011, some foreign posts reduced the number of postal operator-owned and -operated facilities and in some cases closed facilities in an effort to reduce costs. At the same time, some minimized this disruption by expanding retail access through alternatives such as Internet sales and partnerships with retail businesses such as grocery stores or pharmacies. We reported that these changes either reduced operating and labor costs or improved customer service, in some cases because the partner retail facility stays open longer, or both. This trend continues. Deutsche Post, Post Office Limited in the United Kingdom, La Poste, Australia Post, and New Zealand Post have outsourced or franchised most of their postal retail functions to private nonpostal operators. For example, Deutsche Post franchised its postal retail outlets to local businesses to not only reduce expenses, but also increase the availability of postal retail services nationwide by putting retail counters in stores that were open longer than traditional post offices. Deutsche Post representatives stated that while there was some initial resistance to these changes, these concerns abated after a few months as customers realized they received better service and longer hours. The representatives also said the number of retail outlets has increased in recent years in response to increased demand for e-commerce package returns. La Poste has a substantial and growing proportion of retail facilities operated by private providers (in partnership with small shops, especially in rural areas) or co- located in local government-owned buildings (in partnership with local town halls in rural areas). In addition, Australia Post combined its letter and parcel delivery networks in 2018 to obtain efficiencies. Productivity: All of the postal operators in the selected countries took actions to enhance productivity, such as improving automation of mail processing, modernizing and streamlining operations, and changing work processes. For example, Deutsche Post officials stated they had streamlined their parcel sorting process and went from 140 parcel sorting centers in 1990 to 34 in 2019. Deutsche Post officials stated that this streamlining improved service performance for parcels; previously, most parcels were delivered within 3 or 4 days; by 2019, 93 percent of parcels were delivered within 1 day. Royal Mail officials also stated that they increased their level of automation and introduced new methods of parcel delivery, such as new high-capacity equipment for mail carriers, to increase efficiency as well. Government Assistance: The governments of some of the selected countries provided assistance to their postal operators in various forms, including assuming pension costs, granting tax exemptions, and providing subsidies to postal retail operations. For example, the governments of France and the United Kingdom assumed costs of defined benefit pensions for postal employees who are civil servants, while the government of Germany assumed these costs to the extent that they exceed the costs of private sector pensions. While all new employees are employed as private sector employees, German audit officials stated that the government’s pension obligation for postal employees who are or were civil servants and their dependents will last until 2079 and cost the government about €306 billion. The assumption of these pension plans was important in facilitating the privatization of these postal operators, according to Royal Mail and Deutsche Post officials, because without the reduced unfunded pension liabilities, the stock offerings for the newly created companies would have been much less attractive to private investors. France also provides subsidies for certain postal activities. In addition, the United Kingdom split off the postal retail network from Royal Mail into Post Office Limited, a separate entity owned and subsidized by the national government. Actions Regarding Institutional Structure Each of the five foreign countries we selected changed their institutional structure following the development of goals for postal transformation that were tailored to national needs and priorities. Each of these countries had definitions of universal postal services including provisions for nationwide delivery and access to postal retail services. As the following examples illustrate, the national context of each country has been of central importance to shaping these goals. In addition, postal transformation in the three selected European countries—Germany, the United Kingdom, and France—also had an international context in the broader effort to create and promote a single European internal market. Germany: In the 1990s, the German government changed its postal operator, Deutsche Post, from a government agency to a government- owned corporation. In 2000, the government changed Deutsche Post to a privately owned company so it could raise capital, modernize, and create a sustainable infrastructure. Goals for the newly created Deutsche Post were to maintain the high level of postal services, increase efficiency, and enhance profit. The legislation that created Deutsche Post also gave it more flexibility to respond to changes in the market. Currently, Deutsche Post remains a private company with the government holding a minority of its shares. United Kingdom: In 1969, the government of the United Kingdom changed the Post Office, its postal operator, from a government department to Royal Mail, a government-owned corporation prior to changing it to a privately owned company. It began privatizing Royal Mail in 2013 so Royal Mail could become more modern and competitive by raising private capital, operating with more flexibility, and be subject to shareholder scrutiny to drive efficiency. As mentioned above, the government of the United Kingdom also split off postal retail units into a new government-owned entity called “Post Office Limited” that is separate from Royal Mail. France: In 1991, the government of France changed La Poste, the postal service of France, from a government department to a public industrial and commercial establishment. In 2010, the government of France converted La Poste into a state-owned public limited company. This step allowed La Poste to raise additional public capital for investments to maintain and modernize its network, build a European parcel and express network, allow acquisitions outside Europe, and add nonpostal products and services, such as expanding its banking services. Australia: In 1989, the government of Australia changed its postal operator, Australia Post, from a government department to a government-owned corporation. It is required to earn a reasonable rate of return on its assets, maintain its equity, pay a reasonable dividend to the government, and be liable for the same taxes and charges as its competitors. New Zealand: According to a recent report, New Zealand Post began as a government department and became a state-owned enterprise in 1987, when legislation (State-Owned Enterprises Act 1986) created several such entities to address challenges in the national economy. Such corporations are required to be as profitable and efficient as a comparable business not owned by the state. USPS’s Transformation Involves Reassessment of Three Critical Foundational Elements of Its Business Model Congress will face difficult choices in fundamentally reassessing the three critical foundational elements of USPS’s business model—level of universal postal service, financial sustainability, and institutional structure. These choices are likely to require changes in laws and will have differing effects on postal stakeholders. While the specific impacts will depend on the changes made, some or all of USPS’s stakeholders could be affected and these impacts should be considered as part of any reassessment. All three key areas are interrelated and significant changes in one area may affect another. For example, we have testified that Congress faces a tradeoff between the level of postal services the nation needs and the level of postal services the nation is willing to pay for. Level of Universal Postal Service Needed Based on our prior work, a starting point for a fundamental reassessment of USPS’s business model should be determining the level of postal services the nation needs. While mail volumes have declined since fiscal year 2006, businesses, governments, and households still pay USPS billions of dollars annually to deliver more than 140 billion of pieces of mail, demonstrating a continued nationwide demand for postal services. We and others—such as USPS, PRC, and USPS OIG—have called for a fundamental reexamination of what postal services the nation needs now and may need in the future. In particular, we have testified that USPS’s growing financial difficulties, combined with changing demand for postal services, have provided Congress with an opportunity to examine and potentially redefine what postal services should be provided on a universal basis and how they should be provided. As mentioned above, there are numerous federal laws and requirements related to the provision of universal postal service. For example, 6-day delivery has long been required by annual USPS appropriations acts. Over the past decade, legislation has been introduced, and USPS and others have proposed reducing the frequency of delivery. However, no legislation has been enacted that would allow USPS to reduce delivery frequency. There is also no consensus on the level of postal services the nation needs. Changes in service levels face opposition from some stakeholders, such as labor unions, affected communities, and the general public. Currently, legislation has been introduced that supports the preservation of both 6-day and door-to-door delivery for addresses that have it, and some mailer groups support one or both of these positions. Representatives from postal labor unions we spoke with stated that universal postal service is appropriate as currently defined and could be expanded to provide more products and services. Stakeholders have also expressed differing views on whether the frequency of delivery should be reduced to help USPS address its financial problems. USPS and PRC have estimated that eliminating Saturday delivery would reduce USPS’s costs but also would likely affect mail volume sent by business mailers, although USPS and PRC disagreed on the degree to which it would do so. USPS estimated that it could save $1.4 billion to $1.8 billion a year by reducing the frequency of mail delivery to 5 days while maintaining 7-day package delivery. To put these potential savings into context, delivery is USPS’s most costly operation. We reported, however, that USPS would face challenges in, among other things, how efficiently USPS would absorb the additional volume delivered in the remaining delivery days and its potential effect on mail volume. We also described potential trade-offs, such as possibly reducing the demand and value of USPS products if customers are not getting their delivery needs met. Further, key postal stakeholders hold opposing views on many other options that have been proposed. For example, to raise revenues, USPS and some postal labor unions favor eliminating or raising the price cap on market-dominant products, which would enable USPS to raise rates more than the rate of inflation but would require changing the current regulatory system. Mailers, however, have expressed opposition to increasing postage rates higher than the rate of inflation. Postal labor unions also favor increasing revenues by introducing new postal and nonpostal products and services. We have recently found, however, that USPS’s nonpostal revenues generated at postal retail facilities are small and that there are limited opportunities to generate revenues from nonpostal products and services from USPS’s delivery network. For example, we reported that nonpostal products and services offered through USPS’s postal retail facilities generated about $431 million in fiscal year 2018, accounting for less than 1 percent of USPS’s total revenue. In addition, we reported several potential limitations to USPS adding nonpostal services to USPS’s mail carrier activities, such as checking in on homebound and older residents and reporting signs of blighted properties. These limitations included, among other things, limited net revenue potential and a potential adverse effect on mail service delivery. Financial Sustainability A fundamental reassessment of USPS’s business model would include determining the degree to which USPS should be financially self- sustaining, i.e., the degree to which USPS’s operating costs and liabilities should be covered by ratepayers (such as businesses and individuals who pay USPS to send mail). If a reassessment concluded that USPS should be fully self-sustaining, past legislative proposals that would change elements of USPS’s costs and revenues may be worth congressional consideration. Stakeholders, however, have not reached a consensus on any of these proposals and none has been enacted. Another avenue is to focus on reducing costs. As we have also reported, compensation and benefits costs, which comprise about three-quarters of USPS’s operating costs, are driven by a mix of USPS contracts and policies, including collective bargaining agreements negotiated with unions representing 92 percent of USPS employees and statutory requirements governing USPS employee pay and benefits. USPS compensation and benefits costs for its active employees increased by almost $1 billion in fiscal year 2019 despite a slight decrease in the size of the workforce and declining workload from reduced mail volume. While USPS has been able to make some reductions in pay and benefits, its ability to control compensation costs is significantly inhibited by the collective bargaining process, which results in binding arbitration if an impasse is reached. According to USPS, all negotiations take place against the backdrop of binding arbitration (and the arbitrators have historically been reluctant to deviate from the status quo), resulting in only incremental changes. We have long supported changing the laws regarding collective bargaining to require that USPS’s financial condition be considered in binding arbitration. We have also reported that the collective bargaining structure, which was established many years ago, should be reexamined considering the dramatic changes in USPS’s competitive environment and rising personnel costs that have contributed to USPS’s losses. Multiple bills have been proposed changing the process and/or criteria for collective bargaining to a different standard. The 2018 report from the Task Force on the United States Postal System recommended that collective bargaining over compensation should be eliminated for postal employees. While eliminating or revising the collective bargaining process could potentially provide USPS greater flexibility in employee pay, there would be trade-offs. For example, we recently found that the potential annual cost savings associated with USPS implementing cuts for all current employee pay by 1 percent would be about $321 million; a 10 percent cut would potentially save $3.2 billion. However, we also reported that while USPS could reduce its compensation costs through efforts such as reducing mail delivery frequency, USPS would face challenges in realizing these savings, such as the extent to which workhours could be reduced. Furthermore, these savings could be offset by other factors including service or morale issues. With respect to benefits, we recently reported on a wide range of possible changes that would reduce or limit costs for postal retiree health benefits, nearly all of which would require a legislative change. Some approaches would shift costs to the federal government; some would reduce benefits or increase costs to postal retirees or employees; and some approaches would change how benefits are funded. Similar types of legislative changes could be considered with respect to postal pension benefits. In addition, if Congress decides that USPS should be financially self- sustaining but makes no changes to improve USPS’s financial condition, USPS will be unable to address unfunded liabilities for postal retiree health and pension benefits, an inability that could eventually translate into higher costs for future postal ratepayers. Ultimately, if USPS’s expenses continue to exceed its revenues, USPS is likely to continue to miss required payments, reduce operations, or seek federal appropriations through the annual appropriations process to cover its operating costs. If Congress determines that USPS should no longer be expected to be financially self-sustaining or if actions taken do not restore financial self- sustainability, Congress could provide financial assistance—not unlike what happened in other countries or for selected domestic business—to enable USPS to cover its costs, and to fulfill its obligation to provide federal health and pension benefits to postal employees and retirees. Federal financial assistance could be provided in various forms, such as: Appropriating funds to help cover USPS’s operating costs, essentially the same arrangement that was used to finance the former U.S. Post Office Department. Appropriating funds to supplement USPS’s payment of certain costs, such as to help fund its capital investments. For example, the federal government provides Amtrak, which is operated as a for-profit corporation with annual grants to operate and make capital investments in passenger rail service to supplement the revenues it generates. Assuming some or all of USPS’s unfunded liabilities for retiree health benefits. This could take different forms, such as direct assumption of responsibility for unfunded liabilities or, more indirectly, requiring postal retirees to participate in Medicare which would decrease USPS’s costs but increase Medicare’s costs. Assuming some or all of USPS’s unfunded liabilities for pension benefits. Writing off some or all of USPS’s debts to the U.S. Treasury. Options regarding the federal government providing ongoing financial assistance to USPS could have effects on both USPS and the federal government as a whole. Notably, this assistance would have to be funded in some way—either through offsetting reductions in federal expenditures in other areas, through tax increases, or through an increase in federal deficits. Moreover, reliance on federal funding could mean that USPS would be exposed to the uncertainty inherent in the annual appropriations process. In addition, access to annual appropriations to cover financial shortfalls could have an unintended consequence of reducing USPS’s incentives to become more cost-efficient. At present, there is no consensus on USPS’s level of financial self- sustainability should be. For example, representatives of labor unions we spoke with stated that Congress should address issues regarding postal retiree benefits before any reassessment of USPS’s financial self- sufficiency can occur. Increased federal financial support of USPS might also face political opposition, due to concerns about minimizing federal deficits and ensuring fair competition between USPS and the private sector. Institutional Structure The final area of consideration in any reassessment of USPS’s business model is identifying what institutional structure could best deliver the level of postal services at the level of financial sustainability that Congress has determined. As an independent establishment of the executive branch, USPS must provide universal postal service while being expected to be financially self-sustaining. Thus, there may be a tension between attempting to fulfill public service missions while operating in an efficient, business-like and financially self-sustaining manner. USPS officials told us that as an entity of the federal government, its primary purpose is the achievement of its statutory universal service mission, and it has no incentive to seek to maximize profits at the expense of achieving its public service mission over the long term. Therefore, according to USPS, if it were maintained as an independent establishment of the executive branch or converted into a more typical government agency, it could continue to prioritize this public service mission. Additionally, there is widespread support for USPS’s institutional status as an independent establishment of the executive branch. Congressional resolutions have been introduced stating that “Congress should take all appropriate measures to ensure that the United States Postal Service remains an independent establishment of the Federal Government and is not subject to privatization.” Likewise, all four of the largest USPS unions, both of its management organizations, and a number of mailer groups and mailers support keeping USPS an independent establishment of the executive branch. Nonetheless, considering the depth of USPS’s financial problems and its poor financial outlook, now may be an appropriate time for Congress to reconsider what institutional structure will be most appropriate for USPS in the 21st century. However, any substantial change to USPS’s institutional status would require changing federal law. Based on our past work and options identified by USPS and others, Congress has a range of options it could consider in reassessing USPS’s structure (see table 1). The potential advantages and disadvantages of placing USPS into alternative institutional structures for USPS have long been debated. Several options have been discussed: USPS could revert to a traditional federal agency. USPS and its governance would be more consistent with other federal activities that are dependent on federal appropriations provided through the annual appropriations process. Many postal stakeholders, however, do not support such a change. For example, USPS told us that if it became a typical government agency reliant on federal appropriations to fill any operating gap, the political constraints that typically apply to government agencies could reduce USPS’s adaptability. Furthermore, changing USPS to a typical government agency could reduce its incentives to increase revenues or reduce costs in response to changing communication technologies and patterns. Consistent with this point, the 1968 presidential commission found that when it operated as a federal agency, the former U.S. Post Office Department had a lack of innovation, cost-control, and capital investment with major managerial decisions made through the legislative process. These and other issues led to persistent operational deficits, low productivity, and poor mail service. USPS could remain an independent establishment of the federal government with additional authority—relative to the status quo—over certain aspects of its business model. For example, USPS could be provided more flexibility to raise postal rates, introduce new nonpostal products, and make various changes to reduce its costs such as reducing the frequency of delivery or further consolidating its retail, transportation, and processing networks. USPS has long advocated for additional flexibility under its current institutional structure—such as to eliminate the price cap on market-dominant products and have greater flexibility to offer nonpostal products. Representatives from postal unions also stated that USPS should be provided additional flexibility, such as to expand into nonpostal products, which some representatives stated could help preserve its public service mission to provide universal postal services. Consensus does not, however, exist as to what flexibility should be given to USPS. For example, some mailer groups favor keeping the price cap unchanged, stating the cap is sufficient and provides incentives for increased efficiency. In addition, some stakeholders have supported further limiting USPS’s flexibility to reduce service standards, close retail outlets, or consolidate processing facilities, while other stakeholders noted that greater flexibilities in these areas would reduce USPS’s costs and enhance its efficiency. If USPS were to become a government-owned corporation or a government-sponsored enterprise, USPS could be incentivized to increase efficiency as a federally chartered entity providing a public service with a predominantly business nature. For example, three of the four third-party experts we spoke with stated that USPS should retain its current mission of universal postal service but become more like a private company with greater freedom to operate in a business- like manner. The new structure could promote greater incentives toward cost control and financial success. Government-owned corporations are federally chartered entities that provide a public service with a predominantly business nature. These corporations can have a board of directors that is appointed by the President. Government-sponsored enterprises are federally chartered entities that are privately owned and, typically, have a board of directors appointed by private sector owners. If USPS were to be a private company it would become accountable to the shareholders of that company. USPS told us that as a private company, its primary incentive could be to maximize profits and that, in USPS’s view, private shareholders would be most focused on short-term financial outcomes. Thus, any such design of a private USPS would need to balance its profit motive with the nation’s needs for universal postal service and the affordability of that service. For example, while Royal Mail is a private corporation owned by shareholders, the government of the United Kingdom still mandates 6- day delivery for letter mail (and 5-day delivery for packages) with specified delivery standards, and some mail types are subject to price controls. In addition, the United Kingdom monitors the provision of universal postal service and can take enforcement actions regarding regulatory conditions and competition law. Similarly, Germany has legal instruments to enforce the provision of universal postal services, although according to German government officials these instruments have not been used. Although some of the domestic businesses we examined reduced their costs through bankruptcy, this is likely not an option for USPS. As detailed in its report (see appendix I), National Bankruptcy Conference (NBC) found that USPS is not eligible to become a “debtor” under chapters 11 or 9 of the current Bankruptcy Code. According to NBC, a court likely would deem USPS to be a “governmental unit”—meaning it could not file for relief under chapter 11—and a court would deem USPS not to be a “municipality”—meaning it could not file for relief under chapter 9. Therefore, legislation amending the Code would be required to make USPS eligible for relief. According to NBC, however, even if the Bankruptcy Code were amended to allow USPS to file as a chapter 11 or 9 debtor, the Code would still not currently authorize a bankruptcy court to discharge the ongoing statutory obligations that have led to USPS’s current financial situation, and amending the Code to authorize such court action could raise constitutional (separation of powers) concerns. Moreover, NBC noted the bankruptcy process is designed to address obligations that have already accrued, not to override or amend statutes that apply to a debtor’s post- bankruptcy operations and obligations. In NBC’s opinion, because USPS’s pension and health care obligations are imposed by statute instead of by contract as in most bankruptcy reorganization proceedings, the bankruptcy process is not an effective or appropriate mechanism to address USPS’s obligations or potential transformation. NBC thus concluded that “although the bankruptcy process and bankruptcy tools raise interesting ideas for restructuring USPS’s existing and future obligations…all roads for doing so lead back to Congress.” Implementation Considerations Any changes that Congress makes to USPS’s business model will take time to implement and will need to be reevaluated as market conditions evolve. We have reported that fully implementing major transformations of government agencies can take years, and we also found that to be the case for the selected domestic businesses and foreign posts noted in this report, regardless of the changes needed. For example, railroads in the Northeast, airlines, and automakers took many years to implement a series of changes to their businesses. It took Germany more than a decade to fully liberalize and then privatize its postal operator, and the United Kingdom’s effort to privatize its postal operator took about 5 years. All of these organizations continue to adapt as they address ongoing challenges in a changing and highly competitive business environment. For example, GM recently stated that years after exiting bankruptcy and restoring profitability, it is closing some factories and focusing on developing electric and self-driving cars. Several freight railroads facing a downturn in freight traffic have also decided to run longer trains less frequently to reduce labor costs and increase efficiencies. Similarly, changes in the use of postal services will continue for the foreseeable future, necessitating continued adaptation. Some of the countries we selected are anticipating the need to be prepared for possible future changes. For example: In August 2019, German government officials said they would consider reducing postal delivery frequency from 6 to 5 days a week as part of an ongoing review to adapt Germany’s 20-year old postal law to changing market conditions and customer demands. In the United Kingdom, the postal regulator assessed postal users’ needs in 2020 in light of the changes in the postal market and to prepare for its regulatory review, which is to be concluded by 2022. A 2018 consultant’s report to the European Union (EU) recommended that the EU relax its universal service obligations to accommodate future changes in the postal market. The EU is currently studying how postal users’ needs are changing to determine if it needs to change its framework to allow member states to change their definitions of universal service obligations. In November 2019, the Australian government ordered a review of Australia Post’s long-term strategy to operate as a sustainable postal service provider, considering market conditions such as e-commerce, the regulatory environment and changes in business and consumer service needs. The government of New Zealand is scheduled to revise its memorandum of understanding with New Zealand Post defining universal service obligations by 2021. GAO’s Calls for Congressional Action to Address USPS’s Solvency Remain Unaddressed PAEA required GAO to evaluate strategies and options for the long-term structural and operational reform of USPS by December 2011. As USPS continued to face financial challenges, we accelerated this evaluation, which we issued in April 2010. However, we found that USPS’s business model, which was to provide universal postal service through self-supporting, business-like operations as an independent establishment of the executive branch, was not viable due to USPS’s inability to reduce costs sufficiently to respond to continuing declines in mail volume and revenue. In particular, we identified strategies to reduce compensation and benefit costs, reduce other operations and network costs, improve efficiency, and generate revenues through product and pricing flexibility. We also stated that while USPS may be able to improve its financial viability if it took more aggressive action to reduce costs, it was unlikely that those actions alone would fully resolve USPS’s problems unless Congress also took action. Therefore, we stated that Congress should consider, among other things, any and all options available to reduce USPS’s costs. While bills on these issues were introduced and in some cases passed congressional committees, postal reform legislation to address these considerations has not been enacted. In addition, in our most recent update to our High Risk List in 2019, we reiterated the basic elements of our 2010 matter for congressional consideration by stating that Congress should consider various options to better align USPS’s costs with its revenues. We stated that Congress should consider addressing constraints and legal restrictions that limit USPS’s ability to reduce costs and improve efficiency through considering a comprehensive package of legislative actions. To date, such a legislative package has not been enacted. Furthermore, we reported in 2018 that the financial outlook for the Postal Service’s Retiree Health Benefits Fund was poor, as USPS had not made any payments into it since 2010. OPM then forecasted the fund would be depleted by 2030 if USPS continued to not make payments. Therefore, we stated that Congress should consider passing legislation to put postal retiree health benefits on a more sustainable financial footing. However, legislation has not yet been enacted to address this issue. Conclusions We have often reported over the past 10 years that USPS’s ability to take actions taken under its current authority is insufficient to fully address its financial situation. Absent congressional action on critical foundational elements of the USPS business model, USPS’s mission and financial solvency are increasingly in peril. USPS’s growing difficulties to provide universal postal service in a financially self-sustaining matter provide Congress with the need to consider fundamental reform of the entire framework of postal services in the United States. In so doing, we continue to believe that as we stated in 2010, Congress should consider any and all available options. Comprehensive postal reform has not taken place in part because of the difficulty in obtaining compromise among various stakeholders with divergent views. Comprehensive, effective, and successful reform cannot occur until there is leadership and clarity around: what services should be provided, whether USPS is to be fully financially self-sustaining or the extent of federal financial support, and what institutional structure best supports these changes. Congressional leadership is critical in transforming USPS because consensus on policy decisions involving value judgments, trade-offs, and effects on postal stakeholders will be difficult to achieve. In addressing these issues, while all stakeholders’ interests should be understood and taken into consideration, the fundamental needs of the nation must take precedence. Continued inaction will result in deepening financial problems—putting USPS’s mission to provide universal postal service at greater risk and minimizing the ability to make the most appropriate or sustainable policy decisions. Matters for Congressional Consideration We are making the following three matters for congressional consideration: Congress should consider reassessing and determining the level of universal postal service the nation requires. (Matter for Consideration 1) Congress should consider determining the extent to which USPS should be financially self-sustaining and what changes to law would be appropriate to enable USPS to meet this goal. (Matter for Consideration 2) Congress should consider determining the most appropriate institutional structure for USPS. (Matter for Consideration 3) Agency Comments and Our Evaluation We provided a draft of this report to USPS and PRC. USPS and PRC provided written responses which are reproduced in appendixes IV and V, respectively. In its response, USPS concurred with our first two matters to reassess and determine the level of universal postal services the nation requires and to determine the extent to which USPS should be financially self- sustaining. USPS noted that the recent COVID-19 pandemic has both highlighted USPS’s essential role in the nation’s infrastructure and has caused a significant and sudden decline in mail volume, leading to a short-term liquidity crisis. USPS stated that while action by Congress is critical to ensure its ability to operate in the short-term, its financial situation has long been unsustainable due to statutory and regulatory structures that limit their ability to increase revenues and decrease costs. USPS noted that these changes require Congress to adopt reforms to secure USPS’s long-term financial viability. In addition, USPS concurred with the National Bankruptcy Conference’s legal analysis that Federal bankruptcy laws do not apply to USPS and that all roads for USPS restructuring lead back to Congress. USPS generally agreed with our third matter, stating that determining the institutional structure could logically be a part of a comprehensive congressional examination of its business model. USPS stated that it does not believe that corporatization or privatization would unlock new efficiency potential in USPS and that sustainable postal service does not hinge on the provider’s institutional form. However, as we and USPS have stated, its current legal and regulatory structure does not provide flexibility in some key areas. While our report states that a corporate or privatized institutional structure could provide both the flexibility and a greater incentive to operate in a more business-like manner than USPS’s current structure, we also recognize there are advantages and disadvantages to any institutional structure. As a result, we are not recommending any particular institutional structure for USPS, but are urging that Congress identify what institutional structure could best deliver the level of postal services at the level of financial sustainability that Congress determines. In its response, PRC agreed with all of our matters for congressional consideration. Particularly, PRC noted that the matter to reassess and determine the level of universal postal service the nation requires must be addressed as soon as possible. The PRC noted that given USPS’s severe and worsening financial situation (even before the impacts of the current pandemic crisis), a clear and specific definition of universal postal service and how that obligation can be funded must be provided. The PRC stated that Congress may want to consider mandating that PRC define and update the universal service definition by regulation. Both USPS and PRC provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Postmaster General, the Chairman of PRC, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix VI. Appendix I: Reprint of National Bankruptcy Conference’s Report on U.S. Postal Service Bankruptcy Issues Appendix II: Selected Legal Requirements Applicable to the U.S. Postal Service (USPS) Appendix II: Selected Legal Requirements Applicable to the U.S. Postal Service (USPS) Mail delivery quality and frequency 39 U.S.C. § 101(e),(f); see, e.g., Pub. L. 116-6, 133 Stat. 180 (2019) Legal requirements USPS is required to provide prompt, reliable, and efficient services to patrons in all areas, render postal services to all communities, and serve as nearly as practicable the entire population of the United States. USPS is specifically required to receive, transmit, and deliver written and printed matter, parcels, and like matter throughout the United States, its territories and possessions, and pursuant to certain agreements, throughout the world. USPS is required to provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office can be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities. Statutory and regulatory requirements specify the process and criteria for post office closings, including appellate review by the Postal Regulatory Commission (PRC). In determining all policies for postal services, USPS is required to give the highest consideration to the requirement for the most expeditious collection, transportation, and delivery of important letter mail. In selecting modes of transportation, USPS is required to give the highest consideration to the prompt and economical delivery of all mail. Service standards 39 U.S.C. § 3691, 39 C.F.R. Pt. 121 Letter mail monopoly 18 U.S.C. §§ 1693-99; 39 U.S.C. §§ 601-06 Mailbox monopoly 18 U.S.C. § 1725 Collective bargaining 39 U.S.C. §§1004,1206-07 Benefit programs 39 U.S.C. § 1005; 5 U.S.C. §§ 8348(h), 8423, 8909a Level of benefits 39 U.S.C. § 1005(f) Comparability 39 U.S.C. §§ 101(c), 1003(a) Workers’ compensation 39 U.S.C. § 1005(c) For many years, provisions in annual appropriations acts have stated “hat 6-day delivery and rural delivery of mail shall continue at not less than the 1983 level.” USPS is required to establish modern service standards for each market-dominant product (e.g., delivery of First-Class Mail within the continental United States in 2-3 delivery days); these service standards are defined in the Code of Federal Regulations. USPS’s letter delivery monopoly is codified in criminal and civil laws known as the Private Express Statutes. These laws generally prohibit anyone from establishing, operating, or using a private company to carry letters for compensation on regular trips or at stated periods over postal routes or between places where mail regularly is carried. Restricts access to mailboxes by prohibiting anyone from knowingly and willingly placing mailable matter without postage in any mailbox, providing USPS exclusive access to mailboxes. USPS negotiates collective bargaining agreements with its labor unions. If the parties are unable to reach an agreement, binding arbitration by a third-party panel will ultimately be used to establish agreement. USPS is also required to consult with postal supervisory and managerial organizations concerning changes in pay, benefits, and other programs that affect their membership. USPS is required to participate in federal pension and health benefit programs, with specific provisions regarding the required level of USPS’s funding of these programs. For example, USPS is required to prefund both postal pension benefits and postal retiree health benefits, each with payments that fully cover USPS’s share of future benefit costs. The law requires USPS’s fringe benefits to be at least as favorable as those in effect when the Postal Reorganization Act of 1970 was enacted, unless variation of benefits is collectively bargained. Compensation for USPS officers and employees is required to be comparable to the rates and types of compensation paid in the private sector of the U.S. economy. USPS policy also is required to maintain compensation and benefits for all officers and employees on a standard of comparability to comparable levels of work in the private sector. USPS is required to participate in the federal workers’ compensation program, which covers postal and other federal employees and provides compensation to federal employees, as well as dependents, in the event of an employee’s death. Citation(s) Access to facilities 39 U.S.C. § 403(b) Legal requirements USPS is required to establish and maintain postal facilities of such character and in such locations, that postal patrons throughout the Nation will, consistent with reasonable economies of postal operations, have ready access to essential postal services. Generally, annual appropriations prohibit USPS from using funding to consolidate or close small rural or other small post offices. Appropriations restrictions See, e.g., Pub. L. 116-6, 133 Stat. 180 (2019) Processing/logistics facilities Pub. L. 109–435 § 302(c)(5), (2006), 120 Stat. 3219, codified at 39 U.S.C. § 3691 note Price cap 39 U.S.C. § 3622(d) The law requires USPS to provide public information and opportunities for public input and comment before closing or consolidating any mail processing or logistics facilities, and take comments into account when making a final decision. An inflation-based price cap generally limits rate increases for market-dominant products, including First-Class Mail, USPS Marketing Mail, Periodicals and Package Services such as Bound Printed Matter, Media Mail, and Library Mail. The PRC, an independent establishment of the executive branch, must review USPS proposals to change domestic postal rates and fees. Debt limits 39 U.S.C. § 2005 Restriction on nonpostal lines of business 39 U.S.C. §§ 404(e), 102(5) Investment of postal retiree funds 5 U.S.C. §§ 8348(c), 8909a(c) Whenever USPS proposes a change in the nature of postal services that will have an effect on a substantially nationwide basis, it must request an advisory opinion from the PRC on the proposal. USPS has the authority to borrow up to $15 billion from the U.S. Treasury. The annual net increase of obligations for capital improvements and defraying operating expenses is limited to $3 billion. USPS is limited to providing nonpostal services to those offered as of January 1, 2006 that PRC has authorized USPS to continue. Nonpostal service is defined to mean any service that is not a postal service. A postal service is defined as the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation, or other function ancillary thereto. Funds set aside for postal pensions and retiree health benefits are required by law to be invested in U.S. Treasury securities. Appendix III: U.S. Postal Service Financial Information for Fiscal Years 1972 through 2019 Dollars in millions Fiscal year 1972 Appendix IV: Comments from the U.S. Postal Service Appendix V: Comments from the Postal Regulatory Commission Appendix VI: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov. In addition to the individual named above, Derrick Collins (Assistant Director); Greg Hanna (Analyst-in-Charge); Amy Abramowitz; Kenneth John; Hannah Laufe; Serena Lo; Michael Mgebroff; Joshua Ormond; Joshua Parr; Susan Sawtelle; Crystal Wesco; and Laurel Voloder made key contributions to this report.

An independent establishment of the executive branch, USPS is required to provide prompt, reliable, and efficient services to the public. While USPS is to be self-sustaining, it lost about $78 billion from fiscal years 2007 through 2019 due primarily to declining mail volumes and increased costs. Given USPS’s poor financial condition, in 2009 GAO identified USPS’s financial viability as a high-risk area, a designation it retains today. GAO was asked to explore issues related the transformation of USPS and potential implications for stakeholders. This report (1) examines major challenges facing USPS, (2) identifies how selected domestic businesses and foreign posts reportedly have addressed serious challenges, (3) examines critical foundational elements of USPS’s current business model, and (4) identifies key previously issued GAO matters for congressional consideration regarding USPS and actions taken in response. GAO reviewed its prior reports and related matters for congressional consideration, analyzed laws and regulations, and assessed USPS documents on financial and operational performance. It also reviewed reports by the USPS Office of Inspector General, the Postal Regulatory Commission, and other selected groups such as the 2018 Task Force on the United States Postal Service. To identify how domestic businesses and foreign posts addressed similar serious challenges, GAO selected for review (1) six domestic organizations in the airline, automobile, and railroad industries and (2) five foreign posts in five countries—Australia, France, Germany, New Zealand, and the United Kingdom. The businesses and countries had characteristics similar to USPS, such as large unionized work forces, and had reportedly made significant changes to their business models. For each of these businesses and countries, GAO analyzed public reports on financial and operational performance, as well as institutional structure and requirements. GAO also interviewed government and postal officials from three selected countries and officials from the National Audit Offices of two of the selected countries. Because questions were raised regarding the application of the U.S. Bankruptcy Code to USPS, GAO also requested the National Bankruptcy Conference to assess whether USPS could use bankruptcy or other restructuring processes. To examine critical USPS business model elements, GAO reviewed its prior reports and reports from numerous other organizations, and obtained the views of stakeholders. Since GAO's 2009 high-risk designation, the U.S. Postal Service's (USPS) financial viability has progressively worsened due to declining mail volume, increased employee compensation and benefit costs, and increased unfunded liabilities and debt. First-Class Mail volume has declined 44 percent since fiscal year 2006. Additionally, employee compensation and benefits costs have been increasing. Although USPS's work force declined from about 786,000 in fiscal year 2007 to about 617,000 in fiscal year 2013, USPS's work force increased to about 630,000 in fiscal year 2019. Finally, total unfunded liabilities and debt continue their steady upward trend (see figure). To address these challenges, USPS has taken a variety of actions such as providing increased self-service options and reducing facility hours. Statutory requirements, however, limit USPS's ability to make changes in areas such as certain service offerings, pricing, and its employee compensation and benefits. In confronting similar types of challenges that are facing USPS, GAO selected large domestic businesses (companies) and foreign postal entities (widely known as “foreign posts”) that have seen significant change in foundational elements of their business models. Specifically, according to GAO's analysis of publicly available reports and interviews of cognizant officials, these organizations have had major changes in services and products, financial self-sustainment, and institutional structure: Companies and foreign posts have modified services and products to focus on profitable offerings, and two countries’ posts reduced postal service levels. For example, New Zealand Post reduced its mail delivery’s frequency from 5 to 3 days per week in urban areas. Companies have reduced their workforce, infrastructure, and operational costs, and some accepted government financial assistance to help remain financially viable. Cost reduction has also been a priority for all countries’ posts, especially in compensation and benefits, while three countries’ governments provided financial assistance to their posts. Four of the selected companies declared bankruptcy leading to restructured corporations; some merged with other companies to increase their revenues. Two countries privatized their posts, and three others restructured their posts from government departments into government-owned corporations. Regarding USPS, reassessing its business model should start with the level of required postal services. For example, delivery is USPS’s most costly operation; USPS officials estimate annual savings of $1.4 billion to $1.8 billion if delivery of mail were reduced to 5 days rather than 6 days per week. Second, USPS is to function as a financially self-sustaining entity; however, it does not. A reassessment could include determining whether some of USPS’s costs and liabilities should be borne by taxpayers. Third, alternative institutional structures for USPS range from a federal agency to a private company. A bankruptcy proceeding is not an effective or appropriate means to address the issues associated with a potential USPS restructuring, according to the National Bankruptcy Conference. Prior GAO reports have included suggestions for Congress to address USPS’s financial viability. For example, GAO’s 2010 report identified strategies to reduce compensation, benefits, and operational costs. GAO stated that Congress, among other things, consider all options available to reduce costs. While bills in this area were introduced and in some cases passed congressional committees, legislation was not enacted. In 2018, GAO reported that the financial outlook for the Postal Service Retiree Health Benefits Fund was poor—the Office of Personnel Management forecasted the fund would be depleted by 2030 if USPS continued not making payments into it. Legislation has not been enacted to place postal retiree health benefits on a more sustainable financial footing. Postal reform legislation has not taken place in part because of the difficulty in obtaining compromise among various stakeholders with divergent views (see figure below). However, since GAO’s 2010 report, USPS’s financial condition has significantly worsened raising fundamental questions about key elements of USPS’s business model. Such questions warrant congressional action.

GAO_GAO-20-241

Background Key DOD Cyber Hygiene Initiatives DOD officials identified three key department-wide initiatives that include a number of cybersecurity practices aimed at improving cyber hygiene: the DC3I, the CDIP, and the Cyber Awareness Challenge training. These efforts recognize the importance of command leadership, best practices for DOD network users, and technical countermeasures against cybersecurity threats. DC3I. In September 2015, the Secretary of Defense and the Chairman of the Joint Chiefs of Staff signed the DC3I in an effort to transform DOD cybersecurity culture by enabling and reshaping leaders, cyber providers, personnel who perform cyberspace operations, and general users to improve individual human performance and accountability on DOD’s network. The DC3I memorandum identifies 11 tasks assigned to various DOD components to respond to and implement across the department— such as the development of cybersecurity training briefs for DOD leadership, integration of cybersecurity into operational training and exercises, and the development of a resourcing plan to support scheduled inspections of units conducting cyberspace operations. From September 2015 to December 2016, U.S. Cyber Command was initially responsible for ensuring that relevant components implemented the DC3I. In December 2016, the Deputy Secretary of Defense assigned the DOD CIO as the official responsible for ensuring that components implemented the initiative because, in part, the DOD CIO has DOD-wide oversight authority. CDIP. The CDIP is one of seven actions identified in DOD’s Cybersecurity Campaign to prompt commanders and senior leaders to enforce full cybersecurity compliance and accountability across the department. In October 2015, the Deputy Secretary of Defense signed the CDIP to reinforce basic cybersecurity technical requirements identified in policies, directives, and orders as a means to defend DOD information networks, secure DOD data, and mitigate risks to DOD missions. The CDIP memorandum identifies 17 tasks for all commanders and supervisors to implement across the department. These tasks include removing operating system software that no longer receives security updates from vendors, configuring servers consistent with DOD guidance on secure configurations, and addressing vulnerabilities for servers and network infrastructure in a timely manner. Cyber Awareness Challenge Training. This training is intended to help the DOD workforce (including service members, civilians, and contractors) to maintain awareness of known and emerging cybersecurity threats, reinforce best practices to keep information and information systems secure, and ensure that network users stay abreast of changes in DOD cybersecurity policies. DISA develops the training content and periodically updates the training. In addition, the Cyber Workforce Advisory Group that includes officials from the DOD CIO, DISA, and DOD components, solicit input about ways to improve the training and meets annually to approve updates to the Cyber Awareness Challenge. Increasing Cybersecurity Awareness and Accountability at Leadership Levels Federal law and a DOD initiative and strategy highlight the important role of leadership in improving cybersecurity culture and performance across the department. For example, the Federal Information Security Modernization Act of 2014 (FISMA) requires agency heads—including the Secretary of Defense—to ensure that senior agency officials provide security for the information and information systems that support the operations and assets under their control. Additionally, the DC3I states that leaders will be held accountable by the chain of command for the cybersecurity performance of their organization and the individuals who comprise it, and for the role cybersecurity performance plays in accomplishing assigned missions. It also states that leaders will set an example and help individuals master appropriate cyber behavior, will take action against those who commit gross negligence or errors of commission, and may use all available means, both legal and administrative, as they deem appropriate. Further, the 2018 DOD Cyber Strategy states that reducing the department’s network attack surface (i.e., the different points in a network where attackers can try to enter or extract information) requires an increase in cybersecurity awareness and accountability across the department. The strategy also states that the department would hold DOD personnel accountable for their cybersecurity practices and choices. The 2019 Cybersecurity Readiness Review, directed by the Secretary of the Navy, describes best practices for effective cybersecurity leadership. These best practices, according to the readiness review, require Navy leaders to be informed on cybersecurity issues facing their organization, engaged in ensuring cybersecurity issues are addressed, and hold their organization accountable for cybersecurity performance. Key Cybersecurity Roles and Responsibilities A number of DOD officials and components have key roles and responsibilities for cybersecurity, including the three key cyber hygiene initiatives. For example: Secretary and Deputy Secretary of Defense. FISMA makes the Secretary of Defense responsible for providing information security protections commensurate with the risk and magnitude of harm facing the department. In addition, Executive Order 13800, issued in May 2017, aligns with FISMA by holding agency heads accountable for implementing risk management measures commensurate with the risk and magnitude of the harm that would result from unauthorized access, use, disclosure, disruption, modification, or destruction of IT and data. DOD Chief Information Officer. FISMA requires DOD to develop, document, and implement a program to provide security for information and information systems (commonly referred to as a cybersecurity program) and directs the Secretary of Defense to delegate to the DOD CIO (and military department CIOs) authority to ensure compliance with the law. In addition, the DOD CIO is responsible for overseeing implementation of the three key cyber hygiene initiatives. DOD Component heads. DOD component heads are responsible for ensuring that IT under their purview complies with DOD Instruction 8500.01. In addition, component heads are responsible for ensuring that their network users complete annual security awareness training. DOD Component CIOs. DOD component CIOs are responsible for developing, implementing, maintaining, and enforcing a component cybersecurity program on behalf of their respective component heads. In doing so, component CIOs are responsible for ensuring that their components implement the CDIP tasks. Chairman of the Joint Chiefs of Staff. The Chairman of the Joint Chiefs of Staff is responsible for advising the President and Secretary of Defense on operational policies, responsibilities, and programs. The Chairman also assists the Secretary of Defense in implementing operational responses to cyber threats and ensures cyberspace plans and operations are compatible with other military plans and operations. The staff members who support the Chairman of the Joint Chiefs of Staff are referred to as the Joint Staff, which is comprised of members from all of the military services. U.S. Cyber Command. The Commander of U.S. Cyber Command has the mission to direct, synchronize, and coordinate cyberspace planning and operations to defend and advance national interests in collaboration with domestic and international partners. In addition, the Commander is responsible for, among other things, issuing orders and directives to all DOD components for the execution of global operations aimed at securing and defending the department’s networks. Defense Information Systems Agency. The Director of DISA is responsible for developing, implementing, and managing cybersecurity for the department’s network and works with other components to secure DOD systems. For example, the Director is responsible for developing cybersecurity awareness training for all users on DOD’s network. JFHQ-DODIN. The Commander of JFHQ-DODIN is responsible for, among other things, commanding, controlling, planning, directing, coordinating, integrating, and synchronizing DOD defensive cybersecurity operations. JFHQ-DODIN also performs two types of cyber readiness inspections to ensure DOD units comply with requirements related to network security and to evaluate the ability of units to accurately detect and mitigate vulnerabilities and anomalous activity on DOD’s network. Cybersecurity Is a High- Risk Area The security of federal cyber assets has been on our High-Risk List since 1997. In September 2018, we issued an update to this high-risk area that identified actions needed to address cybersecurity challenges facing the nation—including improving implementation of government-wide cybersecurity initiatives aimed at securing federal systems and information. We also have identified ensuring the cybersecurity of the nation as one of nine high-risk areas that need especially focused executive and congressional attention. In August 2017, we reported on DOD’s progress in implementing the department’s cyber strategies. We found that DOD had implemented the cybersecurity elements of the DOD Cloud Computing Strategy and had made progress in implementing the 2015 DOD Cyber Strategy and DOD Cybersecurity Campaign, which was comprised of multiple initiatives including the CDIP. However, DOD’s process for monitoring implementation of the DOD Cyber Strategy resulted in the closure of tasks before they were fully implemented. We also found that DOD lacked a timeframe and process for monitoring implementation of the DOD Cybersecurity Campaign objective to transition to commander-driven operational risk assessments for cybersecurity readiness. We recommended that DOD (1) modify criteria for closing tasks as implemented and reevaluate tasks previously determined to be completed to ensure they meet modified criteria and (2) establish a timeframe and monitor implementation of the DOD Cybersecurity Campaign objective to develop cybersecurity readiness assessments to help ensure accountability. DOD partially concurred with both recommendations. As of January 2020, neither recommendation had been implemented. DOD Has Not Fully Implemented Key Cyber Hygiene Initiatives and Does Not Know the Extent of Protection DOD has not fully implemented its three cyber hygiene initiatives. Specifically, (1) the DOD CIO and DOD components have not implemented seven of the 11 DC3I tasks due in fiscal year 2016; (2) DOD has implemented six of 10 CDIP tasks that the DOD CIO oversees and does not know the extent that seven other CDIP tasks are implemented; and (3) DOD did not know the extent to which users for selected components completed the Cyber Awareness Challenge training in 2018 and one component did not use the required training. In addition, the department does not know the extent that cyber hygiene practices to protect its networks from key cyberattack techniques have been implemented. DOD Has Not Implemented Seven of the 11 DC3I Tasks Due in Fiscal Year 2016 DOD has not implemented seven of the 11 DC3I tasks despite fiscal year 2016 deadlines for each of the tasks being established by the department. In particular, DOD components have implemented four DC3I tasks and have not implemented the seven remaining tasks, as shown in figure 1. As shown above, DOD has implemented four DC3I tasks. For example, DOD CIO implemented a task that requires that office to assess the effect of cyber workforce shortfalls on DOD’s mission and provide recommendations to address these shortfalls (task 10 in figure 1 above). Specifically, in April 2019, DOD CIO provided a plan to the Office of Personnel Management to address cyber workforce shortages by filling vacant positions, enhancing outreach and recruitment, and expanding on hiring authorities. However, DOD has not implemented the remaining seven DC3I tasks. For example: DOD has not fully implemented leadership cybersecurity training briefs (task 1). In April 2016, U.S. Cyber Command developed two training briefs to be used in leadership training. However, as of October 2019, DOD components have not received either training brief, according to DOD officials. In September 2016, U.S. Cyber Command provided the Deputy Secretary of Defense a DC3I status report and informed him that two products were developed to address this task and that they would be disseminated to DOD components. However, as of October 2019, neither U.S. Cyber Command nor the Office of the DOD CIO had disseminated these leadership training briefs across the department, according to DOD officials. In reviewing the training briefs, we found that, if they had been incorporated into DOD leadership training, leaders would have been better positioned to address cybersecurity risks. For example, they may have learned, among other things, how to understand, assess, and interpret cyber-reportable events and incidents and how they affect military operations. DOD has not developed cyber-provider training (task 2). In February 2019, the office of the DOD CIO completed a review of all military and civilian IT positions to identify the work roles of all cyber providers in the department. However, the office has not developed educational and training requirements for cyber providers. DOD CIO officials told us that, consistent with task 2, they are drafting a DOD Manual, Cyber Workforce Qualification and Management Program, which would document educational and training requirements for the work roles for each cyber provider. DOD CIO officials expect to complete the manual around April 2020. DOD has not fully implemented criteria for assessing cybersecurity in operational training and exercises (task 5). In March 2016, the Joint Staff developed criteria for assessing military service and combatant command efforts to integrate cybersecurity into operational training and exercises. For example, the Joint Staff developed a checklist of cybersecurity elements that should be included in cyberspace-related training objectives and assessed during training events. In May 2016, the Vice Chairman of the Joint Chiefs of Staff required that the criteria be used to assess military service and combatant command efforts to integrate cybersecurity into operational training and exercises. In May 2019, Joint Chiefs of Staff officials told us the criteria was not incorporated into the Chairman’s annual training guidance, citing personnel turnover, and that they do not have plans to incorporate the criteria. According to the DC3I, operational and tactical commanders and leaders need to interpret the effect that cyber insecurity may have on the mission and integrate cyber effects into mission planning. If Joint Staff had updated the Chairman of the Joint Chiefs of Staff guidance for operational training, DOD commanders would have had criteria they could use to assess the effect that cyber insecurity may have on military missions. The lack of progress in implementing the tasks occurred, in part, because the DOD CIO did not take steps to ensure that the DC3I tasks were implemented. DOD CIO officials told us they were not aware of their responsibility to oversee implementation of the DC3I. Initially, U.S. Cyber Command was assigned as the entity responsible for overseeing implementation of the DC3I; however, in December 2016, the Deputy Secretary of Defense approved the transition of the DC3I mission lead to the department’s CIO. According to this transition memorandum, the CIO was to leverage existing authorities and departmental efforts to lead and provide oversight of cybersecurity culture and compliance transformation. Additionally, DOD CIO officials told us that the office is focusing its resources on other CIO initiatives, such as implementing the cyber landscape initiative. However, the DC3I included a task (task 11 in figure 1 above) that required an assessment of the resources needed to ensure that DOD implemented the DC3I and this task had not been completed at the time of our review. If DOD CIO does not take appropriate steps to ensure that the DC3I tasks are implemented, the department risks compromising the confidentiality, integrity, and availability of mission-critical information as a result of human error by users on the department’s networks. DOD Has Implemented Six of 10 CDIP Tasks That the DOD CIO Oversees and Does Not Know the Extent That Seven Other CDIP Tasks Have Been Implemented DOD Has Implemented Six of 10 CDIP Tasks That the DOD CIO Oversees Since 2015, DOD has implemented six of 10 CDIP tasks that the DOD CIO is to oversee, but has not achieved desired performance targets for the remaining four tasks even though there is a requirement to implement all 10 by the end of fiscal year 2018. In the 2015 CDIP memorandum, the Deputy Secretary of Defense directed DOD components to implement all 17 CDIP tasks for all system users, IT hardware, and IT software to remove preventable vulnerabilities from DOD’s network that could allow adversaries to compromise information and information systems. According to a March 2019 memorandum, the Deputy Secretary of Defense challenged the department to achieve 90 percent implementation of the 10 CDIP tasks overseen by DOD CIO by the end of fiscal year 2018. In table 1, we list the 17 tasks and indicate the 10 tasks that the department’s CIO oversees. The department has achieved its performance targets for six of the 10 CDIP tasks that the DOD CIO oversees. For example, in October 2018 DOD achieved its performance target for one task that requires the department to move all of DOD’s web servers into a DOD “demilitarized zone,” or DMZ, according to DOD’s fiscal year 2018 Federal Information Security Modernization Act report to the director of the Office of Management and Budget. Placing these web servers in a DMZ directs web traffic intended for those servers—including malicious traffic—to systems within perimeter firewalls that screen the traffic before allowing access to organizations networks. By implementing the task and moving 11,000 web servers into the DMZ, DOD has reduced the risk that malicious traffic can reach its web servers. However, the department has not achieved the department-wide goal for the four remaining CDIP tasks overseen by DOD CIO. For example, DOD did not achieve its performance target for a task that required components to ensure they were compliant with endpoint security guidance. DOD CIO officials told us that the remaining four CDIP tasks are challenging for the department to achieve the 90 percent performance target because some DOD components use aging information technology systems and these older systems may not be equipped to implement all CDIP tasks. We have previously reported that legacy systems have operated with known cybersecurity vulnerabilities that are either technically difficult or prohibitively expensive to address. In light of the security risks posed by DOD component legacy systems, we stated that it is imperative that agencies carefully plan for their successful modernization. DOD did not achieve the 90 percent goal for four of the 10 CDIP tasks by the end of fiscal year 2018 due in part to DOD components not developing plans with scheduled completion dates to implement these four tasks, according to DOD officials. DOD CIO officials told us that they had not required DOD components to develop plans with scheduled completion dates for the remaining four CDIP tasks. CIO officials believed that the DOD components would implement the CDIP memorandum since it was signed by the Deputy Secretary of Defense and it required them to report on their progress in implementing the CDIP tasks. While the Deputy Secretary of Defense did require DOD components to implement these four tasks and report on their progress, components have not achieved performance targets. If DOD components do not develop plans with scheduled completion dates to implement the remaining four CDIP tasks, the department may fail to remove preventable, well-known vulnerabilities from its network and may allow adversaries to compromise the confidentiality, integrity, or availability of sensitive information and information systems. DOD Does Not Know the Extent that Seven CDIP Tasks Have Been Implemented DOD does not know the extent to which components have implemented the seven CDIP tasks that the CIO does not oversee because the responsible components have not reported on their progress, according to DOD officials. For example, DOD has not reported on the extent to which components have disabled hyperlinks to websites that users receive in email messages. Disabling hyperlinks in email messages can help to prevent phishing attacks. DISA officials told us that the agency implemented a security protocol that disables these hyperlinks in DISA’s email server. Consequently, DOD components that use DISA’s email service are compliant with this task’s requirement; however, not all DOD components use DISA’s email service and the extent to which other email services comply with this task is unknown. The CDIP memorandum signed by the Deputy Secretary of Defense stated that the department’s progress in implementing all CDIP tasks would be reported. However, the department has not reported on the progress it has made implementing the seven CDIP tasks that the CIO does not oversee in part because the Deputy Secretary of Defense did not identify, in the CDIP memorandum, a component to oversee the implementation of these tasks and report on their progress. According to DOD CIO officials, some of these seven tasks are more tactical and may be more appropriately tracked at echelons below the office of the DOD CIO. For example, one of these seven tasks requires that commanders ensure the physical security of their network infrastructure devices. We agree that lower echelons may more effectively track the progress of some tasks; however, information about the progress that components make implementing these tasks is not reported to the CIO or any other DOD component, according to DOD officials. In addition, DOD CIO officials told us that JFHQ-DODIN collects some information from inspections it performs to verify the extent that inspected units implement technical guidance documents, some of which relate to these seven CDIP tasks. However, according to DOD officials, JFHQ-DODIN does not report this information to the CIO or any other DOD component. In addition, JFHQ-DODIN inspects a sample of DOD units and therefore does not have information about the status of these tasks across the department. For those units that are inspected, no DOD component is aggregating data from these inspections to identify the extent to which these seven tasks are implemented. If the Deputy Secretary of Defense does not identify a DOD component to oversee the implementation of the seven CDIP tasks that DOD CIO does not oversee and report on progress implementing them, the department will have less assurance that cybersecurity vulnerabilities are being addressed in a timely manner and systems are being securely configured. DOD Has Not Fully Implemented Its Cyber Awareness Challenge Training Initiative Selected DOD Components Did Not Know the Extent to Which Their Users Implemented the 2018 Cyber Awareness Challenge Training The 16 selected components we included in our sample did not always collect information on the number of users (1) that completed the fiscal year 2018 Cyber Awareness Challenge training, (2) that did not complete the training, and (3) whose network access was revoked for not completing the cyber awareness training. Specifically: Unknown number of users that completed the cyber awareness training. Two of the 16 did not collect information on the number of users that completed the fiscal year 2018 Cyber Awareness Challenge training. In particular, the Army and the Defense Finance and Accounting Service could not provide data on the extent that users had taken the required training in fiscal year 2018. Unknown number of users that did not complete the cyber awareness training. Six of the 16 components did not collect information on the number of users that did not complete the cyber awareness training. In particular, the Navy, Air Force, Marine Corps, U.S. European Command, and the Defense Media Activity did not collect information on the users who did not complete the training in fiscal year 2018. In addition, the Army’s training compliance system did not have records for all Army users in 2018, which limited the Army’s ability to determine if all of its users completed the fiscal year 2018 Cyber Awareness Challenge training. Unknown number of users whose network access had been revoked for not completing the required training. Eight of the 16 components that we contacted did not collect data on the number of users whose network access had been revoked for not completing the required training, as implied by DOD policy. Selected DOD components did not know the extent to which their network users implemented the 2018 Cyber Awareness Challenge training by completing it because the DOD component heads did not ensure that their respective components were accurately monitoring and reporting the necessary information. Navy officials told us that they believed it was not DOD or the military service’s policy for the service headquarters to track whether their network users had completed the training. According to Navy officials, there is also no value for large organizations like the Navy, with over 600,000 users, to track and report these data at the headquarters level. However, DOD policy requires all network users to take the Cyber Awareness Challenge training annually. In addition, DOD policy states that all individuals with network access must complete this training to retain access. NIST also advises that agencies capture training compliance data at an agency level, so data can be used to conduct agency-wide analysis and reporting. Multiple DOD policy and guidance documents—including DOD Manual 8570.01-M, and Chairman of the Joint Chiefs of Staff Instruction 6510.01F—state that the DOD component heads are responsible for ensuring that users complete the Cyber Awareness Challenge training and two of these documents require recording training compliance. For example, according to DOD Manual 8570.01-M, Information Assurance (IA) Workforce Improvement Program, components must document and maintain the status of awareness compliance for each user. Further, service policy and guidance places the responsibility on the DOD component heads or senior-level leaders at the headquarters’ level for ensuring that cybersecurity training is completed and documented. For example, Secretary of Navy Instruction 5239.3C, Department of Navy Cybersecurity Policy (May 2, 2016), states that the Chief of Naval Operations and the Commandant of the U.S. Marine Corps shall ensure all authorized users of Department of Navy information systems and networks receive initial cybersecurity awareness orientation as a condition of access and, thereafter, complete annual refresher training, monitor and report workforce cybersecurity training and maintain supporting records. Similarly, Army Regulation 25-2, Army Cybersecurity (Apr. 4, 2019), states that the Deputy Chief of Staff, G3/5/7 is responsible for ensuring that cybersecurity training is integrated and conducted throughout the Army. If the DOD component heads do not ensure that their respective components accurately monitor and report information on the extent that users have completed the Cyber Awareness Challenge training—as well as have access revoked for not completing the training—the components may be unable to ensure that DOD users are trained in the steps needed to address cybersecurity threats to the department. DARPA Has Not Required its Users to Take DOD’s Cyber Awareness Challenge Training One of the 16 selected components in our review—DARPA—did not require its users to take DOD’s Cyber Awareness Challenge training, according to DARPA officials, even though it is required by policy. Instead, DARPA has required its users to take cybersecurity training that it developed. While DARPA developed its own training program, we found that this training program did not address all of the requirements identified in a DOD staff manual or the cybersecurity training topics identified by the Cyber Workforce Advisory Group. DARPA officials recognized that its cybersecurity training was not equivalent to the DOD’s Cyber Awareness Challenge training program, which according to DOD CIO officials, addressed the training topics identified by the DOD Cyber Workforce Advisory Group. They explained that DARPA designs its courses to be concise to allow their personnel to focus on accomplishing the agency’s mission and that users can obtain additional information from references cited in the course materials. In addition, these officials told us that they were unaware their users were required to take the Cyber Awareness Challenge training that DISA developed. The DOD CIO is responsible for overseeing the implementation of the Cyber Awareness Challenge training, according to DOD CIO officials. However, DOD CIO officials told us they were not aware that DARPA has not required its users to take the Cyber Awareness Challenge training that DISA developed and they did not assess the extent that components complied with the requirement for components to use the DISA- developed training. If the DOD CIO does not ensure that DARPA and any other DOD components take the Cyber Awareness Challenge training developed by DISA, users in these components may take actions that lead to or enable exploitations of DOD information systems. DOD Does Not Know the Extent that Cyber Hygiene Practices Have Been Implemented to Protect DOD Networks from Key Cyberattack Techniques DOD identified key techniques that adversaries use most frequently and that pose significant risk to the department’s networks and identified cyber hygiene practices to protect the department’s networks from these techniques. Specifically, JFHQ-DODIN has identified the cyberattack techniques that the agency observes adversaries using most frequently to attack the department’s networks. In addition, the National Security Agency, the Defense Information Systems Agency, and the DOD CIO identified 177 cyberattack techniques and prioritized the techniques according to the level of risk each posed to the department’s networks. The agencies prioritized the techniques using various criteria including the prevalence of the technique and whether the department could detect the use of the technique. Further, the department has established cyber hygiene practices to mitigate most of the frequently occurring techniques and those that the department identified as the highest priority, according to DISA and JFHQ-DODIN officials. However, the department does not know the extent that these cyber hygiene practices have been implemented across the department to protect its networks from these key cyberattack techniques. Components have visibility of the extent that they have implemented practices within their component, according to DOD officials. For example, DISA officials told us that they require their component to implement cyber hygiene practices to protect DOD networks from key cyberattack techniques and are able to determine the extent that those practices are implemented within DISA. However, no component or office within the department has complete visibility of the department’s efforts to implement these protective practices across the department, according to DOD officials. FISMA states that agency heads shall be responsible for, among other things, providing information security protections commensurate with the risk and magnitude of harm that could result from unauthorized access, use, disclosure, disruption, modification or destruction of such information systems. Executive Order 13800 states that agency heads will be held accountable for managing cybersecurity risk to their enterprises. The order requires agency heads to use the NIST’s Framework for Improving Critical Infrastructure Cybersecurity (commonly referred to as the NIST Cybersecurity Framework) to manage their agency’s cybersecurity risk. The Cybersecurity Framework calls for senior executives to monitor cybersecurity risk in the same context as financial risk and other organizational risks. In doing so, the Cybersecurity Framework calls for agencies to, among other things, assess cybersecurity risks (including threats), prioritize cybersecurity outcomes and requirements based on that risk, and establish processes to assess and monitor the implementation of the cybersecurity outcomes and requirements. The department does not know the extent that practices to protect DOD networks from key cyberattack techniques have been implemented across the department in part because no DOD component monitors the extent to which such practices are implemented, according to DOD officials. Officials from JFHQ-DODIN told us that they are able to detect when adversaries are using techniques to attack the department’s networks. However, detecting an attack after it has commenced may still enable an adversary to inflict harm on the department’s networks and the information therein. If the Secretary of Defense does not direct a component to monitor the extent to which practices to protect its network are implemented, gaps in protection could go undetected. These gaps can jeopardize military operations, performance of critical functions, and protection of information within DOD systems and networks. Senior DOD Leaders Have Not Received Information on Two Cyber Hygiene Initiatives or Cyber Hygiene Practices DOD requirements and best practices recognize that senior DOD leaders need key information to make risk-based decisions. Specifically, the DC3I memorandum requires the commander of U.S. Cyber Command, in coordination with the DOD CIO, to provide quarterly updates to the Deputy Secretary of Defense and the Vice Chairman of the Joint Chiefs of Staff on the progress in implementing the DC3I. Further, the CDIP memorandum requires the department to report progress implementing the CDIP tasks. In addition, NIST Special Publication 800-50, Building an Information Technology Security Awareness and Training Program, states that the CIO should ensure that agency heads and senior managers are informed of the progress of the security awareness and training program’s implementation. Senior DOD leaders receive two recurring reports on the department’s cybersecurity posture that include information on one cyber hygiene initiative. Specifically, the Cyber Hygiene Scorecard (Scorecard) is a report measuring compliance with DOD cybersecurity policies, procedures, standards and guidelines. The Scorecard provides information to the Secretary of Defense, the Deputy Secretary of Defense, and DOD component heads about the extent that the 10 CDIP tasks overseen by the DOD CIO are implemented. In addition, the Cyber Landscape Report is a quarterly report that includes information highlighting cybersecurity risks to DOD networks, U.S. critical infrastructure, DOD weapon systems, the cloud, and DOD’s cyber workforce. Based on our analysis, the Cyber Landscape Report also includes some information from the CDIP initiative. However, senior DOD leaders have not received information on the other two cyber hygiene initiatives or cyber hygiene practices to protect DOD networks from key cyberattack techniques in these recurring reports. Specifically, neither the Scorecard nor the Cyber Landscape Report includes information on the extent that the DC3I and the Cyber Awareness Challenge training have been implemented. In addition, neither of these recurring reports identifies key cyberattack techniques the department faces nor do they include information on the extent that the department has implemented cyber hygiene practices to protect DOD networks from these techniques, according to DOD officials. Senior DOD leaders are not receiving complete information in part because the DOD CIO has not assessed the extent that the missing information could improve senior leaders’ ability to make risk-based decisions. According to DOD officials, DOD CIO has not revised the recurring reports or developed a new report in response to such an assessment. DOD CIO officials told us that they do not believe that senior DOD leaders need to be made aware of all cyber hygiene topics we describe here—and in some cases that information could be managed at lower echelons within the organization. While some cyber hygiene information could be managed by lower-echelon DOD leaders, the DC3I memorandum requires information about its progress to be reported to senior leaders. The NIST guidance calls for similar reporting. Additionally, a DOD official told us that the department uses the Cyber Hygiene Scorecard to respond to the department’s requirement to annually report progress on implementing its information security program to the Office of Management and Budget under FISMA. Further, these officials told us that the Scorecard was not originally designed to include the information from our analysis such as information about the DC3I. They told us that this Scorecard was designed to provide an oversight tool to monitor the progress components made implementing the CDIP tasks overseen by DOD CIO. However, while DOD uses the Scorecard with the intention to meet the FISMA annual reporting requirement, the Scorecard does not provide information about 53 of the 69 risk-management FISMA indicators that are called for by the Office of Management and Budget. In addition, DOD CIO is not precluded from revising the Scorecard to include additional information. As one of two recurring reports sent to senior DOD leaders, the Cyber Hygiene Scorecard may be well positioned to provide additional information reflecting progress made implementing cyber hygiene initiatives and associated cybersecurity practices, including the DC3I and efforts to protect DOD networks from the key cyberattack techniques used by adversaries. Further, a DOD CIO official told us that its officials did not include information about the DC3I in the Cyber Hygiene Scorecard because they believed it would be challenging to measure the culture-related objectives in the DC3I. While the DC3I’s culture-related objectives may be difficult to measure, the extent to which assigned DOD components have taken actions to implement the DC3I tasks is measurable. If the DOD CIO does not assess the extent that the missing information could improve senior leaders’ ability to make risk-based decisions—and does not follow up to revise the recurring reports or develop a new report—senior DOD leaders will not be positioned well to make effective and risk-based decisions and manage cybersecurity risks. Conclusions As DOD has become increasingly reliant on IT systems and networks to conduct military operations and perform critical functions, risks to these systems and networks have also increased because IT systems are often riddled with cybersecurity vulnerabilities—both known and unknown. These vulnerabilities and human error can facilitate security incidents and cyberattacks that disrupt critical operations; lead to inappropriate access to and disclosure, modification, or destruction of sensitive information; and threaten national security. DOD has taken actions to address cyber vulnerabilities in the department through establishing the DC3I, the CDIP, the Cyber Awareness Challenge training, and cyber hygiene practices to protect its networks from cyberattack techniques that adversaries may use. However, the department faces challenges implementing the DC3I and CDIP because the DOD CIO has not taken appropriate steps to ensure that the DC3I tasks are implemented, DOD components have not developed plans with scheduled completion dates to implement the remaining four CDIP tasks overseen by DOD CIO, and the Deputy Secretary of Defense has not identified a DOD component to oversee the implementation of the seven other CDIP tasks and report on progress implementing them. By improving oversight through implementing the DC3I tasks, DOD components developing plans with scheduled completion dates to implement the remaining four CDIP tasks that the DOD CIO oversees, and identifying a DOD component to oversee implementation of the seven other CDIP tasks and report on progress implementing them, the department can be better positioned to safeguard DOD’s network by removing preventable, well-known vulnerabilities. If the components address gaps we identified in the extent that they account for whether their users completed the 2018 Cyber Awareness Challenge training will help the department gain assurance that its workforce is prepared to identify and appropriately respond to cybersecurity risks. Additionally, by ensuring that DARPA, and any other similar DOD components, requires its users to take the required DISA- developed training, DOD users may be more aware of threats and vulnerabilities to the department’s networks and may be better equipped to prevent exploitations of DOD information systems. The department does not know the extent that cyber hygiene practices have been implemented to protect DOD networks from key cyberattack techniques. By directing a component to monitor the extent to which practices to protect DOD’s networks are implemented, DOD would be better positioned to ensure that its networks are secure and decrease potential risks to military operations, critical functions, and information assurance. Finally, the lack of information on two cyber hygiene initiatives and cyber hygiene practices in recurring reports provided to senior DOD leaders is concerning because of the need for those leaders to have a complete picture of the state of the department’s cybersecurity posture. By directing DOD CIO to assess the extent that the missing information could improve senior leaders’ ability to make risk-based decisions and revise the recurring reports or develop a new report, DOD leaders would then be better positioned to make effective decisions and manage cybersecurity risks. Recommendations for Executive Action We are making seven recommendations to the Department of Defense. The Secretary of Defense should ensure that the DOD CIO takes appropriate steps to ensure implementation of the DC3I tasks. (Recommendation 1) The Secretary of Defense should ensure that DOD components develop plans with scheduled completion dates to implement the four remaining CDIP tasks overseen by DOD CIO. (Recommendation 2) The Secretary of Defense should ensure that the Deputy Secretary of Defense identifies a DOD component to oversee the implementation of the seven CDIP tasks not overseen by DOD CIO and report on progress implementing them. (Recommendation 3) The Secretary of Defense should ensure that DOD components accurately monitor and report information on the extent that users have completed the Cyber Awareness Challenge training as well as the number of users whose access to the network was revoked because they have not completed the training. (Recommendation 4) The Secretary of Defense should ensure that the DOD CIO ensures all DOD components, including DARPA, require their users to take the Cyber Awareness Challenge training developed by DISA. (Recommendation 5) The Secretary of Defense should direct a component to monitor the extent to which practices are implemented to protect the department’s network from key cyberattack techniques. (Recommendation 6) The Secretary of Defense should ensure that the DOD CIO assesses the extent to which senior leaders’ have more complete information to make risk-based decisions—and revise the recurring reports (or develop a new report) accordingly. Such information could include DOD’s progress on implementing (a) cybersecurity practices identified in cyber hygiene initiatives and (b) cyber hygiene practices to protect DOD networks from key cyberattack techniques. (Recommendation 7) Agency Comments and Our Evaluation We provided a draft of this report to the department for review and comment. In written comments, reprinted in appendix III, DOD concurred with one of our seven recommendations, partially concurred with four, and did not concur with the remaining two. DOD separately provided technical comments, which we incorporated as appropriate. The department concurred with our recommendation (Recommendation 5) that the DOD CIO ensure all components, including DARPA, require their users to take the Cyber Awareness Challenge training developed by DISA. The department partially concurred with four of our recommendations. The department partially concurred with our recommendation that the DOD CIO take steps to ensure that DC3I tasks are implemented. The department concurred that tasks two and six in the DC3I should be implemented and stated that these two tasks are the only two still actively being pursued. The department stated that the remaining five tasks were either implemented or have been overcome by events. However, the department did not provide evidence that the other five tasks were implemented or demonstrate how these tasks were overcome by events during the audit or in its comments on a draft or our report. In addition, JFHQ-DODIN officials stated that the principles outlined in the DC3I are important for the department to achieve its cybersecurity goals. For example, several of these five tasks were focused on improving cybersecurity awareness and training at all levels within the department. Therefore, it is unclear why DOD believes that these cyber hygiene tasks have been overcome by events; DOD did not elaborate. Implementing all seven DC3I tasks that have not been implemented can better position the department to achieve the goals of the DC3I to (1) mitigate the risks of compromising the confidentiality, integrity, and availability of mission- critical information as a result of human error by users on the department’s networks; and (2) transform DOD cybersecurity culture by enabling and reshaping leaders, cyber providers, personnel who perform cyberspace operations, and general users to improve individual human performance and accountability on DOD’s network. The department partially concurred with our recommendation that DOD components develop plans with scheduled completion dates to implement the four remaining CDIP tasks overseen by DOD CIO. DOD provided classified comments on this recommendation. Thus, we cannot respond in detail to their comments. We plan to respond to DOD’s comments in a classified version of this report, which we plan to issue later in 2020. Developing plans that would facilitate implementation of these four CDIP tasks would better position DOD to meet the Deputy Secretary of Defense’s goal of removing preventable vulnerabilities from DOD’s network that could allow adversaries to compromise information and information systems. The department partially concurred with our recommendation that components accurately monitor and report information on the extent that users have completed the Cyber Awareness Challenge training and information on the number who have been denied access to the network for not completing the training. The department concurred that it should ensure components accurately report the number of users who have completed the training. However, it did not concur that components should report the number of users who have been denied access to the network because they have not completed the training. The department stated that a statistic showing this information would not be meaningful and would be burdensome to collect. We disagree that such a measure would not be meaningful because it would help leaders hold network users accountable and better position DOD components to comply with DOD policy. Recognizing that trained and aware users are the first and most vital line of defense, DOD components should document and maintain the status of awareness compliance for each user. In its current approach, DOD is unable to confirm whether all of its network users have completed the cybersecurity training, as required. For example, as stated above, 8 of the 16 (50 percent) of the DOD components we requested training information from told us they did not monitor whether users who did not complete the annual training were blocked from DOD networks and systems. If the Secretary of Defense does not ensure that DOD components accurately monitor and report information on the number of users whose access to the network was revoked because they have not completed the training, the components will jeopardize the department’s ability to ensure that DOD users are trained in steps needed to address cybersecurity threats to the department. In responding to this recommendation, DOD also stated that the Navy indicated that it provided us data on the number of its users who completed the training and the total number of its users. The department stated that we could compute the number of Navy users who had not completed the training by computing the difference between the total number of users and the number of users who completed the training. We updated our assessment of the Navy in our report. We now indicate that the Navy was able to identify the number of users who had completed the training in fiscal year 2018. However, we disagree that the difference between the total number of users and the number of users who completed the training equates to the number of users who did not take the training. DOD CIO officials told us during our audit that computing the number of users using this method is not reliable because there are multiple explanations for the difference between the total number of users and the number of users who took the training. For example, officials told us that some military users leave the service before they complete the annually required training and are included in the service’s total number of users but are not included in the number of users who took the training. The department partially concurred with our recommendation that the CIO assess the extent to which senior leaders have information to make risk-based decisions and then revise accordingly the recurring reports. The department stated that it will revise the recurring reports by merging the Cyber Hygiene Scorecard and a scorecard related to the Cyber Landscape to assist senior leaders’ decision-making. However, the department stated that it did not fully agree with the recommendation because, as written in the draft report, the department believed the recommendation was stating that DOD should have “complete” information. Based on DOD’s comment, we clarified the recommendation to state that senior DOD leaders should have more complete information to make risk-based decisions. We believe this is critical because the cyber hygiene tasks and practices highlighted in the report were identified by the most senior leaders in the department—including the Secretary of Defense, Deputy Secretary of Defense, and Chairman of the Joint Chiefs of Staff—as being the tasks and practices that were essential to protecting DOD information, systems, and networks from the most common and pervasive cybersecurity risks faced by the department. The department also stated that risk is a function of multiple variables, that are continually evolving. We agree that risk is a function of multiple variables—including threats and vulnerabilities—that are continually evolving. As such, we think that information, such as the extent to which cyber hygiene practices have been implemented across the department to protect its networks from evolving key cyberattack techniques, will position senior leaders to make more effective and risk-based decisions and manage cybersecurity risks. The department did not concur with two recommendations. In particular: DOD did not concur with our recommendation that the Deputy Secretary of Defense identify a component to oversee the implementation of the seven CDIP tasks that the CIO does not oversee and report on progress implementing those tasks. The department stated that, since the CDIP’s approval in 2015, the department has issued new or updated versions of a number of cyber- related strategies, including the DOD Cyber Strategy. The department also stated that the Deputy Secretary of Defense directed DOD to develop a classified top 10 list of cybersecurity critical-risk areas and an associated scorecard that provides the Deputy Secretary a quarterly assessment of the department’s progress in reducing the risk for each of these areas. The department also stated that the cyber landscape is constantly evolving with changes in technology, threats, and vulnerabilities, and that this requires DOD to reassess its cybersecurity priorities. The department stated that implementing our recommendation would override these recent efforts and focus the department’s efforts on monitoring areas with lower levels of risk. We disagree that implementing our recommendation would override the department’s recent efforts. In fact, implementing the seven tasks would align with one of the 2018 DOD Cyber Strategy’s objectives to “secure DOD information and systems against malicious cyber activity.” We agree with DOD that the department should reassess cybersecurity priorities in light of changes in technologies, threats, and vulnerabilities. However, DOD did not provide evidence during the audit or in responding to the draft report that the department had assessed the CDIP tasks required by the Deputy Secretary of Defense in 2015. Specifically, the department has not determined whether they remain valid or aligned with the current cybersecurity threat environment, that the vulnerabilities associated with these seven tasks were mitigated or addressed, and that a senior-level DOD official provided written direction canceling the Deputy Secretary of Defense’ CDIP taskings. More importantly, our analysis of the seven tasks that DOD is not currently tracking progress on are consistent with basic cybersecurity standards established by DOD guidance and NIST— and which DOD is planning to apply to certain defense contractors in future contract awards to protect DOD information that is stored or transits through their networks as a part of the Cybersecurity Maturity Model Certification framework. For example, Task 14 requires commanders and supervisors to ensure physical security of their network infrastructure devices. This task aligns with general NIST guidance regarding physical access protections. NIST guidance states that organizations should manage and protect physical access to assets and facilities where information systems reside. Task 15 requires commanders and supervisors to report all commercially provided internet connections to DOD’s unclassified network. This task aligns with general NIST guidance regarding the use of external networks. NIST guidance states that organizations should catalogue all external information systems. Task 16 requires commanders and supervisors to ensure alignment to a Computer Network Defense Service Provider. This task is consistent with DOD requirements on cybersecurity activities to protect the DOD Information Network. The requirements state that DOD IT must be aligned to DOD network operations and security centers, which provide any required cybersecurity services. Task 17 requires commanders and supervisors with Computer Network Defense Service Provider responsibility to ensure the cyber incident response plan(s) are properly exercised and documented. This task aligns with general NIST guidance regarding incident response. NIST guidance states that organizations should provide incident response handling training and implement incident handling capabilities, as well as a process to ensure that response processes and procedures are executed, and maintained ensuring response to detected cybersecurity incidents. If the Deputy Secretary of Defense does not implement this recommendation, the department will have less assurance that cybersecurity vulnerabilities are being addressed in a timely manner and systems are being securely configured. The department did not concur with our recommendation that a component monitor the extent of implementation of practices to protect the department's network from key cyberattack techniques. The department determined that the information in its response to this recommendation included sensitive information. Therefore, we are redacting the department’s response to this recommendation from DOD’s written comments that we are reprinting in Appendix III. However, we still believe the recommendation is valid. As stated in our report, no component or office within the department has complete visibility of the department’s efforts to implement these protective practices across the department, according to DOD officials. Taking action to implement the intent of this recommendation would help address that gap. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; DOD’s Chief Information Officer; the Secretaries of the Army, Navy, and Air Force; the Commandant of the Marine Corps; the Chairman of the Joint Chiefs of Staff; the Commanding Generals of U.S. Strategic Command, U.S. European Command, U.S. Southern Command, and U.S. Cyber Command; and the Directors of DISA, the National Security Agency, DARPA, the Defense Commissary Agency, the Defense Contract Management Agency, the Defense Finance and Accounting Service, the Defense Media Activity, and the Defense Technology Security Administration. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact us: Joseph Kirschbaum at (202) 512-9971 or kirschbaumj@gao.gov, or Nick Marinos at (202) 512-9342 or marinosn@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Scope and Methodology For the purposes of this review, we adapted a definition of cyber hygiene developed by Carnegie Mellon University’s Software Engineering Institute. The institute defines cyber hygiene as a set of practices for managing the most common and pervasive cybersecurity risks faced by organizations today. We discussed the definition of cyber hygiene with Department of Defense (DOD) officials to identify DOD initiatives aimed at improving cyber hygiene. DOD officials identified the Cyber Discipline Implementation Plan (CDIP) as DOD’s main cyber hygiene initiative aimed at implementing technical improvements to DOD networks. In addition, DOD officials identified the DOD Cybersecurity Culture and Compliance Initiative (DC3I) and DOD’s Cyber Awareness Challenge training as two initiatives designed to establish best practices for DOD network users including military personnel, civilians, and contractors. To determine the extent to which DOD has implemented its three cyber hygiene initiatives and practices to protect its networks from cyberattack techniques that adversaries may use, we conducted analyses for each initiative. To determine the extent to which DOD implemented the DC3I, we reviewed the 11 tasks that require components to take actions that are specified in the DC3I memorandum that the Secretary of Defense and the Chairman of the Joint Chiefs of Staff issued in September 2015. We analyzed documentation we collected from U.S. Cyber Command, the office of the DOD Chief Information Officer (CIO), and the Joint Staff that demonstrate actions these components took in response to each of the 11 DC3I tasks and determined the extent to which each task was implemented. To determine the extent to which DOD implemented the CDIP, we reviewed the 17 tasks that require components to take actions specified in a memorandum that the Deputy Secretary of Defense issued in October 2015. We interviewed officials from the office of the DOD CIO about the extent to which DOD components implemented the CDIP tasks, the reasons the components had not fully implemented all of the tasks, and to determine the extent that the DOD CIO knew if DOD components had implemented the remaining seven CDIP tasks. We also reviewed documentation on the extent that DOD components implemented the tasks overseen by DOD CIO by analyzing data included in the Cyber Hygiene Scorecard. We also assessed the reliability of the data in the Scorecard by reviewing the methods the DOD CIO uses to ensure the data reported to the Scorecard are accurate and interviewing cognizant officials. We determined the data are sufficiently reliable for our purposes. To determine the extent that DOD implemented the Cyber Awareness Challenge training, we analyzed the extent that the DOD CIO and the DOD component CIOs ensured that personnel they oversee completed the fiscal year 2018 Cyber Awareness Challenge training. To carry out this analysis, we collected and analyzed information from the DOD CIO and a sample of 16 DOD components. We selected this sample of components by identifying important groupings of components and selecting from these groups to ensure that our sample represented a significant number of DOD personnel as well as a variety of types of components. These groups were: the military services and the Joint Staff, combatant commands, agencies and field activities, and the Office of the Secretary of Defense. Military services and Joint Staff. We selected the four military services because they are the components within DOD with the most personnel. We also included the Joint Staff because this component reflects the strategic perspective for the department as a whole. Combatant commands. We randomly selected three combatant commands from the group of 11 combatant commands—including geographic (e.g., U.S. Central Command) and functional (e.g., U.S. Transportation Command). We selected three of the 11 combatant commands to include the perspectives of multiple combatant commands in our sample. We selected these combatant commands: U.S. European Command, U.S. Southern Command, and U.S. Strategic Command. Agencies and Field Activities. We assembled a list of non-service and non-combatant command components organized by the types of functions that each component performs. We then organized these components by functional groupings. Specifically, we created functional groupings for the components that fall under each of the six Under Secretaries of Defense because these officials oversee components with similar functions. We also included a seventh functional group of miscellaneous components that are not overseen by any of the Under Secretaries of Defense. We then accounted for the size of the components on this list by identifying the larger agencies and the smaller field activities. From this list, we randomly selected one component from each of the seven groups. In doing so, we selected five of the 20 agencies and two of the eight field activities. We chose this ratio of agencies to field activities to reflect the ratio of agencies to field activities in DOD. That is, DOD agencies are about 71 percent of DOD’s non-service and non-combatant command components and about 71 percent of our sample. We selected these five agencies: Defense Advanced Research Projects Agency, Defense Commissary Agency, Defense Contract Management Agency, Defense Finance and Accounting Service and the National Security Agency. We selected these two field activities: Defense Media Activity and Defense Technology Security Administration. The Office of the Secretary of Defense. We also randomly selected one of 16 components from the Office of the Secretary of Defense. This group included the offices that support the six Under Secretaries we discussed above such as the Under Secretary of Defense for Policy as well as other offices including the Office of Cost Assessment and Program Evaluation and the Office of the DOD Chief Management Officer. We selected one component from this group to ensure we reflected the perspective of components at the DOD headquarters level. We selected the Office of the DOD Chief Information Officer. To collect information from this sample of 16 components, we developed a standard set of questions we provided to each component on topics related to both objectives. In particular, we asked DOD components to provide the number of network users that completed the fiscal year 2018 Cyber Awareness Challenge training, the number of network users that did not complete the training, and the number of network users who had their access to the network removed as a result of not taking the training. We also asked other questions including a question about the information that senior leaders are provided regarding cyber hygiene practices. Each component provided written responses to our questions and in some cases provided documentation corroborating their responses. We conducted a content analysis of the components’ responses and the documentation they provided. To complete this content analysis, two analysts assessed the components’ responses, compared and discussed their separate analyses, and reached agreement on their conclusions about their analysis. We compared the information we collected from these components to a provision in NIST Special Publication 800-50, Building an Information Technology Security Awareness and Training Program, which advises agencies to capture training compliance data at an agency level. Further, we interviewed officials from Defense Information Systems Agency and JFHQ-DODIN to determine the extent to which DOD had implemented cyber hygiene practices that the department has implemented to protect its networks from key cyberattack techniques that adversaries may use. To determine the extent to which senior DOD leaders receive information on the department’s efforts to address cyber hygiene initiatives and practices, we first defined senior DOD leaders as the Secretary of Defense, the Deputy Secretary of Defense, and DOD component heads. To identify the information that could be included in reports that senior DOD leaders receive about DOD efforts to mitigate cyberattack techniques, we identified techniques that are most likely to be used by adversaries against DOD’s networks or that could cause severe adverse effects on DOD’s operations. In particular, we identified 22 key cyberattack techniques from two sources: Joint Force Headquarters DOD Information Network (JFHQ-DODIN) provided a list of eight cyberattack techniques that the agency observed adversaries using most frequently in January 2019. JFHQ- DODIN officials also determined that these data are representative of the cyberattack techniques that they have recently observed. We identified 14 cyberattack techniques by analyzing a review conducted in 2016 by the National Security Agency, the Defense Information Systems Agency, and the DOD CIO. In the review, the agencies identified 177 cyberattack techniques and ranked the techniques according to the level of risk the techniques posed to DOD’s unclassified and Secret-level networks. The agencies used a number of different criteria to rank these techniques, including the prevalence of the technique, visibility of the technique, and whether other, closely associated alternative techniques exist. We selected the 14 cyberattack techniques that the agencies identified as the highest priority. Next, we analyzed the contents of two recurring reports that senior leaders receive on the department’s cybersecurity posture: the Cyber Hygiene Scorecard and the Cyber Landscape Report. In particular, we analyzed these reports to determine if they included information about DOD’s implementation of key cyber hygiene initiatives that we describe in the first objective. We also analyzed the reports to determine if they included the lists of key cyberattack techniques and information about the extent that the department had implemented cyber hygiene practices to protect DOD networks from these cyberattack techniques. We conducted this performance audit from January 2019 to April 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: DOD Cybersecurity Culture and Compliance Initiative Tasks The Department of Defense (DOD) Chief Information Officer (CIO) and other relevant DOD components implemented four of the 11 tasks required in the Cybersecurity Culture and Compliance Initiative (DC3I) and the remaining seven tasks were not fully implemented as of October 2019. Table 2 provides additional information of actions taken to address and implement all 11 DC3I tasks. Appendix III: Comments from the Department of Defense Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contacts Staff Acknowledgments In addition to the individuals named above, Tommy Baril (Assistant Director), Kaelin Kuhn (Assistant Director), James P. Klein (Analyst-in- Charge), Tracy Barnes, Amy Bush, Peter Casey, Amie Lesser, Carlo Mozo, Richard Powelson, Michael Silver, Andrew Stavisky, and Walter Vance made significant contributions to this report. Kiana Beshir, Chris Businsky, Shaun Byrnes, and Richard Sayoc also contributed to the report.

DOD has become increasingly reliant on information technology (IT) and risks have increased as cybersecurity threats evolve. Cybersecurity experts estimate that 90 percent of cyberattacks could be defeated by implementing basic cyber hygiene and sharing best practices, according to DOD's Principal Cyber Advisor. Senate Report 115-262 includes a provision that GAO review DOD cyber hygiene. This report evaluates the extent to which 1) DOD has implemented key cyber hygiene initiatives and practices to protect DOD networks from key cyberattack techniques and 2) senior DOD leaders received information on the department's efforts to address these initiatives and cyber hygiene practices. GAO reviewed documentation of DOD actions taken to implement three cyber hygiene initiatives and reviewed recurring reports provided to senior DOD leaders. The Department of Defense (DOD) has not fully implemented three of its key initiatives and practices aimed at improving cyber hygiene. Carnegie-Mellon University defines cyber hygiene as a set of practices for managing the most common and pervasive cybersecurity risks. In discussions with GAO, DOD officials identified three department-wide cyber hygiene initiatives: the 2015 DOD Cybersecurity Culture and Compliance Initiative, the 2015 DOD Cyber Discipline Implementation Plan, and DOD's Cyber Awareness Challenge training. The Culture and Compliance Initiative set forth 11 overall tasks expected to be completed in fiscal year 2016. It includes cyber education and training, integration of cyber into operational exercises, and needed recommendations on changes to cyber capabilities and authorities. However, seven of these tasks have not been fully implemented. The Cyber Discipline plan has 17 tasks focused on removing preventable vulnerabilities from DOD's networks that could otherwise enable adversaries to compromise information and systems. Of these 17, the DOD Chief Information Officer is responsible for overseeing implementation of 10 tasks. While the Deputy Secretary set a goal of achieving 90 percent implementation of the 10 CIO tasks by the end of fiscal year 2018, four of the tasks have not been implemented. Further, the completion of the other seven tasks was unknown because no DOD entity has been designated to report on the progress. The Cyber Awareness training is intended to help the DOD workforce maintain awareness of known and emerging cyber threats, and reinforce best practices to keep information and systems secure. However, selected components in the department do not know the extent to which users of its systems have completed this required training. GAO's review of 16 selected components identified six without information on system users that had not completed the required training, and eight without information on users whose network access had been revoked for not completing training. Beyond the initiatives above, DOD has (1) developed lists of the techniques that adversaries use most frequently and pose significant risk to the department, and (2) identified practices to protect DOD networks and systems against these techniques. However, the department does not know the extent to which these practices have been implemented. The absence of this knowledge is due in part to no DOD component monitoring implementation, according to DOD officials. Overall, until DOD completes its cyber hygiene initiatives and ensures that cyber practices are implemented, the department will face an enhanced risk of successful attack. While two recurring reports have provided updates to senior DOD leaders on cyber information on the Cyber Discipline plan implementation, department leadership has not regularly received information on the other two initiatives and on the extent to which cyber hygiene practices are being implemented. Such information would better position leaders to be aware of the cyber risks facing DOD and make more effective decisions to manage such risks.

CRS_R46211

Introduction The National Security Space Launch (NSSL) program aims to acquire launch services and ensure continued access to space for critical national security missions. The U.S. Air Force implemented the original program in 1995—Evolved Expendable Launch Vehicle (EELV)—and awarded four companies contracts to design a cost-effective launch vehicle system. The DOD acquisition strategy was to select one company and ensure that NSS launches were affordable and reliable. The EELV effort was prompted by significant increases in launch costs, procurement concerns, and the lack of competition among U.S. companies. A major challenge and long-standing undercurrent of concern over U.S. reliance on a Russian rocket engine (RD-180), used on one of the primary national security rockets for critical national security space launches, was exacerbated by the Russian backlash over the 2014 U.S. sanctions against its actions in Ukraine. Moreover, significant overall NSSL program cost increases and unresolved questions over individual launch costs, along with legal challenges to the Air Force contract awards by space launch companies, prompted legislative action. In the John S. McCain National Defense Authorization Act (NDAA) for FY2019, Congress renamed the EELV to the NSSL program to reflect a wider mission that would consider both reusable and expendable launch vehicles. The origins of the NSSL program date back to 1995, after years of concerns within the Air Force and space launch community over increasing cost and decreasing confidence in the continued reliability of national access to space. The purpose of EELV was to provide the United States affordable, reliable, and assured access to space with two families of space launch vehicles. Initially only two companies were in competition: Boeing produced the Delta IV launch vehicle, and Lockheed Martin developed the Atlas V. Overall, the program provided critical space lift capability to support DOD and intelligence community satellites, together known as National Security Space (NSS) missions. The EELV program evolved modestly in response to changing circumstances, and the Air Force approved an EELV acquisition strategy in November 2011, further revising it in 2013. That strategy was designed to (1) sustain two major independent rocket-powered launch vehicle families to reduce the chance of launch interruptions and to ensure reliable access to space; (2) license and stockpile the Russian-made RD-180 heavy-lift rocket engine, a critical component of the Atlas V; (3) pursue a block-buy commitment to a number of launches through the end of the decade to reduce launch costs; and (4) increase competition to reduce overall launch costs. The Air Force and others viewed the overall EELV acquisition strategy as having successfully reduced launch costs while demonstrating highly reliable access to space for DOD and the intelligence community. Others in Congress and elsewhere, however, argued that the program remained far too costly and was not as competitive as it should be. The NSSL program is managed by the Launch Enterprise Systems Directorate of the Space and Missile Systems Center, Los Angeles Air Force Base (El Segundo, CA). The NSSL program consists of four launch vehicles: Atlas V and Delta IV Heavy (both provided by United Launch Alliance [ULA] of Denver, CO) and Falcon 9 and Falcon Heavy (both provided by Space Exploration Technologies Corporation [SpaceX] of Hawthorne, CA). NSS launches support the Air Force, Navy, and National Reconnaissance Office (NRO). More specifically, the Atlas V has launched commercial, civil, and NSS satellites into orbit, including commercial and military communications satellites, lunar and other planetary orbiters and probes, earth observation, military research, and weather satellites, missile warning and NRO reconnaissance satellites, a tracking and data relay satellite, and the X-37B space plane (a military orbital test vehicle). The Delta IV has launched commercial and military communications and weather satellites, and missile warning and NRO satellites. The Atlas V and Delta IV Heavy launch vehicles are produced by ULA, which was formed in 2006 as a joint venture of The Boeing Company (of Chicago, IL) and Lockheed Martin (of Bethesda, MD). In addition to the launch vehicles themselves, the NSSL program consists of an extensive array of support capabilities and infrastructure to permit safe operations of U.S. launch ranges. ULA operates five space launch complexes, two at Cape Canaveral Air Force Station, FL (Space Launch Complex-37 and Space Launch Complex-41), and three at Vandenberg Air Force Base, CA (Space Launch Complex-2, Space Launch Complex-3F, and Space Launch Complex-6). A large number of key suppliers for ULA are spread throughout 46 states. DOD certified SpaceX to compete for NSS launches in 2015. The Falcon 9 flew its first NSSL mission on December 23, 2018, which delivered the Global Positioning System (GPS) III to orbit. SpaceX developed a more capable launch capability in the Falcon Heavy, which DOD certified in June 2018 and later awarded NSS missions under Phase 1A of the NSSL program. SpaceX maintains three launch sites, one at Cape Canaveral Air Force Station, FL (Space Launch Complex 40); one at Kennedy Space Center (Launch Complex 39A); and one at Vandenberg Air Force Base, CA (Space Launch Complex 4E). On October 10, 2018, the Air Force awarded three Launch Service Agreement (LSA) Other Transaction Authority (OTA) agreements to space launch companies. The LSA OTA agreements are "public-private partnerships [that] leverage industry's commercial launch solutions to ensure those systems meet NSS requirements." They also "facilitate development of three NSSL launch system prototypes and maturing those launch systems prior to selecting two NSS launch service providers for launch service procurements beginning in FY2020." The Air Force released request for proposals (RFP) in May 2019 for Phase 2 of the NSSL program, with plans to award two separate Launch Service Procurement (LSP) contracts in the summer of 2020. The selected companies will be responsible for launching national security satellites through 2027. However, the Air Force acquisition strategy of down-selecting no more than two launch providers may mitigate short-term risk but could have second- and third-order effects for resiliency in the future. Congress may consider whether the strategy's cost-benefit analysis warrants further research. Should no more than two launch providers be chosen for LSP contracts in Phase 2, the companies not selected would lose the LSA funds received from the Air Force and could potentially be faced with (1) the choice of abandoning NSSL development to focus on competing in the commercial launch sector or (2) investing vast company reserves to continue development on its own. Furthermore, DOD investment in only two launch providers could mean fewer options for an increasingly diverse range of national space security missions and possibly limit competition, once again, in the launch market. Evolution of the EELV 1990s-2011 By the early 1990s, the U.S. space industrial base supported the production of a number of launch vehicles (i.e., Titan II, Delta II, Atlas I/II/IIAS, and Titan IV) and their associated infrastructure. Although launch costs were increasing and operational and procurement deficiencies were noted by many decisionmakers, no clear consensus formed over how best to proceed. Congress took the initiative in the National Defense Authorization Act for Fiscal Year 1994 (NDAA; P.L. 103-160 , §213) by directing DOD to develop a Space Launch Modernization Plan (SLMP) that would "establish and clearly define priorities, goals, and milestones regarding modernization of space launch capabilities for the Department of Defense or, if appropriate, for the Government as a whole." The recommendations of the SLMP led DOD to implement the EELV program as the preferred alternative. The primary objective of the EELV program was to reduce costs by 25%. The program also sought to ensure 98% launch vehicle design reliability and to standardize EELV system launch pads and the interface between satellites and their launch vehicles. Congress supported these recommendations through the FY1995 NDAA ( P.L. 103-337 , §211), directing DOD to develop an integrated space launch vehicle strategy to replace or consolidate the then-current fleet of medium and heavy launch vehicles and to devise a plan to develop new or upgraded expendable launch vehicles. Congress recommended spending $30 million for a competitive reusable rocket technology program and $60 million for expendable launch vehicle development and acquisition. The original EELV acquisition strategy, initiated in 1994, called for a competitive down-select to a single launch provider and development of a system that could handle the entire NSS launch manifest. In 1995, the Air Force selected four launch providers for the initial competition: Lockheed Martin, Boeing, McDonnell Douglas, and Alliant Techsystems. After the first round of competition, the Air Force selected Lockheed Martin and McDonnell Douglas to continue. When Boeing acquired McDonnell Douglas in 1997, Boeing took over the contract to develop an EELV. Soon thereafter, however, the Air Force revised the EELV acquisition strategy, concluding that there was now a sufficient space launch market to sustain two EELV providers. Throughout the acquisition process, DOD maintained that competition between Lockheed Martin and Boeing was essential. At the time, the Government Accountability Office (GAO) reported that sufficient growth in the commercial launch business would sustain both companies, a premise that, in turn, would lead to lower launch prices for the government. But "the robust commercial market upon which DOD based its acquisition strategy of maintaining two launch companies [throughout the life-cycle of the program] never materialized, and estimated prices for future contracts, along with total program costs, increased." Retaining two launch providers, however, did provide DOD with some confidence in its ability to maintain "assured access to space." This confidence soon collapsed, when in the late 1990s, the United States suffered six space launch failures in less than a year. These failures included the loss of three national security satellites in 1998-1999, at a cost of over $3 billion. One, a critical national security communications satellite (MILSTAR—Military Strategic and Tactical Relay), was lost on a failed Titan IV launch in 1999. That satellite capability was not replaced until 2010 with an AEHF (Advanced Extremely High Frequency) satellite, which experienced substantial acquisition challenges and frequent changes in both design and requirements. The other two losses were an NRO reconnaissance satellite and a DSP (Defense Support Program) satellite. In addition to the cost, schedule, and operational impacts of these lost missions, including a classified national security loss in coverage with MILSTAR, these failures significantly influenced the transition to the EELV program, which had an initial goal to make national security space launches more affordable and reliable. President Clinton directed a review of these failures and sought recommendations for any necessary changes. The subsequent Broad Area Review (BAR) essentially concluded that the U.S. government should no longer rely on commercial launch suppliers alone to provide confidence and reliability in the EELV program. Instead, the BAR recommended more contractor and government oversight through increasing the number of independent reviews, pursuing performance guarantees from the launch providers, and greater government involvement in the mission assurance process. Although these additional oversight activities eventually proved to significantly increase EELV costs, they also eventually led to notable improvements in launch successes. The early 2000s saw considerable turmoil within the Air Force space community and among the EELV launch service providers due to competition in the shrinking space launch industrial base, cost increases, and the growing need for reliable access to space. During this time, the poor business prospects in the space launch market drove Lockheed and Boeing to consider leaving the market altogether. Therefore, to protect its objective of assured access to space, the U.S. government began to shoulder much of the EELV program's fixed costs. To further protect the United States' ability to deliver NSS satellites into orbit, the George W. Bush Administration conducted a number of internal reviews that culminated in the 2004 National Security Policy Directive (NSPD)-40. This directive established the requirement for "assured access to space" and obliged DOD to fund the annual fixed launch costs for both Lockheed and Boeing until such time as DOD could certify that assured access to space could be maintained without two launch providers. DOD thus revised its EELV acquisition strategy because of the collapse of the commercial launch market and the ongoing erosion of the space industrial base. GAO wrote that "in acknowledging the government's role as the primary EELV customer, the new strategy maintained assured access to space by funding two product lines of launch vehicles." In 2006, The Boeing Company and Lockheed Martin announced plans to consolidate their launch operations into a joint venture—ULA. The companies argued that by combining their resources, infrastructure, expertise, and capabilities, they could assure access to space at lower cost. DOD believed that having two launch vehicle families (Atlas V and Delta IV) under one entity (i.e., ULA) provided significant benefits that outweighed the loss of competition. In October 2006, the Federal Trade Commission granted ULA antitrust clearance allowing the new company to form on December 1, 2006. As a result, "unparalleled EELV mission success" ensued, and the tradeoff over increased costs and reduced competition outside ULA was largely deemed acceptable. 2011-Current Status Since 2006, the Air Force has procured space launches from ULA on a sole-source basis. The former EELV program focused primarily on mission success—not cost control. GAO reported, however, that by 2010 "DOD officials predicted EELV program costs would increase at an unsustainable rate" due to possible instabilities in the launch industrial base and the inefficient buying practice of purchasing one launch vehicle at a time. In 2009, SpaceX, a new entrant to the space launch industrial base, became the first private company to successfully develop a liquid fuel rocket that delivered a commercial satellite to orbit. However, SpaceX was not certified to compete for national security missions until 2005. In response, DOD recognized a need to again reorganize the way it acquired launch services. Additional studies and internal reviews evaluated alternatives to the EELV business model, which in turn led to a new EELV acquisition strategy adopted in November 2011. The new acquisition strategy advocated a steady launch vehicle production rate. This production rate was designed to provide economic benefits to the government through larger buys, or block-buys, of launch vehicles, providing a predictable production schedule to stabilize the space launch industrial base. The new EELV acquisition strategy also announced the government's intent to renew competition in the program. In addition to revising its acquisition strategy, DOD undertook significant efforts to obtain greater insight into ULA program costs in advance of contract negotiations. In May 2011, DOD solicited a Request for Information to prospective launch providers. In March 2012, DOD issued a sole-source solicitation for the block-buy to ULA, and in April 2012, the EELV program incurred a critical Nunn-McCurdy cost breach. In December 2013, DOD followed through on its new EELV strategy, signing a contract modification with ULA committing the government to buy 35 launch vehicle booster cores over a five-year period, along with the associated infrastructure capability to launch them. DOD viewed this contract modification as a significant effort on its part to negotiate better launch prices through improved knowledge of ULA contractor costs. DOD officials expected the new contract to realize significant savings, primarily through stable unit pricing for all launch vehicles. However, some in Congress, and some analysts outside government, strongly disputed the DOD estimates of cost savings. DOD announced that it would add up to 14 additional NSS launches to broader competition. However, in the FY2015 budget request, the Air Force announced that the number of EELV launches open to broader competition through FY2017 would be reduced from 14 to 7. Some Members of Congress, and SpaceX officials, raised questions about how many launches would ultimately be openly competed. Perhaps resulting from turmoil associated with the Nunn-McCurdy cost breach, as well as the perceived instabilities mentioned above, the EELV acquisition strategy proceeded to a three-phased approach: Phase 1 (FY2013-FY2019) would consist of the sole-source block-buy awarded to ULA to procure up to 36 cores and to provide 7 years of NSS launch infrastructure capability. Phase 1A (FY2015-FY2017) emerged as a modification to Phase 1 that would consist of opening up competition for NSS launches to new space launch entrants (such as SpaceX). The Air Force said it could award up to 14 cores to a new entrant over 3 years, if a new entrant became certified. Phase 2 (FY2018-FY2022) envisioned full competition among all launch service providers. The operational requirements, budget, and potential for competition are currently being worked on. Phase 3 (FY2023-FY2030) envisioned full competition with the award of any or all required launch services to any certified provider. The Air Force's strategy appeared to fulfill the mandates to maintain assured access to space and introduce competition into the space launch market. To date, the NSSL program has launched more than 70 successful missions in support of the Air Force, the National Reconnaissance Office, and the U.S. Navy. ULA's Delta IV and Atlas V launch vehicles (which are older than the NNSL program) have performed over 90 consecutive successful missions, whereas SpaceX has performed five successful NSS launches. Factors That Complicated EELV Acquisition Strategy Several interrelated factors created uncertainty over the Air Force's ability to continue with the three-phased EELV acquisition strategy. These included ongoing concerns over program and launch costs, U.S. national security vulnerability from dependence on a Russian component in the EELV program (the RD-180 main engine), legal challenges to the acquisition strategy, and legislation that could change the EELV program. Cost Growth in the EELV In March 2012, the EELV program reported two critical Nunn-McCurdy unit cost breaches, which resulted in a reassessment of the program. The cost of the newly restructured program was estimated by GAO in March 2013 at $69.6 billion. This amount represented an increase of $34.6 billion, or about 100%, over the program's estimated cost of $35 billion from a year earlier. GAO identified several causes for this cost growth, including an extension of the program's life cycle from 2020 to 2030, an increase of the planned number of launch vehicles to be procured from 91 to 150 (an increase of 59%), the inherently unstable nature of demand for launch services, and instability in the industrial base. These causes related to changes in the scope of the program and reflected the industrial-base conditions under which the program was being undertaken; they did not appear to imply poor performance by the Air Force or the industry in executing the program. Even so, the overall increase in estimated program costs complicated the Air Force's challenge in funding the program within available resources without reducing funding for other program priorities. It also contributed to focusing attention on modifying their EELV acquisition strategy. In addition, the costs of individual launches themselves came under renewed scrutiny. SpaceX and others asserted that the launch costs charged by ULA were significantly higher than what SpaceX would charge the U.S. government once it was certified by the Air Force to conduct NSS launches. Part of the challenge in verifying these claims, however, is that much of the detailed cost data are proprietary, not readily comparable, and some are speculative to the extent that there is little empirical data on which those costs are provided. Although the Air Force, GAO, ULA, and SpaceX have provided some launch cost data, it is not apparent the data are directly comparable or are calculated using the same cost model assumptions. In addition, because SpaceX has limited data directly related to NSS launches, its cost figures are not likely based on a long history of actual cost, performance, and reliability. Thus, the issue of reliable and consistent cost data for comparative purposes has been a source of frustration for many in Congress. Reliance on the Russian RD-180 Main Engine The original impetus for licensing the Russian RD-180 as the main engine for the Atlas V launch vehicle grew out of concerns associated with the 1991 collapse of the Soviet Union. At the time, the CIA and others expressed serious concern about the potential export and proliferation of Russian scientific and missile expertise to countries hostile to U.S. interests. These concerns in turn spurred a U.S.-Russian partnership to acquire some of Russia's heavy lift rocket engine capabilities, thus expanding upon existing Cold War civil space cooperation. Initially, this took the form of a license agreement between Energomash NPO and RD Amross (of Palm Beach, FL) for the coproduction of the RD-180 engine as part of the EELV acquisition strategy. This later changed in an acquisition revision to simply purchase and stockpile roughly two years' worth of the engines for the Atlas V, an approach that was then viewed as highly cost-competitive. The existing license agreement for purchasing RD-180 engines extends to 2022. In subsequent years, some Members of Congress and policy experts occasionally expressed concern over the potential vulnerability of the EELV program based on reliance on a single critical Russian component. For instance, the FY2005 defense authorization act ( P.L. 108-375 , §912) directed DOD to examine future space launch requirements. The resulting 2006 RAND study concluded that "the use of the Russian-manufactured RD-180 engines in the Atlas V common core is a major policy issue that must be addressed in the near term." Similar concern was noted by GAO in 2011: "the EELV program is dependent on Russian RD-180 engines for its Atlas line of launch vehicles, which according to the Launch Enterprise Transformation Study, is a significant concern for policymakers." In the FY2013 defense authorization act ( P.L. 112-239 , §916), Congress directed DOD to undertake an "independent assessment of the national security implications of continuing to use foreign component and propulsion systems for the launch vehicles under the evolved expendable launch vehicle program." None of these concerns, however, led the Air Force to change its EELV acquisition strategy or to seek a change in legislation governing that strategy. After Russian incursions in Ukraine triggered U.S. sanctions in 2014, Russian backlash against those sanctions heightened alarm over the potential vulnerability of the EELV program and catalyzed the desire for change. In March 2014, the United States imposed sanctions on various Russian entities and persons, including Deputy Prime Minister Dimitry Rogozin, the official overseeing export licenses for the RD-180 rocket engine. In retaliation, Rogozin announced that "we can no longer deliver these engines to the United States unless we receive guarantees that our engines are used only for launching civilian payloads." Precise details of what Rogozin meant, and whether any changes would be implemented, were unclear. Many observers in the United States were increasingly concerned, however, that Russia could suddenly ban all exports of the engine to the United States, or ban exports for military use to some degree. To many outside of the Air Force and ULA, that uncertainty raised serious questions about the longer-term viability of the EELV program, and pointed to a need to completely shed U.S. reliance on the RD-180 as soon as practicable. Congress has since taken steps in each of the past several defense authorization bills (described below) to end this reliance and develop an alternative, domestic-produced U.S. main engine. Although the Air Force committed in principle to this ultimate outcome, some in Congress questioned if Air Force efforts were proceeding at an acceptable pace. As the Air Force pursues the congressional mandates to eliminate dependence on the RD-180 engine and continue to transition to a truly competitive launch market, it foresees major challenges. These include ULA's recent retirement of the Delta IV Medium in August 2019, the fact that SpaceX is currently the only other space launch provider awarded NSS mission requirements, and restrictions on acquisition of the RD-180 engine during this interim period that affect the Atlas V launch schedules. Legislative and Industry Options to Replace the RD-180 In spring 2014, DOD formed a commission to bring together various experts to examine the risks, costs, and options for dealing with the potential loss of the Russian RD-180 rocket engine in the EELV program. The 2014 Mitchell Commission recommended accelerating purchases of the RD-180 under the existing licensing agreement to preserve the EELV Phase 1 block-buy schedule and to facilitate competition in Phases 1A and Phase 2. The commission did not recommend coproducing the RD-180 in the United States, but instead recommended spending $141 million to begin development of a new U.S. liquid rocket engine to be available by 2022, to coincide with the end of Phase 2 in the EELV acquisition strategy. Congress has remained supportive of sustaining current space access capabilities while working toward developing a U.S.-made main rocket engine to replace the RD-180. The FY2015 NDAA permitted ULA to use RD-180 Russian engines purchased before Russia's intervention in Ukraine for continued national security space launch missions if the Secretary of Defense determined it was in the national security interest of the United States to do so. The FY2016 NDAA increased this number to nine RD-180s in order to help maintain competitors in the NSS launch market for a longer period, while the market transitions away from the RD-180 and toward a new domestic-produced rocket engine. The FY2017 NDAA increased the number of the Russian RD-180 rocket engines authorized to be used to a total of 18 rocket engines, beginning with the enactment of the FY2017 NDAA and ending on December 31, 2022. The defense bills since the FY2017 NDAA have not amended the total number of Russian RD-180 rocket engines authorized to be used. The NSSL Program Today The Air Force identified four main priorities in NSSL: mission success, innovative mission assurance, transitioning to new launch vehicles, and assured access for future space architectures. DOD expects to achieve cost saving through acquisitions and operability improvements that consist of the use of common components and infrastructure, standard payload interfaces, standardized launch pads, and reducing on-pad processing. To improve acquisitions, the program offers block buys of launch vehicles and competition between certified providers. The competitions are accomplished through two contract vehicles: Launch Service Agreements (LSA) and Launch Service Procurement (LSP) awards: Launch Service Agreement (LSA) awards are a set of three Air Force RDT&E awards intended to facilitate the development of three domestic launch system prototypes. DOD awarded LSA's to ULA, Northrop Grumman, and Blue Origin in October 2018. Launch Service Procurement (LSP) is an ongoing procurement competition that is currently in Phase 2. The second phase is a 5-year procurement of approximately 34 launches starting in 2022. The Air Force plans to select two space launch providers in 2020. United Launch Alliance, Northrop Grumman, SpaceX, and Blue Origin have submitted bids for phase two, with each company proposing their rocket designs: Vulcan, OmegA, Falcon, and New Glenn, respectively. The two companies selected will share the NSSL notional manifest for the next five years. Phase 1 and Phase 1A awards were made to ULA and SpaceX. DOD has identified 18 active contracts for the NSSL program with obligations awarded to six companies (see Figure 1 ). ULA and SpaceX are currently the only space launch providers certified to launch NSS payloads into orbit. The main focus for ULA is on developing a next-generation launch vehicle called the Vulcan. In July 2014, ULA signed commercial contracts with multiple U.S. liquid rocket engine manufacturing companies to investigate next-generation engine concepts. ULA selected Blue Origin (Kent, WA) BE-4 engine to power its Vulcan launch vehicle. Conclusion Although there are important differences in how to achieve it, widespread support appears to exist across the space community and within Congress for the NSS requirement for robust competition and assured access to space. The recurring challenge since the start of the NSSL program has been how best to pursue this requirement while driving down costs through competition and ensuring launch reliability and performance. The Air Force decision of down-selecting no more than two launch providers and award two separate Launch Service Procurement (LSP) contracts in the summer of 2020 is not without potential implications and could have second- and third-order effects. Congress may consider the following: Directing the Air Force to provide a report on the cost-benefit analysis of selecting more than two launch providers. Drafting legislative in the NDAA for FY2021 authorizing additional funds that allows the Air Force to diversify its launch provider options by continuing to provide development funds through LSA awards to launch companies not selected for LSP contracts in Phase 2. Directing the Air Force to provide a report on the cost saving and associated risk using both reusable and expendable launch vehicles for future solicitations. Lastly, efforts to transition away from the RD-180 to a domestic U.S. alternative engine or launch vehicle are not without technical, program, or schedule risks. Even with a smooth, on-schedule transition away from the RD-180 to an alternative engine or launch vehicle, the performance and reliability record achieved with the RD-180 to date would likely not be replicated until well beyond 2030 because the RD-180 has approximately 81 consecutive successful civil, commercial, and NSS launches since 2000.

The United States is making significant efforts to pursue a strategy that ensures continued access to space for national security missions. The current strategy is embodied in the National Security Space Launch (NSSL) program. The NSSL supersedes the Evolved Expendable Launch Vehicle (EELV) program, which started in 1995 to ensure that National Security Space (NSS) launches were affordable and reliable. For the same reasons, policymakers provide oversight for the current NSSL program and encourage competition, as there was only one provider for launch services from 2006 to 2013. Moreover, Congress now requires DOD to consider both reusable and expendable launch vehicles for solicitations after March 1, 2019. To date, only expendable, or single-use, launch vehicles have been used for NSSL missions. The NSSL program is the primary provider for NSS launches. Factors that prompted the initial EELV effort in 1995 are still manifest—significant increases in launch costs and concerns over procurement and competition. In addition, the Russian backlash over the 2014 U.S. sanctions against Russian actions in Ukraine exacerbated a long-standing undercurrent of concern over U.S. reliance on a Russian rocket engine (RD-180) for critical national security space launches. Moreover, significant overall program cost increases and unresolved questions over individual launch costs, along with legal challenges to the Air Force rocket development and launch procurement contract awards, have resulted in legislative action. In 2015, the Air Force began taking steps to transition from reliance on the Russian made RD-180 engine used on the Atlas V rocket. Some in Congress pressed for a more flexible transition to replace the RD-180 that allowed for development of a new launch vehicle, while others in Congress sought legislation that would move the transition process forward more quickly with a focus on developing an alternative U.S. rocket engine. Transitioning away from the RD-180 to a domestic U.S. alternative provided opportunities for space launch companies that sought to compete for NSS space launches. Because of the technical, program, and schedule risk, as a worst-case scenario, the transition could leave the United States in a situation in which some of its national security space payloads lack an available certified launcher. The Space and Missile System Center (SMC), together with the National Reconnaissance Office (NRO), released a request for proposals in May 2019 to award two domestic launch service contracts. DOD plans to select two separate space launch companies in the summer of 2020 that will be responsible for launching U.S. military and intelligence satellites through 2027. NSS launch has been a leading legislative priority in the defense bills over the past few years and may continue to be so into the future.

GAO_GAO-20-165

Background Roles and Responsibilities for the Recruitment and Retention of Military Physicians and Dentists The ASD(HA) serves as the principal advisor for all DOD health policies and programs. The ASD(HA) has the authority to issue DOD instructions, publications, and memorandums that implement policy approved by the Secretary of Defense or the Under Secretary of Defense for Personnel and Readiness and govern the management of DOD medical programs. The ASD(HA) also exercises authority, direction, and control over the President of the Uniformed Services University of the Health Sciences. Further, the ASD(HA) sets the maximum special and incentive pay amounts for all military physicians and dentists. The Army, the Navy, and the Air Force have the authority to recruit, train, and retain physicians and dentists. Currently, there is no joint DOD unit or process dedicated to recruiting medical students and accessing medical officers because recruiting and retention are the responsibility of the military departments. Each military department has its own organizational structure, responsibilities, and varying degrees of personnel resources for accessing physicians and dentists. The departments’ recruiting commands recruit medical and dental students into the scholarship program. In a separate process, the University recruits and admits a set number of medical students each year. Figure 1 shows the organizational structure of the Military Health System as it relates to the recruitment and retention of military physicians and dentists. Career Path of Military Physicians and Dentists DOD has two primary sources of recruitment for military physicians: the scholarship program and the University. DOD recruits most military dentists through the scholarship program. Participants in DOD’s scholarship program and the University accrue an active-duty service obligation in return for a tuition-free medical or dental education and certain financial benefits. Specifically, scholarship program participants enrolled in a civilian medical or dental school receive paid tuition, books and fees, and a monthly stipend. In some cases, participants are also offered an accession bonus. In exchange, scholarship program participants incur a 6- month active-duty service obligation for each 6 months of benefits received, with a 2-year minimum service obligation. Students at the University are enrolled in the DOD-sponsored medical school at no cost, enter active-duty service as medical students and receive the pay and benefits of an officer at the O-1 pay grade. In exchange, University medical students accrue a 7-year service obligation. Career paths for medical and dental school graduates can differ. For example, Army and Air Force medical school graduates typically become specialized before practicing medicine, while 55 percent of Navy physicians complete a General Medical Officer tour before becoming specialized, according to department officials. Moreover, dental school graduates typically practice as general dentists after completing licensure requirements before choosing to specialize. To become specialized, medical and dental school graduates apply to a medical or dental residency training program, which may require or include a 1-year internship, depending on the program or specialty. After residency, some physicians or dentists may decide to pursue further training, known as “fellowships,” in order to become subspecialists. For example, to become a cardiologist, a physician must complete an internal medicine residency followed by a cardiology fellowship. Residency training typically requires 3 to 7 years for physicians and 1 to 6 years for dentists. Fellowship training typically is 1 or more years in length for physicians and dentists. The required number of years depends on the specialty or subspecialty. After residency or fellowship training—hereafter referred to collectively as residency training—physicians and dentists become credentialed and privileged to practice the specialty or subspecialty that they trained in, and they are also eligible for board certification. Figure 2 portrays possible paths to becoming a military physician or dentist. As noted earlier, scholarship program medical and dental students incur 6 months of an active-duty service obligation for each 6 months of benefits received, with a 2-year minimum service obligation; University medical students accrue a 7-year service obligation. While training in a military residency program, residents receive the pay and benefits of an officer at the O-3 pay grade or higher, depending on prior years of service, and earn creditable years of service toward retirement. In exchange, participants incur an additional 6 months of an active-duty service obligation for each 6-months of residency training, with a minimum 2-year service obligation. However, according to DOD officials, the first year of postgraduate training (i.e., internship or 1 year of advanced education in general dentistry and general practice residency) does not accrue a service obligation and is considered obligation neutral. Currently, the two sets of obligations—the obligation for medical or dental school and the obligation for military residency training—are served concurrently, or at the same time, effectively resulting in the servicemember serving the longer of the two obligations. For example, a student who accepts a 4- year scholarship, trains in a 1-year internship, and then trains in a 4-year residency program will serve a total of 9 years. The first 5 years would be spent in internship and residency, and the final 4 years of this service would be spent discharging the active-duty service obligations concurrently (see figure 3, scenario 2). Depending on career path, years of active-duty service after completion of medical and dental school will vary (see figure 3). Cash Compensation for Military Physicians and Dentists DOD’s measure of cash compensation, known as regular military compensation, includes the sum of basic pay, basic allowance for housing, basic allowance for subsistence, and the federal income tax advantage that accrues from the non-taxable nature of the allowances. For example, according to DOD, in 2017 the average married military officer at the pay grade of O-3 received annual regular military compensation of around $99,000. Specifically, this average officer received around $67,000 for basic pay, $24,000 for the basic allowance for housing, $3,000 for the basic allowance for subsistence, and a federal income tax advantage of $5,000. In addition to regular military compensation, physicians and dentists may be eligible for various special and incentive pays which vary depending upon their status as residents, their service obligations, and their specialty. During residency training, physicians and dentists are eligible for select medical or dental corps incentive pays. Upon completion of residency training, they become eligible for higher rates of incentive pay and, if they become board certified, for Board Certification Pay. After fulfilling their active-duty service obligations from medical or dental school and residency training, in addition to special and incentive pays already received, physicians and dentists become eligible for a multi-year retention bonus. Cash Compensation for Military Physicians and Dentists Is Generally Less Than the Private Sector, but DOD Provides Substantial Deferred and Noncash Benefits Cash compensation for active-duty military physicians and dentists was generally less than the median compensation for private sector civilians in calendar year 2017 for most specialties we reviewed, including at key retention points. However, a substantial portion of the costs of DOD’s overall compensation package is comprised of deferred and noncash benefits provided to active-duty personnel, such as a pension in retirement and tuition-free medical and dental education, but the extent to which servicemembers value these benefits is difficult to determine. Cash Compensation for Military Physicians and Dentists Was Generally Below the Median of Private Sector Civilian Compensation in Comparable Specialties in 2017 Cash compensation for active-duty military physicians and dentists varied depending on pay grade, specialty, and decisions to accept retention bonuses or other special and incentive pays, but was generally less than the median compensation for private sector civilians in calendar year 2017 for most specialties. Although we could not make direct comparisons of military and private sector civilian cash compensation by years of service or experience, we estimated the minimum and maximum military cash compensation for specialized active-duty physicians and dentists in pay grades O-3 to O-6, which represented more than 99 percent of military physicians and dentists in fiscal year 2018. Specifically, we found that the minimum military cash compensation for all 21 physician and 5 of 6 dental specialties we reviewed was less than the civilian median for all pay grades; and the maximum military cash compensation for 16 of 21 physician (see figure 4 below) and 5 of 6 dental specialties (see figure 5 below) we reviewed was also less than the civilian median for all pay grades. Therefore, for many of these specialties, even the most senior military physician and dentists (i.e., pay grade O-5 or higher) at the top of the pay range were estimated to receive cash compensation below the private sector civilian median. The minimum and maximum of total military cash compensation, by specialty and pay grade, and how these compare to reported private sector civilian cash compensation are presented in appendix II. Cash Compensation for Military Physicians and Dentists Is Generally Less Than Private Sector Civilian Compensation at Key Retention Points Cash compensation for military physicians and dentists is generally less than private sector civilian compensation at key retention points. Specifically, we calculated 2017 cash compensation for military medical officers who completed their residency directly after medical school across 21 medical specialties and found that at their first unobligated year of service—after they fulfill their initial active-duty service obligations accrued from medical school and military residency training—all 21 specialties had cash compensation below the private sector civilian median. In addition, we found that all but one specialty (psychiatry) was less than the 20th percentile for private sector civilian compensation. Notably, nine specialties that DOD identified as critical trauma-related wartime specialties in 2019 were less than the 20th percentile. According to senior military department medical corps officials, the first unobligated year of service is a key point of retention for military physicians. A 2012 study of military physicians found that compensation had a large impact on the decision to remain in the military in the first unobligated year of service and just a small impact on retention in the years afterward. For DOD’s scholarship program participants, which constitute the majority of recruited military physicians, we estimate that initial service obligation fulfillment typically occurs about 4 years after successful completion of their residency, or at about 9 years of service. We also calculated cash compensation for military medical officers who (a) completed a 3-year General Medical Officer tour prior to specializing in a residency, or (b) attended the University and accrued a 7-year active- duty service obligation and found that all but three specialties (pediatrics, family medicine, and psychiatry) had cash compensation less than the 20th percentile for private sector civilian compensation, and all specialties were compensated below the median. We reviewed 2017 cash compensation for typical military dental officers across six dental specialties and found that at each of these retention points, military cash compensation was less than the median private sector civilian compensation, three of which were below the 25th percentile (orthodontics, endodontics, and periodontics). According to senior military department dental corps officials, two key points of retention for military dentists are (1) after they fulfill their scholarship service obligation by practicing as a general dentist for several years, and (2) after they have completed residency training for a dental specialty, such as orthodontics, and fulfill their residency service obligation. Unlike their physician counterparts, dental students typically do not begin residency immediately after graduation. According to military department dental corps Chiefs, dental student graduates generally complete a 1- year advanced education in general dentistry certificate, which does not incur a service obligation, then fulfill their dental school active-duty service obligation as general dentists before taking a general dentist’s retention bonus and beginning residency training. Cash compensation is just one factor that servicemembers may consider when making the decision to stay with or separate from the military. According to DOD medical and dental corps officials, other factors that may influence this decision include number and frequency of deployments, ability to function at full scope of practice for training, additional nonphysician duties and administrative requirements placed on active-duty physicians that their private sector counterparts do not experience, family considerations associated with permanent change of station orders, nonselection to residency of choice, nonselection for promotion, and retirement eligibility. Similarly, data from the 2017 DOD Status of Forces Survey show that among all officers, the most important factors that would be considered in a decision of whether to stay on active-duty were the military retirement system and personal choice/freedoms (e.g. control of where to work), as well as factors such as opportunities to be assigned to station of choice, family concerns, and pay and allowances. Moreover, a 2019 study of Army physician service obligations showed that military physicians who were most likely to continue serving after completion of their obligation and ultimately retire were those who had the most years of service accumulated when obligations were completed. That is, those who were close to retirement after completing their service obligations were more likely to stay to receive their retirement benefit. DOD Provides Substantial Deferred, Noncash, and Other Benefits Which Must Be Considered Alongside Cash Compensation, but Value to Servicemembers Is Difficult to Quantify In addition to cash compensation, DOD offers substantial deferred benefits, such as retirement pensions and benefits, and noncash benefits, such as tuition-free medical school education and health care, to its military physicians and dentists. In its report on military compensation, DOD noted that nearly half of military compensation is made up of deferred and noncash benefits, and that this proportion is considerably higher than in civilian compensation. Additionally, in 2011 we identified military personnel costs as an area where DOD could recognize long- term cost avoidance by using a total compensation approach to manage military compensation in a holistic manner that considers deferred and noncash benefits alongside cash compensation. Studies of military compensation highlight that assigning a value to deferred and noncash benefits and comparing them to the civilian private sector proves more difficult than for cash compensation because servicemembers value or use these benefits differently, various assumptions have to be made to assign value, and access to such benefits is not universal among private sector civilian workers. Additionally, it is difficult to measure the extent to which servicemembers discount the value of future benefits. We previously reported that it is generally accepted that some deferred benefits, such as a pension in retirement, are not valued as highly by servicemembers as current cash compensation. However, a recent study found that servicemembers, particularly military officers, may value deferred benefits more highly than was previously reported. For these reasons we did not compare the value of military deferred and noncash benefits to similar benefits in the civilian private sector; however, we describe certain types of deferred and noncash benefits available to physicians and dentists and provide estimates of their value where possible. DOD Deferred Benefits DOD provides access to two primary types of deferred benefits: its employer-sponsored retirement plans and retiree health and dental care. As mentioned previously, the likelihood of benefiting from DOD’s military retirement system is a factor that officers consider when deciding to stay on active duty. Retirement plans. In DOD’s traditional retirement system, known as the “High-Three System,” servicemembers are eligible to receive a defined benefit annuity based on their pay grade and years of service after a minimum 20 years of active-duty service, with no benefits provided to those who separate before then. This system was closed to new entrants at the end of 2017. Based on our estimates, under the High-Three System, the defined benefit for a physician or dentist who retires with 20 years of service in 2035 was estimated to be $2,457,253 (present value). New servicemembers from 2018 onwards were enrolled in the Blended Retirement System (BRS). BRS is a hybrid retirement system that includes a revised defined benefit plan requiring 20 years of active-duty service, a defined contribution plan with agency matching contributions, and a one-time direct cash payout—called continuation pay—distributed at the midcareer point (between 8-12 years of service). Based on our estimates, under the BRS, the defined benefit for a physician or dentist who retires with 20 years of service in 2035 was estimated to be $1,965,802 (present value). The defined contribution plan offers government automatic and matching contributions of up to 5 percent of basic pay to the servicemember’s Thrift Savings Plan, and vested servicemembers who separate before 20 years of active-duty service retain ownership of these contributions. The BRS was implemented in 2018 to modernize the military retirement system. As the Military Compensation and Retirement Modernization Commission reported in 2015, roughly 51 percent of military officers exited service before 20 years, meaning that most left without any retirement benefits under the High-Three System. The BRS is expected to provide retirement benefits for the majority of servicemembers, including those who serve fewer than 20 years, according to DOD. In our interviews, some DOD officials expressed concern about the effects of BRS on retention of military physicians and dentists, because, for example, they believed the opportunity to separate with defined contributions will reduce their incentive to remain for a longer period of active duty. Other DOD officials we interviewed stated that it is too soon to determine the effects of the BRS on retention, and noted that the inclusion of continuation pay as part of the BRS was designed to encourage servicemembers to continue serving at the mid-career point. Retiree health and dental care. Servicemembers retiring from active duty are eligible to enroll in TRICARE. Specifically, retired servicemembers and their eligible dependents are able to participate in TRICARE Prime which is comparable to a health maintenance organization (HMO) program, and TRICARE Select, which is comparable to a preferred provider organization (PPO) program. After they are eligible for Medicare, retired servicemembers and their eligible dependents with Medicare Part A and B can enroll in TRICARE for Life, which provides Medicare-wraparound coverage. Eligible retired servicemembers may also receive benefits from the Department of Veterans Affairs health care system. Specifically, active-duty servicemembers who served 24 continuous months or the full period for which they were called to active duty are eligible for Veteran Affairs’ health care. DOD Noncash and Other Benefits DOD provides access to a wide variety of noncash benefits, some of which are uncommon in the civilian sector, and may offset some of the discrepancies in military and private sector civilian cash compensation. However, limited information exists on the extent to which noncash benefits are used by military physician and dentists. Therefore, we have highlighted select benefits that may be used by military physicians and dentists. Tuition-free medical and dental school. Military physicians and dentists benefit from DOD’s scholarship program and the University, through which prospective medical and dental students receive tuition-free education in exchange for commitment to a number of years in active- duty service. This benefit allows physicians and dentists to avoid thousands of dollars of student debt. For example, according to the Association of American Medical Colleges, the average first-year medical student paid $36,755 for tuition, fees, and health insurance to attend a public medical school during the 2018-19 academic year, and the average first-year student attending a private medical school paid $59,076. Medical and dental care. DOD offers comprehensive health coverage to military personnel and their dependents through TRICARE, a managed care program. Care is provided in more than 650 military treatment facilities worldwide, supplemented by civilian providers. TRICARE offers two health care options to non-Medicare-eligible beneficiaries: TRICARE Prime and TRICARE Select. All active-duty servicemembers are automatically enrolled in TRICARE Prime, which is comparable to a private health maintenance organization plan. Under this program, active- duty servicemembers have no premium costs, deductibles, or out-of- pocket costs for servicemembers and no or low costs for dependents. Medical Expenditure Panel Survey data indicate that the average private sector civilian employee spent over $5,000 in health insurance employee contributions for family coverage in 2018. The TRICARE Active Duty Dental Program supplements the dental services available to active-duty servicemembers at military treatment facilities when necessary care is not available or the servicemember does not have ready access to a military treatment facility. Active-duty servicemembers do not pay premiums for this dental care, do not share in the costs of the care, and do not face any annual or lifetime maximums on the cost of care. Financial benefits during education and training. Medical and dental scholarship students receive O-1 pay and allowances for 45 days of active duty for annual training performed for each year the scholarship is awarded. Participants may also be eligible for a $20,000 signing bonus. During their education, medical and dental scholarship students receive a monthly stipend, and medical students at the University receive officer salary and benefits at grade O-1. After medical school, medical and dental residents receive officer pay and benefits at grade O-3 or higher, according to DOD officials. DOD Uses Incentives to Recruit and Retain Military Physicians and Dentists, but Does Not Consistently Collect Information to Help Inform Investment Decisions Based on our analysis of DOD’s incentives to recruit and retain military physicians and dentists, DOD generally (1) clearly defined the criteria used to determine when to offer incentives, (2) identified and incorporated opportunities for improvement, (3) identified and evaluated unique staffing situations, and (4) made investments to attract and retain top talent. However, we found that DOD did not consistently collect information on (1) replacement costs, (2) current and historical retention efforts, and (3) comparable civilian wages to help inform investment decisions in its package of incentives to recruit and retain military physicians and dentists. Fully applying these seven key principles of effective human capital management in its approach to recruit and retain military physicians and dentists is important to making fully informed investment decisions. DOD Generally Applied Four Key Principles of Effective Human Capital Management to Its Package of Incentives for Recruiting and Retaining Military Physicians and Dentists We found that DOD generally applied effective human capital management principles related to clearly defined criteria on when to use incentives, making investments based on expected improvement in agency results, identifying and evaluating unique staffing situations, and identifying and incorporating opportunities for improvement. To support its operational needs, DOD uses educational, training, and monetary incentives to recruit and retain physicians and dentists. Specifically, DOD’s package of incentives includes, among other things, a tuition-free medical school education through the scholarship program and the University, pay as an O-3 officer or higher during medical or dental residency, the opportunity for further training via a fellowship, and a series of special and incentive pays for fully trained physicians and dentists. According to DOD’s report on military compensation, special and incentive pay authorities provide the services with greater flexibility to target additional compensation where needed to address emerging staffing shortfalls and maintain staffing in critical or hard-to-fill skills. We found that DOD generally applied four of the seven key principles, as described below: Relied on clearly defined, well-documented, consistently applied, and transparent criteria. DOD and the military departments have established rules-based pay plans with clear eligibility criteria for special and incentive pays and recruitment and retention bonuses. Key principles for human capital management state that agencies should consider making targeted investments in specific human capital approaches, and that these approaches should have clearly defined, well-documented, transparent, and consistently applied criteria for making these investments. Identified opportunities for improvement and incorporated these opportunities into the next planning cycle. The services and officials from the Office of the ASD(HA) participate in the Health Professions Incentives Working Group to review recruitment and retention special pay and incentives and recommend adjustment to amounts offered as necessary. For example, as a result of working group discussions, DOD officials stated that they established a new 6- year retention bonus in the fiscal year 2019 pay plan for select medical and dental specialties, in part to ensure greater stability in the numbers of physicians and dentists within these specialties. Military department officials stated they plan to identify potential impacts and determine adjustments, if any, that need to be made. DOD’s report on military compensation advises officials to identify opportunities for improvement using analytical tools to model how changes in compensation might alter the force or career profile. It further states that taking a structured approach to determining both incentive pay eligibility criteria and amounts helps force managers optimize their limited special and incentive pay budgets. Such an approach also provides a mechanism to periodically conduct a rigorous assessment of such pays to ensure that they keep pace with changing conditions. Identified and evaluated unique staffing issues. According to military department officials, medical corps and dental corps community managers, specialty leaders, consultants, and others actively discuss military physicians’ and dentists’ career plans to help inform future staffing needs. Moreover, to attract physicians and dentists in specialties which DOD has identified as a critically short wartime specialty, DOD offers a Critical Wartime Skills Accession Bonus. However, as we reported in 2018, military department officials cited a number of challenges that make it difficult to attract and retain military physicians and dentists, including national shortages and competition with the private sector. Incentive pay and retention bonus amounts are specific to each specialty. DOD’s report on military compensation states that evaluation of unique staffing issues identified by community managers should be a core part of a systematic approach to assessing the application of a special or incentive pay. Similarly, key principles for human capital management note that agencies should tailor human capital strategies to meet their specific mission needs. Targeted investments to attract and retain top talent. The services are authorized to offer targeted monetary incentives in the form of special and incentive pays and recruitment and retention bonuses to eligible physicians and dentists who are in good standing. Moreover, military department officials stated that DOD offers Board Certification Pay to physicians and dentists who achieve and maintain this accreditation because it reflects that the physician or dentist is maintaining skills and qualifications and allows the department to better reflect the high level of the quality of care that is provided by the military health system. Similarly, we reported in 2018 that DOD and the military departments had established a set of minimum qualifications for medical school applicants applying to the scholarship program and the University. Key principles for human capital management state that targeted investments in human capital approaches should help the agency attract, develop, retain, and deploy the best talent and then elicit the best performance for mission accomplishment. The principles further state that decisions regarding these investments should be based largely on the expected improvement in agency results. Similarly, DOD’s Diversity and Inclusion Strategic Plan 2012-2017 notes that retaining top talent is essential to sustaining mission readiness that is adaptable and responsive. DOD Does Not Consistently Collect Information to Help Inform Investment Decisions in Its Package of Recruitment and Retention Incentives In three key areas of effective human capital management related to data on replacement costs, recruitment and retention, and civilian wages, DOD does not consistently collect information to help inform investment decisions in its package of incentives to recruit and retain military physicians and dentists, as described below: Did not identify replacement costs. Military departments do not consistently collect information on replacement costs of military physicians and dentists. Specifically, no military department was able to provide us with a comprehensive assessment of the replacement cost for military physicians and dentists. Replacement cost assessments can be found in other occupations within DOD. For example, in 2017, we reported that the Navy considers the high replacement costs of its nuclear propulsion personnel—up to $986,000 per trainee—in justifying a strategy that prioritizes investment in retention initiatives over new accessions or recruits. Moreover, DOD requires that the training investment and replacement cost for those qualified in the skill be considered when justifying the need for the critical skills retention bonus. DOD’s report on military compensation identified replacement costs and training costs as a factor in assessing incentive pay appropriateness. In 2018, we recommended that the ASD(HA) require that the University develop a reliable method to accurately determine the cost to educate its medical students. DOD partially concurred with our recommendation. In response to our recommendation, the University contracted with the Institute for Defense Analyses to determine the costs to educate University medical students. In its October 2019 final draft report, the Institute for Defense Analyses estimated total accession costs for a fully trained physicians through both the scholarship program and the University; specifically, the report estimated the total cost for a fully trained physician who completes 4 years of medical school and a 3-year military residency to be $878,000 for scholarship medical students and approximately $1.5 million for University medical students. In another similar ongoing effort, Navy officials stated that they have commissioned a Life Cycle Cost study with the Center for Naval Analyses. We are encouraged by these initiatives, which will provide the Office of the ASD(HA) and the military departments a foundation for formalizing the process of collecting information on replacement costs. With the benefit of this information, DOD can make more informed decisions regarding its packages of recruitment and retention incentives. Did not collect current and historical retention information. Military departments do not consistently collect and use current and historical retention information to help inform decisions about investment in retention incentives. Specifically, Navy and Air Force officials told us that they do not have readily available information to determine the percentage of those who accepted a retention bonus among the eligible population, and Army officials noted they do not have a framework in place to use retention information to determine the effectiveness of retention bonuses. Using retention data to measure effectiveness of retention incentives is performed by other communities within DOD. For example, in 2018 we reported that officials from the Navy, Marine Corps, and Air Force measured the effectiveness of aviation retention bonuses by monitoring bonus acceptance rates. DOD’s report on military compensation stated that a review of current and historical data on retention should be a core part of a systematic approach to assessing the application of a special or incentive pay. Further, key principles for human capital management note that periodic measurement of an agency’s progress toward human capital goals and the extent that human capital activities contributed to achieving programmatic goals provides information for effective oversight by identifying performance shortfalls and appropriate corrective actions. Without information on the acceptance rate among those eligible, the military departments cannot assess the effectiveness of the performance of their investment in retention bonuses. Did not assess private sector civilian wages. DOD does not consistently collect and use private sector wage information to help inform investment decisions in its special and incentive pays for physicians and dentists. Based on our review of the minutes of meetings of the Health Professions Incentives Working Group, which recommends changes to the rate and term of special and incentive pays, private sector compensation was occasionally raised as a challenge. However, it was not collected and used to help inform investment decisions on a consistent basis. According to officials from the Office of the ASD(HA) and the military departments, an assessment of civilian wages is not a driving factor when considering adjustments to special and incentive pays, in part because DOD cannot always match civilian sector compensation for military physicians and dentists. Officials from the Office of the ASD(HA) and the military departments acknowledged the disparity between military and civilian cash compensation varies by specialty; however, incentive pay and retention bonus amounts have largely remained the same for over a decade. DOD’s Ninth Quadrennial Review of Military Compensation states that pay at around the 70th percentile of comparably educated civilians is necessary to enable the military to recruit and retain the quantity and quality of personnel it requires. Based on our comparison of military and civilian cash compensation pay previously discussed, we found that the gap between military and private sector civilian varies by specialty and many fall below the civilian private sector median. Moreover, based on our review of cash compensation for medical officers who completed their residency directly after medical school across 21 medical specialties, we found that at their first unobligated year of service, all 21 specialties had cash compensation below the private sector civilian median. Additionally, all but one specialty (psychiatry) were compensated at less than the 20th percentile of private sector civilian compensation. Use of assessments of private sector civilian compensation can be found in other communities within DOD. For example, in 2017, we reported that the Navy justified its use of selective reenlistment bonuses for cyber-related occupations by noting the specific level of starting salaries for comparable civilians. DOD’s report on military compensation states that reviewing civilian wages is a key element in assessing the application of a special or incentive pay. Further, it states that periodic reviews, which should include the use of an analytical tool or model, will ensure that resources are directed at the most pressing staffing needs. For example, professions that consistently command higher pay in the civilian sector—such as the medical professions—may merit predictable pays over the long term. Yet in other areas, evolving mission needs, changing conditions in the civilian market, and other factors may call for increasing an incentive or, in some cases, may show that additional pay can be reduced or eliminated. According to a former Under Secretary of Defense for Personnel and Readiness and a noted expert on defense personnel issues, DOD would benefit from analysis to determine the point at which cash compensation for military physicians, including special and incentive pays, reaches a minimum threshold of attractiveness compared to the private sector. Assessing civilian wages could help DOD understand the relationship of any military and civilian pay discrepancies to its ability to fill particular specialties. For example, we found that in fiscal year 2018, all but three of the specialties we reviewed were below 90 percent of authorization by at least one of the services’ active components. By consistently collecting civilian wage information and using it to inform its package of incentives, DOD will be better positioned to make the most effective use of its recruitment and retention incentives. DOD officials stated that their approach to managing the package of incentives to recruit and retain military physicians and dentists is driven by a number of considerations. Specifically, DOD officials stated that the rates of special and incentive pays represent amounts that are affordable and that the military departments generally believe have allowed them to meet their personnel needs. Further, military department officials stated that budget considerations and statutory limitations hinder their ability to change the rate of special and incentive pays. Current statutory limits to the amount of the retention bonus, incentive pay, and board certification pay are $75,000, $100,000, and $6,000, respectively; there is currently no statutory limit on the critical skills retention bonus for health professionals, which can be paid in addition to other pays. While we believe these are valid considerations, collecting information on replacement costs, retention, and civilian wages would allow the Office of the ASD(HA) and the military departments to provide greater stewardship of available funding by ensuring its efficient application. Specifically, Standards for Internal Control in the Federal Government state that management should use quality information to achieve the entity’s objectives. For example, further analysis of replacement costs could reveal that retention of fully trained physicians is highly economical for DOD, and provide strong support for changes to retention incentives to safeguard significant investment in physicians and dentists. By collecting and using this information to inform its decision-making, DOD and the military departments would be better positioned to assess the effectiveness of their incentives to recruit and retain military physicians and dentists and make sound investment decisions for the future. Medical Students and Residents Perceive That Lengthening Service Obligations Could Negatively Affect Recruitment and Retention of Military Physicians Our surveys of medical students, focus groups with medical residents, and interviews with DOD officials showed there was a general perception that lengthening active-duty service obligations, such as through a system of serving obligations from medical school and residency training consecutively, could negatively affect recruitment and retention of military physicians. Moreover, DOD is considering reductions to the overall number of active-duty physicians, including targeted reductions to certain specialties, and participants in all eight focus groups with residents had concerns about the proposed reductions to authorizations for certain medical specialties. Medical Students and Residents Reported General Unwillingness to Accept Longer Service Obligations without Additional Cash Incentives In our surveys of medical students, we found that they generally would not have accepted the scholarship or attended the University if the service obligations from medical education and residency training were served consecutively. Specifically, an estimated 61 percent of scholarship recipients and an estimated 51 percent of University students in our representative survey responded that they would not have accepted DOD’s scholarship program or attended its University had they been required to fulfill these service obligations consecutively. However, our survey results indicated that students are willing to accept some additional active-duty service obligation for their current programs. Specifically, 68 percent of the University students and almost half (46 percent) of the scholarship students would be willing to accept an additional year of active-duty service obligation. Notably, a lower percentage of medical students would accept 2 additional years of active- duty service obligations—specifically 34 percent of University students and 16 percent of scholarship recipients. Our survey results found that medical students would be more willing to accept longer service obligations if accompanied by additional cash incentives. For example, 80 percent of University students and more than half of scholarship recipients (63 percent) would be willing to accept an additional year of service obligation if accompanied by additional cash incentives. (See figure 6 and appendix III for specific estimates and confidence intervals.) Similar to the survey responses, participants in all eight focus groups with medical residents also would not have accepted the scholarship or attended the University under a system of consecutive active-duty service obligations. However, participants in seven out of eight focus groups we conducted stated that they would be more willing to accept longer service obligations if accompanied by additional cash incentives, such as a larger accession bonus. Lengthening service obligations may also have unintended consequences without other changes to DOD policy. Specifically, participants in five out of eight of our focus groups with medical residents and DOD officials we interviewed expressed concern that lengthening service obligations would delay physicians’ eligibility for retention bonuses, resulting in a reduction of cash compensation over the course of a career. For example, under current policy, a physician who accepted a 4-year scholarship, completed a 1-year internship, and then trained in a 4-year residency training program would be eligible for a retention bonus after 9 years of service. Under a consecutive service obligation model, that same physician would be eligible for a retention bonus after 13 years of service (see figure 7). Further, as previously reported, cash compensation for military physicians is generally less than private sector civilian compensation, and participants in seven out of eight of our focus groups with residents expressed that lengthening service obligations would extend the amount of time they would not be paid comparably to their private sector civilian counterparts. Residents Stated That Longer Service Obligations and Reductions in Authorizations for Medical Specialties Would Likely Affect Their Decision to Continue Military Service Residents in our focus groups stated that lengthening active-duty service obligations would make residency training in a military hospital less attractive and would likely affect their decision to continue military service. Specifically, medical residents in most focus groups we held noted that lengthening service obligations would make them more likely to: fulfill their medical school active-duty service obligation by serving one or more tours as a General Medical Officer and then separate from the military in order to train in a civilian residency program; decline to participate in further medical training and specialization via a fellowship program within the military; and separate from the military sooner than planned, in part because a longer active-duty service obligation would delay their eligibility for certain special and incentive pays. Military department officials we interviewed expressed concern that lengthening active-duty service obligations, such as through a system of serving obligations consecutively, could encourage potential medical residents to choose shorter residency training programs over longer ones. However, participants in all eight focus groups we held with medical residents stated that the ability to train in a chosen medical specialty is more important than the length of the residency program, and a longer active-duty service obligation would not influence their chosen medical specialty. Further, residents who participated in our focus groups stated that the proposed reductions in authorizations—that is, funded positions—for certain medical specialties and associated reductions in residency program spots could negatively affect the attractiveness of residency training in a military setting. DOD has reduced authorizations for certain specialties based on our analysis of DOD’s Health Manpower Personnel Data System information and is considering additional reductions to the overall number of active-duty physicians as part of its budgeting process for fiscal years 2020-2024, including targeted reductions to certain specialties. For example, DOD reduced authorizations for the general pediatrics specialty by 40 percent from fiscal year 2015 through fiscal year 2018, and based on our surveys of medical students, 12 percent of scholarship recipients and 16 percent of University students in the clinical stage of medical school responded that they are interested in practicing the pediatrics specialty after they have completed all required training. Participants in all eight of our focus groups with residents commented that the ability to specialize in their medical specialty of choice was important when deciding to accept the scholarship or attend the University, and narrowing such opportunities would negatively affect the attractiveness of either program for future prospective participants. When reflecting on the proposal to reduce the range of available specialties, residents questioned their ongoing ability to practice their preferred specialty as an active-duty servicemember. In our focus groups, some residents expressed that this issue could play a role in their future decision to continue military service or separate and pursue civilian medical practice. Conclusions DOD’s ability to recruit and retain the right numbers and types of physicians and dentists depends in part on the effectiveness of the package of incentives in which the department invests. To initially recruit these physicians and dentists, DOD relies on its scholarship program and University, which come with active-duty service obligations. Changes to the structure of its active-duty service obligations could affect recruitment and retention of physicians and dentists. Given that DOD spends millions of dollars annually to train medical and dental students to become fully trained physicians and dentists and that almost half of DOD’s special pay budget is dedicated to retaining them, consistently collecting information to help inform investment decisions is critical to ensuring the efficiency of these significant resources. For example, information on the replacement costs of physicians and dentists would help DOD make decisions about whether it is more cost effective to train or retain these personnel. Further, consistent collection of information on the extent to which eligible physicians and dentists accept retention bonuses will help DOD monitor the effectiveness of an incentive that represents a significant investment by DOD. Our comparison of military to private sector cash compensation highlighted that military physicians and dentists generally receive less cash compensation than their private sector civilian counterparts for most specialties we reviewed. This differential, according to DOD officials, is one factor that servicemembers consider in deciding whether to continue service in the military. However, while DOD and military department officials stated that they are aware of how prevailing private sector civilian wages for medical and dental specialties compare to military cash compensation, they do not consistently collect information on this matter and that its role in setting military cash compensation is limited. By collecting and using such information to inform investment decisions, DOD will have better information to efficiently and effectively meet its mission of providing health care during times of war and peace. Recommendations for Executive Action We are making the following three recommendations to DOD: The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with the military departments, collect consistent information on the replacement costs of military physicians and dentists and use this information to inform investment decisions in the package of incentives to recruit and retain military physicians and dentists. (Recommendation 1) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with the military departments, collect consistent information on current and historical retention data, to include data on the percentage of eligible physicians and dentists who accept retention bonuses, and use this information to inform investment decisions in the package of incentives to retain military physicians and dentists. (Recommendation 2) The Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with the military departments, collect consistent information on private sector civilian wages and use this information to help inform investment decisions in the package of incentives to recruit and retain military physicians and dentists. (Recommendation 3) Agency Comments We provided a draft of this report to DOD for review and comment. DOD concurred with all three recommendations and noted that it will take actions to incorporate them into policy within the next two years. DOD’s comments are reprinted in appendix IV. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Office of the Assistant Secretary of Health Affairs, the Secretaries of the Army, the Navy, the Air Force, and the President of the Uniformed Services University of the Health Sciences. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or FarrellB@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: Objectives, Scope, and Methodology This report addresses the following objectives: 1. how compensation for military physicians and dentists compares to private sector civilians with comparable skills in 2017; 2. the extent to which the Department of Defense (DOD) has developed an approach to recruit and retain military physicians and dentists through a package of incentives that reflect key principles of effective human capital management; and 3. the perceptions of military medical students, residents, and DOD officials regarding active-duty service obligations, including their effect on recruitment and retention. Objective 1 - Comparison of Compensation For our first objective, we compared cash compensation for military physicians and dentists to comparable private sector civilian specialties, described the deferred and noncash benefits available to military physicians and dentists, and created estimates of the value of DOD’s retirement benefit for officers with varying current years of service. To compare cash compensation for military physicians and dentists to comparable private sector civilian specialties, we estimated military cash compensation and compared that to civilian compensation data reported in surveys by the American Medical Group Association and American Dental Association. Specialty selection. To select DOD physician and dental specialties that have private sector civilian equivalents, we began with the list of 44 physician and 11 dental specialties in DOD’s Fiscal Year 2018 Health Manpower Personnel Data System report. We selected 21 physician specialties in consideration of the following factors: a comparable private sector civilian specialty existed; the majority of the physician workforce was represented; deploying specialties were included; a balance of procedural, surgical, and other specialties was included, and; specialties identified as critically-short, trauma-related wartime specialties were included. We selected six dental specialties in consideration of the following factors: a comparable private sector civilian specialty existed, and private sector civilian compensation information was available. Estimates of military cash compensation. To estimate cash compensation for military physicians and dentists for our selected specialties, we reviewed DOD policy and guidance and relevant statutes to identify any current measures of cash compensation and other key elements of cash compensation for physicians and dentists. DOD’s measure of cash compensation, known as regular military compensation, includes the sum of basic pay, average basic allowance for housing, basic allowance for subsistence, and the federal income tax advantage that accrues from the nontaxable nature of the allowances. Another key element of cash compensation is the special and incentive pays that DOD offers to eligible military physicians and dentists, such as incentive pay, Board Certification Pay, and retention bonuses. We collected information on basic pay, basic allowance for housing, and basic allowance for subsistence for married personnel from DOD’s fiscal year 2017 Greenbook publication, and information on incentive pays, Board Certification Pay, and retention bonuses from DOD’s fiscal year 2017 Health Professions Officer Special and Incentive Pay Plan. We selected fiscal year 2017 because it was the most recent year of available data amongst all of our sources, and we selected married personnel because according to a DOD report, the majority of officers in the pay grades O-4 to O-6 are married, which largely aligns with DOD's population of physicians and dentists. We estimated a range—the minimum and maximum—of military cash compensation by specialty for pay grades O-3 to O-6. The minimum and maximum are based on two scenarios that represent a range of pay that specialized physicians and dentists can expect to receive, considering only the special and incentive pays listed in the Health Professions Officer Special and Incentive Pay Plan. The minimum includes regular military compensation, Board Certification Pay, and incentive pay. The maximum includes the regular military compensation, Board Certification Pay, and incentive pay at a higher amount in conjunction with a 4-year retention bonus. Our estimates represent the sum of basic pay, average basic allowance for housing, basic allowance for subsistence, special and incentive pays, and the federal tax advantage that accrues from the nontaxable nature of the allowances. To calculate the federal tax advantage, we used the 2018 federal tax tables and applied the 2018 federal tax standard deduction and then converted the calculated federal tax advantage to 2017 dollars. According to a senior DOD dental corps official, most general dentists are not board-certified and do not receive Board Certification Pay; we therefore omitted Board Certification Pay in our estimates for the minimum and maximum military cash compensation of general dentists. Private sector civilian cash compensation information. To identify private sector civilian cash compensation for physicians in comparable specialties, we chose the American Medical Group Association’s 2018 Medical Group Compensation and Productivity Survey—2018 Report Based on 2017 Data because (1) it included all the specialties we selected to review, and (2) it contained information on physicians who practiced in settings that were similar to those in which federal physicians practiced.The survey data provided compensation amounts for each specialty by 20th percentile, median, and 80th percentile. The data excluded the value of any employer-provided malpractice insurance, but some physicians may incur costs for this coverage. Military physicians generally do not need to purchase malpractice insurance. To identify private sector civilian cash compensation for dentists in comparable specialties, we chose the American Dental Association’s Health Policy Institute, Income, Gross Billings, and Expenses: Selected 2017 Results from the Survey of Dental Practice because (1) it included all the specialties we selected to review, and (2) included the net income of dentists and specialists in private practice, which is comparable to military dentists who generally do not need to purchase malpractice insurance. We obtained net income information for full-time practitioners—those who reported working 35 hours a week or more— from the American Dental Association. The survey data provided compensation amounts for each specialty by 25th percentile, median, and 75th percentile. Both surveys represent salaries for 2017. To help determine the reliability and accuracy of private sector civilian compensation information, we checked these data for reasonableness and the presence of any obvious or potential errors in accuracy and completeness. We believe the data are sufficiently reliable for the purpose of this report. Comparisons of military and private sector civilian cash compensation. We compared our estimates of the ranges of military cash compensation by specialty and pay grade to the ranges of private sector civilian cash compensation by specialty from our selected surveys. As we could not make direct comparisons of military and civilian cash compensation by years of service or experience due to data limitations, we compared and presented the ranges of compensation as appropriate. We also compared military cash compensation at the first unobligated year of service to the range of private sector civilian cash compensation, by specialty. We estimated military cash compensation at the first unobligated year of service based on the length of each residency and, if applicable, fellowship—among other assumptions. We identified physician residency and fellowship length information by using the Accreditation Council for Graduate Medical Education’s Data Resource Book for Academic Year 2017-2018, and we requested information on military residency lengths from military department officials to confirm that residency lengths generally aligned with this information. We identified dentist residency and fellowship length information by requesting it from military department officials. For each specialty, we estimated the officers’ pay grade using the following assumptions: (1) no creditable service before medical or dental school; (2) a 4-year medical or dental school duration; (3) participants were commissioned at the O-3 pay grade after medical or dental school completion with 4 years of constructive credit—in accordance with entry grade credit guidance outlined in DOD Instruction 6000.13; (4) the first year of post-graduate medical or dental education does not accrue an active-duty service obligation, and; (5) were promoted to O-4 at 6 years of service, and to O-5 at 12 years of service—in accordance with DOD’s promotion schedule outlined in DOD Instruction 1320.13. The entry grade credit and promotion schedule practices were confirmed by DOD officials. For physicians, we assumed that the active-duty service obligations for medical school and residency were served concurrently, in other words we assumed immediate entry into a residency program. We performed our calculations twice, first assuming no tour as a General Medical Officer and second assuming that physicians completed a 3-year tour as a General Medical Officer—adding 3 years to their years of service at service obligation fulfillment. According to Navy medical corps officials, 55 percent of Navy physicians perform such a tour. When assuming no General Medical Officer tour, the majority of physicians reached this decision point at the O-4 pay grade with the exception of neurosurgeons and cardiac/thoracic surgeons, who were at the O-5 pay grade due to longer residency and fellowship lengths. When assuming a 3-year General Medical Officer tour, physicians in 12 specialties reached this point at the O-5 pay grade, with the remaining nine specialties at the O-4 pay grade. We also conducted this analysis for Uniformed Services University of the Health Sciences (University) students who accrued a 7- year active-duty service obligation. We found that assuming a 7-year obligation for University students produced the same results as assuming a 3-year tour as a General Medical Officer for Health Professions Scholarship Program (scholarship) participants. For dentists, we assumed that the dental school and residency obligations were not served concurrently because, according to the military department Dental Corps Chiefs, dental student graduates typically complete a 1-year advanced education in general dentistry certificate, which does not incur a service obligation, then fulfill their dental school active-duty service obligation as general dentists before taking a general dentist’s retention bonus and beginning residency training. We completed an analysis to understand how the pay grade at the first year of unobligated service may vary for general dentists who worked as a general dentist immediately after completing dental school or completed a 1-year advanced education residency. We found that general dentists generally reached this decision point at the O-3 pay grade; endodontists, orthodontists, pedodontists, and periodontists reached it at the O-4 pay grade, and; oral and maxillofacial surgeons reached it at the O-5 pay grade. Estimates of retirement benefit. To develop estimates of the value of the defined benefit portion for DOD’s two retirement benefit programs— the Blended Retirement System (BRS) and the High-Three—we developed two scenarios for a hypothetical officer who either chose to remain in the High-Three System or to opt into the BRS. We used DOD’s publically-available, online retirement calculators to generate an estimate for each scenario, which Office of the Under Secretary for Personnel and Readiness officials described as the best available tools to determine the value of military retirement benefits. Specifically, the estimates were for a physician or dentist who was commissioned as an O-3 officer in 2015 and assumed separation from service at 20 years. For these scenarios, we developed reasonable estimates to enter into the calculators. For example, in the personal information section of the calculators we estimated the pay entry base date assuming that the officer began earning creditable years of service toward retirement after medical or dental school and that they began active-duty service as an officer at the O-3 pay grade in the month of June after the completion of medical or dental school. The calculators produced an estimate of the present value estimated retirement benefit at 20 years of service, which is when the defined benefit portion becomes effective. Estimates were as of August 2019 and included a specific value for the defined benefit. DOD’s publically available retirement calculators use a discount rate of 5 percent per year, as of July 2018. We also consulted with a senior DOD official from the Office of the Under Secretary for Personnel and Readiness to corroborate the reasonableness of our approach. To help determine the reliability and accuracy of DOD’s retirement calculators, we checked the data for reasonableness and the presence of any obvious or potential errors in accuracy and completeness and interviewed DOD officials knowledgeable about the data. We believe the data are sufficiently reliable for the purpose of this report. Description of deferred and noncash benefits. To describe deferred and noncash benefits available to military physicians and dentists, we reviewed our prior reports, other relevant research, and publically available reports and information from DOD. We interviewed cognizant DOD officials to understand which benefits military physicians and dentists were most likely to utilize. Objective 2 – DOD’s Approach to Recruit and Retain Physicians and Dentists For our second objective, we reviewed pay plans, policies, and other documents developed by the Office of the Assistant Secretary of Defense for Health Affairs (OASD(HA)) and the respective military departments concerning DOD’s approach to recruitment and retention of military physicians and dentists. We also interviewed officials from OASD(HA) and the military departments concerning their decision-making processes in managing this package of incentives. We compared this information with seven key principles of effective human capital management, which was reported in our February 2017 report on military compensation. As we reported in that report, to identify key principles of effective human capital management, we reviewed a compilation of our body of work on human capital management, DOD’s Report of the Eleventh Quadrennial Review of Military Compensation, and the DOD Diversity and Inclusion Strategic Plan 2012 - 2017. The seven key principles of effective human capital management include (1) criteria for making human capital investments are clearly defined, well-documented, consistently applied, and transparent; (2) replacement costs of personnel are considered when deciding to invest in recruitment and retention programs; (3) decisions regarding human capital investments are based largely on expected improvement in agency results and implemented in a manner that fosters top talent; (4) unique staffing issues are identified and evaluated as part of establishing the incentive structure; (5) opportunities for improvement are identified and incorporated into the next planning cycle; (6) current and historical retention data are collected and reviewed as part of efforts to evaluate effects and performance of human capital investments; and (7) civilian wages are assessed and plans are updated as needed. In addition to using the key principles, we also compared aspects of DOD’s approach to recruitment and retention of military physicians and dentists with federal internal control standards, which state management should use quality information to achieve an entity’s objectives, and highlighted areas where DOD’s approach differed from these principles. Objective 3 – Perceptions Regarding Active-Duty Service Obligations For our third objective, to obtain perceptions of (1) military medical students, (2) residents, and (3) DOD officials regarding active-duty service obligations, including their effect on recruitment and retention, we utilized, respectively, (1) web-based surveys of military medical students, (2) focus groups with military medical residents, and (3) interviews with knowledgeable officials. Surveys. For our third objective, to obtain perceptions of military medical students regarding active-duty service obligations, including their effect on recruitment and retention, we conducted two web-based surveys with a generalizable sample of current scholarship and University medical students to obtain information on the students’ knowledge of the current program and willingness to accept different lengths of service obligations or a change to a consecutive service obligation model (see table 1). One survey was administered to current scholarship medical students, while the other was administered to current University medical students. The questions in both surveys were largely the same. The main differences reflected the different pay and benefits from accepting a scholarship or attending the University and the differences in length of active-duty service obligation. For example, scholarship students receive a monthly stipend and, sometimes, an accession bonus, while University students receive the pay and allowances for commissioned officers in the O-1 pay grade. Scholarship participants incur 6 months of an active-duty service obligation for each 6 months of scholarship benefits they receive, with a 2-year, minimum service obligation, while University medical students accrue a 7-year active-duty service obligation. A full listing of survey questions is provided in appendix III. We worked with our social science survey specialists to develop our survey questionnaires, applying generally accepted survey design standards. We conducted pretests of the survey with scholarship and University students who varied by number of years in medical school and military service. Pretesting is necessary to ensure common understanding of terms used and to minimize errors that might occur from respondents interpreting the questions differently than we intended. During each pretest, the subject was not provided the draft survey in advance, but instead was either provided the draft survey at the meeting, or the survey was emailed to the subject at the beginning of the teleconference. After the pretester completed the survey, we discussed all survey questions and response options with the pretester to ensure clarity. We revised the survey instruments based on the feedback we received during each of the pretests until clarity issues were reasonably addressed. We determined fourth-year medical students were less likely to participate in the survey for three reasons: (1) they were close to graduating from medical school at the time the survey instrument was launched; (2) they lose their school email addresses shortly after graduation; and (3) once they are out of medical school, they are further removed from the decision point about either accepting the scholarship or attending the University. Therefore, we excluded them from the sample population. Dental students were also excluded from the sample population because they generally practice as general dentists after graduating from dental school and before training in a residency program, which differs significantly from the career paths of scholarship and University medical students. We defined our target population to be all medical students in their first, second, or third school year under the scholarship program or enrolled at the University. By stratifying, as shown in table 1, the sample allowed us to estimate any population figure across the service with a predetermined statistical precision. We determined the target sample size needed to achieve precision levels of plus or minus 10 percentage points or fewer, at the 95 percent confidence level. We then increased the sample size within each stratum for an expected response rate of 25 percent. The resulting sample frame included 2,972 students, and we selected a stratified random sample of 1,355. We stratified the sampling frame into four mutually exclusive strata based on medical program and service. One survey was administered to current scholarship medical students from June 26, 2019 through August 26, 2019; the survey of current University medical students was administered from June 25, 2019 through August 6, 2019. We created two administrative email accounts, one for scholarship medical students and one for the University medical students, through which we sent an announcement email to the medical students in our sample population. We administered the survey through a web-based application and sent an email from the administrative email accounts stating that the survey was ready to complete. When we received bounce-back messages, we used secondary email addresses if available or called students to request updated contact information. To maximize our response rate, we sent two reminder emails and contacted nonrespondents by telephone to encourage them to complete the survey. Also, we took steps in the development of the survey, data collection, and data analysis to minimize nonsampling errors and help ensure the accuracy of the answers that were obtained. For example, a social- science survey specialist helped to design the questionnaire, in collaboration with analysts having subject-matter expertise. Then, as noted earlier, the draft questionnaire was pretested to ensure that questions were relevant, clearly stated, and easy to comprehend. Our unweighted survey response rate was 60.5 percent for scholarship students and 80 percent for University students, with 624 and 259 respondents, respectively. Per Office of Management and Budget (OMB) Standards and Guidelines for Statistical Surveys, a nonresponse bias analysis should be conducted for a survey with a response rate less than 80 percent (Guideline 3.2.9). The response rate for the survey of University students met this threshold, and we did not assess the potential for nonresponse bias. With respect to scholarship students, after conducting an analysis of propensity of responding to the survey to identify potential sources of nonresponse bias, we identified differential student response patterns by military department and marital status. We developed sampling weights based on the population size, divided by the number of sample students within each stratum. Weights were adjusted for overall nonresponse in University students and nonresponse by military department and marital status among scholarship students so that statistical estimates for survey response percentages are generalizable to the population of students. We expressed the precision of our particular sample’s survey responses as a 95 percent confidence interval. This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. As a result, we were 95 percent confident that each of the confidence intervals in this report included the true percentages of survey responses in the study population. All survey response percentage estimates presented in this report from this survey had a margin of error of plus or minus 6 percentage points or fewer, unless otherwise noted. Focus groups. We also conducted eight focus group meetings with a nongeneralizable sample of 79 military medical residents at three military treatment facilities to obtain the perspectives of military medical residents on issues related to: (1) the nature of active-duty service obligations, including their willingness to accept different lengths of active-duty service obligations; (2) the relative importance of the service obligations in relation to other factors at different decision points, including accepting the scholarship or attending the University; (3) participating in a military residency program, and; (4) choosing a medical specialty to pursue. These meetings involved structured small-group discussions designed to gain more in-depth information about specific issues that cannot easily be obtained from single or serial interviews. Consistent with typical focus group methodologies, our design included multiple groups with varying characteristics but some similarity in experience and responsibility. To identify focus group participants, we considered gender, number of residents who had accepted the scholarship or attended the University, medical specialties, military department affiliation, number of years in a military residency training program, and prior service as a General Medical Officer. The focus groups involved a range of seven to 15 participants during each meeting. We did not select participants using a statistically-representative sampling method, so the information collected from the focus groups is not generalizable and, therefore, cannot be projected across DOD, a military department, or any single military treatment facility we visited. The eight focus group sessions included two pilot focus groups at Walter Reed National Military Medical Center and two sessions for each of the three military departments (Army, Navy, and Air Force). To identify the focus group locations, we selected military treatment facilities that included a diverse mix of medical specialties and a large pool of residents from which to select participants in order to ensure sufficient participation in the focus groups. We traveled to military treatment facilities in Bethesda, Portsmouth, and San Antonio to conduct the focus groups. Table 2 illustrates the total number of focus group participants categorized by military treatment facility, military department, and whether they accepted the scholarship or attended the University. To conduct the focus groups, one of our trained facilitators moderated each of the sessions, following a protocol that included discussion guidelines and a set of eight questions (see table 3). The focus group protocol was validated by one of our methodologists with a social science background and knowledge of small group methods. The same focus group protocol was used at all military treatment facilities the engagement team visited, with some minor modifications made after the pilot sessions at Walter Reed National Military Medical Center. We assured participants that their names would not be directly linked to their responses, and that the results would generally be reported in the aggregate. Because of the limitations on the use of data derived from the focus group meetings, including the nongeneralizable sample and results reported in the aggregate, we did not rely entirely on focus groups, but rather used several different methodologies to corroborate and support our conclusions, including web-based surveys with medical students who either accepted the scholarship or attended the University, and interviews with DOD officials. We performed a content analysis on the responses to identify common themes from across the responses to determine their frequencies. For the qualitative analysis, we developed a standard coding scheme to identify common themes and determine their frequencies. We also identified other themes that we determined to be important based on our surveys with scholarship and University medical students and interviews with DOD officials. To obtain information concerning military dental residents’ views, perceptions, and feelings on issues related to the nature of active-duty service obligations, including their willingness to accept different lengths of service obligations and a change from a concurrent to a consecutive model of service obligation fulfillment, we conducted two focus group sessions with 20 Air Force dental residents who were in training at the Air Force Postgraduate Dental School, Joint Base San Antonio. The focus group participants had previously accepted the scholarship and varied by gender, rank, prior military service, dental specialty, and number of years in dental residency training. These discussions were conducted using a method and protocol that was similar to the approach for the medical students. After analyzing the results of these two focus groups with military dental residents and taking into consideration the interviews we conducted with DOD officials, we determined it was not necessary to conduct further focus groups with military dental residents or include dental students in our survey of current scholarship students. Dental students’ career paths differ in significant ways from medical students’ career paths. According to DOD officials and residents in the dental focus groups, military dentists are generally already serving consecutive service obligations by fulfilling their active-duty service obligation from dental school while serving as general dentists before training in a military residency program. As a result, a change from a concurrent to a consecutive service obligation model may not affect military dentists in a similar way that it would military physicians. Interviews. In addition, we conducted interviews with relevant DOD officials to understand their position on the effect of the length of active- duty service obligations on recruitment and retention of military physicians and dentists. Specifically, we interviewed officials from the Office of the Assistant Secretary of Defense for Health Affairs; the Office of the Under Secretary of Defense for Personnel and Readiness; the Defense Health Agency, and; various areas within the military departments with responsibilities related to medical or dental corps recruitment, retention, and education, such as the Offices of the Surgeons General, Manpower and Reserve affairs, and medical and dental corps or commands. We conducted this performance audit from September 2018 to December 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Cash Compensation of Specialized Military Physicians and Dentists Compared to Private Sector Civilians, 2017 Appendix II: Cash Compensation of Specialized Military Physicians and Dentists Compared to Private Sector Civilians, 2017 percentile) percentile) Below 20th percentile Below 20th percentile median percentile) percentile) Below 20th percentile Below 20th percentile median percentile) percentile) Below 20th percentile Below 20th percentile median percentile) percentile) Radiology- Diagnostic (Interventional) Radiology- Diagnostic (Non-Interventional) The American Medical Group Compensation and Productivity Survey information represents the total annual compensation of the physician, including base and variable compensation plus all voluntary salary reductions. Examples of total compensation would include, but are not limited to, the following: compensation paid as salary or production-based compensation plans, any type of additional bonuses or incentives, clinically-related medical directorships, call coverage, and ancillary or advanced practice clinical supervision stipends. Compensation excludes any fringe benefits and employer payments to any type of retirement, pension, Supplemental Executive Retirement Plan, or tax-deferred profit-sharing plan. Specialty compensation (25th percentile, median, 75th percentile) percentile) Below 25th percentile Below 25th percentile below median compensation (25th percentile, median, 75th percentile) percentile) The American Dental Association, Health Policy Institute, Survey of Dental Practice information represents the reported annual net income of specialists in private practice, 2017. We obtained net income information for full-time practitioners—who reported working 35 hours a week or more—from the American Dental Association (ADA). Payments toward a retirement plan are included in net income. Appendix III: Estimated Population Proportion of Questions from GAO’s Surveys of Military Medical Students We conducted two web-based surveys with a generalizable sample of current Health Professions Scholarship Program (scholarship) and Uniformed Services University of the Health Sciences (University) medical students to obtain information about the students’ knowledge of the current program and willingness to accept different lengths of service obligations or a change to a consecutive service obligation model. One survey was administered to current scholarship medical students from June 26, 2019 through August 26, 2019; the survey of current University medical students was administered from June 25, 2019 through August 6, 2019. The questions in both surveys were largely the same. The main differences reflected the different pay and benefits from accepting a scholarship or attending the University and the differences in length of active-duty service obligation. The survey provided to scholarship students also included questions about whether students considered attending the University, while the survey provided to University students did not include a question about whether they considered accepting the scholarship. As a result, the scholarship survey had additional questions than the University survey. Responses to selected questions we asked in the surveys that were directly applicable to the research objectives in this report are shown below. The surveys consisted of closed- and open- ended questions, including demographic questions that were used in our analyses of the students’ responses. In this appendix, we did not provide information on responses provided to the open-ended or the demographic questions. See appendix I for a full description of the survey and estimation methodologies. GAO Survey of HPSP Medical Students The U.S. Government Accountability Office (GAO), an agency of the United States Congress, is studying the active-duty service obligation associated with the Armed Forces Health Professions Scholarship Program (HPSP) and the Uniformed Services University of the Health Sciences (USUHS). As a part of this study, GAO is conducting a nationwide survey of medical students who are participating in the HPSP or attending USUHS. We appreciate your insights, as it is important for GAO to provide student views of the current program to the Congress. Question 1 - How much did the following factors contribute to your decision to accept the HPSP scholarship? 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval - upper bound (percentage) NA e. Desire to provide care to military personnel, dependents, and retirees f. Desire to provide medical care while deployed g. Other (please specify below) Active-Duty Service Obligations Generally, participants in the HPSP incur a 1-year active-duty service obligation for each year of HPSP scholarship accepted. Similarly, a military residency may also result in an active- duty service obligation of 1 year for each year of residency. Currently, these two sets of obligationsare served at the same time, so a servicemember will effectively serve the longer of the two obligations. Residencies vary in length, and result in different service obligations. One example would be that a service member accepts 4 years of HPSP funding, requiring a 4-year active-duty service obligation, AND completes a 4-year military residency, which requires a 3-year active-duty service obligation. A 4-year military residency only requires a 3-year active-duty service obligation because the intern year or first year of residency does not result in a service obligation. Under the current system, this servicemember would serve both obligations (4 years and 3 years) at the same time. Completion of the first 3 years would satisfy the residency obligation and 3 of the 4 years of HPSP obligation; the final 1 year would satisfy the remaining HPSP obligation. Question 3 - When you decided to accept an HPSP scholarship, how familiar were you, if at all, with the active-duty service obligation requirements for HPSP and for completing a military residency? 95 Confidence Interval – lower bound (percentage) Alternative Active-Duty Service Obligations Responses 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval - upper bound (percentage) a. An additional 1-year service obligation for 4 years of HPSP (1.25 years of commitment for each year of funding)? (No change in the service obligation for the medical residency.) (CHECK ONLY ONE ANSWER) No Don’t Know b. An additional 2-year service obligation for 4 years of HPSP (1.5 years of commitment for each year of funding)? (No change in the service obligation for the medical residency.) (CHECK ONLY ONE ANSWER) Additional service obligations and incentives c. An additional 1-year service obligation for 4 years of HPSP AND additional cash incentives? (No change in the service obligation for the medical residency.) (CHECK ONLY ONE ANSWER) 28.3 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval - upper bound (percentage) d. An additional 2-year service obligation for 4 years of HPSP AND additional cash incentives? (No change in the service obligation for the medical residency.) (CHECK ONLY ONE ANSWER) e. Service obligations served one after the other? For example, a service obligation for 4 years of medical school with the HPSP scholarship and a 4 year military residency have two service obligations – 4 years for HPSP and 3 years for the residency. Service obligations served one after the other in this example would result in a term of 7 years. (CHECK ONLY ONE ANSWER) f. A 4-year active-duty commitment AND a 2-year selected reserve commitment? Currently, HPSP participants may be subject to an individual ready reserve commitment after the completion of their active-duty service obligation. With a selected reserve commitment, reservists typically drill about 1 weekend a month and 2 weeks a year, and may be activated in support of military operations. (CHECK ONLY ONE ANSWER) If ‘No’ or ‘Don’t Know’ to Questions 5a, 5b, 5c, 5d, 5e, or 5f Which of the following funding options, if any, would you have pursued instead of accepting the HPSP scholarship? (CHECK ALL THAT APPLY) Personal or family resources Yes National Health Service Corps Scholarship Program None - would not have attended medical school Other (please specify) GAO Survey of Uniformed Services University of the Health Sciences Students The U.S. Government Accountability Office (GAO), an agency of the United States Congress, is studying the active-duty service obligation associated with the Armed Forces Health Professions Scholarship Program (HPSP) and the Uniformed Services University of the Health Sciences (USUHS). As a part of this study, GAO is conducting a nationwide survey of medical students who are participating in the HPSP or attending USUHS. We appreciate your insights, as it is important for GAO to provide student views of the current program to the Congress. Question 1 - How much did the following factors contribute to your decision to attend USUHS? 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval – upper bound (percentage) a. Desire to avoid or reduce medical school debt b. Officer pay while in school c. Desire to serve your country in the armed forces 34.1 95 Confidence Interval – lower bound (percentage) Very Great Contribution Substantial Contribution Some Contribution Little or No Contribution h. Other (please specify below) Active-Duty Service Obligations The active-duty service obligation for completing the 4-year program at USUHS is 7 years. A military residency also results in an active-duty service obligation of 1 year for each year of residency, with the exception of the first year or intern year, which does not result in an active duty service obligation. Currently, these obligations are served at the same time, so a servicemember will serve the longer of the two obligations. Residencies vary in length and result in different service obligations. An example would be that a servicemember completes medical school at USUHS, which requires a 7-year active-duty service obligation, AND completes a 4-year military residency, which requires a 3-year active- duty service obligation. A 4-year military residency only requires a 3-year active-duty service obligation because the intern year or first year of residency does not result in a service obligation. Under the current system, this servicemember would serve both obligations (7 years and 3 years) at the same time. Completion of the first 3 years would satisfy the residency obligation and 3 of the 7 years of USUHS obligation; the next 4 years would satisfy the remaining USUHS obligation. Question 2 - When you decided to attend USUHS, how familiar were you, if at all, with the active- duty service obligation requirements for attending USUHS and for completing a military residency? 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval – upper bound (percentage) Question 3 - When you decided to attend USUHS, how familiar were you with the fact that the medical school and military residency service obligations are served at the same time? (CHECK ONLY ONE ANSWER) 95 Confidence Interval – lower bound (percentage) Alternative Active-Duty Service Obligations Responses 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval – upper bound (percentage) a. An additional 1-year service obligation for attending USUHS? (No change in the service obligation for the medical residency.) 71.8 23.3 b. An additional 2-year service obligation for attending USUHS? (No change in the service obligation for the medical residency.) No Don’t Know Additional service obligations and incentives c. An additional 1-year service obligation for attending USUHS AND additional cash incentives? (No change in the service obligation for the medical residency.) NA 19.4 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval – upper bound (percentage) d. An additional 2-year service obligation for attending USUHS AND additional cash incentives? (No change in the service obligation for the medical residency.) No Don’t Know e. Service obligations served one after the other? For example, a service obligation of 7 years for attending USUHS and a 4- year military residency has two service obligations – 7 years for USUHS and 3 years for the residency. Service obligations served one after the other in this example would result in a term of 10 years. f. A 7-year active-duty commitment FOLLOWED BY a 2-year selected reserve commitment? Currently, USUHS graduates may be subject to an individual ready reserve commitment after the completion of their active-duty service obligation. With a selected reserve commitment, reservists typically drill about 1 weekend a month and 2 weeks a year, and may be activated in support of military operations. (No change in the service obligation for the medical residency) If ‘No’ or ‘Don’t Know’ to Questions 4a, 4b, 4c, 4d, 4e, or 4f Which of the following funding options, if any, would you have pursued instead of attending USUHS? (CHECK ALL THAT APPLY) National Health Service Corps Scholarship Program 19.0 95 Confidence Interval – lower bound (percentage) 95 Confidence Interval – upper bound (percentage) Appendix IV: Comments from the Department of Defense Appendix V: GAO Contact and Staff Acknowledgments GAO Contact: Staff Acknowledgments: In addition to the contact named above, Lori Atkinson (Assistant Director), Adam Howell-Smith (Analyst in Charge), Taylor Bright, Timothy Carr, Breanne Cave, Alexandra Gonzalez, Caitlin Jackson, Ronald La Due Lake, Won (Danny) Lee, Kirsten Leikem, Amie Lesser, Amanda Miller, Dae B. Park, Stephanie Santoso, and Lillian Yob made key contributions to this report. Related GAO Products Defense Health Care: DOD's Proposed Plan for Oversight of Graduate Medical Education Programs. GAO-19-338. Washington, D.C.: March 28, 2019. Defense Health Care: Actions Needed to Determine the Required Size and Readiness of Operational Medical and Dental Forces. GAO-19-206. Washington, D.C.: February 21, 2019. Military Personnel: DOD Needs to Improve Dental Clinic Staffing Models and Evaluate Recruitment and Retention Programs. GAO-19-50. Washington, D.C.: December 13, 2018. Military Personnel: Additional Actions Needed to Address Gaps in Military Physician Specialties. GAO-18-77. Washington, D.C.: February 28, 2018. Defense Health Reform: Steps Taken to Plan the Transfer of the Administration of the Military Treatment Facilities to the Defense Health Agency, but Work Remains to Finalize the Plan. GAO-17-791R. Washington, D.C.: September 29, 2017. Military Compensation: Additional Actions Are Needed to Better Manage Special and Incentive Pay Programs. GAO-17-39. Washington, D.C.: February 3, 2017. Defense Health Care Reform: DOD Needs Further Analysis of the Size, Readiness, and Efficiency of the Medical Force. GAO-16-820. Washington, D.C.: September 21, 2016. Defense Health Care: Actions Needed to Help Ensure Full Compliance and Complete Documentation for Physician Credentialing and Privileging. GAO-12-31. Washington, D.C.: December 15, 2011. Military Cash Incentives: DOD Should Coordinate and Monitor Its Efforts to Achieve Cost-Effective Bonuses and Special Pays. GAO-11-631. Washington, D.C.: June 21, 2011. Military Personnel: Status of Accession, Retention, and End Strength for Military Medical Officers and Preliminary Observations Regarding Accession and Retention Challenges. GAO-09-469R. Washington, D.C.: April 16, 2009.

DOD invests in a number of incentives to recruit and retain its nearly 15,000 military physicians and dentists, such as providing a tuition-free education to medical and dental students who in return agree to serve as military physicians or dentists for a specific amount of time. Section 597 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 included a provision for GAO to review military physicians' and dentists' compensation, among other things. This report addresses, among other objectives, (1) how compensation for military physicians and dentists compared to private sector civilians with comparable skills in 2017, and (2) the extent to which DOD has developed an approach to recruit and retain military physicians and dentists through a package of incentives that reflect key principles of effective human capital management. GAO compared military and civilian cash compensation for 2017—the most recent year of data amongst data sources, assessed incentive packages against key principles of human capital management, and conducted surveys and held focus groups to obtain the perspectives of current military medical students and residents regarding military service obligations. In 2017, cash compensation for military physicians and dentists in most of the 27 medical and dental specialties GAO reviewed was generally less than the median compensation of private sector civilians, but the Department of Defense (DOD) provides substantial deferred and noncash benefits, such as retirement pensions and tuition-free education, whose value to servicemembers is difficult to determine. GAO found that for 21 of the 27 physician and dental specialties, the maximum cash compensation was less than the private sector civilian median within four officer pay grades (O-3 to O-6) (see figure for number of physician specialties by pay grade). Moreover, cash compensation for military physicians and dentists was less than the private sector civilian median at key retention points, such as after physicians and dentists fulfill their initial active-duty service obligations. DOD recruits and retains physicians and dentists through a package of incentives, including tuition-free medical or dental school and special and incentive pays, such as multi-year retention bonuses. However, DOD does not consistently collect information related to the following three key principles of effective human capital management to help inform investment decisions in its package of recruitment and retention incentives: Replacement costs . DOD does not consistently collect information on replacement costs of military physicians and dentists. However, DOD has previously identified replacement costs as a factor in assessing the appropriateness of incentive pays. Current and historical retention information . DOD does not consistently collect information on retention of physicians and dentists, specifically acceptance rates for retention bonuses, to help assess the effectiveness of these bonuses. Private sector civilian wages. DOD does not consistently collect information on private sector civilian wages. Officials stated that civilian wages are not a driving factor when considering adjustments to special and incentive pays, in part because DOD cannot always match civilian sector compensation for military physicians and dentists. By collecting and using this information to help inform its decision-making, DOD would be better positioned to assess the effectiveness of its incentives to recruit and retain military physicians and dentists and make sound investment decisions for the future.

GAO_GAO-20-5

Background FEMA’s Role in Providing Assistance During and After Wildfires Fire Management Assistance Grants The activities and resources required to suppress wildfires generally belong to the states and federal agencies with land management missions, such as the U.S. Forest Service and four bureaus (Bureau of Land Management, Bureau of Indian Affairs, National Park Service, and U.S. Fish and Wildlife Service) within the U.S. Department of the Interior. FEMA can provide reimbursement to help support wildfire suppression (e.g., labor costs for overtime or seasonal personnel involved in fire suppression activities). When a wildfire burns on nonfederal lands and threatens to become a major disaster, a state governor or governor’s representative may request federal assistance via a Fire Management Assistance Grant (FMAG) administered by FEMA. While the fire is burning, a governor’s office can submit a verbal request for an FMAG to the designated FEMA regional office, followed within 14 days by a formal written request. The regional administrator then either approves or denies the request after consulting with relevant officials from the U.S. Forest Service or bureaus within the U.S. Department of the Interior about technical aspects of the fire. Eligible FMAG costs include, among other things, equipment and supplies, labor costs, travel and per diem, temporary repairs of damage caused by firefighting activities, mobilization and demobilization of resources, and limited costs of pre-positioning fire prevention or suppression resources. From fiscal years 2009 through 2018, FEMA awarded 374 FMAGs totaling $952,318,049. The average FMAG during this timeframe was about $2.5 million. The state of California received the majority of those grant funds—over $543 million. Figure 1 below illustrates the states that received FMAGs during this 10 year period, figure 2 provides annual FMAG totals, and figure 3 provides a breakout of the dollars distributed by state for this same 10 year period. If a wildfire increases in size and intensity in a manner that overwhelms the ability of state, tribal, territorial or local governments to respond and recover effectively, a state or tribal government can request and the President can approve a major disaster declaration, as with other types of disasters (e.g., a hurricane or flood). A disaster declaration is the primary mechanism by which the federal government gets involved in funding and coordinating response and recovery activities. Under the National Response Framework, the Department of Homeland Security (DHS) is the federal department with primary responsibility for coordinating disaster response, and within DHS, FEMA has lead responsibility. From fiscal years 2009 through 2018, a total of 19 major disasters were declared as a result of wildfires. Figure 4 shows the number and locations of these major disaster declarations. Once a major disaster is declared, FEMA can provide funds for response and recovery efforts through the Disaster Relief Fund and coordinate other federal support through the National Response Framework’s 14 Emergency Support Functions. Federal assistance following a major disaster declaration includes the following: Individual Assistance: FEMA’s Individual Assistance programs provide assistance directly to individuals and households, as well as state, local, tribal, and territorial governments to support individual survivors. This assistance covers necessary expenditures and serious needs that cannot be met through insurance or low-interest loans, such as temporary housing assistance, counseling, unemployment compensation, or medical expenses. See appendix I for a further description of FEMA’s Individual Assistance program. Public Assistance: FEMA’s Public Assistance program provides supplemental federal disaster grant assistance to state, local, tribal, and territorial governments and certain types of private nonprofit organizations for debris removal, emergency protective measures, and the restoration of disaster-damaged, publicly-owned facilities and the facilities of certain private nonprofit organizations. The eligibility rules outline the types of damage that can be reimbursed by the federal government and steps that federal, state, and local governments must take in order to document eligibility. If the debris on private property is determined to be so widespread that it threatens the health, safety, or economic recovery of the community, FEMA may determine that debris removal from private property, including contaminated soil, is eligible for reimbursement under the Public Assistance program. An applicant (a state, territorial, or tribal government) may contract for debris removal. Alternatively, if an applicant lacks the capability to perform or contract for debris removal, the applicant may request that the federal government perform the work. In such cases, FEMA may task another federal agency, typically the U.S. Army Corps of Engineers (USACE), to perform or contract the work by issuing a mission assignment (see description below). See appendix I for a further description of FEMA’s Public Assistance program. Mission Assignment to Other Agencies: FEMA can fulfill disaster response needs through mission assignments—work orders it issues to another federal agency to provide a service or other response need. For example, FEMA may request medical teams from the Department of Health and Human Services and logistical support from the Department of Defense. Hazard Mitigation Grant Program: This program is designed to improve disaster resilience—the ability to prepare and plan for, absorb, recover from, and more successfully adapt to disasters—during recovery. The program funds a wide range of projects, such as use of non-combustible materials on new and existing homes to mitigate risk from future wildfires, adding shutters to windows to prevent future damage from hurricane winds and rains, and rebuilding culverts in drainage ditches to prevent future flooding damage. Table 2 below shows money obligated for Individual Assistance, Public Assistance, mitigation efforts, operations (including mission assignments), and administrative costs for the 19 major disaster declarations resulting from wildfires from fiscal years 2009 through 2018. Other Federal Roles and Responsibilities for Wildfires The U.S. Forest Service within the Department of Agriculture and the Bureau of Indian Affairs, Bureau of Land Management, U.S. Fish and Wildlife Service, and National Park Service within the Department of the Interior, are responsible for managing wildfires on federal lands. Wildfire management consists of three primary components: 1. Preparedness involves acquiring and positioning firefighting assets. 2. Suppression involves selecting among strategies to extinguish or contain a fire, with the aim of protecting firefighters and public safety and using the minimum resources necessary. 3. Fuels Reduction involves acting in advance of wildfires to manage vegetation with the aim of reducing the intensity, severity, or negative effects of a wildfire. We are currently reviewing federal fuel reduction efforts, and how those efforts consider community protection, and plan to issue a report on the subject later this year. State Efforts and Assistance Available for Fighting Wildfires State forestry agencies and other nonfederal entities—including tribal, county, city, and rural fire departments—have primary responsibility for managing wildfires on nonfederal lands, and share responsibility for protecting homes and other private structures. When a wildfire occurs on nonfederal lands and begins to exceed the state or local entity’s ability to effectively respond to the wildfire, the state or local entity may seek assistance from neighboring jurisdictions, typically through prescribed mutual aid agreements. For example, during wildfires in California in October and December of 2017, the California Governor’s Office of Emergency Services used the California fire and rescue and law enforcement mutual aid systems, along with the national Emergency Management Assistance Compact to mobilize and organize a large number of emergency services. In total, according to California Governor’s Office of Emergency Services, over 400 state and local government and 200 out-of-state fire departments sent engines, crews, and other assets to assist the local firefighting efforts. When a state or local jurisdiction needs further firefighting assistance, it may request additional support through Geographic Area Coordination Centers overseen by the National Interagency Fire Center. Once a Geographic Area Coordination Center has exhausted the resources it can provide, it can turn to the National Interagency Coordination Center within the National Interagency Fire Center for further assistance. FEMA Provided Assistance to Help Wildfire-Affected State and Local Jurisdictions Consistent with Its Role in the National Response and Recovery Frameworks For wildfire disaster declarations from 2015 to 2018, FEMA provided a variety of assistance to state and local emergency management officials consistent with roles and responsibilities in the National Response Framework and National Disaster Recovery Framework. Specifically, FEMA helped these jurisdictions by reimbursing some fire suppression costs, supporting state-led efforts to coordinate the response and provide for the immediate needs of displaced survivors, and helping localities plan and execute recovery. FEMA has obligated over $2.4 billion to assist in response to and recovery from these disasters to date. As previously discussed, although states and other federal agencies have primary responsibility for fire suppression, some state and local fire suppression costs are eligible for reimbursement through FMAGs. Most wildfire-affected states and localities in our scope received this kind of fire suppression support from FEMA initially in the form of the FMAGs. As the fires ultimately led to major disaster declarations, any funding that FEMA would have provided through the FMAGs were ultimately provided under Public Assistance as part of the declaration. To support state-led response and provide for the immediate needs of displaced survivors, FEMA deployed staff to assist in state Emergency Operations Centers and secured needed resources for mass care—such as cots to help with temporary sheltering, according to state officials. In addition, FEMA assigned federal agencies to perform various missions to help with disaster response. For example, the Environmental Protection Agency provided hazardous material cleanup of damaged properties, and USACE provided public works services, such as contracting for debris removal. As response activities continued and recovery began, FEMA and the state emergency management agencies established Joint Field Offices, which are temporary field offices established to coordinate federal and state efforts in disaster response and recovery, and provided resources to help individual disaster survivors with community services and housing needs. For example, following wildfires in November 2018—including the Camp Fire in Butte County—FEMA provided over $55 million to survivors to reimburse them for the cost of temporary lodging and rentals after their homes were destroyed. In addition, FEMA provided funding and support to local jurisdictions to help address community infrastructure needs. For example, FEMA obligated money to pay for wildfire debris removal from public property as well as from private property, given the widespread effect on the community of toxic fire debris. Also to support recovery, in coordination with state and local entities, FEMA established and staffed Disaster Recovery Centers, which are facilities or mobile offices where survivors can go for information about FEMA programs or other disaster assistance programs. Representatives from the relevant state agencies, FEMA, U.S. Small Business Administration, volunteer agencies, and other agencies were at the centers to answer questions about and help survivors apply for disaster assistance and low-interest disaster loans for homeowners, renters, and businesses. Finally, to assist local jurisdictions with longer-term recovery, FEMA provided assistance to some locally-led long-term recovery activities designed to address housing and other survivor needs in the community. Table 3 shows the amount of assistance FEMA provided for each of the six major disasters that we reviewed, and Appendix II provides a more detailed breakdown of each major disaster, including a map of each disaster, the number of structures that were destroyed, and mission assignment data. Multiple Jurisdictions Reported FEMA Practices that Aided in Wildfire Response and Recovery, But also Experienced Challenges State and local officials we spoke with reported practices that aided in wildfire response and recovery and also experienced challenges that arose in multiple jurisdictions across different disasters. Jurisdictions Noted Specific Actions that Aided Response and Recovery Efforts FEMA and State Collaboration When asked what worked well, officials from three out of the six California counties told us that FEMA and the California Governor’s Office of Emergency Services collaborated effectively during response and recovery efforts. For example, one of the three counties reported that when posing questions or concerns to the California Governor’s Office of Emergency Services, they were able to quickly obtain answers or further information and get help navigating complex issues. As we reported in 2018, according to officials in the California Governor’s Office of Emergency Services and FEMA, they have developed a strong relationship with each other over time, which helps both agencies deliver consistent, unified information to stakeholders and disaster survivors. Services Provided to Disaster Survivors Local officials also praised FEMA’s role in helping to set up and operate Disaster Recovery Centers. Officials in four of the six California counties that we interviewed noted that FEMA was quick to send staff to assist local jurisdiction staff and disaster survivors at the facilities established to provide assistance, such as Local Assistance Centers (generally activated by the county in the immediate wake of a disaster to provide government services to survivors) and Disaster Recovery Centers established by FEMA. For example, one of these counties noted that FEMA had staff available at their Local Assistance Center to support requests for Individual Assistance and other items shortly after the disaster was declared, and the county received positive feedback from the public about the varied types of support provided by experienced staff at their Local Assistance Center. Officials in one of the counties mentioned above, as well as FEMA officials, cited as good practices efforts to bring together local and state providers of governmental services to provide a variety of assistance in one place. For example, FEMA credited one county for their efforts in partnering with a local mental health service provider to offer mental health counseling on site at a Disaster Recovery Center, as opposed to referring individuals to such services off site. Similarly, one Disaster Recovery Center we visited in California included representation from a number of different state agencies, such as the state’s contractors’ licensing board, insurance regulators, department of employment opportunities, and franchise tax board. Officials explained that being able to access a variety of state services in a Disaster Recovery Center can be particularly helpful for fire survivors, as they may have evacuated their homes with very little notice and lost all their identifying documentation to the fire. Jurisdictions Experienced a Number of Response and Recovery Challenges State and county officials described challenges that were present in several of the wildfire disaster declarations that we reviewed. Some of these challenges—such as a complex Public Assistance application process or FEMA staff turnover—are not specific to wildfires and could also affect recovery efforts after a hurricane, flood, or other natural disaster. Some challenges were more specific to and further complicated by the nature of wildfire disasters. These challenges include the complexity and scale of fire debris removal, shortage of temporary housing for wildfire survivors, and lack of local experience dealing with the magnitude of the wildfires encountered in 2017 and 2018. Complexity and Timeframes for FEMA Public Assistance Applications Officials in three of the seven counties we met with said that the onerous and confusing documentation required when applying for Public Assistance grants was a challenge. For example, an official from one county told us that the Public Assistance guidance in effect at the time his county was recovering from disaster contained conflicting information, though he believed this issue has since been resolved. Officials in two counties also described difficulty meeting the deadlines for application submission, especially while managing the other demands of disaster response and recovery. We have previously reported on challenges with FEMA’s administration of the Public Assistance program, including effectively overseeing and staffing the program, among other things. Officials from FEMA’s Public Assistance Division acknowledged that the complexity of the program has been a challenge for local officials in recent years. The officials pointed to the development of a new Public Assistance delivery model as the key initiative to address these challenges. This new delivery model, which includes a new information portal designed to improve local officials’ ability to upload and submit information, was intended to clarify program requirements, improve operations, and respond to previously-identified challenges, according to FEMA officials. FEMA introduced the new model in California during the recovery phase of the 2017 wildfires. Officials from two of the selected counties stated that the new information portal eased the process of submitting documentation for FEMA review. In 2017, we reported on the historical challenges with FEMA’s Public Assistance program and identified additional challenges with the roll-out of the new delivery model, including the need to determine its staffing needs for supporting rollout of the system and strengthen controls over the information system being used. California officials we spoke with also noted that in order for the new delivery model to be used efficiently, it would be helpful for FEMA to provide additional training to stakeholders who use the system. According to FEMA officials, FEMA provided a number of training sessions on the new model to California stakeholders between August 2017 and April 2019. Frequent Turnover of FEMA Staff Officials in three of the seven selected counties told us that frequent rotations of FEMA staff during disaster response and recovery was disruptive. For example, after working with state and local officials following a disaster, the rotations of FEMA staff resulted in having to re- share information that was already provided to FEMA, as well as inconsistent advice or interpretation of FEMA guidelines. FEMA officials acknowledged that ensuring continuity following staff turnover has long been an issue in multiple complex disaster environments. They noted a number of reasons why a staff member in a position might turn over. For example, according to FEMA officials, the disasters in 2017, including Hurricanes Harvey, Irma, and Maria, as well as the California wildfires, required FEMA management to redeploy response personnel from one disaster to the next. We have reported on multiple FEMA workforce challenges in prior work and continue to observe workforce challenges in our ongoing work. We are currently reviewing how FEMA deploys and trains staff to meet disaster mission needs and plan to report early in 2020. Complexity and Scale of Wildfire Debris Removal Debris removal is an important first step in the disaster recovery process, allowing communities to expedite the recovery process by restoring accessibility to public services and space, while ensuring public health and safety in the aftermath of a disaster. Debris removal posed several challenges for state and local jurisdictions affected by the wildfires. Wildfires typically leave no remaining structure, and the resulting ash contains contaminants that must be carefully removed, wrapped, and disposed of before survivors can move back to their properties. This can make the wildfire debris removal process costlier and more complicated than for other types of disaster debris. California’s Department of Resources, Recycling, and Recovery typically handles debris removal after local disasters in the state, but it did not have the capacity to handle the high volume of debris caused by the 2017 Northern California wildfires. As a result, the state asked FEMA to assign USACE with the debris removal mission. According to local officials, there was some confusion over how much contaminated soil should be removed from some properties. Specifically, in some cases, USACE removed more soil than necessary at home sites in an attempt to “scrape” the soil deeply enough to remove all possible contaminants at the site; however, this did not take into account that some contaminants, such as arsenic, occur naturally in the soil. As a result, some property owners were left with large over-excavated pits on their property that needed to be filled in before rebuilding could occur. Figure 5 shows a property site that, according to local officials, had been excavated below the foundation of the home and thus needed to be refilled with soil, complicating the rebuilding effort. In addition, officials from one county stated that USACE staff rotations made it difficult for state and local officials to communicate debris removal options clearly both internally and to the public, leading to confusion among some survivors about their best options for debris removal. In 2018 and 2019, we reported on issues with contracting for wildfire debris removal. We found that USACE’s debris removal contracts, while broad enough to cover any type of debris, had been used primarily to manage hurricane debris removal and did not address issues posed by wildfire debris removal. We also found that miscommunication at the federal level resulted in differing expectations between USACE and state and local officials about debris removal work to be performed, such as the types of structures to be removed from private property and acceptable soil contamination levels. According to USACE officials, they relied on FEMA to manage communication with states and localities and to identify and manage expectations about the scope of work to be performed. We recommended, among other things, that FEMA take the lead to work together with USACE to revise the mission assignment policy and related guidance to better incorporate consideration of contracting needs and to ensure clarity of contracting-related coordination responsibilities. DHS concurred with this recommendation and reported that it will take steps— such as development of mission assignment project management tools and training for mission assignment work—to implement it. Shortage of Temporary Housing for Wildfire Survivors According to DHS’s 2017 National Preparedness Report, providing effective and affordable temporary housing for disaster survivors has been a longstanding and continuing challenge. Wildfires pose an additional challenge because in contrast to disasters such as hurricanes or floods where there may be a substantial portion of a home left standing, and property may be habitable after the most dangerous debris is removed, wildfires generally destroy entire structures and leave a pile of contaminated debris and soil. This kind of damage requires a lengthier clean-up and necessarily precludes survivors from occupying the property until state and local officials declare the lot safe for habitation. In the meantime, one of FEMA’s responsibilities under the Mass Care, Emergency Assistance, Temporary Housing and Human Services Emergency Support Function is to help displaced disaster survivors with access to temporary housing. This has posed challenges for some of the counties we spoke with, most notably in select Northern California communities. In particular, officials in two California counties noted that vacancy rates are very low in these areas, and there were few places to house survivors who were either waiting to rebuild on their property or had been living in rental properties that were destroyed. In addition, in one California county there have been a limited number of potential sites available (such as commercial parks or group sites) to place transportable temporary housing units. According to FEMA, several factors limited the number of commercial or group sites available for such housing units, including limited space for the housing units, contaminated utilities, and challenges with local jurisdictions responsible for deciding whether and where to place group sites. According to FEMA officials, the nature of fire debris affects the array of post-disaster housing options that FEMA can offer through its Individual Assistance program. For example, although FEMA can provide replacement assistance for destroyed homes and repair assistance for homes with damage that can be repaired, the complete destruction of homes due to fires significantly lengthens the recovery processes. Rental assistance and lodging reimbursement are limited by lack of access to rental properties, and the use of manufactured housing units is limited by lack of group sites that meet requirements, including adequate space for such units and access to utilities (e.g., potable water not contaminated by fire damage). See Appendix I for more information on this program. FEMA officials acknowledged that providing housing for survivors has long been a challenge for the agency. They also acknowledged that several of FEMA’s housing tools are less relevant to wildfires versus other disasters (as discussed above). According to FEMA, the agency is currently reviewing various aspects of its housing mission to better identify ways to address some of these challenges. Lack of Experience with Large- Scale Wildfires Officials from two of the counties we spoke with said that their lack of experience in response to and recovery from wildfires of the magnitudes encountered was very challenging. Officials from one of those counties stated that they did not have the knowledge or skill-set needed at the local level to best identify response and recovery needs and relied heavily on FEMA and California’s Governor’s Office of Emergency Services for resources and training in these areas. Officials from another county stated that neither they nor FEMA were accustomed to the level of destruction in a rural area, which created challenges identifying resources and processes to remove damaged trees from private property, storing the volume of downed trees, and maintaining the few roads available for hauling debris. Officials from another county in California described being unprepared when they were tasked with collecting duplicate payments for private property debris removal after survivors received their insurance benefits. Residents who participated in the private property debris removal program who were paid out of FEMA’s Public Assistance program, and subsequently also received an insurance benefit for debris removal, were required to repay the federal government for the duplicate benefit. According to these county officials, they were not aware that collection would be their responsibility until about 2 years after the initial debris removal took place. The officials noted that the administrative burden for identifying the affected homeowners and the amount owed and then collecting the payments was significant, and taxed their administrative capacity. They said they wished they had been aware sooner that they would have to absorb this duty, so they could put systems in place. According to FEMA and state officials, however, these requirements were included in FEMA’s Public Assistance Program and Policy Guide, which states that local governments are responsible for implementing private property debris removal, including the requirement to collect and reimburse FEMA for any duplicate benefits. Nevertheless, the confusion described by the county government illustrates the difficulty jurisdictional officials with little previous wildfire experience can have navigating complex program rules while simultaneously confronting the disaster aftermath. FEMA Has Identified Lessons Learned from 2017 Wildfires but Could Further Benefit from a Comprehensive Assessment of Its Operations, Policies, and Procedures FEMA Has Prepared an After-Action Report for 2017 California Wildfires In June 2019, FEMA Region IX—which provides disaster assistance in California—finalized the after-action report for the October and December 2017 wildfire disasters in Northern and Southern California. FEMA’s 2017 wildfire after-action report offered response and recovery lessons learned from both the challenges identified and successful practices. Some, but not all, of these were mirrored in our interviews with California jurisdictions that were affected by recent wildfires. Among its findings, the 2017 wildfire after-action report identified several areas for improvement. For example, FEMA’s immediate activation of the Transitional Sheltering Assistance program and lack of a unified information system to track applicants’ eligibility for all Individual Assistance programs at the time of the wildfires resulted, in some instances, in applicants receiving sheltering benefits inappropriately (i.e., receiving Transitional Sheltering Assistance benefits despite their residence being undamaged). One potential action to address this challenge identified in the report was to add information on Transitional Sheltering Assistance program applicants into the database that FEMA uses to track disaster information to ensure those applicants have access to all benefits and reduce the potential for duplication. FEMA officials have stated that since the 2017 wildfires, policy changes have been made to address this issue, including adding Transitional Sheltering Assistance program applicant data to the information system used to track eligibility for all Individual Assistance programs. In addition, FEMA reported that the typical contracts USACE had in place for debris removal were not designed to address the nature (i.e., fire- related debris) and scope of work required, particularly with respect to private property debris removal. The agencies worked together to rapidly scope the statements of work for the debris removal contracts to provide services to survivors, but FEMA ultimately found that the contract requirements lacked detail and clarity, resulting in additional costs. USACE prepared its own after-action report after the 2017 wildfires, which also identified challenges with the scope of its debris removal contracts and the mission assignment task orders, and planned to incorporate lessons learned in future debris removal contracts. According to FEMA Region IX officials, many of the issues regarding debris removal stemmed from not having documented processes in place to govern wildfire debris removal specifically. In its after-action report, FEMA identified potential actions to address these challenges—such as developing standard operating procedures in coordination with USACE for fire debris removal—to correct these and other identified areas for improvement. According to USACE officials, FEMA subsequently provided funds through a 2018 wildfire disaster declaration to USACE to develop such standard operating procedures. USACE officials told us they had shared these procedures with FEMA and stated that the procedures will help guide future wildfire private property debris removal operations. The 2017 after-action report also identified a number of strengths and best practices during 2017 wildfire response and recovery efforts in California. For example, the report noted that collaboration and pre- existing relationships between federal and state personnel helped to overcome knowledge gaps about certain programs and improved survivor outcomes (such as the placement of temporary housing units based on work done by an interagency task force). In addition, Facebook provided FEMA with pre- and post-disaster survivor locations (provided voluntarily by the survivor) that helped identify where survivors were located after the wildfires. Using this information, FEMA then worked with the state and private sector in order to help plan for short- and long-term housing solutions. FEMA Could Improve Its Preparation for Potential Effects of Heightened Wildfire Risks by Comprehensively Assessing Its Operations, Policies, and Procedures Standards for Internal Control in the Federal Government state that management should identify, analyze, and respond to significant changes that could impact its internal control system, which would include actions established through policies and procedures. Agency management, therefore, should analyze the effect of identified change on policies and procedures and revise such policies and procedures—and other elements of its internal control system—on a timely basis to maintain effectiveness. The combination of back-to-back devastating wildfire seasons in California, overall upward trends in wildfire disaster declarations, and several factors that point to increased likelihood of severe wildfire activity in the future suggest a change that may have significant impacts on FEMA’s operating environment. As shown in figure 6, from 1953 to the present, the number of major disaster declarations from wildfires has increased in nearly every decade since 1950 and most dramatically in the last two decades. During Congressional testimony from March 2018, FEMA’s Region IX Administrator stated that fire season has changed from covering spring through early fall to a now year-round event, and that the unprecedented impacts from the 2017 wildfire season would linger for years to come. Land use practices and climate trends increase the likelihood that severe and intense wildfires will affect people and communities. As we have described in previous reports, land use practices over the past century have reduced forest and rangeland ecosystems’ resilience to fire. Land use practices like fire suppression and timber harvesting have contributed to abnormally dense accumulations of vegetation. These accumulations can fuel uncharacteristically large or severe wildfires. At the same time, development occurring in and around wildlands—an area often called the wildland-urban interface—has increased, placing more people, businesses, and infrastructure at risk. The wildland-urban interface contains 46 million single-family homes, representing about 40 percent of single-family homes in the United States. According to the 2014 Quadrennial Fire Review, 60 percent of new homes built in the United States since 1990 were built in the wildland-urban interface. As the footprint of human activity and settlement into the wildland-urban interface expands, the risk of fire exposure to people and property is expected to increase further. In addition, changing climate conditions, including drier conditions in certain parts of the country, have increased the length and severity of wildfire seasons, according to many scientists and researchers. For example, in the western United States, the average number of days in the fire season increased from approximately 200 in 1980 to approximately 300 in 2013, according to the 2014 Quadrennial Fire Review. According to the U.S. Global Change Research Program’s 2018 National Climate Assessment, warmer and drier conditions have led to a greater incidence of large forest fires (fires with an area greater than 386 square miles) in the western United States and Alaska, a trend expected to continue as climate warms and the fire season gets longer. Despite these trends and projections, FEMA does not plan to comprehensively assess operations to determine whether and how policies and procedures might need to change to better respond to changing operational conditions. According to FEMA officials, they had not considered conducting this kind of review, because they believe their existing mechanisms—specifically after-action reporting, the continuous improvement process, and program specific mechanisms such as the Public Assistance Change Control Tool—will allow them to incorporate relevant lessons into policies and procedures. According to FEMA officials, after a major disaster, FEMA’s standard practice is to identify areas for improvement and develop lessons learned that can improve FEMA planning and policy and support national preparedness by preparing an after-action report which is required by FEMA policy. FEMA has a continuous improvement program which serves as the overarching process by which it identifies and responds to operational lessons learned identified in after-action reporting. According to FEMA officials, FEMA headquarters reviews all completed after-action reports to identify any areas for improvement that may need to be addressed through changes in policies and procedures. Although the continuous improvement process and its reliance on after- action reporting offers the opportunity to incorporate discrete lessons learned into select policies and procedures, there are some limitations in its ability to offer a comprehensive assessment of its internal controls in light of the strong potential that wildfire disasters will continue to increase. By its nature, after-action reporting captures select issues at a specific time and in a specific place, but it is not a dedicated effort to assess how various policies and procedures may need to be changed to better respond to changing operational conditions. For example, in our discussions with fire-affected jurisdictions, we noted that some programmatic or policy challenges were specific to or made more difficult by the nature of wildfires, such as the complexities of debris removal and difficult housing missions. A comprehensive review of internal controls, such as policies, procedures, and training, may shed light on aspects of FEMA’s operations—well tested over the years in hurricane and flood situations—that could be adapted for greater responsiveness to the wildfire environment, helping to ensure attention to a broad range of issues in addition to those that might be noticed in a specific time and place through after-action reporting. In light of the potential for high-impact wildfires to become more frequent, a dedicated effort to comprehensively assess operations could help FEMA better ensure that its management controls—such as policies, procedures, and training—are as well designed as possible to respond to the unique challenges. Conclusions Devastating wildfires have exacted a large human and financial toll in recent years, with 159 lives lost and $2 billion obligated by FEMA in response during the major disasters of 2017 and 2018. FEMA has provided support personnel and resources to affected state and local jurisdictions to aid in wildfire response and recovery efforts. Given some reports of projected increase in risk from wildfires—as well as the challenges we have noted in providing housing, conducting debris removal operations, and other areas—comprehensively assessing agency operations in response to and recovery from wildfires to determine if any actions or changes to agency policies and procedures are needed could provide guidance or insight for communities that may be affected in the future. Comprehensively identifying, analyzing, and responding to the significant operating changes posed by wildfires, as recommended in internal control standards, could provide FEMA with an opportunity to better ensure the nation is ready to address the unique challenges posed by increased large-scale wildfires. Recommendation for Executive Action We recommend that the FEMA Administrator comprehensively assess operations to identify any additional updates to its management controls—such as policies, procedures, or training—that could enhance future response and recovery from large-scale and severe wildfires. (Recommendation 1) Agency Comments and Our Evaluation In August 2019, we requested comments on a draft of this report from the Departments of Agriculture, Defense, Interior, and Homeland Security. The Departments of Agriculture and Defense had no formal or technical comments. In September 2019, FEMA and the Department of the Interior provided technical comments, which we have incorporated as appropriate. In addition, DHS provided an official letter for inclusion in the report, which can be seen in appendix III, stating that it concurred with our recommendation. DHS’s letter describes a number of ongoing and planned actions that it plans to leverage in addressing our recommendation. These actions include, among other things, the use of sheltering and housing field teams to support states’ efforts to house disaster survivors; continued updates to direct housing guidance; developing guidance for the use of FEMA-issued, state-administered direct housing grants authorized by the Disaster Recovery Reform Act of 2018; and development of a project to analyze and improve capabilities and identify areas of innovation in response to wildfire disasters. DHS anticipates that these efforts will be put into effect by December 2020. We will continue to monitor DHS and FEMA’s efforts in addressing our recommendation. We will send copies of the final report to the Secretaries of the departments mentioned above, the FEMA Administrator, and appropriate congressional committees. If you or your staff have any questions about this report, please contact me at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other key contributors to this report are listed in appendix IV. Appendix I: Federal Emergency Management Agency (FEMA) Individual Assistance and Public Assistance Programs FEMA’s Individual Assistance programs provide assistance directly to individuals and households, as well as state, local, tribal, and territorial governments to support individual survivors. This assistance covers necessary expenditures and serious needs that cannot be met through insurance or low-interest loans, such as temporary housing assistance, counseling, unemployment compensation, or medical expenses. FEMA provides this assistance through seven different programmatic areas, with a substantial amount of the assistance coming from the Individuals and Households Program. The Individuals and Households Program provides financial assistance and direct services to eligible individuals and households who have uninsured or underinsured necessary expenses and serious needs. Individuals and Households Program assistance is intended to meet basic needs and supplement recovery efforts and is not a substitute for insurance. The Individuals and Households Program consists of two forms of assistance: Housing Assistance and Other Needs Assistance. Housing Assistance: Housing assistance may be provided in the form of financial assistance, direct assistance, or a combination of the two. Financial assistance may include lodging expense reimbursement for time spent at hotels or other temporary lodging, rental assistance, and home repair or replacement assistance. Direct housing assistance may be provided when applicants are unable to use rental assistance due to a lack of available housing resources. This type of assistance may include the repair and lease of multi- family housing units—such as apartments—for temporary use by applicants, direct lease assistance, or the provision of transportable temporary housing units, such as recreation vehicles or manufactured housing units. Transportable temporary housing units can be placed on private sites, commercial sites or on group sites. Commercial sites are existing manufactured home sites with available pads that FEMA may lease. Group sites require additional approval when housing needs cannot be met by other direct temporary housing options. They may include publicly-owned land with adequate available utilities. Other Needs Assistance: This consists of financial assistance for other expenses and serious needs caused by the disaster. Some Other Needs Assistance is only provided if an applicant does not qualify for a Small Business Administration disaster loan; this assistance would include personal property, moving and storage, and transportation assistance. Other types of Other Needs Assistance can be provided regardless of SBA loan qualification, including funeral, medical, dental, and child care assistance, and other miscellaneous items. Mass Care and Emergency Assistance This program provides life-sustaining services to disaster survivors immediately before a potential incident, during the response phase, and during the beginning of post-disaster recovery. Services provided include sheltering, feeding, distribution of emergency supplies, support for individuals with disabilities and others with access and functional needs, reunification services for adults and children, support for household pets and service/assistance animals, and mass evacuee support. This program provides supplemental federal financial assistance to states, territories, tribal governments, or private nonprofit entities in order to provide the services of a case manager to a disaster survivor. Through this service, a case manager assists a survivor with developing a disaster recovery plan for meeting his or her unmet needs. Crisis Counseling Assistance and Training Program This program provides supplemental funding to eligible state, territorial, tribal, or local governments, and non-governmental organizations to assist disaster-impacted individuals and communities in recovering from the major disasters through the provision of community-based outreach and psycho-educational services. This program provides legal aid to survivors who qualify as low-income through an agreement with the American Bar Association. The service is limited to cases that would not normally incur legal fees, such as assistance with insurance claims or recovery or reproduction of legal documents lost in the disaster. This program provides unemployment benefits and re-employment assistance services to survivors under the responsibility of the U.S. Department of Labor. This assistance is only available to survivors who are not eligible for regular state unemployment insurance. FEMA employs Voluntary Agency Liaisons who establish and maintain relationships with voluntary agencies active in response and recovery, coordinate with the National Voluntary Organizations Active in Disaster, provide guidance on donations, and act as subject matter experts in development of long term recovery groups with local community organizations, faith-based groups, and other voluntary organizations. FEMA’s Public Assistance program provides supplemental federal disaster grant assistance to state, local, tribal, and territorial governments, and certain types of private nonprofit organizations for debris removal, emergency protective measures, and the restoration of disaster- damaged, publicly-owned facilities and the facilities of certain private nonprofit organizations. The Public Assistance program also encourages protection of these damaged facilities from future events by providing assistance for hazard mitigation measures. The program—which represents the largest share of federal aid from the Disaster Relief Fund—is administered through a partnership between FEMA and the state, tribal or territorial grantee, which provides funding to local or tribal entities who are the subrecipients of a Public Assistance grant award. The Public Assistance program funds both emergency work and permanent work. Public Assistance for Emergency Work FEMA provides funding for emergency work such as emergency protective measures and debris removal that must be conducted immediately to save lives, protect public health and safety, protect improved property, or eliminate or lessen a threat of immediate additional damage. This assistance is divided into two categories, described below. Debris Removal (Category A): Debris removal activities, such as clearance, removal, and disposal, are eligible if the removal is in the public interest based on whether the work eliminates immediate threats to lives, public health, and safety or of significant damage to improved public or private property; ensures economic recovery of the affected community to the benefit of the community at large; or mitigates risk to life and property by removing substantially damaged structures and associated structures. In limited circumstances, based on the severity of the impact of an incident, FEMA may determine that debris removal from private property is eligible under the Public Assistance Program. If debris on private property is so widespread that it threatens public health and safety or the economic recovery of the community, FEMA may provide Public Assistance funding for debris removal from private property. Emergency Protective Measures (Category B): Emergency protective measures conducted before, during, and after an incident are eligible if the measures: eliminate or lessen immediate threats to lives, public health, or safety; or eliminate or lessen immediate threats of significant additional damage to improved public or private property in a cost-effective manner. Examples of such measures include transporting and pre-positioning equipment, flood fighting, supplies and commodities, evacuation and sheltering, child care, security, or searches to locate and recover human remains. Public Assistance for Permanent Work Permanent Work is work required to restore a facility to its pre-disaster design (size and capacity) and function in accordance with applicable codes and standards. This assistance is divided into the five categories listed below: Roads and Bridges (Category C) Water Control Facilities (Category D) Buildings and Equipment (Category E) Utilities (Category F) Parks, Recreational, Other (Category G) Appendix II: Information on Major Disasters Resulting from Wildfires, 2015 through 2018 Below are details on the six wildfire disasters selected for our review and the support the Federal Emergency Management Agency (FEMA) provided under the major disaster declarations. Northern California Wildfires, September 2015 On September 9, 2015, the Butte Fire began burning across Calaveras County, and on September 12, 2015, the Valley Fire began burning across Lake County. FEMA subsequently approved a Fire Management Assistance Grant (FMAG) for the Butte Fire on September 10, 2015, and an FMAG for the Valley Fire on September 12, 2015. On September 22, 2015, the President issued a major disaster declaration at the request of the state for Lake County, which was ultimately expanded to include Calaveras County. On September 28, 2015, FEMA—in collaboration with the state and counties—opened two Disaster Recovery Centers in Calaveras and Lake Counties, and on October 2, 2015, FEMA opened a third Disaster Recovery Center in Lake County. In total, the Valley and Butte Fires burned 146,935 acres, destroyed 2,876 structures, and resulted in 6 deaths. See figure 7 for a map of the fire locations, and tables 4 and 5 for data on FEMA’s mission assignments, Individual Assistance, and Public Assistance support. East Tennessee Wildfires, November 2016 On November 28 2016, strong winds pushed a wildfire—named the Chimney Tops 2 fire—beyond the boundaries of the Great Smoky Mountains National Park and into the surrounding wildland urban interface. The fire primarily spread into Sevier County, Tennessee, which includes the cities of Gatlinburg and Pigeon Forge. That same day, FEMA approved an FMAG for Tennessee to support fire suppression activities. On December 15, following a request by the governor of Tennessee on December 9, the President issued a major disaster declaration for Sevier County. On December 23 and December 28, FEMA—in collaboration with the state and counties—opened Disaster Recovery Centers in Gatlinburg and Pigeon Forge, respectively. The Tennessee wildfires ultimately burned approximately 17,000 acres, destroyed 2,545 structures, and led to 14 fatalities. See figure 8 for a map of the fires’ location, tables 6 and 7 for data on FEMA’s mission assignments, Individual Assistance, and Public Assistance support. Northern and Southern California Wildfires, October 2017 On October 8, 2017, multiple fires began burning in northern California, spreading rapidly due to high winds and dry conditions. Among these fires was the Tubbs Fire in Sonoma and Napa Counties, which was, at the time, the most destructive fire in California’s history. On October 9, 2017, FEMA approved FMAGs for ten separate fires. On October 10, 2017, the President issued a major disaster declaration at the request of the state for seven counties—Butte, Lake, Mendocino, Napa, Nevada, Sonoma, and Yuba. On October 13, 2017, Solano County and Orange County (in southern California) were added to the declaration. In total, the fires included in this disaster declaration burned 240,138 acres, destroyed 8,924 structures, and resulted in 44 deaths. From October 17 through November 28, FEMA—in in collaboration with the state and counties—established five Disaster Recovery Centers to assist disaster survivors. See figure 9 for a map of the fires’ locations, and tables 8 and 9 for data on FEMA’s mission assignments (including FEMA’s assignment of debris removal responsibilities to the U.S. Army Corps of Engineers), Individual Assistance, and Public Assistance support. Figure 10 provides an aerial snapshot of the destruction in one area of the city of Santa Rosa in Sonoma County. Southern California Wildfires, Flooding, Mudflows and Debris Flows, December 2017 On December 4, 2017, the Thomas Fire started burning in Ventura County. Over the next three days, the Thomas Fire and other wildfires spread rapidly through Ventura and neighboring counties—due in part to the Santa Ana Winds—and FEMA approved a number of FMAGs for these wildfires. On December 20, the governor of California requested a major disaster declaration for Los Angeles, San Diego, Santa Barbara, and Ventura Counties. The request was approved on January 2, 2018 for Santa Barbara and Ventura Counties for Public Assistance. In the week that followed, heavy rains exacerbated the damages caused by the fires, leading to mudflows and debris flows. On January 10, FEMA expanded the disaster declaration to include the flooding, mudflows, and debris flows related to the wildfires. Five days later, FEMA added Los Angeles and San Diego Counties to the disaster declaration, and granted all four counties eligibility for Individual Assistance, in addition to the Public Assistance eligibility previously approved. From January 19 through February 5, 2018, FEMA—in collaboration with the state and counties—established five Disaster Recovery Centers to assist disaster survivors. The Southern California wildfires, debris flows, and mudflows ultimately burned 308,083 acres, destroyed 1,378 structures, and caused 23 fatalities. See figure 11 for a map of the fires’ locations, and tables 10 and 11 for data on FEMA’s mission assignments, Individual Assistance, and Public Assistance support. Northern California Wildfires and High Winds, July 2018 On July 23, 2018, the Carr Fire began burning in Shasta County. On July 27, 2018, the Mendocino Complex Fire, a combination of the River and Ranch Fires, began burning in Lake County. FEMA soon approved FMAGs for these fires. On August 4, 2018, the President issued a major disaster declaration for Shasta County, which was ultimately expanded to include Lake County. On August 9, 2018, FEMA—in collaboration with the state and counties—established a Disaster Recovery Center in Shasta County, with a second Disaster Recovery Center established in Lake County on August 21, 2018. One of the wildfires—the Mendocino Complex Fire—was the largest fire in California’s history, burning 459,123 acres. In total, the Carr and Mendocino Complex Fires burned 688,774 acres, destroyed 1,894 structures, and resulted in 4 deaths. See figure 12 for a map of the fires’ locations, and tables 12 and 13 for data on FEMA’s mission assignments, Individual Assistance, and Public Assistance support. Figure 13 shows the aftermath of the Carr Fire in one residential neighborhood. Northern and Southern California Wildfires, November 2018 Information on Fires and Assistance Provided On November 8, 2018, the Camp Fire struck the city of Paradise in Butte County. According to California’s Department of Forestry and Fire Protection, the Camp Fire grew into the deadliest and most destructive fire in California history, resulting in 18,793 structures destroyed, 153,336 acres burned, and 85 deaths. On the same day two other major fires—the Woolsey Fire in Los Angeles County and the Hill Fire in Ventura County— began. On November 8-9, FEMA approved FMAGs for these fires, and the President issued a major disaster declaration for these counties on November 12, 2018. FEMA—in collaboration with the state and counties—opened a Disaster Recovery Center in Butte County on November 16 and four other Disaster Recovery Centers in Butte, Ventura, and Los Angeles counties over the next month. In total, the three fires resulted in 20,295 structures destroyed, 254,816 acres burned, and 88 deaths. See figure 14 for a map of the fires’ locations, and tables 14 and 15 for data on FEMA’s mission assignments, Individual Assistance, and Public Assistance support. Appendix III: Comments from the Department of Homeland Security Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact above, the following staff members made significant contributions to this report: Kathryn Godfrey (Assistant Director), Adam Couvillion (Analyst-in- Charge), Elizabeth Dretsch, Ricki Gaber, Eric Hauswirth, Hannah Hubbard, Tracey King, John Mingus, Ben Nelson, and Kevin Reeves.

In 2017 and 2018, deadly wildfires struck the state of California, tragically resulting in 159 deaths and over 32,000 structures destroyed. FEMA, as the lead federal agency for responding to and recovering from disasters, has obligated about $2 billion in housing, debris removal, and other assistance following these disasters. According to recent environmental assessments, fire seasons are increasing in length, putting more people and infrastructure at risk. GAO was asked to assess a range of response and recovery issues related to the 2017 disasters. Specifically, this report addresses (1) the assistance FEMA provided to jurisdictions in response to major disaster declarations stemming from wildfires from 2015 through 2018, (2) selected jurisdictions' perspectives on FEMA wildfire response and recovery efforts, and (3) the extent to which FEMA has identified and addressed key lessons learned. GAO obtained data on FEMA wildfire disaster assistance and statistics on fire damages and fatalities; reviewed key documentation, such as incident action plans and after action reports; and interviewed officials from FEMA headquarters and regional offices, states, and a nonprobability sample of affected local jurisdictions (e.g., counties). For wildfire-related major disaster declarations from 2015 through 2018, the Federal Emergency Management Agency (FEMA)—consistent with its authorities and responsibilities—helped state and local officials obtain and coordinate federal resources to provide for the needs of wildfire survivors and execute recovery efforts. This support totalled over $2.4 billion and included providing staff to assist at Emergency Operations Centers and establishing Disaster Recovery Centers to coordinate disaster assistance services for survivors. In addition, FEMA provided Public Assistance grant funds to local jurisdictions to help address community infrastructure needs, such as debris removal. FEMA also assigned federal agencies to perform various missions to help with response and recovery—for example, the U.S. Army Corps of Engineers was assigned with contracting for debris removal services in some instances. Officials from jurisdictions that GAO spoke with described practices that aided in wildfire response and recovery, but also reported experiencing challenges. Specifically, officials in affected areas noted that collaboration between FEMA and California's Office of Emergency Services allowed for timely information sharing, and FEMA's assistance at Disaster Recovery Centers greatly assisted survivors in obtaining necessary services. Among the challenges cited were onerous documentation requirements for FEMA's Public Assistance grant program and locating temporary housing for survivors whose homes were completely destroyed. In addition, the unique challenge of removing wildfire debris led to confusion over soil excavation standards and led to overexcavation on some homeowners' lots, lengthening the rebuilding process. FEMA has developed an after-action report identifying lessons learned from the October and December 2017 wildfires, but could benefit from a more comprehensive assessment of its operations to determine if additional actions are needed to ensure that policies and procedures are best suited to prepare for future wildfires. The combination of recent devastating wildfires and projections for increased wildfire activity suggest a potential change in FEMA's operating environment. According to Standards for Internal Control in the Federal Government , such changes should be analyzed and addressed to help ensure that agencies maintain their effectiveness.

CRS_R46277

Introduction Serious disruptions for certain industries caused by the COVID-19 (coronavirus) pandemic have led to calls for federal government assistance to affected industries. Although out of the ordinary, this would not be the first occasion on which the federal government has provided aid to troubled or financially distressed industries. To help inform congressional debate, this report examines selected past instances in which the government has aided troubled industries, providing information about the way in which such assistance was structured, the role of Congress, and the eventual cost. Assistance for distressed industries or businesses—sometimes popularly referred to as "government bailouts"—historically has taken different forms and has occurred under varying circumstances. Assistance has not been limited to outlays by the Treasury, or to actions explicitly authorized by Congress, or to measures which imposed a net cost on taxpayers on an unadjusted cash-flow basis. Sometimes, the industry distress was being driven by external shocks, such as the 9/11 terrorist attacks or the 2007-2009 financial crisis, and other times it was driven by long-term secular trends, such as changes in the economic outlook for the railroad industry. Past assistance has involved such instruments as loan guarantees, asset purchases, capital injections, direct loans, and regulatory changes, with the specific mix of policies varying significantly from case to case. These differences make it somewhat subjective what should be defined as a "bailout." In order to provide greater detail, the examples discussed in this report all involve cases in which federal assistance was (1) widely available to firms within an industry rather than being targeted to a particular firm; (2) extraordinary in nature rather than a type of assistance that is routinely provided; and (3) motivated primarily by a desire to prevent industry-wide business failures. For each case, the report provides data on the costs and income to government, to the extent that they are available. In some of the cases reviewed in this report, the government was able to recoup much or all of its assistance through fees, interest, warrants, and loan or principal repayments. In others, there were no arrangements made for recoupment or repayment. But the fact that a beneficiary of government assistance repaid a loan or gave the government shares that ultimately increased in value does not necessarily mean that the government "broke even" or "made a profit." The government had to borrow, incurring interest payments, to finance these programs, and adjusting federal outlays and receipts for inflation may not account fully for this. In most cases, although not all, government assistance was provided under the assumption that it would be repaid, exposing the government to risk of credit loss that is not accounted for simply by adding up expenditures and receipts. An economist would typically determine whether the government received full compensation for credit assistance by comparing the government's terms to what a private investor would have required for the loan or loan guarantee. Making such adjustments would increase the reported value of federal assistance and in some instances would indicate that taxpayers were not fully compensated—although it is fair to question what terms would have been required, for example, by a hypothetical commercial lender in the depths of the 2007-2009 financial crisis, when private credit markets were not functioning normally. In any case, if such a standard were used, it would be a more demanding one than the government typically uses to measure the costs of federal credit and guarantee programs. The Congressional Budget Office (CBO) has provided assessments of the Troubled Asset Relief Program (TARP) adjusting for borrowing costs and market risk, but CBO has not offered such estimates of other government assistance. The final disposition of assets and liabilities arising from assistance often can take years. But not all sources continued to consistently report data long after the initial intervention. Thus, while the cost estimates presented here are based on official sources, they sometimes involve a degree of uncertainty. In some cases, precise information on the timing of outlays and recoupments is unclear and assumptions are necessary in order to compute the inflation adjustments. Where there is uncertainty about the timing of payments, we present a range of possible inflation-adjusted outcomes. There are broader policy concerns raised by government assistance that are difficult to quantify and do not get captured in tallies of the government's income and expenses. Potential benefits of assistance can include avoiding potentially long-lasting disruptions to consumers, workers, local communities, and the overall economy; averting losses to federally guaranteed retirement funds; and maintaining federal tax revenues. Potential drawbacks to assistance include the possibility that it may reduce competition by rewarding incumbents over new entrants and distort the affected product market by causing (or prolonging) overproduction; that it may cause "moral hazard" if firms respond to government assistance by acting with less financial prudence in the future; and that it can delay an industry's adjustment to structural problems such as high production cost and excess capacity. In every case, federal assistance to certain industries may raise questions about the fairness of providing assistance to some businesses but not to others. Sources Information on the various assistance programs comes primarily from reports from the Government Accountability Office (GAO), Congressional Research Service (CRS), and executive branch agencies involved in the assistance. Specific sources are cited in the individual sections. Reporting on the programs has varied significantly over the years as different agencies have undertaken the assistance under different statutory authority. In some cases, Congress has included specific reporting requirements when assistance is authorized or other specific oversight mechanisms. Historical vote totals are included from http://www.congress.gov and from Congressional Quarterly, CQ Almanac (various years). Various iterations of some bills received multiple votes; for brevity, we only include the final vote taken. Stock prices and market information are from the Wall Street Journal print and online versions. Inflation adjustments are based on gross domestic product (GDP) price index data from the Bureau of Economic Analysis. Railroad Restructuring (1957-1987)7 What Happened to the Company/Industry Throughout the 1950s, the rail industry was in decline as federal spending on highways and the growth of the airline industry ate into railroads' ability to compete with those other modes of transportation. One large railroad, the New York, Ontario and Western, which had been in financial distress since the 1930s, was liquidated in 1957. Rail industry leaders advocated for one or more of the following in order to counter this trend: permission to shut down unprofitable routes, especially passenger routes; direct subsidies to continue operations; and/or encouragement of large-scale mergers to create economies of scale. Congress' initial legislative response, the Transportation Act of 1958 ( P.L. 85-625 ), created a loan guarantee program for railroads and gave the Interstate Commerce Commission (ICC) sole authority over proposals to curtail service, circumventing the previous role of state agencies. Still, the industry underwent a wave of mergers, consolidating from 110 Class I railroads in 1957 to 71 in 1970. The process culminated in the 1968 merger of arch-rivals Pennsylvania Railroad and New York Central Railroad into the Penn Central, the largest railroad in the world at the time. By this time, a wave of bankruptcies was well underway. The New York, New Haven and Hartford Railroad had gone into bankruptcy in 1961 and was merged into the Penn Central in 1969, its inclusion having been a condition of the Penn Central-New York Central merger's approval by the ICC. The Central Railroad of New Jersey failed in 1967. Then, in declining financial condition due to falling revenues, badly rundown infrastructure, high property taxes, incompatible systems, and high labor costs, the Penn Central itself declared bankruptcy in June 1970, less than three years after its creation. Other railroads operating in the Northeast and Midwest also went bankrupt and could not be reorganized, some having suffered severe damage caused by Hurricane Agnes in 1972. The other troubled carriers included the Ann Arbor Railroad, the Reading Railroad, the Lehigh Valley Railroad, the Boston and Maine Railroad, and the Erie Lackawanna Railroad, itself the result of a merger of former competitors completed in 1960. In addition to disrupting passenger and freight transportation, the railroad industry's distress exposed a number of major banks and financial institutions to large potential losses. The commercial paper market, in which firms issue short-term securities to meet near-term financial needs, experienced disruptions following the Penn Central bankruptcy, leading to concerns that the Penn Central's problems could endanger companies in other industries. Executive or Regulatory Agency Action and Assistance Several federal agencies, including the Department of Transportation, the Department of Defense, and the Federal Reserve, were unwilling or unable to assist troubled railroads with loan guarantees. The ICC sought to assist railroads by expediting approval of applications for mergers or abandonment of unprofitable lines, but this was not enough to forestall bankruptcies. Congressional Action and Assistance Congress enacted several measures throughout the 1970s to avert the collapse of the rail industry. These actions combined federal financial assistance, deregulation, and the creation of new quasi-governmental private companies. The Rail Passenger Service and Emergency Rail Services Acts of 1970 The Rail Passenger Service Act of 1970 (P.L. 91-518), which was passed by voice vote in both houses of Congress, relieved all railroad companies of the obligation to provide intercity passenger service, creating a quasi-governmental private company called the National Railroad Passenger Corporation—Amtrak—to operate passenger trains over freight railroads' tracks with federal support. The act called for a "basic system" of key routes that the railroads would continue to operate until Amtrak began operations on May 1, 1971, and provided for railroad companies to transfer unneeded passenger rail equipment to Amtrak. The Emergency Rail Services Act of 1970 (P.L. 91-663) provided up to $125 million in loan guarantees to railroads to preserve essential service until a more permanent restructuring plan could be put in place. The law was passed in the Senate on a vote of 47-29 and in the House on a vote of 165-121. The Regional Rail Reorganization Act of 1973 In March 1973, the bankruptcy court handling the Penn Central's case found that its finances were so precarious that it would likely need to cease all operations before October of that year. In December 1973, the Regional Rail Reorganization Act ( P.L. 93-236 ), also called the 3R Act, created the United States Railway Association (USRA) to provide additional emergency funding and prepare the restructuring and rehabilitation of Penn Central and other bankrupt railroads. The law passed the Senate on a vote of 45-16 and the House on a vote of 284-59. It provided for the creation of Conrail—officially the Consolidated Rail Corporation—as a quasi-private for-profit corporation that would take over operations of various bankrupt railroads in the Northeast and Midwest. USRA was charged with creating a "Final System Plan" that identified the lines that would be transferred to Conrail. The Railroad Revitalization and Regulatory Reform Act of 1976 The Railroad Revitalization and Regulatory Reform (4R) Act of 1976 ( P.L. 94-210 ), which approved the USRA's "Final System Plan," was enacted on February 5, 1976. It passed the House on a vote of 353-62 and the Senate on a vote of 58-26. Conrail was incorporated five days later, beginning operations on April 1, 1976, at which point its predecessors—including the Penn Central—ceased to exist as railroad companies. In addition to taking responsibility for those railroads' physical infrastructure and freight operations, Conrail operated commuter services in several states. The 4R Act provided funding for Conrail, permitted and approved additional property designations under 3R, and facilitated the transfer of ownership of the Penn Central's Northeast Corridor line to Amtrak. Direct federal subsidies to Conrail took several forms including remuneration of direct operating losses, approximately $2.1 billion; capital rehabilitation, approximately $1.2 billion; and "lifetime protection" payments to employees of Conrail and its predecessors, approximately $650 million. Much of this flowed through USRA purchases of Conrail equity instruments. In addition, approximately $3 billion was paid to the estates of bankrupt railroads for property taken to create Conrail. Total assistance for Conrail was estimated at approximately $7 billion. The 4R Act also contained reforms aimed at easing ICC regulation of the railroad industry more broadly. Railroads were given greater flexibility to set shipping rates and were allowed for the first time to sign contracts with large shippers specifying rates and terms of service. The act gave the ICC the power to exempt certain types of freight traffic from rate regulation altogether. The act also created the Railroad Rehabilitation and Improvement Financing (RRIF) loan program, currently codified at 45 U.S.C. §§821-838, to offer long-term, low-cost loans to railroad operators. The RRIF program was intended to assist "short line" railroads, which took over many small lines that were being abandoned by larger railroads, to finance improvements to infrastructure and investments in equipment. Restructuring the Milwaukee and Rock Island Railroads The restructuring of the eastern railroads did not put an end to the industry's difficulties. In the Midwest, the Chicago, Rock Island and Pacific Railroad filed for bankruptcy in 1975, and the Chicago, Milwaukee, St. Paul and Pacific Railroad in 1977. They were not incorporated into Conrail, but were the subject of separate federal legislation. Congress passed the Milwaukee Railroad Restructuring Act ( P.L. 96-101 ) in both the House and the Senate by voice vote in 1979 and the Rock Island Railroad Transition and Employee Assistance Act ( P.L. 96-254 ) in both the House and Senate by voice vote in 1980. Each law contained worker protection provisions and empowered bankruptcy courts to accelerate the sale or abandonment of parts of their networks as part of restructuring. The Chicago, Milwaukee, St. Paul and Pacific Railroad abandoned or sold roughly two-thirds of its network, with the rest ultimately acquired in 1985 by the Canadian Pacific Railroad through an American subsidiary. The case of the Chicago, Rock Island and Pacific Railroad was direr; by March 1980, before Congress had a chance to pass its transition assistance law, the railroad had been deemed incapable of continuing rail operations by the ICC, declared the property of a neutral party (pursuant to 3R), and ceased operations. Its former property was acquired by multiple buyers. The Staggers Rail Act of 1980 With Conrail's profitability still not much improved, Congress passed the Staggers Rail Act of 1980 ( P.L. 96-448 ), by a 61-8 vote in the Senate and a voice vote in the House. The law expanded upon the deregulation begun in the 3R and 4R Acts. Among other provisions, the Staggers Act prevented the ICC from setting maximum shipping rates, permitted railroads to keep their rate agreements with customers secret, broadened the ICC's power to declare exemptions, and required the submissions of proposals for the future of Conrail. While many of its provisions were unpopular with some shippers, particularly those who could not readily move their freight by truck or barge if they found rail rates excessive, the law helped restore the freight rail sector to profitability and eventually led to increased capital investment in the industry. The Northeast Rail Services Act of 1981 While the duty to provide intercity passenger rail had been transferred to Amtrak by the Rail Passenger Service Act of 1970, Conrail was still bound to operate the local commuter routes previously run by its predecessor railroads. The Northeast Rail Services Act of 1981 (NERSA; P.L. 97-35 ) was enacted as Subtitle E of the Omnibus Budget Reconciliation Act of 1981, approved by the Senate on a vote of 80-15 and by the House on a vote of 232-195. NERSA relieved Conrail of all obligations to provide commuter rail service beginning January 1, 1983, in order to improve its profitability. To ensure continuity of operations, however, NERSA required state- or locally-chartered commuter authorities to continue to operate all commuter rail lines previously operated by Conrail, and created a new subsidiary of Amtrak to take over such lines if any state declined to do so (none did). NERSA also stipulated that Conrail's status as a quasi-governmental corporation should be temporary and that the government's stake in the company should eventually be sold to one or more private buyers. Repayment or Recoupment of Assistance Following the reforms in the 3R and 4R Acts, the Staggers Act, and NERSA, Conrail reported a profit in 1981 and in subsequent years. The government's 85% stake in the company was sold through an initial public offering in 1987 after the government rebuffed attempts by other railroads to acquire it in ways that could have reduced rail competition in the Northeast. (The other 15% was owned by Conrail employees.) The government recouped a total of approximately $2 billion, including a $300 million dividend from Conrail and $1.65 billion from the public offering. This was approximately $5 billion less than total government outlays, when measured in nominal dollars, or $20 billion to $24 billion less than the government's outlays when adjusted for inflation ( Table 1 ). Final Outcomes Railroad profitability increased following implementation of the Staggers Act, and railroad companies, devoting themselves entirely to freight traffic, continued to consolidate and shed unprofitable lines. Some 70,000 miles of railroad have been abandoned since 1980, and the number of large railroads—known as Class I railroads—operating in the United States now stands at seven. Following its privatization, Conrail continued as an independent company until 1997, when it was acquired by Norfolk Southern Corporation and CSX Corporation in a joint stock purchase valued at approximately $10.3 billion. Norfolk Southern and CSX split most of the Conrail assets after the purchase. Amtrak has never generated an operating profit, and has received federal operating support every year since its creation. Farm Credit System Crisis (1980s)15 What Happened to the Industry The federal government has a long history of assisting farmers with real estate and operating loans. This intervention has been justified by the presence of asymmetric information between lenders and farmers, lack of competition and resources in rural areas, and policies to target assistance to disadvantaged groups. The two agricultural lenders with the greatest federal connection are the Farm Service Agency (FSA) and the Farm Credit System (FCS), a private cooperative. The first, FSA, is part of the U.S. Department of Agriculture (USDA) and receives federal appropriations to make direct loans and guarantees to farmers who do not qualify for commercial credit. The second, FCS, is privately funded without federal appropriation as a cooperatively owned entity with a statutory mandate to serve only agriculture-related borrowers. The FCS is regulated by the Farm Credit Administration, an independent agency funded by assessments on system institutions. A severe downturn in the agricultural economy beginning in the early 1980s contributed to a financial crisis among many agricultural lenders and their farmer borrowers (the result of low farm income, high interest rates, and declining land prices). Since the FCS had exposure to only a single industry, it held a loan portfolio that developed large delinquencies, much of which was eventually written off as uncollectible. The farm financial crisis caused the FCS to experience operating losses of $2.7 billion in 1985 and $1.9 billion in 1986, for example, which jeopardized its financial stability, including its ability to repay bondholders in private capital markets. While FCS debt is not a government obligation nor guaranteed, many investors perceive its government-sponsored enterprise (GSE) status to imply that the Treasury would not allow FCS default. Moreover, FCS was an important lender to agriculture and held one-third of farm debt at the time. Congressional Action and Assistance The Agricultural Credit Act of 1987 The Agricultural Credit Act of 1987 ( P.L. 100-233 ) was enacted on January 6, 1988, after being approved by the Senate by a vote of 85-2 and the House on a vote of 365-18. The law authorized a $4 billion financial assistance package. It created a new FCS entity, the FCS Financial Assistance Corporation, which utilized $1.26 billion in loans from the U.S. Treasury. The assistance stabilized the FCS by allowing it to repay its bonds and meet its debt obligations. The act required the FCS to work out a schedule for repaying the Treasury, mandated FCS organizational changes, protected FCS borrowers' stock investments in FCS institutions, and specified requirements for restructuring FCS problem farm loans. Among the notable organizational changes, FCS banks became jointly and severally liable for each other's debts (that is, the FCS banks together would be responsible for the cumulative debts of the individual FCS banks if any become insolvent). The act also created an FCS Insurance Corporation, similar to the Federal Deposit Insurance Corporation, to further ensure the ability of the FCS to repay its bonds. Although the primary purpose of the 1987 Act was to rescue and restructure the FCS, the act also led to the creation of a system of borrower rights for the FCS and the FSA. These borrower rights are somewhat unique to agriculture, compared to what was available to homeowners during the 2008 housing crisis. Before the FCS and FSA can initiate foreclosure proceedings, it must offer options to restructure delinquent farm loans when it would be less costly than taking foreclosure action, and it must offer rights of first refusal for an individual or extended family to repay a delinquent loan to avoid foreclosure and preserve a farm homestead. Repayment or Recoupment of Government Assistance The FCS Financial Assistance Corporation borrowed $1.26 billion from the U.S. Treasury during the farm financial crisis of the 1980s. The FCS made provisions in the early 1990s to systematically repay all of its financial assistance by collecting assessments on system banks and associations. The arrangement for the 15-year debt by the FCS Financial Assistance Corporation to the Treasury was that the government paid the interest for the first five years, FCS and the Treasury split the interest during the second five years, and FCS bore all of the interest during the final five years. In June 2005, the last of the bonds and interest was repaid on schedule to the U.S. Treasury. The FCS Financial Assistance Corporation was dissolved in December 2006. Final Outcome Farm Credit System financial performance steadily improved throughout the 1990s and into the present day. The Farm Credit System Insurance Corporation is fully funded to its capitalization goals. The borrowers' rights provisions continue to provide protection to farmers facing new financial difficulties, such as through the financial crisis in 2007-2009 and during the current period of lower farm income. Savings and Loan Crisis (1980s-1990s)20 What Happened to the Industry21 Savings and loan institutions (S&Ls) were state- or federally chartered deposit-taking institutions whose loans mainly took the form of residential mortgages. Some were mutual institutions owned by their depositors, while others had publicly traded shares. Federally chartered S&Ls were authorized in the 1930s to promote mortgage lending and were regulated by a separate regulator, the Federal Home Loan Bank Board (FHLBB), rather than by the agencies responsible for regulating commercial banks. The industry suffered a solvency crisis in the 1980s. When interest rates rose, S&Ls' floating-rate liabilities (e.g., deposits) had a higher interest cost than the industry was earning on fixed-rate assets that had been issued before rates rose (e.g., mortgages). In the presence of government deposit insurance, depositors had little incentive to withdraw their deposits from unprofitable S&Ls, since their deposits were safe even if their S&L failed. This allowed insolvent S&Ls to continue to access the funds needed to keep operating. According to a study by the Federal Deposit Insurance Corporation, "Net S&L income, which totaled $781 million in 1980, fell to negative $4.6 billion and $4.1 billion in 1981 and 1982…. In fact, tangible net worth for the entire S&L industry was virtually zero, having fallen from 5.3 percent of assets in 1980 to only 0.5 percent of assets in 1982." Regulatory Agency Action and Assistance Policymakers were slow to address the crisis because of concerns that resolving large numbers of S&Ls would have a negative effect on homeownership by disrupting mortgage lending. Government policy is generally viewed as exacerbating the crisis in two ways. First, the S&L regulator, the FHLBB, practiced "regulatory forbearance," allowing insolvent firms to keep operating in the hopes that they would eventually become profitable again. Forbearance made the problem larger because it arguably encouraged such "zombie S&Ls" to take on more risks, undermining more conservatively run competitors. Regulatory forbearance was motivated in part by the fact that the Federal Savings and Loan Insurance Corporation (FSLIC), the agency responsible for insuring S&L customers' deposits, lacked the funds to honor deposit insurance claims if all the undercapitalized S&Ls were rescued or closed down. Almost 1,000 thrifts still in operation, holding half of total industry assets, were insolvent or nearly insolvent by 1986. By 1987, the FSLIC itself was insolvent. In the meantime, zombie S&Ls incurred additional losses, which increased the ultimate cost to the government. Second, deregulation in the early 1980s gave the industry new opportunities to take risks that increased ultimate losses, which arguably occurred because deregulation took place in the context of an already undercapitalized industry with inadequate prudential regulation. Congressional Action and Assistance Deposit insurance is self-financing only if insurance premiums match expected losses. Because the FSLIC deposit insurance scheme was inadequate, a government "bailout" could only have been avoided if the government had reneged on its promise to guarantee deposits. The congressional response to the S&L crisis can be divided into two phases. From 1980 to 1982, legislation was enacted to attempt to restore industry solvency (or buy time to restore industry solvency) through forbearance and the removal of legal restrictions on industry activities. From 1987 on, legislation was enacted to attempt to resolve insolvent S&Ls by granting financial resources and to prevent future losses through new regulatory powers. Many of these bills contained wide-ranging provisions, and only the provisions relevant to the S&L crisis are highlighted here. Competitive Equality Banking Act of 1987 (CEBA) The Competitive Equality Banking Act of 1987 ( P.L. 100-86 ) was passed in the Senate on a vote of 96-2 and in House on a vote of 382-12. The law created the Financing Corporation (FICO) to provide funding to FSLIC by issuing $10.8 billion in long-term bonds to be repaid by assessments on savings and loans and the Federal Home Loan Banks. It also eased regulatory requirements for savings and loans in economically depressed areas. According to the FDIC study, "Although the Competitive Equality Banking Act of 1987 provided the FSLIC with resources to resolve insolvent institutions, the amount was clearly inadequate. Nevertheless, under the new FHLBB chairman, Danny Wall, the FSLIC resolved 222 S&Ls, with assets of $116 billion, in 1988.... But despite these resolutions, at year-end 1988 there were still 250 S&Ls, with $80.8 billion in assets that were insolvent based on regulatory accounting principles." Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ( P.L. 101-73 ) was passed by the House on a vote of 201-175 and by the Senate by division vote (individual votes not recorded). The law abolished FSLIC and transferred its assets, liabilities, and operations to the FSLIC Resolution Fund (FRF). The act abolished FHLBB and transferred its authority to the newly created Office of Thrift Supervision with new regulatory powers, created the Savings Association Insurance Fund, administered by FDIC, created the Resolution Trust Corporation (RTC) to resolve troubled thrifts, and created the Resolution Funding Corporation (REFCORP) to issue debt to finance RTC to be repaid by industry assessments and the federal government. Resolution Trust Corporation Funding Act of 1991 The Resolution Trust Corporation Funding Act of 1991 ( P.L. 102-18 ) , passed by the House on a vote of 225-188 and passed by the Senate by voice vote, provided $30 billion to the RTC to cover losses of failed thrifts in FY1991. Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 The Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 ( P.L. 102-233 ), passed by the Senate on a vote of 44-33 and passed in the House by division vote 112-63, provided the RTC up to $25 billion until April 1, 1992, to resolve failed savings and loan institutions. The law also restructured the RTC and terminated FICO. Resolution Trust Corporation Completion Act of 1993 The Resolution Trust Corporation Completion Act of 1993 ( P.L. 103-204 ) passed the House on vote of 235-191 (with 1 Member voting present), and passed the Senate on a vote of 54-45. The law provided $18.3 billion to finish the savings and loan cleanup. It terminated the RTC on December 31, 1995, and authorized $8.5 billion for the Saving Association Insurance Fund (SAIF), to be spent only if the savings and loan industry could not pay for future failures itself through higher insurance premiums. Repayment or Recoupment of Government Assistance The cost of the S&L cleanup was spread among the federal government (through appropriations), government-sponsored enterprises (the Federal Home Loan Bank system), and the industry (through deposit insurance premiums). Two quasi-governmental entities (FICO and REFCORP) were created to provide financing. Measuring the cost of the S&L crisis poses unique challenges compared to the other episodes discussed in this report. The resolution of failing thrifts was not a one-time event. Thrifts may fail at any time, even when economic conditions are generally good, and the insurance fund may be called upon to repay depositors. What was unique during the crisis was the magnitude of the failures, which caused premiums to be inadequate for addressing the problem. Thus, a somewhat arbitrary date must be chosen for the beginning and the end of the cleanup. Different sources vary slightly on the overall net cost. In January 1995, CBO estimated the cost at $150 billion in 1990 dollars. In 1996, GAO estimated the cost at $160.1 billion. Table 2 presents an estimate from the FDIC Banking Review , as this source provides the most detailed information. It estimated expenses paid by the FRF and RTC to be $152.7 billion, with an additional $7.3 billion in indirect costs from 1986 to 1995. Of the $152.7 billion, direct appropriations covered $99.4 billion and FICO and REFCORP bond proceeds covered $38.3 billion. The government recouped $30.1 billion through industry assessments, interest on bonds paid by the industry, and the value of remaining assets seized from failed S&Ls as of the end of 1999, putting the net direct costs at $122.6 billion and the net total costs at $129.9 billion. (CRS classified the FHLBs as industry for purposes of this table, so their contributions are considered a recoupment rather than a government expense.) It should be noted that this source does not include interest costs on the federal debt used to finance appropriations or the FICO and REFCORP bonds issued to finance the cleanup. Final Outcome Cumulatively, 1,043 insolvent firms holding $519 billion in assets were resolved between 1986 and 1995. The industry's finances stabilized by the mid-1990s, by which time the number of S&Ls had fallen by half compared to 1986. The RTC ceased operations at the end of 1995. Some special bonds issued to finance the cleanup remain outstanding until 2030. S&Ls were renamed savings associations or thrifts and their regulation was reformed by FIRREA. Further problems with the regulation of the thrift industry in the 2007-2009 financial crisis led to the elimination of the Office of Thrift Supervision and the shifting of its powers to the federal banking regulators by the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). Airline Industry (2001-2014)34 What Happened to the Company/Industry The use of commercial airplanes as assault vehicles to wreak havoc on the United States has no precedent in aviation history. At the time of the September 11, 2001, terrorist attacks on the World Trade Center in New York and the Pentagon in Washington, the airline industry was already experiencing a difficult financial situation due to the recession. In the wake of the attacks, the federal government temporarily grounded all civil air traffic in the United States, including all commercial flights. The attacks contributed to a significant decline in both domestic and international passenger traffic in 2001 that resulted in major financial losses. Congressional Action and Assistance The Air Transportation Safety and System Stabilization Act In the aftermath of the 9/11 attacks, Congress moved to provide the airline industry with federal financial support. The Air Transportation Safety and System Stabilization Act (Stabilization Act; P.L. 107-42 ) passed in the House by a vote of 356-54, with two Members voting present, and in the Senate by a unanimous vote. It was signed into law on September 22, 2001, providing the airlines access to up to $15 billion in short-term assistance. This included $5 billion in emergency assistance to compensate the air carriers for losses incurred as a result of the attacks, and $10 billion in the form of guaranteed loans designed to provide longer-term stability to the industry and make it more creditworthy in private markets. The Stabilization Act also supported the airline industry by providing premium war risk insurance for 180 days. This insurance was extended multiple times until it expired in 2014. Executive or Regulatory Agency Action and Assistance The Secretary of Transportation and the Comptroller General were in charge of the $5 billion direct compensation to air carriers, while the distribution of the loan guarantees was controlled by an "air transportation stabilization board" (ATSB) consisting of three voting members—the Chairman of the Federal Reserve Board, the Secretary of the Treasury, and the Secretary of Transportation, or their designees—and a non-voting member, the Comptroller General. According to the April 2011 report of the President to the U.S. Congress, as required by the Stabilization Act, 407 air carriers were compensated for direct operating losses as the result of federal ground stop orders as well as any incremental losses incurred between September 11, 2001, and December 31, 2001. Payments totaled nearly $4.6 billion of the $5 billion initially made available. Portions of the remaining balance in the account were rescinded by Congress at various points, with all unobligated balances permanently rescinded by the Omnibus Appropriations Act, 2009 ( P.L. 111-8 , Title I). The ATSB was established to review and decide on airlines' applications for loan guarantee assistance. The ATSB received 16 loan guarantee applications from a range of air carriers, including large airlines, small airlines, low-fare airlines, and charter and cargo carriers. It approved and closed on six loan guarantee applications: American West, ATA Airlines (formerly American Trans Air), Aloha Airlines, Frontier Airlines, US Airways, and World Airways. The total amount of loan guarantees was $1,558,600,000. Repayment or Recoupment of Assistance Five of the six guaranteed loans were fully repaid by the carriers, while the ATA Airlines loan guarantee had to be exercised when ATA Airlines filed for bankruptcy under Chapter 11. In 2005, the ATSB paid approximately $125 million, the outstanding balance on the ATA loan which the ATSB had guaranteed, but eventually recouped $97.2 million of that amount. The ATSB also established that the government was to be compensated for the risks associated with the guarantees through fees and stock warrants. The six airlines paid more than $240 million in fees and interest; while proceeds of warrant sales totaled $142.6 million. Overall, after deducting ATSB expenses, the 2011 report of the President to the U.S. Congress concluded that the government recovered a net of $338.8 million from the carriers as a result of the ATSB loan guarantee activities (see Table 3 ). According to the Federal Aviation Administration's estimate, between September 2001 and December 2014, $1.8 billion in premiums were collected and the total amount of claims paid for three war risk occurrences was $10,107,874. The remaining balance in the Aviation Insurance Revolving Fund is used to back more than $20 billion of the non-premium aviation insurance program that provides critical support to national security and defense by making insurance available to air carriers contracted by the Department of Defense to support military operations. Final Outcome The uncommitted balance of the ATSB loan guarantee authority was $8,441,400,000 on June 28, 2002, the deadline for submitting applications. The Consolidated Appropriations Act of 2008 ( P.L. 110-161 , Division D, Title I) rescinded the unobligated balance of program funds. The War Risk Insurance program expansion expired in 2014. If direct assistance is excluded, the government recouped more than was paid out on both the loan guarantees and the war risk insurance program. Nevertheless, it was exposed to significant financial risks from both programs. Troubled Asset Relief Program (TARP) Bank Support (2008-Present)38 What Happened to the Industry The financial crisis of 2007-2009 grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities that used the repayment of housing loans as the basis of these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value. This caused capital losses for firms holding them, which threated many firms with insolvency. There was widespread lack of trust in financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. This uncertainty prevented firms from accessing credit markets to meet their liquidity needs. The banking industry was at the center of the crisis, both as holders of mortgage backed securities and as lenders making mortgage loans. Executive or Regulatory Agency Action and Assistance The Federal Reserve was created in 1913 largely to act as a lender of last resort in liquidity crises, and its authority was augmented during the Great Depression. As the crisis developed in 2007 and 2008, the Federal Reserve took a variety of steps under its statutory authority to inject liquidity into the financial system. To the degree that the crisis caused solvency problems in financial firms, however, the Federal Reserve was unable to assist, as its authority is limited to lending funds, which offered little assistance to firms that were already highly leveraged and suffering from capital shortfalls. Congressional Action and Assistance Emergency Economic Stabilization Act of 2008 The Emergency Economic Stabilization Act of 2008 (EESA), was brought to the floor of the House as a substitute amendment to H.R. 3997 on September 29, 2008 ; this amendment failed in the House by a vote of 205-228. Another version of EESA, which included the original EESA plus several other provisions not in the first bill, was offered on October 1 in the Senate as an amendment ( S.Amdt. 5685 ) to an unrelated bill, H.R. 1424 , which had previously passed the House. The amendment to H.R. 1424 was approved by a Senate vote of 74-25; it was then taken up by the House and passed by a vote of 263-171, on October 3, 2008. The President signed the amended version of H.R. 1424 , now P.L. 110-343 , the same day as House passage. EESA gave the Department of the Treasury broad authority under the newly created Troubled Asset Relief Program to use up to $700 billion to address the crises. The congressional debate was focused on purchasing the "toxic" assets from firms, thus replacing them with safer assets, but the statute also allowed the Treasury to guarantee assets or to directly augment firms' capital. Among the programs under the EESA authority, the Treasury created the Capital Purchase Program (CPP) to purchase up to $250 billion in preferred shares from banks, thus adding this amount to capital levels. More than 700 banks participated in the CPP and approximately $205 billion was actually disbursed. In addition, there was a relatively small ($570 million) Community Development Financial Institution program that also purchased preferred shares, but on less stringent terms than the CPP. The CPP was augmented with an additional Targeted Investment Program (TIP) preferred share purchases and asset guarantees for two of the most troubled banks, Bank of America and Citigroup. The share purchases were $20 billion to each bank. The asset guarantees were more complicated. Any losses were to be shared between the Treasury, FDIC, and Federal Reserve. The guarantee for Bank of America on $118 billion in assets was offered, but never officially closed. The Citibank guarantee was on $301 billion in assets, but funds were never paid out on any losses. EESA was amended in early 2009, specifically allowing earlier repayment of assistance than originally foreseen and adding additional executive compensation requirements on firms with outstanding assistance. P.L. 111-5 passed the House on a vote of 246-183 and the Senate on a vote of 60-38. Repayment or Recoupment of Assistance In most cases, the Treasury recouped money from sales of preferred shares, primarily back to the issuing banks, as dividends and from warrants that were issued along with the preferred shares and fees paid for the asset guarantees. The Citigroup preferred shares were converted into common equity and sold on the open market. Recoupment from the general TARP bank assistance was completed relatively quickly. For example, by the end of 2011, approximately $255.4 billion had been recouped in total with $17.35 billion of $245.5 billion still outstanding. By 2020, $271.4 billion had been recouped, with $0.04 billion of preferred shares still outstanding. The special assistance for Bank of America was completed by the end of 2009, with a $425 million termination fee paid for the uncompleted asset guarantee and repurchase of the $20 billion in TIP shares resulting in $22.7 billion in recoupment. Citigroup's special assistance finished in December 2009 with $21.8 billion in recoupment from the TIP shares and $3.9 billion in premiums paid for the asset guarantees. Despite the default risk that TARP was exposed to, the government recouped $30.5 billion more than it disbursed on the bank programs (see Table 4 ). Final Outcome The financial crisis passed relatively quickly for the banking industry once the panic conditions of fall 2008 passed. One marker of this is that originally banks were to be required to hold the CPP capital on their books for a minimum of three years, whereas banks began repurchasing CPP preferred shares by March 2009 when the program was still disbursing funds. The overall profitability levels in the banking system returned relatively quickly. Auto Industry (2008-2014)40 What Happened to the Industry In 2008 and 2009, the financial crisis, rising gasoline prices, and a contracting global economy combined to create the worst market in decades for production and sale of motor vehicles in the United States and other industrial countries. While Ford Motor Company had negotiated an $18 billion line of credit in 2007, General Motors (GM) and Chrysler did not have similar long-term financing available when the financial crisis hit, which temporarily made it difficult for most firms to access borrowing markets. In 2009, GM's production dropped by 47% (compared to 2008), and Chrysler's by 57%; total U.S. production among all automakers fell by 34%. The prospect of GM and Chrysler bankruptcies raised other concerns: the failure of their parts suppliers—also used by most other automakers—could cascade financial difficulties throughout the sector; and those supplier failures could overwhelm the federal Pension Benefit Guaranty Corporation with abandoned pension plans. In addition, large affiliated financial companies (which provided auto loans to consumers and dealers) could fail if the automakers entered bankruptcy. Congressional Action and Assistance Congress never passed specific legislation to address auto industry issues. The George W. Bush Administration and congressional leaders differed on the type of assistance that should be offered the automakers: initially, the Administration recommended reprogramming a Department of Energy motor vehicle loan program to provide bridge loans. In December 2008, the House of Representatives passed H.R. 7321 , which would have authorized funds from the DOE Advanced Technology Vehicles Manufacturing program (ATVM) as bridge loans to GM and Chrysler. Although that bill passed the House 237-170, the Senate did not vote on it. When this legislation stalled, the George W. Bush Administration announced that it would use the Troubled Asset Relief Program to support the automakers, arguing that failure to provide assistance could make the recession worse and impose other federal costs, such as unemployment insurance for many displaced auto and auto parts employees. Executive or Regulatory Agency Action and Assistance The Bush Administration made initial TARP loans of $24.8 billion to GM, Chrysler, and two auto financing companies (GMAC and Chrysler Financial) in December 2008 and January 2009. When the Obama Administration took office in January 2009, it continued this loan program, bringing total loans to the auto industry to $79.7 billion. In addition, the Obama Administration established an Auto Task Force chaired by the Secretary of the Treasury to work with GM and Chrysler on restructuring plans with creditors, unions, dealers, and other stakeholders. The goal of the spring 2009 restructurings was to avoid bankruptcy filings, but all stakeholders did not agree to the major changes in the companies. Chrysler and GM filed for bankruptcy in April and June 2009, respectively. After about a month, both companies emerged from bankruptcy court, with new owners: the U.S. Treasury owned about 10% of Chrysler and nearly 61% of GM in return for forfeiting repayment of the previous loans. Other owners included the Canadian government, bondholders, and the United Auto Workers. The federal ownership was sold off over the following years. Repayment or Recoupment of Assistance The assistance was repaid or recouped beginning in 2009 in a variety of ways, including initial public offerings, gradual public offerings of other federal shares, and private sales of stock. Table 5 summarizes the amounts of government assistance and the amount of recoupment for auto industry assistance. Final Outcome The U.S. Treasury sold its last holdings of Chrysler in June 2011 and GM in December 2013. The proceeds from the sales were not enough to cover the original loans to Chrysler and GM. Chrysler Financial fully repaid its loan, and the federal government's recoupment from GMAC was greater than the amount of its assistance. After restructuring and bankruptcy, GM and Chrysler recovered their positions as major U.S. automakers; GM is independent and Chrysler is part of Fiat Chrysler Automobiles (FCA), a corporation based in Great Britain. Table 6 shows comparisons before and after restructuring and bankruptcy. Money Market Mutual Fund Guarantee (2008-2009)44 What Happened to the Industry Money market mutual funds are a type of mutual fund that generally invest in high-quality, short-term assets. Often the value of a share is held at $1 per share and fund gains are paid out as dividends mimicking interest payment. Thus, they are seen as largely analogous to bank deposits, but are not guaranteed by the Federal Deposit Insurance Corporation (FDIC). As part of the market turmoil resulting from the bursting of a nationwide housing bubble, on September 16, 2008, a money market mutual fund called the Reserve Fund "broke the buck," meaning that the value of its shares had fallen below $1. This occurred because of losses it had taken on short-term debt issued by the investment bank Lehman Brothers, which filed for bankruptcy on September 15, 2008. Money market investors had perceived "breaking the buck" to be highly unlikely, and its occurrence set off a generalized run on money market mutual funds, as investors simultaneously attempted to withdraw an estimated $250 billion of their investments—even from funds without exposure to Lehman Brothers. Executive or Regulatory Agency Action and Assistance To stop the run, the Treasury announced an optional program to guarantee deposits in participating money market funds. The Treasury would finance any losses from this guarantee with assets in the Exchange Stabilization Fund (ESF), funds intended to protect the value of the dollar. The Treasury announced this program without seeking specific congressional authorization, justifying the program on the grounds that guaranteeing money market funds would protect the value of the dollar. The program expired after one year in September 2009. Congressional Action and Assistance The Emergency Economic Stabilization Act of 2008 included language (Section 131) that directed the Treasury Secretary to reimburse the Exchange Stabilization Fund for any funds used for the money market guarantee program and prohibited usage of the ESF in the future for such a program. Repayment or Recoupment of Assistance Funds utilizing the guarantee program paid fees for the guarantee of between 0.015% and 0.022% of the amount guaranteed by the program. Final Outcome Over the life of the program, the Treasury reported that no money market mutual fund guarantees were invoked and $1.2 billion in fees had been collected (see Table 7 ). More than $3 trillion of deposits were guaranteed and, according to the Bank for International Settlements, 98% of U.S. money market mutual funds were covered by the guarantee, with most exceptions being funds that invested only in Treasury securities. Agricultural Trade Aid (2018-2019)49 What Happened to the Sector In early 2018, the Trump Administration—citing concerns over national security and unfair trade practices—imposed increased tariffs on steel and aluminum from a number of countries and on a broad range of U.S. imports from China. Several of the affected foreign trading partners—including China, Canada, Mexico, the European Union, and Turkey—responded to the U.S. tariffs with their own retaliatory tariffs targeting various U.S. products, especially agricultural commodities. As a result of these retaliatory tariffs, both market prices and exports of affected U.S. agricultural products dropped sharply in the immediate aftermath of retaliation before gradually recovering as trade shifted to alternate markets. The most notable result of this trade dispute was a decline in trade between the United States and China. From 2010 through 2016, China was the top destination for U.S. agricultural exports based on value. In 2018, U.S. agricultural exports to China declined 53% in value to $9 billion from $19 billion in calendar year 2017. The retaliatory tariffs affected producers of several major U.S. commodities, including field crops like soybeans and sorghum, livestock products like milk and pork, and many fruits, nuts, and other specialty crops. Following the imposition of retaliatory tariffs in 2018, the United States began negotiations with several of the retaliating trade partners to resolve the disputes. However, several of the negotiations were protracted—particularly the U.S.-China trade talks—and trade failed to return to normal patterns during 2018 and 2019. Executive or Regulatory Agency Action and Assistance The Secretary of Agriculture used his authority under Section 5 of the Commodity Credit Corporation (CCC) Charter Act of 1948 (P.L. 80-806; 15 U.S.C. 714 et seq.), as amended, to initiate two ad hoc trade assistance programs in 2018 and 2019. Referred to as "trade-aid packages," these two initiatives represented the Administration's effort to provide short-term assistance to farmers in response to the foreign trade retaliation targeting U.S. agricultural products. The first trade-aid package was announced on July 24, 2018. It targeted production for nine agricultural commodities in 2018 and was valued at up to $12 billion. The second trade-aid package was announced on May 23, 2019. It targeted production for an expanded list of 41 commodities and was valued at up to an additional $16 billion. According to the U.S. Department of Agriculture (USDA), the two trade-aid packages are structured in a similar manner and include three principal components ( Table 8 ): The Market Facilitation Program (MFP) provides direct payments to producers of USDA-specified "trade damaged" commodities. USDA used different payment rate formulas to determine the MFP payment distribution for each of the 2018 and 2019 programs (described below). MFP payments are administered by USDA's Farm Service Agency (FSA). The Food Purchase and Distribution Program (FPDP) is for purchases of unexpected surpluses of affected commodities such as fruits, nuts, rice, legumes, beef, pork, milk, and other specified products for redistribution by USDA's Food and Nutrition Service through federal nutrition assistance programs including food banks, schools, and other outlets serving low-income individuals. It is administered by USDA's Agricultural Marketing Service. The Agricultural Trade Promotion (ATP) program provides cost-share assistance to eligible U.S. organizations for activities—such as consumer advertising, public relations, point-of-sale demonstrations, participation in trade fairs and exhibits, market research, and technical assistance—to boost exports for U.S. agriculture, including food, fish, and forestry products. It is administered by USDA's Foreign Agriculture Service in conjunction with the private sector. The two years of trade assistance, as announced by the Secretary of Agriculture, were valued at a potential combined $28 billion, the largest component being the MFP direct payments to producers valued at a combined $24.5 billion ( Table 8 ). The broad discretionary authority granted to the Secretary under the CCC Charter Act to implement the trade-aid package also allowed the Secretary to determine how the aid was calculated and distributed. Some important differences between the 2018 and 2019 trade aid packages include the following: Although the 2018 and 2019 MFP programs focused payments on the same three commodity groups—non-specialty crops (grains and oilseeds), specialty crops (nuts and fruit), and animal products (hogs and dairy)—the 2019 MFP included an expanded list of eligible commodities (41 eligible commodities in 2019 compared with nine in 2018). The 2018 MFP payments for eligible specialty and non-specialty crops were based on physical production in 2018, and calculated as per-unit payment rates. The 2019 MFP program based its payment rates for specialty crops on harvested acres, and non-specialty crops on planted acres. This change was done to avoid having MFP payments reduced by the lower yields that were expected to occur across major growing regions due to the widespread wet spring and delayed plantings. Then a weighted-average MFP payment-rate-per-acre was calculated at the county level. This was done to minimize influencing producer crop choices and avoid large payment-rate discrepancies across commodities grown within the same county. The end result was a single 2019 MFP payment rate for each county with eligible commodities. Under both 2018 and 2019 MFP programs, payments to dairy producers were based on historical production, while those to hog producers used mid-year inventory data. Payments were made in three tranches under both the 2018 and 2019 MFP programs; cumulative program receipts were subject to annual payment limits and adjusted gross income (AGI) eligibility requirements. The 2018 MFP payments were capped on a per-person or per-legal-entity basis at a combined $125,000 for eligible non-specialty crops, a combined $125,000 for animal products, and, separately, a combined $125,000 for specialty crops. In contrast, the 2019 package used expanded payment limits per individual per commodity group ($250,000) and an expanded maximum combined payment limit across commodity groups ($500,000 versus $375,000 in 2018). Both 2018 and 2019 MFP payment recipients were subject to an AGI eligibility threshold of $900,000, but with an exemption from the AGI criteria if at least 75% of a farm's AGI was from farming operations. There is a general consensus among farm policy analysts that the MFP payments provided a substantial income boost to the U.S. agricultural sector in the aggregate during what otherwise would have been a period of low commodity prices and low net farm income. However, an examination of MFP payments data reveals that they were unevenly distributed across both commodities and regions. Congressional Action and Assistance No congressional action was involved in the establishment, funding, or implementation of the 2018 and 2019 MFP programs. The ranking member of the Senate Committee on Agriculture, Nutrition, and Forestry, Debbie Stabenow of Michigan, has raised concerns about the methodology used to determine payment rates and the resultant distribution of payments across both commodities and regions. In January 2020, Senator Stabenow requested a comprehensive investigation by GAO into the integrity of USDA's trade aid to farmers affected by the Trump Administration's trade policies. Repayment or Recoupment of Assistance There is no provision for repayment or recoupment of any of the funds disbursed under the 2018 and 2019 trade-aid packages. President Trump has claimed that the tariffs imposed on products imported into the United States increased U.S. government revenue, and that these amounts, mainly paid by Chinese exporters, were used to offset the cost of the trade-aid packages. However, economic studies have generally found that the cost of tariffs on imported goods is borne largely by U.S. firms and consumers, not by foreign trading partners. Final Outcome USDA's use of CCC authority to initiate and fund agricultural support programs without congressional involvement is not without precedent, but the scope and scale of its use for the two trade-aid packages—at a potential cost of up to $28 billion—have increased congressional and public interest. On February 11, 2020, USDA Inspector General Phyllis Fong told the House Agriculture Appropriations Subcommittee that her office would be undertaking an investigation of the Administration's trade assistance programs, starting with whether USDA had the proper legal authority to make direct payments to farmers. It is also possible that other countries may challenge MFP payments as a violation of U.S. trade commitments to the World Trade Organization.

Serious disruptions for certain industries caused by the COVID-19 (coronavirus) pandemic have led to calls for federal government assistance to affected industries. Direct federal financial assistance to the private sector on a large scale is unusual, except for geographically narrow assistance following natural disasters. Nonetheless, assistance to business sectors affected by COVID-19 would not be the first occasion on which the federal government has aided troubled or financially distressed industries. Historically, aid—sometimes popularly referred to as "government bailouts"—has taken many forms and has occurred under a wide variety of circumstances. Past assistance has involved such instruments as loan guarantees, asset purchases, capital injections, direct loans, and regulatory changes, with the specific mix of policies varying significantly from case to case. These differences make it somewhat subjective as to what should be defined as a "bailout." To help inform congressional debate, this report examines selected past instances in which the government has aided troubled industries, providing information about the way in which such assistance was structured, the role of Congress, and the eventual cost. In order to provide greater detail, the examples all involve cases in which federal assistance was (1) widely available to firms within an industry rather than being targeted to a particular firm; (2) extraordinary in nature rather than a type of assistance that is routinely provided; and (3) motivated primarily by a desire to prevent industry-wide business failures. The coverage is not exhaustive, and excludes cases in which assistance was targeted at individual firms rather than at entire industries. In some of these cases, the government was able to recoup much or all of its assistance through fees, interest, warrants, and loan or principal repayments. In others, there were no arrangements made for recoupment or repayment. The episodes considered include the following: Railroad Restructuring (1957-1987) Farm Credit System Crisis (1980s) Savings and Loan Crisis (1980s-1990s) Airline Industry (2001-2014) Auto Industry (2008-2014) Troubled Asset Relief Program (TARP) Bank Support (2008-present) Money Market Mutual Fund Guarantee (2008-2009) Agricultural Trade-Aid (2018-2019) Assessing extraordinary assistance can be difficult as particular episodes may play out over decades and full data about assistance may be difficult to collect and analyze. Congress has sometimes included particular oversight and reporting requirements in statutes authorizing aid. In addition, there are broader policy concerns raised by government assistance that may be impossible to quantify and do not get captured in tallies of the government's income and expenses. Possible benefits of assistance may include avoiding potentially long-lasting disruptions to consumers, workers, local communities, and the overall economy; averting losses to federally guaranteed retirement funds; and maintaining federal tax revenues. Potential drawbacks to assistance include the possibility that it may reduce competition by rewarding incumbents over new entrants and distort the affected product market by causing (or prolonging) overproduction; that it may cause "moral hazard" if firms respond to government assistance by acting with less financial prudence in the future; and that it can delay an industry's adjustment to structural problems such as high production cost and excess capacity. In every case, federal assistance to certain industries may raise questions about the fairness of providing assistance to some businesses but not to others.

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Introduction The sale of U.S-origin armaments and other "defense articles " has been a part of national security policy since at least the Lend-Lease programs in the lead-up to U.S. involvement in World War II. Historically, Presidents have used sales of defense articles and services to foreign governments and organizations to further broad foreign policy goals, ranging from sales to strategically important countries during the Cold War, to building global counterterrorism capacity following the terrorist attacks of September 11, 2001. The sale of U.S. defense articles to foreign countries is governed by a broad set of statutes, public laws, federal regulations, and executive branch policies, along with international agreements. An interconnected body of legislative provisions, authorizations, and reporting requirements related to the transfer of U.S. defense articles appears in both the National Defense Authorization Acts (NDAA) and in the State Department, Foreign Operations, and Related Programs (SFOPS) Appropriations Acts. These laws reflect the roles that both the Department of State and the Department of Defense (DOD) take in the administration of the sale, export, and funding of defense articles to foreign countries, which can be found in both Title 22 (Foreign Relations) and Title 10 (Armed Services) of the United States Code . Congress enacted the current statutory framework for the sale and export of defense articles to other countries mainly through two laws—The Foreign Assistance Act of 1961(FAA), 22 U.S.C §2151, et seq., and the Arms Export Control Act of 1976 (AECA), 22 U.S.C. §2751, et seq. Among other provisions, the FAA established broad policy guidelines for the overall transfer of defense articles and services from the United States to foreign entities (foreign countries, firms, and/or individuals) to include both sales and grant transfers, while the AECA also governs the sales of defense articles and services to those entities. This report describes the major statutory provisions governing the sale and export of defense articles—Foreign Military Sales (FMS) and Direct Commercial Sales (DCS)—and outlines the process through which those sales and exports are made. FMS is the program through which the U.S. government, through interaction with purchasers, acts as a broker to procure defense articles for sales to certain foreign countries and organizations, also called eligible purchasers . In DCS, the U.S. government does not act as a broker for the sale, but still must license it, unless export of the item is exempt from licensing according to regulations in the International Traffic in Arms Regulations (ITAR), contained in Subchapter M, 22 CFR 120-130, described below. The President designates what items are deemed to be defense articles or defense services, and thus subject to DCS licensing, via the U.S. Munitions List (USML). All persons (other than U.S. government personnel performing official duties) engaging in manufacturing, acting as a broker, exporting, or importing defense articles and services must register with the State Department according to ITAR procedures. The State Department is required under the AECA to notify Congress 15 to 30 days prior to all planned FMS and DCS cases over a certain value threshold. Congress can, pursuant to the AECA, hold or restrict such sales via a joint resolution. The report also provides a select list of specific legislative limitations on arms sales and end use monitoring requirements found in the Arms Export Control Act. Future updates will consider policy implications and issues for Congress. Sales and Security Assistance/Cooperation Programs In FY2018, the latest year complete agency data is available, the value of authorized U.S. arms sales to foreign governments and export licenses issued totaled about $184.3 billion. Foreign entities purchased $47.71 billion in FMS cases and the value of privately contracted DCS authorizations licensed by the State Department (distinct from actual deliveries of licensed articles and services) totaled $136.6 billion ( Table 1 and Table 2 ). That same year, the State Department requested $7.09 billion (base and OCO) for all of its Title 22 security assistance authorities in its International Security Assistance account, while DOD executed $4.42 billion for Title 10 security cooperation authorities, totaling $11.51 billion, or 24.1% of what foreign entities spent on FMS and 8.4% of the amount of DCS approved licenses. Security Assistance/Security Cooperation Programs While most arms sales and exports are paid for by the recipient government or entity, transfers funded by U.S. security assistance or security cooperation grants to foreign security forces comprise a small portion of arms exports, but they are beyond the scope of this report. These transfers are generally considered foreign assistance, and are authorized pursuant to the FAA, annual National Defense Authorization Acts, and other authorities codified in Title 22 and Title 10 of the U.S. Code. With the exception of Title 10 authorities, the FAA and AECA also govern all of the transfers of U.S.-origin defense articles and services, whether they are commercial sales, government-to-government sales, or security assistance/security cooperation. Major Title 22 grant-based security assistance authorities pertaining to defense articles are Foreign Military Financing (FMF), Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR), Peacekeeping Operations (PKO). Major Title 10 grant-based security cooperation authorities are Authority to Build the Capacity of Foreign Security Forces ("333 authority"), Defense Institution Reform Initiative (DIRI), Ministry of Defense Advisors (MDOA) program, and Southeast Asia Maritime Security Initiative (MSI). DOD, through its Defense Security Cooperation Agency (DSCA), executes most security assistance and security cooperation programs. FMF, IMET, EDA, and equipment lease cases involving the transfer of U.S-origin arms are treated as FMS cases and reported as such by DSCA. Cases executed pursuant to Title 10 authorities are also treated as FMS cases, but are referred to by practitioners as "pseudo-FMS" cases because they often involve a focus on training of foreign forces as well as on the transfer of arms. Sales and Exports of U.S. Defense Articles in Statute, Administration Policy, and Regulation The broad set of statutes, public laws, federal regulations, executive branch policies, and international agreements governing the sale of U.S. defense articles to foreign countries include the following . The Foreign Assistance Act of 1961 and the Arms Export Control Act of 1976 As noted above, the primary statutes covering the sale and export of U.S. defense articles to foreign countries are the FAA (P.L. 87-195, as amended) and AECA ( P.L. 90-629 , as amended) . The FAA expresses, as U.S. policy, that the efforts of the United States and other friendly countries to promote peace and security continue to require measures of support based upon the principle of effective self-help and mutual aid, [and that its purpose is] to authorize measures in the common defense against internal and external aggression, including the furnishing of military assistance, upon request, to friendly countries and international organizations. The AECA states that it is the sense of Congress that all such sales be approved only when they are consistent with the foreign policy of the United States, the purposes of the foreign assistance program of the United States as embodied in the Foreign Assistance Act of 1961, as amended, the extent and character of the military requirement and the economic and financial capability of the recipient country, with particular regard being given, where appropriate, to proper balance among such sales, grant military assistance, and economic assistance as well as to the impact of the sales on programs of social and economic development and on existing or incipient arms races. The FAA also establishes the U.S. policy for how recipient countries are to utilize defense articles sold or otherwise transferred. Section 502 states that defense articles and defense services to any country shall be furnished solely for internal security (including for antiterrorism and nonproliferation purposes), for legitimate self-defense, to permit the recipient country to participate in regional or collective arrangements or measures consistent with the Charter of the United Nations, or otherwise to permit the recipient country to participate in collective measures requested by the United Nations for the purpose of assisting foreign military forces in less developed friendly countries (or the voluntary efforts of personnel of the Armed Forces of the United States in such countries) to construct public works or to engage in other activities helpful to the economic and social development of such friendly countries. Section 22 of the AECA, provides the statutory basis for the U.S. Foreign Military Sales program and allows the U.S. government to interact with purchaser as a broker to procure defense articles for sales to certain foreign countries and organizations, also called eligible purchasers . Under this provision, the President may, without requirement for charge to any appropriation or contract authorization, enter into contracts to sell defense articles or defense services to a foreign country or international organization if it provides the U.S. government with a dependable undertaking to pay the full amount of the contract. Section 38 of the AECA furthermore provides the statutory basis for the U.S. Direct Commercial Sales of defense articles and services. Under this provision, the U.S. government does not act as a broker for the sale, but still must license it, unless specifically provided for in regulations in the International Traffic in Arms Regulations, contained in Subchapter M, 22 CFR 120-130, described below. The President designates what items are deemed to be defense articles or defense services, and thus subject to DCS licensing, via the U.S. Munitions List. All persons (other than U.S. government personnel performing official duties) engaging in manufacturing, acting as a broker, exporting, or importing defense articles and services must register with the State Department according to ITAR procedures. The provision also requires the President to review the items on the USML and to notify the House Foreign Affairs Committee, the Senate Foreign Relations Committee, and the Senate Banking Committee if any items no longer warrant export controls, pursuant to the ITAR. National Security Presidential Memorandum Regarding U.S. Conventional Arms Transfer Policy: NSPM-10 In April 2018, the Trump Administration, citing the AECA, issued a National Security Presidential Memorandum, NSPM-10, outlining its policy concerning the transfer of conventional arms. The memorandum reflects many of the policy statements of the FAA and AECA in aiming to "bolster the security of the United States and our allies and partners," while preventing proliferation by exercising restraint and continuing to participate in multilateral nonproliferation arrangements such as the Missile Technology Control Regime (MTCR) and Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. It explicitly commits the U.S. government to continue to meet the requirements of all applicable statues, including the AECA, the FAA, the International Emergency Economic Powers Act, and the annual NDAAs. NSPM-10 also prioritizes efforts to "increase trade opportunities for United States companies, including by supporting United States industry with appropriate advocacy and trade promotion activities and by simplifying the United States regulatory environment." In addition, NSPM-10 directs the executive branch to consider the following in making arms transfer decisions: the national security of the United States, including the transfer's effect on the technological advantage of the United States; the economic security of the United States and innovation; relationships with allies and partners; human rights and international humanitarian law; and nonproliferation implications. Title 22, Code of Federal Regulations, Foreign Relations The AECA, Section 38, also authorizes the President to issue regulations on the import and export of defense articles. As noted above, the catalog of defense articles subject to these regulations is called the United States Munitions List. The USML is found in federal regulations at 22 CFR 121. The series of federal regulations for importing and exporting of defense articles—the International Traffic in Arms Regulations—is contained in Subchapter M, 22 CFR 120-130. The USML lists defense articles by category and identifies which of those articles are "significant military equipment" further restricted by provisions in the AECA. The President has delegated authority for administering the USML and associated regulations to the Secretary of State, who in turn has delegated this authority to the Deputy Assistant Secretary of State for Defense Trade Controls in the Bureau of Political-Military Affairs (PM). The Directorate of Defense Trade Controls (DDTC) is responsible for ensuring that commercial exports of defense articles and defense services advance U.S. national security objectives. DDTC also administers a public web portal for U.S. firms seeking assistance with exporting defense articles and services. DOD's Security Assistance Management Manual The Department of Defense has a substantial role in the sale of defense articles to foreign countries through FMS, which DOD administers in coordination with the Department of State mainly through the Defense Security Cooperation Agency. DSCA provides procedures for FMS and certain other transfers of defense articles and defense services to foreign entities in its Security Assistance Management Manual (SAMM). The SAMM is used mainly by the military services, the Office of the Secretary of Defense, Special Operations Command (SOCOM), the regional combatant commanders, and country teams in U.S. embassies overseas, and it may also be consulted by foreign countries and U.S. defense contractors. The SAMM also provides the timelines and methods for coordinating FMS, cases with the State Department. Sales and Exports of U.S. Defense Articles in International Agreements25 The United States participates in two international agreements that broadly affect the transfer of U.S. defense articles: The Missile Technology Control Regime and the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. Other international agreements, such as the Treaty on the Nonproliferation of Nuclear Weapons (NPT), the Convention on the Physical Protection of Nuclear Material, the Chemical Weapons Convention, and the Biological and Toxin Weapons Convention, may limit exports of defense-related material, but only material linked to the development of nuclear, chemical, and biological weapons. Missile Technology Control Regime The Missile Technology Control Regime, while not a treaty, is an informal and voluntary association of countries seeking to reduce the number of systems capable of delivering weapons of mass destruction (other than manned aircraft), and seeking to coordinate national export licensing efforts aimed at preventing their proliferation. The MTCR was originally established in 1987 by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Since then, participation has grown to 35 countries. Member nations, by consensus, agree on common export guidelines (the MCTR Guidelines) on transfer of systems capable of delivering weapons of mass destruction, as well as an integral common list of controlled items (the MTCR Equipment, Software and Technology Annex). The annex is a list of controlled items – both military and dual-use – including virtually all key equipment, materials, software, and technology needed for the development, production, and operation of systems capable of delivering nuclear, biological, and chemical weapons. The annex is divided into "Category I" and "Category II" items. Partner countries exercise restraint when considering transfers of items contained in the annex, and such transfers are considered by each partner country on a case-by-case basis. The State Department, Directorate of Defense Trade Controls, administers the U.S. implementation of the MTCR and incorporates the MTCR guidelines and annex into the International Traffic in Arms Regulations and the U.S. Munitions List. The Wassenaar Arrangement In 1996, 33 countries, including the United States, agreed to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The arrangement aims "to contribute to regional and international security and stability, by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilising accumulations." It maintains two control lists. One is a list of weapons, including small arms, tanks, aircraft, and unmanned aerial systems. The second is a list of dual-use technologies including material processing, electronics, computers, information security, and navigation/avionics. Dual-use, in this context, means items and technologies that can be used in both civilian and military applications. DDTC incorporates the Wassennar Arrangement into the ITAR and USML. Under the Export Control Act of 2018 (Subtitle B, Part 1, P.L. 115-232 ), the Department of Commerce is to "establish and maintain a list" of controlled items, foreign persons, and end-uses determined to be a threat to U.S. national security and foreign policy. The legislation also directs the Commerce Department to require export licenses; "prohibit unauthorized exports, re-exports, and in-country transfers of controlled items"; and "monitor shipments and other means of transfer." Foreign Military Sales Process The FMS program is the U.S. government-brokered method for delivering U.S. arms to eligible foreign purchasers, normally friendly nations, partner countries, and allies. The program is authorized through the AECA, with related authorities delegated by the President, under Executive Order 13637, to the Secretaries of State, Defense, and Commerce. The State Department (DOS) is responsible for the export (and temporary import) of defense articles and services governed by the AECA, and reviews and submits to Congress an annual Congressional Budget Justification (CBJ) for security assistance. This also includes an annual estimate of the total amount of sales and licensed commercial exports expected to be made to each foreign nation as required by 22 U.S.C §2765(a)(2)). DOD generally implements the FMS program as a military-to-military program and serves as intermediary for foreign partners' acquisition of U.S. defense articles and services. Using what is commonly called the Total Package Approach , U.S. security assistance organizations must offer, in addition to specific defense articles, a sustainment package to help the buyer maintain and operate the article(s) effectively and in accord with U.S. intent. DOD follows the Defense Federal Acquisition Regulation Supplement (DFARS), except where deviations are authorized. Acquisition on behalf of eligible FMS purchasers must be in accordance with DOD regulations and other applicable U.S. government procedures. This arrangement affords the foreign purchaser the same benefits and protections that apply to DOD procurement, and it is one of the principal reasons why foreign governments and international organizations might choose to procure defense articles through FMS. FMS requirements may be consolidated with U.S. requirements or placed on separate contracts, whichever is more expedient and cost-effective. Purchasers must agree to pay in U.S. dollars, by converting their own national currency or, under limited circumstances, though reciprocal arrangements. When the purchase cannot be financed by other means, credit financing or credit guarantees can be extended if allowed by U.S. law. FMS cases can also be directly funded by DOS using Foreign Military Financing appropriations. Letters of Request (LOR) Start the Process When an eligible foreign purchaser (government or otherwise) decides to purchase or otherwise obtain a U.S. defense article or service, it begins the process by making the official request in the form of a letter of request (LOR) (See Figure 1 for an illustration of the process from receipt to case closure.) The letter may take nearly any form, from a handwritten request to a formal letter, but it must be in writing. The purchaser submits the LOR to a U.S. security cooperation organization (SCO), normally an Office of Defense Cooperation nested within the U.S. Embassy in the country, or directly to DSCA or an implementing agency (IA). The IA is usually a military department or DOD agency (e.g., Army Security Assistance Command, Navy International Programs Office, Air Force International Affairs). The LOR can be submitted in-country or through the country's military and diplomatic personnel stationed in the United States. Unless an item has been designated as "FMS Only," DOD is generally neutral as to whether a country purchases U.S.-origin defense articles/services through FMS or DCS (discussed below). The AECA gives the President discretion to designate which military end-items must be sold exclusively through FMS channels. This discretion is delegated to the Secretary of State under Executive Order 13637 and, as a matter of policy, this discretion is generally exercised upon the recommendation of DOD. Once the U.S. SCO receives the LOR, it transmits the request to the relevant agencies (e.g., DSCA, IA) for consideration and export licensing. U.S. government responses to LORs include price and availability (P&A) data, letters of offer and acceptance (LOAs), and other appropriate actions that respond to purchasers' requests. If the IA recommends disapproval, it notifies DSCA, which coordinates the disapproval with DOS, as required, and formally notifies the customer of the disapproval. Letters of Offer and Acceptance (LOA) Set Terms After approving the transfer of a defense article, the United States responds with a letter of offer and acceptance. The LOA is the legal instrument used by the USG to sell defense articles, defense services including training, and design and construction services to an eligible purchaser. The LOA itemizes the defense articles and services offered and when implemented becomes an official tender by the USG. Signed LOAs and their subsequent amendments and modifications are also referred to as "FMS cases." The time required to prepare LOAs varies with the complexity of the sale. Reports to Congress Within 60 days after the end of a quarter, the State Department, on behalf of the President, sends to the Speaker of the House, HFAC, and the chairman of the SFRC a report of, inter alia, LOAs offering major defense equipment valued at $1 million or more; all LOAs accepted and the total value; the dollar amount of all credit agreements with each eligible purchaser; and all licenses and approvals for exports sold for $1 million or more. Case Executions Deliver Articles The IA takes action to implement a case once the purchaser has signed the LOA and necessary documentation and provided any required initial deposit. The standard types of FMS cases are defined order, blanket order, and cooperative logistics supply support arrangement (CLSSA). A CLSSA usually accompanies sales of major defense articles, providing an arrangement for supplying repair parts and other services over a specified period after delivery of the articles. Defined order cases or lines are commonly used for the sale of items that require item-by-item security control throughout the sales process or that require separate reporting; blanket order cases or lines are used to provide categories of items or services (normally to support one or more end items) with no definitive listing of items or quantities. Defined order and blanket order cases are routinely used to provide hardware or services to support commercial end items, obsolete end items (including end items that have undergone system support buyouts), and selected non-U.S. origin military equipment. The case must be implemented in all applicable data systems (e.g., Defense Security Assistance Management System [DSAMS], Defense Integrated Financial System [DIFS], DSCA 1200 System, and Military Department [MILDEP] systems) before case execution occurs. The IA issues implementing instructions to activities that are involved in executing the FMS case. Case execution is the longest phase of the FMS case life cycle. Case execution includes acquisition, logistics, transportation, maintenance, training, financial management, oversight, coordination, documentation, case amendment or modification, case reconciliation, and case reporting. Case managers, normally assigned to the IAs, track FMS delivery status in coordination with SCOs. FMS records, such as case directives, production or repair schedules, international logistics supply delivery plans, requisitions, shipping documents, bills of lading, contract documents, billing and accounting documents, and work sheets, are normally unclassified. All case transactions, financial and logistical, must be recorded as part of the official case file. Cost statements and large accounting spreadsheets must be supported by source documents. LOA requirements are fulfilled through existing U.S. military logistics systems. With the exception of excess defense articles (EDA) or obsolete equipment, items are furnished only when DOD plans to ensure logistics support for the expected item service life. This includes follow-on spare parts support. If an item will not be supported through its remaining service life, including EDA and obsolete defense articles, an explanation should be included in the LOA. FMS cases may be amended or modified to accommodate certain changes. An amendment is necessary when a change requires purchaser acceptance. The scope of the case is a key issue for the IA to consider in deciding whether to prepare an amendment, modification, or new LOA. In defined order cases, scope is limited to the quantity of items or described services, including specific performance periods listed on the LOA. In blanket order cases, scope is limited to the specified item or service categories and the case or line dollar value. In CLSSAs, scope is limited by the LOA description of end items to be supported and dollar values of the cases. A scope change takes place when the original purpose of a case line or note changes. U.S. government unilateral changes to an FMS case are made by a modification and do not require acceptance by the purchaser. Customs Clearance In all FMS cases, the firms then ship the defense articles to the foreign partner via a third-party freight forwarding company. The security cooperation organization, part of the U.S. embassy country team, may receive the item and hand it over to the purchaser, or the purchaser may receive it directly. The U.S. government and the purchaser's advanced planning for transportation of materiel is critical for case development and execution. DOD policy requires that the purchaser is responsible for transportation and delivery of its purchased materiel. Purchasers can use DOD distribution capabilities on a reimbursable basis at DOD reimbursable rates via the Defense Transportation System (DTS). Alternatively, purchasers may employ an agent, known as a Foreign Military Sales freight forwarder, to manage transportation and delivery from the point of origin (typically the continental United States) to the purchaser's desired destination. Ultimately, the purchaser is responsible for obtaining overseas customs clearances and for all actions and costs associated with customs clearances for deliveries of FMS materiel, including any intermediate stops or transfer points. Generally, title to FMS materiel is transferred to the purchaser upon release from its point of origin, normally a DOD supply activity, unless otherwise specified in the LOA. However, U.S. government security responsibility does not cease until the recipient's designated government representative assumes control of the consignment. Direct Commercial Sales Process DOS Role in DCS While an export license is not required for the FMS transfers, registered U.S. firms may sell defense articles directly to foreign partners via licenses received from the State Department. In this case, the request for defense articles and/or defense services may originate as a result of interaction between the U.S. firm and a foreign government, may be initiated through the country team in U.S. embassies overseas, or may be generated by foreign diplomatic or defense personnel stationed in the United States. A significant difference between DCS licenses and FMS cases is that in DCS, the U.S government does not participate in the sale or broker the defense articles or services for transfer by the U.S. government to the foreign country. While DCS originates between registered U.S. firms and foreign customers, an application for an export license goes through a review process similar to FMS ( Figure 2 , below). DOS and DOD have agency review processes that assess proposed DCS transfers for foreign policy, national security, human rights, and nonproliferation concerns. In order for a U.S. firm to export defense articles or services on the U.S. Munitions List, it must first register with the State Department, Directorate of Defense Trade Controls. It must then obtain export licenses for all defense articles and follow the International Traffic in Arms Regulations. Once granted, an export license is valid for four years, after which a new application and license are required. To export a defense article through DCS, a U.S. defense firm must comply with ITAR requirements. The three Directorates of the State Department's Bureau of Political-Military Affairs publish policy, issue licenses, and enforce compliance in accord with the ITAR in order to ensure commercial exports of defense articles and defense services advance U.S. national security and foreign policy objectives. If marketing efforts involve the disclosure of technical data or the temporary export of defense articles, the defense firm must also obtain the appropriate export license from DDTC. DOD's Defense Technology Security Administration (DTSA) serves as a reviewing agency for the export licensing of dual-use commodities and munitions items and provides technical and policy assessments of export license applications. Specifically, it identifies and mitigates national security risks associated with the international transfer of critical information and advanced technology in order to maintain the U.S. military's technological edge and to support U.S. national security objectives. The ITAR includes many exemptions from the licensing requirements. Some are self-executing by the exporting firm who is to use them and normally are based on prior authorizations. Other exemptions (for example, the exemption in 22 CFR 125.4(b)(1) regarding technical data) may be requested or directed by the supporting military department or DOD agency. DOD Role in DCS In contrast to FMS, DOD does not directly administer sales or facilitate transportation of items purchased under DCS, although, unless the host country requests that purchase be made through FMS, DOD tries to accommodate a U.S. defense firm's preference for DCS, if articulated. In addition, DOD does not normally provide price quotes for comparison of FMS to DCS. If a company or country prefers that a sale be made commercially rather than via FMS, and when a company receives a request for proposal from a country and prefers DCS, the company may request that DSCA issue a DCS preference for that particular sale. The particulars of each recipient country, U.S. firm, and sale determine whether FMS or DCS is preferred. Before approving DCS preference for a specific transaction, DSCA considers the following: Items provided through blanket order and those required in conjunction with a system sale do not normally qualify for DCS preference. FMS procedures may be required in sales to certain countries and for sales financed with Military Assistance Program (MAP) funds or, in most cases, with FMF funds. The DSCA Director may also recommend to the DOS that it mandate FMS for a specific sale. DCS preferences are valid for one year; therefore, during this time, if the IA receives from the purchaser a request for pricing and availability (P&A) or an LOA for the same item, it should notify the purchaser of the DCS preference. U.S. firms may request defense articles and services from DOD to support a DCS to a foreign country or international organization. Defense articles must be provided pursuant to applicable statutory authority, including 22 U.S.C. 2770, which authorizes the sale of defense articles or defense services to U.S. companies at not less than their estimated replacement cost (or actual cost in the case of services). The SCO chief and other relevant members of the country team normally meet with visiting U.S. defense industry representatives regarding their experiences in country. The SCO chief responds to follow-up inquiries from industry representatives with respect to any reactions from host country officials or subsequent marketing efforts by foreign competitors. The SCO chief alerts embassy staff to observe reactions of the host country officials on U.S. defense industry marketing efforts. As appropriate, the SCO chief can pass these reactions to the U.S. industry representatives. However, the SCO may not work on behalf of any specific U.S. firm; its only preference can be for purchasers to "buy American." If the SCO chief believes that a firm's marketing efforts do not coincide with overall U.S. defense interests or have potential for damaging U.S. credibility and relations with the country, the SCO chief relays these concerns, along with a request for guidance, throughout the country team and to the Combatant Command, Military Department, and DSCA. Excess Defense Articles If a partner is unable to purchase, or wishes to avoid purchasing, a newly-manufactured U.S. defense article, it may request transfer of Excess Defense Articles from DOD to its designated recipient. EDA refers to DOD and United States Coast Guard (USCG)-owned defense articles that are no longer needed and, as a result, have been declared excess by the U.S. Armed Forces. This excess equipment is offered at reduced or no cost to eligible foreign recipients on an "as is, where is" basis. As such, EDA is a hybrid between sales and grant transfer programs. DOD states that the EDA program works best in assisting friends and allies to augment current inventories of like items with a support structure already in place. All FMS eligible countries can request EDA. An EDA grant transfer to a country must be justified to Congress for the fiscal year in which the transfer is proposed as part of the annual congressional justification documents for military assistance programs. There is no guarantee that any EDA offer will be made on a grant basis; each EDA transfer is considered on a case-by-case basis. EDA grants or sales that contain significant military equipment or with an original acquisition cost of $7 million or more require a 30-calendar day congressional notification. Title to EDA items transfers at the point of origin, except for items located in Germany; those EDA items transfer title at the nearest point of debarkation outside of Germany. All purchasers or grant recipients must agree that they will not transfer title or possession of any defense article or related training or other defense services to any other country without prior consent from DOS pursuant to 22 U.S.C. §2753 and 22 U.S.C. §2314. Interagency Relationships in Arms Sales The decision-making and execution involved in a transfer of defense articles or services includes myriad stakeholders, from the President and Congress to small, two-person Security Cooperation Organizations in embassies around the world. Having granted to the President authority to carry out arms sales and exports, Congress oversees its conduct. In further delegation of authority, the Secretaries of State and Defense, through their departments, carry out functions outlined in statute, federal regulations, and executive orders. State Department Policy Prerogatives All security assistance programs are subject to the continuous supervision and general direction of the Secretary of State, to be consistent with U.S. foreign policy interests. DOS ensures partner and purchaser eligibility for arms transfer(s) and obtains required assurances from recipient countries and organizations. The State Department also reviews and approves export license requests for direct commercial sales of items on the United States Munitions List. As mentioned above, DOS submits to Congress, in its Congressional Budget Justification, an annual estimate of the total amount of transfers expected to be made to each foreign nation and an annual arms sale proposal report (Javits Report) required by law. Within the State Department, the Bureau of Political-Military Affairs (PM) is the main administrator for arms transfers, whether FMS or DCS. PM provides policy direction for sale and export of defense articles related to international security, security assistance, military operations, defense strategy and plans, and defense trade. Under PM, the Office of Regional Security and Arms Transfers (RSAT) manages the sale/transfer of U.S.-origin defense articles and services to foreign governments. PM/RSAT, which is responsible for ensuring that all FMS cases are properly reviewed within the State Department for consistency with U.S. foreign policy and national security objectives, receives all FMS cases from DSCA, DOD's FMS implementing agency. PM/RSAT officers coordinate with other department bureaus and offices and provide recommendations to PM leadership on whether to approve potential FMS sales. Finally, PM/RSAT officers work with PM leadership and DOD to make the required notifications, to include briefing congressional staff on the Javits Report. Each U.S. embassy country team, under the direction of the State Department and led by the Chief of Mission (usually the U.S. Ambassador), prepares an Integrated Country Strategy (ICS) detailing mission plans for engagements with the host country, including defense education, training, arms transfers, and other cooperation. Within the country team, the senior defense official (SDO) directs the preparation of the defense cooperation portion of ICS. The embassy's SCO (see footnote 41 ), normally called the Chief of the Office of Defense Cooperation (ODC Chief), annually forecasts and documents the budget for defense cooperation activities, based upon his or her own contacts with the host nation military and those of the SDO and other military stationed in-country. Both the SDO and ODC Chief work under the direct supervision of the Chief of Mission but report to, and are evaluated by, the geographic combatant command (COCOM) in the operational area where the host nation lies. They manage the delicate task of balancing the COCOM's view of necessary security cooperation and capacity-building activities with relevant State Department officials' views. The SDO and ODC Chief may submit their recommendations directly to both the Head of Mission and to the COCOM. Where there is a large ODC, with subordinate service representative offices, the service representatives may submit service-specific forecasts and budgets to their service and its implementing agency as well. The COCOM views may or may not be reflected in the mission's ICS submission, as the Head of Mission ultimately decides what the mission will forward. Many countries that receive U.S.-made defense articles and services have organizations similar to an ODC in their embassies or consulates in the United States. They interact with both State Department and DOD officials, as well as U.S. defense contractors, to initiate and coordinate pre-LOR (for FMS) or pre-DCS actions. DOD Policy and Implementation Role Notwithstanding the primary role of the State Department, DOD plays a central role in shaping arms sales policy and implementing arms transfers (as noted in sections above outlining the processes for FMS and DCS). DOD Directive 5132.03 promulgates DOD Policy and Responsibilities Relating to Security Cooperation, based on the National Defense Strategy and the National Military Strategy. Within DOD security cooperation, the Theater Campaign Plan (TCP) balances U.S. government strategic imperatives with host nation military-to-military engagement. Each country section of the TCP identifies significant security cooperation initiatives planned for the country and articulates specific, measurable, attainable, relevant, and time-bound objectives in support of such initiatives. The regional COCOM's corresponding, subordinate country cooperation plans drive the specific transfers of defense articles and services, including major arms transfers and training events. The objectives set within these strategies take into account the host nation's security environment, political will, willingness and ability to protect sensitive information and technologies, and absorptive capacity, as well as policy and legal constraints. The COCOM then passes its recommendations for FMS and EDA arms transfers to the Chairman of the Joint Chiefs of Staff (CJCS) and to the Under Secretary of Defense for Policy (USD (P)) for inclusion in the integrated country strategy and the joint regional strategy; they also identify obstacles to execution of plans, including shortfalls in security cooperation authorities or resources, joint capability shortfalls, or shortfalls in partners' capabilities. The CJCS is generally charged with providing military advice to the Secretary of Defense concerning security cooperation. The CJCS and the USD(P) are charged with developing and managing a process to address obstacles to campaign plan execution that the COCOMs identify. The office of the USD(P) is generally charged with representing DOD in security assistance and security cooperation matters, setting DOD's security cooperation priorities, and harmonizing these within a whole-of-government approach to engagements with allied and partner nations. The one assistant charged purely with leading security cooperation is the Director of the Defense Security Cooperation Agency. Selected tasks of this officer, normally a 3-star general or flag officer, working directly for the USD (P), include providing guidance to the DOD Components and DOD representatives to U.S. missions (i.e. senior defense officials) for the execution of DOD security cooperation programs; managing and administering those Title 10 and 22 programs for which DSCA has responsibility, consistent with security cooperation priorities; and coordinating the development of foreign disclosure and sales policies and procedures for defense information, technology, and systems (with the USD(P) and USD (Sustainment). In sum, DOD generally implement security cooperation programs on behalf of the Department of State, as part of broader foreign policy and national security strategies. Based on its authority under Title 22, the State Department must arbitrate among a large number stakeholders (e.g., partner nations, embassy country teams, COCOMs, Joint Staff and Office of the Secretary of Defense) and interests (e.g., economic gain for U.S. firms, technology security, long-term national security of the United States and its partners). End-Use Monitoring (EUM) The Arms Export Control Act (AECA) directs the President to establish a program that provides for the end-use monitoring for all defense articles and defense services sold, leased, or exported under the act. The program is required to provide reasonable assurance that the recipient is complying with the requirements imposed by the U.S. government with respect to use, transfers, and security of the articles and services, as well as that such articles and services are being used for the purposes for which they were provided. The executive branch has two formal EUM programs: Blue Lantern is for Direct Commercial Sales, while Golden Sentry is for Foreign Military Sales. If exported defense articles require specialized physical security and accounting, the Golden Sentry program conducts specialized Enhanced EUM. State Department's Blue Lantern Program (DCS) The State Department's Directorate for Defense Trade Controls administers the Blue Lantern program for articles and services on the USML exported via DCS. According to DOS, it includes pre-license, post-license, and post-shipment checks to verify the bona fides of foreign country consignees and end users, as well as verifying the legitimacy of proposed transactions and the compliance with U.S. defense export rules and policies. Typically conducted by U.S. embassy and consular staff, verifications occur in over 100 countries every year. If the Blue Lantern check determines an unfavorable use, it may result in the denial or revocation of the export license, the violator's entry on DDTC's watch list, or referral to Homeland Security Investigations or the FBI. In FY2018, with 35,779 authorized DCS export license applications, DOS initiated 466 Blue Lantern checks (268 pre-license, 89 post-shipment, and 109 containing both pre-license and post-shipment checks) in over 70 countries. In the same year, DOS closed 585 Blue Lantern cases, with 168 labeled "unfavorable." DOD's Golden Sentry Program (FMS) The Defense Security Cooperation Agency administers DOD's Golden Sentry program, which is the FMS counterpart of State's Blue Lantern program. Golden Sentry's objective is to ensure compliance with technology control requirements and to provide reasonable assurance that the recipients are complying with U.S. government requirements with respect to the use, transfer, and security of defense articles and services. The program includes actions to prevent misuse or unauthorized transfer of the articles or services from title transfer until disposal, with the type of article or service generally determining the level of monitoring required. In routine EUM, DOD's Security Cooperation Organizations (SCOs) are required to observe and report any potential misuse or unapproved transfer of FMS articles or services to the regional COCOM, DSCA, and the State Department. They must conduct their checks at least quarterly, and must document their checks in reporting to DSCA. In the case of arms, ammunition, and explosives, SCOs are required to apply the same standards of U.S. control to the items upon release to the purchaser. Enhanced EUM—Golden Sentry Some security-sensitive exported or transferred defense articles require specialized physical security and accounting. These items are designated as requiring Enhanced End-Use Monitoring (EEUM) by a military service's export policy, or by interagency agreement, or through DOD policy resulting from consultation with Congress. The EEUM program is administered through Golden Sentry and requires DOD's SCOs in-country to conduct planned and coordinated visits to host nation installations, where they verify by serial number each EEUM-designated item on an annual basis. Questions for Congressional Consideration Do Current Levels of Arms Sales and Exports Fulfill Statutory and Policy Objectives? Section 1 of the AECA states, "An ultimate goal of the United States continues to be a world which is free from the scourge of war and the dangers and burdens of armaments; in which the use of force has been subordinated to the rule of law; and in which international adjustments to a changing world are achieved peacefully. In furtherance of that goal, it remains the policy of the United States to encourage regional arms control and disarmament agreements and to discourage arms races." The AECA proceeds to acknowledge and allow that arms transfers and cooperation are necessary to "maintain and foster the environment of international peace and security essential to social, economic, and political progress." These two paragraphs appear to draw a distinction between the policy aims of arms production and transfer on the one hand and, on the other, the burden [emphasis added] thereof as separate from economic endeavor and progress. Current Administration policy contained in NSPM-10 is to "bolster the security of the United States and our allies and partners," while preventing proliferation by exercising restraint and continuing to participate in multilateral nonproliferation arrangements such as the Missile Technology Control Regime and the Wassenaar Arrangement. It explicitly commits the U.S. government to continue to meet the requirements of all applicable statues, including the AECA, the FAA, the International Emergency Economic Powers Act, and the annual NDAAs. It also prioritizes efforts to "increase trade opportunities for United States companies, including by supporting United States industry with appropriate advocacy and trade promotion activities and by simplifying the United States regulatory environment." The document adds "a dynamic defense industrial base" as a named employment source and stipulates "economic security" as a requirement for national security and defense. Congress may consider whether current sales and exports of defense articles and services, at current levels, bolster the security of the U.S. and its allies, while simultaneously fostering U.S. industry and innovation. Overall, should the goals of increasing trade opportunities for U.S. companies be an explicit goal of U.S. arms sales policy? In light of the potential differences between 10 U.S.C. § 2151 and the current United States Conventional Arms Transfer Policy, Congress may consider whether to reformulate the goals of the Arms Export Control Act in light of the contemporary national security situation, whether and to what extent economic security comprises a facet of national security including any effect on the defense industrial base (DIB) and the national technical industrial base (NTIB), and whether to determine the value of U.S. national arms production and export as part of overall U.S. exports and the degree to which desirability of arms production contributes to real long term economic growth. Are Current Methods of Conducting Sales of Defense Articles and Services Consistent with the Intent and Objectives of the AECA? In FY2018, foreign entities purchased $47.71 billion in FMS cases and the value of privately contracted DCS authorizations licensed by the State Department totaled $136.6 billion (see Table 1 and Table 2 , above). Congress may consider if this amount of annual arms sales is consistent with the intent of statute governing these sales. The FAA expresses, as U.S. policy, "the efforts of the United States and other friendly countries to promote peace and security continue to require measures of support based upon the principle of effective self-help and mutual aid." The AECA states that "all such sales be approved only when they are consistent with the foreign policy of the United States, the purposes of the foreign assistance program…, and the economic and financial capability of the recipient country, with particular regard being given, where appropriate, to proper balance among such sales, grant military assistance, and economic assistance as well as to the impact of the sales on programs of social and economic development and on existing or incipient arms races." Section 1 of the AECA further limits U.S. arms sales, as policy, to levels extant when it was enacted: It is the sense of the Congress that the aggregate value of defense articles and defense services- (1) which are sold under section 2761 or section 2762 of this title; or (2) which are licensed or approved for export under section 2778 of this title to, for the use, or for benefit of the armed forces, police, intelligence, or other internal security forces of a foreign country or international organization under a commercial sales contract; in any fiscal year should not exceed current levels. Congress may consider whether and how it measures the relation between the 1976 level of arms sales and any contemporary level. Are End Use Monitoring Programs Resourced Adequately? Some critics of current EUM programs point to a potential disparity between the number of defense articles exported and the number of EUM investigations completed. For example, in the State Department's Blue Sentry Program in FY2018, DDTC authorized 35,779 export license applications. DOS initiated 466 Blue Lantern checks (268 pre-license, 89 post-shipment, and 109 containing both pre-license and post-shipment checks) in over 70 countries. This represents approximately 1.3 percent of adjudicated license applications. The State Department employed five full-time employees and six contractors to administer the program. Some analysts have argued that such a small staff could not possibly track everything that happens to billions of dollars' worth of defense articles transferred to dozens of foreign countries each year. Acting Assistant Secretary of State for Political-Military Affairs Tina Kaidanow testified that under current programs, there are a number of steps that the U.S government can take to endure proper end use of exported defense articles. She noted further that most U.S defense manufacturers are responsible for ensuring compliance with the ITAR, with personnel dedicated to ensuring such compliance while working closely with the State Department to address any compliance issues that may arise. Appendix. Selected Legislative Restrictions on Sales and Export of U.S. Defense Articles Since the enactment of the Foreign Assistance Act (FAA) in 1961, Congress has amended both the FAA and the AECA, as well as Title 10 U.S.C. (governing DOD) in order to limit the sale and export of U.S. defense articles to certain foreign countries. Additional limitations have been enacted in the annual State/Foreign Operations and Related Programs Appropriations Acts, and through the National Defense Authorization Acts. The following illustrative examples are not intended to be comprehensive. Restrictions Based on Human Rights Violations Section 502B(a)(2) of the FAA (22 U.S.C. 2304(a)(2)) prohibits, absent the exercise of a presidential waiver, security assistance to any country where the government engages in a consistent pattern of gross violations of internationally recognized human rights. "Security assistance" is defined here to include "sales of defense articles or services, extensions of credits (including participations in credits), and guaranties of loans" under the AECA. The U.S. "Leahy Laws," Section 620M of the FAA and 10 U.S.C. § 362, prohibit U.S. security assistance to foreign security force units when credible evidence exists that the unit has committed a gross violation of human rights. However, these laws do not define security assistance, and in practice the executive branch applies them only to U.S.-funded transactions, excluding FMS or DCS. The Child Soldiers Prevention Act of 2008 ( P.L. 110-547 , 22 U.S.C §2370c-1), prohibits assistance to and licensing for direct commercial sales of military equipment to the government of a country that is clearly identified as having governmental armed forces, police, or other security forces, or government-supported armed groups, that recruit or use child soldiers. The Victims of Trafficking and Violence Protection Act of 2000, P.L. 106-386 , amended Section 502B of the FAA to require that the President report to the Congress on countries found to be involved in extreme forms of trafficking of persons. The act prohibits nonhumanitarian and nontrade-related aid, including security assistance, to countries that do not comply with minimum standards for eliminating trafficking in persons, subject to presidential waiver. Restrictions on Countries Supporting Terrorism Section 40 of the AECA (22 U.S.C. §2780) prohibits exporting or otherwise providing, directly or indirectly, any munitions item to a country whose government has repeatedly provided support for acts of international terrorism. Section 40A (22 U.S.C. §2781) prohibits any defense article or defense service from being sold or licensed for export to any county the President determines is not cooperating fully with United States antiterrorism efforts. The prohibitions contained in this section do not apply with respect to any transaction subject to reporting requirements under title V of the National Security Act of 1947, 50 U.S.C. §3091 et seq. Restrictions on the Process of Foreign Military Sales Section 830 of the FY2017 National Defense Authorization Act, P.L. 114-328 , required the Secretary of Defense to prescribe regulations to require the use of firm fixed-price contracts for Foreign Military Sales. Restrictions and Limitations on Specific Countries and Regions Libya: Section 404 of the International Security and Cooperation Act of 1985, P.L. 99-83 , which amended the FAA (22 U.S.C. §2439aa-8), authorized the President to prohibit any goods or technology, including technical data or other information, from being exported to Libya. Middle East Countries, Excluding Israel: Section 36(h)(1) of the AECA, P.L. 90-629 , 22 U.S.C §2776(h)(1), requires any certification relating to a proposed sale to Middle East countries, excluding Israel, to include a determination that the sale or export of the defense articles or defense services will not adversely affect Israel's qualitative military edge over military threats to Israel. West Bank and Gaza: Section 699 of the FY2003 Foreign Relations Authorization Act, P.L. 107-228 , prohibits the sale of defense articles or defense services to any person or entity whom "the President determines, based on a preponderance of the evidence, … has knowingly transferred proscribed weapons to Palestinian entities in the West Bank or Gaza," for two years after congressional notification. Iraq: The FY2008 NDAA, Section 1228, P.L. 110-181 , required the President to implement a policy to control the export and transfer of defense articles into Iraq, with no defense articles to be provided to the Government of Iraq until the President certified to Congress that a registration and monitoring system was in place. Arab League Boycott of Israel: Section 564 of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, P.L. 103-236 , stated, "No defense article or defense service may be sold or leased by the United States Government to any country or international organization that, as a matter of policy or practice, is known to have sent letters to United States firms requesting compliance with, or soliciting information regarding compliance with, the Arab League secondary or tertiary boycott of Israel…" Saudi Arabia and Kuwait: Section 104 of the Dire Emergency Supplemental Appropriations and Transfers for Relief from the Effects of Natural Disasters, for Other Urgent Needs, and for Incremental Costs of "Operation Desert Shield/Desert Storm" Act of 1992, P.L. 102-229 , prohibited any funds appropriated in the act to conduct, support, or administer any sale of defense articles or defense services to Saudi Arabia or Kuwait until that country paid in full their commitments to the United States made during Operation Desert Shield/Storm. Restrictions on Defense Articles Related to Nuclear, Biological, and Chemical Weapons The AECA has a series of provisions limiting the export of defense items related to nuclear, biological, and chemical weapons (22 U.S.C. §2799aa). Those controls are explained in detail in CRS Report R41916, The U.S. Export Control System and the Export Control Reform Initiative , by Ian F. Fergusson and Paul K. Kerr.

The sale and export of U.S.-origin weapons to foreign countries ("defense articles and defense services," officially) are governed by an extensive set of laws, regulations, policies, and procedures. Congress has authorized such sales under two laws: The Foreign Assistance Act (FAA) of 1961, 22 U.S.C. §2151, et seq. The Arms Export Control Act (AECA) of 1976, 22 U.S.C. §2751, et seq. The FAA and AECA govern all transfers of U.S.-origin defense articles and services, whether they are commercial sales, government-to-government sales, or security assistance/security cooperation grants (or building partnership capacity programs provided by U.S. military personnel). These measures can be provided by Title 22 (Foreign Relations) or Title 10 (Armed Services) authorities. Arms sold or transferred under these authorities are regulated by the International Traffic in Arms Regulations (ITAR) and the U.S. Munitions List (USML), which are located in Title 22, Parts 120-130 of the Code of Federal Regulations (CFR). The two main methods for the sale and export of U.S.-made weapons are the Foreign Military Sales (FMS) program and Direct Commercial Sales (DCS) licenses. Some other arms sales occur from current Department of Defense (DOD) stocks through Excess Defense Articles (EDA) provisions. For FMS, the U.S. government procures defense articles as an intermediary for foreign partners' acquisition of defense articles and defense services, which ensures that the articles have the same benefits and protections that apply to the U.S. military's acquisition of its own articles and services. For DCS, registered U.S. firms may sell defense articles directly to foreign partners though licenses and agreements received from the Department of State. Firms are still required to obtain State Department approval, and for major sales DOD review and congressional notification is required. In some cases where U.S. firms have entered into international partnerships to produce some major weapons systems, comprehensive export regulations under 22 CFR 126.14 are intended to allow exports and technical data for those systems without having to go through the licensing process. Congress has amended the FAA and AECA to restrict arms sales to foreign entities for a variety of reasons . These include restrictions on transfers to countries that violate human rights and states that support terrorism, as well as limitations on specific countries at certain times, such as any Middle East countries whose import of U.S. arms would adversely affect Israel's qualitative military edge. Arms transfers to Taiwan are governed under the Taiwan Relations Act of 1979, P.L. 96-8 , 22 U.S.C. § 3301 et seq. Under the AECA, Congress can also overturn individual notified arms sales via a joint resolution . During the 116 th Congress, such joint resolutions were introduced in opposition to planned arms sales to Saudi Arabia, but did not pass . All U.S. defense articles and defense services sold, leased, or exported under the AECA are subject to end-use monitoring (to provide reasonable assurance that the recipient is complying with the requirements imposed by the U.S. government with respect to use, transfers, and security of the articles and services) to be conducted by the President (Section 40A of the AECA) to ensure compliance with U.S. arms export rules and policies. FMS transfers are monitored under DOD's Golden Sentry program and DCS transfers are monitored under the State Department's Blue Lantern program.

GAO_GAO-19-370T

Background More than a dozen federal agencies—known as National Drug Control Program agencies—have responsibilities for drug prevention, treatment, and law enforcement activities. For example, the Department of Health and Human Services (HHS) has led efforts to expand access to drug treatment, and the Departments of Justice (DOJ) and Homeland Security (DHS) have taken lead roles in limiting the availability of illicit drugs through criminal investigations and prosecutions. The Anti-Drug Abuse Act of 1988 established ONDCP to enhance national drug control planning and coordination. In this role, the office is responsible for (1) leading the national drug control effort, (2) coordinating and overseeing the implementation of national drug control policy, (3) assessing and certifying the adequacy of National Drug Control Programs and the budget for those programs, and (4) evaluating the effectiveness of national drug control policy efforts. Until its 2018 reauthorization, ONDCP had been operating under the provisions of the ONDCP Reauthorization Act of 2006 pursuant to annual appropriations acts. In October 2018, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the SUPPORT Act) was enacted and reauthorized ONDCP and a number of its programs. The SUPPORT Act aims to address overprescribing and opioid misuse in the United States and includes provisions involving law enforcement, public health, and healthcare financing and coverage. Under both the ONDCP Reauthorization Act of 2006 and the SUPPORT Act, the Director of ONDCP is required to promulgate the National Drug Control Strategy and work with National Drug Control Program agencies to develop an annual National Drug Control Program Budget. Prior to the SUPPORT Act, the Director was required to promulgate a National Drug Control Strategy on an annual basis, while under the SUPPORT Act, generally, the National Drug Control Strategy is required to be developed every two years. ONDCP did not issue a National Drug Control Strategy for 2017 or 2018 despite the statutory requirement. Under both the ONDCP Reauthorization Act of 2006 and the SUPPORT Act, the National Drug Control Strategy is to set forth a comprehensive plan to reduce illicit drug use and the consequences of such illicit drug use in the United States by limiting the availability of and reducing the demand for illegal drugs. Preliminary Observations on the 2019 National Drug Control Strategy As part of our ongoing work, we are reviewing the 2019 National Drug Control Strategy that ONDCP issued on January 31, 2019. Agency officials told us that they began preparing the National Drug Control Strategy in early 2018—prior to the enactment of the SUPPORT Act in October 2018. Officials stated that the National Drug Control Strategy was intended to respond to the requirements of the ONDCP Reauthorization Act of 2006, which was the applicable law at that time. In light of ONDCP’s stated approach, we based our preliminary analysis of the National Drug Control Strategy on the ONDCP Reauthorization Act of 2006. However, the SUPPORT Act retained certain similar requirements for the National Drug Control Strategy contained in the prior law. According to ONDCP, the 2019 National Drug Control Strategy provides a high-level vision of federal drug control efforts by focusing on prevention, treatment and recovery, and reducing the availability of illicit drugs. The 2019 National Drug Control Strategy designates one overarching strategic objective—to reduce the number of lives lost to drug addiction— and provides some general descriptions of federal agencies’ activities. However, our preliminary observations related to the 2019 National Drug Control Strategy indicate that it does not include several pieces of required information, including the following: Quantifiable and measurable objectives. The National Drug Control Strategy was required to include “annual quantifiable and measurable objectives and specific targets to accomplish long-term quantifiable goals that the Director determines may be achieved during each year beginning on the date on which the National Drug Control Strategy is submitted.” However, our work showed that the 2019 National Drug Control Strategy does not include this information. While it lists seven items that it designates as measures of performance or effectiveness, it does not indicate how they would be quantified or measured, or targets to be achieved each year. For example, one of the measures of performance relates to educating the public, especially adolescents, about drug use. However, it lacks information on how ONDCP would measure its efforts to educate adolescents, as well as targets ONDCP hopes to achieve, such as the number of adolescents educated or specific knowledge gains. Further, none of the seven measures has a baseline of current performance or annual targets, and four of the seven measures do not have associated timelines—which are important ways that results could be quantified. For example, one of the Strategy’s measures of effectiveness is that evidence-based addiction treatment, particularly medication-assisted treatment for opioid addiction, is more accessible nationwide for those who need it. However, there is no information on the current level of treatment access, any targets for expanding access, or any associated timeline by which ONDCP hopes to achieve desired results. Program and budget priorities. The National Drug Control Strategy was required to include “a 5-year projection for program and budget priorities.” While the 2019 National Drug Control Strategy outlines several high-level priorities, including a top priority to address the current opioid crisis and its associated deaths, it does not include such a 5-year projection. Specific assessments. The National Drug Control Strategy was required to include specific assessments related to illicit drug use. For example, the National Drug Control Strategy was required to include “an assessment of the reduction of illicit drug availability.” This assessment was to be measured by, among other things, the quantities of cocaine, heroin, marijuana, methamphetamine, ecstasy, and other drugs available for consumption in the United States; the amount of marijuana, cocaine, heroin, methamphetamine, ecstasy, and precursor chemicals and other drugs entering the United States; and the number of illicit manufacturing laboratories seized and destroyed as well as the number of hectares of marijuana, poppy, and coca cultivated and destroyed domestically and in other countries. The 2019 National Drug Control Strategy does not include this information. In addition, the National Drug Control Strategy was required to include “an assessment of the reduction of the consequences of illicit drug use and availability.” This assessment was to include the burden illicit drug users placed on hospital emergency departments; the annual national health care cost of illicit drug use; and the extent of illicit drug-related crime and criminal activity. Similarly, the 2019 National Drug Control Strategy does not include this information. Performance measurement system. The ONDCP Director was required to submit “as part of the National Drug Control Strategy a description of a national drug control performance measurement system.” Among other things, this system was to describe the sources of information and data that would be used for each performance measure incorporated into the performance measurement system. This system was also to coordinate the development and implementation of national drug control data collection and reporting systems to support policy formulation and performance measurement. Further, the system was to monitor consistency across the drug-related goals and objectives of the National Drug Control Program agencies and ensure that each agency’s goals and budgets support are fully consistent with the National Drug Control Strategy. The 2019 National Drug Control Strategy does not contain a description of such a national drug control performance measurement system. As part of our ongoing work, we also asked ONDCP for information regarding how ONDCP officials determined the adequacy of National Drug Control Program agencies’ budget submissions without a National Drug Control Strategy in effect for 2017 and 2018. The National Drug Control Program Budget is to provide information on federal drug control funding requested by the executive branch to implement the National Drug Control Strategy. National Drug Control Program agencies are required to submit to ONDCP the portion of their annual budget requests dedicated to drug control activity undertaken by the department, agency, or program. Agencies are to prepare these as part of their overall budget submission to the Office of Management and Budget for inclusion in the President’s annual budget request. ONDCP is required to review and certify whether these budgets are sufficient to support the relevant goals and objectives outlined in the National Drug Control Strategy and then include these budgets in the consolidated National Drug Control Program Budget, which the President issues alongside his budget each year. As of March 4, 2019, ONDCP had not provided information on how it accomplished the required determination. In addition, as of March 4, 2019, the President’s FY 2020 budget, and the accompanying National Drug Control Program Budget, had not been released. We will continue to consider ONDCP’s activities in this area as part of our ongoing work. As part of our ongoing work, we will also discuss the 2019 National Drug Control Strategy with ONDCP and plan to examine how ONDCP intends to address additional requirements in the SUPPORT Act. The lack of information in the 2019 National Drug Control Strategy on assessing progress toward its objective to reduce lives lost reflects findings in our previous reports. Our prior work in general, and our work on federal drug control efforts in particular, has consistently emphasized the importance of setting clear priorities through measurable and quantifiable goals, and assessing progress toward those goals over time, in order to achieve results. For example: In March 2018, we reported on federal agencies’ efforts—including those of ONDCP—to limit the availability of and enhance their response to illicit opioids, such as heroin and fentanyl. We reviewed five strategies related to combating illicit opioids and determined that only one included outcome-oriented performance measures that aim to assess the effectiveness of its efforts—ONDCP’s Heroin Availability Reduction Plan (HARP). In contrast, we found that ONDCP’s High Intensity Drug Trafficking Areas (HIDTA) programs’ Heroin Response Strategy did not include any outcome-oriented performance measures. Outcome measures address the results of programs and services, such as reductions in overdose deaths, and they can help in assessing the status of program operations, identifying areas that need improvement, and ensuring accountability for results. Among other things, we recommended in March 2018 that ONDCP coordinate with the HIDTAs to establish outcome-oriented performance measures to assess progress towards the goals set out in the Heroin Response Strategy. While ONDCP neither agreed nor disagreed with our recommendation, ONDCP told us in June 2018 that they had engaged with leaders from the HIDTAs participating in the Heroin Response Strategy to develop performance measures, including some outcome performance measures. As of March 4, 2019, this recommendation has not yet been addressed and ONDCP has not provided additional information on these efforts. We continue to believe that establishing these measures would enhance the HIDTAs’ ability to assess whether these efforts are producing intended results. In October 2017, we reported on HHS’s efforts to reduce the prevalence of opioid misuse and the fatalities associated with it by expanding access to medication-assisted treatment (MAT) for opioid use disorder. These efforts included four grant programs that focus on expanding access to MAT in various settings (including rural primary care practices and health centers) and implementing regulatory and statutory changes that expanded treatment capacity by increasing patient limits for a MAT medication—buprenorphine—and by expanding the types of practitioners who can prescribe it in an office-based setting. We found that HHS had not established performance measures with targets that would specify the results that HHS hoped to achieve through its efforts, and by when. We concluded that without this information, HHS would not have an effective means to determine whether its efforts are helping to expand access to MAT or whether new approaches are needed. Among other things, we recommended that HHS establish performance measures with targets related to expanding access to MAT for opioid use disorders. HHS concurred with the recommendation and in February 2019, provided information that the agency had established performance measures with targets to increase the number of prescriptions for certain MAT medications, one of the potential ways to measure access to MAT. However, the recommendation has not yet been fully addressed, in part because HHS did not provide information on measures related to the treatment capacity of providers who prescribe or administer MAT medications, which HHS had identified as another way to measure access. We continue to believe that fully implementing this recommendation will help ensure that invested resources in the program are yielding intended results. As our prior work shows, using data—such as information collected by performance measures and findings from program evaluations and research studies—to drive decision-making can help federal agencies improve program implementation, identify and correct problems, and make other management decisions. Although agencies may struggle to effectively use this approach, regular performance reviews and evidence- based policy tools can help them incorporate performance information into federal decision-making. Without effective long-term plans, such as a national strategy, that clearly articulate goals and objectives and without specific measures to track performance, federal agencies cannot fully assess whether taxpayer dollars are invested in ways that will achieve desired outcomes. ONDCP’s responsibility to develop the National Drug Control Strategy and coordinate among federal agencies offers the agency an important opportunity to guide federal activities to address the unprecedented number of drug overdose deaths. We are continuing with ongoing and planned work to monitor and assess federal drug control efforts. Chairman Cummings, Ranking Member Jordan, and Members of the Committee, this concludes our prepared statement. We would be happy to respond to any questions you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff has any questions concerning this testimony, please contact Triana McNeil at (202) 512-8777 (McNeilT@gao.gov) or Mary Denigan-Macauley at (202) 512-7114 (DeniganMacauleyM@gao.gov). Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contacts named above, Joy Booth (Assistant Director), Will Simerl (Assistant Director), Michelle Loutoo Wilson (Analyst in Charge), Billy Commons, Helen Desaulniers, Wendy Dye, Jane Eyre, Kaitlin Farquharson, and Jan Montgomery made key contributions to the testimony. Other staff who made key contributions to the reports cited in the testimony are identified in the source products. Related GAO Products Drug Control: DOD Should Improve Its Oversight of the National Guard Counterdrug Program. GAO-19-27. Washington, D.C.: January 17, 2019. Colombia: U.S. Counternarcotics Assistance Achieved Some Positive Results but State Needs to Review the Overall U.S. Approach. GAO-19-106. Washington, D.C.: December 12, 2018. Opioid Crisis: Status of Public Health Emergency Authorities. GAO-18-685R. Washington, D.C.: September 26, 2018. Prescription Opioids: Medicare Needs Better Information to Reduce the Risk of Harm to Beneficiaries. GAO-18-585T. Washington, D.C.: May 29, 2018. VA Health Care: Progress Made Towards Improving Opioid Safety, but Further Efforts to Assess Progress and Reduce Risk Are Needed. GAO-18-380. Washington, D.C.: May 29, 2018. Illicit Opioids: Office of National Drug Control Policy and Other Agencies Need to Better Assess Strategic Efforts. GAO-18-569T. Washington, D.C.: May 17, 2018. Illicit Opioids: While Greater Attention Given to Combating Synthetic Opioids, Agencies Need to Better Assess their Efforts. GAO-18-205. Washington, D.C.: March 29, 2018. Substance Use Disorder: Information on Recovery Housing Prevalence, Selected States’ Oversight, and Funding. GAO-18-315. Washington, D.C.: March 22, 2018. Substance-Affected Infants: Additional Guidance Would Help States Better Implement Protections for Children. GAO-18-196. Washington, D.C.: January 19, 2018. Opioid Use Disorders: HHS Needs Measures to Assess the Effectiveness of Efforts to Expand Access to Medication-Assisted Treatment. GAO-18-44. Washington, D.C.: October 31, 2017. Counternarcotics: Overview of U.S. Efforts in the Western Hemisphere. GAO-18-10. Washington, D.C.: October 13, 2017. Preventing Drug Abuse: Low Participation by Pharmacies and Other Entities as Voluntary Collectors of Unused Prescription Drugs. GAO-18-25. Washington, D.C.: October 12, 2017. Prescription Opioids: Medicare Needs to Expand Oversight Efforts to Reduce the Risk of Harm. GAO-18-15. Washington, D.C.: October 6, 2017. Newborn Health: Federal Action Needed to Address Neonatal Abstinence Syndrome. GAO-18-32. Washington, D.C.: October 4, 2017. Opioid Addiction: Laws, Regulations and Other Factors Can Affect Medication-Assisted Treatment Access. GAO-16-833. Washington, D.C.: September 27, 2016. Anti-Money Laundering: U.S. Efforts to Combat Narcotics-Related Money Laundering in the Western Hemisphere. GAO-17-684. Washington, D.C.: August 22, 2017. International Mail Security: Costs and Benefits of Using Electronic Data to Screen Mail Need to Be Assessed. GAO-17-606. Washington, D.C.: August 2, 2017. Drug Control Policy: Information on Status of Federal Efforts and Key Issues for Preventing Illicit Drug Use. GAO-17-766T. Washington, D.C.: July 26, 2017. Medicaid Expansion: Behavioral Health Treatment Use in Selected States in 2014. GAO-17-529. Washington, D.C.: June 22, 2017. Drug-Free Communities Support Program: Agencies Have Strengthened Collaboration but Could Enhance Grantee Compliance and Performance Monitoring. GAO-17-120. Washington, D.C.: February 7, 2017. Highlights of a Forum: Preventing Illicit Drug Use. GAO-17-146SP. Washington, D.C.: November 14, 2016. Drug Enforcement Administration: Additional Actions Needed to Address Prior GAO Recommendations. GAO-16-737T. Washington, D.C.: June 22, 2016. State Marijuana Legalization: DOJ Should Document Its Approach to Monitoring the Effects of Legalization. GAO-16-419T. Washington, D.C.: April 5, 2016. Firearms Trafficking: U.S. Efforts to Combat Firearms Trafficking to Mexico Have Improved, but Some Collaboration Challenges Remain. GAO-16-223. Washington, D.C.: January 11, 2016. Prenatal Drug Use and Newborn Health: Federal Efforts Need Better Planning and Coordination. GAO-15-203. Washington, D.C.: February 10, 2015. Office of National Drug Control Policy: Office Could Better Identify Opportunities to Increase Program Coordination. GAO-13-333. Washington, D.C.: March 26, 2013. Prescription Pain Reliever Abuse: Agencies Have Begun Coordinating Education Efforts, but Need to Assess Effectiveness. GAO-12-115. Washington, D.C.: December 22, 2011. This is a w ork of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety w ithout further permission from GAO. How ever, because this w ork may contain copyrighted images or other material, permission from the copyright holder may be necessary if you w ish to reproduce this material separately.

Over 70,000 people died from drug overdoses in 2017, according to the most recently available Centers for Disease Control and Prevention data. Overdoses have become the leading cause of death due to injuries in the United States, and most of these deaths involve opioids. GAO has a body of work on drug policy and ongoing work on ONDCP's efforts, including issuance of the National Drug Control Strategy. GAO also noted in its March 2019 High Risk report that federal efforts to prevent drug misuse is an emerging issue requiring close attention. This statement includes preliminary GAO observations on the 2019 National Drug Control Strategy and related findings from select GAO reports on federal opioid-related efforts. It is based on ongoing GAO work, two reports that GAO issued in March 2018 and October 2017, and selected updates on recommendations from these reports as of February 2019. For ongoing work and recommendation updates, GAO assessed the 2019 National Drug Control Strategy against statutory requirements, reviewed ONDCP and HHS documents, and interviewed ONDCP officials. The Office of National Drug Control Policy (ONDCP)—responsible for coordinating and overseeing efforts by more than a dozen federal agencies to address illicit drug use—issued the 2019 National Drug Control Strategy on January 31, 2019. ONDCP describes the strategy as a high-level vision of federal drug control efforts, focused on prevention, treatment and recovery. The strategy designates one overarching objective to reduce the number of lives lost to drug addiction, and provides some description of federal agencies' activities, including steps to reduce the availability of illicit drugs. However, it does not include certain information required by law, such as annual objectives that are quantifiable and measurable, or a 5-year projection for program and budget priorities. This required information could help prioritize activities across federal agencies and measure progress over time, which previous GAO work has shown to be important for achieving results. GAO will continue to assess the strategy as part of ongoing work, and make recommendations as appropriate. The lack of information in the 2019 National Drug Control Strategy on measuring progress toward its objective to reduce lives lost is particularly concerning in light of previous GAO reports. These reports found that individual agencies could do more to assess their particular efforts related to opioids. For example, GAO reported in March 2018 on five agency-specific strategies to combat illicit opioids, and also reported in October 2017 on the Department of Health and Human Services' (HHS) efforts to expand access to medication-assisted treatment for opioid use disorder. In these reports, GAO recommended, among other things, that federal agencies establish performance measures to better determine progress toward their goals. While federal agencies have taken some action to implement these recommendations, such as establishing performance measures for access to medication-assisted treatment, additional actions to measure the effectiveness of related drug control efforts would further help to gauge agencies' success, determine if new approaches are needed, and efficiently target resources.

CRS_R46306

Introduction In recent years, policymakers, industry stakeholders, and educational institutions have shown an interest in the federal government increasing financial support to individuals who pursue training and postsecondary education in non-degree instructional and work-based learning programs. These are instructional or work-based programs designed primarily for individuals beyond high school age and for which a degree is not conferred upon completion. Such programs include, but are not limited to, apprenticeships (e.g., masonry), college certificate programs (e.g., medical billing), and courses that lead to professional certificates or licensure (e.g., Microsoft certifications). By some accounts, there already is, and will continue to be, demand for workers to fill jobs that do not require a college degree but do require training or postsecondary education (e.g., skilled electrical work, health care support services). In addition, there is some evidence that the percentage of jobs requiring more than a high school diploma but not a degree is increasing. Although the federal government annually makes available over $100 billion in direct financial aid to individuals pursuing postsecondary education, the overwhelming majority of those funds are not available to a significant proportion of the individuals pursuing training and education through postsecondary non-degree programs. As some traditional colleges experience declining enrollment, some schools have shown an interest in creative approaches to increasing enrollment and maintaining revenues, including reaching out to adults who want to pursue completion of short programs that allow quick reentry into the workforce and/or increase earnings. Given the purported demand for workers with certain postsecondary non-degree credentials, Congress may consider viable options for providing direct federal support to students pursuing the completion of non-degree programs. Several proposals have surfaced recently that would increase direct federal support to students pursuing training and education in non-degree (short-term) programs. From 2011 to 2017, the Department of Education (ED) experimented with allowing Pell Grants to be received for short-term non-degree postsecondary education programs. In October 2019, the House Committee on Education and Labor ordered reported the College Affordability Act ( H.R. 4674 ), which would comprehensively reauthorize the Higher Education Act (HEA) and would expand the types of non-degree programs eligible for Pell Grants. In 2018, the President's Council of Economic Advisers presented options for bringing 25- to 64-year-olds back into the workforce with the skills required in the changing economy in an effort to increase the rate of economic growth. These included providing unemployment insurance benefits for individuals while training, providing Pell Grants for some short-term training programs, and developing a new comprehensive program for retraining displaced workers. The President's FY2021 budget request for ED proposed expanding Pell Grants to short-term programs that are not currently Pell-eligible. Several education and business organizations have supported extending Pell Grants, and occasionally Direct Loans, to programs that are shorter in duration than those that are currently eligible. Some stakeholders, however, express concerns about promoting non-degree programs and increasing financial support for students pursuing them. There is concern that some non-degree programs do not increase the employment or earnings of completers compared to individuals whose highest level of education is high school completion. Some concerns focus on how the federal government would ensure the quality of the programs. Other concerns focus on potentially high federal costs associated with supporting the programs, the potential need for student supports and business coordination, and the possibility of perpetuating income inequalities by fostering lower income students to pursue non-degree programs that lead to lower income professions. Some have raised questions about the demonstrated diminishing labor market returns over time for some technical non-degree programs, including apprenticeships. Additionally, some non-degree educational programs intended to prepare individuals for a specific occupation are neither required by nor necessarily preferred by employers, although the programs may be of a high quality. In light of evidence of employers increasingly relying on degrees when establishing hiring requirements, non-degree credential holders may have more difficulties in securing employment over the long term. In addition, adults with degrees currently employed in positions that do not require a degree may be crowding non-degree holders out of some occupations. In 2018, for instance, 28% of employment was in occupations that typically require a degree for entry-level positions, while 42% of the population aged 18 and over had a degree. This report provides an overview of existing federal programs and benefits that support individuals engaged in the pursuit of training and education in non-degree instructional and work-based learning programs. It informs consideration of additional or revised policy approaches aiming to support pursuit of training and education through non-degree programs. The report begins with a brief description of employer demand for individuals who have completed non-degree programs. This is followed by a discussion of the landscape and key characteristics of non-degree programs, from those offered through work-based learning to those offered through more formal instructional means. The report concludes with a detailed description of six federal programs and three tax benefits that currently provide direct financial support to students pursuing training and postsecondary education in non-degree instructional and work-based learning programs. Each program and benefit description highlights potential gaps and limitations in the scope and extent to which the program or benefit supports individuals pursuing non-degree programs, as well as student eligibility requirements and federal administration and oversight. Labor Market for Non-degree Programs Key stimuli for promoting financial support for individuals pursuing training and postsecondary education in non-degree programs include that the unfulfilled employer/business need for individuals with non-degree credentials is impeding, and/or will impede, economic growth; and that an individual's attainment of a non-degree postsecondary credential provides a worthwhile payoff. This section of the report provides data on the proportion of total employment and mean wages earned in occupations by typical entry-level education requirements. This discussion provides a sense of the market for non-degree credentials. It does not offer a comprehensive exposition of labor market returns and social impacts of increased non-degree program completion. In May 2018, approximately 6.2% of jobs in the national economy were in occupations for which the typical entry-level education requirement was a non-degree postsecondary credential ( Table 1 ). The Department of Labor's (DOL's) Bureau of Labor Statistics (BLS) assigns a typical entry-level education requirement—the typical education level most workers need to enter an occupation—for occupations that it tracks. Table 1 also presents the mean annual wages for occupations by typical entry-level education required. Mean annual wages for occupations that, at entry, require a high school diploma or its equivalent, some college but no degree, or a non-degree credential are all similar. While Table 1 shows differences in mean annual wages across education categories, these wages do not capture differences within the categories, which in many cases may include sizeable earnings differentials. For example, some research has found earnings premiums for individuals attaining long-term certificates, certificates in technical (e.g., electronics) and health fields, certificates in the field in which the individual works, and certificates from community colleges. Non-degree Programs Postsecondary non-degree programs provide training and education primarily to individuals who are beyond the typical age for secondary education. Most, but not all, non-degree programs are intended to prepare individuals for a particular occupation. Non-degree programs may be described by various classifications. One commonly used classification scheme delineates programs primarily provided by educational institutions (non-degree instructional) and by employers (work-based learning), although some programs include both instructional training and work-based learning. Non-degree Instructional Programs In general, postsecondary non-degree instructional programs are a combination of postsecondary courses or a postsecondary curriculum that fulfills an educational or professional objective, but for which a student does not earn a degree upon completion. Non-degree instructional programs prepare individuals for a wide variety of specialized jobs and more general employment. Upon completion of a non-degree instructional program, individuals receive a postsecondary educational certificate, which is a credential awarded by an educational institution based on the completion of a postsecondary instructional program, including coursework, assessment, or other performance evaluations. Individuals pursue non-degree programs for various reasons, including to expand knowledge and skills, to prepare for further education, to prepare for employment, to sustain employment, and when seeking promotion. For purposes of this report, non-degree instructional programs exclude those that lead to postbaccalaureate certificates and exclude transfer programs . Typically, transfer programs do not award a certificate or degree, but provide education for at least two academic years and are acceptable for full credit toward a bachelor's degree. Non-degree instructional programs should not be confused with certifications and licenses, which are occupational credentials awarded by entities that assess whether individuals have met established occupational standards or requirements. Licenses are required to practice in some occupations. Certifications show that an individual has attained competency in an occupation. Some certifications and licenses require the completion of a non-degree instructional (or degree) program. Non-degree Instructional Program Providers A diverse set of entities offer non-degree instructional programs. Traditional postsecondary educational institutions—colleges and universities—offer non-degree instructional programs, as do trade, vocational, and technical schools. In fall 2018, almost 3,000 institutions of higher education enrolled nearly1.9 million non-degree seeking undergraduate students. Other entities also offer such programs, including businesses; professional organizations; trade unions; nonprofit organizations; federal, state, and local governments; museums; bootcamps; hospitals; and the military. One study estimated that there were over 4,500 for-profit non-traditional postsecondary educational institutions enrolling almost 670,000 students in academic year (AY) 2009-2010. Duration, Structure, and Cost of Programs Non-degree instructional programs vary considerably in length and duration. Programs may require a few days or more than two years to complete. Generally, the length is related to curriculum requirements, industry expectations, and the breadth and complexity of skills that the program is intended to instill. The length of the program may also be affected by federal, state, and private entities that require a minimum number of educational hours to be eligible for employment, or for certification or licensing. The overall program duration may be broken up if it is designed in stackable units. A single educational program aligned to a career path may be redesigned into a sequence of independent programs (stackable units). Programs are offered in classrooms, online, by correspondence, with cooperative elements, or through a combination of methods. Generally, students must fund or find funding for the cost of a program, and, if applicable, for related living expenses and lost wages for foregone employment. Program cost varies by length, program resource requirements, and provider. For example, for the most heavily enrolled programs in AY2018-2019, the average published cost for tuition and fees was over $9,000 at public less-than-two-year colleges and approximately $15,000 at private less-than-two-year colleges. Credit and Noncredit Programs In non-degree instructional programs, a dichotomy exists between programs made up of credit course(s) and those structured as a series of noncredit courses. However, courses in the same field of study with the same vocational objective and industry recognition may be offered for credit at one institution and noncredit at another, or even within the same institution. Generally speaking, individuals who successfully complete credit courses and programs earn credits that may be transferred or used as currency toward the completion of other credit programs (either at the conferring school or at another school). All degree programs are credit programs. Credit programs are most often approved by an accrediting entity and may have more stringent student entrance or prerequisite requirements. Credit programs may lead to a variety of vocations. Although noncredit programs may offer continuing education units (CEUs) or vocational certificates to program completers, the programs do not proffer these students currency toward the pursuit of credit programs or noncredit programs in other fields. The advantage of noncredit programs is that they often are less expensive for students and educational institutions, cover a broader range of topics, and can be modified more quickly to be attentive to industry and student needs. Noncredit programs may satisfy career entry requirements; may include adult basic education (ABE) and English as a second language (ESL) instruction; may provide personal enrichment; and may be customized training. Based on 2007-2013 enrollment information from nine colleges in one state community college system, approximately 38% of enrollments were in noncredit courses: vocational (18%), ABE (9%), ESL (7%), and general educational development (GED) (4%). Participation Data National level data on the universe of non-degree instructional programs, enrollment, and completions are incomplete. Some states and the federal government do not collect data on noncredit programs. A 2016 nationwide survey found that 8% of adults aged 16-65 and not enrolled in high school had a postsecondary certificate, although some of these certificates may be postgraduate. The subset of educational institutions participating in the HEA Title IV federal student aid programs (see the " HEA Title IV Federal Student Aid " section below) awarded almost 1 million for-credit non-degree undergraduate credentials and approximately 3 million undergraduate degrees in AY2017-2018. Work-Based Learning Programs The term work-based learning refers to a range of training and educational activities that are intended to impart general or specific workplace skills to individuals through time spent at an employer's worksite or a simulated work location. The terms defined in Table 2 are examples of common types of work-based learning in the federal context. Work-based learning is a broad term and may occur at multiple points in a career path and in multiple forms, ranging from career exploration for youth to highly specialized technical training for incumbent workers. Activities considered to be work-based learning include, but are not limited to, on-the-job training (OJT), apprenticeships, summer job experiences, internships, externships, residencies, cooperative programs (co-ops), and paid or unpaid work experiences. Programs that provide wages or remuneration are often referred to as earn and learn programs . Registered Apprenticeship (RA) RA programs are a distinctive form of work-based learning because of their DOL oversight. RA programs are registered with DOL or a DOL-approved state agency if they meet standards delineated in federal regulations. Among the requirements, a registration application must include a work process schedule, which outlines the major competencies of the occupation and how a combination of OJT and/or related instruction will lead to the worker demonstrating proficiency in those competencies. Once a program is registered, the registration agency must review the program no less than once every five years to ensure that it remains in compliance with the required standards. If the program demonstrates a "persistent and significant failure to perform successfully," the program may be deregistered. Providers Because work-based learning encompasses such a broad range of training activities, it is possible for multiple types of entities or individuals to offer such learning experiences. Work-based learning experiences may be provided by employers (either formally or informally), labor unions, external training providers, educational institutions providing work-relevant instruction, or partnerships of these entities. Structure, Duration, and Cost of Programs Work-based learning is generally structured to meet the needs of the employer, potential employer, or trainee. For example, summer internships may offer three to four months of informal training opportunities. Conversely, a summer internship may offer a formal curriculum covering specified procedures or tasks through iterative task-based coaching/instruction. RA programs require at least 2,000 hours of supervised OJT and range in duration from one to six years, but most RA programs are four years in duration. Some RA programs take a time-based approach through which an apprentice learns and obtains skills by completing a specified number of hours of OJT. Other programs take a competency-based approach in which skill attainment is verified by the apprentice demonstrating proficiency in the skill learned. Programs may also be constructed as hybrid programs that combine aspects of the time-based and competency-based approaches. All RA program designs must include related instruction to supplement OJT. The costs of work-based learning programs are primarily borne by the provider, but the trainee may be required to cover his/her living costs. Program costs may include the lost work time of experienced employees, fees for contracted trainers, and trainee wages. As the work-based learning progresses, some portion of the program costs may be offset by the trainee's increased productivity. In some cases, trainees may be required to pay for related instruction or other costs. Work-based learners who do not receive remuneration or receive nominal remuneration must provide for their own transportation, room, and board while also potentially forgoing the opportunity to earn wages from other paid employment. Participation Data The data on work-based or employer provided training are not extensive. The data sets that do exist often differ in methodology, timeframe, and purpose. For example, some surveys look only at firms with 50 or more employees, while others are part of larger household surveys not designed around employer provided training questions. A summary of four different government surveys related to employer provided training in the 1990s concluded that while most establishments offer some training (formal or informal), the percentage of workers receiving training ranged from 16% to 70%. A 2016 nationwide survey found that 21% of adults aged 16-65 had completed a work-based learning program, although not all of these programs were intended to prepare individuals for a particular occupation or field of work. Among adults aged 16-65, the most common work-based learning programs completed were in healthcare and teaching. With respect to RA, DOL reported approximately 633,000 active apprentices in about 25,000 active programs in FY2019. In the same year, about 81,000 apprentices completed a program. The construction industry currently accounts for the largest share of apprenticeships, though they are available in other industries such as manufacturing and transportation. Federal Programs and Benefits The federal government provides direct financial support to individuals pursuing training and education that might better prepare them for entry into the workforce and that might help them realize their potential. None of the federal programs or benefits that provide such support focus exclusively on promoting training or education through the pursuit of non-degree programs. With that caveat in mind, federal programs are described below in an order that generally attempts to correspond to their relevance to supporting the pursuit of training or education through non-degree programs. The design and implementation of the federal programs and benefits are notably different in several aspects including, but not limited to, the choice and monitoring of non-degree programs. The primary benefit programs are the Workforce Innovation and Opportunity Act (WIOA) Title I program, the federal student aid programs, federal tax benefits, and veterans educational assistance. WIOA Title I, administered by the Department of Labor (DOL), is intended to encourage general workforce development and may be used to directly subsidize training costs of individuals who pursue training and education. The federal student aid programs, authorized under Title IV of the Higher Education Act (HEA) and administered by the Department of Education, provide grants and loans to students to aid them in accessing and completing postsecondary education programs. The Internal Revenue Service (IRS) administers the Internal Revenue Code, which, among other things, provides certain tax benefits as a strategy for post-education financial support. Educational assistance administered by the Department of Veterans Affairs (VA), specifically the Post-9/11 GI Bill and Veteran Employment Through Technology Education Courses (VET TEC), are programs designed to provide direct financial support to students that allows them to pursue a wide variety of educational and training programs. Two programs that augment the basic living supports for needy families with some training and education assistance are also discussed in this report. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T), administered by the Department of Agriculture (USDA), provides training and education opportunities to individuals with a high risk for educational failure. Temporary Assistance for Needy Families (TANF), administered by the Department of Health and Human Services (HHS), provides flexibility to states to use TANF funds for activities that would develop a more highly skilled workforce through training and education. The subsequent sections of this report describe these prominent federal programs that can be used to support students in non-degree programs. The sections are organized to focus on key program design elements and highlight differences among the programs. Table 3 highlights a few program characteristics that help to delineate key differences. WIOA Contracts and Individual Training Accounts (ITAs) (DOL) Title I of the Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128 ) is the primary federal workforce development legislation and is intended to bring about increased coordination among federal workforce development and related programs. WIOA Title I is administered by DOL and funded through discretionary appropriations. Services authorized under WIOA are intended to: increase the employment, retention, and earnings of participants, and increase attainment of recognized postsecondary credentials by participants, and as a result, improve the quality of the workforce, reduce welfare dependency, increase economic self-sufficiency, meet the skill requirements of employers, and enhance the productivity and competitiveness of the Nation. The Adult and Dislocated Worker Employment and Training Activities program under WIOA Title I provides formula grants to states, which in turn allocate the majority of those funds to local Workforce Development Boards (WDBs). At the local level, funds are required to be used for five main purposes: establishing a One-Stop delivery system, providing career services, providing training services, establishing relationships with employers, and developing industry or sector partnerships. As part of its service delivery model, WIOA provides consumer choice to participants. The program for adult and dislocated worker participants in WIOA is structured around two main levels of services: career services and training. On an operational level, career services are categorized as basic and individualized . Basic services include assistance such as labor market information and job postings, while individualized services include assistance such as skills assessment and case management. Eligibility of Non-degree Programs Eligible WIOA participants may pursue training and education at the eligible training provider (ETP) of their choice. A state Eligible Training Provider List (ETPL) identifies choices to customers who are accessing WIOA services. Generally, ETPs include the following: institutions of higher education that are eligible to participate in the HEA Title IV federal student aid programs and offer programs leading to a recognized postsecondary credential, entities that provide RA, or other public or private training providers. Allowable training activities that may be supported with WIOA Title I funds are non-degree and degree instructional programs and certain types of work-based learning, including OJT, RA, customized training, and incumbent worker training. Training must be for occupations that are in demand in the local area or region, are in demand in an area to which the trainee is willing to relocate, or are deemed (by the local WDB) to have "high potential for sustained demand or growth in the local area." In addition, the implementing regulations for WIOA specify that a program of training services provided by an ETP is one or more courses or classes or a structured regimen that leads to the following: an industry-recognized certificate or a certificate of completion of an RA, a license recognized by the state or federal government, an associate or baccalaureate degree, a secondary school diploma or equivalent, employment, or measurable skill gains toward a credential. Local areas under WIOA may reserve up to 20% of combined adult and dislocated worker funds for incumbent worker training. Participant Eligibility for Training The workforce development system designed by WIOA is premised on universal access, such that an adult age 18 or older who is a citizen or noncitizen authorized to work in the United States does not need to meet any qualifying characteristics in order to receive career services. While basic career services are available to all adults, individualized career services are to be provided as appropriate to help individuals obtain and retain employment. Under WIOA, service at one level is not a prerequisite for service at the next level. To be eligible to receive training, an individual must be unlikely or unable to obtain or retain employment that leads to economic self-sufficiency, be in need of training services to obtain or retain employment that leads to economic self-sufficiency, have the skills and qualifications to participate successfully in training, select a training service linked to an occupation in the local area (or be willing to relocate to another area where the occupation is in demand), and be unable to obtain other grant assistance (e.g., Pell Grants) for the training services. These determinations are made by a One-Stop operator through an interview, evaluation, or assessment, which can include a recent evaluation or assessment conducted pursuant to another education or training program. Local WDBs designate colleges and universities, private organizations, and government agencies as One-Stop operators that assess and evaluate individuals and decide which individuals to provide with access to training services. Of funds allocated to a local area for adult employment and training activities, priority for career and training services is to be given to recipients of public assistance, other low-income individuals, and individuals who are basic skills deficient. It is left to the discretion of the local WDB, in consultation with the state's governor, to determine how to allocate funds among these priority groups. Basic Benefit Payment Structure Under WIOA, training is allowed through ITAs or through contracts for services. While ITAs are the primary vehicle, contracts may be used in certain circumstances. WIOA also permits funds to be used for supportive services (e.g., child care and transportation) and "needs-related payments" necessary to enable an individual to participate in training. When an individual is determined by a One-Stop operator to be eligible to receive training services, that individual, in consultation with the One-Stop operator, may choose training services from the ETPL. At that point, an ITA is established, from which payment is made to the ETP, not to the individual, for training services. Local WDBs have the authority to set limits on the type and duration of training and may choose to set limits on the amount of an ITA, based on individual circumstances or on an across-the-board level. WIOA participants who are in receipt of an ITA may use ITA funds to support non-degree instructional and degree programs and the related instruction portion of an RA. In addition, local WDBs are also authorized to provide supportive services, including transportation, child care, dependent care, housing, and needs-related payments necessary to enable an individual to participate in training. While training is typically carried out through the ITA model, local WDBs may provide training through a contract for services, which may include various forms of work-based learning. The contract is an agreement between a local WDB and an employer or RA sponsor for occupational training for a WIOA participant in exchange for reimbursement from the WDB. A contract for services may be used if the consumer choice requirements of WIOA are met; the services are OJT, RA, customized training, incumbent worker training, or transitional employment; the local WDB determines there is an insufficient number of training providers in a local area to meet the ITA requirements; the local WDB determines there is a local training program of demonstrated effectiveness to serve individuals with barriers to employment; the local WDB determines that it is most appropriate to contract training services to train multiple individuals in in-demand occupations or industry sectors; or the training service is a pay-for-performance contract. For example, through a contract, a local WDB may reimburse an OJT provider (employer) for up to 50% of the wage rate of a participant (reimbursement rates may be 75% in limited circumstances). State and local WDBs may also enter into contracts with RA sponsors to reimburse the sponsors for up to 75% of an apprentice's wages. Notably, reimbursement for wages is supported by a contract, not an ITA. Basic Administrative Structure As noted, states are responsible for developing the ETPL. Local WDBs and One-Stop operators administer the training programs and payments to training providers. Thus, administrative structures and procedures vary by state. Quality Assurance Mechanisms Quality assurance of training providers is established through both initial and continued provider eligibility processes. The governor and the state WDB in each state are responsible for establishing criteria and procedures for eligible providers of training services to receive funding in the local workforce investment areas. RA programs are automatically eligible to be included on the state ETPL. Non-RA training providers not previously eligible under WIOA or its predecessor law must apply to the governor and the local WDB (according to a procedure established by the governor) for initial eligibility of one fiscal year. To maintain continued eligibility, existing training providers must follow procedures established by the governor and implemented by the local WDB and submit WIOA-specified information. WIOA provides general requirements while allowing local WDBs discretion on specific factors. For example, while WIOA indicates that OJT contracts should be limited in duration, as appropriate to the occupation, the training content, and the participant's prior work experience and service strategy, the exact length of the OJT contract is determined by the local WDB. Similarly, WIOA requires that in determining employer eligibility to receive WIOA incumbent worker training funding, a local WDB must consider the characteristics of individuals in the program and the relationship of the training to the competitiveness of the individual and the employer without establishing quantifiable targets. Measures of Program Performance WIOA requires ETPs and states to report measures of program participation and outcomes. Notably, RA programs are not required to submit ETP performance report information. To be considered for continued eligibility, providers must submit to the governor every two years the following performance and cost information for participants receiving training under WIOA Title I: the percentage of program participants in unsubsidized employment in the second and fourth quarters after program exit; median earnings of program participants who are in unsubsidized employment during the second quarter after program exit; the percentage of program participants who obtain a recognized postsecondary credential, or secondary school diploma or equivalent, during participation or within one year of program exit; information on the type of recognized postsecondary credentials received by program participants; information on the cost of attendance, including tuition and fees, for program participants; and information on program completion rates for program participants. In addition, the governor may require additional, specific performance information deemed necessary to determine continued eligibility. States are required to publish and disseminate annual ETP performance reports. The reports must include the following information with respect to each program of study eligible to receive WIOA funds, disaggregated by the type of entity that provided the training, during the most recent program year and the three preceding program years: the total number of participants who received training services through a WIOA Title I program, the total number of participants who exited from training services, and the average cost per participant for the participants who received training services. In addition, the ETP performance reports must include the number of participants with barriers to employment served by the WIOA Title I programs, disaggregated by each program of study eligible to receive WIOA funds and each subpopulation of such individuals, and by race, ethnicity, sex, and age. Program Participation The first WIOA ETP performance report is not yet available, but some participation data are available. Within the WIOA-authorized forms of work-based learning, the most recent data available (2017) indicate 955,094 adult participants and 469,572 dislocated worker participants. The majority of participants are age 30 and over (67% of adults and 82% of dislocated workers) and unemployed or have received a layoff notice (82% of adults and 92% of dislocated workers). While many participants had no postsecondary education experience (59% of adults and 47% of dislocated workers), a notable 22% of adults and 34% of dislocated workers had a degree. Table 4 shows usage of training services among program exiters in program year 2018. Fewer than 20% of WIOA Title I participants engage in work-based learning provided under contract. The majority, over 66%, of trainees pursue skills training or upgrading through non-degree instructional and degree programs with ITAs. The most popular occupations pursued by adults through training were healthcare, transportation and material moving, and production. The most popular occupations pursued by dislocated workers were transportation and material moving, computer and mathematical, office and administrative support, and management. Program Limitations WIOA Title I currently supports adult entry or reentry into the workforce primarily by providing career services, but short-term training and education are also provided. The program assumes that many participants only need career services. Support for non-degree training and education pursuits could be bolstered by the following: increasing focus of One-Stop operators to increase access to non-degree training; additional funding could be dedicated to wage reimbursement and/or ITAs to ensure the availability of career services; the 20% limit on incumbent training could be relaxed to ensure current workers remain employed despite changing skill requirements, and the restriction on recipients of training services being able to obtain other grant assistance (e.g., Pell Grants) could be eliminated to allow programs to supplement one another. Non-degree program quality may vary given state and local flexibility in developing the ETPL. HEA Title IV Federal Student Aid (ED) Title IV of the Higher Education Act (HEA; P.L. 89-329, as amended), authorizes programs that provide financial assistance to students to promote access to, affordability, and completion of higher education at certain institutions of higher education (IHEs). The programs are administered by the Department of Education. Grants are available to qualified, financially needy students, and loans are available to qualified borrowers (both students and parents of dependent students). The primary types of Title IV aid are Federal Pell Grants and federal student loans made through the William D. Ford Federal Direct Loan (Direct Loan) program. The Pell Grant and Direct Loan programs are designed to provide portable aid (i.e., the availability of aid follows students to the eligible postsecondary education institutions in which they choose to enroll). Title IV also authorizes other aid programs that are relatively smaller in scale and thus are not discussed in this report. Pell Grants and Direct Loan program loans are available to all eligible individuals regardless of congressional appropriations. The Direct Loan program is a mandatory entitlement program for budgetary purposes. As a mandatory entitlement, all eligible individuals have access to borrow in accordance with program rules, and the requisite budget authority is available. The Pell Grant program is often referred to as a quasi-entitlement because eligible students receive the Pell Grant award to which they are entitled regardless of discretionary appropriations levels. Eligibility of Non-degree Programs Pell Grants and Direct Loans may be used to pursue Title IV-eligible programs of study, which include non-degree instructional and degree programs and some work-based learning. Title IV-eligible programs must be offered by Title IV-participating IHEs. To be eligible, programs and Title IV-participating IHEs must meet a variety of criteria, including quality assurance (see the " Quality Assurance Mechanisms " section). Title IV-participating IHEs are classified as public IHEs, private nonprofit IHEs, proprietary (private for-profit) IHEs, and public and private nonprofit postsecondary vocational institutions. Non-degree programs must meet several eligibility requirements. For example, in general, the Title IV-eligible non-degree instructional program and the Title IV-eligible portion of work-based learning must lead to a certificate or other recognized non-degree credential (e.g., diploma or license). Also, Title IV aid is generally not available for noncredit programs or portions of programs for which a defined number of credit or clock hours is not associated. For instructional and work-based learning programs measured in clock hours, the OJT portion of work-based learning must be offered under the supervision of an IHE. If a portion of the OJT is offered by an entity under contract with an IHE, such portion must be less than 50% of the program. In general, non-degree programs are subject to specific durational requirements, including weeks of instructional time and number of credit or clock hours. For Pell Grants, the non-degree programs offered by public and private nonprofit postsecondary vocational institutions and proprietary institutions must either be at least 15 weeks of instructional time and at least one of the following: 600 clock hours, 16 semester hours, or 24 quarter hours; or at least 10 weeks of instructional time and at least one of the following: 300 clock hours, 8 semester hours, or 12 quarter hours. For the Direct Loan program, non-degree programs offered by public and private nonprofit postsecondary vocational institutions and proprietary institutions must be at least 10 weeks of instructional time and 300-599 clock hours. In addition, students must be enrolled in an eligible program of study on at least a half-time basis to borrow through the Direct Loan program. See the text box below for information on an ED experiment with shorter duration programs. Non-degree programs at public and private nonprofit IHEs that are at least one academic year in length and lead to a certificate or other recognized non-degree credential are eligible for both the Pell Grant and Direct Loan programs, without regard to any of the above-specified durational requirements. Participant Eligibility For a student to be eligible to receive Title IV funds for his or her higher education, he or she must be enrolled (or accepted for enrollment) in a Title IV-eligible program. In addition, among other criteria, a student must be a U.S. citizen, national, legal permanent resident, or other specified eligible noncitizen; and have a high school diploma (or equivalent, such as a general educational development [GED] certificate) or meet other relevant criteria. Individuals must also meet program-specific eligibility criteria to receive Pell Grants or Direct Loan program loans. Pell Grant Program-Specific Eligibility Criteria To receive Pell Grants, students must meet program-specific criteria that include the following: being enrolled in an undergraduate program, not having completed the curriculum requirements of a bachelor's degree, and demonstrating financial need (primarily individuals from families in the two lowest income quintiles as determined under the program's award rules). All recipients are subject to a cumulative lifetime eligibility cap on Pell Grant aid of 12 full-time semesters (or the equivalent). Direct Loan Program-Specific Eligibility Criteria To receive Direct Loan program loans, students must meet program-specific criteria that include being enrolled on at least a half-time basis. Students (or their parents in the case of PLUS Loans to parents borrowing on behalf of a dependent child) may need to meet additional eligibility criteria to qualify for specific Direct Loan program loan types. The primary loans are the following: Direct Subsidized 83 Loans for undergraduate students with demonstrated financial need, Direct Unsubsidized Loans for any student regardless of financial need, and PLUS Loans for parents of dependent undergraduate students and graduate and professional students regardless of financial need. Individuals who are new borrowers on or after July 1, 2013, may only borrow Direct Subsidized Loans for a period of time not to exceed 150% of the published length of their academic program. Basic Benefit Payment Structure In general, the amount of Title IV aid for which a student is eligible is guided by statutory award rules. Aggregate Title IV aid and other aid (e.g., institutional aid) typically cannot exceed a student's cost of attendance (COA). The COA is an institutionally determined measure of a student's educational expenses for the period of enrollment and generally includes items such as tuition and fees; an allowance for books and supplies; and, as applicable, an allowance for room and board. The COA may also include transportation costs and dependent care expenses. An important feature of the Pell Grant award rules is that the grant is determined without consideration of any other financial assistance a student may be eligible to receive or may be receiving. Annual appropriations acts and the HEA establish the total maximum Pell Grant award amount that a student may receive in an academic year. For award year (AY) 2020-2021, the maximum Pell Grant award that an eligible individual enrolled full-time for a 26-30 week academic year may receive will be $6,345. The amount may be reduced based on the student's COA, financial need, enrollment rate, or program duration. Pell Grant awards used to pursue non-degree programs are generally subject to income taxation; whereas Pell Grant awards used to pursue degree programs are only subject to income taxation if used for purposes other than tuition and fees. Direct Loan program award rules vary by type of loan borrowed. In addition, numerous other factors could affect the type and amount of aid awarded. However, some generally applicable rules apply to the Direct Loan program. Other types of financial assistance awarded to the student must be taken into account when awarding Direct Loan program loans. Also, an individual cannot be awarded a Direct Subsidized Loan or Direct Unsubsidized Loan in an amount that exceeds statutory annual and aggregate award limits, which are determined based on an individual's dependency status and class level. For example, a dependent undergraduate student may borrow up to $5,500 in Direct Subsidized Loans and Direct Unsubsidized Loans for his or her first year, while an independent undergraduate student may borrow up to $9,500 in such loans in his or her first year. The annual maximum loan amount an undergraduate student may receive is prorated when the borrower is enrolled in a program that is shorter than a full academic year. Basic Administrative Structure ED's Office of Federal Student Aid (FSA) is the primary entity responsible for administering the Title IV aid programs. The administrative tasks associated with the programs are completed by a number of actors (e.g., FSA, IHEs), depending on the function. FSA undertakes many high-level functions in Title IV program administration. These include, but are not limited to, contracting for the operation and maintenance of systems to process aid; providing customer service, training, and user support for the administration of the programs; and ensuring integrity of the programs. IHEs complete many of the day-to-day functions associated with awarding and disbursing Title IV aid to students. ED makes funds available to IHEs so that they can disburse awards to students. IHE functions include verifying a student's eligibility to receive the aid, calculating aid amounts, disbursing aid funds, and managing program funds at the institutional level. In addition, under the Pell Grant program ED pays participating IHEs an administrative cost allowance. Quality Assurance Mechanisms Several HEA provisions intended to ensure the quality of Title IV-eligible programs and Title IV-participating IHEs have been enacted to protect students and taxpayers. The program integrity triad—state authorization, accreditation, and ED certification—is the foundation of these provisions and is intended to provide a balance in the Title IV eligibility requirements. State authorization is intended to provide consumer protection, accreditation is intended to provide quality assurance, and ED certification is intended to provide direct oversight of compliance in the Title IV programs. In addition to the requirements of the program integrity triad, non-degree programs may be required to meet gainful employment requirements. The following subsections briefly describe each piece of the triad and the gainful employment requirements as they relate to Title IV-eligible programs. State Authorization An IHE must be authorized to provide a postsecondary education within the state in which it is located to participate in the Title IV programs, which includes complying with any applicable state approval or licensure requirements. State approval and licensure requirements vary appreciably among the states. For instance, some states approve IHEs and their individual educational programs, while other states only require approval of an IHE as a whole. The degree to which a state evaluates an individual educational program may also vary by state. For example, states variously evaluate program curricula, program objectives, projected enrollment, student outcome measurements (e.g., completion and placement rates), and justification of program need (e.g., industry demand or consumer interest). In addition, some states require programmatic accreditation (discussed below) or separate approval by another state agency (e.g., a professional licensing agency). Accreditation100 To participate in Title IV programs, an IHE must be accredited by an accrediting agency recognized by ED as a reliable authority of the quality of the education being offered. Accrediting agencies are private associations of member educational institutions or industry associations that undertake quality review of educational institutions and/or programs. In general, an IHE need only be accredited by a regional or national accreditor to participate in Title IV programs. The regional or national accreditor must evaluate whether the IHE meets accrediting agency-prescribed criteria. Although these criteria vary among the agencies, ED-recognized accrediting agencies must regularly evaluate statutorily specified areas, including an IHE's faculty, curricula, facilities, student support services, and success with respect to student achievement in relation to the institution's mission. Within these broadly outlined criteria, accrediting agencies have discretion as to the precise evaluation measures. Regional and national accreditors evaluate an IHE's performance on the whole, but may choose to evaluate a sample of programs. An educational program does not need to be accredited by a programmatic accrediting agency for Title IV purposes. However, an IHE may seek programmatic accreditation to satisfy employer and some occupational licensure requirements. To gain programmatic accreditation, an educational program offered by an IHE is evaluated on established standards for the particular field of study, such as whether the curriculum meets professional guidelines. ED Certification When an IHE seeks to participate in Title IV programs, it must apply for certification from ED. During this process, ED evaluates whether the IHE meets Title IV participation requirements. ED reviews each educational program to determine whether it satisfies eligibility requirements. For example, the eligibility requirements include the aforementioned durational requirements; and 300-599 clock-hour programs that may be eligible to participate in the Direct Loan program must, among other requirements, have verifiable completion and placement rates of at least 70%. If an IHE wants to add a new educational program to its Title IV eligibility, it generally may self-certify to ED that the new program is Title IV eligible or, for new 300-599 clock-hour programs, submit an application to ED for approval. Gainful Employment (GE)106 The HEA specifies that most non-degree programs must prepare students for "gainful employment in a recognized occupation." Regulations promulgated in 2014 (2014 GE regulations) defined the term gainful employment in a recognized occupation , but they were rescinded in 2019. The 2014 GE regulations were intended to serve as a proxy measure for programmatic quality by establishing debt-to-earnings (D/E) rates that programs were required to meet. The rationale behind the rule was that if an educational program is of sufficient quality, then it will lead to earnings that will enable students to repay the student loans they borrowed for enrollment in the program. Under the GE framework, each program subject to the GE rules must meet two D/E rates. Programs that fail to meet minimum standards in multiple years will be ineligible for Title IV participation for three years. No program has yet been subject to loss of Title IV eligibility under the requirements. In addition, the education programs subject to GE rules must meet third-party standards such as being approved by an ED-recognized accrediting agency, being recognized by the relevant state agency, being programmatically accredited (if required by a federal entity or state agency in the state in which the IHE is located or otherwise seeks state approval), and meeting any applicable educational prerequisites for professional licensure or certification in the state in which the IHE is located. Measures of Program Performance The HEA does not define measures of performance for the Title IV programs. The HEA does require that Title IV participating IHEs and ED report information on enrollment, certificates and degrees conferred, student charges, and other information that may be of interest to prospective and current students and policymakers. Program Participation ED collects data annually on Title IV non-degree instructional for-credit programs. Table 5 shows the total number of non-degree instructional for-credit programs and credentials and the percentage of non-degree instructional for-credit programs and awards by institutional sector in AY2017-2018. Of the 6,418 Title IV-participating IHEs, 4,618 offered non-degree for-credit programs. Approximately half of Title IV-eligible non-degree for-credit programs are offered by private for-profit IHEs, while more than two-thirds of non-degree for-credit credentials from Title IV-eligible programs are awarded by public IHEs. In AY2015-2016, approximately 765,000 Pell Grant recipients pursued non-degree credit programs and received about $2.7 billion in Pell Grant awards—roughly 10% of the total number of recipients and dollar amount of awards. Also in AY2015-2016, approximately 10% of undergraduates who borrowed a Direct Loan were pursuing certificate programs. Program Limitations Support for non-degree programs is limited in several ways: Title IV aid is only available to support individuals pursuing credit programs of a statutorily specified duration at Title IV-participating IHEs. Support for work-based learning is limited to programs or portions of programs that lead to a certificate or degree and that are offered by Title IV-participating IHEs. Some students who may choose to pursue training or education via non-degree programs will not be eligible. These include students who do not have a high school diploma (or equivalent) or who are not enrolled in a career pathway program; with respect to Pell Grants, students who have a bachelor's degree; and with respect to the Direct Loan program, students enrolled less than half-time. Non-degree program quality may vary. It is primarily assessed through the program integrity triad, since the 2014 GE rules have been rescinded. State authorizers and accreditors have some flexibility in determining and applying criteria to assess quality. Few reports have examined state authorization requirements in general, or as they relate to program quality in particular. However, those that have done so identify the variation among state authorization requirements as an impediment and a complicating factor in assessing institutional experiences with state authorization. They note that an individual state's history, resources, and priorities may affect the extent to which the state chooses to take a more active or passive role in some areas, such as evaluating non-degree programs. Despite difficulties in assessing state authorization requirements, researchers have pointed to the following as potential weaknesses in at least some states' authorization requirements: concerns that the oversight of some state boards may be impaired by potential conflicts of interest, overrepresentation of special interests, or a sense of being beholden to IHEs; input requirements (e.g., faculty members' qualifications, facilities and equipment used in the instructional process) may impede innovative education models; elongated timeframes to receive state authorization, which may be a result of a complex regulatory state process or a lack of state resources; conflicts across state laws in instances where an institution offers educational programming in multiple states; and despite the fact that many states require institutions to report on student outcomes, few states may actually make authorization renewal decisions based on those outcomes. A 2014 GAO report identified some of the strengths and weaknesses of the accreditation system as it relates to program quality. One strength is that institutional accreditors tailor their expert peer reviews depending on the school type and mission. In addition, programmatic accreditation is specifically aligned to the particular field or type of program. Potential weaknesses identified by GAO include conflicting interests between IHEs and the IHE-funded accreditors, the insufficiency of accreditor capacity and resources, the inability of experts to assess innovative modes of education (e.g., competency-based education), and the difficulty in defining and measuring academic quality. Tax Benefits (IRS)122 Education tax benefits, administered by the Internal Revenue Service, partially offset some of the costs of higher education for eligible taxpayers. They differ from other benefits in several ways. First, unlike many benefits programs, education tax benefits tend to provide the greatest advantage to upper middle income taxpayers. Second, unlike traditional financial aid, which is used to pay for education expenses around the time the education is received, taxpayers claim education tax benefits when they file their federal income tax return. Hence, taxpayers receive a tax benefit only after they have already paid for their education expenses, sometimes many months after the expense is incurred. Many education tax benefits are only available to individuals enrolled in a degree program. However, some education tax benefits do have eligibility rules that are broad enough to include individuals enrolled in non-degree programs. In contrast to most other federal education programs, the education tax benefits discussed in this report reduce federal revenues rather than increase outlays. Hence, education tax benefits are considered a type of "spending through the tax code" that is not subject to annual appropriations. Any persons that meet the requirements for these benefits can receive them (generally when they file their federal income tax return). Education tax benefits may encourage overconsumption of education or subsidize education that would have taken place without these tax incentives. Taxpayers in non-degree programs may currently be eligible for the following: The Lifetime Learning Credit, which reduces a taxpayer's income tax liability and provides financial assistance to taxpayers (or their family members) who are pursuing education. The Lifetime Learning Credit is a nonrefundable tax credit for 20% of the first $10,000 in qualifying expenses. The credit phases out for taxpayers above certain income thresholds. Employer Provided Educational Assistance, which excludes eligible employer provided educational costs from the taxpayer's taxable income. 529 accounts, which are intended to help families save for future educational expenses. Eligibility of Non-degree Programs The Lifetime Learning Credit and 529 accounts may be used for eligible education expenses associated with pursuing non-degree programs at Title IV-eligible IHEs. A broader range of non-degree programs may be eligible for employer provided educational assistance. The Lifetime Learning Credit (LLC) Qualified education expenses used to calculate the amount of the credit are defined as tuition and related expenses required for enrollment in a course at a Title IV-eligible IHE. Related expenses are amounts that are required for enrollment, including books, supplies, and equipment, but do not include living expenses or other expenses that are not required for enrollment. These expenses must be reduced by any amount of tax-free educational assistance used to pay for qualified educational assistance (including employer provided educational assistance and tax-free distributions from 529 accounts). For the purposes of the LLC, a course can either be part of a post-secondary degree program or be a course to help the student acquire or improve job skills (e.g., part of a non-degree program). Employer Provided Educational Assistance Employer provided educational assistance can be used for tuition, fees, books, supplies, and equipment associated with any form of instruction or training that improves or develops the recipient's skills. According to IRS Publication 970, "the payments don't have to be for work-related courses or courses that are part of a degree program." For example, an employer could pay up to $5,250 of the tuition costs of an employee's course to improve his or her skills. This amount would not be included in the employee's wage income. In addition, the statute does not state that the institution providing the program must be a Title IV-eligible IHE. 529 Accounts Tax-free withdrawals from 529 accounts are allowed for qualified expenses, which include tuition and required fees, room and board, books, supplies, equipment, and, for special needs beneficiaries, additional expenses at a Title IV-eligible IHE. Those expenses do not need to be associated with a degree program. Participant Eligibility for Training Eligibility for training depends on factors outside of the tax code. Whether the training qualifies for tax incentives is a different question. To qualify for tax benefits, participants must either file a federal income tax return or be claimed as a dependent or spouse on one. The Lifetime Learning Credit (LLC) Taxpayers can claim the credit for qualified education expenses paid for themselves, their spouses, or their dependent children. Taxpayers cannot claim the credit if they file as married filing separately, if they (or their spouses if filing jointly) are nonresident aliens, or if their income is $68,000 or more ($136,000 or more if married filing jointly). Employer Provided Educational Assistance Participants can only use this tax benefit if their employer offers an educational assistance program. 529 Accounts Beneficiaries of a 529 account are designated at the time of its establishment. Amounts in a 529 account may also be transferred to another 529 account established for certain relatives of designated beneficiaries. Basic Benefit Payment Structure Individuals apply for the LLC when they file their federal income tax return after incurring qualified educational expenses. Qualified educational expenses paid from a 529 account or through an employer are tax-free. The Lifetime Learning Credit (LLC) The LLC is calculated as 20% of the first $10,000 of qualified education expenses, yielding a maximum credit of $2,000 per taxpayer. The maximum credit amount phases out for taxpayers with income between $58,000 and $68,000 ($116,000 and $136,000 for married joint filers) in 2019. Because the credit is nonrefundable, the amount of the credit that the taxpayer receives cannot by definition exceed the taxpayer's federal income tax liability. Hence, if a taxpayer has little to no federal income tax liability (e.g., they are low-income), they will generally receive little if any benefit from a non-refundable tax credit like the LLC. Employer Provided Educational Assistance Employers may choose to provide their employees with up to $5,250 in tax-free tuition assistance per year under an employer sponsored educational assistance program. The assistance is not included in the employees' wages and is not subject to federal income taxes, nor is it subject to payroll taxes. 529 Accounts Taxpayers can withdraw funds from their 529 accounts tax-free and use the distribution to pay for qualifying education expenses associated with non-degree programs, subject to restrictions of the individual plans. (In practice, many taxpayers establish 529 plans for children. However, these taxpayers are allowed under the statute to transfer some or all of the child's 529 account balance into the 529 account of certain relatives of the child tax-free. ) Basic Administration The IRS primarily relies on taxpayers, employers, and states to ensure proper administration of the benefits, although the IRS may audit taxpayers to ensure compliance. The Lifetime Learning Credit (LLC) Taxpayers effectively apply for the LLC by filing their federal income tax return (Form 1040) and IRS Form 8863 (related to claiming education tax credits). These forms, and their associated instructions, describe eligibility rules and help taxpayers calculate the amount of the credit. Taxpayers do not explicitly need to list the course or program of study they are enrolled in when applying for the LLC on their federal income tax return, although they are asked to provide information about the educational institution on Form 8863. Employer Provided Educational Assistance To qualify as an educational assistance program, an employer's plan must be in written form and must meet certain other requirements. According to regulation, "it is not required that a program be funded or that the employer apply to the IRS for a determination that the plan is a qualified program. However, under IRC Section 601.201 (relating to rulings and determination letters), an employer may request that the IRS determine whether a plan is a qualified program." In addition, a program cannot discriminate in favor of employees who are officers, shareholders, self-employed, or highly compensated (although such employees can be eligible for these benefits along with other employees). Employees eligible to participate in the program must be given reasonable notice of its terms and availability. 529 Accounts Generally, states sponsor 529 plans, and individuals can establish accounts in a given plan for a designated beneficiary. When a taxpayer withdraws an amount from a 529 plan, the 529 program is to provide the taxpayer with a Form 1099-Q, which will show the total amount withdrawn and the breakdown between investment growth ("earnings") and the original investment ("basis"). If taxpayers apply any of this withdrawal to a non-eligible expense, they are required to include a portion of the withdrawal on their federal income tax returns, and hence, it may be subject to taxation. Unless audited, a taxpayer does not have to document how they have spent their withdrawals (e.g., the kind of program). In 2018, approximately 0.5% of taxpayers were audited. Quality Assurance Mechanisms Outside of the eligibility rules discussed above, the Internal Revenue Code (IRC) does not have rules regarding the quality of training and education programs for which a tax benefit is claimed. Measures of Program Performance The IRS does not publish, nor is it required to collect or publish, any measures of a non-degree program's performance. Program Participation IRS data on these education tax benefits are limited. The Lifetime Learning Credit (LLC) IRS data indicate that in 2015, approximately 2.5 million taxpayers claimed approximately $2.1 billion of the LLC, for an average credit of $830 per taxpayer. These data indicate that approximately half of all LLC dollars were claimed by taxpayers with adjusted gross income (AGI) between $50,000 and $200,000. Taxpayers with AGI below $15,000 or more than $200,000 generally did not claim the LLC, due to its nonrefundability and phase-out, respectively. To date, no studies have evaluated the impact of the LLC on enrollment in non-degree programs or its effectiveness in helping non-degree candidates improve their job skills. Employer Provided Educational Assistance Administrative data from the IRS on the exclusion of employer provided educational assistance are unavailable. To date, no studies have evaluated the impact of employer provided educational assistance on enrollment in non-degree programs or its effectiveness in helping non-degree candidates improve their job skills. 529 Accounts Administrative data from the IRS on 529 plans are unavailable. Survey data analyzed by GAO indicate that relatively few families have established these accounts, and that those who do tend to have greater assets and income than those who do not establish the accounts. CRS has not identified any studies that have evaluated the impact of 529 plans on enrollment in non-degree programs or their effectiveness in helping non-degree candidates improve their job skills. Program Limitations Most research regarding education tax benefits broadly have found little effect on increasing enrollment. This research highlights some limitations with education tax benefits that may be applicable to non-degree programs. First, education tax benefits, when received many months after expenses are incurred, may provide limited assistance to students who cannot afford upfront education costs. Second, as GAO has highlighted, there are a variety of different education benefits and it may be confusing for taxpayers to determine what benefit they are eligible for, and which benefits provide the largest tax savings. Finally, the education tax benefits discussed in this report only benefit taxpayers with income tax liabilities, which excludes many low-income taxpayers who have little to no income tax liabilities. Veterans Education Programs (Post-9/11 GI Bill® and VET TEC) (VA) Veterans education programs (GI Bills) were originally intended to help former servicemembers adjust to civilian life by providing for the "reintegration of the discharged soldier, sailor, and marine into the civilian economy in the most prompt and adequate manner." Over the years, the benefits have been renewed and revised to also compensate for compulsory service, encourage voluntary service, avoid veteran unemployment, provide equitable benefits to all who served, and promote military retention. The pilot Veteran Employment Through Technology Education Courses (VET TEC) and its predecessor are an alternative approach that incentivizes training providers for program completion and employment. VET TEC is not a GI Bill. The GI Bills and VET TEC provide financial assistance to students whose eligibility is based on a qualifying individual's service in the uniformed services while such students are enrolled in approved programs of education, which include training programs. The GI Bills and VET TEC are administered primarily by the Department of Veterans Affairs. The GI Bills are appropriated entitlements funded with mandatory spending. Appropriated entitlement spending is funded, but not controlled, in annual appropriations acts. VET TEC is funded by a limited allocation from GI Bill appropriations. The remainder of this section describes the Post-9/11 GI Bill and VET TEC. The Post-9/11 GI Bill has represented approximately 80% or more of total GI Bill participation and spending in each year since FY2013. Eligibility of Non-degree Programs While the majority of Post-9/11 GI Bill benefits are used to support education through degree pursuit, they are also used to support students pursuing training and education through approved work-based learning and non-degree instructional programs at a variety of training establishments and educational institutions. Non-degree programs include credit and noncredit instructional programs, courses that prepare individuals for assessments to further their education or career (e.g., Advanced Placement [AP] exams or real estate licensing exams), OJT, apprenticeships, and courses that lead to a predetermined educational, vocational, or professional objective ( Table 6 ). The variety of eligible programs was intended to provide eligible individuals with the maximum choice in training and education options. VET TEC benefits are only available for the pursuit of non-degree high-technology programs of education at contracted training providers that enter into a Program Participation Agreement (PPA) with the VA. A high-technology program of education provides instruction in computer programming, computer software, media application, data processing, or information science. The training providers must meet several criteria including, but not limited to, not offering degrees and not charging tuition and fees that exceed annual VA caps. Participant Eligibility for Training Post-9/11 GI Bill benefits are available to eligible servicemembers and veterans and their family members. The program is not open to the general public and is not based on family income levels. A servicemember or veteran must meet qualifying active duty service requirements in the uniformed services and either continue on active duty or meet specified discharge/release requirements. An eligible servicemember may transfer benefits to family members. The spouse and children of a servicemember who dies in the line of duty while serving on active duty as a member of the Armed Forces are also eligible. To be eligible for VET TEC, an individual must be a GI Bill-eligible veteran enrolled full-time in a VET TEC-eligible program. VET TEC participants may or may not be recipients of GI Bill benefits. Basic Benefit Payment Structure Both the Post-9/11 GI Bill and VET TEC provide living stipend payments directly to participants and payments to providers for direct program costs. Program costs are paid by the Post-9/11 GI Bill concurrent with program pursuit, while VET TEC pays costs during and after pursuit. In addition to payments, eligible individuals may apply for personalized counseling to help guide their career paths, ensure the most effective use of their VA benefits, and help them achieve their goals. Post-9/11 GI Bill The Post-9/11 GI Bill provides eligible persons an entitlement to educational assistance payments over a period of 36 months (or its equivalent in part-time educational assistance). In cases where a veteran transfers all or a portion of the benefits, transferors and transferees must share the 36 months of entitlement. Under the Post-9/11 GI Bill, several types of benefit payments are available. The amount of each payment and eligibility for the payments depends on an individual's benefit level; the type of training or education program pursued; the rate of enrollment or pursuit; actual charges, and when relevant, in-state tuition charges; the location of the training or education; and the mode of education delivery. An individual's benefit level is based on their aggregate length of qualifying active duty service or other eligibility characteristics. While an individual is enrolled in a program of education or pursuing training, an educational institution may receive payments for tuition and fee charges, and the individual may receive a monthly housing allowance, a books and supplies stipend, tutorial assistance, and additional monthly payments. Individuals are reimbursed for fees charged for taking approved tests. As an illustration in AY2019-2020, a veteran enrolled in an educational program at a hypothetical private educational institution may receive up to $24,476.79 in tuition and fees, but no more than the actual tuition and fee charges; between approximately $800 and $4,300 monthly for housing, depending on location; and up to $1,000 for books and supplies. Veterans pursuing OJT or apprenticeship receive a progressively decreasing housing allowance that is intended to partially offset scheduled wage increases associated with the OJT or apprenticeship, and may not receive a tuition benefit if no tuition is charged by the sponsoring employer or instructional provider. VET TEC Under VET TEC, payments are provided to veterans and training providers. While enrolled full-time, veterans receive a monthly housing allowance that is similar to the Post-9/11 GI Bill housing allowance. The VA reimburses the qualified training provider for the cost of tuition and other fees for the program. The VA pays 25% of the cost upon initial enrollment of an eligible veteran, 25% upon program completion, and 50% upon employment of the completer in a suitable field. Training providers cannot charge tuition and fees to the VET TEC participant directly. Basic Administrative Structure Potential participants apply to the VA to ensure eligibility for either the Post-9/11 GI Bill or VET TEC. Eligible individuals may then enroll in or enter into a training agreement for approved programs. Educational institutions and training establishments certify the expected and actual enrollment and pursuit of eligible individuals to the VA. Certifications of individual enrollment and pursuit are made at regular intervals and when there are changes to what was previously certified. The VA verifies eligibility, calculates payment amounts, and distributes payments to eligible individuals and educational institutions. Quality Assurance Mechanisms Program quality for GI Bill-approved programs is primarily determined by semi-independent state approving agencies (SAAs), but the VA also has oversight obligations. Program quality for VET TEC programs relies heavily on participant employment outcomes. Post-9/11 GI Bill157 While the VA primarily relies on SAAs for initial approval of programs of education, the VA and SAAs share responsibility for ongoing oversight. The VA contracts (or enters into agreement) with each SAA to provide approval, oversight, and other related activities to ensure the quality of programs of education and proper administration of GI Bill benefits. Statutory and regulatory provisions and policy have established standards for the programs of education, educational institutions, and training establishments. The quality standards apply to each program of education. Many standards were established in response to reports of poor quality or incidences of abuse. Four prominent standards apply to the quality of most programs: program objective, independent study (e.g., online) restrictions, the 85-15 rule, and contractual arrangement restrictions. The program objective may not be avocational, recreational, or personal development. Independent study programs must be accredited by an ED-recognized accrediting agency and must lead to a degree or certificate that meets additional statutorily specified criteria. Under the 85-15 rule, no more than 85% of students enrolled in a program of education may have tuition, fees, or other charges covered by institutional aid or by a GI Bill. For programs offered in part or exclusively through contractual agreements, the contracted courses must be independently approved for GI Bill purposes. Besides the standards that apply to most programs of education, there are additional requirements depending on the type of program. For example, non-degree programs must be offered in facilities with adequate space and equipment, taught by instructors with adequate education and qualifications, and follow curricula with recognized accepted standards. Programs designed to prepare individuals for state licensure or certification or for an occupation requiring state board approval must meet the relevant instructional requirements. Programs of education that have not been approved or certified as meeting quality educational criteria by another government agency are required to meet various standards and criteria in addition to the aforementioned standards. Non-degree programs that have been approved by other government agencies are Federal Aviation Administration (FAA) approved flight training programs, DOL Registered Apprenticeships, and state-approved apprenticeships. The standards include, but are not limited to, having faculty with adequate qualifications and having a curriculum that is similar to other institutions, or meeting licensure, certification, or board standards. VET TEC158 The VA is the sole arbiter in determining if a facility is eligible for VET TEC. The payment structure and several key elements of the PPA are designed to ensure program quality and value. The payment structure, as described earlier, reimburses training providers when veterans complete the program and when they find meaningful employment . Meaningful employment means employment occurring within 180 days of program completion and using the skills of the completed program for self-employment, promotion, or new employment. Key quality-related requirements within the VET TEC PPA require that training providers be licensed or approved by the required federal, state, or municipal agencies and meet the 85-15 rule. The PPA further requires that the VET TEC-eligible programs not be self-paced. Measures of Program Performance As of 2013, the VA is required to report annually on the number of credit hours, certificates, degrees, and other qualifications earned by Post-9/11 GI Bill participants. The requirement was initiated to determine whether the program effectively prepares eligible individuals for the future. The VET TEC program performance measures are the program admittance rate, job placement and retention rates for program completers, the percentage of program completers employed less than six months in the field of study, the percentage of program completers employed at least six months in the field of study, median annual salary for employed program completers, and transfer rates to other academic or vocational programs. Program Participation Although GI Bill participant pursuit of training and education through non-degree programs is low, many educational institutions and training providers that do not offer degrees are approved for GI Bill purposes. Approximately 9% of GI Bill participants pursued an educational certificate in 2013, compared to 81% who pursued a degree. In FY2018, approximately 0.4% of Post-9/11 GI Bill participants were pursuing OJT or an apprenticeship. Of the educational institution and training establishment locations that offered programs approved for GI Bill purposes, almost 500 flight school locations, over 18,000 school locations, and over 9,000 OJT/apprenticeship locations did not award any degrees, based on data from December 2019. Of the over 18,000 school locations, 37% were private for-profit, 37% were public, and 27% were private nonprofit schools. The most popular certificates completed by Post-9/11 GI Bill participants in AY2018-2019 were in welding; information technology; heating, ventilation, and air conditioning; health care; and gunsmithing. Based on July 1, 2019, data following the February 2019 VET TEC launch, there were five approved training providers and eight participants. Program Limitations Program eligibility is limited to individuals who have served in the uniformed services and their family members. Some recent examinations of the program have found that program quality oversight may be compromised by the oversight process described above. A 2018 GAO report indicated that SAA funding, the scope and focus of oversight actions, and the process for choosing institutions to audit may limit the ability to adequately conduct thorough oversight. A 2018 VA OIG report found that SAAs lacked adequate controls to review all statutory approval standards, including, in particular, potentially deceptive advertising or program modifications. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T) (USDA)170 SNAP (formerly known as the Food Stamp Program), is administered by the Department of Agriculture and provides eligible low-income households with benefits redeemable for eligible foods at authorized retailers. The vast majority of federal funding for SNAP is for the food benefits themselves, but the federal government provides other SNAP funding as well. For example, states receive SNAP Employment & Training (E&T) funding to provide employment and education services for SNAP participants; this education is sometimes provided through non-degree programs. First established by Congress in 1987 (then called Food Stamp Employment & Training (FSET)), the statutory purpose of SNAP E&T is to assist members of households participating in SNAP in "gaining skills, training, work, or experience that will increase their ability to obtain regular employment and meet state or local workforce needs." Congress also established SNAP E&T as a way to meet the SNAP's work-related requirements; generally, nondisabled adults ages 18 to 59 are subject to these requirements. Each state agency responsible for administering SNAP is required to implement a SNAP E&T program. States have the option to make their SNAP E&T programs mandatory or voluntary. That is, the state may choose to (1) make participation in E&T a condition of receiving SNAP benefits (mandatory) or (2) offer E&T but not require participation (voluntary). According to FY2017 USDA Food and Nutrition Service (USDA-FNS) data, the majority (35 of 53) state agencies operate voluntary E&T programs. A state's E&T program must include one or more of the following components: job search programs, job search training, workfare (work-for-benefits), work experience (may include OJT or apprenticeships), education, self-employment training, WIOA (i.e., job training services that are managed by agencies under WIOA), and programs to improve job retention. SNAP E&T funding includes several streams of mandatory funding: nearly $124 million is available without a state match, and then an open-ended federal match is available for states' administrative expenses and states' reimbursements for dependent care and transportation. Total E&T funding each year varies, depending on states' use of open-ended matching funding. Since October 2015, USDA-FNS, in partnership with Seattle Jobs Initiative (SJI), has been operating SNAP to Skills , a SNAP E&T capacity-building project USDA describes as addressing the need for education beyond high school. The project is "designed to provide states the technical assistance, tools, and resources they need to build more effective and job-driven SNAP E&T programs." SNAP to Skills provides enhanced technical assistance to 10 states, but reaches additional states with tools, resources, and a SNAP E&T learning academy. Statutory provisions require some integration between the WIOA Title I program and SNAP E&T. The SNAP E&T program must be delivered through the statewide workforce development system, unless the component is not available locally through such a system. While SNAP E&T recipients can receive services through WIOA One-Stop centers, SNAP staff have experience addressing the unique challenges of E&T recipients, such as low basic skills, housing instability, and mental health issues. Eligibility of Non-degree Programs A state's available services and programs vary. SNAP E&T programs can provide certain education activities, as specified in federal regulations: Educational programs or activities to improve basic skills or otherwise improve employability including educational programs determined by the State agency to expand the job search abilities or employability of those subject to the program. Allowable educational activities may include, but are not limited to, high school or equivalent educational programs, remedial education programs to achieve a basic literacy level, and instructional programs in English as a second language. Only educational components that directly enhance the employability of the participants are allowable. A direct link between the education and job-readiness must be established for a component to be approved. SNAP E&T education activities must have a direct link to employment and help SNAP participants move promptly into employment. Some states do offer and fund SNAP participants' pursuit of education and training via non-degree programs. According to FY2017 data, the most common education activities offered are vocational training and basic education. SNAP E&T may also provide actual work experience or training. Apprenticeships and subsidized employment are allowable, as are unpaid internships. Participant Eligibility for Training SNAP E&T serves those SNAP participants who are subject to the program's general work requirements, but some states may target their services to a subset of this population. To participate in SNAP, households must be income-eligible and meet certain other nonfinancial rules such as citizenship and work requirements. To be financially eligible, household gross monthly income (all income as defined by SNAP law) must be at or below 130% of the federal poverty level, and household net monthly income (SNAP-specified deductions are subtracted) must be at or below 100% of the federal poverty level. Under certain state options, the threshold may be as high as 200% of the federal poverty line. Under current law for SNAP participation, general work requirements or work registration requirements are in place. That is, non-disabled adults who are not working are required to register for work, accept a job if offered one, and not reduce their work below 30 hours per week. This work registrant population is the eligible population for SNAP E&T programs, but states may design their E&T programs to focus on a subset of this population. States may also choose to make E&T mandatory for this population or a subset of it. The process by which SNAP agencies or third-party partners assign or refer an individual for particular E&T programs or services varies. USDA guidance requires state agencies to assess participants to determine the most effective E&T component(s) for that participant; guidance suggests a range of assessment tools. The 2018 farm bill ( P.L. 115-334 , enacted December 2018) now requires all states to include "case management services such as comprehensive intake assessments, individualized service plans, progress monitoring, or coordination with services providers." In general, E&T funds cannot be used to serve Temporary Assistance for Needy Families cash assistance recipients (see the " Temporary Assistance for Needy Families (TANF) (HHS) " section for more information). Some individuals enrolled half-time or more in an IHE are ineligible for SNAP. Such individuals may be eligible if assigned or placed in the IHE through a specified program, including a WIOA Title I program or SNAP E&T. Basic Benefit Payment Structure SNAP provides food assistance, while SNAP E&T provides educational programs and funds some associated costs. SNAP E&T funds may be used to cover the costs of education, develop a program component, or pay for the costs associated with an education program. Associated costs may include dependent care and transportation. Most E&T funding does not go directly to program participants but rather is administered by state agencies and contracted programs. It is common for states to contract for specific education programs or to work through partnerships. USDA-FNS presents third-party partnerships as a model for developing, implementing, and growing a SNAP E&T program. Through such partnerships, states work with a third party such as a community college. The third party provides a financial or in-kind contribution to the program. Upon invoicing, the state draws down federal funds to reimburse the partners. The federal funds may be 100% funding or a 50% match depending on the funding stream. For Pell Grant-eligible students, the Pell Grant must be the first payer of college expenses. The first payer indicates that the Pell Grant amount would be based on full college expenses, whereas the E&T benefit would be based on the college expenses not covered by the Pell Grant. Associated expenses supported by E&T must be reasonable and necessary. Before using E&T funds for tuition, the state must first explore other funding sources, such as education grants (but not loans). W orkforce partnerships were added to the E&T program by the 2018 farm bill. Workforce partners may include private employers, nonprofit organizations providing services relating to workforce development, and training providers identified on WIOA ETPLs. The workforce partners provide training, work, or experience. As mentioned above, work components may include OJT and apprenticeships. Basic Administrative Structure Each SNAP E&T program is designed by the state within a federal framework of rules and is subject to USDA-FNS approval. Statute and regulation set out requirements for states' E&T plans. State programs can and do vary greatly in their capacity and services offered. Per changes made by the 2018 farm bill, the programs must be implemented in consultation with the state workforce development board (WDB) or private employers or employer organizations (See the " WIOA Contracts and Individual Training Accounts (ITAs) (DOL) " section for state WDBs' responsibilities under WIOA Title I). SNAP E&T participants generally learn of the available programs and services through the SNAP state agency or referrals to partner agencies. Quality Assurance Mechanisms States typically monitor and assess provider and program quality, though USDA-FNS has increasingly provided technical assistance and resources to help them do so. Measures of Program Performance The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) required USDA to establish a performance indicators reporting process. USDA has finalized the regulation implementing this reporting, and the first annual report was due in January 2018. As of the date of this report, USDA has not published a compilation or information based on the reports. The national reporting measures are unsubsidized employment in the second quarter after completion of participation in SNAP E&T; median quarterly wages in the second quarter after completion of participation in SNAP E&T; unsubsidized employment in the fourth quarter after completion of participation in SNAP E&T; and completion of an educational, training, work experience, or OJT component. Program Participation The majority of SNAP E&T participants were provided services other than education. According to USDA-FNS FY2016 data, the most recent available, 38 of 53 SNAP state agencies provided an education component in their E&T program, and the states served almost 70,000 SNAP participants in the education components of their programs. FY2016 SNAP E&T participation data on all participants (not necessarily education component participants) by state show that some states served fewer than 100 participants, while other states served nearly 100,000. Program Limitations There are a few limitations to SNAP E&T. First, it is more common for SNAP E&T participants to participate in job search or other non-education components; fewer than 10% of participants receive education. Second, information is not available on the quality of educational programs or work experience. A forthcoming evaluation on the 2014 farm bill pilot projects may inform future guidance and policymaking. In addition, subsequent employment outcomes are not available. Finally, wages earned through SNAP E&T may increase household income, and thus may reduce eligibility for SNAP and SNAP E&T. Temporary Assistance for Needy Families (TANF) (HHS)206 The Temporary Assistance for Needy Families block grant has the statutory purpose of increasing state flexibility to (1) provide assistance to needy families with children so that children can live in their own homes or in the homes of relatives; (2) end the dependence of needy parents on government benefits by promoting work, job preparation, and marriage; (3) reduce out-of-wedlock pregnancies; and (4) promote the formation and maintenance of two-parent families. States may expend their TANF block grants (and associated state funds) in any manner "reasonably calculated" to achieve TANF's statutory purpose. TANF is administered HHS. Under federal budget rules, TANF is a mandatory spending program. TANF is not a dedicated education and/or training program, but a broad-purpose block grant that gives states permission to spend funds on a wide range of benefits, services, and activities. TANF is best known for providing monthly assistance to needy families with children, primarily headed by single mothers, to help meet their basic needs. This assistance is usually in the form of cash, but may also be paid as a voucher or to a third party to meet a basic need. TANF funds may also be used to support subsidized employment, OJT, and training and education programs; however, this is a subset of the types of activities that TANF may fund. Several states have used TANF funds to support career pathways . According to HHS, "a career pathway provides access to interconnected education programs and support services for students and workers to help them advance in their chosen career paths to jobs with family-sustaining wages." One state program includes coordinators who are paid with TANF funds but are employed at a community college and serve as case managers, recruiting students and ensuring they have access to support services. The program also makes use of college work-study jobs. Eligibility of Non-degree Programs TANF has no rules limiting the types of training and education programs that are eligible, though there are limits on how much training and education may be counted toward meeting its performance measure (see the " Measures of Program Performance " section). Therefore, the state may decide what kinds of vocational educational training are eligible. Participant Eligibility for Training TANF funds must be used for low-income families with children; thus, parents or other caretakers of children would be eligible for training and education. Financial eligibility rules are set by the state in which the family resides, and there is a significant amount of variation among them. According to HHS data, "in 2015, over one-third of adult TANF assistance recipients (38.6%) had less than a high school education, and more than half (53.9%) had no further education beyond high school completion (or its equivalent)." Basic Benefit Payment Structure TANF helps fund state assistance programs for needy families with children. Funds are provided to the states, which then provide assistance to families. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ), which created TANF, requires that funds be spent as determined by state legislatures. States determine eligibility rules and benefit amounts for these programs. They also determine what activities to require of adult recipients of assistance. There is no federal requirement to provide different benefit amounts depending upon whether adult recipients are in training and education, but benefits must be reduced or ended if recipients refuse to participate in required activities that may include training and education. (States may create "good cause" and other exceptions for which the sanction for failure to participate in required activities may be waived.) TANF also provides funding for a wide range of benefits and support services other than cash assistance, and some low-income parents who do not receive cash assistance are served by TANF funds. Support services may include, but are not limited to, advising, career planning, and employment services. Basic Administrative Structure Benefits and services are delivered at the state and local level. States decide which participants get which services. State TANF programs sometimes refer assistance recipients to a WIOA One Stop Center for education or employment. Other states choose to operate employment and training services for TANF recipients separately from the WIOA system. Quality Assurance Mechanisms There are no federal rules regarding the quality of training and education programs, though states might establish such rules. Measures of Program Performance The minimum work participation rate (WPR) is TANF's sole performance measure. TANF requires each state to meet a performance standard that requires a minimum percentage of its assistance caseload to either be working or engaged in activities. The rules for what counts as engagement limits training and education: "vocational educational training" is limited to 12 months in a lifetime; obtaining a GED is either not countable toward the standard or counted only if an individual is in another activity more closely related to work for a minimum number of hours per week. States may also meet their minimum work participation rate in whole or in part through reducing the cash assistance caseload. Program Participation and Outcomes Little program-wide data exists on TANF participation in training and education and the subsequent outcomes. Program Limitations Child care and educational preparation may limit a large proportion of TANF recipients from taking advantage of and succeeding in non-degree programs. Most TANF assistance adults are single mothers with young children. States may use TANF funds to assist parents with child care. The TANF cash assistance caseload is significantly disadvantaged in terms of education. The choice of non-degree programs may be limited: The 12-month lifetime limit on vocational educational training limits the types of training that TANF recipients can pursue. An individual in an apprenticeship program may exceed the income eligibility threshold for receiving assistance. In addition, the quality of training and education programs is unknown.

Recent Administrations and Congress have demonstrated bipartisan support for increasing federal assistance to individuals pursuing training and education in postsecondary non-degree programs, sometimes referred to as short -term programs . Non-degree programs are postsecondary training and education programs that are most often shorter in duration than a bachelor's or associate's degree program. They generally provide work-based learning or educational instruction to individuals who are beyond the typical age for secondary education to prepare them for a particular occupation. Examples of support have included proposals to expand existing federal programs, create new programs, and improve coordination between existing programs. This report provides an overview of existing federal programs and benefits that support individuals pursuing training and education in non-degree programs. A prominent argument for supporting individuals pursuing training and education in non-degree programs is that there is a substantial employer need for individuals with some postsecondary credentials but no degree. In 2018, approximately 72% of jobs in the national economy were in occupations for which the typical entry-level education is less than an associate's degree. Just over 6% explicitly required a non-degree credential, but these credentials could prepare individuals for many jobs that do not require a bachelor's or higher level degree. Mean annual wages for individuals whose highest educational attainment is high school completion are similar to those for individuals with a non-degree credential. Earnings for individuals with only non-degree credentials vary based on differences in occupational field, program duration, and type of educational institution attended. Several federal programs provide direct financial support to or on behalf of students to enable them to pursue training and postsecondary education in non-degree instructional and work-based learning programs. None of these federal programs or benefits that provide such support focus exclusively on promoting non-degree program pursuits. The federal programs include the following: Title I of the Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128 ) is the primary federal workforce development statute. The program relies on state and local workforce development boards to enter into contracts with training and education program providers and oversee the quality of the providers. Title IV of the Higher Education Act of 1965 (HEA; P.L. 89-329), as amended, authorizes grant and loan programs that provide financial assistance to higher education students. Non-degree program quality assessment is handled by state authorizers, accrediting agencies, and in some instances through Department of Education certification. Education tax benefits, administered by the Internal Revenue Service (IRS), partially offset some of the costs of higher education for eligible taxpayers. Many education tax benefits are only available to individuals enrolled in a degree program, but three education tax benefits can also be claimed for postsecondary non-degree programs: the Lifetime Learning Credit, the Exclusion for Employer Provided Educational Assistance, and tax-advantaged 529 plan education savings accounts. The Post-9/11 GI Bill and Veteran Employment Through Technology Education Courses (VET TEC) were originally intended to help veterans enter the civilian workforce. Post-9/11 GI Bill program quality is primarily overseen by state agencies under contract with the Department of Veterans Affairs. VET TEC program quality is assured by withholding 50% of tuition and fees from providers until participants are employed. Supplemental Nutrition Assistance Program (SNAP) Employment & Training (E&T) provides eligible low-income households with employment and education services. E&T funding is administered by state agencies through contracted providers, which receive funds to cover education and other program costs. The Temporary Assistance for Needy Families (TANF) block grant is best known for providing monthly cash assistance to needy families with children but may be used to support subsidized employment, on-the-job training, and training and education programs.

GAO_GAO-20-132

Background The FSS program is directed and managed by GSA and provides federal agencies with a simplified process for obtaining commercial supplies and services at prices associated with volume buying. Schedules are catalogs of related products and services, from pre-approved vendors, with established pricing that can be used by federal agencies to obtain goods and services, ranging from office furniture to medical equipment and supplies. Since 1960, GSA has delegated authority to VA to manage health care related schedules, currently totaling nine schedules. (Throughout this report, we use the term “FSS” to refer to VA’s FSS program, unless otherwise noted.) These nine VA schedules, as shown in figure 1, are designed to provide FSS users at VA and other agencies with a menu of items—including medical equipment, supplies, and services—they can order from in a streamlined manner. Sales to VA on the pharmaceutical schedule were $33.5 billion from fiscal years 2014 through 2018. We omitted the pharmaceutical schedule from our review because it differs substantially from the other eight schedules, particularly in its use of a prime vendor. How the VA’s FSS Program Is Managed VA’s FSS program is managed by the National Acquisition Center (NAC), a VA-wide contracting organization which is also responsible for procuring items like high-tech medical equipment for medical centers. NAC is part of VA’s Office of Procurement, Acquisition and Logistics, which is overseen by VA’s Office of Acquisition, Logistics, and Construction. Within NAC, the FSS Service, which is comprised of about 80 staff, is divided into teams of contracting staff who are responsible for individual schedules. Another team, NAC’s Program Management and Resource Support, manages functions such as issuing guidance and providing training. In 2016, NAC issued a Procedural Guideline that generally sets a goal for its contracting staff to complete their review of and award decision for vendor-submitted FSS offers within 180 calendar days. Like GSA’s FSS program, users of the VA FSS program are charged a fee on the price of their FSS purchases, called the Industrial Funding Fee (IFF). VA’s FSS fee is 1 percent for services and 0.5 percent for goods. Fees generated by VA FSS fund its operations and other VA procurement operations. NAC facilitates collection of the IFF from vendors that sell products or services under VA FSS contracts, and vendors remit the IFF to VA’s Supply Fund, a self-supporting revolving fund. The Supply Fund, in turn, is used to provide funding to NAC for the operation of the FSS Service, the office that manages VA’s FSS program. VA FSS Users VA’s schedules are used by organizations across the federal government, including the Department of Defense, Department of Health and Human Services, and the Department of Homeland Security. In this review, we focus on how the Veterans Health Administration (VHA) uses VA’s schedules. VHA, the only VA administration that uses the VA schedules, provides medical care to about 9 million veterans at 170 medical centers. These medical centers are organized into 18 Veterans Integrated Service Networks (VISN), organizations that manage medical centers and associated clinics across a given geographic area. Each VISN is served by a corresponding Network Contracting Office (NCO), which is responsible for awarding contracts for medical goods and services that the medical centers need. Two primary groups of VHA staff place FSS orders: 1. VHA contracting officers, who are authorized to enter into contracts on behalf of the government, may place orders against the schedules. They handle purchases over the micro-purchase threshold, which is generally $10,000. 2. Certain VHA medical center logistics staff are authorized to make smaller purchases at or below the micro-purchase threshold, including placing FSS orders. Many of these staff are in the medical centers’ logistics offices, which are responsible for managing the supply chain for VHA’s medical centers. Figure 2 provides an overview of VA’s procurement structure and FSS users. VA’s Medical-Surgical Prime Vendor Program In addition to purchasing goods and services through FSS, VHA logistics staff at VA’s medical centers can also buy them through the MSPV-NG program. In this program, VA medical centers use contractors called medical-surgical prime vendors to obtain many of the supplies they use on a daily basis, such as bandages and scalpels. These prime vendors operate local warehouses and deliver supplies ordered by medical centers. The prices for these medical supplies are established by separate contracts or agreements that are awarded by contracting officers within VA’s Strategic Acquisition Center (SAC). The MSPV-NG program is managed by SAC and VHA. As we reported in 2018, for over a decade, each medical center used VHA’s legacy MSPV program to order medical supplies. Many of those items were purchased using VA’s FSS, which provided medical centers with a great deal of flexibility to order from a catalog containing hundreds of thousands of items. However, this flexibility prevented VHA from standardizing the items used across its medical centers and also affected its ability to leverage its buying power to achieve greater cost avoidance. In December 2016, VHA transitioned to a new iteration of this program called MSPV-NG, which has a narrower catalog of medical supplies than the legacy program, which offered hundreds of thousands of items. As of September 2019, the catalog offers about 22,000 supply items to medical centers. Veterans First Contracting Program Requirements In June 2016, a Supreme Court decision clarified that VA must apply the Veterans First Contracting Program preference before contracting with a non-veteran-owned business, including purchases made through FSS. This program, referred to in this report as Veterans First, provides preference within VA for contracting with veteran-owned small businesses. Specifically, VA contracting officers must apply the “VA Rule of Two,” meaning they must conduct market research to determine whether there is a reasonable expectation that two or more veteran- owned small businesses will submit offers for a particular good or service at a fair and reasonable price that offers best value to the government. If two or more such businesses are found, contracting officers must set aside the procurement for the veteran-owned small businesses. Use of VA’s FSS Was Flat While Overall VHA Spending Rose, but NAC Lacks Controls to Verify Sales Data and Visibility into Small Business Participation and User Experience VHA used NAC’s FSS to purchase billions of dollars in medical supplies and services over the past 5 years. Sales for the eight non- pharmaceutical schedules, however, have been largely flat, as compared to the rise in VHA’s total health care spending. Though we found vendor- submitted sales reports to be sufficiently reliable for describing overall trends, we found that NAC does not have controls in place to ensure that vendors are providing complete data—used to calculate fees that finance the program. In an attempt to assess data completeness, NAC recently began comparing vendor data to Federal Procurement Data System-Next Generation (FPDS-NG) data for verification. However, because agencies do not report micro-purchases made via purchase card in FPDS-NG, this approach alone is not effective. We also found that NAC does not analyze existing data on the number of veteran-owned small businesses that hold FSS contracts, the types of goods and services they offer, or which schedules have the most or least participation by these businesses. This information is important because VHA contracting officers must apply the Veterans First preference to contracts. The existence or lack of veteran-owned small businesses on FSS affects whether these staff can use FSS to fulfill their needs. Finally, we found that NAC has limited visibility into the FSS user experience. Those insights could help NAC identify potential areas for improvement. Billions of Dollars in Medical Supplies and Services Are Purchased through VA FSS, but Sales Are Flat amid a Rise in Overall VHA Medical Spending VHA obligated $291 billion from fiscal years 2014 to 2018 for health care services provided at its medical facilities—$12 billion of which was for medical supplies and services obligated using the eight non- pharmaceutical VA schedules. In contrast to VHA obligations for health care at its medical centers, which increased nearly 20 percent during this 5-year period, VA FSS purchases on these schedules were flat. See figure 3. We found that the VHA sales trends varied among our three selected schedules during this period, as shown in figure 4. Specifically, VHA sales on the FSS for Medical Equipment and Supplies, the largest of the three, were generally flat. VHA sales on the FSS for Patient Mobility Devices, which includes items such as wheelchairs, increased nearly 50 percent, while sales on the Healthcare Staffing schedule fell by more than 30 percent. VA Lacks Controls to Ensure That Vendors Provide Complete Data NAC does not have controls in place to ensure that vendors provide complete data in their sales reports. These sales reports—required per an FSS contract clause—are NAC’s only means of tracking FSS sales and related fees that finance the FSS program. In fiscal year 2018, vendors on VA’s nine schedules remitted $82 million in IFF from customers to VA’s Supply Fund. Figure 5 provides an overview of key steps in VA’s FSS vendor sales report and IFF collection process. Like NAC, GSA also depends on vendor-reported data to track its FSS sales. However, we found that GSA takes additional steps for its FSS program to ensure the completeness of vendor-reported data. GSA has internal controls to ensure data completeness, including a staff of 43 Industrial Operations Analysts who implement GSA procedures to ensure that, among other things, vendors have sound sales data reporting processes. We did not evaluate GSA’s use of these analysts, but, according to GSA FSS officials, these analysts review vendor sales data, educate vendors about GSA’s requirements, and conduct checks on vendor internal controls and compliance with GSA policies. Having internal controls in place is essential to ensure completeness of vendor-reported sales data. In February 2019, NAC officials told us they had tried to use obligation data reported in FPDS-NG to verify the completeness of vendor sales data. However, they found that FPDS-NG did not contain a substantial portion of vendor sales. These officials stated that the difference between the vendor sales data and the obligations in FPDS-NG was likely due in large part to purchases under the micro-purchase threshold (currently $10,000) that agencies do not report to FPDS-NG. Because agencies do not report micro-purchases made via purchase cards to FPDS-NG, per the Federal Acquisition Regulation, this approach alone is not effective to ensure data completeness. To estimate what portion of vendor-reported sales were below the micro- purchase threshold, we compared sales data that vendors reported to VA to the obligations included in FPDS-NG data for fiscal year 2018 for the eight schedules we reviewed. We found that 54 percent of VA FSS sales as reported in vendor data were not included in FPDS-NG. VA procurement officials we interviewed told us that the 54 percent were likely micro-purchases made by medical center logistics staff using their government purchase cards. For a more detailed view, we also reviewed the percentage of fiscal year 2018 sales included in FPDS-NG for our three selected VA schedules, and found that 65 percent and 71 percent of FSS sales for the Medical Equipment and Supplies and the Patient Mobility Devices schedules, respectively, were not included in FPDS-NG, as shown in figure 6. Finally, we compared FPDS-NG data to FSS sales reports for non-VA agencies. We found instances where obligations in FPDS-NG reported by these agencies exceeded those reported by vendors in FSS sales reports—sometimes significantly. Specifically, from fiscal years 2014 to 2018, FPDS-NG reflected a cumulative $533 million more than the sales that vendors reported to NAC for non-VA agencies for the Healthcare Staffing schedule. This difference between reported sales and obligations indicates a risk that vendors are under-reporting VA FSS sales to other agencies. Standards for Internal Control in the Federal Government require that management have adequate controls for ensuring the quality of data. NAC FSS officials told us that they would like to do more to mitigate the risk that vendors may not be reporting complete VA FSS sales data, given the differences we found and that NAC also found between reported sales and obligations. Additional internal controls, similar to the process used by GSA, would help NAC to ensure vendor-reported sales are complete, and that the appropriate IFF sales fees that finance the FSS program are collected. NAC Lacks Visibility into the Extent of Veteran- Owned Small Business Participation in the VA FSS Program We found that NAC does not assess data on the participation of, and items and services offered by, veteran-owned small businesses in NAC’s FSS program. This information is important because VHA contracting staff must apply the “VA Rule of Two” preference before contracting with a non-veteran-owned business. This preference for veteran-owned small businesses under the Veterans First program—which VA implemented more expansively after the 2016 Supreme Court decision—has had a major impact on VA procurement, as we reported in 2018. Thus, the availability of information about goods and services offered by veteran- owned small businesses on FSS affects whether contracting officers can use FSS as a simplified means of making purchases. However, NAC officials do not track the types of goods and services offered by veteran- owned small businesses holding FSS contracts, or which schedules have the most or least participation by these businesses. In interviews for this review and from our prior work, 10 contracting officers told us they use FSS less often than in the past. They cited the Veterans First requirement and instances where their market research showed a lack of veteran- owned small businesses holding FSS contracts. Instead, these contracting officers said, they found the goods and services they needed from veteran-owned small businesses on the open market. In addition, officials with VA’s Office of Small and Disadvantaged Business Utilization told us that that they do not analyze existing data on veteran-owned small businesses to assess these businesses’ participation in the FSS program. To conduct our own analysis, we looked at March 2019 data for the three selected VA schedules and found that goods and services provided by veteran-owned small businesses ranged from 11 to 23 percent of all the line items offered on these schedules, as shown in figure 7. According to the Standards for Internal Control in the Federal Government, program officials need quality information on how well their programs are serving end users—in this case, VHA contracting officers. Without analyzing veteran-owned small business participation in its FSS program, NAC cannot assess whether its program is meeting the needs of its users in light of the Veterans First preference, which requires contracting officers to apply the VA Rule of Two before purchasing through a non-veteran-owned business. Because the number of veteran- owned small businesses available on FSS directly affects how often contracting officers are able to use FSS, taking steps to better understand these data would enable NAC to, if necessary, make adjustments to its program to ensure contracting officers can use FSS as a regular, reliable, and simplified source for obtaining goods and services. NAC Has Limited Visibility into User Experience with the FSS Program NAC is not consistently obtaining and analyzing feedback from FSS users on their experience with the FSS program, despite having some tools in place to gather such information. To provide support to users, NAC’s website provides links to the FSS Help Desk and to a customer survey, among other contact information. However, while these tools could be used to gather feedback on whether the products and services offered on VA’s schedules meet user needs, NAC has received minimal user feedback via these tools. FSS leadership acknowledged the importance of user feedback, and stated they would like to develop a more comprehensive feedback mechanism, such as email surveys sent to users on a periodic basis with questions specific to their FSS program experience. Without such a feedback mechanism, NAC officials lack information on users’ experience with the program that could provide insights on areas for improvement. These insights, including whether program improvements are needed, are especially important given that FSS sales did not keep pace with the increased VHA spending over the past 5 years. Standards for Internal Control in the Federal Government state that, in order to formulate a strategy and achieve program objectives, management needs quality information to make informed decisions and evaluate performance. NAC Faces Numerous Challenges Managing Its FSS Program The NAC FSS program office faces numerous challenges—some of which are VA-wide issues we have identified in prior reports—including inadequate training and leadership instability. For example, NAC FSS guidance and training for contracting staff is not comprehensive, which poses a risk of inefficient use of contracting staff. Further, limited collaboration between FSS leadership at both NAC and GSA has resulted in missed opportunities to share tools and practices. These and other challenges faced by NAC were further exacerbated by a 3-year leadership gap in the FSS program; these positions have since been filled. NAC FSS Program Guidance and Training for Contracting Staff Is Not Comprehensive NAC FSS Guidance Is Not Comprehensive The Federal Acquisition Regulation, along with GSA and VA’s FSS regulations and policies, form the basis for NAC’s management of the VA FSS program. NAC issues additional guidance to operationalize these higher-level policies into NAC’s FSS work processes. This internal guidance takes several forms, including Procedural Guidelines, FSS Bulletins, and Standard Operating Procedures. We found that NAC’s internal guidance does not provide contracting staff with a comprehensive overview of key aspects of their jobs, creating confusion for the staff that implements the guidance. For example, NAC contracting staff members we interviewed stated that, for offers from resellers and distributors without significant commercial sales, assessing price reasonableness was a challenge. They said NAC’s standard processes assume that commercial sales data would be available to form the foundation of price analysis, but no NAC guidance outlines how to approach this analysis for distributors and resellers that lack significant commercial sales. Additionally, several contracting staff we interviewed told us that FSS team chiefs and supervisors provide them guidance informally, which can create confusion and variation in applying requirements across the VA FSS teams. For example, one member of the contracting staff told us that some teams require vendors to submit new commercial sales data when exercising an option to extend an FSS contract. But he told us this is not the case across all of VA’s FSS teams. Standards for Internal Control in the Federal Government state that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving objectives or addressing related risks. Reviewing NAC FSS policies and procedures, including those given informally, will allow NAC FSS leadership to provide more comprehensive guidance to all FSS contracting staff on these basic, but critical, steps to help ensure an even application of the FSS offer review process. NAC FSS Training Is Not Comprehensive We found that training for NAC FSS contracting staff is not comprehensive, posing another challenge to NAC’s management of its FSS program; we also cited inadequate training when adding VA Acquisition Management to GAO’s High Risk list. NAC contracting staff attend training at VA’s Acquisition Academy, and several staff members we interviewed said they found it helpful. However, according to NAC officials, and based on our review of course materials and VA-wide training, the Academy does not provide FSS-specific training. There are differences between awarding and managing FSS contracts and other types of federal contracts. For instance, before awarding an FSS contract, NAC FSS contracting staff must take steps that in some cases are specific to the evaluation of FSS contract offers, such as seeking to obtain discounts from a vendor’s commercial pricelist that are equal to or greater than the discounts offered to the vendor’s most favored customer. In addition, while NAC has provided some FSS-specific training to its contracting staff, such training is not offered on a regular basis, and no overall FSS training program or curriculum exists to guide NAC training for contracting staff. According to the NAC FSS official responsible for training, the last comprehensive office-wide FSS training provided to staff was about 3 years ago (since then, 16 new contracting staff have joined NAC FSS). We interviewed 16 other NAC contracting staff, and six of them expressed the need for more extensive training on FSS-specific contracting. In mid-2018, the NAC FSS Director created Team Lead positions to help train and mentor FSS contracting staff. This effort is still in development. The NAC official responsible for training, among other things, stated that other training and mentoring efforts are underway since he joined NAC in November 2018, specifically among individual NAC schedule teams, which sometimes provide informal training to their contracting staff. However, some of these informal training efforts are not offered on a consistent basis. For example, a senior member from the contracting staff on the Medical Equipment and Supplies schedule team provided a series of training sessions to his team on evaluating offers from distributors and resellers without significant commercial sales to the general public. However, this training was not provided to all NAC FSS contracting staff, even though contracting staff working on most of the eight schedules must review offers from distributors and resellers. NAC officials are in the early stages of exploring ways to improve training for their contracting staff. In the summer of 2019, NAC officials told us they plan to post materials from all prior training on NAC’s intranet. They also developed new orientation training for the nine new contracting staff who joined NAC in July 2019, covering topics such as FSS policies and where to find them, as well as an introduction to contract systems. The NAC FSS official responsible for training emphasized that these topics were covered at a basic level and said he would like to develop more comprehensive training that would be offered on a consistent basis. Standards for Internal Controls in the Federal Government state that well- trained staff, among other things, are essential to effective program execution. In addition, GAO’s guide for assessing federal government training states that in order to ensure training is effective, training programs should be guided by an overall strategy, informed by assessing priorities and evaluating results. While NAC has taken some steps to improve training for FSS contracting staff, NAC has yet to implement a comprehensive and consistently offered FSS training curriculum. Doing so could enable NAC to provide its staff with the tools and clarity needed to perform their roles and increase efficiency. Collaboration between NAC and GSA Is Limited, and GSA Does Not Have Current Documentation of Its Delegation of Authority to VA We found that NAC faces challenges effectively collaborating with GSA, the agency that oversees all FSS for the federal government. GSA has longstanding processes and established tools—such as its use of analysts to review vendors’ internal controls, as well as its automated offer-intake system—stemming from its decades of experience running an FSS program that is larger than VA’s program. However, collaboration and knowledge-sharing between NAC and GSA is limited. For example, in the past, NAC and GSA held meetings quarterly, but since 2015, these meetings have been held on an ad hoc basis. Neither organization took action until recently to ensure that meetings continued at regular intervals. GSA officials told us that during 2016 through 2018, they met with NAC a number of times in response to questions from NAC FSS officials. However, these meetings covered general policy questions, and according to NAC, did not focus on discussing cross-agency roles and responsibilities or on sharing practices for managing the FSS program. Separately, VA Office of the Inspector General’s Office of Contract Review officials told us of a 2010 working group formed to collaboratively discuss revisions to GSA’s regulations, which included representatives from GSA, NAC, the VA Office of the Inspector General, and others. According to these VA Inspector General officials, this group was disbanded about a year after it began due to disagreements among the participants. Upon NAC’s FSS Director’s request, in February 2019, NAC and GSA resumed quarterly meetings. However, NAC officials noted instances where collaboration is still limited. For example, GSA did not provide NAC officials with advance notice about the publication of a final rule establishing changes to GSA’s FSS regulations that were relevant to NAC’s administration of its FSS program. NAC discovered the final rule had gone into effect after it was published, independent of any communication from GSA. NAC officials stated they would like to have additional opportunities for input on GSA regulations that affect the VA FSS program. Our prior work has found that clearly defining roles and responsibilities is a key practice for cross-agency collaboration. Without a clear and shared understanding of their respective responsibilities, and processes to ensure they share tools and practices, NAC will not have the opportunity to learn from GSA’s experience or have timely input on GSA actions that affect the VA FSS program. GSA and VA are also missing a document—namely, GSA’s updated delegation of authority to VA—that could guide their collaboration efforts. This delegation should state what authority is granted to VA, and cite the limitations on that authority. We found a January 2008 Federal Register notice mentioned a 2004 update to the delegation, but the GSA Director of Policy for the Federal Acquisition Service was unable to locate or provide this update. VA was also unable to locate a copy of the 2004 update. Instead, GSA and VA gave us a number of documents, including memorandums and other communications that spanned from the 1960s to the 1990s. The documents were fragmented and outdated. Further, many of these older documents referred to outdated laws, regulations, or organizations, raising questions about their current applicability. Standards for Internal Control in the Federal Government state that the roles of those responsible for carrying out programs should be clearly outlined in policy, and GAO has also reported that written guidance and agreements on collaboration are key features of successful cross-agency collaboration. The lack of current documentation related to GSA’s delegation to VA, alongside the limitations in NAC and GSA communication, undermine a firm foundation on which to build collaboration. Without a clear delineation of roles and responsibilities—and effective overall coordination—NAC and GSA risk misunderstandings and missed opportunities to share information and tools that could improve NAC’s management of the VA FSS program. Key FSS Leadership Vacancies Spanned 3 Years From 2015 until 2018, senior VA FSS leadership positions were vacant, which affected VA’s FSS program management and directly contributed to many of the challenges we identified above. Namely, the FSS program director position was vacant for over 2 years and the role of FSS Program Management and Resource Support team chief was vacant for about 19 months. During that time, chiefs of individual VA schedules held the Director or Chief positions on an acting and rotational basis. During these rotations, these chiefs were dual-hatted as they maintained responsibility for their primary job role. The Associate Executive Director of the NAC stated that he was reluctant to make long-term, strategic policy decisions while the FSS Director position was vacant. In late 2017 and late 2018, respectively, NAC permanently filled these two FSS program positions. However, by then, broader changes had taken place within VA contracting that affected the VA FSS program: namely, the Supreme Court ruled in 2016 that before VA may contract with a non-veteran-owned business, VA must apply the “VA Rule of Two,” including instances when VA makes purchases through FSS. Also in late 2016, VA launched the MSPV-NG program, which offers items similar to those items offered on two VA schedules. Figure 8 provides a timeline of these FSS leadership vacancies and events. Although both of these leadership positions have since been filled, the effect of the gaps is still evident in some cases. According to NAC FSS officials, hiring to fill open FSS contracting staff positions was slowed by the leadership gaps, which added to workload pressures; more contract offers were received than completed in fiscal years 2015 and 2016, creating a backlog. Contracting staff workload is a VA-wide issue we previously identified, and is one of the areas of concern we cited in adding VA Acquisition Management to GAO’s High Risk List in 2019. In late 2018, the FSS Director sought approval for 10 additional contracting staff; 9 of these positions were filled in July 2019. NAC leadership stated that these positions should help address some of the backlog faced by FSS contracting staff. NAC Rarely Meets Its Timeliness Goals for FSS Contract Awards NAC has experienced major delays in awarding vendor contracts and missed its timeliness goal for contract award 75 percent of the time from fiscal years 2014 through 2018. NAC’s inefficient offer intake system and fragmented vendor guidance likely contributed to these delays. NAC FSS leadership has acknowledged these challenges and is working to address some of them. Assessing the appropriateness of these timeliness goals and taking steps to comprehensively identify and address barriers to achieving them will better position NAC’s contracting workforce to improve contract award timeliness. NAC Has Not Awarded FSS Contracts in a Timely Manner Our analysis shows that from fiscal years 2014 through 2018, NAC did not meet its timeliness goals for 75 percent of its FSS contract awards. To do this analysis, we compared NAC FSS contract award data for the eight non-pharmaceutical schedules against the timeliness goal of 180 calendar days for contracting staff reviews and decisions on vendor contract awards, as set forth in a NAC Procedural Guideline. Specifically, we found that 319 of the 803 FSS contract awards took at least double the 180-day goal. In addition, 12 of them exceeded the goal by more than 1,080 days—six times the goal. During fiscal years 2015 and 2016, the program accumulated a backlog of FSS offers, which coincided with a vacancy in the FSS Director position starting in October 2015. While NAC staff made some progress on mitigating this backlog, timeliness remains an issue. For example, during fiscal year 2018, NAC missed its timeliness goal 73 percent of the time. Figure 9 portrays NAC’s timeliness of FSS contract awards over this 5-year period. We also analyzed the timeliness of awards for the three selected VA schedules from fiscal years 2014 through 2018, as shown in figure 10. This analysis shows that NAC consistently missed its timeliness goals across the three different schedules. However, for contract modifications—typically changes to contract items or prices—NAC met its timeliness goal—set at 60 calendar days—80 percent of the time over this 5-year period. We reviewed data on about 14,000 modifications executed by NAC for the eight non-pharmaceutical schedules from fiscal years 2014 to 2018. About 2,300 of these modifications were executed to add new items to existing contracts. For these, NAC met the timeliness goal only 54 percent of the time. The ability to quickly add new items to FSS contracts is important to ensure that agency users have access to up-to-date medical supplies and services through the VA FSS program. These timeliness goals apply across all of NAC’s eight non- pharmaceutical schedules, regardless of how complex a contract award or modification might be. Various factors can affect contracting staff’s ability to meet these goals, including the complexity of the award, staff’s workload, and whether or not vendor documentation is complete. NAC FSS leadership has acknowledged these challenges and is working to address some of them. However, NAC has not assessed if the current timeliness goals are appropriate, or performed a comprehensive assessment of the barriers that prevent FSS contracting staff from achieving timeliness goals. Standards for Internal Control in the Federal Government state the importance of management making well-informed decisions and conducting meaningful evaluations of their organization’s performance. Assessing the appropriateness of current timeliness goals and taking steps to comprehensively identify and address barriers to achieving them will better position NAC contracting staff to meet these goals. Moreover, timelier contract awards enable medical centers to obtain needed goods and services and, as a result, help FSS to remain useful to medical centers. Inefficient Offer-Intake Process and Fragmented Vendor Guidance Likely Contributed to Delays When seeking a VA schedule contract award, NAC processes require vendors to submit an offer and required documents. Because NAC’s offer intake system is not automated, NAC officials must manually check a general FSS email inbox for vendor submissions and manually review the vendor’s offer and required documents to determine if all information is included. Further, there are no automated checks for completeness of vendor documentation. We analyzed a non-generalizable sample of 26 selected FSS contracts awarded beginning in fiscal year 2014 through January 2019 on three schedules—Medical Equipment and Supplies, Patient Mobility, and Healthcare Staffing—and found that in 14 instances, VA contracting staff identified incomplete documentation and had to follow up with the vendors to receive revisions. NAC officials told us that tracking vendor offers and associated documents from email is cumbersome and time consuming because they have to sort through several separate vendor email messages to splice together vendor offer submissions, due to file size limitations. The inefficient offer intake process also led to delays in assigning offers to contracting staff. NAC did not always assign offers to contracting staff immediately after vendor submission, delaying the start of work. Our review of 26 selected VA FSS contract files identified 10 instances where NAC took more than 20 days after receipt to assign the offer to contracting staff. NAC officials told us that these delays were caused by both the non-automated offer-intake process as well as the team chiefs’ lack of time to assign these offers to contracting staff for their review. According to the FSS Director, in mid-2018 he created a team lead for each NAC schedule team to assign offers to contracting staff and monitor these offers to better ensure timeliness. Figure 11 summarizes key steps in NAC’s FSS manual offer intake and award process, as described by FSS contracting officials. In contrast to VA’s manual system, since 2004, GSA has used an online system called eOffer to manage its FSS offer intake process. This system includes automated system checks to ensure documentation is complete before it is submitted by vendors. Once offers are submitted, supervisors in GSA FSS offices review offers in the system and assign them to contracting staff for review. We have not evaluated whether the eOffer system increases efficiency or reduces errors in submitted offers, but, according to GSA officials, eOffer achieves efficiency and accuracy due to the automated checks that will not let vendors submit an incomplete offer package. NAC contracting staff told us that they could benefit from a more efficient system to accept offers from vendors. In late 2018, NAC and GSA discussed the possibility of adopting GSA’s eOffer online system, as well as its companion eMod, which is used to process modifications. In November 2018, GSA’s estimate to add VA to the system was about $9 million for the first year, and nearly $8 million annually thereafter, which, according to NAC’s FSS Director, is cost-prohibitive. GSA officials told us that to determine this cost, they compared the number of NAC FSS contracts to the number of GSA FSS contracts, and apportioned 10 percent of the overall system development and operation cost to VA. Despite the cost of GSA’s systems, if VA does not address limitations in its own manual offer-intake process, such as implementing a system that can provide automated checks for completeness, delays in assigning offers to contracting staff will continue. Further, FSS contracting staff will continue to spend additional resources and time to gather and complete offer documentation before they can determine whether to award the contract. We also reviewed NAC’s website and found that guidance for vendors was fragmented. Pieces of guidance were spread out among a number of documents as opposed to being located in one document or section of the website for vendors to easily locate. This also contributes to vendors submitting incomplete offer documentation, which, in turn, contributes to delays in contract awards. Incomplete documentation for pricing and sales data is particularly common—namely, information that enables contracting staff to compare the prices vendors offer the government and commercial customers for the same goods. As stated in Standards for Internal Control in the Federal Government, clear communication with outside parties, like vendors, is essential to ensuring that NAC is able to help achieve its program objectives. Clearer guidance would provide vendors with a reminder of program requirements that could reduce VA FSS contracting staff review time and improve their efficiency in reviewing contract offers. VA Has Not Assessed Whether FSS and MSPV-NG Program Duplication Is Necessary or Efficient Over the past few years, the FSS and MSPV programs have transitioned from functioning together to existing as separate programs serving similar VA medical center needs. However, VA leaders have not assessed if the overlapping offerings are a necessary and effective use of resources, or allow VA to fully leverage its buying power—a stated goal of both the MSPV-NG and FSS programs. As we reported in November 2017, for over a decade, VA’s medical centers used VHA’s legacy MSPV program to order medical supplies—many of which were purchased using NAC’s FSS program. When VHA transitioned to its MSPV-NG program in late 2016, it significantly narrowed the catalog to 6,000 items, and VHA contracting officials told us that they modified the contracting approach in March 2018 to have the prime vendor supply the items directly, separate from FSS. At the outset, VHA set goals for the MSPV-NG program, including standardization of requirements for supply items and cost avoidance by leveraging VA’s substantial buying power. However, the MSPV-NG program recently revised its goals from focusing on standardization to increasing the number of catalog items available for medical centers’ use—the catalog contains more than 20,000 items as of September 2019. We compared the MSPV-NG catalog to the VA Medical Equipment and Supplies schedule to determine whether they offered similar products, and found overlap. For example, we found that as of June 2019, about two-thirds (139 of 206) of the MSPV-NG catalog suppliers also offered items on the Medical Equipment and Supplies schedule. Also, in March 2019, NAC FSS leadership provided analysis to the MSPV-NG program office showing that 41 percent of items that the MSPV-NG program planned to include in an update of the MSPV catalog were already available under VA FSS contracts. This duplication could result in inefficiencies whereby different sets of contracting staff within the FSS and MSPV-NG programs award, modify, and manage contracts for the same or similar medical supplies for VA medical center use. The MSPV-NG program office is currently developing the next iteration of the program, called MSPV 2.0, which it plans to roll out in February 2021. In April of 2019, a senior VHA procurement official announced at a vendor forum that the VA FSS program would be used as a source for its MSPV 2.0 supply catalog. However, in June of 2019, MSPV-NG program officials and VHA procurement leadership told us they decided against using FSS for this purpose and provided several reasons for this decision. First, these officials stated that FSS was not comprehensive enough to fulfill the MSPV 2.0 catalog; as noted above, FSS could provide about 40 percent of needed items. These officials also stated that the effort needed to create new FSS contracts or add new items to existing VA FSS contracts to fulfill the remaining 60 percent of the required MSPV 2.0 catalog would be too time consuming. Further, these officials also stated that there were not enough veteran-owned small businesses that offer items on VA FSS to support the MSPV 2.0 requirements. They stated this could result in extra time and resources to solicit both within FSS and the open market to ensure that they meet the VA Rule of Two. NAC FSS leaders told us that they communicated their willingness to support the MSPV 2.0 program by offering to work with vendors to quickly add the needed items; however, the MSPV-NG program office did not involve them in their final decision not to use FSS as a source for the MSPV 2.0 program. VA procurement leaders have informally discussed the future of the FSS program, according to a senior VHA procurement official. According to this official, VA has not determined whether it will change the strategy for FSS, or if the duplication between the FSS and MSPV-NG programs is a necessary and efficient use of resources. VA’s Strategic Plan for Fiscal Years 2018-2024 calls for related efforts to be coordinated with each other to achieve cross-organizational unity of purpose. When adding VA Acquisition Management to our High Risk List in March of 2019, we reported that VA lacks an effective medical supplies procurement strategy. While this finding stemmed from our review of VA’s MSPV-NG program and was related to the recommendation that VA develop an overarching strategy for this program, the same applies for VA’s FSS program in that VA does not have a strategic approach for its procurement of medical supplies through these two programs. Further, we reviewed VHA’s Modernization Campaign Plan, dated March 2019, and VHA’s Modernization Plan briefing slides, dated October 2019, which describe several modernization initiatives. One of these initiatives is to transform the supply chain through modernization. This modernization plan includes the planned MSPV 2.0 program and VA’s planned changes to its supply chain management system; however, it does not include FSS. As VA is undertaking these efforts, it is unclear how and whether FSS fits into VA’s vision of a modernized supply chain. Taking steps to assess VA FSS and MSPV program duplication will allow VA to determine if it is efficiently using its contracting staff. Moreover, communicating its decision to managers of these two programs will allow these managers to focus and coordinate their resources accordingly. This assessment will also help VA determine if it is leveraging its buying power to improve the effectiveness and efficiency of services for veterans and their families. Conclusions The continued utility of parts of VA’s FSS program is in question amid flat sales in recent years and competing programs available to medical center staff for supplies, such as MSPV-NG. VA has the opportunity to improve its FSS program by ensuring that it has complete vendor sales data and better information on participation by veteran-owned small business and user experiences. Obtaining such information would enable NAC to ensure it is collecting all fees it is owed which support program operations, and ensure that FSS can remain a regular, reliable and simplified source for contracting officers to obtain goods and services on behalf of the medical centers. Other steps are necessary, however, to address challenges VA faces with its FSS program. Specifically, the FSS program needs to provide comprehensive guidance and training to its contracting officers, and assess timeliness goals and barriers to achieving these goals to ensure the program remains useful to customers—namely medical centers that rely on the goods and services provided by FSS. In working to improve its FSS program, NAC has the opportunity to gain insights and experience from GSA on how it manages its much larger schedules program. However, lack of collaboration between GSA and NAC has resulted in missing opportunities for such information sharing. Finally, both VA’s FSS and MSPV-NG programs support VA’s overall medical supply chain, yet VA has not assessed whether duplication between them is a necessary and effective use of resources. Without this assessment, VA could be missing opportunities to leverage buying power and improve efficiency in procuring goods and supplies for its medical centers. Recommendations for Executive Action We are making a total of 11 recommendations, including nine to VA and two to GSA: The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC puts controls in place to better ensure the completeness of vendor FSS sales reporting. (Recommendation 1) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC assesses data on the participation of and items and services offered by veteran-owned small businesses in NAC’s FSS program, in order to determine whether their program is meeting the needs of VHA contracting officers who use it given the Veterans First requirements they must meet. (Recommendation 2) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC directs the FSS Director to develop a mechanism to consistently obtain and analyze VHA user feedback on the FSS program. (Recommendation 3) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC provides FSS contracting staff with comprehensive FSS guidance. (Recommendation 4) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC develops an FSS-specific training program to include essential skills and processes to meet ongoing training needs for new and existing contracting staff. (Recommendation 5) The Administrator of GSA should work with the Secretary of VA to develop a memorandum of understanding outlining the roles and responsibilities of GSA and NAC for collaborating under GSA’s delegation of authority to VA for the healthcare-related Federal Supply Schedules, including the processes through which the two organizations will coordinate and share useful tools and practices. (Recommendation 6) The Secretary of Veterans Affairs should work with the Administrator of GSA to develop a memorandum of understanding outlining the roles and responsibilities of GSA and NAC in collaborating under GSA’s delegation of authority to VA for the healthcare-related Federal Supply Schedules, including the processes through which the two organizations will coordinate and share useful tools and practices. (Recommendation 7) The Administrator of GSA should take steps to document its delegation of authority for the healthcare-related Federal Supply Schedules to VA. (Recommendation 8) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s NAC assesses the appropriateness of NAC’s current timeliness goals for FSS contract awards and takes steps to comprehensively identify and address barriers to achieving them. (Recommendation 9) The Secretary of Veterans Affairs should ensure that the Associate Executive Director of VA’s National Acquisition Center takes measures to ensure greater efficiency in the offer-intake process, such as providing additional guidance for vendors or by adopting a system that includes checks for completeness of required vendor documentation. (Recommendation 10) The Secretary of Veterans Affairs should take steps to assess duplication between VA’s FSS and MSPV programs, to determine if this duplication is necessary or if efficiencies can be gained. (Recommendation 11) Agency Comments We provided a draft of this report to the Department of Veterans Affairs and to the General Services Administration for review and comment. In VA’s comments, reproduced in appendix II, it concurred with all of our nine recommendations. In GSA’s comments, reproduced in appendix III, it concurred with our two recommendations. We are sending copies of this report to the appropriate congressional committees. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Department of Veterans Affairs and the Administrator of the General Services Administration. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by email at oakleys@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Objectives, Scope, and Methodology This report assesses: (1) what is known about the Department of Veterans Affairs’ (VA) use of its Federal Supply Schedule (FSS) program for fiscal years 2014 through 2018; (2) challenges the National Acquisition Center (NAC) faces in effectively managing the FSS program, (3) the extent to which NAC awarded FSS contracts in a timely manner from fiscal years 2014 through 2018, and (4) the extent to which FSS and the Medical-Surgical Prime Vendor-Next Generation (MSPV-NG) programs provide overlapping or duplicative offerings. To assess what is known about VA’s use of its FSS program from fiscal years 2014 through 2018, we analyzed quarterly vendor sales report data provided by NAC. To assess the reliability of these data, we reviewed documentation and other information on the internal controls of the data systems used by NAC to collect and verify VA FSS sales reports. We found these data to be sufficiently reliable for analyzing overall trends in sales on VA’s FSS for this time period. We also obtained contracting data from the Federal Procurement Data System-Next Generation (FPDS-NG) for fiscal years 2014 through 2018, as well as a listing of VA FSS contracts active during that period from NAC. We used these data to analyze contract obligations on VA FSS contracts over this time period. Further, we compared total obligations based on FPDS-NG data to vendor-reported sales data provided by NAC by schedule and fiscal year. We found the FPDS-NG data sufficiently reliable for our purpose of comparing reported obligations to vendor sales data. We also used information obtained from a prior GAO review of VA’s Veterans First Program when discussing FSS use and used Standards for Internal Control in the Federal Government as criteria to assess this use. We selected the Medical Equipment and Supply (65IIA), Patient Mobility (65IIF), and Healthcare Staffing (621I) schedules as the focus of our review, based on total number of active contracts; they collectively represented about two-thirds of the approximately 1,700 active VA FSS contracts at the time we began our review. We excluded the pharmaceutical schedule from our review because, unlike the other schedules, orders are placed almost exclusively through the pharmaceutical prime vendor, and participation is a statutory requirement. We also reviewed and compared VA, Veterans Health Administration (VHA), and General Services Administration (GSA) policies, guidance, and memorandums related to the program and interviewed VHA- and VA- wide procurement officials regarding factors that affect use of the VA schedules, including the Veterans First program. We also analyzed data on items offered by vendors on the three selected schedules to determine the percent of items offered by veteran-owned small businesses. We interviewed VHA contracting staff and supply chain logistics staff at VA medical centers—users of the program—on factors that affect their use of FSS. We conducted site visits at a non-generalizable selection of two Veterans Integrated Service Networks (VISNs), visiting one medical center within each. Additionally, we interviewed Network Contracting Office (NCO) officials within each selected VISN, either in person or via telephone: VISN 12: VA Great Lakes Health Care System Clement J. Zablocki VA Medical Center (Milwaukee, Wisc.) Great Lakes Acquisition Center, NCO 12 (Milwaukee, Wisc.) VISN 10: VA Healthcare System Cincinnati, Ohio VA Medical Center NCO 10 (via telephone) We selected VISNs and medical centers primarily based on geographical proximity to NAC and GAO offices, as well for higher total obligations in fiscal year 2018. At each selected medical center, we interviewed the Facility Chief Supply Chain Officer and other members of the logistics staff. At each selected NCO, we interviewed leadership, branch chiefs, and contracting officers on teams that cover goods and services included on the three VA schedules we selected. Separately, we also spoke with representatives of the Coalition for Government Procurement, a group representing a number of FSS vendors, and attended a conference for vendors organized by NAC. To assess challenges NAC faces in effectively managing the FSS program, we reviewed GSA and VA procurement regulations, policies, and guidance as well as NAC FSS guidance. We analyzed the content of training offered by the Veterans Affairs Acquisition Academy and by NAC FSS. We also reviewed systems and processes used by NAC FSS staff to accept and review FSS offers and award contracts. We also interviewed NAC FSS leadership, contracting staff, and other staff regarding management of the FSS program during a site visit to NAC. We obtained and analyzed information on NAC FSS staffing, including leadership vacancies. We obtained documentation on analogous GSA practices for managing its FSS program, as well as documents delegating management of healthcare-related schedules to VA. We also interviewed officials in GSA’s Federal Acquisition Service who are responsible for overseeing its FSS program. To determine the extent to which NAC met its timeliness goal for processing FSS offers and modifications, we analyzed timeliness data collected by NAC for fiscal years 2014 through 2018, for the eight non- pharmaceutical schedules; we also performed limited analysis of timeliness for the pharmaceutical schedule, and additional analysis for our three selected schedules. We focused our analysis of timeliness on offers resulting in a contract award, because these are the cases that are relevant to users of the FSS program. To provide context for overall workload, we also analyzed timeliness for offers that were withdrawn, or where contracting staff decided not to make an award. We excluded offers that were reviewed by the VA Inspector General, Office of Contract Review, from our overall timeliness analysis because NAC policy does not count the time required for these reviews against its timeliness goal. To assess the reliability of timeliness data, we collected information on the system and processes used to maintain the data, performed electronic testing, and compared reported dates to source documents for selected contracts. We found these data sufficiently reliable for the purpose of assessing overall performance and trends in NAC FSS timeliness. From the three selected schedules, we selected a non-generalizable sample of 26 NAC FSS contracts awarded in fiscal years 2014 through January 2019. Eight of the contracts were randomly selected from all active contracts on the three schedules as of January 2019, while the remaining 18 contracts were selected by stratified random sample of contracts awarded in fiscal year 2018, focusing on those which exceeded the 180-day timeliness goal and omitting those with few or no sales. Thirteen of the contracts were under the Medical Equipment and Supplies schedule, seven of the contracts were under the Healthcare Staffing schedule, and the remaining six were under the Patient Mobility schedule. For each selected contract, we reviewed documents in the contract file; we also interviewed cognizant members of the contracting staff for 16 of the contracts. We selected this non-generalizable sample to provide illustrative examples of process steps and factors affecting timeliness; it was not the sole source of our findings on factors contributing to timeliness, which also included analysis of policies, guidance, and data, and interviews with NAC officials. To assess the extent to which the FSS and MSPV-NG programs provide overlapping or duplicative offerings, we reviewed policy and guidance related to both programs and interviewed VHA- and VA-wide procurement leaders. To assess the extent of overlap between the MSPV-NG and VA FSS catalogs, we also analyzed data on the items available through MSPV-NG and VA FSS, as well as the vendors participating in each, to assess extent of duplication. We interviewed VA officials from NAC, the Office of Acquisition and Logistics, the Strategic Acquisition Center, and VHA regarding the relationship between MSPV-NG and the FSS program. We analyzed policies related to these programs that affect management and use of VA FSS, and interviewed VA officials about their impact. We also reviewed documents and interviews with MSPV program office staff from an ongoing GAO review of the MSPV program. We used information obtained from an ongoing GAO review as well as published GAO reports on VA’s MSPV-NG program. Finally, we reviewed documents, including VA’s 2018-2024 Strategic Plan and VHA supply chain modernization plans. We conducted this performance audit from November 2018 to January 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Department of Veterans Affairs Appendix III: Comments from the General Services Administration Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Shelby S. Oakley, 202-512-4841 or oakleys@gao.gov. Staff Acknowledgments In addition to the individual named above, Lisa Gardner, Assistant Director; Teague Lyons, Analyst-in-Charge; Erin Stockdale; Sarah Amer; Maurice Robinson; Emily Bond; Rashmi Agarwal; Andrew Burton; Virginia Chanley; Matthew T. Crosby; Susan Ditto; Lori Fields; Gina Flacco; Suellen Foth; and Alyssa Weir made key contributions to this report.

Through the FSS program, VA manages nine healthcare-related schedules—groups of contracts used to order medical supplies and services—under authority delegated by GSA. VA's FSS program management, including the speed with which it adds new contracts, affects VA medical centers' ability to use it to easily obtain goods and services. Further, recent changes in VA's medical procurement have also raised questions about the future role of the program. GAO was asked to examine VA's management and use of its FSS program. This report assesses (1) what is known about VA use of its FSS program for fiscal years 2014-2018; (2) program management challenges faced by NAC; (3) the extent to which NAC awarded FSS contracts to vendors in a timely manner from fiscal years 2014-2018; and (4) the extent to which the FSS and MSPV-NG programs provide overlapping or duplicative offerings. GAO reviewed eight VA schedules, excluding pharmaceutical due to the use of a prime vendor, among other things. GAO also analyzed three of these schedules representing about two-thirds of VA's FSS contracts; analyzed policies, guidance, and processes; and interviewed senior VA procurement, contracting, and supply chain logistics staff at NAC and two medical centers. Over the past 5 years, Department of Veterans Affairs (VA) medical spending increased, but spending on its eight non-pharmaceutical Federal Supply Schedules (FSS) was flat. GAO found the vendor-submitted sales reports to be sufficiently reliable for describing these trends. However, GAO found that VA's National Acquisition Center (NAC)—the VA-wide contracting organization responsible for FSS—lacks controls to ensure the completeness of vendor sales data, which is used to calculate fees that finance the program. The FSS program faces numerous challenges. For instance, NAC FSS guidance and training are not comprehensive, posing a risk of inefficiency and uneven application of requirements by contracting staff. Limited collaboration between FSS leadership at both NAC and the General Services Administration (GSA) also resulted in missed opportunities to share tools and practices. A 3-year FSS leadership gap further exacerbated challenges; these positions are now filled. NAC also failed to meet its 180-day timeliness goal for 75 percent of the non-pharmaceutical FSS contracts it awarded from fiscal years 2014 through 2018 (see figure), though NAC met its goal for contract modifications 80 percent of the time. By assessing timeliness goals and identifying barriers to achieving them, NAC leadership can take steps to better enable its contracting workforce to provide an efficient and reliable means to obtain needed goods and services through FSS. Moreover, VA's procurement leaders have not assessed, and communicated to program managers, whether the duplication between FSS and the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program is a necessary and effective use of resources. These two programs feature many of the same items, and different contracting staff manage different contracts for the provision of the same or similar medical supplies for VA medical centers. Without assessing duplication between these two programs, VA is at risk of inefficient use of its contracting workforce, and may be unable to fully leverage its buying power.

GAO_GAO-19-483

Background The Rulemaking Process under the APA Under the APA, agencies engage in three basic phases of the rulemaking process: they initiate rulemaking actions, develop proposed rulemaking actions, and develop final rulemaking actions. Built into agencies’ rulemaking processes are opportunities for internal and external deliberations, reviews, and public comments. Figure 1 provides an overview of the rulemaking process. The public comment portion of the rulemaking process generally comprises three phases: 1. Comment Intake: During this phase, agencies administratively process comments. This may include identifying duplicate comments (those with identical or near-identical comment text, but unique identity information), posting comments to the agency’s public website, and distributing comments to agency subject-matter experts within responsible program offices for analysis. 2. Comment Analysis: During this phase, subject-matter experts analyze and consider submitted comments. This may include the use of categorization tools within FDMS or outside software systems. 3. Comment Response: During this phase, agencies prepare publicly available responses to the comments in accordance with any applicable requirements. Agencies are required to provide some response to the comments in the final rule, but in some cases, an agency may also prepare a separate report to respond to the comments. Legal Requirements for Public Comments As illustrated in figure 1 above, the public has the opportunity to provide input during the development of agencies’ rules. Among other things, the APA generally requires agencies to publish an NPRM in the Federal Register; allow any interested party an opportunity to comment on the rulemaking process by providing “written data, views, or arguments”; issue a final rule accompanied by a statement of its basis and purpose; and publish the final rule at least 30 days before it becomes effective. The APA requires agencies to allow any interested party to comment on NPRMs. The APA does not require the disclosure of identifying information from an interested party that submits a comment. Agencies therefore have no obligation under the APA to verify the identity of such parties during the rulemaking process. Instead, the APA and courts require agencies to consider relevant and substantive comments, and agencies must explain their general response to them in a concise overall statement of basis and purpose, which in practice forms part of the preamble of the final rule. Courts have explained that significant comments are comments that raise relevant points and, if true or if adopted, would require a change in the proposed rule. However, courts have held that agencies are not required to respond to every comment individually. Agencies routinely offer a single response to multiple identical or similar comments. As explained by Regulations.gov’s “Tips for Submitting Effective Comments,” “the comment process is not a vote,” and “agencies make determinations for a proposed action based on sound reasoning and scientific evidence rather than a majority of votes. A single, well-supported comment may carry more weight than a thousand form letters.” The APA includes provisions on the scope of judicial review that establishes the bases under which a court shall find an agency’s action unlawful. Among these APA bases are when the court finds that agency action, findings, and conclusions were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” and “without observance of procedure required by law.” How an agency managed and considered public comments may be relevant during judicial review. For example, one basis for a court’s reversal of an agency action has been that, upon review of the statement of basis and purposes, the court concludes the agency failed to consider or respond to relevant and significant comments. Conversely, courts have upheld agency rules when the courts have found the statement of basis and purposes demonstrate the agency considered the commenter’s arguments. The E-Government Act of 2002 The E-Government Act of 2002 requires agencies, to the extent practical, to accept comments “by electronic means” and to make available online the public comments and other materials included in the official rulemaking docket. Executive Order 13563 further states that regulations should be based, to the extent feasible, on the open exchange of information and perspectives. To promote this open exchange, to the extent feasible and permitted by law, most agencies are required to provide the public with a meaningful opportunity to participate in the regulatory process through the internet, to include timely online access to the rulemaking docket in an open format that can be easily searched and downloaded. Most agencies meet these responsibilities through Regulations.gov, a rulemaking website where users can find rulemaking materials and submit their comments, but all agencies are not required to use that platform. In October 2002, the eRulemaking Program was established as a cross-agency E-Government initiative and is currently based within EPA. The eRulemaking PMO leads the eRulemaking Program and is responsible for developing and implementing Regulations.gov, the public- facing comment website, and FDMS, which is the agency-facing side of the comment system used by participating agencies. As of March 2018, Regulations.gov identified 180 participating and 128 nonparticipating agencies. These agencies may be components of larger departmental agencies. Some nonparticipating agencies, including FCC and SEC, have their own agency-specific websites for receiving public comments. The comment systems within the scope of this report are as follows: FDMS and Regulations.gov: FDMS is federal government-wide document management system structured by dockets (or file folders) that offer an adaptable solution to service a wide range of regulatory activities routinely performed by federal agencies. The public-facing website of FDMS is Regulations.gov, which is an interactive website that allows the public to make comments on regulatory documents, review comments submitted by others, and access federal regulatory information. Regulations.gov allows commenters to submit comments to rulemakings by entering information directly in an electronic form on the Regulations.gov website. This form also allows commenters to attach files as part of their comment submission, and can be customized by each participating agency. Appendix II provides an example of one comment form from Regulations.gov. Additionally, all participating agencies allow comments to be submitted by mail or hand delivery. At their discretion, some participating agencies also allow comments to be submitted via email. See table 1. FCC’s Electronic Comment Filing System (ECFS): ECFS is a web- based application that allows anyone with access to the internet to submit comments to FCC rulemaking proceedings. ECFS allows commenters to submit comments to rulemakings through two main avenues: brief text comments submitted as Express filings, and long- form comments submitted as Standard filings. Both types of filings can be submitted through an ECFS comment form, which requires commenters to enter information directly into an electronic form on the ECFS website. See appendix III for examples of the comment forms used by ECFS. Additionally, interested parties with the appropriate technical capabilities can submit either type of filing directly to ECFS via a direct application programming interface (API) or through a public API that is registered with the website Data.gov. Filing comments through an API allows interested parties the ability to file a large number of comments without having to submit multiple individual comment forms. Finally, to accommodate a large volume of comment submissions for the 2015 Open Internet rulemaking, FCC allowed interested parties to submit Express comment filings in bulk through formatted CSV files that were submitted via a dedicated email address and then uploaded into ECFS. Similarly, for the 2017 Restoring Internet Freedom rulemaking, FCC allowed commenters to submit Express comment filings in bulk through a dedicated file- sharing website, and the comments were then uploaded into ECFS. With the exception of these two rulemakings, FCC does not allow comments to be submitted electronically outside of ECFS. Figure 2 shows how ECFS facilitates public commenting by using the processes discussed above. SEC’s Comment Letter Log: When SEC requests public comments on SEC rule proposals, the public can submit comments to rulemakings through an online form, which requires commenters to enter information in an electronic form on SEC’s website. This form also allows commenters to attach files as part of their submission. When commenters submit a comment, it is sent to SEC staff as an email. SEC also allows comments to be submitted via email and mail. After review, staff upload the comment and any associated data into the Comment Letter Log, which is the internal database that SEC staff use to manage the public comment process, and post the comment to the public website. See appendix IV for an example of a comment form on SEC’s website. Selected Agencies Collect Some Information from Commenters and Accept Anonymous Comments through Regulations.gov and Agency-Specific Websites Selected Agencies Collect Some Identity Information through Comment Forms Consistent with the discretion afforded by the APA, Regulations.gov and agency-specific comment websites use required and optional fields on comment forms to collect some identity information from commenters. In addition to the text of the comment, each participating agency may choose to collect identity information from the Regulations.gov comment form by requiring commenters to fill in other fields, such as name, address, and email address before they are able to submit a comment. Participating agencies may also choose to collect additional identity information through optional fields. For example, while EPA does not make any fields associated with identity information available to commenters, CFPB makes all fields available and requires that commenters enter something into the first name, last name, and organization name fields before a comment can be submitted. Table 2 shows the fields on Regulations.gov in which each of the participating agencies we analyzed require commenters to enter information and the optional fields available for commenters to voluntarily enter information. FCC requires that all commenters complete the following fields on both the Standard and Express comment forms in ECFS: (1) name, (2) postal address, and (3) the docket proceeding number to which they are submitting a comment. The ECFS comment form also allows commenters to voluntarily provide additional information in optional fields, such as email address. Similarly, SEC’s comment forms require commenters to provide (1) first and last name, (2) email address, and (3) the comment content, before a comment can be successfully submitted. The comment form also allows commenters to voluntarily provide other information in optional fields, such as their city and state. Agencies Accept Anonymous Comments Regardless of the fields required by the comment form, the selected agencies all accept anonymous comments in practice. Specifically, in the comment forms on Regulations.gov, ECFS, and SEC’s website, a commenter can submit a comment under the name “Anonymous Anonymous,” enter a single letter in each required field, or provide a fabricated address. In each of these scenarios, as long as a character or characters are entered into the required fields, the comment will be accepted. Further, because the APA does not require agencies to authenticate submitted identity information, neither Regulations.gov nor the agency-specific comment websites contain mechanisms to check the validity of identity information that commenters submit through comment forms. As part of the Regulations.gov modernization effort, the Office of Information and Regulatory Affairs (within the Office of Management and Budget) and the Department of Justice proposed language for a disclosure statement on every comment form that would require the commenter to acknowledge that they are not using, without lawful authority, a means of identification of another person with any comment they are submitting. Commenters would be required to acknowledge their agreement with the statement before their comment could be submitted. According to PMO officials, even with this disclosure statement, anonymous comments would still be permitted and accepted by Regulations.gov. This disclosure statement was proposed in response to allegations of comments being submitted to rulemakings on behalf of individuals without their permission. As of April 2019, this proposed language has not yet been approved by the Executive Steering Committee for Regulations.gov. However, the proposed disclosure statement would be provided on the Regulations.gov comment form, and it is unclear whether similar information would be made available to commenters submitting comments via email or mail. In contrast to the other selected agencies, according to FCC officials, FCC rules require the submission of the commenter’s name and mailing address, or the name and mailing address of an attorney of record. However, in March 2002, FCC initiated a rulemaking related to the submission of truthful statements to the commission. Among other issues, FCC sought comment on whether rulemaking proceedings should be subject to an already existing rule that prohibited the submission of written misrepresentations or material omissions from entities that are subject to FCC regulation. In its final rule, issued in March 2003, FCC decided to continue to exempt comments to rulemakings from this rule because of the potential that such a requirement would hinder full and robust public participation in such policy-making proceedings by encouraging disputes over the truthfulness of the parties’ statements. According to FCC officials, to comply with APA requirements, the commission tries to minimize barriers that could prevent or discourage commenters from participating in the commenting process, and in practice accepts anonymous comments. See figure 3 for an example of an anonymous comment in ECFS. Additionally, in our survey of program offices with rulemaking responsibilities at selected agencies, 39 of 52 offices reported that they received anonymous comments on some rulemakings for which their office has been responsible since 2013. The remaining 13 offices responded that they did not receive or were unaware of receiving anonymous comments, though most of these offices do not have high levels of rulemaking activity or receive a high volume of comments. Regulations.gov and Agency-Specific Comment Websites Collect Some Information about Public Users’ Interaction Regulations.gov and agency-specific comment websites also collect some information about public users’ interaction with their websites through application event logs and proxy server logs. This information, which can include a public user’s Internet Protocol (IP) address, browser type and operating system, and the time and date of webpage visits, is collected separately from the comment submission process as part of routine information technology management of system security and performance. The APA does not require agencies to collect or verify this type of information as part of the rulemaking process. Regulations.gov collects some information from commenters accessing the website but it is never linked to any specific comment. In Regulations.gov, proxy server logs capture information such as the country from which a user accesses the site, the user’s browser type and operating system, and the time and date of each page visit on the website. According to PMO officials, this information is provided to the eRulemaking PMO in summary statistics that are used to assess what information is of least interest to Regulations.gov visitors, determine technical design specifications of the website, and identify system performance problems. This information is collected about all public users visiting Regulations.gov, regardless of whether they submit a comment. Further, because the PMO receives this information in the form of summary statistics, it cannot be connected to any specific comment. The eRulemaking PMO also monitors IP addresses that interact with Regulations.gov via security firewalls, but, according to PMO officials, the web application firewall (WAF) logs (a type of application event log) have never been connected to specific comments, though in some cases the URL the blocked user was attempting to access may be captured in the log. FCC officials stated that the current ECFS application architecture does not facilitate FCC identifying the source IP address of the submitter of a specific comment filed in ECFS. FCC collects information about public users’ interactions with ECFS through its web-based application proxy server logs, including the IP address from which a user accesses the site and the date and time of the user’s interaction. However, ECFS does not obtain or store IP addresses as part of the comment data it collects when a public user ultimately submits a comment. Within the current architecture, ECFS would require officials to match date and time stamps from the proxy server log to the ECFS comment data to connect a given IP address to a specific comment. SEC officials stated it would be difficult to match the large number of daily hits to their general website to the much smaller number of comments submitted to their rulemaking proceedings. SEC collects information about public users’ interactions with the SEC.gov website through proxy server logs, including the IP address from which a user accesses the website and the user’s date, time, and URL requests. However, according to officials, a public user never directly interacts with the Comment Letter Log, and none of the information from the proxy log is included as part of the data it collects in association with comment submissions. Despite this difficulty, SEC officials stated that linking the proxy log data from the general SEC.gov website to a specific comment in the Comment Letter Log could be done on a case-by-case basis. Most Selected Agencies Have Some Internal Guidance Related to Commenter Identity Seven of 10 selected agencies have documented some internal guidance associated with the identity of commenters during the three phases of the public comment process, but the substance of this guidance varies, reflecting the differences among the agencies and their respective program offices. For example, as shown in table 3, BLM has no internal guidance related to identity information, while CFPB has internal guidance related to the comment intake and response to comments phases. For selected agencies that have guidance associated with the identity of commenters, it most frequently relates to the comment intake or response to comment phases of the public comment process. The guidance for these phases addresses activities such as managing duplicate comments (those with identical or near-identical comment text but varied identity information) or referring to commenters in a final rule. In addition, some agencies have guidance related to the use of identity information during comment analysis. Agencies are not required by the APA to develop internal guidance associated with the public comment process generally, or identity information specifically. For the three selected agencies that did not have identity-related guidance for the public comment process, cognizant officials told us such guidance has not been developed because identity information is not used as part of their rulemaking process. For example, BLM officials stated that the only instance in which identity information would be considered is when threatening comments are referred to law-enforcement agencies. Identity-Related Guidance for Comment Intake According to our analysis of the internal guidance the selected agencies provided, five of the 10 agencies have documented identity-related guidance associated with the comment intake phase. (See table 4.) Identity-related guidance for the comment intake phase addresses posting comments and their associated identity information to public comment websites. The guidance generally falls into two categories: (1) the treatment of duplicate comments (those comments with identical or near-identical content, but unique identity information) and (2) the management of comments reported to have been submitted using false identity information. Four of the 10 selected agencies have documented guidance on defining and posting duplicate comments, which may also be referred to as mass mail campaigns. However, in accordance with the discretion afforded them under the APA, agency definitions of duplicate comments and recommendations on how to manage them during comment intake vary. Specifically, for EBSA and WHD—the selected agencies within the Department of Labor (DOL)—one comment letter with multiple signers is considered one comment, while the same comment submitted by multiple signers as separate letters is counted separately. In both cases, however, each individual signer may provide unique identity information. In contrast, EPA guidance states that mass mail submissions often include attachments containing either bundled duplicate messages or a single comment with multiple signatures. For EPA, each signature is counted as a duplicate comment submission. As of February 2019, CFPB’s draft guidance does not explicitly define duplicate comments, but it does note that “duplicate identical submissions” are not subject to the agency’s policy of posting all comments. Instead, the official responsible for managing the docket during comment intake may remove duplicate comments from posting or decide not to post them. According to CFPB officials, this policy is only applicable to comments that contain entirely identical comment content and identity information, and does not apply to mass mailing campaigns. Similarly, when DOL agencies receive duplicate comments as part of mass mail campaigns, the agency can choose to post a representative sample of the duplicate comment to Regulations.gov along with the tally of the duplicate or near-duplicate submissions, or post all comments as submitted. EPA guidance states that duplicate comments submitted as part of mass mailings are to be posted as a single primary document in Regulations.gov with a tally of the total number of duplicate comments received from that campaign. However, as discussed later in this report, EPA may post all duplicate comments it receives, depending on the format in which they are submitted. Comments with Potentially False Identity Information Five of the 10 selected agencies have documented internal guidance on how to manage posting comments that may have been submitted by someone falsely claiming to be the commenter. However, the procedures related to addressing comments with potentially false identity information also vary among agencies. For EBSA and WHD, guidance from DOL states that if a comment was submitted by someone falsely claiming to be the commenter, the identifying information is to be removed from the comment and the comment is treated as anonymous and remains posted. In cases where an individual claims that a comment was submitted to CFPB or SEC using the individual’s identity information without his or her consent, both agencies’ guidance provide staff with discretion to redact, reattribute, or otherwise anonymize the comment letter in question. According to internal guidance from CFPB, EPA, and SEC, if agency officials are able to confirm that a comment was submitted by someone falsely claiming to be the commenter, such as by the agency sending an email to the address associated with the comment, the comment may not be made available to the public. SEC officials stated that although they have discretion to remove the comment from public posting, the typical response is to encourage the individual making the claim to submit another comment correcting the record. Similarly, if a member of the public contacts EPA claiming that a comment was submitted using his or her identity information without consent and agency staff cannot confirm it, EPA guidance directs staff to ask the requester who submitted the claim to submit another comment to the docket explaining that the original comment was submitted without the individual’s consent. Both comments will be included in the docket. Identity-Related Guidance for Comment Analysis According to our analysis of the guidance the selected agencies provided, four of the 10 agencies have identity-related guidance for the comment analysis phase (see table 5). Identity-related guidance for the comment analysis phase includes criteria for coding comments for analysis, including by identifying the type of commenter (such as an individual or interest group). CMS guidance states that, during review, comments should be separated by issue area and tables may be used to assist in the grouping of comments and preparing briefing materials. While this guidance notes that these tables may be used to group commenters based on their identity during review, when summarizing comments later in the process the guidance indicates that CMS officials should avoid identifying commenters by name or organization. FDA training materials address how to prepare comment summaries to help ensure the agency has properly identified all comments regarding an issue. To conduct a quality-control check on the comment review process, FDA sorts the comments by commenter and reviews the comments from a sample of key stakeholders, including interested trade associations and consumer or patient groups, to confirm that relevant issues were identified. For EBSA and WHD, guidance from DOL recommends attaching the “organization name” to comments within a docket to improve transparency and help the agency and public users search for organizations within Regulations.gov. In addition, DOL guidance suggests flagging comments for additional review, including at least one flag based on identity. Identity-Related Guidance for Responding to Comments According to our analysis of the guidance the selected agencies provided, five of the 10 agencies have documented identity-related guidance for responding to comments. (See table 6.) Identity-related guidance for the response to comments phase includes guidance for agency officials on how, if at all, to address identity information related to comments in developing the final rule. As discussed previously, during comment analysis, CMS guidance indicates that officials should avoid identifying commenters by name or organization when summarizing comments. These summaries may then be used as a basis for the agency’s formal comment summary included in the preamble of the final rule. CFPB guidance states that a summary of the rulemaking process should be developed for the preamble of the final rule and include how many comments are received and from which type of commenter. CFPB is to describe both the commenters and comments in general terms rather than identify commenters by name or entity. For example, rather than naming a specific financial institution, CFPB may refer to “industry commenters” in the final rule. For EBSA and WHD, guidance from DOL states that when several commenters suggest the same approach to revising or modifying the proposed rule, the names of specific commenters can be cited as a list in a footnote. When choosing which commenter should appear first in the list, DOL agencies are to select the commenter with the strongest or most detailed discussion on the issue. However, it is not necessary to always identify commenters by name, and, according to DOL officials, the department’s general practice is not to do so. Instead, the agency may use phrases such as “several commenters,” or “comments by the ABC Corporation and others.” DOL agencies may also reference commenters by type rather than name, using terms including “municipal agency, state workforce agency, employer, academic representative, agency, and industry,” among others. FDA training materials recommend that the final rule include a very brief explanation of the number and scope of comments to the proposed rule, including who submitted them. Commenters are not identified as individuals, but rather by commenter type, such as trade associations, farms, or consumer advocacy organizations, among others. Selected Agencies’ Treatment of Identity Information Collected during the Public Comment Process Varies Within the discretion afforded by the APA, the 10 selected agencies’ treatment of identity information during the comment intake, comment analysis, and response to comments phases of the public comment process varies. Selected agencies differ in how they treat identity information during the comment intake phase, particularly in terms of how they post duplicate comments, which can lead to identity information being inconsistently presented to public users of comment systems. Selected agencies’ treatment of identity information during the comment analysis phase also varies. Specifically, program offices with responsibility for analyzing comments place varied importance on identity information during the analysis phase. All agencies draft a response to comments with their final rule, but the extent to which the agencies identify commenters or commenter types in their response also varies across the selected agencies. Selected Agencies Vary in Their Treatment of Identity Information during the Comment Intake Phase Within the discretion afforded by the APA and E-Government Act, selected agencies vary in how they treat identity information during the comment intake phase, which includes identifying duplicate comments and posting comments to the public website. Further, the way in which the selected agencies treat comments during the comment intake phase results in identity information being inconsistently presented on the public website. Generally, officials told us that their agencies either (1) maintain all comments within the comment system, or (2) maintain some duplicate comment records outside of the comment system, for instance, in email file archives. Specifically, officials from four selected agencies (CMS, FCC, FDA, and WHD) stated that they maintain all submitted comments in the comment system they use. Officials from the other six agencies (BLM, CFPB, EBSA, EPA, FWS, and SEC) stated that their agencies maintain some comment records associated with duplicate comments outside of the comment system. Among the four agencies that maintain all submitted comments within their comment system, our review of comment data showed that practices for posting duplicate comments led to some identity information or comment content being inconsistently presented on the public website. For example, according to CMS officials responsible for comment intake, CMS may post all duplicate comments individually, or post duplicate comments in batches. When duplicate comments are posted in batches, the comment title will include the name of the submitting organization followed by the total number of comments. However, as discussed previously, CMS does not have any documented policies or guidance associated with the comment intake process, and we identified examples where the practices described by CMS officials differed. On one CMS docket, for instance, staff entered more than 37,000 duplicate comments individually, with the commenter’s name and state identified in the comment title. However, the attached document included with each of the posted comments was an identical copy of one specific comment containing a single individual’s identity information. While all the individual names appear to have been retained in the comment titles, and the count of total comments is represented, any additional identity information and any potential modifications made to each duplicate comment submitted have not been retained either online or outside of FDMS, and are not presented on the public website. (See fig. 4.) Similarly, although our analysis of WHD comments did not suggest that any comments were missing from Regulations.gov, on one WHD docket almost 18,000 duplicate comments were associated with a single comment with one individual’s name identified in the comment title. While all of the comments are included within 10 separate attachments, none of the identity information included with these comments can be easily found without opening and searching all 10 attachments, most of which contain approximately 2,000 individual comments. (See fig. 5.) Our review of comment data showed that the selected agencies that maintain some comment records outside of the comment system (six of 10) also follow practices that can inconsistently present some identity information or comment content associated with duplicate comments. For BLM and FWS, agency officials responsible for comment intake stated that all comments received through Regulations.gov are posted, but a single example may be posted when duplicate paper comments are received. As discussed previously, neither BLM nor FWS have internal guidance or policy associated with comment intake. For CFPB, EBSA, EPA, and SEC, the agency may post a single example along with the total count of all duplicate comments, but does not necessarily post all duplicate comments online. Thus, identity information and unique comment contents for all duplicate comments may not be present on the public website. For example, on one CFPB comment, the agency posted an example of a submitted comment containing only the submitter’s illegible signature. None of the other associated identity information for the posted sample, or any of the duplicate comments, is included in the comment data. (See fig. 6.) Similarly, for all duplicate comments received, SEC posts a single example for each set of duplicate comments and indicates the total number of comments received. As a result, the identity information and any unique comment content beyond the first example are not present on the public website. (See fig. 7.) The Importance of Identity Information to Comment Analysis Varies On the basis of the results from our survey, program offices with responsibility for analyzing comments differ in the importance they place on identity information during the analysis phase. Because subject-matter experts are responsible for reviewing public comments and considering whether changes to the proposed rule should be made, program offices generally analyze comments. Officials from all but one of the 52 program offices we surveyed responded that they were responsible, in whole or in part, for analyzing public comments. In our survey of program offices with regulatory responsibilities in the 10 selected agencies, at least one program office in each agency reported that the identity or organizational affiliation of a commenter is at least slightly important to comment analysis. Additionally, five of the 10 selected agencies (CMS, EPA, FCC, FDA, and FWS) had at least one program office that reported that the identity or organizational affiliation of a commenter is not at all important to comment analysis. None of the 52 program offices we surveyed responded that the identity of an individual commenter is extremely important to their analysis, while only one program office responded that the commenter’s organizational affiliation is extremely important to its analysis. (See fig. 8.) According to officials we interviewed from eight of the 10 selected agencies, the substance of the comment is considered during analysis rather than the submitted identity information. Officials from six of these agencies emphasized that because the agency accepts anonymous comments, identity is not relevant to their analysis of comments. However, officials from four of the eight selected agencies stated that, in certain instances, identity information may be noted. In the case of FDA, officials explained that commenters are required to indicate a category to which they belong, such as “individual consumer” or “academia.” According to FDA officials, however, these categories were used to assist in writing the comment response, rather than informing the analysis. Officials from the Department of the Interior’s Office of the Solicitor (responsible for part of the comment process at BLM and FWS) stated that the agency may make particular note of comments submitted by a law firm, as these comments can help the agency understand the position of the law firm and to prepare a defense in the event that a lawsuit is filed. Similarly, officials from EPA stated that they are familiar with many commenters and their positions on certain issues, due to prior legal interactions. In another example of how an agency may consider the identity of a commenter, officials from FWS stated that when scientific data are provided in support of a comment, subject-matter experts will verify the data and their source. Selected Agencies Differ in How They Identify Commenters When Responding to Comments All selected agencies draft a response to comments with their final rule, but the extent to which the agencies identify commenters in their response varies. In our survey of program offices with regulatory responsibility, officials from 51 of 52 offices stated that they are responsible in whole or in part for responding to comments. Of those responsible, at least one program office from eight of the 10 agencies (28 of 52 offices) reported that they identified comments by commenter name, organization, or comment ID number in the response to comments for at least some rulemakings since 2013. In the case of WHD, officials we interviewed explained that when they discuss a specific comment in the preamble to the final rule, they provide the name of the organization that submitted the comment so that anyone interested in locating the response to the comment may do so easily. We found that EBSA and FCC also identified commenters by individual or organizational name in their response to comments, while EPA referred to comments by their comment ID number. For example, in a rule finalized in 2018, EPA referred to comment ID numbers in the response to comments: “Two comments: EPA-R06-RCRA-2017-0556-0003 and EPA- R06-RCRA-2017-0556-0005 were submitted in favor of the issuance of the petition.” EPA officials noted that there is variation within the agency in terms of how commenters are identified when the agency is responding to comments, and there may be some situations where the commenter is identified by name. Officials from all program offices within CFPB and BLM responded to the survey that they never identified comments by commenter name, organization, or comment ID in their responses to public comments. In its response to comments in a 2014 final rule, for example, CFPB stated that “industry commenters also emphasized the need to coordinate with the States,” without specifying the organization or specific comments. Similarly, in its response to comments document for a 2016 rule, for example, BLM responded directly to the themes and issues raised by comments while stating that the issue was raised by “one commenter” or “some commenters.” Selected Agencies’ Practices Associated with Posting Identity Information Are Not Clearly Communicated to Public Users of Comment Websites The 10 selected agencies have implemented varied ways of posting identity information during the comment intake process, particularly regarding posting duplicate comments, as allowed by the APA. Our analysis of Regulations.gov and agency-specific comment websites shows that these practices are not always documented or clearly communicated to public users of the websites. Public users are members of the public interested in participating in the rulemaking process via Regulations.gov or agency-specific websites. They may or may not submit a comment. In part to facilitate effective public participation in the rulemaking process, the E-Government Act requires that all public comments and other materials associated with the rulemaking docket should be made “publicly available online to the extent practicable.” There may be situations where it is not practicable to post all submitted items, for example when resource constraints prevent the scanning and uploading of thousands of duplicate paper comments. Because the content of such comments is still reflected in the administrative record, such practices are not prohibited by the APA or the E-Government Act. However, key practices for transparently reporting open government data state that federal government websites—like those used to facilitate the public comment process—should fully describe the data that are made available to the public, including by disclosing data sources and limitations. This helps public users make informed decisions about how to use the data provided. In the case of identity information submitted with public comments, for example, public users may want to analyze identity information to better understand the geographic location from which comments are being submitted, and would need information about the availability of address information to do so. The Administrative Conference of the United States has made several recommendations related to managing electronic rulemaking dockets. These include recommendations that agencies disclose to the public their policies regarding the treatment of materials submitted to rulemaking dockets, such as those associated with protecting sensitive information submitted by the public. As described earlier in this report, the varied practices that selected agencies use with regard to identity information during the public comment process results in the inconsistent presentation of this information on the public websites, particularly when it is associated with duplicate comments. Although the APA and E-Government Act do not include any requirements associated with the collection or disclosure of identity information, we found that the selected agencies we reviewed do not effectively communicate the limitations and inconsistencies in how they post identity information associated with public comments. As a result, public users of the comment websites lack information related to data availability and limitations that could affect their ability to use the comment data and effectively participate in the rulemaking process themselves. Selected Agencies’ Practices Associated with Posting Identity Information on Regulations.gov Vary and Are Not Clearly Communicated to Public Users Public users of Regulations.gov seeking to submit a comment are provided with a blanket disclosure statement related to how their identity information may be disclosed, and are generally directed to individual agency websites for additional detail about submitting comments. The Regulations.gov disclosure statements and additional agency-specific details are provided on the comment form, and a user seeking to review comments (rather than submit a comment) may not encounter them on Regulations.gov. Regulations.gov provides the following disclosure statement at the bottom of each comment submission form: Any information (e.g., personal or contact) you provide on this comment form or in an attachment may be publicly disclosed and searchable on the Internet and in a paper docket and will be provided to the Department or Agency issuing the notice. To view any additional information for submitting comments, such as anonymous or sensitive submissions, refer to the Privacy Notice and User Notice, the Federal Register notice on which you are commenting, and the Web site of the Department or Agency. Similar information is provided to all public users in the Privacy Notice, User Notice, and Privacy Impact Assessment for Regulations.gov and the eRulemaking Program. While all of these note that any information, personal or otherwise, submitted with comments may be publicly disclosed, public users are not provided any further detail on Regulations.gov regarding what information, including identity information, they should expect find in the comment data. We found that when Regulations.gov provides public users with additional agency-specific information about the comment intake process, including accepting and posting comments, it is typically provided in the context of the comment form and does not provide public users enough detail to determine what comment data will be available for use when searching comments that are already submitted. Specifically, each comment form contains a pop-up box under the heading “Alternate Ways to Comment,” which reflects the language associated with comment submission methods included in the NPRM on which individuals are seeking to comment. Additionally, three participating agencies in our review (EPA, FWS, and WHD) provide additional detail about posting practices on the comment form under the heading “Agency Posting Guidelines.” Both FWS and WHD indicate that the entire comment, including any identifying information, may be made available to the public. Although WHD follows DOL policy associated with posting duplicate comments, which allows some discretion in posting practices, according to a WHD official, without exception, all comments are posted to Regulations.gov. In our review of WHD comment data, we did not identify instances where this practice was not followed. The “Agency Posting Guidelines” provided by EPA inform public users that all versions of duplicate or near-duplicate comments as part of mass mail campaigns may not be posted; rather a representative sample will be provided, with a tally of the total number of duplicate comments received. (See fig. 9.) However, this information does not provide enough detail to help public users determine whether all of the individual comments and associated identity information are posted within this docket, because it indicates that samples are provided for duplicate comments, rather than all of the copies submitted. We found that one EPA docket received more than 350 separate sets of duplicate comments comprising a total of more than 4.3 million comments (as reported by Regulations.gov) but there is variation in how these comments were posted. Specifically, EPA inconsistently presented duplicate comments: 198 of the 350 duplicate comment sets in this docket were submitted via email. Of the duplicate comment sets submitted via email, 45 sets have all comments posted in Regulations.gov, while 153 sets have a sample of the comments posted. According to EPA officials, this inconsistency results from the format in which the comments were submitted. For example, when duplicate comments are compiled into a single document and submitted to EPA through one email, all of the comments will be posted, whereas duplicate comments that are emailed separately will be accounted for in the tally accompanying a sample comment. While the APA and the E-Government Act do not require comments to be posted in any particular way, EPA has established detailed internal guidance for the comment intake process for its Docket Center staff. This document is in draft form, but clearly lays out the processes EPA staff are expected to follow when duplicate comments are submitted in different ways, and what naming conventions will be used in different instances. However, EPA does not provide similar information to public users about the process it uses to determine whether all duplicate comments will be posted, making it challenging for public users to determine whether all comments are available on Regulations.gov. Participating Agency Websites The eRulemaking PMO provides participating agencies with flexibility in how they choose to use FDMS and Regulations.gov, with each department or agency responsible for managing its own data within the website. As a result, Regulations.gov directs public users to participating agencies’ websites for additional information about agency-specific review and posting policies. We found that all of the selected participating agencies provide additional information of some kind about the public comment process on their own websites. However, the provided information usually directs users back to Regulations.gov or to the Federal Register. Further, even when selected participating agencies include details on their website about the agency’s posting practices or treatment of identity information associated with public comments, it does not fully describe data limitations that public users need to make informed decisions about how to use the data provided. Specifically, seven of the eight participating agencies (BLM, CMS, CFPB, EPA, FWS, FDA, and WHD) direct public users back to Regulations.gov and the Federal Register, either on webpages that are about the public comment process in general, or on pages containing information about specific NPRMs. As discussed previously, however, the disclosure statement on Regulations.gov directs public users to the agency website for additional information. Although three of these participating agencies (EPA, FWS, and FDA) do provide public users with information beyond directing them back to Regulations.gov or the Federal Register, only FDA provides users with details about posting practices that are not also made available on Regulations.gov. EPA: The additional information provided on EPA’s website largely replicates the “Agency Posting Guidelines” provided on the Regulations.gov comment form, as shown in figure 9. As discussed previously, however, the way in which EPA posts duplicate comments varies, and the provided information does not include details about the process the agency uses to determine whether all duplicate comments will be posted. FWS: One NPRM-specific web page that we identified communicated to public users that all comments will be posted on Regulations.gov, including any personal information provided through the process. This largely replicates the “Agency Posting Guidelines” provided on the Regulations.gov comment form, as well as language included in the NPRM itself. However, according to an FWS official, when the agency receives hard-copy duplicate comments through the mail, only one sample of the duplicate is posted publicly on Regulations.gov. FWS does not have any policies related to this practice and the information FWS provides to public users does not include details about how the agency determines which comment to post as the sample. FDA: On its general website, FDA includes a webpage titled, “Posting of Comments.” On this page, FDA provides users with a detailed explanation about a policy change the agency made in 2015 related to the posting of public comments submitted to rulemaking proceedings. Specifically, prior to October 2015, FDA did not publicly post comments submitted by individuals in their individual capacity. See figure 10. After October 15, 2015, FDA’s policy is to publicly post all comments to Regulations.gov, to include any identifying information submitted with the comment. In our review of FDA comments submitted to dockets opened since October 15, 2015, we did not identify instances where this policy was not followed. The one participating agency in our scope (EBSA) that does not direct public users back to Regulations.gov instead recreates the entire rulemaking docket on its own website. On the main EBSA webpage related to regulations, public users can find links to various websites related to rulemaking, including a “Public Comments” page, but not Regulations.gov. From the “Public Comments” page, public users can access pages that are specific to NPRMs and other activities for which EBSA is requesting public comments. On the NPRM-specific webpages, the rulemaking docket that can be found on Regulations.gov is duplicated, including individual links to each submitted comment. Certain document links, such as those for the proposed rule or final rule, direct a public user to the Federal Register document, but the comment links do not direct users to Regulations.gov. While EBSA follows DOL guidance associated with posting duplicate comments, which allows some discretion in posting practices, EBSA does not have a policy for how comments are posted to Regulations.gov or its own website, and in the examples we reviewed the content of the docket pages does not always match. According to EBSA officials, the agency began this practice prior to the development of Regulations.gov, and has continued it because internal staff and other stakeholders find the webpages useful. However, we have previously reported that reducing or eliminating duplicative government activities can help agencies provide more efficient and effective services. Further, on EBSA’s “Public Comments” webpage, public users are informed that comments with inappropriate content will be removed, but no other information associated with EBSA’s posting practices is provided on this general page. In one instance on an NPRM-specific webpage, public users are informed that identity information has been removed from certain comments due to the inclusion of personal health information, but most of the NPRM-specific webpages we reviewed did not include this disclosure. Additionally, duplicate comments are posted on the NPRM- specific webpages under the heading “Petitions,” and are posted with a number following the title of the comment. While public users are informed that the number represents the total number of comments submitted, not all links include a copy of each individual comment. This practice aligns with DOL guidance, but as a result, the way in which EBSA posts duplicate comments varies even within dockets, and the provided information does not include details about the process the agency uses to determine whether all duplicate comments will be posted. Additionally, because EBSA recreates rulemaking dockets on its own website without referencing Regulations.gov or explaining the process, public users lack assurance about how EBSA’s data sources relate to one another. Because participating agencies are not required to adhere to standardized posting practices, Regulations.gov directs public users to participating agency websites for additional information about posting practices and potential data limitations. However, the additional information provided on the selected agencies’ websites is rarely different from what is provided on Regulations.gov. Further, it does not describe the limitations associated with the identity information contained in publicly posted comments, and in many cases simply directs users back to Regulations.gov. As allowed for under the APA, all of the participating agencies in our review vary in the way in which they post identity information associated with comments—particularly duplicate comments. However, the lack of accompanying disclosures may potentially lead users to assume, for example, that only one entity has weighed in on an issue when, actually, that comment represents 500 comments. The APA, E-Government Act and relevant Executive Orders establish the importance of public participation in the rulemaking process, to include access to electronic rulemaking dockets in formats that can be easily searched and downloaded. Further, key practices for transparently reporting open government data state that federal government websites— like those used to facilitate the public comment process—should fully describe the data that are made available to the public, including by disclosing data sources and limitations. Without better information about the posting process, the inconsistency in the way in which duplicate comments are presented to public users of Regulations.gov limits public users’ ability to explore and use the data and could lead users to draw inaccurate conclusions about the public comments that were submitted and how agencies considered them during the rulemaking process. Agency-Specific Comment Websites Do Not Clearly Communicate Posting Policies to Public Users Both SEC and FCC use comment systems other than Regulations.gov and follow standardized posting processes associated with public comments submitted to their respective comment systems, but SEC has not clearly communicated these practices to the public. Although it appears to users of the SEC website that the agency follows a consistent process for posting duplicate comments, this practice has not been documented or communicated to public users of its website. As discussed earlier, SEC posts a single example for each set of duplicate comments and indicates the total number of comments received. As a result, the identity information and any unique comment content beyond the first example are not accessible to the public online. According to SEC officials, this practice is not documented in formal policy, and is not explicitly communicated to public users of the SEC’s comment website. Although SEC does provide public users with some information on its “How to Submit Comments” page, this information is limited to informing public users that all comments will be posted publicly, without any edits to personal identifying information, and no other information related to SEC’s posting process is provided. Without clearly communicated policies for posting comments, public users of SEC.gov do not have information related to data sources and limitations needed to determine whether and how they can use the data associated with public comments. In contrast, FCC identifies its policies for posting comments and their associated identity information in a number of places on the FCC.gov website, and on the ECFS web page within the general website. Regarding comments submitted to rulemaking proceedings through ECFS, public users are informed that all information submitted with comments, including identity information, will be made public. According to FCC officials, all comments are posted directly to ECFS as they are submitted, without intervention by FCC staff. Further, according to officials, all duplicate comments remain in ECFS as individual comments, unless an organization submits a Standard filing with an attached file containing multiple comments. Our review of ECFS comment data did not identify discrepancies with this practice. Conclusions While the public comment process allows interested parties to state their views about prospective rules, the lack of communication with the public about the way in which agencies treat identity information during the posting process, particularly for duplicate comments, may inhibit users’ meaningful participation in the rulemaking process. While the APA does not include requirements for commenters to provide identity information, or for agency officials to include commenter identity as part of their consideration of comments, key practices for transparently reporting open government data state that federal government websites—like those used to facilitate the public comment process—should fully describe the publicly available data, to include disclosing data sources and limitations. Without clearly communicating how comments and their associated identity information are presented in the data, public users could draw inaccurate conclusions about public comments during the rulemaking process, limiting their ability to participate in the rulemaking process. Five selected agencies do not have a policy for posting comments, and the selected agencies generally do not clearly communicate to public users about the way in which they publicly post comments and their associated identity information. In addition, one agency fully duplicates rulemaking dockets on its own website, without informing users that the information may be found in a searchable database on Regulations.gov. Regulations.gov does not provide detailed information about posting policies, and seven of the eight participating agencies in the scope of our review direct public users back to Regulations.gov or the Federal Register on their own websites. Further, the available information is provided on the comment form, so public users seeking to review comment data that had been previously submitted may not encounter it. Because all of the participating agencies in our review vary in the way in which they post identity information associated with comments—particularly duplicate comments—the lack of accompanying disclosures may potentially lead users to reach inaccurate conclusions about who submitted a particular comment, or how many individuals weighed in on an issue. As a result, public users of Regulations.gov do not have information related to data sources and limitations that could affect their ability to effectively use the comment data and, consequently, participate in the rulemaking process. Similarly, users of SEC.gov do not have information related to data sources and limitations needed to determine whether and how they can use the data associated with public comments, because the agency lacks a policy for posting duplicate comments and associated identity information to the public. In short, more clearly communicated information about posting policies, particularly with regard to identity information and duplicate comments, could help public users make informed decisions about how to use the comment data these agencies provide, and how comments may have informed the rulemaking process. Recommendations for Executive Action We are making the following eight recommendations to the Directors of BLM, CFPB, and FWS; the Administrators of CMS, EPA, and WHD; the Assistant Secretary of Labor for EBSA; and the Chairman of the SEC, respectively: The Director of BLM should create and implement a policy for standard posting requirements regarding comments and their identity information, particularly for duplicate comments, and should clearly communicate this policy to the public on the BLM website. (Recommendation 1) The Administrator of CMS should create and implement a policy for standard posting requirements regarding comments and their identity information, particularly for duplicate comments, and should clearly communicate this policy to the public on the CMS website. (Recommendation 2) The Director of CFPB should finalize its draft policy for posting comments and their identity information, particularly for duplicate comments, and clearly communicate it to the public on the CFPB website. (Recommendation 3) The Assistant Secretary of Labor for EBSA should 1. create and implement a policy for standard posting requirements regarding comments and their identity information, particularly for duplicate comments; 2. clearly communicate this policy to the public on the EBSA website; 3. evaluate the duplicative practice of replicating rulemaking dockets on the EBSA website, to either discontinue the practice or include a reference to Regulations.gov and explanation of how the pages relate to one another. (Recommendation 4) The Administrator of EPA should finalize its draft policy for posting comments and their identity information, particularly for duplicate comments, and clearly communicate it to the public on the EPA website. (Recommendation 5) The Director of FWS should create and implement a policy for standard posting requirements regarding comments and their identity information, particularly for duplicate comments, and should clearly communicate this policy to the public on the FWS website. (Recommendation 6) The Chairman of the SEC should develop a policy for posting duplicate comments and associated identity information and clearly communicate it to the public on the SEC website. (Recommendation 7) The Administrator of WHD should clearly communicate its policy for posting comments and their identity information, particularly for duplicate comments, to the public on the WHD website. (Recommendation 8) Agency Comments and Our Evaluation We provided drafts of this product for comment to CFPB, EPA, FCC, SEC, the Department of Health and Human Services, the Department of the Interior, and DOL. We received written comments from three of the selected agencies and the three Departments which are reproduced in appendixes V through X. All of the selected agencies generally agreed with the recommendations directed to them and indicated that they intended to take action to more clearly communicate their posting policies to the public. BLM, EBSA, FWS, and SEC also stated that they intend to develop written policies associated with posting comments. In its written comments, the Department of Health and Human Services stated that CMS already has policies for standard posting requirements. However, CMS could not provide us with this policy during the course of our review, and in the accompanying technical comments, officials stated that guidance associated with posting comments has not been formalized in a written document. Given that we found significant variation in the way that CMS posts comments, even within a single docket, we continue to believe that it is important for CMS to develop and implement a standard policy for posting comments and their identity information, in addition to communicating this policy to the public on the CMS website. CFPB and EPA also stated that they intend to finalize their draft policies for posting comments and their associated identity information. In addition, EPA included technical comments in its letter, which we considered and incorporated in this report as appropriate. FCC had no comments on the draft report, but provided technical comments, which we incorporated as appropriate. The remaining selected agencies and departments also provided technical comments, which we considered and incorporated in this report as appropriate. As arranged with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees; the Director of CFPB; the Administrator of EPA; the Chairmen of FCC and SEC; and the Secretaries of Health and Human Services, the Interior, and Labor. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6722 or bagdoyans@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XI. Appendix I: Survey of Program Offices with Regulatory Responsibilities within Selected Agencies To determine how selected agencies treat identity information associated with public comments, in October 2018 we surveyed and received responses from 52 program offices within the selected agencies about their practices associated with comment intake (including identifying duplicate comments and posting comments to the public website), comment analysis (including reviewing comments and considering their content), and response to comments. To select the program offices to receive survey questionnaires about the public comment process, we first reviewed agency websites to identify all of the program offices in each of the selected agencies. We then identified program offices with regulatory responsibilities described by the websites and that had issued at least one Notice of Proposed Rulemaking (NPRM) from 2013 through 2017, and provided these lists to the selected agencies for confirmation. Table 7 lists the program offices we surveyed. Survey Development We developed a draft survey questionnaire in conjunction with another GAO engagement team conducting work on the public comment process, and pretested it with program office officials from four of the selected agencies in August and September 2018. We interviewed these officials to improve the questionnaire and ensure that (1) the questions were clear and unbiased, (2) the information could be feasibly obtained by program office officials, (3) the response options were appropriate and reasonable, and (4) the survey did not create an undue burden on program office officials. The process of developing the survey was iterative, where we used the results of one pretest to modify the questionnaire for the next pretest. Survey Administration and Review We distributed the questionnaires to the program offices as fillable Portable Document Format (PDF) forms, in October 2018 requesting that officials collaborate with others in their office to ensure the responses were reflective of the program office as a whole, rather than one individual’s experience. Two agencies, CMS and SEC, have agency-level administrative offices with centralized responsibilities for certain aspects of the public comment process. For these agencies, the selected program offices were instructed to leave certain questions blank, and we provided separate questionnaires for the administrative offices. All 52 program offices completed the survey, but the results cannot be generalized to program offices outside of the selected agencies. In developing, administering, and analyzing this survey, we took steps to minimize the potential errors that may result from the practical difficulties of conducting any survey. Because we surveyed and received responses from all program offices with regulatory responsibilities in the selected agencies, our results are not subject to sampling or nonresponse error. We pretested and reviewed our questionnaire to minimize measurement error that can arise from differences in how questions are interpreted and the sources of information available to respondents. We also answered questions from program offices during the survey, reviewed completed questionnaires, and conducted follow-up as necessary. On the basis of this follow-up and with agreement from the responding officials, we edited responses as needed. For CMS and SEC, we edited the blank questions in the program office questionnaires with responses from their administrative offices. Relevant Survey Questions Appendix II: Regulations.gov Comment Form Example Comments are submitted to Regulations.gov via an electronic comment form. See figure 11 for an example of a comment form from Regulations.gov. Appendix III: Electronic Comment Filing System Comment Forms The Federal Communications Commission’s (FCC) Electronic Comment Filing System (ECFS) allows commenters to submit comments to rulemaking proceedings via a Standard filing and Express filing. A Standard filing allows commenters to attach a file to their comment. See figure 12 for an example of a Standard filing. An Express filing does not allow for files to be attached. See figure 13 for an example of an Express filing. Appendix IV: Securities and Exchange Commission Comment Form Example One way in which comments are submitted to the Securities and Exchange Commission (SEC) is through an electronic comment form. See figure 14 for an example of a comment form from SEC.gov. Appendix V: Agency Comments from the Bureau of Consumer Financial Protection Appendix VI: Agency Comments from the Environmental Protection Agency Appendix VII: Agency Comments from the Department of Health and Human Services Appendix VIII: Agency Comments from the Department of the Interior Appendix IX: Agency Comments from the Department of Labor Appendix X: Agency Comments from the Securities and Exchange Commission Appendix XI: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, David Bruno (Assistant Director), Elizabeth Kowalewski (Analyst in Charge), Enyinnaya David Aja, Gretel Clarke, Lauren Kirkpatrick, James Murphy, Alexandria Palmer, Carl Ramirez, Shana Wallace, and April Yeaney made key contributions to this report. Other contributors include Tim Bober, Dahlia Darwiche, Colin Fallon, Justin Fisher, James Healy, Katie LeFevre, Barbara Lewis, and Maria McMullen.

Federal agencies publish on average 3,700 proposed rules yearly and are generally required to provide interested persons (commenters) an opportunity to comment on these rules. In recent years, some high-profile rulemakings have received extremely large numbers of comments, raising questions about how agencies manage the identity information associated with comments. While the APA does not require the disclosure of identifying information from a commenter, agencies may choose to collect this information. This report examines (1) the identity information collected by Regulations.gov and agency-specific comment websites; (2) the guidance agencies have related to the identity of commenters; (3) how selected agencies treat identity information; and (4) the extent to which selected agencies clearly communicate their practices associated with identity information. GAO selected a nongeneralizable sample of 10 federal agencies on the basis of large comment volume. GAO surveyed 52 program offices within these agencies about their comment process; and reviewed comment websites, agency guidance, and posted comment data. GAO also interviewed relevant agency officials. The Administrative Procedure Act (APA) governs the process by which many federal agencies develop and issue regulations, which includes the public comment process (see figure below). Regulations.gov and agency-specific comment websites collect some identity information—such as name, email, or address—from commenters who choose to provide it during the public comment process. The APA does not require commenters to disclose identity information when submitting comments. In addition, agencies have no obligation under the APA to verify the identity of such parties during the rulemaking process. GAO found that seven of 10 selected agencies have some internal guidance associated with the identity of commenters, but the substance varies, reflecting the differences among the agencies. The guidance most frequently relates to the comment intake or response to comment phases of the public comment process. With the discretion afforded by the APA, selected agencies' treatment of commenters' identity information varies, particularly when posting duplicate comments (identical or near-identical comment text but varied identity information). Generally, officials told GAO that their agencies (1) post all comments within the comment system; or (2) maintain some comments outside of the system, such as in email file archives. For instance, one agency posts a single example of duplicate comments and indicates the total number of comments received. However, within these broad categories, posting practices vary considerably—even within the same agency—and identity information is inconsistently presented on public websites. Selected agencies do not clearly communicate their practices for how comments and identity information are posted. GAO's key practices for transparently reporting government data state that federal government websites should disclose data sources and limitations to help public users make informed decisions about how to use the data. As a result, public users of the comment websites could reach inaccurate conclusions about who submitted a particular comment, or how many individuals commented on an issue.

GAO_GAO-20-311T

Background The federal government plans to invest over $90 billion for IT in fiscal year 2019. Nevertheless, we have previously reported that investments in federal IT too often resulted in failed projects that incurred cost overruns and schedule slippages, while contributing little to the desired mission- related outcomes. For example: The United States Coast Guard (Coast Guard) decided to terminate its Integrated Health Information System project in 2015. As reported by the agency in August 2017, the Coast Guard spent approximately $60 million over 7 years on this project, which resulted in no equipment or software that could be used for future efforts. The Department of Veterans Affairs’ Financial and Logistics Integrated Technology Enterprise program was intended to be delivered by 2014 at a total estimated cost of $609 million, but was terminated in October 2011. The Department of Defense’s Expeditionary Combat Support System was canceled in December 2012 after spending more than a billion dollars and failing to deploy within 5 years of initially obligating funds. The Department of Homeland Security’s (DHS) Secure Border Initiative Network program was ended in January 2011, after the department obligated more than $1 billion for the program. Our past work has found that these and other failed IT projects often suffered from a lack of disciplined and effective management, such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT. Federal IT projects have also failed due to a lack of oversight and governance. Executive-level governance and oversight across the government has often been ineffective, specifically from CIOs. For example, we have reported that some CIOs’ roles were limited because they did not have the authority to review and approve the entire agency IT portfolio. In addition to failures when acquiring IT, our cybersecurity work at federal agencies continues to highlight information security deficiencies. The following examples describe the types of risks we have found at federal agencies. In September 2018, we reported that the Department of Education’s Office of Federal Student Aid exercised minimal oversight of lenders’ protection of student data and lacked assurance that appropriate risk- based safeguards were being effectively implemented, tested, and monitored. In August 2017, we issued a report stating that, since the 2015 data breaches, the Office of Personnel Management (OPM) had taken actions to prevent, mitigate, and respond to data breaches involving sensitive personal and background investigation information. However, we noted that the agency had not fully implemented recommendations that DHS’s United States Computer Emergency Readiness Team made to OPM to help the agency improve its overall security posture and improve its ability to protect its systems and information from security breaches. We reported in July 2017 that information security at the Internal Revenue Service had weaknesses that limited its effectiveness in protecting the confidentiality, integrity, and availability of financial and sensitive taxpayer data. An underlying reason for these weaknesses was that the Internal Revenue Service had not effectively implemented elements of its information security program. We reported in August 2016 that the information security of the Food and Drug Administration had significant weaknesses that jeopardized the confidentiality, integrity, and availability of its information systems and industry and public health data. In May 2016, we found that the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, OPM, and the Department of Veteran Affairs did not always control access to selected high-impact systems, patch known software vulnerabilities, or plan for contingencies. An underlying reason for these weaknesses was that the agencies had not fully implemented key elements of their information security programs. FITARA Increases CIO Authorities and Responsibilities for Managing IT Congress and the President have enacted various key pieces of reform legislation to address IT management issues. These include the federal IT acquisition reform legislation commonly referred to as the Federal Information Technology Acquisition Reform Act (FITARA). This legislation was intended to improve covered agencies’ acquisitions of IT and enable Congress to monitor agencies’ progress and hold them accountable for reducing duplication and achieving cost savings. The law includes specific requirements related to seven areas: Agency CIO authority enhancements. CIOs at covered agencies have the authority to, among other things, (1) approve the IT budget requests of their respective agencies and (2) review and approve IT contracts. Federal data center consolidation initiative (FDCCI). Agencies covered by FITARA are required, among other things, to provide a strategy for consolidating and optimizing their data centers and issue quarterly updates on the progress made. Enhanced transparency and improved risk management. The Office of Management and Budget (OMB) and covered agencies are to make detailed information on federal IT investments publicly available, and agency CIOs are to categorize their investments by level of risk. Portfolio review. Covered agencies are to annually review IT investment portfolios in order to, among other things, increase efficiency and effectiveness and identify potential waste and duplication. Expansion of training and use of IT acquisition cadres. Covered agencies are to update their acquisition human capital plans to support timely and effective IT acquisitions. In doing so, the law calls for agencies to consider, among other things, establishing IT acquisition cadres (i.e., multi-functional groups of professionals to acquire and manage complex programs), or developing agreements with other agencies that have such cadres. Government-wide software purchasing program. The General Services Administration is to develop a strategic sourcing initiative to enhance government-wide acquisition and management of software. In doing so, the law requires that, to the maximum extent practicable, the General Services Administration should allow for the purchase of a software license agreement that is available for use by all executive branch agencies as a single user. Maximizing the benefit of the Federal Strategic Sourcing Initiative. Federal agencies are required to compare their purchases of services and supplies to what is offered under the Federal Strategic Sourcing Initiative. In June 2015, OMB released guidance describing how agencies are to implement FITARA. This guidance was intended to, among other things: assist agencies in aligning their IT resources with statutory requirements; establish government-wide IT management controls to meet the law’s requirements, while providing agencies with flexibility to adapt to unique agency processes and requirements; strengthen the relationship between agency CIOs and bureau CIOs; and strengthen CIO accountability for IT costs, schedules, performance, and security. The guidance identifies a number of actions that agencies are to take to establish a basic set of roles and responsibilities (referred to as the common baseline) for CIOs and other senior agency officials and, thus, to implement the authorities described in the law. For example, agencies are to conduct a self-assessment and submit a plan describing the changes they intend to make to ensure that common baseline responsibilities are implemented. In addition, in August 2016, OMB released guidance intended to, among other things, define a framework for achieving the data center consolidation and optimization requirements of FITARA. The guidance directed agencies to develop a data center consolidation and optimization strategic plan that defined the agency’s data center strategy for fiscal years 2016, 2017, and 2018. This strategy was to include, among other things, a statement from the agency CIO indicating whether the agency had complied with all data center reporting requirements in FITARA. Further, the guidance states that OMB is to maintain a public dashboard to display consolidation-related costs savings and optimization performance information for the agencies. In June 2019, OMB issued Memorandum M-19-19, which updated the data center optimization initiative and redefined a data center as a purpose-built, physically separate, dedicated space that meets certain criteria. It also revised the priorities for consolidating and optimizing federal data centers. Specifically, OMB directed agencies to report on spaces designed to be data centers (i.e., tiered data centers) as part of their inventories and to focus efforts on data centers that host business applications, rather than special purpose data centers. According to OMB’s August 2019 quarterly reporting instructions, non-tiered data centers may be flagged for removal in one reporting period and removed in the next unless OMB provides a written denial within a specified time frame. In addition, OMB described criteria for designating certain data centers as mission critical facilities, and would therefore not be taken into consideration when setting new agency-specific closure targets. Those mission critical designations are also assumed to be granted unless OMB specifically overturns them. Regarding cost savings, OMB’s new memorandum, M-19-19, noted that agency-specific targets would be set in collaboration with each agency and appropriately aligned to that agency’s mission and budget. OMB’s new memorandum also replaced the previous optimization metrics with new measures that focus on reporting the numbers of agencies’ virtualized hosts, underutilized servers, data centers with advanced energy metering, and the percentage of time that data centers were expected to be available to provide services. In contrast to the previous guidance, the new memorandum does not specify government-wide performance targets for the optimization metrics. Instead, OMB worked with agencies to establish agency-specific targets. In addition, the guidance describes how agencies could apply for an optimization performance exemption for data centers where typical optimization activities (consolidation of data collection, storage, and processing to a central location) are technically possible but increase the response time for systems beyond a reasonable limit. Congress Has Undertaken Efforts to Continue Selected FITARA Provisions and Modernize Federal IT Congress has recognized the importance of agencies’ continued implementation of FITARA provisions, and has taken legislative action to extend selected provisions beyond their original dates of expiration. Specifically, Congress and the President enacted laws to: remove the expiration dates for the enhanced transparency and improved risk management provisions, which were set to expire in 2019; remove the expiration date for portfolio review, which was set to expire in 2019; and extend the expiration date for FDCCI from 2018 to 2020. In addition, Congress and the President enacted a law to authorize the availability of funding mechanisms to help further agencies’ efforts to modernize IT. The law, known as the Modernizing Government Technology (MGT) Act, authorizes agencies to establish working capital funds for use in transitioning away from legacy IT systems, as well as for addressing evolving threats to information security. The law also creates the Technology Modernization Fund within the Department of the Treasury, from which agencies can “borrow” money to retire and replace legacy systems, as well as to acquire or develop systems. Further, in February 2018, OMB issued guidance for agencies on implementing the MGT Act. The guidance was intended to provide agencies additional information regarding the Technology Modernization Fund, as well as the administration and funding of the related IT working capital funds. Specifically, the guidance encouraged agencies to begin submitting initial project proposals for modernization on February 27, 2018. In addition, in accordance with the MGT Act, the guidance provided details regarding a Technology Modernization Board, which is to consist of (1) the Federal CIO; (2) a senior IT official from the General Services Administration; (3) a member of DHS’s National Protection and Program Directorate; and (4) four federal employees with technical expertise in IT development, financial management, cybersecurity and privacy, and acquisition that were appointed by the Director of OMB. FISMA Establishes Responsibilities for Agencies to Address Federal Cybersecurity Congress and the President enacted the Federal Information Security Modernization Act of 2014 (FISMA) to improve federal cybersecurity and clarify government-wide responsibilities. The act highlights the increasing sophistication of cybersecurity attacks, promotes the use of automated security tools with the ability to continuously monitor and diagnose the security posture of federal agencies, and provides for improved oversight of federal agencies’ information security programs. To this end, the act clarifies and assigns specific responsibilities to entities such as OMB, DHS, and the federal agencies. Table 1 describes a selection of the OMB, DHS, and agency responsibilities. The Administration Has Undertaken Efforts to Improve and Modernize Federal IT and Strengthen Cybersecurity Beyond the implementation of FITARA, FISMA, and related actions, the administration has also initiated other efforts intended to improve federal IT and the nation’s cybersecurity. Specifically, in March 2017, the administration established the Office of American Innovation, which has a mission to, among other things, make recommendations to the President on policies and plans aimed at improving federal government operations and services. In doing so, the office is to consult with both OMB and the Office of Science and Technology Policy on policies and plans intended to improve government operations and services, improve the quality of life for Americans, and spur job creation. In May 2017, the Administration also established the American Technology Council, which has a goal of helping to transform and modernize federal agency IT and how the federal government uses and delivers digital services. The President is the chairman of this council, and the Federal CIO and the United States Digital Service Administrator are among the members. In addition, in May 2017, the President signed Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. This executive order outlined actions to enhance cybersecurity across federal agencies and critical infrastructure to improve the nation’s cyber posture and capabilities against cybersecurity threats. Among other things, the order tasked the Director of the American Technology Council to coordinate a report to the President from the Secretary of DHS, the Director of OMB, and the Administrator of the General Services Administration, in consultation with the Secretary of Commerce, regarding the modernization of federal IT. In response, the Report to the President on Federal IT Modernization was issued in December 2017 and outlined the current and envisioned state of federal IT. The report focused on modernization efforts to improve the security posture of federal IT. Further, it recognized that agencies have attempted to modernize systems but have been stymied by a variety of factors, including resource prioritization, ability to procure services quickly, and technical issues. The report provided multiple recommendations intended to address these issues through the modernization and consolidation of networks and the use of shared services to enable future network architectures. Further, in March 2018, the Administration issued the President’s Management Agenda, which laid out a long-term vision for modernizing the federal government. The agenda identified three related drivers of transformation—IT modernization; data, accountability, and transparency; and the workforce of the future—that are intended to push change across the federal government. The Administration also established 14 related Cross-Agency Priority goals, many of which have elements that involve IT. In particular, the Cross-Agency Priority goal on IT modernization stated that modern IT must function as the backbone of how government serves the public in the digital age. This goal established three priorities that are to guide the Administration’s efforts to modernize federal IT: (1) enhancing mission effectiveness by improving the quality and efficiency of critical services, including the increased utilization of cloud-based solutions; (2) reducing cybersecurity risks to the federal mission by leveraging current commercial capabilities and implementing cutting edge cybersecurity capabilities; and (3) building a modern IT workforce by recruiting, reskilling, and retaining professionals able to help drive modernization with up-to-date technology. On May 15, 2018, the President signed Executive Order 13833: Enhancing the Effectiveness of Agency Chief Information Officers. Among other things, this executive order was intended to better position agencies to modernize their IT systems, execute IT programs more efficiently, and reduce cybersecurity risks. The order pertains to 22 of the 24 Chief Financial Officers (CFO) Act agencies; the Department of Defense and the Nuclear Regulatory Commission are exempt. For the covered agencies, the executive order strengthened the role of agency CIOs by, among other things, requiring them to report directly to their agency head; serve as their agency head’s primary IT strategic advisor; and have a significant role in all management, governance, and oversight processes related to IT. In addition, one of the cybersecurity requirements directed agencies to ensure that the CIO works closely with an integrated team of senior executives, including those with expertise in IT, security, and privacy, to implement appropriate risk management measures. Agencies Need to Address the IT Acquisitions and Operations High-Risk Area In the March 2019 update to our high-risk series, we reported that agencies still needed to complete significant work related to the management of IT acquisitions and operations. As government-wide spending on IT increases every year, the need for appropriate stewardship of that investment increases as well. However, we pointed out that OMB and federal agencies have not made significant progress since 2017 in taking the steps needed to improve how these financial resources are budgeted and realized. To address this issue, we highlighted the need for OMB and federal agencies to further implement the requirements of federal IT acquisition reforms, including the enhancement of CIO authority. Our update to the IT acquisitions and operations high-risk area also stressed that OMB and agencies needed to continue to implement our prior recommendations in order to improve their ability to effectively and efficiently invest in IT. Specifically, since fiscal year 2010, we have made 1,320 recommendations and one matter for Congressional consideration to address shortcomings in IT acquisitions and operations. As stated in our 2019 high-risk update, OMB and agencies should demonstrate government-wide progress by, among other things, implementing at least 80 percent of our recommendations related to managing IT acquisitions and operations. As of November 2019, OMB and agencies had fully implemented 807 (or 61 percent) of their 1,320 recommendations. In addition, the matter for Congressional consideration had also been implemented. Figure 1 summarizes the progress that OMB and agencies have made in addressing our recommendations compared to the 80 percent target. Overall, federal agencies would be better positioned to realize billions in cost savings and additional management improvements if they address these recommendations, including those aimed at implementing CIO responsibilities, reviewing IT acquisitions, improving data center consolidation, and managing software licenses. Agencies Need to Address Shortcomings and Challenges in Implementing CIO Responsibilities In all, various laws, such as FITARA and related guidance, assign 35 IT management responsibilities to CIOs in six key areas. These areas are: leadership and accountability, budgeting, information security, investment management, workforce, and strategic planning. In August 2018, we reported that none of the 24 agencies we reviewed had policies that fully addressed the role of their CIO, as called for by federal laws and guidance. In this regard, a majority of the agencies had fully or substantially addressed the role of their CIOs for the area of leadership and accountability. In addition, a majority of the agencies had substantially or partially addressed the role of their CIOs for two areas: information security and IT budgeting. However, most agencies had partially or minimally addressed the role of their CIOs for two areas: investment management and strategic planning. Further, the majority of the agencies minimally addressed or did not address the role of their CIOs for the remaining area: IT workforce. Figure 2 depicts the extent to which the 24 agencies had policies that addressed the role of their CIOs for the six areas. Notwithstanding the shortfalls in agencies’ policies addressing the roles of their CIOs, most agency officials stated that their CIOs are implementing the responsibilities even if the agencies do not have policies requiring implementation. Nevertheless, in their responses to our survey, the CIOs of the 24 selected agencies acknowledged that they were not always very effective in implementing the six IT management areas. Specifically, at least 10 of the CIOs indicated that they were less than very effective for each of the six areas of responsibility. We believe that until agencies fully address the role of CIOs in their policies, they will be limited in addressing longstanding IT management challenges. Figure 3 depicts the extent to which the CIOs reported their effectiveness in implementing the six areas of responsibility. Beyond the actions of the agencies, however, shortcomings in agencies’ policies were also partially attributable to two weaknesses in OMB’s guidance. First, the guidance did not comprehensively address all CIO responsibilities, such as those related to assessing the extent to which personnel meet IT management knowledge and skill requirements and ensuring that personnel are held accountable for complying with the information security program. Correspondingly, the majority of the agencies’ policies did not fully address nearly all of the responsibilities that were not included in OMB’s guidance. Second, OMB’s guidance did not ensure that CIOs had a significant role in (1) IT planning, programming, and budgeting decisions; and (2) execution decisions and the management, governance, and oversight processes related to IT, as required by federal law and guidance. In the absence of comprehensive guidance, CIOs would not be positioned to effectively acquire, maintain, and secure their IT systems. In response to the survey conducted for our August 2018 report, the 24 agency CIOs also identified a number of factors that enabled and challenged their ability to effectively manage IT. Specifically, most agency CIOs cited five factors as being enablers to effectively carrying out their responsibilities: (1) NIST guidance, (2) the CIO’s position within the agency hierarchy, (3) OMB guidance, (4) coordination with the Chief Acquisition Officer (CAO), and (5) legal authority. Further, the CIOs cited three factors as major challenges to their ability to effectively carry out responsibilities: (1) processes for hiring, recruiting, and retaining IT personnel; (2) financial resources; and (3) the availability of personnel/staff resources. As shown in figure 4, the five enabling factors were identified by at least half of the 24 CIOs and the three factors cited as major challenges were identified by at least half of the CIOs. Although OMB issued guidance aimed at addressing the three factors identified by a majority of the CIOs as major challenges, the guidance did not fully do so. Further, regarding the financial resources challenge, OMB recently required agencies to provide data on CIO authority over IT spending; however, its guidance did not provide a complete definition of that authority. In the absence of such guidance, agencies created varying definitions of CIO authority. Until OMB updates its guidance to include a complete definition of the authority that CIOs are to have over IT spending, it will be difficult for OMB to identify any deficiencies in this area and to help agencies make any needed improvements. In order to address challenges in implementing CIO responsibilities, we made three recommendations to OMB and one recommendation to each of the selected 24 federal agencies for each of the six IT management areas. Most agencies agreed with or had no comments on the recommendations. However, as of November 2019, none of the 27 recommendations had been implemented. We will continue to monitor the implementation of these recommendations. Agencies Need to Ensure That IT Acquisitions Are Reviewed and Approved by CIOs FITARA includes a provision to enhance covered agency CIOs’ authority through, among other things, requiring agency heads to ensure that CIOs review and approve IT contracts. OMB’s FITARA implementation guidance expanded upon this aspect of the legislation in a number of ways. Specifically, according to the guidance: CIOs may review and approve IT acquisition strategies and plans, rather than individual IT contracts; CIOs can designate other agency officials to act as their representatives, but the CIOs must retain accountability; CAOs are responsible for ensuring that all IT contract actions are consistent with CIO-approved acquisition strategies and plans; and CAOs are to indicate to the CIOs when acquisition strategies and acquisition plans include IT. In January 2018, we reported that most of the CIOs at 22 selected agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. For instance, most of the 22 agencies did not identify all of their IT contracts. In this regard, the agencies identified 78,249 IT- related contracts, to which they obligated $14.7 billion in fiscal year 2016. However, we identified 31,493 additional IT contracts with combined obligations totaling $4.5 billion, raising the total amount obligated to IT contracts by these agencies in fiscal year 2016 to at least $19.2 billion. Figure 5 reflects the obligations that the 22 selected agencies reported to us relative to the obligations we identified. The percentage of additional IT contract obligations we identified varied among the selected agencies. For example, the Department of State did not identify 1 percent of its IT contract obligations. Conversely, eight agencies did not identify over 40 percent of their IT contract obligations. Many of the selected agencies that did not identify these IT contract obligations also did not follow OMB guidance. Specifically, 14 of the 22 agencies did not involve the acquisition office in their process to identify IT acquisitions for CIO review, as required by OMB. In addition, seven agencies did not establish guidance to aid officials in recognizing IT. We concluded that, until these agencies involve the acquisition office in their IT acquisition identification processes and establish supporting guidance, they cannot ensure that they will identify all such acquisitions. Without proper identification of IT acquisitions, these agencies and their CIOs cannot effectively provide oversight of the acquisitions. In addition to not identifying all IT contracts, 14 of the 22 selected agencies did not fully satisfy OMB’s requirement that the CIO review and approve IT acquisition plans or strategies. Further, only 11 of 96 randomly selected IT contracts at 10 of the 22 agencies were CIO-reviewed and approved as required by OMB’s guidance. The 85 contracts that were not reviewed had a total possible value of approximately $23.8 billion. Until agencies ensure that CIOs are able to review and approve all IT acquisitions, CIOs will continue to have limited visibility and input into their agencies’ planned IT expenditures and will not be able to effectively use the increased authority that FITARA’s contract approval provision is intended to provide. Further, agencies will likely miss an opportunity to strengthen their CIOs’ authority and the oversight of acquisitions. As a result, agencies may award IT contracts that are duplicative, wasteful, or poorly conceived. As a result of these findings, we made 39 recommendations in our January 2018 report. Among these, we recommended that agencies ensure that their acquisition offices are involved in identifying IT acquisitions and issuing related guidance, and that IT acquisitions are reviewed in accordance with OMB guidance. OMB and the majority of the agencies generally agreed with or did not comment on the recommendations. As of November 2019, 23 of the 39 recommendations had been implemented. We will continue to monitor the implementation of the remaining recommendations. Agencies Have Made Significant Progress in Consolidating Data Centers, but Need to Take Action to Achieve Planned Cost Savings Data center consolidation efforts are key to implementing FITARA. Specifically, OMB established the FDCCI in February 2010 to improve the efficiency, performance, and environmental footprint of federal data center activities. The enactment of FITARA in 2014 codified and expanded the initiative. In addition, OMB’s August 2016 memorandum that established the Data Center Optimization Initiative (DCOI) included guidance on how to implement the data center consolidation and optimization provisions of FITARA. Among other things, the guidance required agencies to consolidate inefficient infrastructure, optimize existing facilities, improve their security posture, and achieve cost savings. According to the 24 agencies covered by the initiative, data center consolidation and optimization efforts had resulted in approximately $4.7 billion in cost savings through August 2018. Even so, additional work remains to fully carry out the initiative. Specifically, in a series of reports that we issued from July 2011 through April 2019, we noted that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans, data center optimization, and OMB’s tracking and reporting on related cost savings. In April 2019, we reported that agencies continued to report mixed progress toward achieving OMB’s goals for closing data centers and realizing the associated savings by September 2018. Specifically, as of August 2018, over half of the agencies reported that they had met, or planned to meet, all of their OMB-assigned closure goals for tiered data centers by the deadline. Six agencies reported that they did not plan to meet their goals for tiered data centers. In addition, as of August 2018, 11 agencies reported that they had already met the goal for closing 60 percent of their non-tiered centers, three agencies reported that they planned to meet the goal by the end of fiscal year 2018, and nine agencies reported that they did not plan to meet the goal by the end of fiscal year 2018. In all, the 24 agencies reported a total of 6,250 data center closures as of August 2018, which represented about half of the total reported number of federal data centers. In addition, the agencies reported 1,009 planned closures by the end of fiscal year 2018, with an additional 191 closures planned through fiscal year 2023, for a total of 1,200 further closures. Further, in August 2018, 22 agencies reported that they had achieved $1.94 billion in cost savings for fiscal years 2016 through 2018, while two agencies reported that they had not achieved any savings. In addition to that amount, 21 agencies identified an additional $0.42 billion in planned savings through fiscal year 2018—for a total of $2.36 billion in planned cost savings from fiscal years 2016 through 2018. Nevertheless, this total is about $0.37 billion less than OMB’s goal of $2.7 billion for overall DCOI savings. From July 2011 through April 2019, we made a total of 196 recommendations to OMB and 24 agencies to improve the execution and oversight of the initiative. Most agencies and OMB agreed with our recommendations or had no comments. As of November 2019, 121 of these 196 recommendations had been implemented. We also have ongoing work to review and verify the quality and completeness of federal data center inventories and strategies for consolidation submitted by the agencies covered by the law. We expect to issue the report related to this work in early 2020. Agencies Have Improved Management of Software Licenses In our 2015 high-risk report’s discussion of IT acquisitions and operations, we identified the management of software licenses as a focus area, in part because of the potential for cost savings. Federal agencies engage in thousands of software licensing agreements annually. The objective of software license management is to manage, control, and protect an organization’s software assets. Effective management of these licenses can help avoid purchasing too many licenses, which can result in unused software, as well as too few licenses, which can result in noncompliance with license terms and cause the imposition of additional fees. As part of its PortfolioStat initiative, OMB has developed a policy that addresses software licenses. This policy requires agencies to conduct an annual, agency-wide IT portfolio review to, among other things, reduce commodity IT spending. Such areas of spending could include software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. Of the 24 selected agencies we reviewed, only two had comprehensive policies that included the establishment of clear roles and central oversight authority for managing enterprise software license agreements, among other things. Of the remaining 22 agencies, 18 had policies that were not comprehensive, and four had not developed any policies. Further, we found that only two of the 24 selected agencies had established comprehensive software license inventories, a leading practice that would help them to adequately manage their software licenses. The inadequate implementation of this and other leading practices in software license management was partially due to weaknesses in agencies’ policies. As a result, we concluded that agencies’ oversight of software license spending was limited or lacking, thus, potentially leading to missed savings. However, the potential savings could be significant considering that, in fiscal year 2012, one major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even when its oversight process was ad hoc. Accordingly, we recommended that OMB issue a directive to help guide agencies in managing software licenses. We also made 135 recommendations to the 24 agencies to improve their policies and practices for managing licenses. Among other things, we recommended that the agencies (1) regularly track and maintain a comprehensive inventory of software licenses and (2) analyze the inventory to identify opportunities to reduce costs and better inform investment decision making. Most agencies generally agreed with the recommendations or had no comments. As of November 2019, all but 19 of the 135 recommendations had been implemented. In particular, for our recommendations on maintaining and analyzing a comprehensive inventory of software licenses, agencies had fully implemented 42 out of 48 recommendations. Table 2 reflects the extent to which the 24 agencies implemented the recommendations in these two areas. Agencies Need to Address Shortcomings in Cybersecurity Area Safeguarding federal computer systems has been a longstanding concern. This year marks the 22nd anniversary of GAO’s first designation of information security as a government-wide high-risk area in 1997. We expanded this high-risk area to include safeguarding the systems supporting our nation’s critical infrastructure in 2003, protecting the privacy of personally identifiable information in 2015, and establishing a comprehensive cybersecurity strategy and performing effective oversight in 2018. Most recently, we identified federal information security as a government-wide high-risk area in our March 2019 high-risk update. As we have previously noted, in order to strengthen the federal government’s cybersecurity posture, agencies should fully implement the information security programs required by FISMA. In this regard, FISMA provides a framework for ensuring the effectiveness of information security controls for federal information resources. The law requires each agency to develop, document, and implement an agency-wide information security program. Such a program should include risk assessments; the development and implementation of policies and procedures to cost- effectively reduce risks; plans for providing adequate information security for networks, facilities, and systems; security awareness and specialized training; the testing and evaluation of the effectiveness of controls; the planning, implementation, evaluation, and documentation of remedial actions to address information security deficiencies; procedures for detecting, reporting, and responding to security incidents; and plans and procedures to ensure continuity of operations. Since fiscal year 2010, we have made 3,323 recommendations to agencies aimed at addressing the four cybersecurity challenges. These recommendations have identified actions for agencies to take to strengthen technical security controls over their computer networks and systems. They also have included recommendations for agencies to fully implement aspects of their information security programs, as mandated by FISMA. Nevertheless, many agencies continue to be challenged in safeguarding their information systems and information, in part, because many of these recommendations have not been implemented. Of the 3,323 recommendations made since 2010, 2,511 (or 76 percent) had been implemented as of November 2019, leaving 812 recommendations (or 24 percent) not implemented. Agencies’ Inspectors General Are to Identify Information Security Program Weaknesses In order to determine the effectiveness of the agencies’ information security programs and practices, FISMA requires federal agencies’ inspectors general to conduct annual independent evaluations. The agencies are to report the results of these evaluations to OMB, and OMB is to summarize the results in annual reports to Congress. In these evaluations, the inspectors general are to frame the scope of their analyses, identify key findings, and detail recommendations to address the findings. The evaluations also are to capture maturity model ratings for their respective agencies. Toward this end, in fiscal year 2017, the inspector general community, in partnership with OMB and DHS, finalized a 3-year effort to create a maturity model for FISMA metrics. The maturity model aligns with the five function areas in the NIST Framework for Improving Critical Infrastructure Cybersecurity (Cybersecurity Framework): identify, protect, detect, respond, and recover. This alignment is intended to help promote consistent and comparable metrics and criteria and provide agencies with a meaningful independent assessment of their information security programs. The maturity model is designed to summarize the status of agencies’ information security programs on a five-level capability maturity scale. The five maturity levels are defined as follows: Level 1 (Ad hoc): Policies, procedures, and strategy are not formalized; activities are performed in an ad-hoc, reactive manner. Level 2 (Defined): Policies, procedures, and strategy are formalized and documented but not consistently implemented. Level 3 (Consistently Implemented): Policies, procedures, and strategy are consistently implemented, but quantitative and qualitative effectiveness measures are lacking. Level 4 (Managed and Measurable): Quantitative and qualitative measures on the effectiveness of policies, procedures, and strategy are collected across the organizations and used to assess them and make necessary changes. Level 5 (Optimized): Policies, procedures, and strategy are fully institutionalized, repeatable, self-generating, consistently implemented and regularly updated based on a changing threat and technology landscape and business/mission needs. According to this maturity model, Level 4 (managed and measurable) represents an effective level of security. Therefore, if an inspector general rates an agency’s information security program at Level 4 or Level 5, then that agency is considered to have an effective information security program. For fiscal year 2018, most of the 23 civilian CFO Act agencies’ inspectors general reported that their agencies were at Level 2 (defined) for the detect function; Level 3 (consistently implemented) for the identify, protect, and recover functions; and at Level 4 (managed and measurable) for the respond function. Table 3 shows the individual maturity ratings for each covered agency. OMB Requires Agencies to Meet Targets for Cybersecurity Metrics In its efforts toward strengthening the federal government’s cybersecurity, OMB also requires agencies to submit related cybersecurity metrics as part of its Cross-Agency Priority goals. In particular, OMB developed a goal so that federal agencies will be able to build and maintain more modern, secure, and resilient IT. A key part of this goal is to reduce cybersecurity risks to the federal mission through three strategies: manage asset security, protect networks and data, and limit personnel access. The key targets supporting each of these strategies correspond to areas within the FISMA metrics. Table 4 outlines the strategies, their associated targets, and the 23 civilian CFO Act agencies’ progress in meeting those targets, as of June 2019. In conclusion, by addressing the high-risk areas on improving the management of IT acquisitions and operations and ensuring the cybersecurity of the nation, the government has the opportunity to both save billions of dollars and advance the efficiency and effectiveness of government services. Most agencies have taken steps to execute key IT management and cybersecurity requirements and initiatives, including implementing CIO responsibilities, requiring CIO reviews of IT acquisitions, realizing data center consolidation cost savings, managing software assets, and complying with FISMA requirements. The agencies have also continued to address the recommendations that we have made over the past several years. Nevertheless, further efforts by OMB and federal agencies to implement our previous recommendations would better position them to improve the management and security of federal IT. To help ensure that these efforts succeed, we will continue to monitor agencies’ efforts toward implementing the recommendations. Chairman Connolly, Ranking Member Meadows, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this testimony, please contact Carol C. Harris, Director of Information Technology Acquisition Management Issues, at (202) 512-4456 or harriscc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Kevin Walsh (Assistant Director), Jessica Waselkow (Assistant Director), Chris Businsky, and Rebecca Eyler. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The federal government plans to spend over $90 billion in fiscal year 2019 on IT. Even so, IT investments have too often failed or contributed little to mission-related outcomes. Further, increasingly sophisticated threats and frequent cyber incidents underscore the need for effective information security. To focus attention on these concerns, GAO has included both the management of IT acquisitions and operations and cybersecurity on its high-risk list. For this statement, GAO summarized its key related reports and assessed agencies' progress in implementing the reports' recommendations. Specifically, GAO reviewed the implementation of recommendations on (1) CIO responsibilities, (2) IT acquisition review requirements, (3) data center consolidation, (4) the management of software licenses, and (5) cybersecurity. Federal agencies and the Office of Management and Budget (OMB) have taken steps to improve the management of information technology (IT) acquisitions and operations and ensure the nation's cybersecurity through a series of initiatives. As of November 2019, federal agencies had fully implemented 61 percent of the 1,320 IT management-related recommendations that GAO has made to them since fiscal year 2010. Likewise, agencies had implemented 76 percent of the 3,323 security-related recommendations that GAO has made since fiscal year 2010. Significant actions remain to be completed to build on this progress. Chief Information Officer (CIO) responsibilities . Laws such as the Federal Information Technology Acquisition Reform Act (FITARA) and related guidance assign 35 key responsibilities to agency CIOs to help address longstanding IT management challenges. In August 2018, GAO reported that none of the 24 selected agencies had established policies that fully addressed the role of their CIO. GAO recommended that OMB and the 24 agencies take actions to improve the effectiveness of CIOs' implementation of their responsibilities. Although most agencies agreed or did not comment, none of the 27 recommendations have yet been implemented. CIO IT acquisition review . According to FITARA, covered agencies' CIOs are required to review and approve IT contracts. Nevertheless, in January 2018, GAO reported that most of the CIOs at 22 covered agencies were not adequately involved in reviewing billions of dollars of IT acquisitions. Consequently, GAO made 39 recommendations to improve CIO oversight for these acquisitions. Since then, 23 of the recommendations have been implemented. Consolidating data centers . OMB launched an initiative in 2010 to reduce data centers. In August 2018, 22 agencies reported that they had achieved $1.94 billion in cost savings for fiscal years 2016 through 2018, while two agencies reported that they had not achieved any savings. GAO has made 196 recommendations to OMB and agencies to improve the reporting of related cost savings and to achieve optimization targets. As of November 2019, 121 of the recommendations have been implemented. Managing software licenses . Effective management of software licenses can help avoid purchasing too many licenses that result in unused software. In May 2014, GAO reported that better management of licenses was needed to achieve savings, and made 135 recommendations to improve such management. As of November 2019, all but 19 of the recommendations had been implemented. Ensuring the nation's cybersecurity . While the government has acted to protect federal information systems, GAO has consistently identified shortcomings in the federal government's approach to cybersecurity. The 3,323 recommendations that GAO made to agencies since 2010 have been aimed at addressing cybersecurity challenges. These recommendations have identified actions for agencies to take to fully implement aspects of their information security programs and strengthen technical security controls over their computer networks and systems. As of November 2019, 76 percent of the recommendations had been implemented.

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"The Afghanistan Papers" On December 9, 2019, the Washington Post published a series of documents termed "the Afghanistan Papers" (herineafter "the Papers"). The Papers comprise two sets of documents: Notes and transcripts of interviews with more than 400 U.S. and other policymakers conducted between 2014 and 2018 by the Special Inspector General for Afghanistan Reconstruction (SIGAR), and Approximately 190 short memos (referred to as "snowflakes") from former Secretary of Defense Donald Rumsfeld, dating from 2001 to 2004. The Washington Post contends that "the Lessons Learned interviews broadly resemble the Pentagon Papers, the Defense Department's top-secret history of the Vietnam War," although the SIGAR interviews and Pentagon Papers differ in several key ways. Perhaps most importantly, the Pentagon Papers were a contemporaneous recounting of the Vietnam War based mostly on classified material from the Office of the Secretary of Defense; the SIGAR Lessons Learned documents are unclassified records of interviews with a wide array of policymakers carried out as many as 15 years after the events described. The documents, and the Washington Post stories that accompany them, suggest that U.S. policies in Afghanistan often were poorly planned, resourced, and/or executed. These apparent shortcomings contributed to several outcomes that either were difficult to assess or did not fulfill stated U.S. objectives. The documents, released at a time when the United States is engaged in talks with the Taliban aimed at ending the 18-year U.S. military presence in the country, have attracted attention, and some Members of Congress have called for further investigation into U.S. policy in Afghanistan. However, there is debate over how revelatory the SIGAR interviews are, with some analysts contending that the information they contain was available at the time and remains so today (see " Reactions to "the Afghanistan Papers" below). SIGAR "Lessons Learned" Interviews SIGAR, an independent investigative body created by Congress in 2008, conducted interviews with hundreds of U.S. and other policymakers as part of a lessons learned project, a self-assigned effort to "identify and preserve lessons from the U.S. reconstruction experience in Afghanistan, and to make recommendations to Congress and executive agencies on ways to improve our efforts in current and future operations." Since 2015, SIGAR has published seven lessons learned reports on topics such as corruption, counternarcotics, and U.S. efforts to reintegrate ex-combatants. The Washington Post obtained the interview notes and transcripts after submitting a series of Freedom of Information Act (FOIA) requests beginning in August 2016. In response to an October 2017 lawsuit against SIGAR filed by the newspaper, SIGAR released the first document, a 10-page 2015 interview with Michael Flynn (who had served in several senior military capacities in Afghanistan). SIGAR subsequently released other requested documents to the Washington Post . After federal agencies reviewed the documents to determine whether they contained classified material, the final batch of interviews was delivered in August 2019. In total, SIGAR conducted 428 interviews with U.S., European, and Afghan officials. Sixty-two interviewees are identified while 366 are redacted; the Washington Post has sued SIGAR to disclose those names because, it argues, "the public has a right to know which officials criticized the war." SIGAR contends that those individuals should be seen as whistleblowers and may face professional or other harm if their identities are made public. As of January 2020, a decision from the U.S. District Court in Washington, DC, remains pending. Main Themes In reviewing the Papers, which total roughly 2,000 pages and evade simple characterization, several key themes emerge, as outlined below. Dates in parentheses or noted in the text indicate when the interview was conducted. Quotes in this report, unless noted in the text as direct quotes from transcripts, are from SIGAR notes of interviews; CRS cannot independently verify or otherwise characterize the documents and the interviews the documents purport to describe. At least four of the named interviewees have contested the views attributed to them by SIGAR. Negative Effects of U.S. Funding The most frequently discussed subject in the SIGAR interviews was (a) the large sum of U.S. money ($132 billion in development assistance since 2001) that poured into Afghanistan and (b) the extent to which much of it was reportedly wasted, stolen, exacerbated existing problems, or created new ones. Nearly every SIGAR interviewee who discussed the issue argued that Afghanistan, one of the world's poorest and least developed countries in 2001, was unable to make use of the amount of financial resources that the U.S. and its international partners channeled into the country. Variations of the phrase "absorptive capacity" were repeated throughout the SIGAR interviews. One unnamed national security official offered some specificity, saying that Ashraf Ghani, then the Afghan Finance Minister and now President, had said in 2002 that "the Afghan capacity to absorb money was $2 billion a year, max. Everything else was wasted money" (October 1, 2014). The United States alone has contributed over $7 billion a year on average since 2001. In answering why the United States delivered so much money into Afghanistan, many interviewees pointed to U.S. domestic politics. One U.S. Agency for International Development (USAID) official said, "How much money was put into political, military, and development [aid] became a proxy for our commitment" (December 9, 2015). This was largely driven by executive branch agencies, according to one unnamed official, who observed that the U.S. Office of Management and Budget (OMB) proposed reductions between 2005 and 2007 because money from previous years remained unspent (April 13, 2015). However, other policymakers rejected these reductions, arguing that "the political signal by a budget reduction at [a] turning point in the war effort would adversely affect overall messaging and indirectly reconstruction efforts on the ground. The articulation of goals for the purpose of budgeting and programming was largely secondary to the political implications of budgeting." However, some of those interviewed by SIGAR faulted Congress, not executive branch agencies, for wasteful spending. The same USAID official quoted above (December 9, 2015) said, "The Hill was complicit. They gave more money than was requested. Every year they asked why we weren't doing our jobs, but they gave the same amount of money or more." Douglas Lute, the Deputy National Security Advisor for Iraq and Afghanistan under President George W. Bush and President Obama, noted that Congress was subject to the same kinds of political pressures that drove executive branch officials to push for higher budgets in the absence of evidence that the funds would be effective: In terms of appropriations, Congress appropriated what the administration asked for.... The thought is that if we don't spend, [the Government Accountability Office] or committees on the Hill will stop us from getting more funding. This leads to spend, spend, spend. The reason this is happening: no one is paying attention in an interagency sense to resources.... We were also pouring money into huge infrastructure projects to obligate money that was appropriated to show we could spend it. And we were building infrastructure in ways that Afghanistan could never sustain or even use in some cases. This approach to resource allocation extended down the chain of command, according to some interview subjects. An unnamed U.S. Army civil affairs officer said that costs kept rising because "We had no reason to negotiate or hold contractors' feet to the fire because the money kept coming no matter what.... We didn't get credit for saving money; in fact, we got credit for spending it" (July 12, 2016). Another said (on June 27, 2016) that because he or she was not given guidance on how to measure the impact of certain projects, "dollar figures were always the metric. No one said that money spent should be our metric, but without guidance, it was the only metric we could use.... We did not stop and look back at what happened and whether it was effective. The emphasis was on completing more projects." What was the impact of this flow of money on Afghanistan itself? Nearly all SIGAR interviewees contended that U.S. funding improved conditions in the country with regard to health, education, and other human development indicators, at least partly given the low level of the country's development in 2001 (see " Other Voices: U.S. Efforts as Relatively Successful " below). However, some positive assessments were qualified: one unnamed Afghan official said that "Yes, we have made gains, and generally speaking, life is better for people." However, he or she goes on to ask, "When we compare the gains to the resources, were the gains enough? No. ... Were the gains that were made sustainable? No. Most of the gains remain fragile" (October 21, 2015). For some interviewees, this influx of money also created or exacerbated problems. One of the problems most often raised was the money's apparent role in helping drive corruption, which continues to undermine the very Afghan state that the funds were intended to support. Andrew Wilder, the Vice President of Asia Programs at the United States Institute of Peace, said in his SIGAR interview that, "Giving Afghans so much money actually delegitimized the government, which was either perceived to become more corrupt or actually became more corrupt as a result, and favored specific communities at the expense of others" (January 25, 2017). Beyond the possibility for Afghans to redirect U.S. aid flows for political purposes, several interviewees argued that U.S. assistance had a structural bias that created perverse incentives for Afghans. Former Afghan deputy cabinet minister Tariq Esmati said (on December 12, 2016) that "all the attention was to the insecure districts. And the districts that were relatively secure also became insecure in order to get some programs." One USAID official put it more bluntly: development programs targeted "worse case scenarios and [the] most insecure areas" which "rewarded bad behavior. Governors in [more secure areas] would come to Kabul and ask, "what do I have to do to get love from [the] Americans, blow some shit up?" (November 18, 2016). In many cases, interviewees pointed to the grant contracting system to explain why so much money was wasted and to argue that few of the benefits were actually reaped by Afghans themselves. A senior U.S. official said (on December 11, 2015) We would buy American products, American grain, American consultants, American security experts, and they would implement our aid programs…. The Afghans used to tell me that somewhere between 10-20% actually shows up in Afghanistan, and less than 10% ever gets to a village. So you [the United States] tell us [the Afghans] that you just spent a billion dollars as we see $50 million worth of roads. You [the United States] hire a big contractor and inside the beltway consultant, who then hires 15 subcontractors. The first guy takes 20%, then next level takes 20% who would go hire a bunch of expensive American experts to do [for 10 times the price] what Afghan diaspora refugees or Indian experts could do.... [These Americans we hire] travel to Afghanistan first class or at least business class with five security guys each.... The money you spend doesn't get to the village, doesn't really help the Afghan government. Beyond the practical effect of enabling corruption, some interviewees argued that ready U.S. money warped Afghan political culture (from a July 31, 2015, interview with a U.N. official): Afghan perceptions of the US were shaped by the Emergency Loya Jirga and Constitutional Loya Jirga [consultative assemblies held in 2002-2003].... Religious leaders were approached [and they] received nice packages from the US in return for accepting certain measures on women, human rights. The perception that was started in that period: If you were going to vote for a position that the [U.S. government] favored, you'd be stupid to not get a package for doing it. So that even those in favor would ask for compensation.... So from the beginning, their experience with democracy was one in which money was deeply embedded. Unclear U.S. Goals Many of the interviewees argued that, from the beginning, the U.S. engagement in Afghanistan, supported by the flow of money noted above, lacked a clear goal. One unnamed former National Security Council (NSC) staffer said, "I don't think we had an end state in mind. We kept planning; conditions kept changing. We were solving problems but there was no end state vision that you could point to" (January 5, 2015). According to many respondents, lack of clarity was a product of how many objectives the U.S. had in Afghanistan. One USAID official (May 18, 2015) described U.S. policy as having "a present under the Christmas tree for everyone. By the time you were finished you had so many priorities and aspirations it was like no strategy at all. If you have 50 priorities then you don't have any priorities at all." This confusion reportedly extended even into specific areas of U.S. policy. An unnamed former United Nations official said in a June 1, 2015, interview that "on reconstruction, there was not a clear understanding of what we were trying to achieve; [there were] no clear objectives." On counternarcotics (CN), a former State Department official said that it was "unclear what the goal of CN was" (June 29, 2015). Competing Priorities The proliferation of U.S. goals in Afghanistan apparently led to another complication: U.S. actions to achieve some of these objectives undermined others. Interviewees repeatedly discussed this dynamic, particularly when referring to the U.S. project as being divided into military and nonmilitary lines of effort. According to interviewees, when U.S. security interests clashed with interests less directly tied to security, the former almost always prevailed. The two areas that the interviews identified as particularly compromised, given an emphasis on security or other issues, were counternarcotics and anti-corruption. A State Department counternarcotics contractor told SIGAR on September 16, 2016, that "To the best of my knowledge chief of mission [in the U.S. embassy] never carried [the] message about CN to [the] Afghan government. Attitude was 'got so much else on my plate I have no time to deal with drugs.'" A senior U.S. official put it simply: "They [the United States] would payoff … local leaders to not fight them and would turn away when local leaders grew poppy" (March 29, 2016). On anti-corruption, the contrast may have been even clearer: a USAID official said that the view of senior U.S. officials was "Be patient, we can get back to corruption. We have higher priorities on getting the bad guys" (August 24, 2015). In July 2015, a Treasury Department official attributed the U.S. "failure to be more aggressive" on prosecuting those responsible for the 2010 collapse of Kabul Bank (KB) to the higher importance placed on security objectives: "Petraeus made the point that yes KB is bad, but we're fighting a war here, there are bigger issues at stake." Sometimes even U.S. counternarcotics and anti-corruption goals, which appeared symbiotic according to some interviewees, were at odds: a former U.S. defense official said on May 17, 2016, that U.S. payments to governors to reduce poppy cultivation actually "undermined good governance. People saw us as complicit working with corrupt governors to take out opposition" when those governors targeted the opium cultivation of their political opponents but left alone opium cultivation of their allies. Some U.S. officials argued that these contradictions were unavoidable, and that the United States had no choice but to pursue security interests over other, and by definition secondary, objectives. A former U.S. official at the U.S. Embassy said (on May 31, 2015) of the U.S. decision to partner with warlords with records of corruption or human rights abuses, "I'm not so sure we should have done it any differently. These 'warlords' equaled the ground force that just defeated the Taliban and al Qaeda—on the ground with US SOF [Special Operations Forces]. ... [T]hese weren't just random bandits running around." Organizational Confusion and Competition While U.S. efforts in Afghanistan were dominated by the Department of Defense, given the wide array of U.S. interests in Afghanistan, U.S. policy formulation and execution required input from many federal departments and agencies. The problems associated with trying to coordinate among all of these entities, and with the complex series of bureaucratic structures erected to facilitate that coordination, were another consistent theme of the SIGAR interviews. By most accounts, interagency coordination was a consistent problem that various structures failed to solve. The performance of the Washington, D.C.-based Afghanistan Interagency Operation Group (AOIG), which was created in 2003, was co-chaired by the Department of State and National Security Council, and met weekly, generally received favorable reviews from interviewees. The State Department's Coordinator for Reconstruction and Stabilization (SCRS), on the other hand, attracted particular criticism: various officials stated that it was "expensive and time-consuming ... initially structured to fail and at the end it only made life horrible for everybody else" (June 25, 2015) and "failed at the operation level" (July 10, 2015). The State Department's Special Representative for Afghanistan and Pakistan (SRAP), established in 2009 and closed in 2017, also generally was criticized. One typical critique, from an unnamed State Department official in a December 10, 2014, interview, said that "the model is not sustainable. Desk officers are supposed to develop regional experience throughout their career so they have a couple of languages and they continually rotate back to their area or region of specialization.... The SRAP set up created parallel structures." Anti-corruption, counternarcotics, and other mission priorities rarely fit neatly under one agency or department's purview. The wide range of actors with equities in programs in these areas arguably bred not just confusion but competition. One former development contractor said about counternarcotics (interview on June 8, 2016) that there was "nobody really in charge, no one on top of the heap and saying to everyone this is what you need to do. Competitive personalities [were] not concerned about what makes sense but could they build their career." That competition, in turn, also presented opportunities for Afghans to exploit. An unnamed former US ambassador described for SIGAR interviewers on December 14, 2015, that "[former Afghan president Hamid] Karzai was trying to figure out how to manipulate the U.S., manipulating different U.S. agencies against one another for leverage. … The mission starts to lose coherence; you have agencies snapping at each other' s ankles [italics original]." Surveying the numerous problems of interagency coordination, Marin Strmecki, Secretary of Defense Rumsfeld's special advisor on Afghanistan, recommended (interview on October 19, 2015) a more unified command structure: When we operate in something like [Afghanistan], there needs to be unity of command, not unity of effort. So if it is a situation [where] there is a lot of lead flying in the air, it makes sense for the general of whatever task force that is deployed to be in charge of both the military and civilian elements. So the ambassador would essentially be his chief political officer. He should be able to give orders to that chief political officer just as he would another subordinate. Similarly, if it is more a stabilization operations and there is not as much lead flying in the air, the military should be put under the ambassador…. Our current system works if you are lucky and you get a Khalilzad and Barno or a Petraeus and Crocker, where for some reason they all agree on the priorities and work well together. They are in sync. That is basically luck. Lack of Expertise Multiple SIGAR interviewees criticized U.S. policies that they claimed either failed to generate relevant expertise within the U.S. government or even disincentivized the creation or application of that expertise in Afghanistan. For instance, regional subject matter expertise was a frequently cited problem. A number of interviewees criticized the United States for not training U.S. staff in local languages. Without knowledge of these languages, U.S. officials were reportedly less able to learn from, build trust with, or effectively partner with Afghan counterparts. Former director of intelligence for the NATO-led military effort Michael Flynn said that when we get to Afghanistan [in 2009], there is only one officer on the ISAF staff that could speak Dari … but he was only there briefly. The Air Force pulled him out in like July and sent him to Japan.... [W]e laughed about it because this is how insane this [system] is.... Even today, we are still in Afghanistan and you go tell me how many actual U.S. members of the military or policy [community], or from State who speak Dari or Pashto. That is a shame and that is a policy decision. The most commonly cited problem, regardless of the interviewee's national origin, position in government, or time of service in Afghanistan, was the loss of expertise and trust brought about by short-term deployments. A commonly repeated theme, as one U.S. official put it (April 12, 2016), was that the U.S. did not have one "14 year engagement, [but] had 14 1-year engagements." Numerous interviewees described the problems created by short tours as the greatest detriment to U.S. policy success: "At the strategic level, the single most disabling factor was our failure to maintain long-term leadership at the Embassy and at our military commands. We should have someone in the job for 3 to 5 years for continuity" (former U.S. official at the embassy in Kabul, May 31, 2015). "If you take away one thing, the one year rotation for USAID, DOS [Department of States] and DOD [Department of Defense] personnel is the biggest obstacle to success and the biggest single factor in our failure" (former USAID official David Marsden, December 3, 2015). "Biggest problem was turnover of people … the result is no institutional memory" (June 27, 2016). The interview records suggest that there was no consensus on how to solve this problem. One proffered solution was higher pay for government employees deployed to Afghanistan: Strmecki said in his interview that talented staff leave "the government for our contractors and NGOs and our other implementing partners because [they] pay them so much more." However, one unnamed legal advisor who worked in Kabul said (on October 30, 2017) higher pay for some U.S. positions meant that those who filled the jobs "had very little understanding of the culture—they came in because the salary was lucrative.... [T]hey saw this as a couple of years of opportunity to get rid of their house mortgages." Lack of expertise arguably exacerbated many of the other problems facing U.S. policy. At times, Afghans reportedly exploited the lack of knowledge and institutional memory to shape U.S. policy to meet their own ends. In one extreme case, Afghanistan expert Thomas Johnson described how "we were used by the tribes" because suspects taken into custody by the United States as terrorists were actually "traditional tribal enemies that [U.S. partners] claimed were Taliban" (January 7, 2016). Multinational Coalition: Too Many Cooks? U.S. efforts in Afghanistan have been aided from the outset by a multinational coalition. From combat, to training Afghan forces, to providing development assistance, U.S. allies and partners have made significant contributions. However, this work has not been without complications, and many of the SIGAR interviewees who worked on coordinating U.S. and international efforts discussed what they saw as deficiencies. The system that emerged in Afghanistan became known as the "lead nation" system, whereby each policy area was overseen by a different country: for example, Italy focused on developing Afghanistan's justice sector, Germany worked with Afghan police, and the British initially were responsible for counternarcotics. However, according to former National Security Advisor Stephen Hadley, "With this [multilateral] approach, everyone had small pieces of the sector and it then meant that [their respective policy areas] became everyone's second or third order priority so nothing got done." Generally, interviewees who observed or participated in the system described it as disorganized: John Wood, NSC director for Afghanistan 2007-2009, said, "Everyone has a piece of the pie but [there's] no coherence.... Each lead nation left to determine how to approach things—each changed frequently. Even if things lined up with the lead nation none of them moving at same pace" (June 17, 2015). The difference in pacing and approach was explained by an unnamed NSC staffer, who argued "tasks were conditioned by what countries were willing to do," which "created some tensions between the coalition and the nation states" (July 14, 2015). Iraq as a Distraction Those U.S. officials SIGAR interviewed who worked on Afghanistan in the first decade of the war held a near-universal judgment that the U.S. invasion of Iraq in March 2003 distracted U.S. attention and diverted U.S. financial and other resources, allowing the Taliban to regroup. Former U.S. Ambassador to NATO Nicholas Burns described Iraq as the "higher priority" and Afghanistan as "the less acute theater." According to an unnamed NSC staffer (October 21, 2014) More specifically regarding why the U.S. and Department of Defense were anxious for someone else to take a robust leading role in Afghanistan, it was so we could have greater resources and capability to prioritize Iraq. ... From early spring 2002, during my time at the Secretary's office, until 2011, Afghanistan has to be looked at with one eye on what is happening in Iraq. Even in the early and tail end (2009-2011) days, either materially or politically, it all seemed to be about Iraq. It was hard to come to terms with the reality that your whole portfolio is a secondary effort or, at worst, an "economy of force" mission. Your job was not to win, it was to not lose … We are bleeding resources away as things get worse in Iraq, and we were looking for more ways to make do in Afghanistan…. In hindsight, there was a window between late 2002-2003 and early 2005 where there was relative peace in Afghanistan. The Taliban was on its heels and people were not that disillusioned. One official (interviewed on September 23, 2015) said that between 2005 and 2007, "Iraq was all we could handle." Another said that a "significant pressure in the 2003 to 2010 timeframe was the draw of resources toward Iraq and away from Afghanistan" (April 13, 2015). By the time the United States began to draw down forces in Iraq and refocus on Afghanistan, many observers argued that the damage was already done: the Afghan state's military and governing capabilities (both effectively nonexistent in 2001) had not been adequately developed, allowing for the rise of a new Taliban insurgency that further undermined those abilities. One unnamed U.S. official said in a February 9, 2016, interview, "In all honesty, Afghanistan got neglected when we went to Iraq and when we got back to Afghanistan, we didn't have enough capacity." Pakistan's Support for the Taliban The war in Iraq arguably distracted U.S. policymakers from dealing with Pakistan's role in facilitating the Taliban's comeback. Early on, Pakistan "was not seen as bad guys," according to an international aid consultant in an October 9, 2015, interview. A number of interviewees, particularly senior U.S. officials, attributed the Taliban's resurgence, and the resulting failure of the U.S. to solidify gains in Afghanistan, to material support for the group from, and its safe havens in, Pakistan. A good deal of material related to the sensitive issue of Pakistani support for the Taliban appeared to be redacted, but the issue still emerged throughout the interviews. Most interviewees who addressed the subject argued that U.S. and Pakistani interests in Afghanistan were fundamentally incompatible. One unnamed DOD or NSC staffer told SIGAR in an October 1, 2014, interview, "The belief that Pakistan's national interest aligned with the US because [then-Pakistani leader Pervez] Musharraf joins the [U.S.] effort after 9/11 is a false belief." According to this view, the positive role Pakistan played with regard to Al Qaeda blinded U.S. policymakers to the Pakistanis' support for the Taliban. As Strmecki said in his October 19, 2015, interview, Because of people's personal confidence in Musharraf and because of things he was continuing to do in helping police up a bunch of the al-Qaeda in Pakistan, there was a failure to perceive the double game that he starts to play by late 2002, early 2003. You are seeing the security incidents start to go up and it is out of the safe havens. I think that the Afghans and Karzai himself, are bringing this up constantly even in the earlier parts of 2002. They are meeting unsympathetic ears because of the belief that Pakistan was helping us so much on al-Qaeda. With U.S. attention to the issue reportedly low, Pakistan maintained support for the Taliban in order to maintain some of Pakistan's influence in Afghanistan. In at least one account, Pakistani leaders were forthright in private about this strategy. In the transcript of his January 11, 2016, interview with SIGAR, Ryan Crocker, who served as U.S. ambassador to both Pakistan (2004-2007) and Afghanistan (2011-2012), quoted then-head of Pakistan's intelligence agency (ISI, Inter-Services Intelligence) Ashfaq Kayani as telling him You know, I know you think we're hedging our bets, you're right, we are because one day you'll be gone again, it'll be like Afghanistan the first time [when the United States turned away from Afghanistan after the Soviet withdrawal in 1989], you'll be done with us, but we're still going to be here because we can't actually move the country. And the last thing we want with all of our other problems is to have turned the Taliban into a mortal enemy, so, yes, we're hedging our bets. Other Problems Beyond the main themes discussed above, other issues impacting U.S. policymaking in Afghanistan surfaced throughout the SIGAR interviews: Positivity bias (e.g., Flynn interview on November 11, 2015: "As intelligence makes it way up higher [within the bureaucracy], it gets consolidated and really watered down; it gets politicized … because once policymakers get their hands on it, and frankly once operational commanders get their hands on it, they put their twist to it…. Operational commanders, State Department policymakers, and Department of Defense policymakers are going to be inherently rosy in their assessments.") Not considering greater inclusion of or interaction with the Taliban at the outset (e.g., U.N. official on August 27, 2015: "Lesson learned: if you get a chance to talk to the Taliban, talk to them…. At that moment [2001], most … Taliban commanders were interested in joining the government.") Powers granted to Afghanistan's central government (e.g., unnamed U.S. official, October 18, 2016: "why did we create centralized gov't in a place that has never had one … set us up for failure") Other Voices: U.S. Efforts as Relatively Successful Some of the officials interviewed by SIGAR lauded arguable gains made and facilitated by the international community's work in Afghanistan since 2001, a perspective not generally included in the Washington Post stories. A number of interviewees argued, as one unnamed U.S. official did on June 2, 2015, "There's not enough recognition of the scale of achievements in Afghanistan…. Afghanistan has given a higher return on investment than almost any other reconstruction effort. From 2002-2012, [Afghanistan] made more progress in human development than any other country." Others contended (as referenced above) that one cannot assess the success or failure of U.S. efforts without considering the state of the country in 2002: "We have to remember what we were starting with in Afghanistan. Afghans were starting with nothing. Social and economic development was at the lowest level possible. And that's why Taliban and al Qaeda found a home there, and why we went in…. You must look at where we were, what we tried to do, and where we got to" (unnamed senior State Department official April 26, 2016). Some officials outside the United States echoed these sentiments in their interviews. A Danish official said on June 30, 2015, despite corruption and all of the other problems, "we'd be worse off without our [Afghanistan] intervention. The development side has had an impressive record." Abdul Jabar Naimee, who has served as governor of several eastern Afghan provinces, said in his March 6, 2017, interview I am seeing that in the [W]est a thinking is going that they helped the Afghans but it was useless. This is a completely a wrong assumption. In the three provinces where I have been working as governor, in all the three places when I have share[d] programs with the people, or I have participated in the projects['] events, I have seen people are happy with the help they have received…. The assumption that people of Afghanistan are not happy with the help that was done for their improvement, this assumption is wrong, people are grateful for the help and they still benefit from the work that was done. Snowflakes (Rumsfeld Memos)8 Former Secretary of Defense Donald Rumsfeld's "snowflakes" (the last of which is dated December 22, 2004), unlike the SIGAR interviews, provide a contemporaneous view into one senior policymaker's thinking over the first several years of the U.S. effort in Afghanistan. Because they are brief and relatively informal, there are risks in taking them as representative of U.S. policy as a whole, but their on-the-ground perspective could still be useful in assessing U.S. policy in Afghanistan. They may also demonstrate that various perceptions noted in the SIGAR interviews—such as that Afghanistan was less of a priority than Iraq—had merit. Many of the approximately 200 snowflakes are minor; some notable excerpts are below. Rumsfeld apparently did not anticipate long-term U.S. financial support for Afghan security forces. In an April 8, 2002, memo to Secretary of State Colin Powell, Rumsfeld wrote, "The U.S. spent billions freeing Afghanistan and providing security. We are spending a fortune every day. There is no reason on earth for the U.S. to commit to pay 20 percent for the Afghan army. I urge you to get DoS turned around on this—the U.S. position should be zero [underline original]. We are already doing more than anyone." Rumsfeld expressed continual concern about not having a plan (e.g., "I am convinced we have to have a plan for Afghanistan and that nobody else in the government is going to do it unless we do. What do you propose?" (October 17, 2002) Rumsfeld expressed an eagerness to reduce U.S. commitments in Afghanistan. In a September 25, 2003, memo to Under Secretary of Defense for Policy Doug Feith, he wrote, "We need a good conceptual speech that describes where the responsibility is (and moves the blame if it fails away from the U.S.), namely on the Afghan people and on the international community." Rumsfeld sought greater input over non-Department of Defense equities. He wrote to White House Chief of Staff Andrew Card on August 19, 2002, requesting "that I have an opportunity to interview any person who is proposed for Ambassador to Afghanistan, before the selection gets made and before the President is involved. The post is very important for the Department of Defense and I would like to have a good sense of who it might be and why." There is some evidence that Afghanistan, by 2003, may not have been a major focus for Rumsfeld. Rumsfeld received a November 7, 2003, letter from Afghan Uzbek leader Abdul Rashid Dostum, who painted a picture of widespread Taliban activity and said "please do not forget the battle against terrorist and extremists in Afghanistan." Rumsfeld forwarded the letter in a memo to CENTCOM Commander General John Abizaid on November 18, 2003, describing the letter as "worrisome" and saying "if he [Dostum] is correct that the Taliban are in control of that many areas within Afghanistan, that is news to me." Reactions to "the Afghanistan Papers" The Washington Post 's "Afghanistan Papers" have attracted significant attention, though policymakers and outside analysts disagree about whether they contain new and relevant information and, if so, what effect this information should have on U.S. policy in Afghanistan going forward. In Congress, most of the Members who reacted publicly did so to reiterate previous calls to remove U.S. troops from Afghanistan. Senator Tom Udall spoke on the Senate floor about the Papers on December 12, voicing support for S.J.Res. 12 , introduced in March 2019 by Udall and Senator Rand Paul. The resolution would, among other provisions, mandate the removal of all U.S. forces from Afghanistan within a year of enactment. Senator Kirsten Gillibrand called for Senate hearings to investigate "these deeply concerning revelations about the Afghan war," and Representative Max Rose said that the Papers demonstrated that "the time to end this war and bring our troops home honorably is now." Top U.S. defense officials largely defended the U.S. conduct of the war, arguing that the Papers did not constitute evidence that former officials had lied to the American public, and that the Papers, as part of a Lessons Learned project, were structured to invite criticism, in hindsight, of the war effort. Pentagon Spokesman Jonathan Hoffman said on December 12, 2019, I would quibble with the idea that we weren't providing [accurate information] in the past. I think what we see from the report from the Washington Post is, looking at individuals giving retrospectives years later on what they may have believed at the time ... those statements appeared for the most part to be people looking back retrospectively on things that they had said previously—and using hindsight to speak to comments they had made. Secretary of Defense Mark Esper dismissed claims that officials had lied, saying, "For 18 years now, the media has been over there [in Afghanistan]…. The Congress has been there multiple times…. We've had the SIGAR there. We've had IGs there. This has been a very transparent—it's not like this war was hiding somewhere and now all of a sudden there's been a revelation…. So [the] insinuation that there's been this large-scale conspiracy is just, to me, ridiculous." Chairman of the Joint Chiefs of Staff General Mark Milley, appearing alongside Esper, said, "I know that I and many, many others gave assessments at the time based on facts that we knew at the time. And those were honest assessments, and they were never intended to deceive neither the Congress nor the American people." SIGAR Special Inspector General John Sopko wrote a December 17, 2019, letter to the editor of the Washington Post disputing some of the Post 's characterizations and saying that "the Afghanistan Papers is an important contribution to public discourse about the war in Afghanistan. But it is not a 'secret' history. SIGAR has written about these issues for years, including in seven Lessons Learned reports and more than 300 audits and other products." On January 15, 2020, Sopko testified in front of the House Foreign Affairs Committee that U.S. policy in Afghanistan has been characterized by "institutional hubris and mendacity" and that "We have incentivized lying to Congress.... [T]he whole incentive is to show success and to ignore failure and when there's too much failure, classify it or don't report it." Outside observers have offered differing views of the Papers. One concurred with the Post 's assessment that in the Papers, "officials' indictment of policies for which they themselves were responsible lays bare the massive institutional deceit that forms the heart of what the United States has done" in Afghanistan. Other observers have taken a softer line. One wrote, "it is apparent from the documents that many officials in power attempted to 'spin' a spiraling Afghanistan conflict for the public," though they did so because "the U.S. government has every incentive to paint a better picture of progress than is the reality on the ground." Still others have argued that the Papers contain little that has not already been readily and publicly available for years: "the only new information here is the identity of those making the criticisms." Those making this argument have pointed to reports from SIGAR (including their seven publicly released Lessons Learned reports for which the interviews in "the Afghanistan Papers" were conducted) and other inspectors general, as well as media, academic, and other public accounts. One summarizes, "In short, if you're surprised by the Afghanistan Papers, you haven't been paying attention." Another observer criticizes the Post for "putting sensationalist spin on information that was not classified, has already been described in publicly available reports, only covers a fraction of the 18 years of the war, and falls far short of convincingly demonstrating a campaign of deliberate lies and deceit." Given that there has been evidence of shortcomings in the U.S. war and development effort for years, one observer argues that "Afghanistan is best seen, not as a morality play, but as a classic foreign policy dilemma in which all the options are bad ones": Reasonable people can debate, with the benefit of hindsight, whether the United States should have accepted these risks as the price of avoiding another two decades of war. But the tragic dilemma of Afghanistan is that there have always been costs of withdrawal as well as costs of continued intervention. Possible Questions for Congress "The Afghanistan Papers" raise a number of potential questions for Congress to consider as Members evaluate the Trump Administration's Afghanistan policies. U.S. Strategy . What role, if any, has Congress played in compelling successive executive branch administrations to articulate U.S. strategy and/or policy goals in Afghanistan? What are the means by which Congress has attempted to shape or influence those goals? What have been the most and least effective of those means? Congressional Oversight . Members of Congress have conducted oversight of executive branch policy through various means, including appointing a special inspector general, public and closed hearings, Member and staff delegations to Afghanistan, letters to executive branch officials, and public statements. What have been the most and least effective methods of congressional oversight? U.S Aid: Budgeting. To what extent has Congress scrutinized executive branch funding requests? Have appropriated U.S. funding levels differed from those requests and if so, what changes have been made and why? To what extent have congressional budgeting decisions in Afghanistan been made due to political expediency? How, if at all, can Members of Congress insulate budgeting or other policymaking processes from political pressures? U.S. Aid: Conditionality. What conditions has Congress imposed on U.S. aid to Afghanistan and why? How, if at all, have those conditions impacted the delivery of U.S. aid, Afghan government actions, U.S.-Afghan relations, and congressional interactions with the executive branch? What kinds of changes, if any, to the Foreign Assistance Act or other relevant pieces of legislation might make U.S. development assistance more effective? Reporting . What has been the impact of congressionally mandated reporting on policy or outcomes? How, if at all, does Congress use these reports? What are the most and least useful reports that Congress receives on U.S. military and development efforts in Afghanistan? How, if at all, does Congress require agencies to evaluate their programs, and how does this inform reports to Congress? Has there been any evolution in specific monitoring and evaluation requirements? Bureaucracy. How has Congress shaped executive branch structure? Have these efforts been helpful? How direct a role should Congress play in mandating the establishment or nature of offices or other bureaucratic structures within the executive branch that work on Afghanistan? Personnel Issues . To what extent have U.S. efforts in Afghanistan been hampered by the frequent personnel turnover cited by many SIGAR interviewees? How, if at all, have congressional actions improved, undermined, or otherwise affected the ability of federal agencies to train and deploy capable workforces in Afghanistan? What congressional action, if any, is needed to help the executive branch, or individual departments, address this issue? Recommendations . What are the most important things that Congress could have been doing over the past 18 years to ensure U.S. success in Afghanistan? What can (and should) Congress do going forward?

On December 9, 2019, the Washington Post published a series of documents termed "the Afghanistan Papers." The Papers comprise two sets of documents: about 1,900 pages of notes and transcripts of interviews with more than 400 U.S. and other policymakers that were carried out between 2014 and 2018 by the Special Inspector General for Afghanistan Reconstruction (SIGAR), and approximately 190 short memos (referred to as "snowflakes") from former Secretary of Defense Donald Rumsfeld, dating from 2001 to 2004. The documents, and the Washington Post stories that accompany them, suggest that U.S. policies in Afghanistan often were poorly planned, resourced, and/or executed. These apparent shortcomings contributed to several outcomes that either were difficult to assess or did not fulfill stated U.S. objectives. Key themes of the SIGAR interviews include N egative effects of U.S. funding. The most frequently discussed subject in the SIGAR interviews was (a) the large sum of U.S. money ($132 billion in development assistance since 2001) that poured into Afghanistan and (b) the extent to which much of it was reportedly wasted, stolen, exacerbated existing problems, or created new ones, particularly corruption. Unclear U.S. g oals . Many of the interviewees argued that, from the beginning, the U.S. engagement in Afghanistan, supported by the money noted above, lacked a clear goal. Competing p riorities . The proliferation of U.S. goals in Afghanistan led to another complication: U.S. actions to achieve some of these objectives seemed to undermine others. Organizational confusion and competition. While U.S. efforts in Afghanistan were dominated by the Department of Defense, given the wide array of U.S. interests in Afghanistan, U.S. policy formulation and execution required input from many federal departments and agencies. The problems associated with trying to coordinate among all of these entities was a consistent theme. Lack of e xpertise . Multiple SIGAR interviewees criticized U.S. policies that they claimed failed to generate relevant expertise within the U.S. government or even disincentivized the creation or application of that expertise in Afghanistan. Disorganized m ulti national coalition . Many of the SIGAR interviewees who worked on coordinating U.S. and international efforts discussed what they saw as a disorganized system. Iraq as a distraction. U.S. officials who were working on Afghanistan in the first decade of the war held a nearly universal judgment, in SIGAR interviews, that the U.S. invasion of Iraq in March 2003 distracted U.S. attention and diverted U.S. financial and other resources. Pakistan 's support for the Taliban . A number of interviewees, particularly senior U.S. officials, attributed the Taliban's resurgence, and the failure of the U.S. to solidify gains in Afghanistan, to material support for the group from, and its safe havens in, Pakistan. Other voices: U.S. efforts as relatively successful. Some of the officials interviewed by SIGAR lauded arguable gains made and facilitated by the international community's work in Afghanistan since 2001, a perspective not generally included in the Washington Post stories. The documents, released at a time when the United States is engaged in talks with the Taliban aimed at ending the 18-year U.S. military presence in the country, have attracted significant attention. Some Members of Congress have called for further investigation into U.S. policy in Afghanistan. However, there is debate over how revelatory the SIGAR interviews are: policymakers and outside analysts disagree about whether they contain new and relevant information and, if so, how the information should affect U.S. policy in Afghanistan going forward.

CRS_R45863

Introduction The rise in popularity of cryptocurrencies and the underlying blockchain technology presents both challenges and opportunities to the energy sector. Cryptocurrencies, such as Bitcoin, are sometimes referred to as virtual currency , a term that can also refer to a broader class of electronic money. A blockchain is a digital ledger that enables parties to agree on the current ownership and distribution of assets in order to conduct new business. When applied to cryptocurrencies, the blockchain allows the validation of transactions to occur by a decentralized network of computers. As cryptocurrencies (such as Bitcoin, the cryptocurrency with the largest market capitalization) have increased in popularity, the energy demand to support cryptocurrency mining activities has also increased. The state of Washington, by some estimates, hosted 15%-30% of all Bitcoin mining operations globally in 2018. When such increases in energy demand for cryptocurrency mining occur at a local level, the resulting peak loads may increase customers' electricity rates depending on pricing structure. However, not all cryptocurrencies require energy-intensive operations. Outside of cryptocurrencies, opportunities arising from blockchain technologies could include facilitating energy and financial transactions on a smart grid. This report explains how cryptocurrency is "mined," where mining activity is concentrated, how some states and utilities are responding to localized increases in energy demand from Bitcoin mining facilities, and potential considerations for Congress. Considerations for Congress include potential policy options to address energy conservation and energy efficiency standards as well as options for blockchain technology in the energy sector. This report is part of a suite of CRS products on cryptocurrencies and the underlying technology, distributed ledger technology, and blockchain (see textbox below). Blockchain and Cryptocurrencies Blockchain provides a means of transacting among parties who may not otherwise trust one another. Blockchain networks allow for individuals engaging in transactions to also be the ones to validate them. Cryptocurrencies such as Bitcoin, Ether, Alpha Coin, and Papyrus provide a means of validating transactions in a decentralized network that is outside of an intermediary, such as a bank for financial transactions or a title company for a real estate transaction. This validation can be done in bulk and at relatively high speeds, making cryptocurrency an attractive avenue for certain financial transactions. Cryptocurrencies are built to allow the exchange of some digital asset of value (the cryptocurrency) for a good or service. Bitcoin is the most popular cryptocurrency, garnering the largest market share, and Bitcoin arguably initiated the interest in blockchain technology. Blockchain uses a combination of technologies to work. These technologies include encryption and peer-to-peer (P2P) networks. Transactions are added to a blockchain in an addition-only manner. Once added, a transaction cannot be altered, providing a layer of security and transparency. Transactions are grouped together to form a tranche , or "block." Blocks are added to a blockchain in a manner that links it to the previous block, so any change data in a previous block makes that change known to users immediately as they try to add a new block. Encryption is used to ensure that parties trading assets on a blockchain have rights to that asset, and that data held in the blockchain is tamper resistant. P2P networks are used to distribute information across participating users without a central authority acting as an arbiter of that information. Cryptocurrency Mining There are three primary approaches to gaining ownership of Bitcoin: purchase Bitcoin directly by exchanging conventional money and a paying an exchange fee; earn Bitcoin in return for a product or service; or create Bitcoin through mining . Bitcoin and other cryptocurrencies each implement their own blockchain: mining is the creation and publication of a new block in a blockchain. Early cryptocurrency platforms, like Bitcoin, required the use of mining to validate transactions. In blockchain platforms generally, miners—those seeking to add a block to a blockchain—are incentivized to improve their value in that blockchain through either a monetary, reputational, or stake award, for example. New blocks may be added to a blockchain through a variety of methods. For Bitcoin, new blocks are added to the blockchain through proof-of-work (PoW). Under PoW, miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). Hash values are used to ensure the integrity of data, in this case, that a block of data in the blockchain has not been modified. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hash value. The problem Bitcoin miners are trying to solve is the creation of a hash value for a given block which begins with a certain number of zeros. They add data to the block through changing the nonce in order to change the hash value and discover the solution. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining. The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block. Generally, by solving the problem or puzzle, miners win the opportunity to post the next block and possibly gain a reward for doing so. In the case of Bitcoin, miners who create and publish new blocks in the blockchain are rewarded with Bitcoin. Once the problem is solved and a valid hash is identified, the miner announces it to the community using P2P networking. Other users can validate the solution immediately—without going through the resource-intensive computation process. Once the majority of the community of users validates and confirms the block, it is added to the chain. Miners are held to a strict set of rules that maintain the overall market structure. There are a limited number of Bitcoin to be mined, which creates a value attributed to scarcity. For Bitcoin, new blocks are published every 10 minutes. As the rewards for published blocks halve every 210,000 blocks, the reward of new Bitcoin diminishes roughly every four years (e.g., the reward of 50 Bitcoins per block in 2008 was reduced to 25 in 2012). On October 31, 2018, block 548173 rewarded the miner with 12.5 Bitcoins plus approximately 0.2 Bitcoins in transaction fees. On the date that block was generated, trading for 1 Bitcoin closed at approximately $6,343; as of July 29, 2019, trading for 1 Bitcoin closed at approximately $9,507. Bitcoin is rewarded on a first-come, first-served basis, meaning whoever solves and publishes the solution first is rewarded with Bitcoin. Miners throughout the network compete against each other in a race to be the first to resolve the PoW and earn the reward. The competition often is a criticism of the PoW system, as there are many more miners expending energy for these "useless" calculations than the one miner that wins the race and correctly resolves the PoW. Mining Technology The technology used by miners has advanced over time. Early miners were able to earn Bitcoin relatively easily with affordable equipment. Bitcoin could initially be mined on a central processing unit (CPU) such as a personal laptop or desktop computer. As interest in Bitcoin mining increased, miners discovered that graphic cards could more efficiently run hashing algorithms and aid in mining. Field Programmable Gate Arrays (FPGAs) then replaced graphic cards, as the circuits in an FPGA could be configured and programmed by users after manufacturing. Application-specific integrated circuits (ASICs) have replaced these and graphic cards. ASICs are designed for a particular use—such as Bitcoin mining. As more sophisticated equipment has been adopted, miners have also moved away from working individually to working in larger groups. Many miners have determined it is more cost efficient to join "mining pools" that help disperse the energy and equipment costs (and the profits) and increase the speed or likelihood of a successful transaction. ASICs used for Bitcoin mining are usually housed in thermally-regulated data centers with access to low-cost electricity. While these developments have transformed Bitcoin mining into a more consolidated industry, they have not resolved the energy consumption issue or the computational "waste," as different Bitcoin mining pools still must compete against one another using the PoW method. How Much Energy Is Consumed from Bitcoin and Other Cryptocurrency Mining? Cryptocurrency mining requires energy to (1) operate the devices computing the calculations required to maintain the integrity of the blockchain and (2) thermally regulate the devices for optimal operation. A node, or computing system, on the blockchain may be composed of an individual user or a group of users that have pooled resources; as such, the exact number of connected devices on the network is unknown. Devices have different hashrates—the number of calculations (or hash functions) performed on the network per second—and have different power requirements. Devices with greater hashrates can perform more calculations in the same amount of time than devices with lesser hashrates. For example, "a hashrate of 14 terahashes [14 trillion attempted mining solutions] per second can either come from a single Antminer S9 running on just 1,372 W [Watts], or more than half a million Sony Playstation-3 devices running on 40 MW [megawatts—million Watts]." There are four main factors that contribute to energy consumption of cryptocurrency mining: 1. hardware computing power; 2. network hashrate; 3. the difficulty; and 4. the thermal regulation for the hardware. These factors, some of which also interact with the price of Bitcoin, can alter the energy intensity of mining. For instance, in December 2017, the price of Bitcoin rose creating an influx of mining. As the mining network grew, the difficulty and hashrate increased. Miners sought out more powerful equipment as the competition increased, which consumed more energy. Several studies have examined the energy consumption of cryptocurrencies. While technology advancements in devices used for Bitcoin mining have led to increases in the hashrates of mining devices (i.e., improved device efficiency), the network hashrate has also increased as the popularity of Bitcoin increased. According to one recent estimate, as of "mid-March 2018, about 26 quintillion hashing operations are performed every second and non-stop by the Bitcoin network." Estimating the power consumption of the global Bitcoin network depends upon the efficiency of different hardware, the number of machines in use, and the cooling requirements for large-scale mining facilities. Table 1 presents various estimates for the power required by the Bitcoin network. Generally, these estimates use hashrates and miner hashing efficiencies to determine energy consumption. One study relied upon hardware data derived from initial public offering (IPO) filings to estimate power consumption. Fewer studies have examined power requirements for other cryptocurrencies (Bitcoin is the largest cryptocurrency platform in both currency in circulation and transactions processed), although those studies have found comparatively lower power requirements than for Bitcoin. Global power requirement estimates for Bitcoin have increased within the last five years. For comparison, the largest estimate of 7,670 MW in Table 1 is nearly 1% of U.S. electricity generating capacity (or approximately 0.1% of global electricity generating capacity). Opinions differ on whether future growth in Bitcoin will significantly impact energy consumption and subsequent carbon dioxide (CO 2 ) emissions. Some argue that sustainability concerns due to energy consumption are misplaced, and that the competitiveness of Bitcoin mining means that only miners with the most competitive mining hardware and the lowest electricity costs will persist over time. Further, this could lead to fewer miners using energy inefficient hardware, as they may no longer be able to compete effectively. Some anticipate that energy demands will diminish as the reward incentive shifts from discovering new Bitcoin to earning revenue through transaction fees. As a result, some would argue that the energy consumption from mining Bitcoin is a temporary issue. Others recognize the volatility of cryptocurrency markets but observe that network hashrates of several cryptocurrencies have trended upward suggesting that energy consumption (and subsequent CO 2 emissions) will increase. However, these estimates do not include energy required for cooling systems and other operations and maintenance activities associated with cryptocurrency mining. One study on projections of Bitcoin growth considered the potential effects on global CO 2 emissions should Bitcoin eventually replace other cashless transactions. The study found that the associated energy consumption of Bitcoin usage could potentially produce enough CO 2 emissions to lead to a 2 o C increase in global mean average within 30 years. These projections assume that the global portfolio of fuel types (and subsequent CO 2 emissions) used to generate electricity remains fixed according to portfolio profiles from 2014 and does not consider that, in many cases, Bitcoin is often mined in areas with plentiful and affordable renewable energy. Further, the projections do not consider any potential effects of a collapse of Bitcoin prices on hashrates or energy consumption, and whether the capital invested in Bitcoin mining could be used for other cryptocurrencies or for other purposes. Projections of continued growth in energy consumption led some to call for reform in the cryptocurrency industry. Others argue that continued reliance on fossil-fuel-based electricity is the important issue and not the energy intensity of Bitcoin. What Is the Cryptocurrency Industry Doing to Reduce Energy Consumption? As the Bitcoin network's energy consumption grows, some have questioned whether the PoW algorithm is sustainable. One option to reduce cryptocurrency energy consumption is to shift to alternative protocols for validating transfers. Currently, PoW is the most widely used. However, other protocols, such as Proof-of-Stake (PoS) and Proof-of-Authority (PoA) could potentially accomplish validations more energy efficiently. Many other alternative algorithms exist. Each algorithm presents trade-offs; for example, some algorithmic attributes facilitate scalability and others facilitate speed of transactions. The potential application of blockchain technology to the energy sector (and other sectors) will depend upon the ability for these technologies to provide transparent, secure, scalable, and timely transaction validation. The technical differences and their applicability are discussed in the Appendix . Where Is Bitcoin Mined? Several factors contribute to ideal mining locations and include energy costs, regulations, and technology. Often the energy costs are affected by geographical characteristics like proximity to hydroelectric power or lower ambient temperature that reduces the need for cooling. Local and national governments around the world have responded differently to the growth of Bitcoin: some are actively developing cryptocurrency industries, some are restricting cryptocurrencies, and some are regulating cryptocurrencies in an effort to balance financial innovation and risk management. According to a study in 2017, nearly three-quarters of all major mining pools are based in either China (58%) or in the United States (16%). Some countries and regions where significant cryptocurrency mining activities have been identified include Australia, Canada, Georgia, Russia, and Sweden, as shown in Figure 1 . China has taken steps to regulate and tax the trading of Bitcoin, and has even proposed implementing a ban on mining. As of April 2019, it was reported that the National Development and Reform Commission, deemed mining as a "wasteful and hazardous" activity. China's share of major mining pools may change substantially in response to regulations and policy actions. In 2013, the Chinese government reportedly restricted Chinese banks from using cryptocurrencies as currency, citing concerns about money laundering and a threat to financial stability. In September 2017, Beijing declared that initial coin offerings (ICO) were illegal and that all mainland cryptocurrency exchanges be shut down. In January 2018, China's Leading Group of Internet Financial Risks Remediation submitted a request to local governments to regulate electricity, taxes, and land use for mining companies, and "guide the orderly exit of such companies from the Bitcoin mining business." Since the implementation of these regulatory measures, Bitcoin trading with the Chinese yuan has reportedly dropped from 90% of global Bitcoin trading to under 1%. However, as illustrated in Figure 1 , China, despite changes in regulation, remained a popular location for mining in 2018, partly due to the comparatively low cost of energy. The generation sources that provide low cost electricity to cryptocurrency miners in China vary regionally. In some regions, the electricity likely is provided from fossil fuel sources; for example, in Inner Mongolia where cryptocurrency miners have been active, thermal power represents 63% of the electric capacity. Cryptocurrency Mining and Utilities: Domestic and International Examples Cryptocurrency mining includes costs associated with equipment, facilities, labor, and electricity. Mining pool companies around the world therefore seek cheap, reliable electricity. While many mining pools are still in China, some have been able to utilize closed industrial facilities in the United States that can provide abundant electricity at affordable rates. As miners are not typically bound by geographic location, locations with favorable electricity rates and policies may encourage operations. Conversely, locations with restrictive regulations or high electricity prices may discourage mining operations. In the United States, the sale of electricity is governed by a patchwork of federal, state, and local regulations. For the sale of electricity, the states generally have regulatory jurisdiction over retail electricity transactions, though federal and municipal authorities may also play a role. State approaches to regulation vary considerably. States and cities that are dealing with an influx of cryptocurrency mining because of affordable electricity rates are instituting local laws as issues arise. Examples of such approaches—both domestic and international—along with the more general benefits and challenges associated with developing a cryptocurrency mining industry are delineated through the selected examples below. New York State The state of New York and the city of Plattsburgh (NY) have developed various policies in response to growth in energy demand by cryptocurrency mining activities. In December 2018, New York State approved Assembly Bill A8783B, creating a new digital currency task force. This task force will include a team of technology experts, investors, and academics all appointed by the Governor, the state Senate, and the Assembly. The task force intends to produce a report in 2020 that includes a discussion of "the energy consumption necessary for cryptocurrency mining operations and other policy considerations related thereto." The task force law does not include any specific measures regarding licensing, but New York State already requires a license for cryptocurrency businesses, known as a "Bitlicense." Introduced in 2014, fewer than 20 licenses have been granted as of January 2019. The Bitlicense is intended to subject crypto mining companies to anti-money laundering and counterterrorism standards, as well as require background checks on all employees. Plattsburgh, NY Plattsburgh's 20,000 residents reportedly have electricity rates below $0.05 per kilowatt-hour (kWh) year-round (as compared to the U.S. average retail price of about $0.10/kWh). Inexpensive electricity for Plattsburgh is generated from the New York Power Authority's (NYPA's) hydroelectric facility on the St. Lawrence River. Plattsburgh has an agreement with the NYPA to buy 104 MW of power at any time to serve its customers. This has exceeded electricity demand requirements for Plattsburgh, even with several industrial facilities in operation. Plattsburgh has faced a number of challenges balancing the promise and pitfalls of cryptocurrency mining. Bitcoin mining companies were attracted to the abundant and cheap electricity, with two cryptocurrency mining businesses reportedly operating in Plattsburgh in 2017. As Plattsburgh residents primarily rely on electricity for home heating, during a particularly cold winter in early 2018, electricity rates increased as the 104 MW of power from the hydropower facility was reportedly exceeded, and electric power had to be purchased from other sources at higher rates. During January and February of 2018, cryptocurrency mining operations were recorded as responsible for approximately 10% of the local power demand. The cost of purchasing additional power to meet the increased demand were proportionally distributed among all customer classes. The costs of purchasing additional power combined with increased energy use in response to cold weather resulted in residential electricity bills that were reportedly up to $300 higher than usual. According to the New York Public Service Commission, the two cryptocurrency companies operating in Plattsburgh at the time contributed to an increase of nearly $10 to monthly electricity bills in January 2018 for residential customers. In March 2018, the city of Plattsburgh also instituted an 18-month moratorium on any new cryptocurrency mining operations—a first in the United States. Also in March 2018, the New York Public Service Commission ruled that municipal power authorities could issue a tariff on high-density-load customers—including cryptocurrency companies—"that do not qualify for economic development assistance and have a maximum demand exceeding 300 kW and a load density that exceeds 250 kWh per square foot per year." Additionally, Plattsburgh began addressing fire safety concerns, heat management, and overall nuisance associated with cryptocurrency mining by passing local laws. None of the new laws specifically address energy consumption, or noise, which is a concern for some local residents. Massena, NY In December 2017, Coinmint, a crypto mining company, looking to expand operations, went to Massena, NY (90 miles west of Plattsburgh) and signed a lease to convert a retired Alcoa aluminum plant into a cryptocurrency mining facility. Coinmint reportedly requested from NYPA 15 MW of subsidized power that would in turn lead to 150 jobs and $700 million in local investment. The proposal required the approval of NYPA's board of trustees and was added to their January 2018 agenda for consideration. However, in March 2018, following consideration of the Coinmint proposal, the NYPA board of trustees approved a moratorium on allocating economic development assistance in the form of subsidized power to high-density-load operations until NYPA could analyze all possible impacts. The New York State Public Service Commission approved, in July 2018, new electricity rates for the Massena Electric Department to allow high-density load customers—such as cryptocurrency companies—to be eligible for service under an individual service agreement. This is the second ruling by the commission on cryptocurrency rates. Washington State By some estimates, the state of Washington hosted 15%-30% of all Bitcoin mining operations globally in 2018. Like New York, Washington has affordable, reliable hydropower. Along the Columbia River in a region known as the Mid-Columbia Basin, five hydroelectric dams reportedly generate nearly six times as much power as the residents and local businesses can utilize. These hydroelectric facilities typically export the surplus electricity to larger electricity demand markets, such as Seattle or Los Angeles, which helps to keep the costs of electricity relatively low for local consumers at about $0.025/kWh (as compared to the U.S. average retail price of about $0.10/kWh). Since 2012, the Mid-Columbia Basin has reportedly attracted Bitcoin mining companies because of low-priced electricity, and the resulting growth in energy demand has challenged the cost structure of several of the region's public utility districts (PUDs). Several PUDs imposed a moratorium on new applications for mining operations. The moratorium was issued as public utilities are required to hear and rule on applications for future power contracts. If the applications for mining operations continued to be approved, the contracts could have outpaced the public utilities' original projections and planning for demand increases. For example, in Douglas County—where the bulk of the new mining projects are occurring—a new 84-MW substation that was previously expected to provide enough capacity to serve the area for the next 30 to 50 years under a normal population growth scenario was fully subscribed in less than a year. In response, the PUDs will have to find alternatives for meeting the growing demand, such as purchasing power on the open market. In addition, there are concerns over the cost of upgrading new infrastructure, including substations and transmission lines, and who would bare those costs. PUDs in the region are also challenged by "rogue" miners, those that set up server equipment in homes without any proper licensing, permits, or infrastructure upgrades. These servers have a larger demand for energy than the infrastructure in a residential community is designed to provide. It is relatively easy for the PUDs to locate rogue miners given the abnormal increase in power demand; once identified, the miners are required to obtain the proper equipment and permits but may simply move operations to another unpermitted location. Other PUDs in the region are adapting to increased interest in mining operations. In December 2018, Chelan County PUD approved a new rate for blockchain operations starting April 2019 and lifted a moratorium. While some are concerned that Bitcoin mining operations and related infrastructure could eventually lead to utility stranded assets, others see Bitcoin as a stepping block to a larger possibly more prosperous endeavor—researching alternative uses for blockchain technology. The Department of Commerce for Douglas County intends to build a "blockchain innovation campus," which the county states could both assuage concerns over the volatility of the Bitcoin market and be an investment in the future diversification of the local economy. This approach, however, is not entirely without risk. For example, Giga Watt, a Bitcoin mining firm, declared bankruptcy in 2018, owing creditors nearly $7 million, $310,000 of which is owed to Douglas County Public Utility District. International Case Studies Due to the decentralized nature of cryptocurrency mining, miners are not typically bound by geographic location. These characteristics typically impact mining profits and contribute to selecting the ideal location for operations. While some countries may have favorable energy costs, they may have restrictive regulations (e.g., China). Below are a few international locations that have garnered the attention of cryptocurrency miners. Canada Canada generates affordable (albeit not the cheapest) hydroelectric power. Further, Canada has the added benefit of being in a cold weather climate, which can reduce overall cooling costs. In 2016, approximately 58% of total electricity generation in Canada was from hydropower resources. Canadian electricity providers generate 13 terawatt hours (TWh) more electricity than their domestic consumers need. Due to this excess in electricity some providers have offered incentives for miners. In January 2018, the public utility Hydro-Quebec offered electricity at a rate of $0.0394/kWh to cryptocurrency miners. Miners responded, and by February 2018, Hydro-Quebec has received around 100 inquiries. Based on these inquiries, 10 TWh of the surplus would have been obligated to mining. Hydro-Quebec did not expect the high degree of new demand (reportedly several thousand megawatts worth of project proposals) for electricity and in March 2018 ceased processing requests until guidelines are developed. In response to concerns with the sharp increase in electricity demand, Hydro-Quebec commissioned a study on the economic benefits of cryptocurrency mining. In May 2018, the study estimated that direct job creation for cryptocurrency mining ranges from 1.2 jobs per MW of a 20 MW operation to 0.4 jobs per MW for a 250 MW operation. Data centers, by comparison, can create between 5 and 25 jobs per MW. By June 2018, Hydro-Quebec announced it would triple the price it originally offered to new applicants for cryptocurrency mining operations (although the utility indicated this is a temporary adjustment until a final determination is made). Meanwhile towns across the Quebec Province have placed moratoriums on new mining operations citing energy demand, size, and noise concerns. Georgia Georgia has positioned itself as an attractive location for Bitcoin mining operations. In Georgia, mining company Bitfury's electricity rates reportedly range from around $0.05/kWh to $0.06/kWh. Georgia's low price of electricity can be attributed to large hydropower resources. In 2016, hydropower accounted for 81% of the total electricity generated. The low cost of electricity, plus a favorable regulatory environment, makes Georgia a favorable location for Bitcoin mining operations. In 2015, the government of Georgia offered Bitfury a $10 million dollar loan to mine in Georgia. The government expanded a power plant to provide electricity to Bitfury's cryptocurrency mining facility at no additional cost. Local Bitcoin miners, however, are having a difficult time competing with Bitfury. Smaller local mining pools were not offered similar incentives and have been struggling to mine in a low-price environment. Furthermore, some locals criticize the government for providing Bitfury incentives. The Georgian government has created tax-free zones for mining activities and electricity. Without a tax regime in place for mining, some Georgian lawmakers claim that Georgians are losing possible tax revenue. Iran Iran also has relatively cheap electricity making it attractive to mining operations. Iran's electricity mix is dominated by natural gas. According to the U.S. Energy Information Administration, Iran is the third largest producer of dry natural gas in the world at nearly 9.5 trillion cubic feet (Tcf) in 2017 and most of it (6.9 Tcf) was consumed domestically. In addition, Iran subsidizes electricity produced from fossil fuels. According to International Energy Agency data from July 23, 2019, subsidies for electricity were valued at $16.6 billion in 2018. With energy subsidies, average electricity prices in Iran are reportedly around $0.006/kWh, far cheaper than even in China. Despite the low price of electricity in Iran, miners face other challenges, such as U.S. sanctions. The decentralized and pseudonymous nature of Bitcoin transactions may make financial sanctions imposed on governments and individuals difficult to enforce. However, Bitcoin transactions are publicly recorded on its digital ledger. According to the U.S. Department of the Treasury Under Secretary for Terrorism and Financial Intelligence, We are publishing digital currency addresses to identify illicit actors operating in the digital currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and [Anti-Money Laundering and Countering the Financing of Terrorism] AML/CFT safeguards to further their nefarious objectives. Since the reintroduction of U.S. sanctions, the Iranian government has recognized a potential role for cryptocurrencies. In January 2019, the Central Bank of Iran presented a draft of new cryptocurrency regulation. Digital currencies, not backed by the Central Bank, will be restricted as a form of payment inside Iran. The draft framework, however, would authorize rial-backed cryptocurrency use, ICOs, mining, and other crypto-related activities. These draft regulations and the possible negative consequences from the United States may keep some miners from relocating to Iran, despite the low cost of electricity. Iranian state media reported that Tadvin Electricity Company saw an increase in energy demand of 7% due to cryptocurrency mining activities in June 2018. In response, Iran's Power Ministry is reportedly considering enforcing special tariffs on cryptocurrency miners. The Iranian Cabinet reportedly ratified a bill in August 2019 that introduces new rules for the cryptocurrency market in Iran. The regulations reportedly stipulate that mining cryptocurrencies would be allowed in Iran if certain conditions are met. Conditions reportedly include receiving approval from Iran's Ministry of Industry and conducting mining activities outside of provincial centers (with exceptions for Tehran and Esfahan where additional restrictions may apply). Blockchain Technology Potential for the Energy Sector Blockchain is a method of quickly validating transactions and of record keeping for large quantities of data. Some blockchains and cryptocurrencies do not operate through a decentralized, permission-less network like Bitcoin. Within the energy sector, a number of opportunities for blockchain technology have been proposed. These opportunities include smart contracts, distributed energy resource record keeping, and ownership records. One of the more easily transferrable options for blockchain is trading Renewable Energy Credits (RECs). Using blockchain to trade RECs could provide customers the ability to purchase RECs without the need for a centralized entity to verify transactions. In October 2018, a subsidiary of the PJM Interconnection LLC—a regional transmission organization that operates an electric transmission system serving part of the Eastern Interconnection electricity grid —announced plans for testing blockchain technology to trade RECs. Other more advanced utilizations for blockchain in the energy sector could be highly disruptive. For example, there is increasing interest in net metering and a transactional grid (i.e., where producers of distributed energy resources, such as rooftop solar, can sell the electricity to nearby consumers). Prototype projects have relied upon blockchain technology among other peer-to-peer approaches to facilitate renewable energy transactions at the local level. Other peer-to-peer efforts include managing virtual power plant operations and enabling those who do not own renewable energy systems to pay for a portion of the energy generation of a host's system in exchange for a reduction on their utility bills (e.g., renters paying for a portion of an apartment building's rooftop solar system). If such applications are found to be practical and economical, blockchain technology could alter the manner in which electricity customers and producers interact. Traditionally electric utilities are vertically integrated. Blockchain could disrupt this convention by unbundling energy services along a distributed energy system. For instance, a customer could directly purchase excess electricity produced from their neighbor's solar panels instead of purchasing electricity from the utility. On the one hand, this could result in a more transparent and efficient system. Blockchain could encourage more competition among generators and more flexibility and choice for consumers. On the other hand, unbundling energy services could lead to concerns over distribution control to accommodate the decentralization. Furthermore, storing vast quantities of data about critical infrastructure on distributed ledgers may introduce additional cybersecurity concerns. The sale of electricity via blockchains that are independent of a conventional utility framework may be subject to significant legal interpretation, and potentially represents the intersection of various federal and state statutes and regulations. Jurisdiction over the sale of electricity from a distributed energy resource or electric vehicle charging station hinges upon its definition as either a retail transaction or a sale for resale. Retail transactions are generally defined by the Federal Energy Regulatory Commission (FERC) as "sales made directly to the customer that consumes the energy product," whereas sales for resale are defined as "a type of wholesale sales covering energy supplied to other electric utilities, cooperatives, municipalities, and Federal and state electric agencies for resale to ultimate consumers." States typically regulate retail electricity transactions, while FERC has jurisdiction over the transmission and wholesale sales of electricity in interstate commerce. One survey by the Electric Power Research Institute, collected data on the potential barriers and advantages of blockchain in utilities. Of those surveyed, utilities in the United States were in early pilot stages or in the research phase, while some utilities in Europe had been using blockchain for over a year. Respondents identified opportunities and challenges to investment in blockchain technology with 77% of respondents identifying concerns that the energy industry "lacks appropriate standards." Options for Congress to Address Cryptocurrency's Energy Consumption In addition to state and local policy efforts that seek to mitigate the regional effects of growth in cryptocurrency mining, there are options that could be adopted by the federal government to improve the energy efficiency of mining operations. Further, as the financial and energy sectors, among others, explore adopting blockchain, Congress may consider options to curb the energy intensity of the technology. Minimum Energy Conservation Standards An approach to reducing the energy consumption of cryptocurrencies could include the establishment of minimum energy conservation standards for the equipment engaged in mining activities or the cooling equipment that maintains efficient mining operations. The Department of Energy (DOE) administers national energy efficiency standards for appliances and other equipment. DOE maintains federal energy efficiency standards as authorized under the Energy Policy and Conservation Act ( P.L. 94-163 , 42 U.S.C. §§6201-6422) as amended. DOE's Appliance and Equipment Standards program sets minimum energy efficiency standards for approximately 60 commercial product categories. There are no national standards for computer products. In 2012, DOE issued a request for information regarding miscellaneous residential and commercial electrical equipment, and in 2014 issued a proposed determination of coverage for computers and battery backup systems. Some view voluntary and market-driven approaches as more appropriate for computer technology than minimum energy conservation standards. Others state the importance of public and private sector collaboration in developing energy efficiency standards that are "ambitious and achievable." Congress may consider whether minimum national energy efficiency standards that address cryptocurrency mining should be established. Such standards could focus on the specific technology used by cryptocurrency miners—ASICs—or could focus on computer and battery backup systems as defined within DOE's proposed determination. DOE published energy conservation standards and test procedures for computer room air conditioners (CRACs) on May 16, 2012. According to the final rule, a CRAC is defined as: A basic model of commercial package air conditioning and heating equipment (packaged or split) that is: (1) Used in computer rooms, data processing rooms, or other information technology cooling applications; (2) rated for sensible coefficient of performance (SCOP) and tested in accordance with 10 CFR 431.96, and (3) not a covered consumer product under 42 U.S.C. 6291(1)–(2) and 6292. A computer room air conditioner may be provided with, or have as available options, an integrated humidifier, temperature, and/or humidity control of the supplied air, and reheating function. DOE established 30 different equipment classes for CRAC and set minimum requirements for each class. Initial compliance dates of October 29, 2012, or October 29, 2013, were established, depending upon the equipment class. DOE is required to review test procedures for covered products at least once every seven years. The frequency requirement for reviewing energy efficiency standards of covered products is no later than six years after issuance of a final rule. DOE issued a request for information regarding test procedures for CRACs on July 25, 2017. Voluntary Energy Efficiency Standards In addition to minimum national energy efficiency standards issued by DOE, the U.S. Environmental Protection Agency (EPA) and DOE jointly administer the voluntary ENERGY STAR labeling program for energy-efficient products, homes, buildings, and manufacturing plants. ENERGY STAR has standards for miscellaneous residential and commercial electrical equipment—including computers and displays. ENERGY STAR also has specifications for enterprise servers, data storage equipment, small network equipment, large network equipment, and uninterruptible power supplies. Congress may consider whether ENERGY STAR specifications for cryptocurrency mining technology are needed, or whether existing specifications for equipment used in data centers are appropriate. Data Center Energy Efficiency Standards Congress may also choose to consider the creation or adoption of energy efficiency standards for data centers used by mining companies. Verifiable information on cryptocurrency mining power usage is limited and based on what is voluntarily reported. Under these circumstances, it is reported that as cryptocurrency mining centralizes and professionalizes, mining facilities are taking on characteristics (e.g., power and cooling needs) that are similar to other large computing facilities, such as data centers. One option for improving the energy efficiency of Bitcoin mining could be to establish energy efficiency standards for data centers or large computing facilities. According to DOE, data centers are energy-intensive compared to other building types. DOE estimates that data centers account for approximately 2% of total U.S. electricity use. In 2014, data centers in the United States consumed an estimated 70 billion kWh, and are projected to consume approximately 73 billion kWh in 2020. The growth in cloud computing services has led to commitments by some data-centric companies to power data centers with renewable energy. Although there are no national efficiency requirements for data centers, the federal government has taken steps to improve the efficiency of its own data centers. In 2010, the Federal Data Center Consolidation Initiative (DCCI) was established. The Federal Information Technology Acquisition Reform Act (FITARA, P.L. 113-291 ) was enacted on December 19, 2014, to establish a long-term framework through which federal IT investments could be tracked, assessed, and managed, to significantly reduce wasteful spending and improve project outcomes. The DCCI was superseded by the Data Center Optimization Initiative (DCOI) in 2016. The DCCI established and the DCOI maintains requirements for agencies to develop and report on strategies "to consolidate inefficient infrastructure, optimize existing facilities, improve security posture, achieve cost savings, and transition to more efficient infrastructure." The DCOI also included energy efficiency goals for data centers: 1. Existing tiered data centers to achieve and maintain a power usage effectiveness (PUE) of less than 1.5 by September 30, 2018, and 2. New data centers must be designed and maintain a PUE no greater than 1.4, and are encouraged to achieve a PUE no greater than 1.2. For the PUE metric, the DCOI references Executive Order (E.O.) 13693 and the implementation instructions. E.O. 13693 was revoked by and replaced with E.O. 13834, which does not discuss data centers. The implementation instructions for E.O. 13834 state that "data centers are energy intensive operations that contribute to agency energy and water use and costs," and encourage agencies "to implement practices that promote energy efficient management of servers and Federal data centers," and "to install sub-meters, including advanced energy meters, in data centers where cost effective and beneficial for tracking energy performance and improving energy management." The authorization of the DCOI was extended until October 1, 2020, by the FITARA Enhancement Act of 2017 ( P.L. 115-88 ). Congress may choose to consider whether federal data center PUE requirements should be extended to certain types of data centers outside the federal government. For Bitcoin mining facilities, reportedly little is known about their operations, including power usage effectiveness. Options for Federal Regulation of Blockchain Technology for Distributed Energy Rules and regulations governing the retail sale of electricity generally originate with a state public utility commission. An electric utility is defined in federal law as any person, state, or federal agency "which sells electric energy." Definitions may be found in Public Utility Regulatory Policies, 16 U.S.C. Section 2602. This definition could potentially be interpreted that generators of electricity that make energy trades using blockchain technology are electric utilities by virtue of the fact that they sell electricity, and are therefore subject to all laws, requirements, and regulations pertaining to electric utilities. Congress may choose to consider extending or clarifying FERC's role regulating blockchain technology use in the energy sector. While blockchain could be implemented as a means to validate peer-to-peer distributed electricity trading, these transactions could potentially still be subject to FERC oversight as engaging in a sale for resale. Applications of blockchain technology in the energy sector have been limited in scope to date; wide-scale adoption of blockchain technologies could pose additional vulnerabilities to grid operations. FERC may also have a role in considering whether the existing grid infrastructure is capable of handling more power movement at high speeds in response to blockchain users' transactions. Other potential issues could include data privacy, interoperability of technology solutions, and market structure. FERC has not issued guidance or announced standards associated with blockchain technologies. Within this context, utilities and industry groups may interpret the lack of guidance as a signal to continue business as usual. Appendix. Select Algorithmic Approaches to Crypto-Mining As the Bitcoin network's energy consumption grows, some have questioned whether the proof-of-work (PoW) algorithm that is used by Bitcoin is sustainable. Many alternative algorithms exist. PoW and two approaches that are conceptually less energy intensive—proof-of-stake and proof-of-authority—are discussed below and illustrated in Figure A-1 . Proof-of-Work Under proof-of-work (PoW), miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). The hash value ensures a user that the block of data sent has not changed. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hash value. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining. The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block. Generally, by solving the problem or puzzle, miners win the opportunity to post the next block and possibly receive a reward for doing so. In the case of Bitcoin, miners who create and publish new blocks in the blockchain are rewarded with Bitcoin. Once the problem is solved and a valid hash is identified, the miner announces it to the community. Other users can validate the solution immediately—without going through the resource-intensive computation process—by having transparent access to the entire history of the blockchain's transaction ledger. Once the majority of the community validates and confirms the block, the next block can be added to the chain. Proof-of-Stake Proof-of-stake (PoS) depends on the community's actual stake in the currency instead of consuming energy in a race to be the first to solve computations. The more currency a "forger" (i.e., the PoS term in lieu of the PoW term "miner") holds, the more transactions can be validated. This method skips the energy-intense hashing race. All of the currency is already created, and the amount is stagnant. Forgers earn currency through transaction fees for building a new block (and thereby validating a transaction). A new block is determined by the level of stake (e.g., wealth) a forger has invested in the cryptocurrency. Thus, forgers put their own cryptocurrency investment at risk and therefore would likely only build a block for valid transactions. If a forger added a block to the blockchain based on an invalid transaction, it would risk losing its stake. Potential energy reductions from use of PoS are leading to changes in some major cryptocurrencies. Ethereum—a platform that uses a cryptocurrency called Ether—plans to move to a PoS system and is currently working on the remaining challenges, such as scaling a PoS system and maintaining a decentralized system. The Ethereum network expects to go through several upgrade phases in order to fully transition to PoS. The timeline for this transition has not yet been revealed, but this new solution upgrade, known as Serenity, was announced at DevCon 4. The Serenity upgrade would utilize a new PoS algorithm called "Casper" that is intended to overcome some of the drawbacks (e.g., centralizing a traditionally decentralized currency) of a PoS community. Proof-of-Authority Proof-of-authority (PoA) is another method of validating transactions in a blockchain. Like much of the terminology associated with blockchain, there is not a formal definition of PoA, and the definition may differ from one group to another, depending on the purpose of the blockchain platform. One understanding of PoA—as it relates to cryptocurrency—has validators curating their own reputation in order to achieve payout. Validators earn their reputation by running software to put transactions into blocks that require a link to properly identify that validator. This method places every person in the network on equal footing—everyone only has one identity. An alternative understanding of PoA, among the supply chain industry, uses a blockchain network to track logistics transparently. PoA provides a level of scalability and security within private networks that PoS or PoW cannot. Limitations of PoS, PoA, and PoW PoS, PoA, and PoW algorithms have limitations. While PoS and PoA both reduce energy consumption levels and require far less sophisticated equipment, they both create a more controlling and limited environment. PoW requires community decisionmaking. PoS and PoA are more individualistic. This could undermine the concept of the decentralized nature of the distributed ledger system design, which is one of the fundamental principles in cryptocurrency. Cryptocurrency was developed to move away from the centralized power of the banking system and move toward a decentralized network. The Ethereum upgrade is intended to integrate several new aspects and is expected to achieve a more decentralized system even when compared with PoS. Ethereum's "Phase Zero" of the PoS specification was frozen on June 30, 2019, with the formal launch targeted for January 3, 2020. PoW is also vulnerable to attacks. PoW blockchains publish new blocks to the longest available chain. Although difficult to accomplish, a malicious actor could devote overwhelming computational resources to rewriting a blockchain—developing different transactions with different nonce and hash values. This is known as the "51% attack." At a point where their chain is the longest, the malicious actor could publish the blockchain, and the system would accept it as the valid one. By rewriting the chain, the malicious actor would reestablish the distribution of resources (i.e., which accounts have Bitcoin and how much the account holds). This would require substantial energy consumption, space, equipment, and money, and would all have to be done covertly to avoid being caught. While this may appear to be difficult to execute, PoW algorithms are not invulnerable.

The popularity of cryptocurrencies such as Bitcoin and the underlying blockchain technology presents both challenges and opportunities to the energy sector. As interest in Bitcoin and other cryptocurrencies has increased, the energy demand to support cryptocurrency "mining" activities has also increased. The increased energy demand—when localized—can exceed the available power capacity and increase customers' electricity rates. On the other hand, not all cryptocurrencies require energy-intensive mining operations. Some cryptocurrencies can operate under algorithms that require less energy. In addition, blockchain technologies could present opportunities for the energy sector by facilitating energy and financial transactions on a smart grid. Bitcoin and other cryptocurrencies can be used to make payments without banks or other third-party intermediaries, and are sometimes considered virtual currency. The technology underlying these cryptocurrencies is blockchain. A blockchain is a digital distributed ledger that enables parties who may not otherwise trust one another to agree on the current ownership and distribution of assets in order to conduct new business. New blocks may be added to a blockchain through a variety of methods. In mining blocks, users seek to add the next block to the chain. For Bitcoin, new blocks are added to the blockchain through a proof-of-work (PoW) algorithm. Under PoW, miners—those seeking to add a block to a blockchain—are presented a difficult computational problem. Once the problem is solved, other users can validate the solution and confirm the block, adding the next block to the chain. In the case of Bitcoin, miners who create and publish new blocks are rewarded with Bitcoin. Less energy intensive, alternative algorithms exist, such as proof of stake and proof of authority. Cryptocurrency mining through PoW requires substantial energy to (1) operate the devices computing the calculations required to maintain the integrity of the blockchain and (2) thermally regulate the devices for optimal operation. Devices have different performance capabilities and have different power requirements. Generally, the device, or a cluster of devices, that can perform more calculations per second will require more energy for powering and cooling the device or devices. Global power requirement estimates for Bitcoin have increased within the last five years. Network power estimates for 2018 range between 2,500 megawatts (MW) and 7,670 MW, which, for comparison, is nearly 1% of U.S. electricity generating capacity. Opinions differ on whether future growth in Bitcoin will significantly impact energy consumption and subsequent carbon dioxide (CO 2 ) emissions. Cryptocurrency mining includes costs associated with equipment, facilities, labor, and electricity. Some users pool computational resources to solve PoW problems faster, and are on a worldwide hunt for cheap, reliable electricity in abundance. While many mining pools are in China, some have been able to utilize closed industrial facilities in the United States that can provide abundant electricity at affordable rates. According to a study in 2017, nearly three-quarters of all major mining pools are based in either China (58%) or in the United States (16%). By some estimates, the state of Washington hosted 15%-30% of all Bitcoin mining operations globally in 2018. Governments are developing various policies in response to growth in energy demand by cryptocurrency mining activities. In some areas, applications from potential mining companies have exceeded the available capacity. Other areas have offered reduced electricity rates to attract miners. In the United States, in addition to efforts at the state and local level, there are potential options that could be adopted by the federal government to improve the energy efficiency of mining operations. Potential federal policy options include minimum energy conservation standards, voluntary energy efficiency standards, and data center energy efficiency standards. In addition to the challenges that cryptocurrency mining presents to the energy sector, there are also opportunities, particularly for blockchain. These may include electric vehicle charging infrastructure and distributed energy resources, among others. The U.S. electricity grid is critical infrastructure and subject to certain regulations to maintain safe and reliable operations. Opinions differ as to a potential role for blockchain technology in the energy sector. The popularity of cryptocurrencies such as Bitcoin and the underlying blockchain technology presents both challenges and opportunities to the energy sector. As interest in Bitcoin and other cryptocurrencies has increased, the energy demand to support cryptocurrency "mining" activities has also increased. The increased energy demand—when localized—can exceed the available power capacity and increase customers' electricity rates. On the other hand, not all cryptocurrencies require energy-intensive mining operations. Some cryptocurrencies can operate under algorithms that require less energy. In addition, blockchain technologies could present opportunities for the energy sector by facilitating energy and financial transactions on a smart grid. Bitcoin and other cryptocurrencies can be used to make payments without banks or other third-party intermediaries, and are sometimes considered virtual currency. The technology underlying these cryptocurrencies is blockchain. A blockchain is a digital distributed ledger that enables parties who may not otherwise trust one another to agree on the current ownership and distribution of assets in order to conduct new business. New blocks may be added to a blockchain through a variety of methods. In mining blocks, users seek to add the next block to the chain. For Bitcoin, new blocks are added to the blockchain through a proof-of-work (PoW) algorithm. Under PoW, miners—those seeking to add a block to a blockchain—are presented a difficult computational problem. Once the problem is solved, other users can validate the solution and confirm the block, adding the next block to the chain. In the case of Bitcoin, miners who create and publish new blocks are rewarded with Bitcoin. Less energy intensive, alternative algorithms exist, such as proof of stake and proof of authority. Cryptocurrency mining through PoW requires substantial energy to (1) operate the devices computing the calculations required to maintain the integrity of the blockchain and (2) thermally regulate the devices for optimal operation. Devices have different performance capabilities and have different power requirements. Generally, the device, or a cluster of devices, that can perform more calculations per second will require more energy for powering and cooling the device or devices. Global power requirement estimates for Bitcoin have increased within the last five years. Network power estimates for 2018 range between 2,500 megawatts (MW) and 7,670 MW, which, for comparison, is nearly 1% of U.S. electricity generating capacity. Opinions differ on whether future growth in Bitcoin will significantly impact energy consumption and subsequent carbon dioxide (CO 2 ) emissions. Cryptocurrency mining includes costs associated with equipment, facilities, labor, and electricity. Some users pool computational resources to solve PoW problems faster, and are on a worldwide hunt for cheap, reliable electricity in abundance. While many mining pools are in China, some have been able to utilize closed industrial facilities in the United States that can provide abundant electricity at affordable rates. According to a study in 2017, nearly three-quarters of all major mining pools are based in either China (58%) or in the United States (16%). By some estimates, the state of Washington hosted 15%-30% of all Bitcoin mining operations globally in 2018. Governments are developing various policies in response to growth in energy demand by cryptocurrency mining activities. In some areas, applications from potential mining companies have exceeded the available capacity. Other areas have offered reduced electricity rates to attract miners. In the United States, in addition to efforts at the state and local level, there are potential options that could be adopted by the federal government to improve the energy efficiency of mining operations. Potential federal policy options include minimum energy conservation standards, voluntary energy efficiency standards, and data center energy efficiency standards. In addition to the challenges that cryptocurrency mining presents to the energy sector, there are also opportunities, particularly for blockchain. These may include electric vehicle charging infrastructure and distributed energy resources, among others. The U.S. electricity grid is critical infrastructure and subject to certain regulations to maintain safe and reliable operations. Opinions differ as to a potential role for blockchain technology in the energy sector.

CRS_R45780

Introduction The United States is currently experiencing the longest economic expansion in its history. Although short-term forecasts are predicting continued economic expansion, some economists have expressed uncertainty over how long the expansion will continue. History has shown that economic expansions inevitably give way to economic slowdowns. If the next slowdown is significant, the economy could enter a recession, which is typically characterized by falling output and rising unemployment. Predicting when the economy may transition from expansion to recession, however, is notoriously difficult, as the ebb and flow of the economy is determined by many different factors, including a number that lie outside the country's borders. Countercyclical fiscal policy may help to stabilize the economy when it enters a recession. Countercyclical fiscal policy refers to short-term tax and spending adjustments to stimulate consumer and business demand in an effort to counteract economic contraction and return the economy to its potential. Effective fiscal stimulus does not always require contemporaneous legislative action by Congress. There are certain "automatic stabilizers" that work without congressional action to lower taxes and increase spending as the economy weakens. As a result, an economic slowdown or recession does not necessarily warrant a policy response. However, Congress has a range of options it could consider when designing a stimulus package should a recession occur and automatic stabilizers are not sufficient to counteract it. This report identifies and summarizes options Congress may consider in response to a recession. The analysis begins by reviewing the features effective countercyclical fiscal policies are commonly thought to have, and then distinguishes between countercyclical and growth-oriented policies. Next, the report summarizes and evaluates potential fiscal policy options that Congress could consider. The options presented are drawn from those policies considered during the Great Recession for which estimates of their potential economic impact exist. The report concludes with a brief discussion about enacting fiscal stimulus in the context of the country's long-run budget outlook. Effective Countercyclical Fiscal Policy Effective fiscal policy in response to recessions of average duration and severity is usually considered to have three general features: it is timely, targeted, and temporary. For fiscal policy to be effective in returning the economy to its potential, it must stimulate the economy at the appropriate time. Implemented too early, and there is a risk that fiscal tools are wasted and not available if the downturn becomes more severe. Implemented too late, and there is a risk that the downturn becomes so severe that much more fiscal (and monetary) stimulus is needed to stabilize the economy. Alternatively, the economy could have already returned to a path toward full potential on its own, in which case untimely stimulus risks overheating the economy. Timely implementation of fiscal policy is made inherently difficult by three well-known lags: the lag in recognizing a recession, the lag in negotiating and implementing a policy response, and the lag between policy implementation and when the economy is affected. A targeted fiscal stimulus will produce the most "bang for the buck," or, in economics jargon, involve changes with the largest "multipliers." Fiscal policy multipliers measure the change in economic output in response to a dollar change in taxes or a dollar change in spending. For example, a multiplier of 1.5 means that $1.00 of stimulus will lead to a $1.50 change in output. Conversely, a multiplier of 0.75 means that $1.00 of stimulus will lead to a $0.75 change in output. Larger multipliers suggest larger stimulative effects. Economists use multipliers to estimate the impact a particular fiscal policy, or collection of polices, will have on the economy. On the revenue side, it appears that the largest multipliers are associated with tax reductions that are targeted at lower-income households and those with less access to liquid assets. These individuals are more likely, out of necessity, to increase their spending in response to a tax cut or rebate than those with higher incomes or more accessible forms of wealth. Business tax reductions also are estimated to stimulate demand, but most analyses find the multiplier effects to be smaller than those of well-targeted individual tax reductions. This finding is the result of research that indicates businesses are slow to respond to investment tax incentives, that business tax rate reductions primarily benefit existing capital rather than new investment, and that hiring incentives do not directly address the primary factor that influences the decision to bring on more employees, which is the demand for businesses' products and services. Direct spending increases usually register as highly stimulative on a per-dollar basis, although some spending increases are able to work their way more quickly into the economy than others. For example, spending on unemployment benefits and food stamp assistance increase automatically during a recession and are targeted at households most vulnerable during a downturn. As a result, their potential to stimulate demand are usually estimated to be quite large. Assistance to state and local governments to relieve budgetary pressures and maintain spending are estimated to be moderately cost effective. Spending on infrastructure, while believed to have a significant impact on the economy given enough time, can take many months to take effect due to the length of time it takes to plan and complete such projects. Temporary stimulus can help to contain the budgetary impact of tax reductions and spending increases, which, in turn, can increase the effectiveness of the stimulus by mitigating the adverse effect large deficits can have on long-term growth. Although fiscal stimulus must result in a deficit to affect overall spending, deficits themselves are not necessarily problematic. Large and sustained deficits, however, can have undesirable effects. For example, as the economy starts to recover from a downturn, continued deficits can lead to higher interest rates as the government competes with the private sector for loanable funds. Higher interest rates can counteract the stimulus as the government's need to finance deficits "crowds out" private-sector investment and consumption. These higher interest rates can also attract borrowing from abroad, causing the dollar to appreciate and reducing net exports. Deficits can also harm longer-run economic growth since they reduce national saving, which is closely linked to the capital formation process that is critical for economic growth. Countercyclical Versus Growth-Oriented Policies Before discussing potential policy options for countering an economic downturn, it is useful to distinguish between countercyclical fiscal policies and growth-oriented policies. Some confusion arises because of the terminology used and the time frame in question. Economists view cyclical fluctuations, also known as the business cycle, as short-run phenomena that occur as the result of various external "shocks" that temporarily move the economy away from its long-run growth path. These transitory shocks often influence the economy via changes in total spending or, in economic terms, aggregate demand. During a recession, total spending generally falls below the economy's productive capacity, resulting in rising unemployment and falling capital utilization. In an expansion, total spending rises until it matches the economy's productive capacity, requiring firms to deploy previously idle resources. Countercyclical fiscal (and monetary) policies have the potential to affect aggregate demand (i.e., total spending) and decrease the severity of fluctuations in the economy that occur over the business cycle. In contrast to the business cycle, economic growth is a long-run phenomenon that is tied to factors that determine the productive capabilities of the economy. Thus, whereas countercyclical policies tend to focus on the demand side of the economy, growth-oriented polices target the supply side with the goal of influencing the sources of growth—mainly, the quantity and quality of employed labor, the amount of capital, and the level of technology. The sources of long-run growth are taken to be more or less fixed in the short run, making them less of a concern over a single business cycle. Growth-oriented policies therefore take a longer-term approach to structuring the government's tax and spending initiatives with the aim of improving the incentives to work, invest, and innovate. Part of this approach is minimizing uncertainty over tax and spending policy itself, so that households and businesses can make long-lasting decisions that will support growth. Another part of this approach is prudent management of deficits and the debt so that high interest rates do not inhibit growth factors, such as investment. This report analyzes policy options from a countercyclical, and not a long-term growth, perspective. Potential Countercyclical Fiscal Policy Tools Countercyclical fiscal policy tools may be sorted into two categories—automatic stabilizers and discretionary changes that require legislative action. Automatic stabilizers are features built into the economy's tax and transfer system that lower taxes and increase spending as the economy weakens. They take effect automatically without the need for congressional action. Discretionary policies refer to legislative changes to individual and business taxes, and to government spending enacted in response to economic conditions. The distinction between the two can become blurred; automatic stabilization policies can be modified in response to an economic downturn by legislative action, and discretionary changes could be made to take effect and expire automatically if certain criteria are met. The following sections review a select set of policy options that are often considered in response to a recession. The options are drawn from the Congressional Budget Office (CBO) and Moody's Analytics, both of which estimated the impact of specific policies or approaches in response to the Great Recession. While a general approach to stimulating a weakened economy with reduced taxes and increased spending is often advocated, specific policies have different impacts on the economy and differing administrative complexities. CBO's and Moody's estimates provide insight into which specific policy options may be most worthwhile to implement during the next downturn. The policy options presented—or variations of them—are ones commonly considered when designing a fiscal stimulus package and are not unique to either CBO or Moody's. However, policymakers may consider that the economy has the potential to return to full employment without intervention. As such, one policy option is to allow the economy to correct itself. Fiscal policy's estimated impact in response to the next recession is likely different from the impact estimated by CBO and Moody's in response to the Great Recession. Generally accepted economic theory holds that fiscal policy has a greater impact on the economy the further it is from full employment. This is because there is a greater abundance of idle resources that can be brought back into producing goods and services. The Great Recession was the most severe downturn since the Great Depression, and the economy was far from full employment. Thus, estimates of the impact of stimulus at that time may be an upper bound for fiscal policy's stimulative effect. Additionally, hindsight has allowed economists to improve their estimation techniques. Still, the relative magnitudes estimated by CBO and Moody's will conceivably still hold if they are updated in the future. It is important to briefly discuss the inherent difficulty of estimating the exact impact specific fiscal policies could have on the economy. All of the estimates presented below (and elsewhere) are based on models that rely on a set of assumptions about how individuals and businesses may react to policy changes, and on assumptions about how the Federal Reserve may adjust monetary policy to accommodate or to offset a fiscal policy change. The assumptions are subject to significant uncertainty. It is also never known what would happen in the absence of a particular stimulus package change (i.e., the counterfactual). As a result, the focus should be on the relative magnitudes of policies' impacts and not on individual point estimates. One set of CBO estimates presented below is qualitative. Still, the estimates presented in this section were made using conventional methods and provide a starting point for understanding how specific policies may affect the economy. Automatic Stabilizers The automatic stabilizers that receive the most attention are the progressive structure of the income tax system and Unemployment Compensation (UC) benefits. During an economic downturn, more taxpayers begin to move into lower marginal tax brackets as employment and incomes fall, reducing the proportion of income subject to tax and helping to cushion the fall in spending. Likewise, with rising unemployment, more individuals will have met the conditions required to qualify for UC benefits (i.e., state government spending increases), which provide some income support and, in turn, can help mitigate the negative impact rising unemployment has on aggregate demand. Other programs that may act as automatic stabilizers include the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp program), Medicaid, and Temporary Assistance for Needy Families (TANF). Automatic stabilizers are attractive because they can be designed to satisfy the three criteria for effective countercyclical policy. These programs take effect automatically in a timely fashion to help stabilize demand as the economy begins to weaken and even before a recession has been declared. Therefore, the lag between recognition and implementation is reduced. Automatic stabilizers are also targeted to individuals whose incomes are falling, which suggests a large "bang for the buck." And finally, these programs generally continue to provide support if the downturn becomes more severe, but gradually taper off as the economy begins to improve, making them temporary. However, if the recession is long enough, some individuals may exhaust their benefits before the recession is over. For example, UC benefits may be claimed by an individual for six months or less in most cases. Making adjustments to automatic stabilizers in response to a recession is discussed in the " Government Spending " section. While an attractive first line of defense against a weakening economy, automatic stabilizers may not provide enough stimulus to counteract a severe or prolonged economic downturn. In such cases, the stabilizers may need to be adjusted or supplemented with additional fiscal tools. Modifying automatic stabilizers before or in response to a recession—for example, by expanding or extending coverage—arguably crosses into the realm of discretionary fiscal policy. Potential modifications to current automatic stabilizers are discussed in the " Direct Payments and Transfers to Households " section of the report, along with estimates of the economic impact of these changes. Neither CBO nor Moody's estimated the impact of the baseline automatic stabilizers. Individual Tax Relief Enacting individual tax relief to boost demand is an option for stimulating the economy since personal consumption accounts for approximately 70% of U.S. GDP. Tax cuts or rebates that are spent will have the largest impact; tax cuts that are saved do not lead to additional spending and therefore have no stimulative impact. As discussed previously, tax relief directed toward lower- and moderate-income households appears to provide the most "bang for the buck." Delivering targeted tax relief to these households, however, can be complicated by the fact that many of them do not pay income taxes and may not file tax returns. Additionally, careful consideration is needed about how to deliver any tax relief so that household incomes are increased as soon as possible. Table 1 summarizes CBO's and Moody's estimates of the impact of several individual tax policies—discussed in more detail below—that were considered, and in some cases enacted, in response to the Great Recession. Lump-Sum Rebates One way to provide an infusion of money directly into the budgets of lower- and moderate-income households is to issue tax "rebates." Limitations on the administrative aspects of delivering such rebates, sometimes also referred to as "lump-sum" or "cash" rebates, has resulted in the stimulus being structured as an advanced tax credit based on a prior year's income, but used to offset a future year's tax liabilities. This was the general approach used most recently in response to the 2001 recession and again during the Great Recession. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) provided a lump-sum rebate check of up to $600 for joint filers, $500 for head of household filers, and $300 for single filers. However, the rebate was actually an advanced credit for taxes to be paid on income earned in 2001. The advanced credit was based on taxpayers' 2000 tax returns. Taxpayers then included the credit when completing their 2001 tax returns and were allowed to keep any overpayment if the credit they received (estimated using their 2000 returns) was too large. Individuals who had no tax liability in 2000 were ineligible for the credit. Eligible rebate recipients received their checks between July and October of 2001. The legislation was enacted in early June. The Economic Stimulus Act of 2008 (ESA; P.L. 110-185 ) also provided a tax rebate to individuals. Like the 2001 rebate, the ESA rebate was actually an advanced credit for 2008 taxes, based on returns filed in 2007. Unlike the 2001 rebate, the ESA rebate was made partly refundable to target lower-income households. The rebate was equal to the lesser of $600 ($1,200 for joint filers) and the individual's 2007 tax liability. Since the calculation depended on taxes paid in 2007, lower-income households who did not need to file a 2007 return would have been ineligible for a rebate. However, the law stipulated that for those who had not filed a 2007 tax return, but whose total income was at least $3,000, the rebate was equal to $300 ($600 for joint filers). Rebate recipients also were eligible for an additional $300 rebate per child under the age of 17. Disbursements of rebate checks mostly occurred between the end of April and middle of May of 2008. Making Work Pay Tax Credit and Payroll Tax Holiday An alternative to issuing lump sum rebates is to spread the tax reduction over time. The American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) attempted such an approach by creating the Making Work Pay (MWP) tax credit, which was available in 2009 and 2010. The MWP tax credit was equal to 6.2% of a taxpayer's earned income up to $400 for single filers and $800 for joint filers. Because individuals must pay 6.2% of their income toward the Social Security portion of payroll taxes, and because the credit was fully refundable, the credit effectively eliminated the Social Security tax on the first $6,450 of a single filer's income and the first $12,900 of joint filers' income. The credit began phasing out for workers with incomes exceeding $75,000 ($150,000 for joint filers), and was not available to those with incomes greater than $95,000 ($190,000 for joint filers). The refundability of the credit helped to benefit lower-income households. The MWP tax credit expired at the end of 2010. Following the expiration of the MWP credit, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) enacted a payroll tax "holiday." The holiday reduced workers' share of the Social Security payroll tax by 2 percentage points, from 6.2% to 4.2% on income up to $106,800 for 2011. The analogous tax for self-employed workers was reduced similarly from 12.4% to 10.4%. Because payroll taxes are withheld from each paycheck a worker receives, the reduction provided a benefit spread out over the year. The holiday did not benefit the lowest-income workers as much as the MWP credit because to receive the same $400 benefit, an individual needed to earn $20,000. Additionally, workers whose income was not subject to the Social Security tax did not benefit from the holiday because they had no tax to be reduced. The holiday was extended two more times, once through February 2012, and then again through the end of 2012. Both the MWP tax credit and the payroll holiday assisted only individuals who were working. Because unemployment typically increases during a recession, neither of these policies assisted those who had lost their job. However, unemployed individuals did receive UC benefits. Reduction in Individual Income Tax Rates Taxes could be reduced by lowering individual income tax rates. The Internal Revenue Service (IRS) would need to publish new withholding tables to enable employers to adjust employee withholdings so the reduction would be reflected in workers' paychecks. The IRS could make this change rather quickly; new withholding tables were published within two months of the enactment of P.L. 115-97 , commonly referred to as the Tax Cuts and Jobs Act, or TCJA. A drawback of an across-the-board tax rate reduction, from a short-term stimulus perspective, is that it would not have the maximum effect on demand. To have maximum effect, tax reductions must target lower- and moderate-income households because the spending of these households is most responsive to increases in after-tax income. However, an across-the-board income tax rate reduction is not well-targeted to these households because they pay little or no income taxes, and therefore would not benefit much, or at all, from a tax rate reduction. At the same time, many of those who would not benefit from an income tax rate reduction are working and therefore paying payroll taxes. Because the stimuluative effect of an across-the-board rate reduction is low, so too is its cost effectiveness. Although households in the lower tax brackets would receive a benefit, the majority of such a tax reduction would flow to taxpayers at the upper end of the income distribution. This is because higher-income households pay a disproportionate share of income taxes. But as previously discussed, these households are estimated not to be as responsive to increases in after-tax income as lower- and moderate-income households. Combined with a likely large revenue loss from an across-the-board rate reduction, this implies that the "bang for the buck" would be low. The stimulative effect is further diminished if sizable deficits lead to higher interest rates, crowding out private investment. The cost associated with this approach could be reduced by limiting the reduction to the lower brackets. However, because of the marginal structure of the income tax, many upper-income households would receive a tax cut, albeit small relative to their income, because a portion of their earnings falls within the lower tax brackets. The costs could also be contained by making the reduction temporary, but compared to other options, it would still be relatively expensive. Reduction in Dividend and Capital Gains Taxes A reduction in taxes on capital gains and dividends is another option for providing individual tax relief as a countercyclical measure. Currently, long-term capital gains and dividends are taxed at rates of 0%, 15%, or 20%, depending on an individual's tax bracket. Capital gains and dividends qualify as long term if the underlying asset has been held for at least a year. Short-term capital gains are taxed at the individual's ordinary income tax rate; the maximum individual income tax rate in 2019 is 37%. Long-term capital gains and dividends have received preferential tax treatment to varying degrees since the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ). Prior to 1990, capital gains and dividends had been taxed at ordinary rates as the result of the Tax Reform of 1986 ( P.L. 99-514 ). Capital gains and dividends tax rates were last reduced (to 0% and 15%) in an attempt to stimulate the economy by the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ). The American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) increased the top rate to 20% for high-income individuals, resulting in the current three-rate regime. The Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) added a 3.8% tax on high-income individuals, bringing the effective top tax rate to 23.8%. The effectiveness of reducing taxes on capital gains and dividends in stimulating the economy is likely to be small. The overwhelming majority of capital gains and dividends income is received by taxpayers in the upper end of the income distribution, which implies the majority of any tax reduction would accrue to these taxpayers. For example, the Urban-Brookings Tax Policy Center (TPC) estimates that 95.8% of the tax on long-term capital gains and dividends is paid by taxpayers in the top 20% of the income distribution, and 76.5% is paid by taxpayers in the top 1%. Although there is an argument that lower taxes on investment income may be beneficial for longer-term growth, effective stimulus must increase demand in the short run. Business Tax Incentives The economy can also be stimulated by boosting business spending. The primary focus when targeting business spending has been new investment, which is a component of aggregate spending (demand). Business investment, while comprising a smaller share of GDP than consumer spending, is much more volatile than consumer spending and hence typically decreases more during recessions. However, the decline in investment spending may be in direct response to the decline in overall spending, which makes it difficult for policy to induce businesses to invest more. This section reviews a number of possible business tax incentives that Congress may consider during the next recession. Table 2 summarizes CBO's and Moody's estimates of the impact of several business tax polices—discussed in more detail below—that were considered, and in some cases enacted, in response to the Great Recession. Provide Incentives for Investment Incentives that directly target new investment are thought to be one of the more effective stimulus policies among business tax incentives. Two general approaches for encouraging investment are by accelerating depreciation or offering an investment tax credit. Accelerated depreciation allows a business to deduct from its income the cost of an investment faster than its useful (economic) life would dictate and, as a result, increases the after-tax return on eligible new investments. The most accelerated form of depreciation is expensing, and it allows a business to deduct the full cost of a qualified investment in the year it is purchased instead of spreading the deduction over a number of years. Accelerated depreciation is not currently available as a stimulus option since the 2017 tax revision ( P.L. 115-97 ) provided expensing for equipment through 2022, followed by a four-year phase-out period. An investment tax credit would allow a business to offset its tax liability by an amount equal to a fraction of its investment. The amount of investment that occurs in response to a tax credit depends on how responsive investment is to reduced investment costs. The empirical literature has not generally found total investment to be considerably responsive to tax incentives. Intuitively, this can be explained by the fact that investments require large and one-off expenditures involving durable assets that require time to plan and incorporate into the production process. The responsiveness of investment to tax incentives may be lower during recessions than more normal times since recessions are periods of heightened uncertainty, which reduces the desire to make investments. If investment incentives are to be included in a stimulus package, they are likely to be more effective if they are available for a short period of time to encourage businesses to take advantage of them and to limit the budgetary impact. Reduce the Corporate Income Tax Rate Reducing the corporate income tax rate could provide stimulus by increasing new corporate investment. Historically, however, corporate tax rate reductions have not been part of stimulus packages. When compared to alternative options, the short-term stimulus effect of a corporate rate reduction is likely to be small. This is for two primary reasons. First, investment incentives are most effective when they stimulate new investment. Although a reduction in the corporate tax rate would encourage some new investment by increasing the after-tax return to investment, it would also, and primarily, provide a windfall benefit to existing capital. Thus, the "bang for the buck" is expected to be quite low. Second, investment decisions are made with an eye toward future economic conditions since many assets are long-lived. If a rate reduction is temporary, or if corporate decisionmakers suspect rates will be higher in the future, the incentive to invest is lower. A rate reduction in response to the next recession may even be smaller than could be expected in the past because P.L. 115-97 permanently lowered the corporate tax rate from 35% to 21%. Net Operating Loss Carrybacks Allowing net operating losses to be carried back could provide tax relief for some businesses. When a business experiences a loss it owes no tax in that year (known as a loss year ). Currently, the business may use a loss to reduce future taxes by claiming it as a deduction against income earned after the loss year. This process is known as carrying forward a loss , and a business may carry a loss forward indefinitely until there is no more loss to be deducted. Prior to the 2017 tax revision ( P.L. 115-97 ), businesses were able to use losses to obtain a refund for past taxes paid, a process known as carrying back a loss . Losses had generally been limited to a two-year carryback since 1997, but this was temporarily extended to five years during the Great Recession. Businesses prefer to carry losses back rather than carry them forward because carrybacks produce an immediate and certain benefit, whereas carryforwards reduce taxes at some uncertain time in the future. Allowing losses to be carried back would help some firms with cash flow problems. A business in a loss position may have trouble making payroll and covering other operating expenses. Carryback losses would provide these firms with an infusion of cash and potentially allow them to ride out an economic downturn with less need to lay off workers. It would also allow firms in a loss position (or close to it) to benefit more from immediate expensing, which would help investment. The stimulative effects of loss carrybacks are generally thought to be small because they are not tied to increased investment or employment. Economic uncertainty may overshadow the incentive to invest during a recession, and profitable investment opportunities are less available during a recession. Hiring Incentives The tax code could be used to directly target rising unemployment during a recession via a hiring tax credit. During a downturn businesses cut back on hiring, and, depending on the severity of the recession, lay off employees. One way to address the reduction in the demand for employees is to reduce the cost of hiring and retaining workers by offering a tax credit tied to firms' payroll costs. To be most effective, only hiring and retention that would not otherwise occur would be eligible. This is inherently difficult because it is impossible to know whether a business is being encouraged to hire an employee or simply claiming the tax incentive because it is eligible. Past attempts to better target hiring and retention incentives have resulted in complex administrative issues, which have discouraged participation. These issues have created some skepticism over the effectiveness of this policy, and the literature has found mixed results. A deeper structural relationship between the employment decisions of firms and the performance of the economy would likely limit even a well-designed hiring incentive during a recession. The demand for labor by firms depends on the demand for its products and services. If consumers are withholding spending on goods and services, the firms' desire to hire workers to fill orders and produce goods is reduced regardless of a hiring incentive. Government Spending The government can boost aggregate demand directly with increased spending. Like tax incentives, spending policies can take many forms, but three broad categories are helpful for classifying government spending: direct payments and transfers to households, aid to states and local governments, and government purchases of goods and services. This section discusses each of these categories. Table 3 summarizes CBO's and Moody's estimates of the impact of several spending policies—discussed in more detail below—that were enacted in response to the Great Recession. Direct Payments and Transfers to Households Examples of direct payments and transfers to households include extending or enhancing UC benefits and increasing SNAP (formerly the Food Stamp program) benefits. These options would boost the disposable income of unemployed or underemployed individuals, who could be expected to spend nearly all of the stimulus. Therefore, the stimulative effect of direct payments and transfers to households in distress is believed to be large. These policies may also be comparatively simple to enact and administer because they would build on programs already in place. Congress has extended UC benefits in response to eight recessions in recent history. Extending the duration of UC benefits would give individuals who are unemployed more time to secure employment. Congress could also, or additionally, enhance the benefit amount recipients received. In addition to extending the duration of UC benefits, ARRA ( P.L. 111-5 ) also increased the amount eligible beneficiaries received by $25 each week. ARRA also provided for a tax exclusion up to the first $2,400 of unemployment benefits received. The increase in the standard deduction enacted by P.L. 115-97 , however, reduces the ability of an exclusion to enhance benefits. There is no consensus about how long of an extension or how large of an enhancement is appropriate. If the appropriate balance is not struck, there could be adverse effects, particularly with respect to accepting gainful employment once the economy has improved. SNAP benefits were also increased across-the-board during the Great Recession by ARRA ( P.L. 111-5 ). SNAP households' monthly benefit amounts are calculated using a maximum benefit and household-specific circumstances (such as household size). The ARRA provision specifically increased the maximum monthly benefit by 13.6%, thereby increasing the food purchasing power of eligible low-income households. Though the ARRA increase was originally expected to be effective through 2018, the duration of the increase in SNAP benefits was subsequently shortened to March 31, 2014, by P.L. 111-226 , and then to October 31, 2013, by P.L. 111-296 to offset the cost of these bills. Aid to States and Local Governments Aid to states and localities could support aggregate demand if their budgets become strained due to an economic downturn. Most states have balanced-budget requirements that limit their ability to carry out independent countercyclical policy. As states and municipalities experience budgetary pressure from declining tax revenue, state and local governments may need to raise taxes and cut spending, including laying off employees. Therefore, aid to states and localities, while not generally believed to be as stimulative as direct transfers to individuals, is predicted to be moderately effective at combating a downturn as a "defensive" stimulus that can help to maintain services, taxes, and employment. Typically aid to states has been provided through existing programs. Assistance could be provided through a general revenue transfer, although this approach is not typically used. In the past, one way Congress has provided aid to states is via Medicaid enhancement. In response to the Great Recession, ARRA ( P.L. 111-5 ) temporarily increased the federal medical assistance percentage (FMAP) by 6.2 percentage points. FMAP is the rate at which the federal government reimburses states for Medicaid expenditures and is used for determining the federal government's share of a number of other domestic social policy programs, such as the State Children's Health Insurance Program (CHIP) and foster care and adoption assistance. ARRA also provided funding to support state and local first responders, as well as school systems. Infrastructure Direct federal infrastructure investment, and aid to state and local governments to invest in infrastructure, is an option for supporting demand and stimulating the economy. Economic downturns often experience a drop in overall investment by the private sector. By making expenditures in public works, the government can offset the reduction in private investment while at the same time making investments in long-lived projects that will reap a benefit after the downturn has passed. Examples of types of infrastructure investments the government may make include roads, bridges, railroads, ports, airports, energy grids, and management of water resources, among others. Infrastructure investment may not be the ideal policy tool to combat a mild recession. The "bang for the buck" measure for government investment is usually estimated to be high, but infrastructure projects take a long time to get under way and a longer time to complete. There is a good chance that a recession could be over by the time the stimulus from such investment affects the economy. This does not mean that infrastructure investment is not desirable, and it may be justified based on longer-term growth policies. Stimulus and the Budget Outlook The United States' recent budget deficits and the country's long-run budget outlook could influence the size of any stimulus package. The FY2018 real (inflation-adjusted) deficit equaled 3.8% of gross domestic product (GDP), which was higher than the average federal deficit since FY1969 (2.9% of GDP). Real deficits are projected to increase over the next 10 years. In its latest economic forecast, the Congressional Budget Office (CBO) projected that U.S. debt held by the public would also increase over the next 10 years, from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029. Large and persistent budget deficits can hamper economic growth by lowering the rate of capital formation via reduced national saving, and can potentially offset short-term economic stimulus. At the same time, high levels of debt relative to GDP can constrain a country's borrowing capacity. There are no signs that federal borrowing capacity will be exhausted in the short term. However, Congress may consider the consequences of exhausted fiscal space in designing the next potential stimulus package since it would increase both deficits and the debt.

Although the United States is currently experiencing its longest economic expansion, history has shown that economic expansions inevitably give way to economic slowdowns. If the next slowdown is significant, the economy could enter a recession, which is typically characterized by falling output and rising unemployment. Short-term forecasts are predicting continued economic expansion, but predicting when the economy may transition from expansion to recession is notoriously difficult, as the ebb and flow of the economy is determined by many different factors, including a number that lie outside the country's borders. This report identifies and summarizes options Congress may consider in response to a possible recession. Recognizing that the economy has the potential to return to full employment without intervention, one policy option is simply to allow the economy to correct on its own with the support of certain "automatic stabilizers" already in place. Automatic stabilizers work without congressional action to lower taxes and increase spending as the economy weakens. Examples include the progressive structure of the income tax system and Unemployment Compensation (UC) benefits, among others. Congress also has a range of other options it could consider when designing a stimulus package should a recession occur and automatic stabilizers are not sufficient to counteract it. The options presented in this report are drawn from the Congressional Budget Office (CBO) and Moody's Analytics, both of which estimated the impact of specific policies or approaches in response to the Great Recession. While a general approach to stimulating a weakened economy with reduced taxes and increased spending is often advocated, specific policies have different impacts on the economy and differing administrative complexities. CBO's and Moody's estimates provide insight into which specific policy options may be most worthwhile to implement during the next downturn. The policy options presented—or variations of them—are ones commonly considered when designing a fiscal stimulus package and are not unique to either CBO or Moody's. The United States' recent budget deficits and the country's long-run budget outlook could influence the size of any stimulus package. Large and persistent budget deficits can hamper economic growth by lowering the rate of capital formation via reduced national saving, and can potentially offset short-term economic stimulus. At the same time, high levels of debt relative to gross domestic product can constrain a country's borrowing capacity. There are no signs that federal borrowing capacity will be exhausted in the short term. However, the consequences of exhausted fiscal space may be worth considering in designing the next stimulus package since it would increase both deficits and the debt.

CRS_R46208

What Are Digital Assets? Digital assets are assets issued and transferred using distributed ledger or blockchain technology. They are often referred to as crypto-asset , digital token , or cryptocurrenc y , among other terminology. Digital assets can be securities, currencies, or commodities. Although market participants use different terms to describe them, financial regulators have stated that—regardless of what they are called—financial activities, services, and market participants must adhere to applicable laws and regulations. In the case of digital assets, depending on their characteristics, this can include securities laws and regulations. One key difference between digital and traditional assets is an asset's ownership and exchanges of ownership. Whereas traditional assets are generally recorded in private ledgers maintained by central intermediaries, digital assets' ownership and exchange are generally recorded on a decentralized digital ledger. Digital Assets as Securities The Securities and Exchange Commission (SEC) is the primary regulator overseeing securities offers, sales, and investment activities, including those involving digital assets. However, not all digital assets are securities. In general, a security is "the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." When a digital asset meets the criteria defining a security, it would be subject to securities regulation. For example, most of the initial coin offerings (ICOs) are securities, but Bitcoin is not a security, mainly because it does not have a central third-party common enterprise. Market intermediaries (e.g., investment advisers, trading platforms, and custodians) involved with digital asset investment, trading, and safekeeping could also be subject to relevant securities regulation. Securities regulations could apply if the intermediaries are directly engaged in the security-based digital asset transactions or if they use digital assets (including non-security-based digital assets) to facilitate securities transactions. This report focuses on digital assets and activities that are subject to securities regulation. It discusses the objectives and policy rationale of securities laws and regulations; SEC initiatives to address specific regulatory challenges arising from certain unique digital asset features that raise questions concerning the adequacy of the existing regulatory framework; and policy issues for congressional and industry consideration in five selected areas: initial coin offerings, stablecoins, digital asset exchange-traded funds, digital asset custody, and digital asset trading. Securities Regulation Background Securities regulation generally applies to all securities and related intermediaries, whether they are digital or traditional. This section broadly discusses the objectives and policy rationale behind securities laws and regulations. Congress established the SEC and the main framework for capital markets and securities regulation to restore market confidence after the stock market crash of 1929. The regulatory framework's key objectives are to promote disclosure of important market-related information, maintain fair dealing, and protect against fraud. As a result, the existing securities regulatory regime focuses on disclosure-based rules, an antifraud regime, and rules governing securities market participants (e.g., exchanges, broker-dealers, and investment advisors). The SEC's mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. For example, one of the cornerstones of securities regulation—the Securities Act of 1933—is often referred to as the "truth in securities" law. As the phrase suggests, disclosures allow investors to make informed judgments about whether to purchase specific securities by ensuring they receive financial and other significant information on securities offered for sale. The SEC does not make investment recommendations. The disclosure-based regulatory philosophy is consistent with Supreme Court Justice Louis Brandeis's famous dictum that "sunlight is said to be the best of disinfectants; electric light the most efficient policeman." The current developments in digital asset trading and fundraising are not the first time securities regulators have had to accommodate new technology. Capital markets infrastructure has experienced continuous innovation since the securities regulatory framework was first formed in the 1930s. For example, securities trading platforms experienced a major revolution in the late 1960s and early 1970s, when trading processes shifted from paper and pen-based manual settlements in isolated markets to electronic platforms, which incorporate new data-processing and communications technologies that link all markets together. Congress responded to these advancements by amending Section 11A of the Securities Exchange Act to establish a national market system. The congressional objectives were to encourage efficient, competitive, fair, and orderly markets that are in the public interest and protect investors. The SEC's Current Regulatory Approach Although digital assets as a capital market innovation evolved quickly, the SEC to date has not been active in promulgating new digital-asset-specific rules. One rationale for this approach is that, because it is uncertain how the characteristics and use of digital assets will evolve, highly prescriptive regulations could become obsolete, and potentially inefficient. The SEC's current regulatory framework that governs traditional and digital securities include the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940. It has also used existing tools and a number of initiatives besides rulemaking to address specific regulatory issues arising from certain unique digital asset features. The SEC's approaches include the following: Innovation office . The SEC created the Strategic Hub for Innovation and Financial Technology (FinHub) in 2018 to engage in financial technology ( fintech ), consolidate and clarify communications, and inform policy research. In 2019, FinHub conducted outreach meetings in multiple cities and published a framework for analyzing whether a digital asset is a security. Enforcement . The SEC has brought enforcement actions against securities token issuers and digital asset traders and asset managers, among others. The SEC established a new Cyber Unit and increased its monitoring of and enforcement actions against illicit cyber-based transactions. No-action letter s . The SEC uses no-action letters to provide relief for digital-asset-related businesses and to signal its regulatory intentions to capital markets. For example, the SEC issued a no-action letter to TurnKey Jet, a business-travel startup, stating that its issued tokens are not securities. This was the SEC's first no-action letter for an ICO. The letter triggered a wave of industry discussions and could set a precedent for future digital asset activities. Solicitation for public input . The SEC released a letter to the industry in March 2019 to solicit public input regarding digital asset custody. The comments may help the SEC understand the challenges the industry faces and assess investor-protection risks. New product approval . The SEC could approve or reject new digital asset products. For example, the SEC has reviewed Bitcoin ETF proposals in recent years and has consistently rejected such proposals as of 2019. Issues Raised by Digital Assets in the Securities Regulation Context Digital assets and their use in capital markets are a growing presence in the financial services industry's development. They raise policy questions, including whether new digital-asset-related practices have outgrown or are sufficiently overseen by the existing regulatory system; how the regulatory frameworks can achieve a level playing field where the same businesses and risks could be subject to the same regulation; and how to protect investors without hindering innovation. A fundamental understanding of innovative trends and the appropriate timing of the related policy actions are also important for digital asset regulation. In analyzing technological changes, some commentators suggest that society tends to overestimate a technology's effects in the short run and underestimate its effects in the long run. This illustrates the delicate balance between social pressure for change and the appropriate timing for policy responses in the face of innovation. This section explains key examples of digital asset developments and use cases, focusing on policy issues and legislative proposals in the securities regulation context. The most salient digital asset-related policy issues include regulatory oversight and investor protection. Regulatory O versight . Digital asset issuers and investors face a steep learning curve in comprehending the regulatory landscape and determining how or if securities laws apply to them. It may not always be clear whether a digital asset is a security subject to SEC regulation. Multiple agencies apply different regulatory approaches to digital assets at the federal and state levels. For example, for certain digital assets, the SEC treats them as "securities," the Commodity Futures Trading Commission treats them as "commodities," and the Internal Revenue Service treats them as "property." State regulators oversee digital assets through state money transfer laws, and the Treasury Department's Financial Crimes Enforcement Network monitors digital assets for anti-money laundering purposes. Investor Protection. Digital asset investors—which may include less-sophisticated retail investors, who may not be positioned to comprehend or tolerate high risks—may be especially vulnerable to new types of fraud and manipulation, leading to questions about investor protection. First, there appears to be high levels of scams and business failures. A 2018 study from Satis Group, a digital asset advisory firm, found that 81% of ICOs were scams and another 11% failed for operational reasons. Second, many digital asset companies offering securities do not comply with SEC registration and disclosure obligations, potentially affecting investors' ability to understand their risk exposures. Third, the high volatility of digital assets' valuations can potentially result in large gains and losses, the risk of which may not be well understood by less-sophisticated investors. Lastly, digital assets operate outside the traditional financial system and thus may not offer common types of transaction protectio ns. For example, banks may have the option to halt or reverse suspicious transactions and associate transactions with the users' identities, but a digital asset transaction is generally irreversible through such intermediaries. Initial Coin Offerings Businesses raise funding from capital markets through securities offerings, such as stocks, bonds, and digital assets. ICOs are a new fundraising mechanism in which projects sell their digital tokens in exchange for fiat currency (e.g., dollars) or cryptocurrency (e.g., Bitcoin). A typical ICO transaction involves the issuer selling new digital "coins" or "crypto tokens" to individual or institutional investors. Investors pay for these tokens with either cryptocurrencies or traditional currencies. ICOs are often compared with initial public offerings (IPOs) of the traditional financial world because both are methods by which companies acquire funding. The main difference is that ICO investors receive digital assets in the form of virtual tokens or the promise of future tokens, unlike IPO investors who receive an equity stake representing company ownership. These coins or tokens are new digital currencies each company creates and sells to the public. Coin purchasers could redeem the coins for goods or services from crypto enterprises or hold them as investments hoping the coins would increase in value. Although every crypto enterprise is different, they generally make transfers without an intermediary or any geographic limitation. Industry practitioners are increasingly using the term security token offering s (STOs) to describe ICOs. This change of terminology reflects the industry's acceptance that many ICOs are securities offerings and thus subject to securities laws and regulations. Securities laws require all securities offers and sales to either be registered under their provisions (as a public offering) or qualify for an exemption from registration (as a private offering). ICOs can take many forms. They can be listed on national exchanges as public offerings or be issued pursuant to the private securities offering exemptions. Operational and regulatory conditions—including investor access, maximum offering amounts, and filing requirements—differ depending on the type of offering an ICO selects. Table 1 illustrates examples of ICO fundraising options. ICOs could potentially use all the existing securities offering venues. They have already reportedly been issued under several of the private exemptions (e.g., Regulation D, Regulation Crowdfunding, and Regulation A). Although public offering ICOs are possible, as of year-end 2019, no ICOs have yet issued under this method. The previously discussed policy issues relating to regulatory oversight and investor protection also apply to ICOs. Digital Asset "Exchanges" About 300 platforms are offering digital asset trading and referring to themselves as "exchanges," as of December 2019. A platform that offers trading in digital asset securities and operates as an "exchange" (as defined in the federal securities laws) must register with the SEC as a national securities exchange or obtain exemption. However, many such platforms are registered as money-transmission services (MTSs) instead of SEC-regulated national securities exchanges. MTSs are money transfer or payment operations that are mainly subject to state, rather than federal, regulations. Because MTS regulations were not designed with digital asset trading activities in mind, some argue that they are insufficient in regulating the transfer of digital assets. In addition, these services raise investor-protection concerns because they are not subject to the more rigorous oversight as national securities exchanges. The SEC issued a statement in 2018 clarifying that the online platforms for buying and selling digital assets that qualify as securities could be unlawful. These digital asset trading platforms face problems with fraud and manipulation. Some think applying SEC regulation would help, but others are concerned that regulation could stifle financial innovation. Digital Asset "Exchanges" Versus National Securities Exchanges Although current technological advancements may seem to have blurred the terminology used, certain platforms trading digital assets that are securities appear to behave as functional equivalents to national securities exchanges. For example, these platforms bring together buyers and sellers, execute trades, and display prices. However, there are differences, such as the blockchain-enabled trading platforms operating without a central database and the fact that not all digital assets trading on platforms are securities. The general consensus among domestic and international securities regulators regarding digital assets is that regulatory oversight should be balanced with the need to foster financial innovation. However, if digital asset trading platforms are buying and selling securities and fall within the SEC's regulatory regime, then securities regulation's basic objectives should arguably continue to apply. In addition, some international authorities believe that, although digital asset trading platforms may face issues similar to traditional exchanges, regulatory approaches may still need to be adjusted to account for particular operating models that may amplify risks differently. In general, policymakers contending with major financial innovations have historically focused on addressing risk concerns while tailoring their regulatory framework flexibly to accommodate evolving technology. The differences between digital asset "exchanges" and the SEC regulated national securities exchanges could include transparency, fairness, and efficiency. These are principles guiding the national securities exchange regulation, yet they are perceived as lacking for digital asset "exchanges." Many digital asset "exchanges" are reportedly exaggerating their volumes on a routine basis to attract more participation. Investors are perceived to have no idea whether the trading volume and prices reflect real activities or market manipulation. To take the more frequently studied digital asset Bitcoin for example, one study shows that 95% of Bitcoin's trading volume displayed on digital asset price and volume aggregator CoinMarketCap.com is either fake or non-economic in nature. Another widely cited academic study illustrates the scale of potential damage that digital asset market manipulations could create, underlining the investor-protection concerns in the digital asset space. The study argues that a single market manipulator likely fueled half of Bitcoin's 2017 price surge that pushed its price close to $20,000. The activities were reportedly carried out through the largest digital asset "exchange" at that time, Bitfinex, and used a stablecoin called Tether to boost the demand for Bitcoin. For this alleged manipulation, Bitfinex and Tether faced a class complaint seeking a total of $1.4 trillion in damages. Although Bitfinex and Tether rebutted the study, calling it "bogus," they are currently under investigation by federal and state regulators. Given the scale of such issues, some have questioned whether digital asset trading warrants more regulatory safeguards that protect investors and promote more efficient market operations. It is difficult to predict the extent to which an SEC-regulated digital asset national exchange would have mitigated the market manipulations, or if the SEC's regulatory framework is the best fit for addressing all the digital-asset-trading-related policy concerns. Still, digital asset "exchanges" under the current operating environment appear vulnerable to misconduct. The Bitcoin price manipulation study's author, a finance professor with a background in forensics, said that "years from now, people will be surprised to learn investors handed over billions to people they didn't know and who faced little oversight." Current State of Play The SEC took its first enforcement action against an unregistered digital asset "exchange" in 2018. The SEC stated that the platform "had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption," but was perceived to have failed to do so. Some of the largest digital asset "exchanges" have developed a system to rate digital assets based on the probability that they could be defined as securities. These "exchanges" reportedly hope that by so doing they could exclude securities-based digital assets from their unregistered trading platforms, thus circumventing SEC securities regulation. This action is part of the digital asset industry's self-regulation discussion that is gaining momentum. For example, an international law firm's 2018 survey showed that the vast majority of the respondents thought the industry should formalize self-regulation and subject that self-regulation to regulatory oversight. Many digital asset trading platforms also reportedly sought to obtain exemptions from the SEC to operate as alternative trading systems (ATS). ATSs are "dark pools" that do not publicly display the size and price of their orders. ATSs face fewer regulatory requirements than national exchanges, but they must register as broker-dealers and meet certain SEC and Financial Industry Regulatory Authority (FINRA) compliance and filing requirements, such as custody, books and records, and regulatory examinations. However, any ATS that transacts more than 5% of the trading volume of any security, which also trade on the national securities exchange system, could face stricter "order display" and "first access" rules that effectively integrate that ATS in part into the national market system. A number of the largest digital asset "exchanges" (e.g., Coinbase, Gemini, Bitstamp, and ItBit) have obtained state-level regulatory licenses (BitLicense) from New York State's Department of Financial Services. The license requirements include certain investor protection, market fraud and manipulation prevention, and illicit activity prevention measures. Digital Asset Custody Custodians provide safekeeping of financial assets. They are financial institutions that do not have legal ownership of assets but are tasked with holding and securing assets, among other administrative functions. The SEC's custody rules impose requirements designed to protect client assets from the possibility of being lost or misappropriated. Custodians are important building blocks for the financial services industry. The custody industry for traditional assets is large and concentrated. In the past 90 years, financial custody has evolved from a system of self-custody to one in which major custodians provide asset custody for client accounts. Today, four banks (BNY Mellon, J.P. Morgan, State Street, and Citigroup) service around $114 trillion of global assets under custody. Digital-asset custody has recently attracted regulatory attention because the SEC custody rules could pose unique challenges for custodians of digital assets. The custody rules were developed for traditional assets, which are easier than digital assets to secure and produce tangible tracks of physical existence or records. Digital assets generally lack physical existence or records produced by intermediaries, as seen in traditional assets such as gold or bank accounts. Common practice in the digital asset industry so far focuses on safeguarding private keys, unique numbers assigned mathematically to digital asset transactions to confirm asset ownership. This practice raises the question of how possession or control of a digital asset should be defined for regulatory purposes. The challenges include but are not limited to, for example, that a digital asset could have multiple private keys or that a single private key does not exist. As such, some believe the digital asset custody definition should go beyond the verification of the keys to incorporate holistic custody views. Regulators are currently evaluating whether custody requirements should be adjusted to account for digital assets' unique operational characteristics. The SEC released a letter to the industry in March 2019 to solicit public input regarding digital asset custody. The SEC summarized a number of policy issues, including the use of distributed ledger technology (DLT) to record ownership, the use of public and private cryptographic key pairings to transfer digital assets, the ability to restore or recover digital assets once lost, the generally anonymous nature of DLT transactions, and the challenges posed to auditors in examining DLT and digital assets. On July 8, 2019, the SEC and FINRA, a self-regulatory organization, issued a joint statement to outline considerations for digital asset securities custody. They acknowledged the challenges of applying custody requirements to digital assets and stated that there are initiatives underway to solicit input from market participants that could help develop new ways to establish "possession or control" for digital asset securities. Digital Asset Exchange-Traded Funds ETFs are pooled investment vehicles that gather and invest money from a variety of investors. ETFs combine features of both mutual funds and stocks and can trade on national exchanges. Some industry practitioners hope that the ETF structure could incorporate digital assets. Individual investors typically buy digital assets, for example, Bitcoins, from other owners or through digital asset trading platforms and other intermediaries. Individual investors currently cannot directly purchase digital assets (e.g., Bitcoins) from the SEC-regulated national securities exchanges. Some have proposed allowing retail investors to buy or sell digital assets on regulated exchanges through the exchange-traded fund (ETF) structure—where, instead of directly trading digital assets, the investors would buy or sell publicly traded ETF shares with values linked to underlying digital assets. This section discusses potential Bitcoin ETFs' policy implications for the digital asset industry. Bitcoin ETF Proposals As mentioned previously, some digital assets are securities subject to securities laws and regulations. But digital assets could also be structured as securities products, even if the underlying assets are not securities. The proposed Bitcoin ETFs are the most prominent example. Although Bitcoin is not a security, Bitcoin ETFs would be securities products with value linked to the underlying Bitcoins and are subject to securities regulation, including the Investment Company Act of 1940 and Investment Advisers Act of 1940. The digital asset industry has submitted many Bitcoin ETF proposals with the hope of gaining access to more retail investors, but, as of the end of 2019, the SEC has not approved a Bitcoin ETF. The SEC repeatedly stated in its rejections that Bitcoin ETF proposals did not meet standards governing national securities exchanges. Specifically, the SEC stated that the proposals have not met the requirements in Section 6(b)(5) of the Exchange Act that order national exchanges to be "designed to prevent fraudulent and manipulative acts and practices." The agency articulated its rationale in a 2018 staff letter that listed challenges related to a Bitcoin ETF. In addition to market manipulation concerns, major Bitcoin ETF challenges included valuation and pricing, custody, and liquidity. For example, all ETFs must frequently value their portfolio assets. The valuation process determines what investors should pay for the ETF shares and how the ETFs perform. Some worry that the Bitcoin ETFs would not be able to obtain the information necessary to adequately value the digital assets given the high volatility and fragmentation of the markets. Bitcoin ETFs also have supporters. One institutional investor argues that ETFs provide a familiar and convenient way for investors to invest in digital assets, enabling them to participate in digital asset trading and partake in the potential financial gains brought by technological advancements, despite the potential trade-offs with respect to investor protection. In a public statement about a dissenting vote on a disapproved Bitcoin ETF proposal, SEC Commissioner Hester Peirce stated that certain Bitcoin ETF proposals do satisfy the Section 6(b)(5) statutory requirements and that the disapproval may dampen innovation and inhibit institutionalization. Stablecoins in Securities Markets Stablecoins are a type of digital asset designed to maintain a stable value by linking its value to another asset or a basket of assets, typically collateralized by fiat currencies or facilitated by algorithms. The best-known example of a proposed stablecoin is Facebook's Libra proposal (see discussion below). Since it was first announced in mid-2019, Libra has generated many policy concerns, inspired new considerations for comparable use cases from the private and public sectors, and fueled discussions of other global stablecoins. A stablecoin arrangement's individual components are complex, leading to many crosscutting policy discussions. The Financial Stability Board, an international financial authority, characterizes a stablecoin's components as the following: Entities/structures involved in issuing stablecoins; entities/structures that manage assets linked to the coins; infrastructure for transferring coins; market participants/structures facing users (e.g., platforms/exchanges, wallet providers) and the governance structure for the arrangement, including the role and responsibilities of a possible governance body and the underlying stabilisation mechanism used for the stablecoin. Stablecoin-related policy concerns vary; they include, market integrity, investor protection, financial stability, monetary policy, payments, and illicit activity prevention. Some of these concerns are outside of the scope of this report, which focuses on securities regulation. In addition to securities regulators, other regulatory authorities—central banks, payment system regulators, and financial crime enforcement entities—have been involved in stablecoin monitoring and oversight. Facebook's Libra Proposal Facebook's planned stablecoin Libra attracted congressional attention after it was announced on June 18, 2019. At related congressional hearings, Facebook received multiple questions regarding whether Libra is an ETF and how it should be regulated. These questions arose because to create the stablecoin, Libra would be backed by reserve assets, including bank deposits and short-term government securities. New Libra tokens could only be created or destroyed by authorized sellers. Some industry practitioners argue that Libra's proposed operational structure is similar to the creation and redemption process used by ETFs. Facebook acknowledged at the House hearing that Libra uses operational mechanisms that are similar to ETFs, but stated its view that it is still a payment tool and not an investment vehicle. If deemed an ETF, Libra must comply with the SEC's regulatory regime governing securities, investment advisors, and investment companies. SEC approval would be required to launch the project. The SEC is reportedly evaluating whether Libra's structure makes it an ETF. Stablecoin-Related Legislative Proposals The House Financial Services committee discussed three stablecoin-related securities proposals at an October 2019 House Committee on Financial Services hearing. The Managed Stablecoins are Securities Act of 2019 ( H.R. 5197 ) proposes to subject stablecoins to securities regulation by amending the statutory definition of the term security to include a new category of securities called "managed stablecoins." The bill would define a managed stablecoin as a digital asset that has either (1) a market value that is determined, in whole or significant part, by reference to the value of a pool or basket of assets that are held, designated, or managed by one or more persons; or (2) holders that are entitled to obtain payment which is determined, in whole or in significant part, on the basis of the value of a pool or basket of assets held, designated, or managed by one or more persons. Because managed stablecoin issuers are generally perceived as not acknowledging their stablecoins as securities, this bill would remove regulatory uncertainty by stating that a managed stablecoin is a security and therefore subject to securities regulation. The second legislative proposal would limit public company executives' ability to own managed stablecoins. This draft proposal incorporates the same "managed stablecoins" definition, but would take a slightly different approach by delisting a public company if its directors and executives either (1) received compensation in managed stablecoin; (2) bought or sold a managed stablecoin; or (3) were affiliated with a person who bought or sold a managed stablecoin after the date of the security's registration. Lastly, the Keep Big Tech Out of Finance Act ( H.R. 4813 ) would prevent large technology firms like Facebook from offering certain financial services or issuing digital assets.

In recent years, financial innovation in capital markets has fostered a new asset class—digital assets—and introduced new forms of fundraising and trading. Digital assets , which include crypto - assets , cryptocurrencies , or digital tokens , among others, are digital representations of value made possible by cryptography and distributed ledger technology. Regardless of the terms used to describe these assets, depending on their characteristics, some digital assets are subject to securities laws and regulations. Securities regulation generally applies to all securities, whether they are digital or traditional. The Securities and Exchange Commission (SEC) is the primary regulator overseeing securities offerings, sales, and investment activities. The SEC's mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The existing securities regulatory regime generally aligns with this mission, and the SEC's digital asset regulation generally follows the same regime. The SEC has used existing authorities to evaluate new product approval, provide individual regulatory relief, and solicit public input for policy solutions more tailored to digital assets. Digital assets have a growing presence in the financial services industry. Their increasing use in capital markets raises policy questions regarding whether changes to existing laws and regulations are warranted and, if so, when such changes should happen, what form they should take, and which agencies should take the lead. The current innovative environment is not the regulatory regime's first encounter with changing technology since its inception in the 1930s. Some technological advancements led to regulatory changes, whereas others were dealt with through the existing regime. The general consensus is that regulatory oversight should be balanced with the need to foster financial innovation, but securities regulation's basic objectives should apply. In addition, some believe that certain digital asset activities that may appear similar to traditional activities nonetheless require adjusted regulatory approaches to account for particular operating models that may amplify risks differently. In general, policymakers contending with major financial innovations have historically focused on addressing risk concerns while tailoring a regulatory framework that was flexible enough to accommodate evolving technology. Current developments that raise policy issues include the following: Initial coin offerings (ICOs) . ICOs as a digital asset fundraising method can be offered in many forms using existing public and private securities offerings channels. Although ICOs may be useful fundraising tools, they raise regulatory oversight and investor protection concerns. Digital asset "exchanges . " Some industry observers perceive digital asset trading platforms as functional equivalents to the SEC-regulated securities exchanges in buying and selling digital assets. But these platforms are not subject to the same level of regulation, suggesting that they may be less transparent and more susceptible to manipulation and fraud. Digital asset custody . Custodians provide safekeeping of financial assets and are important building blocks for the financial services industry. Digital assets present custody-related compliance challenges because custodians face difficulties in recording ownership, recovering lost assets, and providing audits, among other considerations. The SEC is aware of the challenges and is engaging stakeholders to discuss potential issues and solutions. Digital asset exchange-traded funds (ETFs) . ETFs are pooled investment vehicles that gather and invest money from a variety of investors. ETF shares can trade on securities exchanges like a stock. Currently, digital assets themselves are generally not sold on SEC-regulated national exchanges. However, if portfolios of digital assets were made available as ETFs, they may be sold on national exchanges. The SEC has not yet approved any digital asset ETFs because of market manipulation and fraud concerns. Stablecoins in securities markets . Stablecoins are a type of digital asset designed to maintain a stable value by linking its value to another asset or a basket of assets. Issues concerning stablecoins include market integrity, investor protection, payments, financial stability, and illicit activity prevention. Three legislative proposals relating to securities regulation were discussed at a House Committee on Financial Services hearing: the first proposal ( H.R. 5197 ) would subject stablecoins to securities regulation; the second draft proposal would limit public company executives' access to stablecoins; and the third proposal ( H.R. 4813 ) would prevent "Big Tech" firms from offering financial services or issuing digital assets.

GAO_GAO-20-436

Background Whistleblower Protections OSC is an independent federal investigative and prosecutorial agency. Its primary mission is to safeguard the merit system in federal employment by protecting employees and applicants for federal employment from prohibited personnel practices, especially reprisal for whistleblowing. OSC reviews disclosures of wrongdoing within the federal government from current federal employees, former employees, and applicants for federal employment. These individuals, known as whistleblowers, make disclosures of alleged wrongdoing to OSC that the employee reasonably believes evidences either (1) a violation of law, rule, or regulation; (2) gross mismanagement; (3) gross waste of funds; (4) abuse of authority; (5) a substantial and specific danger to public health or safety; or (6) censorship related to research, analysis, or technical information. If a whistleblower believes his or her agency took, threatened to take, or did not take a personnel action because of a protected disclosure, the whistleblower may file a retaliation complaint with OSC. An employee may file a retaliation complaint with OSC even if the protected disclosure was made to another body such as an Inspector General’s office rather than OSC. Various statutory provisions have established protections for federal employee whistleblowers over the years. The Civil Service Reform Act of 1978 provided the first statutory whistleblower protections for disclosures of violations of laws, mismanagement, or gross waste of funds for federal employees, former employees, and applicants for employment. The 1978 act established both the Merit Systems Protection Board (MSPB) and OSC and placed OSC within MSPB. Under the act, OSC was authorized to review allegations of wrongdoing within federal agencies, to investigate and obtain corrective action over allegations of prohibited personnel practices, including whistleblower retaliation, and to initiate disciplinary actions against employees who commit prohibited personnel practices, among other things. Later, to strengthen protections for those who claim whistleblower retaliation, Congress passed the Whistleblower Protection Act of 1989. The 1989 act separated OSC from MSPB, making OSC an independent agency. The act also created the individual right of action, allowing whistleblowers to bring their appeals to MSPB after exhausting remedies at OSC. In 2012, the Whistleblower Protection Enhancement Act clarified the scope of protected whistleblowing under the Whistleblower Protection Act and mandated broader outreach to inform federal employees of their whistleblower rights, among other things. Further, the Dr. Chris Kirkpatrick Whistleblower Protection Act of 2017, among other items, enhanced disciplinary penalties for supervisors who retaliate against whistleblowers. Probationary Status Employees Federal employees in the civil service are required to serve a period of probation when they begin serving initial appointments. These periods are typically for 1 to 2 years, and they allow an agency to evaluate the employee before the appointment becomes final. Our prior work notes that the probationary period provides a way for agencies to dismiss poorly performing employees or those engaging in misconduct before the process to do so becomes more complex and lengthy. In particular, we concluded that the probationary period could be more effectively used by agencies, which in turn could help agencies deal with poor performers more effectively. According to MSPB, the probationary period, if used fully, is one of the most helpful assessment tools available for supervisors to determine an individual’s potential to fulfill the requirements of the specific position. During the probationary period, the employee is still technically considered an applicant for employment. As such, probationary employees do not have the same protections against adverse personnel actions as other employees. Prior to firing a probationary employee for poor job performance or misconduct, an agency does not need to afford the same procedural protections required before removing a non- probationary employee. Therefore, it is reasonable to expect that probationary employees will be terminated at higher rates than permanent employees. Probationary employees also lack the same rights to appeal adverse actions, such as demotions or removals, to the MSPB that other federal employees have. However, probationary employees do have some legal protections. For example, probationary employees may file a complaint with OSC if they believe a personnel action such as reassignment, demotion, or removal was retaliation for whistleblowing. If OSC determines there are reasonable grounds to believe that retaliation has occurred, it may seek corrective action, including filing a petition with the MSPB. Additionally, a probationary employee who has filed a complaint with OSC may subsequently file an individual right of action with MSPB. Probationary employees also may appeal to MSPB if they believe they have been fired for partisan political reasons or because of discrimination based on their marital status. Probationary employees also have the right to file a complaint of discrimination with their agencies and subsequently file an appeal of a final agency decision with the Equal Employment Opportunity Commission or a civil action in federal district court if they believe that they have been discriminated against based on their race, color, religion, sex, national origin, age, disability, or genetic information. Existing Data are Insufficient to Determine if the Rate of Filing Whistleblower Disclosures or Retaliation Complaints Varies by Probationary Status The average annual total of probationary and permanent federal employees from fiscal years 2014 through 2018 was approximately 1.9 million. During the same time period, 14,043 federal employees filed whistleblower disclosures, whistleblower retaliation complaints, or both. That is, an average of roughly 2,800 employees—about 0.15 percent of the federal workforce—filed complaints each year. For whistleblower disclosure complaints, whistleblower retaliation complaints, or both over this 5-year period, we estimate that probationary employees filed between 6.6 percent and 18.2 percent of complaints, while permanent employees filed between 76.8 percent and 93.4 percent of complaints. Because existing data are insufficient to determine probationary status of employees for more than 18 percent of each year’s complaints, it is not possible to determine whether probationary employees file at lower, comparable, or higher rates than their prevalence (about 13.5 percent, on average, across this time period) in the overall employee population. Figure 1 shows how many employees we could determine through matching were in probationary and permanent status when they filed whistleblower disclosure or retaliation complaints, along with the numbers of unmatched complaints for fiscal year 2018. The pattern is similar for the other years we examined; estimates for each year are available in appendix II. Estimates Suggest Probationary Employees Who Filed Complaints Were Consistently Terminated at Higher Rates than Permanent Employees Who Filed, and at Higher Rates than Employees Government-wide Overall, probationary employees—whether or not they have filed a complaint with OSC—are terminated at a higher rate than permanent employees, which is consistent with expectations that determining the suitability of employees for the particular position is a major purpose of the probationary period. In fiscal year 2018, 1.1 percent of probationary employees were terminated, regardless of whether they filed a whistleblower disclosure or retaliation complaint. In the same year, 0.3 percent of permanent employees were terminated, regardless of filing status. These percentages were consistent across the years we studied. As discussed below, estimated termination rates for permanent and probationary employees who filed either or both types of complaints we examined consistently exceeded these government-wide rates. Specifically, among permanent employees who filed, estimated termination rates could be anywhere from 1.7 to 17.1 percentage points higher than the 0.4 percent average for all permanent employees over this period. Among probationary employees who filed, estimated termination rates could be from 5.3 to 72.6 percentage points higher than the 1.3% average for these employees government-wide. Whistleblower disclosures. Estimated termination rates among employees who filed whistleblower disclosures from fiscal years 2014 to 2018 were higher than termination rates among all federal employees. This applies to both probationary and permanent employees. Specifically, estimated termination rates for probationary employees who filed were higher than estimated termination rates for permanent employees who filed. For example, as shown in table 1, in fiscal year 2018: The lowest estimated rate (minimum) of termination among probationary employees who filed whistleblower disclosures was 10.1 percent, compared to the overall 1.1 percent termination rate for all probationary employees. The lowest estimated rate (minimum) of termination among permanent employees who filed whistleblower disclosures was 2.9 percent, compared to the overall 0.3 percent termination rate for all permanent employees. Taking unmatched complaints into account, we estimated that the termination rate for probationary employees who filed whistleblower disclosures could be any percentage from 10.1 to 46.9 percent. Taking unmatched complaints into account, we estimated that the termination rate for permanent employees who filed whistleblower disclosures could be any percentage from 2.9 to 5.2 percent. The minimum estimated termination rate for probationary employees (10.1 percent) who filed whistleblower disclosures exceeds the maximum estimated rate for permanent employees who filed whistleblower disclosures (5.2 percent). Whistleblower retaliation complaints. We found that the lowest possible rates (minimums) of termination for employees who filed whistleblower retaliation complaints were higher than termination rates among all federal employees, both for probationary and permanent employees. Specifically, estimated termination rates for probationary employees who filed were higher than estimated termination rates for permanent employees who filed. For example, as shown in table 2, in fiscal year 2018: The lowest estimated rate (minimum) of termination for probationary employees who filed retaliation complaints was 17.4 percent, compared to the overall 1.1 percent termination rate for all probationary employees. The lowest estimated rate (minimum) of termination for permanent employees who filed retaliation complaints was 5.5 percent, compared to the overall 0.3 percent termination rate for all permanent employees. Taking unmatched complaints into account, we estimated that the termination rate for probationary employees who filed whistleblower retaliation complaints could be any percentage from 17.4 to 69.4 percent. Taking unmatched complaints into account, we estimated that the termination rate for permanent employees who filed retaliation complaints could be any percentage from 5.5 to 9.9 percent. The minimum estimated termination rate for probationary employees who filed retaliation complaints (17.4 percent) exceeds the maximum estimated rate for permanent employees who filed retaliation complaints (9.9 percent). Both whistleblower disclosures and retaliation complaints. For the category of employees who filed both whistleblower disclosures and retaliation complaints, termination rates were higher than termination rates among all federal employees, both for probationary and permanent employees. Specifically, estimated termination rates for probationary employees who filed were higher than estimated termination rates for permanent employees who filed. For example, as shown in table 3, in fiscal year 2018: The lowest estimated rate (minimum) of terminations among probationary employees who filed both whistleblower disclosures and retaliation complaints was 14.1 percent, compared to the overall 1.1 percent termination rate for all probationary employees. The lowest estimated rate (minimum) of terminations among permanent employees who filed both types of complaints was 7.8 percent, compared to the overall 0.3 percent termination rate for all permanent employees. Taking unmatched complaints into account, we estimated that the termination rate for probationary employees who filed both types of complaints could be any percentage from 14.1 to 56.3 percent. Taking unmatched complaints into account, we estimated that the termination rate for permanent employees who filed both types of complaints could be any percentage from 7.8 to 13.2 percent. The minimum estimated termination rate for probationary employees who filed both a whistleblower disclosure and a retaliation complaint (14.1 percent) exceeds the maximum estimated rate for permanent employees who, filed both types of complaints (13.2 percent). As previously discussed, probationary employees being terminated at a higher rate than permanent employees is consistent with expectations, given that determining the suitability of employees for the particular position is a major purpose of the probationary period. However, the higher rate of termination for filers generally, and the higher estimated rates for probationary employees specifically, suggests a potential relationship between filing and terminations that may disproportionately impact probationary employees. As stated earlier, we did not determine whether the disclosures and complaints filed had merit, whether termination actions were justified, or whether the terminations occurred before or after the filing of the whistleblower disclosure or retaliation complaint. As such, further examination would be needed to fully understand these relationships. OSC Does Not Require Filers to Identify Probationary Status OSC requires federal employees to use OSC Form-14 to submit a complaint alleging a prohibited personnel practice or a disclosure. Complainants begin the process by selecting a checkbox based on their particular complaint or disclosure. Depending on their selections, complainants are asked to provide additional information. Data fields on the form that are marked with an asterisk are mandatory. OSC instructions state that the agency cannot process forms lacking necessary information. OSC Form-14 includes a non-mandatory data field that asks whether the complainant is currently a probationary employee. Because it is not a required field, complainants may choose not to provide that information. According to OSC, it has designated only a limited amount of requested information as mandatory. OSC officials said that to avoid creating impediments for employees to file complaints, mandatory fields are limited to the information that is necessary for processing a complaint. In August 2019, according to OSC officials, OSC transitioned to a new electronic Case Management System (eCMS). This new system’s electronic version of the complaint form includes a data field as part of the question about employee status. Here employees can check off probationary status for OSC to capture and input complainants’ probationary status. According to OSC, when complainants provide this information, the agency is able to track the information in eCMS. OSC officials estimated that a number of filers voluntarily provide information on probationary status; however, the officials could not specify to what extent filers provide that information in their initial filings, or the extent to which this data is collected during processing of the case. OSC’s mission is to “safeguard the merit system by protecting federal employees and applicants from prohibited personnel practices, especially reprisal for whistleblowing.” Additionally, OSC’s 2017-2022 strategic plan includes an objective to ensure agencies provide timely and appropriate outcomes for referred whistleblower disclosures. One of the agency’s strategies to help achieve that objective is to monitor all whistleblower disclosures and referrals to agencies to identify trends or systemic challenges. Further, Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity’s objectives. OSC officials stated that OSC’s routine administration of disclosures and complaints allow them to identify trends. However, this process does not consistently use standard, structured data to identify trends, but rather relies on the personal experience of investigators. Without consistent quality information, including information on probationary status, OSC cannot have reasonable assurance that it is adequately identifying trends and challenges. OSC told us that because of limited resources it currently has no plans to conduct data studies or analyses of employees in their probationary period who file whistleblower claims. As previously discussed, the higher rates of termination we found for complainants, and in particular for probationary employees, suggests a potential relationship that warrants further examination. However, without consistent identification of probationary employees who file whistleblower claims, OSC will continue to lack complete data that would enable this analysis and support OSC’s goal of identifying trends and systemic challenges. Collecting and maintaining such information on every claimant, which could now be more easily done under eCMS, would provide OSC or other entities the ability to analyze termination rates or other issues related to a whistleblower’s probationary status. Having more complete information on trends and challenges could help OSC to ensure that its current level of resources are being distributed to support its mission. Conclusions Probationary employees, by definition, are relatively new to their positions and are thus uniquely vulnerable to retaliation from employers due to the limited protections afforded them. Our estimates demonstrate that employees who file whistleblower disclosures and complaints of retaliation are terminated at a higher rates than employees government- wide, and suggest that these differences may be more pronounced for probationary employees. OSC has roles and responsibilities related to understanding key trends and challenges for whistleblowers, and could potentially further investigate whether these differences indicate a particular risk for probationary employees. However, they are not collecting data on probationary status that would enable them to do so. Without consistent information on probationary status, OSC is unable to properly analyze the effect of that status on those who file whistleblower disclosures, retaliation complaints, or both; and thus, cannot have reasonable assurance there is equal treatment of probationary employees. Recommendation for Executive Action The Office of Special Counsel should require federal employees who are filing whistleblower disclosures or retaliation complaints to identify on their complaint forms their status as a permanent or probationary employee. Agency Comments and Our Evaluation We provided a draft of this report to OSC for review and comment. In its written comments, reproduced in appendix III, OSC disagreed with our conclusions and recommendation. While we continue to believe that our conclusions and recommendation are fully supported by the evidence— as discussed below—we made minor clarifications to our report to more clearly state the nature of our findings in response to OSC’s comments. OSC also provided technical comments, which we incorporated as appropriate. In its written comments, OSC expressed a concern that our report overreaches. OSC stated that our report appears to draw its conclusions based on correlative instead of causative data. Specifically, OSC stated that our report appears to connect the expected greater rate of termination of probationary employees to whistleblower retaliation, based on correlative data and without taking into account key factors such as justification for the termination, timing in relation to the disclosure or the filing of a complaint, or the merit of the individual’s complaint. Absent this type of crucial, detailed analysis that could help determine causation, OSC stated that few, if any, conclusions can be drawn regarding alleged retaliation experienced by probationary employees. As stated in our draft report, and noted by OSC, our estimates demonstrate that employees who file whistleblower disclosures and complaints of retaliation are terminated at higher rates than employees government-wide, and the estimates suggest that these differences may be more pronounced for probationary employees. Our draft report acknowledged that we did not assess certain factors: (1) whether the disclosures and complaints filed had merit, (2) whether the termination actions were justified, or (3) whether the termination actions occurred before or after the filing of the whistleblower disclosure or retaliation complaint. Because we did not control for these factors, we did not speculate about what caused these differences to occur or make causal claims about the relationship between probationary status and whistleblower retaliation. Instead, we stated that further examination and analysis would be needed to fully understand this indicator of potential risk. As we noted in the report, such analysis would require complete and accurate data on probationary status—data which OSC does not currently collect. Therefore, we recommended that OSC collect more complete data so that OSC could, if it chose, do exactly the type of crucial, detailed analysis that it says could help determine causation. Accordingly, we continue to believe that our recommendation for OSC to collect complete and accurate data on probationary status is warranted as such analysis is not possible without it. OSC also expressed a concern that our report appears to suggest that it perhaps may not be doing enough to protect probationary employees. OSC asserted that it already has reasonable assurance that it is appropriately protecting probationary employees from unlawful retaliation. We did not assess OSC’s review of the filed disclosures and complaints, and we made no claims or implications about whether OSC’s protection of whistleblowers is adequate or appropriate. Our report uses one specific outcome (terminations) as an example of an adverse employment action that could potentially signal retaliation. We did not present any findings about whether terminations were warranted, whether employees were appropriately protected, or any other information related to OSC’s handling of cases. We continue to believe, however, that OSC’s ability to run relevant data reports is constrained when the necessary data are not collected for the total population of filers. Without consistent quality information, including information on probationary status of all filers, OSC cannot have reasonable assurance that it is adequately identifying trends and challenges. Lastly, OSC stated that making employment status fields mandatory is onerous and unnecessary and that singling out probationary status from the list seems arbitrary and incomplete. The agency stated that the form includes the option for the individual to self-identify as a probationary employee, which OSC believes is sufficient. We do not believe that changing a field from optional to mandatory would place an undue burden on filers or OSC. We are sending copies of this report to relevant congressional committees, the Special Counsel and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2717 or jonesy@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Objectives, Scope, and Methodology Our objectives were to (1) analyze the extent to which employees who filed whistleblower disclosures and retaliation complaints were in a probationary status, (2) analyze the extent to which these filings were associated with differences in termination rates, and (3) examine Office of Special Counsel (OSC) procedures related to probationary employees. We reviewed the Office of Special Counsel’s OSC 2000 database design documentation and submitted questions to OSC officials to determine what data were available. OSC does not collect or maintain data that identify whistleblowers and retaliation complaints filed by employees in probationary status in OSC 2000. In late August of 2019 OSC officials state that in late August of 2019 OSC launched a new system called the electronic Case Management System (eCMS) to replace OSC 2000. We submitted a series of questions pertaining to how OSC will collect and maintain probationary status information of employees filing complaints in eCMS. These questions pertained to the functionality of and reporting capability of eCMS in addition to OSC’s ability to conduct analysis of complainants who are in probationary status using eCMS. We obtained all closed whistleblower disclosure case data and closed prohibited personnel practices complaint data with allegations related to whistleblower retaliation from 2014 to 2018 from OSC’s previous electronic case management system (OSC 2000). We also requested and obtained 2014 to 2018 OPM Enterprise Human Resources Integration (EHRI) data. OSC 2000 is a case management system, so it was necessary to use combinations of variables associated with complaints filed, such as first name, last name, agency, email address, and job series to identify individual employees. We analyzed employees from federal agencies that submit human resources information to OPM. Factors such as complaints filed anonymously, name changes, and spelling variations could affect the precision of these counts of employees. However, because we are presenting these data in broad ranges throughout the report, these limitations do not likely affect our overall findings and message. After identifying employees in the OSC 2000 data, we then matched OSC 2000 data to OPM’s EHRI data. This was necessary because the OSC 2000 database does not include the probationary status of people filing complaints with OSC. We started by matching unique name and agency combinations. If that was not sufficient, we attempted to match using variables such as state, job series, and employee work email address. We matched OSC 2000 data to EHRI data using case data from OSC 2000 and federal probationary status as of the end of the fiscal year date from EHRI. We acknowledge that matching using these dates may not be precise, but because we present our results in ranges, we do not believe a more precise matching of dates would have resulted in substantive differences in the results overall. We matched 82 percent of the complaints in OSC 2000 to employees in EHRI. . Because it is not possible to determine the probationary status for unmatched cases, the rates of filing among matched cases may not precisely reflect the overall rates for all probationary employees. To account for this uncertainty, we estimated minimum and maximum rates of filing for permanent and probationary employees, and present these ranges in addition to the specific matched rates. Further, we calculated the number of instances in which matched employees who filed either a whistleblower disclosure or a retaliation complaint were terminated from federal employment. As we did with filing rates, we also estimated minimum and maximum termination rates to account for the uncertainty introduced by unmatched cases. Terminations were used because they represent adverse consequences for employees which could indicate retaliation. While other indicators, such as transfers could represent a potential retaliatory action, we focus on terminations because this is the most serious adverse action for which probationary employees have the little protection, and because OSC officials indicated that complaints with termination are prioritized. We did not determine (1) whether the disclosures or complaints had merit, (2) whether the termination actions were justified, or (3) whether the termination actions were before or after the filing of the whistleblower disclosure or retaliation complaint. Because these estimates do not consider the timing or merit of terminations, or other factors potentially associated with terminations, they do not represent proof of a causal relationship between filing and terminations, but rather one indicator of potential risk. To produce reasonably conservative estimates, we made certain assumptions in estimating the minimum and maximum rates in our ranges. Specifically, for unmatched cases we assumed that unknown characteristics, including probationary status and termination rate could be as much as 3.5 times their observed rate in known data. We believe these assumptions are reasonably conservative. While it is not impossible for this small group of unmatched complaints to be even more skewed, there is no evidence to suggest such an extreme assumption would be warranted. We assessed the reliability of the OSC 2000 and EHRI databases for the purposes of using limited data from these databases for our own analysis. We reviewed agency documents, electronically tested data for missing data and outliers, and submitted questions to agency officials about these databases. These two databases are the only sources of data that can be compared to determine the probationary status of individuals filing complaints with OSC. We determined that OSC’s data were sufficiently reliable to present the number of complaints filed by type. With regard to probationary status, the data were not available in OSC 2000. As a result, probationary status and termination rates were drawn from EHRI, which we found to be sufficiently reliable for this purpose. We conducted this performance audit from January 2019 to May 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Employees Filing Whistleblower Disclosures and Retaliation Complaints, Fiscal Years 2014-2018 The figure shown below details the distribution of probationary matched, permanent matched,and unmatched complaints for fiscal years 2014- 2018. Appendix III: Comments of the Office of Special Counsel Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Clifton G. Douglas Jr. (Assistant Director), Katherine Wulff (Analyst-In-Charge), Michael Bechetti, Karin Fangman, Steven Flint, Robert Gebhart, Steven Putansu and Wesley Sholtes made key contributions to this report.

Federal employee whistleblowers—individuals who report allegations of wrongdoing—potentially help to safeguard the government from fraud, waste, and abuse. OSC was created to help protect whistleblowers. Probationary employees—generally those with less than 1 or 2 years of federal service—can be especially vulnerable to reprisal because they have fewer protections from adverse personnel actions, including termination. A 2017 law included a provision for GAO to examine retaliation against whistleblowers in their probationary period. This report examines (1) the extent to which probationary employees filed whistleblower disclosures or reprisal complaints, (2) termination rates of complainants, and (3) OSC procedures related to probationary employees. GAO used complaint data and workforce data to identify the probationary status of employees who filed claims with OSC from fiscal year 2014 to 2018 (the most recent full years of available data); estimated the number of instances where claimants were terminated; and reviewed OSC procedures. GAO found that existing data are not sufficient to determine if the rates of filing whistleblower disclosures, retaliation complaints, or both vary by probationary status. The average annual number of probationary and permanent federal employees from fiscal years 2014 to 2018 was approximately 1.9 million employees. Over this time frame, an average of approximately 2,800 employees—about 0.15 percent—filed complaints each year. Existing data were not sufficient to determine probationary status of employees for over 18 percent of each year's complaints. Therefore, it is not possible to determine whether probationary employees file at lower, comparable, or higher rates than their prevalence in the overall employee population. Specifically, probationary employees represented about 13.5 percent, on average, of the federal workforce, and GAO estimates that they filed from 6.6 percent to 18.2 percent of complaints. GAO estimates suggest that both permanent and probationary employees who filed complaints were consistently terminated at higher rates than federal employees government-wide. For example, in fiscal year 2018, the termination rate for probationary employees government-wide was 1.1 percent, while the lowest estimated rate of termination among probationary employees who filed a complaint was 10.1 percent. For permanent employees, the overall termination rate was 0.3 percent, while the lowest estimated rate for filers was 2.9 percent. GAO estimates also suggest that probationary employees who filed complaints were terminated at higher rates than permanent employees who did the same. For example, in fiscal year 2018: The lowest estimated termination rate for probationary employees who filed whistleblower disclosures (10.1 percent) exceeded the maximum estimated rate for permanent employees who did the same (5.2 percent). The lowest estimated termination rate for probationary employees who filed retaliation complaints (17.4 percent) exceeded the maximum estimated rate for permanent employees who did the same (9.9 percent). The lowest estimated termination rate for probationary employees who filed both types (14.1 percent) exceeded the maximum estimated rate for permanent employees who did the same (13.2 percent). The Office of Special Counsel's (OSC) complaint form allows but does not require complainants to identify whether they are probationary or permanent employees when filing a whistleblower disclosure or retaliation complaint. OSC officials said they try to limit mandatory data fields to the information that is necessary for processing a case, and that they have no plans to do any analysis of employees in their probationary period who file claims. However, the higher rates of termination GAO found for filers generally, and probationary employees specifically, suggests that there could be a risk of unequal treatment. Without first identifying probationary employees who file whistleblower claims, OSC would lack complete data should it decide at some point to analyze the effect of probationary status on filers. Collecting and maintaining such data on every claimant would provide OSC or other entities the ability to analyze termination rates or other issues related to a whistleblower's probationary status.

GAO_GAO-20-339

Background DOD started the F-35 program in 2001 to develop a fifth-generation fighter aircraft intended to replace a range of aging aircraft in the U.S. military services’ inventories and to provide enhanced capabilities to warfighters that capitalized on technological innovations. Among other capabilities, the program designed the F-35 aircraft to be difficult to observe using radar and include sensors that can provide insights into potential targets and other warfighting information. The program is producing and delivering three variants of the F-35 aircraft: the F-35A conventional takeoff and landing variant for the Air Force, the F-35B short takeoff and vertical landing variant for the Marine Corps, and the F-35C carrier-suitable variant for the Marine Corps and the Navy. The characteristics of the services’ variants are similar, but each variant also has unique operating requirements. For example, the Marine Corps requires that the F-35B be capable of operating from aircraft carriers, amphibious ships, and main and austere operating bases alike, requiring the capability to conduct short takeoffs and vertical landings. Figure 1 shows an F-35B exercising this capability. While DOD plans to purchase 2,470 aircraft for the U.S. services, the F- 35 program is acquiring more than just aircraft. The complete F-35 air system has eight elements, including training and maintenance systems. Figure 2 shows the eight elements that make up the entire F-35 Air System and how they each support the aircraft. For example, the program intends for the Automated Logistics Information System (ALIS) to provide the necessary logistics tools to F-35 program participants as they operate and sustain the F-35 aircraft. To do this, ALIS consists of multiple software applications designed to support different squadron activities, such as supply chain management, maintenance, training management, and mission planning. For the F-35 aircraft to have full capability, each element of the air system has to be developed and fielded in sync with the aircraft. However, we found in March 2020 that problems with ALIS still pose significant challenges to day-to-day F-35 operations. According to DOD, it plans to replace ALIS with a new system named the Operational Data Integrated Network (ODIN). Furthermore, DOD reports that it is currently developing a strategy for ODIN, which will include key tasks, milestones and schedule, risks and opportunities, governance structure, and cost estimates. We concluded that, as DOD proceeds with replacing ALIS with ODIN, it will be important for the department to carefully consider and assess the key technical and programmatic uncertainties that we reported in March 2020. These include how much of ALIS will be incorporated in ODIN and the extent to which DOD has access to the data it needs to play a more active role in the management of the system. These issues are complex, and will require significant direction and leadership to resolve. Further, we reported in March 2020 that the F-35 program office was not able to provide us with historic costs showing how much the department had spent on ALIS over the years. Also, because DOD had not answered key questions about the future of the system, such as the extent to which the re-design will incorporate current ALIS software, DOD has not been able to develop accurate cost estimates for the ALIS re-design. We recommended that DOD develop and implement a strategy for the re- design of ALIS. The strategy should be detailed enough to clearly identify and assess the goals, key risks or uncertainties, and costs of re- designing the system. DOD concurred with the recommendation. Status of F-35 Program Development and Costs as of April 2019 DOD began development of the F-35 aircraft in 2001 without adequate knowledge of its critical technologies or a solid design, as we reported in March 2005. DOD’s acquisition strategy also called for high levels of concurrency between development and production—building aircraft while continuing to refine the designs of key components—which runs counter to GAO’s leading practices for major defense acquisition programs. In our prior work, we identified the F-35 program’s lack of adequate knowledge and high levels of concurrency as the major drivers of the program’s eventual significant cost and schedule growth, among other performance shortfalls. Since 2001, the program has been rebaselined with new cost and schedule estimates three times. DOD initiated the most recent restructuring in 2010 when the program’s cost estimates for each aircraft exceeded critical thresholds established by statute—a condition known as a Nunn-McCurdy breach. DOD then established a new acquisition program baseline that increased the program’s cost estimates by $162.7 billion and extended delivery schedules 5-6 years into the future. This last revision is the current program baseline, reflecting the cost and schedule estimates to deliver the aircraft and systems and to meet the original program requirements. From 2018 to 2019, the total cost estimate of the F-35 acquisition program increased by $22 billion, from $406 billion to over $428 billion. This increase was partially due to the addition of the estimated Block 4 modernization costs. Block 4 includes efforts to enhance and add capabilities—beyond the F-35 baseline program—through hardware and software upgrades. In April 2019, the F-35 program estimated that Block 4 development and procurement costs would add $13.9 billion to the program’s total baseline cost. Beyond this Block 4 increase, the F-35 program baseline costs also increased by $8 billion over the program’s 2018 estimate. Table 1 outlines the program’s baseline costs, the Block 4 modernization costs, and the sum total of the baseline and Block 4 cost estimates since 2001. In addition to the acquisition costs above, the program estimates that the sustainment costs to operate and maintain the F-35 fleet for its planned 66-year life cycle are $1.2 trillion, bringing the total cost of the F-35 program to over $1.6 trillion. Status of Testing, Production, and Reliability and Maintainability as of December 2019 The F-35 program office, in coordination with the Director of Operational Test and Evaluation (DOT&E), received approval to conduct some preliminary operational testing in January 2018. This included weapons, cybersecurity, and cold weather testing, among other things. The program’s formal operational testing (conducted by DOT&E) started in December 2018 and was ongoing in 2019. The purpose of operational testing is to assess the effectiveness, suitability, survivability, lethality, and mission capability of the F-35, including the information systems and the air vehicle, in an operationally representative environment. Operational testing includes cybersecurity assessments, some of which the program has conducted. The program plans for the remaining testing to take place through at least September 2020, while the program continues to produce and deliver aircraft. Through 2019, F-35 program test officials had identified over 3,200 deficiencies. Deficiencies represent specific instances where the weapon system either does not meet requirements or where the safety, suitability, or effectiveness of the weapon system could be affected. The test officials categorize deficiencies according to their potential impact on the aircraft’s performance. Category 1 deficiencies are critical and could jeopardize safety, security, or another requirement. Category 2 deficiencies are those that could impede or constrain successful mission accomplishment. In June 2018, we recommended that the program resolve all critical deficiencies before making a full-rate production decision, in part, to reduce the potential for additional concurrency costs stemming from continuing to produce aircraft while testing was ongoing. DOD concurred with our recommendation and stated that it would resolve critical deficiencies before full-rate production, currently planned to occur between September 2020 and March 2021. Production of the aircraft began one year after testing started in 2007, while development was in its early stages. Due to the concurrency of testing and production, according to an F-35 program official, as many as 550 aircraft delivered through 2020 will need retrofits to fix deficiencies and design issues found during testing. The program refers to the cost of these fixes as its concurrency cost, which the program estimates at $1.4 billion; this estimate did not change with the program’s last update in 2019. Until operational testing is complete, there is a risk that the program may identify additional deficiencies. As a result, as we have previously reported, the concurrency costs of retrofitting delivered aircraft could increase. In our June 2018 report, we found that the program was not on track to meet its reliability and maintainability (R&M) performance targets. R&M targets indicate how much time the aircraft will be in maintenance rather than operations. We concluded that the program was missing a prime opportunity to infuse affordability into the aircraft’s future with better R&M performance. As a result, we recommended that the F-35 program office identify what steps it needed to take to ensure the F-35 meets R&M requirements and update the R&M Improvement Program with these steps. DOD concurred with the recommendations, noting that the F-35 program office would update the R&M Improvement Program with the steps needed to ensure continued progress towards its goals. In April 2019, we found that F-35 R&M performance had shown some small improvements but that the program could take more actions to meet the R&M targets. We made additional recommendations to the Secretary of Defense, with which DOD concurred and has taken some actions to implement. Currently, the Office of the Under Secretary of Defense for Acquisition and Sustainment (OUSD (A&S)) is the acquisition decision authority for the F-35 program, and would direct the F-35 program office to take any further actions. In 2019, the program’s R&M performance generally remained unchanged. However, measurable improvements in R&M can take time to manifest. For example, fielded aircraft must be modified and flown for many hours before the program can measure improvements. For details about the R&M performance, see appendix IV. Block 4 Modernization’s Development Approach As we have previously reported, even though operational testing of the baseline program remains ongoing, the F-35 program office has turned its attention to Block 4 modernization activities using a different development approach. DOD refers to this approach as Continuous Capability Development and Delivery (C2D2). This method is loosely based on the Agile software development process. With this approach, the program plans to deliver capabilities to the warfighter faster than it did during the baseline development program. For example, rather than take years to develop and deliver all the required capabilities to the warfighter, the program intends to incrementally develop, test, and deliver small groups of capabilities every 6 months. In January 2018, to transition from the baseline development program to its Block 4 activities, the F-35 program started using the C2D2 approach to develop and test software updates to address deficiencies identified during testing. The planned $13.9 billion Block 4 effort exceeds the statutory and regulatory thresholds for what constitutes a major defense acquisition program, and Block 4 is more expensive than many of the other major weapon acquisitions already in DOD’s portfolio. To provide better oversight into Block 4 activities, in 2016, we recommended that the Secretary of Defense hold a milestone B review—a critical point in an acquisition program leading to the engineering and manufacturing development phase—and manage it as a separate major defense acquisition program. DOD did not concur with our recommendation, and it continues to manage Block 4 within the larger F-35 program. We maintain that DOD should manage the Block 4 activities as a separate program. Operational Testing Delays Provide More Time to Address Deficiencies before Full-Rate Production Decision Completion of Operational Testing Delayed by 9 Months In 2019, the F-35 program conducted a majority of its planned operational testing but added 9 months to the schedule to complete the remaining tests. Specifically, as of February 2020, according to test officials, the program completed 156 flight tests. The program must still conduct four open-air flight tests, the remaining cybersecurity tests of the air vehicle and mission systems, and 64 simulated flight tests. The 9-month delay needed to complete testing, however, also provides additional time for the program to address our June 2018 recommendation that it resolve critical deficiencies before making its full-rate production decision, currently planned to occur between September 2020 and March 2021. Figure 3 shows the test schedule as of 2019, the delay to the schedule into 2020, and the remaining tests events planned. The completion of operational testing hinges on three main tasks: (1) the final four open-air flight tests; (2) cybersecurity testing; and (3) the final development, integration, verification and validation of its simulator and 64 simulated flight tests. First, the program expects to complete the four remaining open-air tests between March and April 2020. To conduct these tests, the program must finish moving the Radar Signal Emulators—test assets that simulate long- range threat radars—from the Nevada Test and Training Range to the Point Mugu Sea Range in California. According to test officials, there is some risk with this move, such as damage to the sensitive test equipment. The test facilities will have to integrate the equipment into the testing infrastructure at Point Mugu. Second, while the program has conducted cybersecurity testing on several aspects of the F-35 aircraft and support systems, three air vehicle subsystems tests and two enterprise-level ALIS tests remain. The program expects to complete these by August 2020.The tests completed to date have identified multiple cybersecurity vulnerabilities. The F-35 program office has taken steps to address some identified vulnerabilities and is working to address the remainder. Test officials stated that some of the delays to cybersecurity testing of the aircraft are due to safety concerns and the risk of losing the use of a test aircraft before testing is complete. According to DOD policy, cybersecurity testing should be conducted as early in the operational test cycle as possible. Leaving this critical testing to the end of operational testing adds risk to the program because the program will not know the extent to which the aircraft may have cybersecurity vulnerabilities until near the expected decision to proceed to full-rate production. If the program cannot finish these tests by September 2020, officials stated that DOT&E could require that the cybersecurity testing be completed in follow-on testing and not hold up the full-rate production decision. Any additional cybersecurity vulnerabilities may require more time to develop and implement plans to address vulnerabilities in aircraft that have already been produced and those slated for production. Lastly, the program has not been able to complete the F-35 Joint Simulation Environment, which we refer to as the aircraft simulator, on time. The simulator runs the F-35’s mission systems software along with other software models (such as other weapons and modern threat systems) to provide complex test scenarios that the program cannot replicate in a real-world environment. We reported in April 2019 that the simulator’s development was behind schedule and was a risk to operational testing. Since then, the program has struggled to develop the complex software and functionality needed to complete the simulator. The difficulties stem, in part, from the program office’s original plan to have the contractor, Lockheed Martin, develop the simulator. However, in August 2017, program office officials decided that the contractor’s proposal was considered to be too expensive. To mitigate concerns over the cost of the proposal, the program decided to have the Navy complete the work. The program originally expected the Navy’s simulator to be ready for testing in 2017, but it is now 3 years behind schedule. According to program office officials, the simulator’s development effort has taken longer than expected to integrate F-35 aircraft and sensor data, in part because the contractor claimed the data as its own intellectual property. These issues were resolved by 2019 when the contractor provided the necessary data. Because of these delays, the program now expects that the simulator will be ready by August 2020, with the planned simulator testing expected to take about 3 weeks. According to test officials, there is increased risk that the completion of the simulator may face additional delays to correct deficiencies and add needed capabilities, but also stated that they can complete the tests by August 2020. Due to these delays to completing operational testing, the program has delayed its full-rate production decision by at least an additional 9 months. Though the program is working toward September 2020, the program has acknowledged this decision could be made as late as March 2021. Any additional delays due to challenges with moving the emulators, completing the simulator, or cybersecurity testing could further delay the end of operational testing and the program’s decision to enter into full-rate production. This delay, however, gives the program more time to complete two key steps consistent with statute and DOD policy. Complete operational testing, which is intended to demonstrate that the aircraft are operationally suitable. Resolve all deficiencies, which should be done prior to full-rate production, and is discussed below. Even with these delays, the program plans to have produced and delivered over 550 aircraft before operational testing is complete, adding to the risk of finding more deficiencies that will require retrofits—at additional cost—for the delivered aircraft. Statute and DOD policy states that the preliminary low-rate production quantities will be set at the development request for proposal decision point. If, at that time, low-rate initial production quantities are determined to be above 10 percent of the total quantity planned, the Secretary of Defense must explain the reasons for the increase in a report to Congress. When a program reaches the planned low-rate initial production quantity, and requires to exceed the quantity, the program may seek approval to produce quantities above that amount. The F-35 program will have delivered more than 10 percent of the total planned production quantities—due to the necessity to prevent a break in production—before operational testing and the full-rate production decision are complete. As noted above, this approach has contributed to the $1.4 billion in concurrency costs already incurred by the program. The program reports that none of the category 1 deficiencies is a safety of flight concern and all of them have operational workarounds. In 2019, the program split the category 1 deficiencies into two groups. Group A are deficiencies that may cause death, severe injury, severe occupational illness, or major loss or damage to equipment and has no workaround. The program has none of these deficiencies currently. Group B are deficiencies that may critically restrict the combat readiness capabilities or may result in adequate performance but not be able to accomplish the primary or alternate missions. All of the 9 category 1 deficiencies are in group B. F-35 Program Made Progress Resolving Deficiencies during 2019, but Many Remain Unresolved In 2019, the F-35 program resolved nearly 300 of the deficiencies it had identified in developmental and operational testing, but discovered even more over the same period. Specifically, 331 new deficiencies were identified in operational testing during 2019. As of December 2019, the F- 35 program had 870 open deficiencies. Of the 870 open deficiencies, the program characterizes nine as category 1 and 861 as category 2. The program reports that none of the category 1 deficiencies is a safety of flight concern and all of them have operational workarounds. In 2019, the program split the category 1 deficiencies into two groups. Group A are deficiencies that may cause death, severe injury, severe occupational illness, or major loss or damage to equipment and has no workaround. The program has none of these deficiencies currently. Group B are deficiencies that may critically restrict the combat readiness capabilities or may result in adequate performance but not be able to accomplish the primary or alternate missions. All of the 9 category 1 deficiencies are in group B. Of the 9 open category 1 deficiencies, the program reports all have operational workarounds—procedures that avoid encountering the deficiency. This represents four fewer open category 1 deficiencies than we reported in April 2019, reflecting the resolution of previously identified deficiencies and the addition of new ones, some of which were resolved. For example, the program fielded a software fix to a category 1 deficiency, which showed that the F-35’s cockpit display could falsely indicate its AIM-9X weapon—an air-to-air missile—selection status as “selected” though the weapon’s status is not selected. Figure 5 shows the F-35 firing an AIM-9X missile. The program office plans to continue to address the open deficiencies, but officials report that some will not be fully resolved for several years. Further, some deficiencies may not be resolved ever and some may be resolved well after the program has completed testing, and after it expects to have made a full-rate production decision. According to DOT&E, there are many significant deficiencies the program should address to ensure the F-35 baseline aircraft configuration is stable prior to adding all of the new capabilities planned in Block 4. As of December 2019, the program office and the contractor have resolved over 2,300 deficiencies and program office officials stated that they have a process in place to address the high priority ones. F-35 Aircraft Prices Decreased but Manufacturing and Supply Chain Risks Remain In 2019, the program reported continuing to negotiate lower unit prices across all F-35 aircraft variants and delivered more aircraft on time. However, officials also reported that the airframe and engine contractors demonstrated some declines in production performance, such as the number of labor hours to produce each aircraft, as production rates increased. We also identified other risk indicators that could affect the contractors’ future production performance. Specifically, the airframe contractor’s manufacturing processes do not meet all manufacturing leading practices that programs should meet before full-rate production. Additionally, parts shortages increased significantly in 2019 and Turkey’s suspension from the program will likely further complicate existing supply chain challenges. Aircraft Prices Decreased and More Aircraft Were Delivered on Time, but Other Measures of Production Performance Declined According to the program office, the negotiated prices for all F-35 variants have generally been decreasing with each production lot and as more aircraft are being procured in each lot. In April 2019, we reported that the program set a goal of reducing the negotiated unit price of an F-35A to less than $80 million by lot 13. According to a program official, in October 2019, the program finalized the contract action for lots 12-14 that met this goal. Specifically, with the most recent contract, the program agreed to purchase 351 F-35As, with unit costs declining to $73 million in lot 14. Figure 6 shows how the negotiated price for an F-35A has decreased since production began, as reported by the program office. According to the program office, it negotiated lower unit prices by working with the airframe contractor to leverage economic order quantity purchases and invest in cost reduction initiatives. Economic order quantities involve the contractor making large purchases of components that it will use across multiple procurement lots of aircraft to reduce production costs by achieving economies of scale. The program office estimates that the economic order quantity purchases for lots 12-14 will save the program about $225.5 million. In addition, the program office and prime contractors have continued to invest in various initiatives to lower production costs. Specifically, the program office spent $320 million in efforts to improve manufacturing processes that it estimates could result in up to $10.5 billion in savings over the life of the program. The airframe contractor told us that it has invested $170 million as of January 2019 to further lower its production costs. The engine contractor also told us that it spent $33 million to potentially realize over $4 billion of cost savings. Airframe Production Trends The airframe contractor—Lockheed Martin—delivered 43 more aircraft in 2019 than in 2018, and as of October 2019, there were 229 aircraft in various stages of assembly worldwide. The contractor also delivered more aircraft on time in 2019. According to contractor officials, the improved rates of on-time delivery are partially a result of the contractor’s efforts to obtain a performance incentive fee that was added to the lot 11 production contract. The program intended the incentive fee to focus the contractor on improving its performance in the final assembly phase of production, which was expected to improve its on-time deliveries. To earn the incentive fee, contractor representatives told us they took several steps to improve production rates. For example, because the F-35Cs were taking longer to produce and all variants had to move through the same final assembly area, the contractor made a separate final assembly line for the F-35Cs so work could proceed without delaying the other variants. This step, according to program office officials, allowed the contractor to improve on-time deliveries for F-35As and F-35Bs. Figure 7 highlights progress in the contractor’s aircraft deliveries since 2016. Other production metrics associated with the airframe, however, demonstrated varied performance over the last two years as production increased. For example, the average number of hours needed to build an aircraft decreased slightly for the F-35A but increased for the B and C variants. Defense Contract Management Agency officials told us the increase was partly attributable to new personnel. In particular, since January 2017, the contractor has hired and trained nearly 1,700 new personnel to accommodate increased production rates—nearly doubling its workforce. New personnel take time to train and gain experience on the production line. According to contractor representatives, as these new employees become more experienced and produce more aircraft, they expect the metric to improve. The contractor’s amount of rework needed was also mixed. During the course of production, the contractor may identify issues with a part or a process, which, in turn, may lead to scrap, rework, and repair to replace or fix the issue. Between 2016 and 2017, most F-35 variants realized improvements in the amount of scrap, rework, and repair needed. In 2018 and 2019, however, only the F-35A continued to show improvements. Figure 8 shows the average total hours for scrap, rework, and repair for each variant since 2016. According to the program office, the increased production rate posed a challenge, and because the contractor has not built as many F-35Cs, this has added to the increase in scrap, rework and repair. To improve performance in this regard, the contractor put teams in place to focus on addressing the main drivers of scrap, rework, and repair. Engine Production Trends Similarly, the engine contractor—Pratt & Whitney—increased its production rate by roughly 51 percent in 2019. However, engine on-time delivery performance has continued to decline which officials attribute to production quality issues and parts delays. Specifically, in 2019, 91 percent of engines delivered were late. In 2019, the airframe contractor was able to work around the late engine deliveries to deliver the entire aircraft on time. Figure 9 shows the engine contractor’s on-time and late deliveries since 2016. In addition, the average number of quality notifications per engine— production defects indicating a quality issue—has increased by 16 percent in 2019. Figure 10 highlights the engine contractor’s quality notifications per engine over the last 4 years. According to the Defense Contract Management Agency’s performance reports, engine test failures, among other quality issues, have affected engine deliveries. According to an official from this agency, there have been 18 engine test failures in 2019, which is eight more than in 2018, each requiring disassembly and rework. The engine contractor stopped deliveries due to the test failures, which has slowed engine acceptance and reduced on-time deliveries. These issues are affecting engines built at the engine contractor’s production facility in West Palm Beach, Florida, which opened in 2014. To address this issue, the engine contractor has developed new tooling for the assembly line and has established a team to identify characteristics leading to the test failures. Plans are also in place for additional training for employees. F-35 Program Has Not Met All Manufacturing Leading Practices, Indicating Risk to Future Production While F-35 aircraft have been in production since 2007 and have reached a high level of manufacturing readiness per DOD guidance, the program is not meeting two of eight manufacturing leading practices GAO has identified as indicators of a program’s readiness for full-rate production, or milestone C review. To date, the program is meeting or plans to meet six leading practices for this milestone: Demonstrating processes on a pilot production line. Building and testing production-representative prototypes to demonstrate product in intended environment. Collecting statistical process control data. Conducting an independent cost estimate. Conducting an independent program assessment. Conducting major milestone decision review to begin production. However, we also found that the production processes are not in control according to the Process Capability Index. This index is a tool to measure how closely the production steps result in a part or subsystem that meets predefined standards. According to the leading practices, meeting these standards provides greater confidence that the contractor can produce a high quality product consistently, to minimize variation which results in fewer defects or the need for rework. Additionally, the F- 35 aircraft have not achieved their reliability goals through testing of production representative prototypes. These two leading practices focus on gathering sufficient knowledge to determine the relative ease of manufacturing and whether the product is of high quality and sufficiently mature to move forward into full-rate production. Our analysis of contractor data shows that the airframe contractor’s production processes are in flux. The contractor continues to change some of its production processes, and in other cases, is not following its own established processes well, which has led to several quality issues over the years. For example, in 2018, we reported that the contractor had halted deliveries of aircraft after the Air Force identified corrosion between the aircraft’s surface panels and the airframe because the contractor did not apply a primer when it attached the panels. We reported in 2019 that the program office, the contractor, and the F-35 Program Executive Officer reached a mutual agreement on the cost to resolve this issue, the details of which they did not disclose publicly. In November 2019, a mechanic identified titanium fasteners installed in an area of the aircraft where the design calls for a fastener stronger than titanium. According to the program office, the incorrect fasteners were installed on most already- fielded F-35 aircraft. That same month, the contractor started implementing its corrective action plan. As of March 2020, the F-35 program office had reviewed and approved the contractors’ analysis as well as its durability and damage reports on the use of these fasteners. We describe other key F-35 technical risks in appendix V. Over the years, the airframe contractor has continued to change and refine production processes, aiming to improve efficiency amidst concurrent development and production. For example, the airframe contractor identified a particular process that installs wiring harnesses into the aircraft wings as a driver of one of its production quality issues. To address this issue, the prime contractor developed a new tool that helps the installer route the wires more consistently. While process changes like these can improve the quality of the product, they also indicate that the overall production process are not in control less than a year before the program’s planned full-rate production decision, or milestone C review. In 2019, according to our analysis, the total number of key F-35 manufacturing processes identified in the final assembly phase increased 70 percent, to a total of over 10,000 critical processes. Furthermore, of these critical processes, only 30 percent are currently able to produce a product within predefined design standards. According to manufacturing leading practices, critical processes should be repeatable, sustainable, and consistent in producing parts within quality standards. Meeting these practices provides confidence that the contractor can produce the product within cost, schedule, and quality targets. Without processes in control, the program could face continued quality issues that will add to the overall cost of the program. Figure 11 shows the F-35 aircraft in the final assembly phase of production where some of these processes take place. Another leading practice that should be met before making a full-rate production, or milestone C decision, is to demonstrate that a production representative prototype can meet the program’s R&M goals. The R&M goals lay out specific quantitative goals aimed at ensuring that an aircraft will be available for operations as opposed to out of service for maintenance. We reported in April 2019 that the F-35 aircraft in service around the world were still not meeting all of their R&M goals and recommended the program take actions to ensure that the aircraft would meet those goals. Despite some improvement in 2019, the program is not meeting half of its R&M goals. Until the program does so, the warfighter will continue to accept aircraft for delivery that are less reliable and more costly to maintain than originally planned. For details on the F- 35’s R&M performance, see appendix IV. The program has not met these two leading manufacturing practices, in part, due to the changes the airframe contractor made and continues to make to the production line and the program’s concurrent approach to acquisition. We have repeatedly found that DOD programs that moved into full-rate production carrying manufacturing risks experienced billions of dollars in cost growth in production, and nearly two-thirds reported increases in average procurement unit costs. With the risks the F-35 program still faces, it may realize additional cost and schedule growth if these production risks are not evaluated. Despite these risks, the program has continued to push forward with increased production rates and has not taken actions to determine the potential impact of not meeting these leading practices may have on future production and overall life-cycle costs. Furthermore, according to a program official, the F-35 program has not completed a comprehensive assessment of production risks and does not plan to ahead of its full-rate production decision. However, according to DOD officials, the F-35 program office and prime contractor convene a monthly Joint Risk Management Board, which identifies and manages overall program risk, and has completed an independent technical risk assessment to support the full-rate production decision, which identified production risks. Title 10 section 2366c of the U.S. Code requires the milestone decision authority for a major defense acquisition program to provide Congress with a report that includes, among other things, a summary of any manufacturing risks associated with the program; however, this summary is not required until 15 days after the authority grants approval for the program to enter the production and deployment phase. The program currently plans to obtain this approval between September 2020 and March 2021. In this case, however, the F-35 program has not met all of the manufacturing leading practices that should be met before the full-rate production decision. Furthermore, the underlying risks, such as not meeting R&M goals, have persisted for years and the program has yet to take steps to fully address these risks. If an evaluation of these risks is not provided ahead of the full-rate production decision, Congress will not be fully aware of the risks the program is taking by committing to increased production rates. F-35 Supply Chain Challenges Continue and May Be Exacerbated by Turkey’s Suspension from the Program According to program officials, some suppliers for the F-35 struggled to meet increased production demands in 2019 and, as a result, the program witnessed increased rates of late deliveries or parts shortages. In particular, the number of parts delivered late to the airframe contractor, as well as parts shortages, have grown steadily over the past 2 years. According to the Defense Contract Management Agency: Between August 2017 and July 2019, the number of parts delivered late increased from under 2,000 to more than 10,000. Between July 2018 and July 2019, the parts shortages per month increased from 875 to over 8,000. According to contractor representatives, roughly 60 percent of parts shortages are attributable to 20 suppliers. To mitigate late deliveries and parts shortages—and deliver more aircraft on time—the airframe contractor has utilized methods such as reconfiguring the assembly line and moving planned work between different stations along the assembly line. According to the program office, such steps can cause production to be less efficient, which, in turn, can increase the number of labor hours necessary to build each aircraft. Airframe contractor representatives and a program office official cited measures they are taking to improve supplier performance in light of the upcoming full-rate production decision. For example, the contractor instituted action plans to help problematic suppliers, sent task teams to struggling suppliers to help resolve issues, and, in some cases, is seeking alternative sources. Additionally, the program office has established joint meetings with the prime contractor to monitor progress on a weekly basis and holds a semiannual review to achieve executive-level coordination. While prime contractor representatives told us that they have been actively managing underperforming suppliers for several years, some of their efforts are new and will need time before results materialize. These supply chain risks may compound as the program continues to produce, deliver, operate, and maintain more aircraft each year. For example, in April 2019, we found that fielded, operational F-35 aircraft were not meeting warfighter requirements, largely due to spare parts shortages and difficulty in managing and moving parts around the world. We recommended that the program assess what actions it should take to meet warfighter requirements, which could include adjusting the amount of spare parts acquired. DOD concurred and is working toward addressing the recommendation to identify warfighter gaps with regard to the supply chain. However, with the aircraft in production also facing significant shortages, this problem could get worse as the program prepares to further increase the production rate from 141 aircraft in 2019 to 169 in 2022. We found that Turkey’s recent suspension from the F-35 program is likely to compound these existing supply chain issues. In July 2019, Turkey was suspended from the F-35 program. In particular, the Under Secretary of Defense for Acquisition and Sustainment directed that the F-35 program establish alternative sources and to stop placing orders from Turkish suppliers after March 2020. According to an official with that office, Turkish suppliers will provide parts through the end of lot 14 deliveries (scheduled to take place through 2022), in part, to avoid disruptions to aircraft deliveries and additional cost growth from standing up new suppliers. The F-35 program office identified that Turkish companies supplied 1,005 parts for the F-35 airframe and engine and some of these parts have been provided by only one supplier. As of December 2019, the program has identified new suppliers for all of these parts, but it still needs to bring roughly 15 parts currently produced in Turkey up to the current production rate. During our review, the program reported that production through lot 14 should not be adversely affected if it continues to accept parts from Turkey until lot 14 aircraft are delivered, but risk remains with the transition to alternate sources. However, lots 12-14 still face some risk receiving parts from Turkey. According to program officials, some of these new parts suppliers will not be producing at the rate required until next year, as roughly 10 percent are new to the F-35 program. Airframe contractor representatives stated it would take over a year to stand up these new suppliers, with lead times dependent on several factors, such as part complexity, quantity, and the supplier’s production maturity. In addition, these new suppliers are required to go through qualification and testing to ensure the design integrity for their parts. According to an official with the Under Secretary of Defense for Acquisition and Sustainment, by accepting parts from Turkish suppliers through lot 14, the program will have additional time to ensure new suppliers can meet demands for parts. Additionally, the program reported that it intends to utilize alternative sources for parts currently made in Turkey for aircraft delivered under lots 13 and 14 contracts. Furthermore, according to a program office official, it is also not clear how the prices for parts that will be obtained from new suppliers after Lot 14 will compare with the prices under the contracts with the suppliers from Turkey, but the official noted that alternative sources could be more costly. Block 4 Reporting Requirement Expires Before Completion Date, and Cost Estimate Does Not Fully Reflect Leading Practices In its May 2019 report to Congress, DOD outlined its plans for Block 4 with a development cost estimate of $10.6 billion for activities through fiscal year 2024. Since the 2019 report, we found the program office has increased its estimate by about 14 percent, to $12.1 billion, primarily due to schedule delays. The program now expects to extend the delivery of Block 4 capabilities by 2 additional years, through 2026. In the meantime, DOD’s Block 4 annual reporting requirement to Congress is scheduled to end in 2023, 3 years before development is complete. Additionally, most of the capabilities the F-35 program planned to deliver in 2019 were delayed. Furthermore, we found that the program’s cost estimate used to support its report to Congress does not fully meet cost estimating leading practices. Block 4 Modernization Will Not Be Completed before Reporting Requirements Expire, in Light of Schedule Delays The Block 4 development cost and schedule have grown considerably since DOD’s last report to Congress. In 2016, GAO recommended that DOD manage Block 4 as a major defense acquisition program with its own reporting requirements, separate from the original F-35 development program. DOD did not concur with our recommendation, citing the F-35 as DOD’s most closely managed system and its existing F-35 program oversight. The NDAA for Fiscal Year 2017 required DOD to report annually on elements of a Block 4 baseline, such as development and retrofit cost estimates, beginning no later than one year after the award of the development contract for follow on modernization, until March 31, 2023. At that time, we reported that DOD had requested funding for the development and delivery of Block 4 through the end of 2022. However, over the last year, the program has revised its Block 4 schedule and now expects to field Block 4 capabilities into fiscal year 2026. As a result, there is no requirement for DOD to report on Block 4 progress for at least 3 years even though those efforts will be ongoing. In its May 2019 Block 4 report to Congress, DOD reported that the total cost to develop 66 Block 4 capabilities—both hardware and software— would be $10.6 billion for activities planned from fiscal years 2018 to 2024. The report also included the F-35 program office estimate of an additional $6.4 billion in fiscal year 2018 through 2024 funding to retrofit aircraft from the baseline F-35 configuration to a full Block 4 configuration. The F-35 program based the costs in this report on its Block 4 development cost estimate from July 2018. However, we found that reported Block 4 costs did not include all Block 4 costs. In particular, the report did not include Block 4 costs the program incurred prior to 2018 or costs that the effort will incur after 2024. Because the F-35 program office is not managing the Block 4 effort as a separate program, it has chosen to exclude the past and future costs in the Block 4 cost estimate it reported to Congress. Instead, the program reported on Block 4 costs for the future years defense program—which is DOD’s projected spending for the current budget year and the next four years. By excluding any costs prior to 2018 and those that would be incurred after 2024, the program did not report on the total costs of Block 4. In May 2019, the program also updated its Block 4 development cost estimate, increasing both the time and cost to complete the work, but this updated estimate was not included in its May 2019 report to Congress. The updated cost estimate reflects that the program office will be fielding Block 4 capabilities into fiscal year 2026. This new schedule adds 2 years to the costs DOD reported to Congress in May 2019. Additionally, our analysis of DOD’s updated cost estimate indicates the total cost of Block 4 development grew by $1.5 billion to a total of $12.1 billion for activities in fiscal years 2018 through 2026. Furthermore, in addition to the Block 4 development costs, the program also estimates it will need another $2.9 billion to develop other capabilities, such as upgrades to ALIS. Program officials attributed this schedule and cost growth to having better insight into the scope of work to develop and test Block 4 capabilities and noted that they would continue to refine and update these costs annually as modernization efforts progress further into development. Once the existing statutory reporting requirement expires in 2023, DOD will no longer be required to provide Congress key information that would be useful in making informed decisions regarding the Block 4 effort— which now extends until 2026. Furthermore, without a complete cost estimate for Block 4, inclusive of costs already incurred and those not yet incurred but estimated through completion, Congress is left without a complete picture of what DOD intends to spend on the total Block 4 effort. Without a complete picture of these costs, the Congress’s ability to assess the program’s cost and schedule performance in the future will be hindered. Program Office Delayed Delivery of Most 2019 Block 4 Capabilities to the 2020s The airframe contractor did not deliver the Block 4 capabilities it planned to deliver in 2019. Specifically, according to the plan outlined in its May 2019 report to Congress, the F-35 program was going to deliver eight Block 4 capabilities in 2019. However, the program delivered only one—a software capability called the auto ground-collision avoidance system. This capability enables the aircraft to perform an automatic recovery when it predicts that the aircraft will strike the ground. This was ahead of schedule as the program had originally planned to deliver this capability after 2019. According to program officials, the development of the other capabilities is taking longer than planned and, as a result, the program pushed their delivery schedule into 2020. Development and delivery of the capabilities within the Block 4 effort are complex, and the program does not consider development complete until the products for all elements of the F-35 air system are ready. In particular, full capability delivery occurs when the contractor delivers all of the software and hardware needed for all of the F-35 air system elements to support the planned capability. Program officials stated they are still working to put the processes in place to synchronize the delivery of the late capabilities for all of the F-35 air system elements. For example, the airframe contractor had planned to deliver a capability called the interim full motion video for the Marine Corps in 2019. The contractor developed the software needed, but it is late in developing the hardware needed for the software to operate and, as a result, the contractor did not deliver the capability in 2019 as planned. DOD test officials we met with at Edwards Air Force Base stated that in 2019, using the C2D2 approach, the contractor delivered other, partial Block 4 capabilities to be tested. However, test officials told us those capabilities were delivered later than expected. Since the program could not fully test those capabilities on the aircraft, the program office deferred them to the next incremental update scheduled for 2020. Changes such as these have contributed to the Block 4 cost and schedule growth. The program is also discovering issues during Block 4 testing, causing the testing to take longer than anticipated. According to a DOT&E official, Block 4 software changes caused issues with functionality of F-35 baseline aircraft capabilities that worked before the program installed new Block 4 software onto the aircraft. The program discovered issues with each new software version during flight testing and has been working to fix these issues in subsequent software updates. Testing and DOD officials stated that the contractor had not performed adequate testing of the software before delivering it to the test fleet as the reason for these issues. Contractor representatives acknowledged these issues and stated that they will conduct additional lab testing for future software releases to avoid such problems going forward. Block 4 Development Cost Estimate Does Not Fully Meet Leading Practices, Which Limits Congress’ Understanding of Costs We found that the F-35 program office’s Block 4 cost estimate did not fully meet the four key characteristics of GAO’s cost estimating leading practices when projecting Block 4 development costs. Table 2 presents key points from our assessment, and appendix II provides additional detail on our rationale. As reflected in table 2, our assessment of the F-35 Block 4 development cost estimate identified a number of missing elements. Specifically, the estimate does not rely on a product-oriented work breakdown structure (WBS), it does not address cost risk and uncertainty, it does not take into account risk related to technology maturity, and it does not have an independent cost estimate, as leading practices reflect. While the program office updates its cost estimate regularly, officials told us that they do not intend to address some of these missing elements in future updates. Work breakdown structure. According to cost estimating leading practices, the program should base its cost estimate on a program- level, product-oriented WBS that allows a program to track cost and schedule by defined deliverables, such as hardware or software components. The WBS ensures that the program does not leave out any portions of the work and makes it easier to compare it to similar systems and programs. According to program officials, the Block 4 cost estimate does not rely on a single WBS; rather, multiple, contractor-derived WBSs exist for the program. Without its own, program-office-level WBS, the program lacks a framework to develop a schedule and cost plan that it can use to track progress and accomplishments. Risk and uncertainty analyses. The program did not perform cost risk and uncertainty analyses. Program officials said they do not plan to conduct a formal risk analysis. The program office works jointly with the contractor to identify and manage risks for the F-35 program. For example, there are monthly Joint Risk Management Boards attended by both program office and contractor leadership. However, overall program risk management is different from quantitative cost risk and uncertainty analyses in that program risk management is not specific to costs and it is not used to assess the cost variance of the cost estimate itself. When planning for funding decisions for a program of this scale, analyzing program-level risks alone is inadequate. Without a risk analysis, the cost estimate will not be fully accurate or credible because it will not account for the effects of potential schedule slips or other risks that the program could realize. Technology maturity. A program office official stated that in developing the cost estimate they did not consider that technologies would not be mature, but rather assumed that most technologies needed to deliver each Block 4 capability would be mature before the program begins development for that capability. The official stated that the complexity of design, development, and testing based on the baseline program experience was reflected in the estimate, but the cost estimate did not identify if there were specific costs associated with maturing these technologies. The official further noted that Block 4 costs would increase if a capability takes longer than planned to design, integrate, and test due to its immaturity. In 2019, we recommended that the Secretary of Defense ensure that the F-35 program office completes an independent technology readiness assessment, as part of its business case for the initial Block 4 capabilities, before initiating additional development work. DOD did not concur with our recommendation. According to a program official, as of December 2019, the program office had not completed any technology readiness assessments even though the contractor has started development of over half of the capabilities within Block 4. Going forward, the program is considering holding incremental technology readiness assessments as it plans for and develops a new set of capabilities, in accordance with the C2D2 schedule. Program officials told us that, going forward, as they update the Block 4 cost estimate, they will consider the results of future technology readiness assessments. Until the program office does so, management cannot determine a reasonable level of additional resources that might be necessary to cover increased costs resulting from unexpected design complexity, incomplete requirements, technology uncertainty, and other uncertainties. Independent cost estimate. In 2019, we also recommended the F- 35 program office include an independent cost estimate as part of its business case for Block 4. As noted in table 2, the Block 4 effort still lacks an independent cost estimate. The program is planning for the Office of the Secretary of Defense, Cost Assessment and Program Evaluation to have a draft independent cost estimate for an interim program review scheduled for March 2020 and to have a complete independent cost estimate in June 2020. This estimate will evaluate the entire F-35 program, including Block 4. With these pieces currently missing, the Block 4 development cost estimate does not present a full picture of Block 4’s cost. Ultimately, without a complete understanding of Block 4 costs, the program could face additional cost growth, which will be hard to track without a complete cost baseline. The lack of a complete cost baseline hinders insight and oversight into the program’s costs, plans, and progress to date and going forward. Moreover, if a cost estimate does not fully or substantially meet all four characteristics of cost estimating leading practices, it cannot be considered reliable. Conclusions DOD plans for the F-35 to be central to the warfighter prevailing in future conflicts. However, the program has been behind schedule and over cost almost since its inception. DOD is slated to move into full-rate production despite several key challenges in the production of aircraft. We acknowledge that the current F-35 program’s production rates are more commonly associated with programs already in full-rate production. However, the F-35 aircraft in the field have not met standards for reliability and maintainability, indicating that the program is not delivering aircraft at the level of quality expected. Additionally, the program’s concurrent approach and the contractor’s continual changes to the production line indicate that the production line processes are not in control. Leading practices indicate that mature production lines—production lines ready for full-rate production—should meet metrics for consistency. Furthermore, to minimize production risk and potential cost growth, suppliers should routinely meet quality and delivery schedules, although this is not yet true of the F-35 program. Not meeting these leading practices poses risks that DOD and the international partners will not routinely receive the F-35’s they specified and need. The long-standing challenges with receiving parts on time and efforts underway to replace Turkish suppliers of parts for the F-35 compound these production challenges and may raise additional risks. Unless the program office assesses and reports on these manufacturing risks ahead of the milestone C review, Congress may not have key insights into the risks that remain with the program and to the overall effort to deliver F-35s to the warfighter. Since the F-35 program is not managing the Block 4 effort as a separate program with traditional oversight tools, we are particularly concerned as Block 4 efforts proceed through development and testing. Specifically, because of the delays to the program, after 2023, DOD will not be required to provide Congress information on Block 4’s development efforts as the current reporting requirements will end. Furthermore, the program’s cost estimate, as presented in its report to Congress, does not fully present all incurred and future costs for Block 4. Without this information, Congress may not have the insight it needs to assess Block 4 cost and schedule progress as well as to make informed oversight and budgeting decisions. In addition, the Block 4 development cost estimate does not fully meet leading practices, lacking a full reflection of all costs. Specifically, the cost estimate does not have a program office level work breakdown structure, a risk and uncertainty analysis, and consideration of technology readiness. Without a comprehensive and credible cost estimate, DOD and Congress lack a sound basis for informed investment decision making, realistic budget formulation, meaningful progress measurement, proactive course correction when warranted, and program and contractor accountability for results. Matter for Congressional Consideration Congress should consider revising Section 224(d) of the National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, to extend DOD’s Block 4 reporting requirement until all Block 4 capabilities are fielded to ensure that Congress is aware of cost and schedule growth beyond 2023. (Matter for Consideration 1) Recommendations for Executive Action We are making the following five recommendations to the Secretary of Defense to direct the Undersecretary of Defense for Acquisition and Sustainment (OUSD (A&S)). The OUSD (A&S) should direct the F-35 program office to provide information that is similar to that which is statutorily required after the milestone C review to Congress ahead of the milestone C review (full-rate production decision). This submission should include an evaluation of the production risks associated with critical production processes that are not in control, reliability and maintainability (R&M) targets that are not met, and supplier readiness—particularly for those replacing Turkish suppliers, along with the steps it is taking to address those risks. (Recommendation 1) The OUSD (A&S) should direct the F-35 program office to establish a Block 4 cost estimate baseline that includes all Block 4 costs, including incurred costs and future costs in its reports to Congress as required by the NDAA for Fiscal Year 2017, so that Congress has a complete understanding of all Block 4 costs and can compare this baseline to future cost estimates and performance. (Recommendation 2) The OUSD (A&S) should direct the F-35 program office to complete a program office level, product-oriented work breakdown structure for the next update to its Block 4 cost estimate to ensure that the estimate meets the comprehensive leading practices. (Recommendation 3) The OUSD (A&S) should direct the F-35 program office to conduct risk and uncertainty analyses for the next update to its Block 4 cost estimate to ensure that the estimate meets the credible leading practices. (Recommendation 4) The OUSD (A&S) should direct the F-35 program office to consider the results of its future technology readiness assessment of all Block 4 technologies and incorporate the cost and schedule risks of developing those technologies in the next update to its Block 4 cost estimate to ensure that the estimate meets the comprehensive leading practices. (Recommendation 5) Agency Comments and Our Evaluation We provided a draft of this report to DOD for review and comment. DOD provided written comments, which we have reproduced in appendix VI. DOD concurred with three of the recommendations related to the Block 4 modernization effort (recommendations 2, 4, and 5 above). While DOD did not concur with the other two recommendations, it outlined planned actions that we believe, if implemented, would meet the intent of our recommendations. DOD also provided technical comments, which we incorporated as appropriate. We will continue to monitor the program and evaluate implementation of these recommendations. DOD officials did not concur with the first recommendation, which, in the draft report, was to evaluate production risks and provide a statutorily required report to Congress ahead of the program’s full-rate production decision. While DOD did not concur with the draft recommendation, it agreed to keep the Congress apprised of these matters in its quarterly briefings to the defense committees. To clarify the actions we intended DOD to take to address our findings, we revised the recommendation to indicate that DOD should provide information to Congress on the production risks we identified in our report, ahead of the milestone C review. If the DOD provides a substantive assessment highlighting these production risks, as well as the steps it will take to mitigate them, during its quarterly briefing to Congress ahead of the milestone C review, it would address the intent of our recommendation. DOD also did not concur with our third recommendation for the F-35 program office to complete a program-level, product-oriented work breakdown structure (WBS) for the next update to its Block 4 cost estimate. DOD noted that its next scheduled update was due in April 2020, after we provided our report for comment. While DOD noted it would be unable to complete a program-level WBS by the April 2020 update, it agreed to evaluate moving to a program-level, product-oriented WBS in 2021. If the F-35 program office utilizes a program-level, product- oriented WBS for this cost estimate update, it would meet the intent of our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; and the Under Secretary of Defense for Acquisition and Sustainment, the Secretary of the Air Force, the Acting Secretary of the Navy, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or ludwigsonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. Appendix II: F-35 Block 4 Development Cost Estimate Analysis To assess the reliability of the F-35 Block 4 development cost estimate, we obtained and reviewed cost estimate documentation such as the Joint Program Office briefing on its May 2019 estimate, the Air System Procurement Playbook—a planning document for Block 4—and its cost estimate models. Additionally, we met with relevant staff in the F-35 program office and the Department of Defense’s Office of Cost Assessment and Program Evaluation. We analyzed this information and determined the extent to which the program office’s practices for developing the F-35 Block 4 development cost estimate were consistent with the leading practices identified in the GAO Cost Estimating and Assessment Guide. These practices have been found to be the basis for reliable cost estimates. We assessed each practice as being one of the following: Met—the agency provided data and documentation that satisfies the entire leading practice criterion. Substantially met—the agency provided data and documentation that satisfies a large portion of the leading practice criterion. Partially met—the agency provided data and documentation that satisfies about half of the leading practice criterion. Minimally met—the agency provided data and documentation that satisfies a small portion of the leading practice criterion. Not met—the agency provided data and documentation that does not satisfy any portion of the leading practice criterion. For our reporting needs, we collapsed GAO’s 18 leading practices into four general characteristics: comprehensive, well-documented, accurate, and credible. The assessment of each characteristic was based on an average of the F-35 program office’s scores for the leading practices included in that category. A second analyst verified the assessment and management reviewed the results. We determined the overall assessment rating by assigning each individual rating a number: Not met = 1, Minimally met = 2, Partially met = 3, Substantially met = 4, and Met = 5. Then, we took the average of the individual assessment ratings to determine the overall rating for each of the four characteristics. The resulting average becomes the Overall Assessment as follows: Not met = 1.0 to 1.4, Minimally met = 1.5 to 2.4, Partially met = 2.5 to 3.4, Substantially met = 3.5 to 4.4, and Met = 4.5 to 5.0. A cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met. If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. See table 4 for a high level summary of each leading practice and the reasons for the overall scoring. Appendix III: Objectives, Scope, and Methodology This report fulfills two mandates. First, the National Defense Authorization Act for fiscal year 2015 included a provision for GAO to review the F-35 acquisition program annually until the program reaches full-rate production. This is the fifth report under that provision. Second, the National Defense Authorization Act for Fiscal Year 2020 includes a provision for GAO to review the program’s production and Block 4 progress annually through 2025. In this report, we (1) provide information on the program’s progress toward completing operational testing and resolving deficiencies found in testing; (2) assess the program’s production performance and manufacturing efficiency initiatives; and (3) assess the program’s modernization cost estimate and progress with Block 4 development efforts. To provide information on the program’s progress in operational testing and the resolution of deficiencies, we first reviewed the baseline program’s costs, schedule, and performance plans and compared the actual progress in each area with the goals established in its 2012 baseline to identify any significant trends. We reviewed progress on test events completed versus those that remain, test schedules, program briefings, and DOD briefings. We traveled to Edwards Air Force base to interview DOD test authorities and met with officials from the program office, DOD test authorities, and the contractor Lockheed Martin (the prime aircraft contractor), to discuss key aspects of F-35 development progress, including flight testing, future test plans, and recent findings from test events. Specifically, we obtained updates on key events that are required to complete testing according to the program office’s current schedule. We also interviewed the Director, Operational Test and Evaluation office and F-35 program developmental and operational test pilots. To provide information on the program’s progress resolving deficiencies, we interviewed the same officials mentioned above and discussed how the number of open and closed deficiencies changed in 2019. We reviewed program and contractor information on deficiency reports, mitigations, resolutions, and the deficiency resolution process. To assess the program’s production performance and manufacturing efficiency initiatives, we obtained and analyzed the production metrics from Lockheed Martin and Pratt & Whitney (the prime engine contractor) and their aircraft and engine delivery rates from 2012 through 2019. We reviewed metrics and briefings provided by the program office, Lockheed Martin, Pratt & Whitney, and the Defense Contract Management Agency to identify progress in improving manufacturing processes. We analyzed delivery dates for lot 11 aircraft delivered in 2019. We traveled to the production facility in Fort Worth, Texas to discuss reasons for any delivery delays and plans for improvements with officials from Lockheed Martin. We obtained cost investment and savings estimates and discussed cost and manufacturing efficiency initiatives, such as the economic order quantity purchases, with the contractors and program office officials to understand potential cost savings and plans. We collected and analyzed the extent to which the program has met leading practices identified by GAO for full-rate production. We also obtained and analyzed metrics on parts and aircraft quality through December 2019 and discussed steps taken to improve quality and deliveries with Lockheed Martin and Pratt & Whitney officials. We interviewed officials from Lockheed Martin, Pratt & Whitney, and Northrop Grumman (a key subcontractor) regarding the administration’s decision to suspend Turkey from the program and the implications of the suspension for the contractors. We determined that the contractors’ production metrics and delivery dates were sufficiently reliable for our purposes of determining production efficiency and deliveries. We collected and analyzed production and supply chain performance data from the program office, Lockheed Martin, and Pratt & Whitney. To assess the reliability of the May 2019 Block 4 development cost estimate, we evaluated documentation supporting the estimate, such as the cost estimating models, the F-35’s Air System Procurement Playbook, its updated acquisition strategy, the Decision Memorandum requirements document, and briefings provided to the DOD decision authority. We assessed the cost estimating methodologies, assumptions, and results against leading practices for developing a comprehensive, accurate, well- documented, and credible cost estimate, identified in GAO’s Cost Estimating and Assessment Guide. We also interviewed program officials responsible for developing and reviewing the cost estimate to understand their methodology, data, and approach for developing the estimate. We found that the cost estimate was not reliable. To assess progress with Block 4 development efforts, we interviewed DOD and program office officials, and contractor representatives regarding the program’s Block 4 planning, development, testing, and production activities to date. We reviewed other program documentation, such as the F-35’s fiscal year 2020 budget request, to identify costs associated with the Block 4 effort. We compared the program’s accomplishments in 2019 to its plans and identified what capabilities the program office delivered to the fleet. We reviewed the program office’s plans to develop and deliver additional Block 4 capabilities from 2020 through 2025. We conducted this performance audit from June 2019 to May 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix IV: The F-35’s Reliability and Maintainability Metrics The Joint Strike Fighter Operational Requirements Document, which outlines the requirements Department of Defense and the military services agreed the F-35 should meet, defines all eight reliability and maintainability (R&M) metrics. Table 5 shows each F-35 variants’ performance against these metrics’ targets, as of August 2019. Appendix V: Status of Selected F-35 Technical Risks Newly Identified Technical Risks F-35B Thrust Cutback: An F-35B aircraft can experience an unanticipated cutback in thrust during vertical landings (hover). The contractor put hover weight restrictions in place to mitigate the effect and has identified the root cause. The contractor is developing software and hardware fixes. F-35C Nose Landing Gear: During shipboard landings, the F-35C can experience bending stress, which causes cracking of the coating on a part in the nose landing gear. In the short term, this part will be inspected for damage every 400 flying hours. The contractor is also redesigning the part that is cracking and expects to test it between early 2020 to June 2021. F-35B Three Bearing Swivel Module: The module is mounted at the back of the aircraft and allows the thrust from the engine to be vectored from straight aft for conventional flight to straight down for short takeoff and vertical landing operations. In June 2019, an F-35B experienced a warning indicator in its short takeoff mode due to a hardware component. However, according to the contractor, this component should not cause a warning indicator or loss of functionality for the aircraft. The contractor has identified the root cause of the hardware issue and a gap in the software’s logic that led to the warning. As a result, the contractor is making manufacturing changes to the hardware and implementing software changes to address the issue. Technical Risks Identified in Our Previous Reports Canopy Coating Delaminations: The F-35 fleet has experienced over 50 incidents of the canopy transparencies delaminating after less than 100 flight hours since August 2017. This is over 30 more than we reported in 2019. The contractor tested solutions for the delaminations in 2019 and implemented a solution of adding a vent to the canopy’s frame. Since October 2019, the contractor has added a vent to 146 canopies with one subsequent delamination. Helmet Mounted Display: During low-light flights, the Helmet Mounted Display’s technology cannot display pure black images, instead presenting a green glow on the screen, which makes it difficult to see the full resolution of the night vision video feed. The contractor developed a new display to avoid this effect. According to F-35 program officials, they placed an initial order of 62 displays with 35 delivered by December 2019 to support U.S. Marine Corps and Navy F-35C fleet operations. Three F- 35C pilots completed initial day and night testing using the new display in July 2019 on a carrier. The contractor expects to have a fully qualified redesign by August 2021 and will incorporate it into the production of lot 12 aircraft. Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, the following staff members made key contributions to this report: Justin Jaynes and Alissa Czyz (Assistant Directors); Diana Maurer, Desirée E. Cunningham (Analyst-in- Charge), Jillena Roberts, Tim Moss, Rose Brister, Juaná Collymore, Emile Ettedgui, Jennifer Leotta, and Jeff Hubbard, Other staff who contributed include Leslie Ashton, Priyanka Sethi Bansal, Vinayak Balasubramanian, Julia DiPonio, Christine Pecora, Ralph Roffo, Roxanna Sun, Jessica Waselkow, and Alyssa Weir. Related GAO Products Weapon System Sustainment: DOD Needs a Strategy for Re-Designing the F-35’s Central Logistics System. GAO-20-316. Washington, D.C.: March 6, 2020. F-35 Aircraft Sustainment: DOD Faces Challenges in Sustaining a Growing Fleet. GAO-20-234T. Washington, D.C.: November 13, 2019. Defense Acquisitions: Observations on the F-35 and Air Force’s Advanced Battle Management System. GAO-19-456T: Washington, D.C.: May 2, 2019. F-35 Joint Strike Fighter: Action Needed to Improve Reliability and Prepare for Modernization Efforts. GAO-19-341. Washington, D.C.: April 29, 2019. F-35 Aircraft Sustainment: DOD Needs to Address Substantial Supply Chain Challenges. GAO-19-321. Washington, D.C.: April 25, 2019. F-35 Joint Strike Fighter: Development is Nearly Complete, but Deficiencies Found in Testing Need to Be Resolved. GAO-18-321. Washington, D.C.: June 5, 2018. Warfighter Support: DOD Needs to Share F-35 Operational Lessons Across the Military Services. GAO-18-464R. Washington, D.C.: April 25, 2018. F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency. GAO-18-75. Washington, D.C.: October 26, 2017. F-35 Joint Strike Fighter: DOD’s Proposed Follow-on Modernization Acquisition Strategy Reflects an Incremental Approach Although Plans Are Not Yet Finalized. GAO-17-690R. Washington, D.C.: August 8, 2017. F-35 Joint Strike Fighter: DOD Needs to Complete Developmental Testing Before Making Significant New Investments. GAO-17-351. Washington, D.C.: April 24, 2017. F-35 Joint Strike Fighter: Continued Oversight Needed as Program Plans to Begin Development of New Capabilities. GAO-16-390. Washington, D.C.: April 14, 2016. F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System. GAO-16-439. Washington, D.C.: April 14, 2016. F-35 Joint Strike Fighter: Preliminary Observations on Program Progress. GAO-16-489T. Washington, D.C.: March 23, 2016. F-35 Joint Strike Fighter: Assessment Needed to Address Affordability Challenges. GAO-15-364. Washington, D.C.: April 14, 2015. F-35 Sustainment: Need for Affordable Strategy, Greater Attention to Risks, and Improved Cost Estimates. GAO-14-778. Washington, D.C.: September 23, 2014. F-35 Joint Strike Fighter: Slower Than Expected Progress in Software Testing May Limit Initial Warfighting Capabilities. GAO-14-468T. Washington, D.C.: March 26, 2014. F-35 Joint Strike Fighter: Problems Completing Software Testing May Hinder Delivery of Expected Warfighting Capabilities. GAO-14-322. Washington, D.C.: March 24, 2014. F-35 Joint Strike Fighter: Restructuring Has Improved the Program, but Affordability Challenges and Other Risks Remain. GAO-13-690T. Washington, D.C.: June 19, 2013. F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term Affordability Is a Major Concern. GAO-13-309. Washington, D.C.: March 11, 2013. Fighter Aircraft: Better Cost Estimates Needed for Extending the Service Life of Selected F-16s and F/A-18s. GAO-13-51. Washington, D.C.: November 15, 2012.

The acquisition cost for the F-35 program increased substantially in 2019, partially due to the program's addition of estimated costs for modernization of hardware and software systems, referred to as its Block 4 efforts. This is the fifth report under the provision that Congress included in statute for GAO to review the F-35 program annually until the program reaches full-rate production. This is also the first report under another provision in statute to review the program's production and Block 4 progress annually through 2024. Among other objectives, this report assesses (1) the program's production performance and (2) the program's modernization cost estimate and development progress. GAO reviewed Department of Defense (DOD) and contractor documentation and interviewed DOD officials and contractor representatives. The F-35 program is at risk of missing its test schedule and not meeting manufacturing leading practices. In 2019, the F-35 program conducted much of its planned operational testing but extended the schedule by 9 months, which delays the program's full-rate production decision to between September 2020 and March 2021. Over that time, the program will continue to deliver aircraft. In addition, while the F-35 program has increased the production rate and negotiated lower aircraft prices, it is not meeting manufacturing leading practices identified by GAO. Specifically, only about 3,000 of the over 10,000 airframe contractor's manufacturing key processes meet predefined design standards for ensuring product quality. Also, the fielded aircraft, over 500 so far, do not meet the program's reliability and maintainability goals. Although the contractor is changing manufacturing processes to address problems and improve efficiency, more remains to be done. Unless the program office evaluates the risks of not meeting these leading practices, the military services and international partners are at risk of not receiving the quality aircraft they purchased. In addition, the July 2019 suspension of Turkey from the F-35 program—due to security concerns after its acquisition of Russian defense equipment—is likely to compound production risks. The program has identified new sources for 1,005 parts produced by Turkish suppliers, but the program is assessing the effect of 15 key parts not currently being produced at the needed production rate. In 2019, estimated development costs to modernize the F-35's hardware and software systems—known as Block 4—increased by over $1.5 billion. The cost increase puts estimated Block 4 development costs at $12.1 billion. However, the cost estimate did not fully adhere to leading practices, such as including all life cycle costs. In addition, while development will continue through 2026, reports on Block 4 that the program submits to Congress are slated to end in 2023. Without continued Block 4 reporting through the development phase, Congress will lack important oversight information.

CRS_R46359

Introduction The Coronavirus Disease 2019 (COVID-19) pandemic is affecting communities around the world and throughout the United States, with case counts growing daily. As private health insurance is the predominant source of health coverage in the United States, there is considerable congressional interest in understanding private health insurance coverage of health benefits related to COVID-19 diagnosis, treatment, and prevention. This report addresses frequently asked questions about covered benefits and consumer cost sharing related to COVID-19 testing, treatment, and a potential vaccine. It discusses recent legislation, references relevant existing federal requirements and recent administrative interpretations of them in relation to COVID-19, and notes state and private-sector actions. It begins with background information on types and regulation of private health insurance plans. The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ) requires specified types of private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, without consumer cost sharing. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) further addresses private health insurance coverage of COVID-19 testing, and requires coverage of a potential vaccine and other preventive services without cost sharing, if they are recommended by specified federal entities. There are no federal requirements that specifically require coverage of COVID-19 treatment services. However, one or more existing federal requirements are potentially relevant, as discussed in this report. Some states have also announced requirements related to covered benefits and consumer costs, and some insurers have reported that they will voluntarily cover certain relevant benefits. This report discusses most U.S. private health insurance plans' coverage of health care items and services related to COVID-19, but it generally does not discuss the delivery of those services, insurers' payments to health care providers, or private health insurance coverage of other benefits. The Appendix lists Congressional Research Service (CRS) analysts who can discuss with congressional clients other topics of interest related to private health insurance and COVID-19, including types of plans and coverage of benefits not addressed in this report. Also beyond the scope of this report are public health coverage programs (e.g., Medicare); the domestic and international public health responses to COVID-19; and economic, human services, and other nonhealth issues. For further information on these topics, congressional clients can access the CRS Coronavirus Disease 2019 resources page at https://www.crs.gov/resources/coronavirus-disease-2019 . The information in this report is current as of its publication date and may be superseded by subsequent congressional or administrative action. Congressional clients may contact the report author and/or the experts listed in the Appendix for questions about further developments. In addition, Centers for Medicare & Medicaid Services (CMS) guidance related to private health insurance and COVID-19 is compiled on its website. Background on Private Health Insurance The private health insurance market includes both the group market (largely made up of employer-sponsored insurance) and the individual market (which includes plans directly purchased from an insurer). The group market is divided into small- and large-group market segments; a small group is typically defined as a group of up to 50 individuals (e.g., employees), and a large group is typically defined as one with 51 or more individuals. Employers and other group health plan sponsors may purchase coverage from an insurer in the small- and large-group markets (i.e., they may fully insure ). Sponsors may instead finance coverage themselves (i.e., they may self-insure ). The individual and small-group markets include plans sold on and off the individual and small-group health insurance exchanges, respectively. Covered benefits, consumer costs, and other plan features may vary by plan, subject to applicable federal and state requirements. The federal government may regulate all the coverage types noted above (i.e., individual coverage, fully insured small- and large-group coverage, and self-insured group plans), and states may regulate all but self-insured group plans. Federal and state requirements may vary by coverage type. This report focuses on private-sector plans explained above. There are some variations of these coverage types, and there are other types of private health coverage arrangements, which may or may not be subject to the requirements discussed in this report, or for which there may be other policy questions related to COVID-19. These other coverage types are out of the scope of this report, but a number of them are identified in the Appendix , along with resources for further information. One coverage variation, grandfathered plans , is included in this report because it is explicitly referenced in legislation relevant to COVID-19 and private health insurance coverage. Grandfathered plans are individual or group plans in which at least one individual was enrolled as of enactment of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), and which continue to meet certain criteria. Plans that maintain their grandfathered status are exempt from some, but not all, federal requirements. Another type of coverage, short-term, limited duration insurance (STLDI or STLD plans), is also included in this report, because it is explicitly excluded from a coverage definition cited by relevant legislation. STLDI is coverage, generally sold in the individual market, which meets certain definitional criteria. The statutory definition of "individual health insurance coverage" excludes STLDI; thus, STLDI is exempt from complying with all federal health insurance requirements applicable to individual health insurance plans. FAQ: COVID-19 Covered Benefits and Cost Sharing The remainder of this report addresses private health insurance coverage of COVID-19 testing, treatment, and vaccination, when a vaccine becomes available. Where there are federal requirements related to such coverage, it is useful to understand the following: Is the service or item required to be covered? If so, is cost sharing allowed? In general, private health insurance cost sharing includes deductibles, coinsurance, and copayments. Are plans allowed to impose prior authorization or other medical management requirements? For example, some insurers require that they (the insurer) provide prior authorization for routine hospital inpatient care, and/or require that primary care physicians provide approval or referrals for specialty care, as a condition for covering the care. Does the coverage requirement depend on how or where the service or item is furnished (e.g., by an in-network versus out-of-network provider)? Under private insurance, benefit coverage and consumer cost sharing is often contingent upon whether the service or item is furnished by a provider that the insurer has contracted with (i.e., whether that provider is in network for a given plan). In instances where a contract between an insurer and provider does not exist, the provider is considered out of network . When does the coverage requirement go into effect? What types of plans are subject to the coverage requirement? To the extent that information is available, these issues are addressed with regard to private health insurance coverage of COVID-19 testing, treatment, and vaccination. Table 1 summarizes key information. Are Plans Required to Cover COVID-19 Testing? FFCRA and CARES Act Prior to the enactment of the FFCRA ( P.L. 116-127 ), there were no federal requirements specifically mandating private health insurance coverage of items or services related to COVID-19 testing. Section 6001 of the FFCRA requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, as defined in the act. Per FFCRA, the coverage must be provided without consumer cost sharing, including deductibles, copayments, or coinsurance. Prior authorization or other medical management requirements are prohibited. The definition of testing that must be covered was expanded by Section 3201 of the CARES Act ( P.L. 116-136 ). In addition, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Treasury issued an FAQ document on April 11, 2020 (hereinafter, "Tri-Agency April 11 FAQ"), on the private health insurance coverage requirements in FFCRA and the CARES Act. Together, the acts and guidance require coverage of certain tests and services, as summarized below. Specified COVID-19 diagnostic tests, including both molecular (e.g., polymerase chain reaction, or PCR, tests) and serological tests (i.e., antibody tests), and the administration of such tests are covered. "Items and services furnished to an individual during [visits, as specified below] that result in an order for or administration of [an applicable COVID-19 test], but only to the extent such items and services relate to the furnishing or administration of such product or to the evaluation of such individual for purposes of determining the need of such individual for such product." This definition could encompass additional diagnostic testing associated with the visit. However, it would not encompass treatment for COVID-19-associated illnesses. The coverage requirements apply to the specified items and services when furnished at visits including to health care provider offices, urgent care centers, emergency rooms, and "nontraditional" settings, including drive-through testing sites. The requirements apply to both in-person and telehealth visits. FFCRA does not specify whether its coverage requirements apply when the test is furnished by an out-of-network provider. However Section 3202 of the CARES Act addresses insurer payments to in-network and out-of-network providers. In addition, the Tri-Agency April 11 FAQ clarifies that the FFCRA coverage requirements apply both in network and out of network. The coverage requirements in FFCRA apply only to the specified items and services that are furnished during the COVID-19 public health emergency period described in that act, as of the date the FFCRA was enacted (March 18, 2020). These requirements apply to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. This includes grandfathered individual or group plans, which are exempt from certain other federal private health insurance requirements. Per the definition of individual health insurance coverage cited in the act, the requirements do not apply to STLDI. State and Private-Sector Actions In recent weeks, some states have announced coverage requirements, and some insurers have clarified or expanded their policies, regarding coverage of COVID-19 testing, among other services. However, states cannot regulate self-insured plans, and insurer announcements do not necessarily apply to those plans either. FFCRA does apply to self-insured group plans in addition to the other plan types discussed above. To the extent that state requirements about or plans' voluntary coverage of COVID-19 testing did not extend as far as FFCRA and CARES Act requirements, the federal laws supersede them. However, state requirements and plans' voluntary coverage may exceed applicable federal requirements, as long as they do not prevent the implementation of any federal requirements. Even though federal law now requires most plans to cover specified COVID-19 testing services without cost sharing, it may be useful for consumers to contact their insurers or plan sponsors to understand their coverage. Subject to applicable federal and state requirements, coverage of the COVID-19 test and related services and items may vary by plan. Are Plans Required to Cover COVID-19 Treatment? Essential Health Benefits Guidance on COVID-19 Coverage Although FFCRA requires certain plans to cover specified COVID-19 testing services without cost sharing, neither FFCRA nor the CARES Act mandates coverage of COVID-19 treatment services. There is no federal requirement specifically mandating private health insurance coverage of items or services related to COVID-19 treatment. However, one or more existing federal requirements are potentially relevant, subject to state implementation and plan variation. There is a federal statutory requirement that certain plans cover a core set of 10 categories of essential health benefits (EHB). However, states, rather than the federal government, generally specify the benefit coverage requirements within those categories. Current regulation allows each state to select an EHB-benchmark plan. The benchmark plan serves as a reference plan on which plans subject to EHB requirements must substantially base their benefits packages. Because states select their own EHB-benchmark plans, there is considerable variation in EHB coverage from state to state. On March 5, 2020, and March 12, 2020, CMS issued guidance addressing the potential relevance of EHB requirements to coverage of COVID-19 treatment, among other benefits, subject to variation in states' EHB-benchmark plan designations. According to the March 12 document, "all 51 EHB-benchmark plans currently provide coverage for the diagnosis and treatment of COVID-19" (emphasis added), but coverage of specific benefits within the 10 categories of EHB (e.g., hospitalization, laboratory services) may vary by state and by plan. The March 12 document suggests that coverage of medically necessary hospitalizations would include coverage of medically necessary isolation and quarantine during the hospital admission, subject to state and plan variation. Quarantine in other settings, such as at home, is not a medical benefit. The document notes, "however, other medical benefits that occur in the home that are required by and under the supervision of a medical provider, such as home health care or telemedicine, may be covered as EHB," subject to state and plan variation. The March 12 document confirms that "exact coverage details and cost-sharing amounts for individual services may vary by plan, and some plans may require prior authorization before these services are covered." In other words, even where certain treatment items and services are required to be covered as EHB in a state, cost-sharing and medical management requirements could apply, subject to applicable federal and state requirements. In addition, cost sharing and other coverage details may vary for services furnished by out-of-network providers. Individual and fully insured small-group plans are subject to EHB requirements. Large-group plans, self-insured plans, grandfathered plans, and STLDI are not. Whether or not certain treatment services are defined as EHB in a state, other state benefit coverage requirements may be relevant to COVID-19 treatment. Plans may also voluntarily cover benefits. See " State and Private-Sector Actions " below. Certain Federal Requirements Related to Cost Sharing Other existing federal requirements are also relevant to consumer cost sharing on COVID-19 treatment services, to the extent that such treatments are covered by the consumer's plan, and largely to the extent that they are defined by a state as EHB. For example, plans must comply with annual l imits on consumers' out-of-pocket spending (i.e., cost sharing, including deductibles, coinsurance, and copayments) on in-network coverage of the EHB. If certain treatment services are defined as EHB in a state, and are furnished by an in-network provider, consumers' out-of-pocket costs for the plan year would be limited as discussed below. If certain treatment services are not defined as EHB in a state, and/or are furnished by out-of-network providers, this out-of-pocket maximum would not necessarily apply. In 2020, the out-of-pocket limits cannot exceed $8,150 for self-only coverage and $16,300 for coverage other than self-only. This means that once a consumer has spent up to that amount in cost sharing on applicable in-network benefits, the plan would cover 100% of remaining applicable costs for the plan year. The out-of-pocket maximum applies to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. The requirement does not apply to grandfathered plans or STLDI. State and Private-Sector Actions As stated above, in recent weeks, some states have announced coverage requirements related to COVID-19 testing services and items, and some insurers have clarified or expanded their policies to include relevant coverage. Some of these state and insurer statements also address coverage of treatment services. However, as discussed above, states cannot regulate self-insured plans, and insurer announcements do not necessarily apply to those plans either. Coverage, cost sharing, and the application of medical management techniques (e.g., prior authorization) can vary by plan, subject to applicable federal and state requirements. It may be useful for consumers to contact their insurers or plan sponsors to understand their coverage of services and items related to COVID-19 treatment. Will Plans Be Required to Cover a COVID-19 Vaccine? CARES Act and Existing Preventive Services Coverage Requirements As of the date of this report, there is no vaccine against COVID-19 approved by the Food and Drug Administration (FDA) for use in the United States, although several candidates are in development. Prior to the enactment of the CARES Act, there were no federal requirements specifically mandating private health insurance coverage of items or services related to a COVID-19 vaccine. However, per an existing federal requirement (§2713 of the Public Health Service Act [PHSA]) and its accompanying regulations, most plans must cover specified preventive health services without cost sharing. This includes any preventive service recommended with an A or B rating by the United States Preventive Services Task Force (USPSTF); or any immunization with a recommendation by the Advisory Committee on Immunization Practices (ACIP), adopted by the Centers for Disease Control and Prevention (CDC), for routine use for a given individual. These coverage requirements apply no sooner than one year after a new or revised recommendation is published. Requirements of PHSA Section 2713 apply to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. The requirements do not apply to grandfathered plans or to STLDI. By regulation, plans are generally not required to cover preventive services furnished out of network. They are allowed to use "reasonable medical management" techniques, within provided guidelines. Cost sharing for office visits associated with a furnished preventive service may or may not be allowed, as specified in regulation. Section 3203 of the CARES Act requires specified plans—the same types as those subject to PHSA Section 2713—to cover a COVID-19 vaccine, when available, and potentially other COVID-19 preventive services, if they are recommended by ACIP or USPSTF, respectively. This coverage must be provided without cost sharing. Section 3203 also applies an expedited effective date for the required coverage: 15 business days after an applicable ACIP or USPSTF recommendation is published. Otherwise, requirements of Section 3203 mirror the existing requirements under PHSA Section 2713. The requirement to cover COVID-19 vaccination and other preventive services is not time limited, whereas the FFCRA requirement to cover COVID-19 testing is limited to the duration of a declared COVID-19 public health emergency. See " Are Plans Required to Cover COVID-19 Testing? " State and Private-Sector Actions Some of the state and insurer announcements about coverage of COVID-19 benefits, discussed earlier in this report, reference coverage of a potential vaccine. However, pending development and approval of the vaccine, and pending the implementation of the CARES Act requirements related to COVID-19 vaccine coverage, it is premature to discuss potential variations in coverage of the vaccine at the state or plan level. It may still be useful for consumers to contact their insurers or plan sponsors to understand their coverage of services and items related to a potential COVID-19 vaccine. Appendix. Resources for Questions about Private Health Insurance and COVID-19 This report has focused on coverage of COVID-19 testing, treatment, and vaccination by most types of private health insurance plans. CRS analysts are also available to congressional clients to discuss other topics of interest related to private health insurance and COVID-19, including coverage of COVID-19 benefits by types of private plans not specifically addressed in this report; other issues related to private coverage of COVID-19 benefits; private coverage of certain other benefits of concern during this pandemic, or of services furnished via telehealth; and issues related to private health insurance enrollment and premium payments. The following table lists examples of such topics of interest, any relevant legislative or administrative resources, any relevant CRS resources, and names of appropriate CRS experts for the benefit of congressional clients. Besides the CRS reports listed below that provide background on relevant topics, also see CRS reports on health provisions in recent COVID-19 legislation: CRS Report R46316, Health Care Provisions in the Families First Coronavirus Response Act, P.L. 116-127 , and CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136) . The information in this report is current as of its publication date and may be superseded by subsequent congressional or administrative action. Congressional clients may contact the report author and/or experts listed below for questions about further developments. In addition, CMS guidance related to private health insurance and COVID-19 is compiled on its website.

The Coronavirus Disease 2019 (COVID-19) pandemic is affecting communities around the world and throughout the United States, with case counts growing daily. As private health insurance is the predominant source of health coverage in the United States, there is considerable congressional interest in understanding private health insurance coverage of health benefits related to COVID-19. This report addresses frequently asked questions about private health insurance covered benefits and consumer cost sharing related to COVID-19 testing, treatment, and a potential vaccine. It discusses recent legislation, references existing federal requirements and recent administrative interpretations of them in relation to COVID-19, and notes state and private-sector actions. Federal and state health insurance requirements may relate to covered benefits and consumer cost sharing, among many other topics. These requirements can vary by coverage type (i.e., individual coverage, fully insured small- and large-group coverage, and self-insured plans). Covered benefits, consumer costs, and other plan features may vary by plan within each type of coverage, subject to applicable federal and state requirements. The following bullets summarize federal requirements related to coverage and cost sharing (which includes deductibles, coinsurance, and copayments) of COVID-19 testing, treatment, and vaccination. Additional details are addressed in the report, including the applicability of the requirements to different types of plans; whether the coverage requirements apply even when furnished by out-of-network providers; whether plans are allowed to impose prior authorization or other medical management techniques; and the applicable dates of any coverage requirements. COVID-19 Testing . The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ), as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ), requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, as defined by the acts. This coverage must be provided without consumer cost sharing. COVID-19 Treatment . There are no federal requirements that specifically require coverage of COVID-19 treatment. However, the existing federal requirement that certain plans cover a set of 10 categories of essential health benefits (EHB) is potentially relevant to coverage of COVID-19 treatment items and services, depending on state and plan variation with regard to implementation of this requirement. Even where treatment items and services are required to be covered as EHB, cost sharing could apply. COVID-19 Vaccine . As of the date of this report, there is no vaccine against COVID-19 approved by the Food and Drug Administration (FDA) for use in the United States, although several candidates are in development. The CARES Act requires most plans to cover a COVID-19 vaccine, when available, without cost sharing, if it is recommended by the Advisory Committee on Immunization Practices (ACIP). Similarly, most plans must cover, without cost sharing, any other COVID-19 preventive services that are recommended for use by the United States Preventive Services Task Force (USPSTF). Some states have also announced relevant requirements on the plans they regulate, and some insurers have reported that they will cover certain relevant benefits. Several organizations are tracking these announcements, as noted in this report. Congressional Research Service (CRS) experts on other topics related to private health insurance and COVID-19, including types of plans and coverage of benefits not addressed in this report, are listed in the Appendix for the benefit of congressional clients. For information on other COVID-19 issues, congressional clients can access the CRS Coronavirus Disease resources page at https://www.crs.gov/resources/coronavirus-disease-2019 .

CRS_R46243

Introduction In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." There are 33 temporary tax provisions scheduled to expire at the end of 2020. This report discusses six provisions related to the individual income tax: (1) the tax exclusion for canceled mortgage debt, (2) mortgage insurance premium deductibility, (3) the above-the-line deduction for qualified tuition and related expenses, (4) the credit for health insurance costs of eligible individuals, (5) the medical expense deduction adjusted gross income (AGI) floor of 7.5%, and (6) the exclusion for income of certain state and local tax rebates and reimbursement for volunteer firefighters and emergency medical responders. These six provisions were extended through 2020 in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The first three provisions had expired at the end of 2017 and have been included in recent tax extenders legislation. Two provisions are housing related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007). The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007. Both provisions were temporary when first enacted, but in recent years have been extended as part of tax extenders legislation. The above-the-line deduction for qualified tuition and related expenses was first added as a temporary provision in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ), and has regularly been extended since. The Further Consolidated Appropriations Act, 2020, also extended through 2020 individual provisions that expired in 2019 and 2018. The credit for health insurance costs of eligible individuals (also known as the health coverage tax credit [HCTC]) was scheduled to expire after 2019, whereas the medical expense deduction adjusted gross income (AGI) floor of 7.5% had expired at the end of 2018. The act also reinstated for one year, and expanded, a provision allowing for the exclusion from income of certain state and local tax rebates and reimbursement for volunteer firefighters and emergency medical responders that had expired in 2010. The three provisions that expired in 2018, 2019, or 2010 were not in the previous tax extenders legislation. The health coverage tax credit, which applied to recipients of trade adjustment assistance, among others, was last extended through 2019 by the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ). The 7.5% floor for itemized deductions for medical expenses was provided through 2018 by the 2017 tax revision ( P.L. 115-97 , commonly known as the Tax Cuts and Jobs Act). The exclusion of reimbursements for volunteer firefighters and emergency medical respondents was originally enacted in the Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ). In recent years, Congress has chosen to extend most, if not all, recently expired or expiring provisions as part of tax extenders legislation. The most recent tax extenders package is in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The temporary reinstatement of the exclusion for volunteer firefighters and emergency medical responders was in a different part of the act, Division O, the Setting Every Community Up for Retirement Enhancement ("SECURE") Act of 2019. The estimated cost of the extensions of temporary individual tax provisions enacted in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) is provided in Table 1 . As described above, the first three provisions had expired at the end of 2017. Thus, they were extended for three years (with two years of the three-year extension being retroactive). The 7.5% medical expense deduction floor had expired at the end of 2018, meaning that one year of the two-year extension was retroactive. The health care tax credit was scheduled to expire at the end of 2019, and was extended for one year. The provision for volunteer firefighters and emergency medical responders is scheduled to be effective for one year (2020). Tax Exclusion for Canceled Mortgage Debt2 Historically, when all or part of a taxpayer's mortgage debt has been forgiven, the amount canceled has been included in the taxpayer's gross income. This income is typically referred to as canceled mortgage debt income. Canceled (or forgiven) mortgage debt is common with a short sale, in which a homeowner agrees to sell a house and transfer the proceeds to the lender in exchange for the lender relieving the homeowner from repaying any debt in excess of the sale proceeds. For example, in a short sale, a homeowner with a $300,000 mortgage may be able to sell the house for $250,000. The lender would receive the $250,000 from the home sale and forgive the remaining $50,000 in mortgage debt. Lenders report the canceled debt to the Internal Revenue Service (IRS) using Form 1099-C. A copy of the 1099-C is also sent to the borrower, who in general must include the amount listed in his or her gross income in the year of discharge. To understand why forgiven debt has historically been taxable, it may be helpful to explain why it is viewed as income from an economic perspective. Income is a measure of the increase in an individual's purchasing power over a designated period of time. When individuals experience a reduction in their debts, their purchasing power has increased (because they no longer have to make payments). Effectively, their disposable income has increased. From an economic standpoint, it is irrelevant whether a person's debt was reduced via a direct transfer of money to the borrower (e.g., wage income) that was then used to pay down the debt, or whether it was reduced because the lender forgave a portion of the outstanding balance. Both have the same effect, and thus both are subject to taxation. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ), signed into law on December 20, 2007, temporarily excluded qualified canceled mortgage debt income that is associated with a primary residence from taxation. Thus, the act allowed taxpayers who did not qualify for one of several existing exceptions to exclude canceled mortgage debt from gross income. The provision was originally effective for debt discharged before January 1, 2010. Since then, the provision has regularly been extended as part of the tax extenders. The exclusion was most recently extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The rationales for extending the exclusion are to minimize hardship for households in distress and lessen the risk that nontax homeowner retention efforts are thwarted by tax policy. The exclusion's supporters may also argue that extending the exclusion would continue to assist the recoveries of the housing market and overall economy. The exclusion's opponents may argue that extending the provision would make debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfilling debt obligations. Some may also view the exclusion as unfair because its benefits depend on whether a homeowner is able to negotiate a debt cancelation, the taxpayer's income tax bracket, and whether the taxpayer retains ownership of the house following the debt cancellation. Mortgage Insurance Premium Deductibility5 Traditionally, homeowners who itemize their tax deductions have been able to deduct the interest paid on their mortgages, as well as any property taxes they pay. Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). Specifically, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if the homeowner itemized, and if the homeowner's adjusted gross income was below a certain threshold ($55,000 for single, and $110,000 for married filing jointly). Originally, the deduction was only to be available for 2007, but it was extended several times. The deduction was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Taxpayers of all ages may be less likely to claim the mortgage insurance premium deduction compared to prior periods because other provisions of the 2017 tax revision, including a higher standard deduction (in part as a trade-off for elimination of personal exemptions) and a cap on the deduction of state and local taxes, reduced the expected number of itemizers (projected to fall from about one-third of individual income tax returns to 11%). A justification for allowing the deduction of mortgage insurance premiums is that it helps to promote homeownership and, relatedly, the recovery of the housing market following the December 2007-June 2009 Great Recession. Homeownership is often argued to bestow certain benefits to society, such as higher property values, lower crime, and higher civic participation. Homeownership may also promote a more even distribution of income and wealth, as well as establish greater individual financial security. Furthermore, homeownership may have a positive effect on living conditions, which can lead to a healthier population. With regard to the first justification, it is not clear that the deduction for mortgage insurance premiums affects the homeownership rate. Economists have identified the high transaction costs associated with a home purchase—mostly resulting from the down payment requirement, but also from closing costs—as the primary barrier to homeownership. The ability to deduct insurance premiums does not lower this barrier—most lenders will require mortgage insurance if the borrower's down payment is less than 20% regardless of whether the premiums are deductible. The deduction may allow buyers to borrow more, however, because they can deduct the higher associated premiums and therefore afford a higher housing payment. Concerning the second justification, it is also not clear that the deduction for mortgage insurance premiums is still needed to assist in the housing market's recovery. Based on the S&P CoreLogic Case-Shiller U.S. National Composite Index, home prices have generally increased since the bottom of the market following the Great Recession. In addition, the available housing inventory is now slightly below its historical level. Both of these indicators suggest that the market is stronger than when the provision was enacted. Economists have noted that owner-occupied housing is already heavily subsidized via tax and nontax programs. To the degree that owner-occupied housing is oversubsidized, it could be argued that extending the deduction for mortgage insurance premiums would lead to a greater misallocation of resources that are directed toward the housing industry. Above-the-Line Deduction for Qualified Tuition and Related Expenses10 This provision allows taxpayers to deduct up to $4,000 of qualified tuition and related expenses for postsecondary education (both undergraduate and graduate) from their gross income. Expenses that qualify for this deduction include tuition payments and any fees required for enrollment at an eligible education institution. Other expenses, including room and board expenses, are generally not qualifying expenses for this deduction. The deduction is "above-the-line," that is, it is not restricted to itemizers. Individuals who could be claimed as dependents, married persons filing separately, and nonresident aliens who do not elect to be treated as resident aliens do not qualify for the deduction, in part to avoid multiple claims on a single set of expenses. The amount that can be claimed for the deduction is generally reduced by any tax-free assistance, if that assistance can be used to pay for expenses that qualify for the deduction. Tax-free assistance includes tax-free grants and scholarships (including Pell Grants), employer-provided educational assistance, and veterans' educational assistance. The maximum deduction taxpayers can claim depends on their income level. Taxpayers can deduct up to $4,000 if their income is $65,000 or less ($130,000 or less if married filing jointly); or $2,000 if their income is between $65,000 and $80,000 ($130,000 and $160,000 if married filing jointly). Taxpayers with income above $80,000 ($160,000 for married joint filers) are ineligible for the deduction. These income limits are not adjusted for inflation. The above-the-line deduction for qualified tuition and related expenses was enacted temporarily by the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ). It has been extended a number of times. Most recently, the deduction was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). One criticism of education tax benefits is that the taxpayer is faced with a confusing choice of deductions and credits and tax-favored education savings plans, and that these benefits should be consolidated. Some tax reform proposals have consolidated these benefits into a single education credit. Taxpayers may claim the tuition and fees deduction instead of education tax credits for the same student. These credits include permanent tax credits: the American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit. The AOTC is directed at undergraduate education and is limited to the first four years of postsecondary education. The Lifetime Learning Credit (20% of up to $10,000) is not limited in years of coverage. These credits are generally more advantageous than the deduction, except for higher-income taxpayers, in part because the credits are phased out at lower levels of income than the deduction. For example, for single taxpayers, the Lifetime Learning Credit begins phasing out at $59,000 for 2020. The deduction benefits taxpayers according to their marginal tax rate. Students usually have relatively low incomes, but they may be part of families in higher tax brackets. The maximum amount of deductible expenses limits the tax benefit's impact on individuals attending schools with comparatively high tuitions and fees. Because the income limits are not adjusted for inflation, the deduction might be available to fewer taxpayers over time if extended in its current form. The distribution of the deduction in Table 2 indicates that some of the benefit is concentrated in the income range where the Lifetime Learning Credit has phased out, but also that significant deductions are claimed at lower income levels. Because the Lifetime Learning Credit is preferable to the deduction at lower income levels, it seems likely that confusion about the education benefits may have caused taxpayers not to choose the optimal education benefit. Credit for Health Insurance Costs of Eligible Individuals16 The credit for health insurance costs of eligible individuals, commonly known as the health coverage tax credit (HCTC), reduces the cost of qualified health insurance for eligible individuals. To be eligible to claim the HCTC, taxpayers must be (1) an eligible trade adjustment assistance (TAA) recipient; (2) an eligible alternative TAA recipient or reemployment TAA recipient; or (3) an eligible Pension Benefit Guaranty Corporation (PBGC) pension recipient. Additionally, an individual is not eligible for the HCTC if they have access to "other specified coverage," which includes coverage for which an employer (or former employer) incurs 50% of the cost as well as Medicare, Medicaid, the Children's Health Insurance Programs, and other federal and military health or medical benefit plans. Under this provision, eligible taxpayers are allowed a refundable tax credit for 72.5% of the premiums they pay for qualified health insurance for themselves and their family members. Eligible taxpayers with qualified health insurance may claim the tax credit (1) when tax returns are filed or (2) as advance payments, on a monthly basis, throughout the year. This latter option helps taxpayers pay for health plan premiums as they become due. The credit is not available for months beginning on or after January 1, 2021. The HCTC was originally authorized by the Trade Act of 2002 ( P.L. 107-210 ). The credit has been extended and modified several times. Extensions or modifications have been made in trade adjustment assistance legislation as well as tax extenders legislation. The Trade Preferences Extension Act of 2015 ( P.L. 114-27 ) extended the HCTC through December 31, 2019, and also made changes to address the interaction between the HCTC and the premium tax credit established under the Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended). The credit was extended through December 31, 2020, in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Medical Expense Deduction Adjusted Gross Income (AGI) Floor of 7.5%21 Individuals are allowed to deduct unreimbursed medical expenses above a specific income threshold if they itemize their deductions. Prior to 2013, these deductions were allowed only for amounts in excess of 7.5% of income. Expenses reimbursed by an employer or insurance company are not eligible for deduction. The Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) increased the floor for individuals claiming the itemized deduction for medical expenses from 7.5% to 10% of adjusted gross income (AGI). The higher floor went into effect for taxpayers under age 65 beginning for the 2013 tax year. Individuals 65 or older, however, were still able to claim the deduction under the lower, 7.5% floor for tax years 2013 through 2016. The 2017 tax revision ( P.L. 115-97 ) temporarily allowed all taxpayers (not just those aged 65 or older) to claim the deduction subject to the 7.5% floor for the 2017-2018 tax years. The Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), extends the 7.5% floor for all taxpayers through 2020. After 2020, under current law, the floor is scheduled to increase to 10% of AGI for all taxpayers. A complicated set of rules governs the expenses eligible for the deduction. Generally speaking, these expenses include amounts paid by the taxpayer on behalf of himself or herself, his or her spouse, and eligible dependents for the following purposes: (1) health insurance premiums (including employee payments for employer-sponsored health plans, Medicare Part B premiums, and other self-paid premiums); (2) diagnosis, treatment, mitigation, or prevention of disease, or for the purpose of affecting any structure or function of the body, including dental care; (3) prescription drugs and insulin (but not over-the-counter medicines); (4) transportation primarily for and essential to medical care; and (5) lodging away from home primarily for and essential to medical care, up to $50 per night for each individual. The current lower floor is for all taxpayers, and future extensions, if any, could make the lower floor general, or limit it to taxpayers 65 and over. Based on a 2011 special study of deductions by age, 58% of dollars deducted were by those 65 and over, who made up 39% of taxpayers claiming the deduction. Taxpayers of all ages may be less likely to claim the medical expense deduction compared to prior periods because, as mentioned previously, other provisions of the 2017 tax revision, including a higher standard deduction (in part as a trade-off for elimination of personal exemptions) and a cap on the deduction of state and local taxes, reduced the expected number of itemizers (projected to fall from about one-third of taxpayers to 11%). These provisions are slated to expire after 2025, but are in place for the next few years. The likelihood of itemizing generally increases with income. However, the AGI floor for the medical expenses deduction reduces the likelihood that very high-income individuals would claim the deduction. For all taxpayers, medical expenses alone might not make it worthwhile to itemize unless they can also claim other itemized deductions (e.g., home mortgage interest or state and local taxes). Benefits for Volunteer Firefighters and Emergency Medical Responders28 The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ) provided an exclusion from gross income of certain benefits for members of qualified voluntary emergency response organizations. These payments include the forgiveness or rebate of state and local income and property taxes or payments by states or their political subdivisions to reimburse for expenses. The exclusion was limited to $30 a month. The provision disallowed any itemized deductions for the state and local taxes otherwise excluded. This provision was enacted after a 2002 IRS decision that a reduction in property taxes for volunteers who are emergency responders was includible in gross income. The provision was temporary, effective from the date of enactment (December 20, 2007) through 2010. The provision was allowed to expire as scheduled. The SECURE Act of 2019, enacted as Division O of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), reinstated the provision for 2020 and increased the amount to $50 a month. The reinstated provision is likely to have a wider scope than it previously did because of the reduction in the number of itemizers due to provisions of the 2017 tax act ( P.L. 115-97 ), which is expected to reduce the share of itemizers, previously about one-third of taxpayers, to an estimated 11%.

Six temporary individual income tax provisions were extended or reinstated by the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. These provisions are often referred to as "tax extenders." Of the six provisions that were extended through 2020, three had expired in 2017 and were extended retroactively. They are the tax exclusion for canceled mortgage debt, the mortgage insurance premium deduction, and the above-the-line deduction for qualified tuition and related expenses. Two of the tax provisions extended through 2020 are health related. The first of these provisions was scheduled to expire at the end of 2019. The second had expired at the end of 2018, and thus was extended retroactively. They are the health coverage tax credit, and the 7.5% floor for the medical expense deduction. A sixth provision, the exclusion from gross income for volunteer firefighters and emergency responders, which had expired in 2010, was reinstated and expanded for one year, through 2020. This report provides background information on individual income tax provisions that will expire in 2020. For other reports related to extenders, see CRS Report R45347, Tax Provisions That Expired in 2017 ("Tax Extenders") , by Molly F. Sherlock; CRS Report R44990, Energy Tax Provisions That Expired in 2017 ("Tax Extenders") , by Molly F. Sherlock, Donald J. Marples, and Margot L. Crandall-Hollick; and CRS Report R46271, Business Tax Provisions Expiring in 2020, 2021, and 2022 ("Tax Extenders") , coordinated by Molly F. Sherlock.

GAO_GAO-19-239

Background Housing Finance System In the primary market, lenders originate mortgage loans to borrowers to purchase homes. To evaluate the creditworthiness of a potential borrower (called underwriting), the lender considers the borrower’s credit scores and history, monthly debts including mortgage payments relative to income (debt-to-income ratio), and the amount of the mortgage loan relative to the home’s value (loan-to-value ratio). Borrowers with strong credit histories typically receive prime mortgages with the most competitive interest rates and terms. Lenders generally require borrowers to purchase private mortgage insurance when the loan-to-value ratio is higher than 80 percent. Some borrowers also may qualify for federal mortgage insurance programs (discussed later in this section). Mortgage lending creates certain risks: Credit risk is the risk that the borrower will default on the mortgage by failing to make timely payments. Prepayment risk is the risk that borrowers will pay off the principal of the loan before the mortgage term ends. Prepayment reduces or eliminates future interest payments. The lender must relend or reinvest the prepaid amount and may have only lower-interest options available for lending or investing the funds if interest rates have decreased. Interest rate risk is the risk that an increase in interest rates will reduce the value of a loan for the lender. For example, a lender might fund mortgage lending through short-term deposits. If interest rates rise and the lender previously made a long-term fixed-rate mortgage at a lower rate, the difference between the interest payments the lender receives from the mortgage and the interest the lender has to pay to its depositors decreases. Liquidity risk is the risk that an institution will be unable to meet its financial obligations as they come due without incurring unacceptable losses. For example, firms can be exposed to liquidity risk by funding longer-term asset purchases with shorter-term debt obligations. After origination, mortgages are serviced until they are paid in full or closed due to nonpayment. Servicers can provide borrowers with account statements, respond to customer service questions, and collect monthly payments, among other duties. The servicer can be the same institution that originated the loan or the servicer can change as institutions sell servicing rights. Lenders hold mortgage loans in their portfolios or sell them to institutions in the secondary market (see fig. 1). Lenders sell their loans to transfer risk (such as interest rate risk in the case of fixed-rate mortgages) or to increase liquidity. Secondary market institutions can hold the mortgages in their portfolios or pool them into MBS that are sold to investors. Participants in the secondary market include federal entities, issuers of private-label MBS, and investors. Private institutions, primarily investment banks, may issue MBS (known as private-label securities) which are backed by mortgages that are not federally insured and do not conform to the enterprises’ requirements. Federal Participation in the Housing Finance System The federal government participates in the primary and secondary mortgage markets as both an actor and a regulator. In the primary market, the federal government operates mortgage guarantee and insurance programs to promote homeownership for certain types of borrowers. For example, the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), Department of Agriculture’s Rural Housing Service, and HUD’s Office of Public and Indian Housing offer programs that insure mortgages against default or guarantee lenders payment of principal and interest. In the secondary market, the federal government facilitates mortgage lending through the enterprises (discussed below) and the Government National Mortgage Association (Ginnie Mae). Ginnie Mae is a federally owned corporation within HUD that guarantees the timely payment of principal and interest to investors in securities issued through its MBS program. Ginnie Mae-guaranteed MBS consist entirely of mortgages insured or guaranteed by federal agencies (such as FHA) and are issued by financial institutions it approves. The federal government also regulates the housing finance system through FHFA, which oversees the enterprises; the Bureau of Consumer Financial Protection, also known as the Consumer Financial Protection Bureau (CFPB); and the federal banking regulators, which enforce regulatory standards for mortgage lending. Enterprises Congress chartered Fannie Mae and Freddie Mac as for-profit, shareholder-owned corporations in 1968 and 1989, respectively. They share a primary mission to enhance the liquidity, stability, and affordability of mortgage credit. The enterprises generally purchase mortgages that meet certain criteria for size, features, and underwriting standards (known as conforming loans) and hold the loans in their own portfolios or pool them into MBS that are sold to investors. In exchange for a fee, the enterprises guarantee the timely payment of interest and principal on MBS that they issue. The enterprises also have obligations to support housing for certain groups. Following the enactment of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, the enterprises have been required to meet specific goals for the purchase of mortgages supporting underserved groups (such as low- and moderate-income families) or certain geographic areas. In 2008, the Housing and Economic Recovery Act (HERA) tasked the enterprises to fund new affordable housing programs, including the Housing Trust Fund and the Capital Magnet Fund. The enterprises fund these programs with a dollar amount based on their unpaid balance of new business, purchases, and the funds distribute the money to states and housing organizations to support affordable housing. Conservatorship HERA established authorities for providing capital support to the enterprises and established FHFA as an independent regulatory agency for the enterprises. HERA also authorized the Director of FHFA to appoint FHFA as a conservator or receiver for the enterprises. FHFA put the enterprises into conservatorship in September 2008. FHFA has a statutory responsibility to ensure that the enterprises operate in a safe and sound manner and that their operations and actions of each regulated entity foster a liquid, efficient, competitive, and resilient national housing finance market. FHFA sets strategic goals for its conservatorship of the enterprises. According to FHFA, the enterprises’ boards of directors oversee day-to-day operations, but certain matters are subject to FHFA review and approval. For example, FHFA officials told us that FHFA reviews and approves some pilot programs. Fannie Mae and Freddie Mac retain their government charters and continue to operate legally as business corporations. Using authority provided in HERA, Treasury has committed to providing up to $445.6 billion in capital support to Fannie Mae and Freddie Mac while they are in conservatorship through the senior preferred stock purchase agreements. If Fannie Mae or Freddie Mac has a net worth deficit at the end of a financial quarter, Treasury will provide funds to eliminate the deficit. Under the most recent agreement in December 2017, the enterprises must pay Treasury a dividend of all their quarterly net income above a $3 billion capital reserve that each enterprise is allowed to retain. Reforming the Housing Finance System and Our Framework for Considering Reform Proposals Since the 2007–2009 financial crisis, Congress has taken steps to improve regulation and consumer protection related to the housing finance system. For example, to address challenges related to limitations on mortgage information, HERA requires FHFA to collect market data. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) created CFPB, which has undertaken a number of consumer protection initiatives related to mortgage lending and servicing. The Dodd-Frank Act also updated the Truth in Lending Act to prohibit lenders from making certain mortgage loans without regard to a consumer’s ability to repay the loan (known as the ability-to-pay rule). A lender is presumed to have met the ability-to-repay requirement when it originates a qualified mortgage—a category of loans that have certain more stable features that make it more likely a borrower will repay the loan. Congress also has considered proposals to make significant changes to the housing finance system. During the 113th Congress (January 2013– January 2015), three proposals—the Housing Finance Reform and Taxpayer Protection Act of 2014, S. 1217; the FHA Solvency Act of 2013, S. 1376; and the Protecting American Taxpayers and Homeowners Act of 2013, H.R. 2767—were reported out of committee but no further action was taken. In September 2018, the Protecting American Taxpayers and Homeowners Act of 2018 (H.R. 6746) was reintroduced in the 115th Congress and referred to committee. As of the end of the 115th Congressional session, no further action had been taken. Industry groups and think tanks also have published reform proposals. We discuss reform proposals made since 2014 in more detail later in this report. Federal agencies also have commented on housing finance reform. In early 2018, the Director of FHFA sent a letter to the Chairman and Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs stating that conservatorship is not sustainable and needs to end, and provided suggestions on how the enterprises could be reformed. For example, the letter states that the housing finance system should preserve 30-year fixed-rate mortgages, end taxpayer bailouts for failing firms, maintain liquidity, and provide a level playing field for lenders of all sizes. It also states that secondary market activities should be managed by shareholder-owned firms chartered by a regulator and operating as utilities with an explicit paid-for federal guarantee on MBS issued by regulated firms. In June 2018, the Office of Management and Budget released recommendations to reform the federal government in a number of areas, including housing finance. The recommendations propose privatizing the enterprises, allowing new private entities to enter the market, and providing an explicit federal guarantee on MBS that could only be accessed in limited, exigent circumstances. In a 2014 report, we outlined a framework composed of nine elements we consider to be critically important to help policymakers assess or craft proposals to change the housing finance system (see table 1). Government Continues Significant Support of Housing Market but Recent Trends Present Risks to Enterprises and Others The housing market has recovered since the financial crisis, with significant federal support. Indicators of recovery include rising house prices and declining mortgage delinquency rates. However, the federal government has continued to support the housing market with guarantees on more than two-thirds of new mortgages each year since 2008, either through government-insured originations or by guaranteeing timely payment to investors on mortgage loans purchased and securitized by the enterprises. The government also has continued to play a very substantial role in the secondary market, guaranteeing around 95 percent or more of all MBS issued annually since 2008. But recent trends—some loosening of underwriting standards, the rise of nonbank mortgage lenders and servicers, and less access to affordable housing and homeownership—may pose additional risks and challenges to the housing market and participants, including the enterprises. Enterprises Have Benefited from Housing Recovery but Government Still Supports a Majority of Mortgages Several indicators demonstrate that the housing market has recovered since the financial crisis of 2007–2009. For example, real national average house prices have consistently risen each year since 2012 (see fig. 2). The rise in house prices also has been complemented by consistent economic growth, declining unemployment, and low mortgage rates since 2009. Higher house prices have some positive implications for the financial soundness of the enterprises: higher prices can reduce the enterprises’ potential losses due to defaulted loans because the enterprises can recover more value from properties securing the loans. Serious delinquency rates (90 or more days delinquent) for mortgages purchased by Fannie Mae and Freddie Mac have declined steadily and since 2014 have remained between 1 and 2 percent for both enterprises (see fig. 3). Examining delinquency rates for mortgages by origination year reveals significant differences for mortgages originated before and after the financial crisis. According to Fannie Mae and Freddie Mac reports, mortgages originated since 2009 have had lower delinquency rates than those originated before 2009. For example, in 2017, Fannie Mae’s serious delinquency rate was 6.6 percent for mortgages originated in 2005–2008, compared to 0.5 percent for mortgages originated since 2009. As of October 2018, mortgages originated since 2009 represented more than 90 percent of Fannie Mae’s and 80 percent of Freddie Mac’s outstanding held loans and guaranteed MBS. Serious delinquency rates for mortgages insured by FHA are higher on average than those purchased by the enterprises but generally have followed similar trends. Compared to pre-2007 levels, trends in mortgage originations indicate a smaller-volume market largely composed of prime conforming and government-insured mortgages, as shown in figure 4. During 2008–2017, total mortgage origination volume—the dollar value of mortgage loans— remained below pre-crisis levels. Much of the decrease in volume resulted from large declines in prime jumbo and nonprime originations since 2008. Prime jumbo and nonprime originations represented a significant share of originations (market share) before 2007 but declined sharply since 2008. Prime jumbo market share recovered somewhat, increasing from a low of 6 percent in 2009 to approximately 18 percent of originations each year since 2014. Riskier nonprime originations remain very low compared to their pre-crisis levels. Meanwhile, federally insured mortgages (such as those insured by FHA or guaranteed by VA) grew significantly in 2008 and retained a market share between 19 and 25 percent in 2008–2017. Finally, prime conforming origination volume varied year-to-year but these mortgages have represented the majority of originations since 2007. Federally insured and prime conforming mortgages represented 80 percent or more of originations every year since 2008. The federal government has continued to support a significant share of the mortgage markets since the financial crisis. For instance, while down from the peak in 2009, the federal government has guaranteed more than two-thirds of new mortgages since 2014, either by insuring mortgages or by guaranteeing timely payment to investors on loans purchased and securitized by the enterprises (see fig. 5). Government-insured mortgages declined leading up to the financial crisis, largely due to the availability of nonprime mortgages and securitization by fully private institutions. But when the availability of these products declined sharply, government agencies such as FHA and VA insured or guaranteed significantly higher volumes of mortgages. For instance, the share of mortgages insured or guaranteed by federal agencies grew from 6 percent ($134 billion) in 2007 to more than 20 percent ($328 billion) in 2008. As of 2017, federally insured mortgages were 25 percent ($444 billion) of total originations. Similarly, as the share of conventional mortgages held in banks’ portfolios declined during the financial crisis, the enterprises purchased and securitized large volumes of these mortgages. The share of mortgage originations purchased by the enterprises peaked at 65 percent in 2008 and still accounted for nearly half of new mortgages in 2017. The federal government also has maintained a very substantial role in the secondary mortgage market since the financial crisis. The enterprises and Ginnie Mae guaranteed around 95 percent or more of all MBS issued each year since 2008, despite a nearly decade-long economic expansion. In line with the rise in federally insured originations, Ginnie Mae’s market share increased substantially, from 5 percent ($110 billion) in 2007 to 22 percent ($301 billion) in 2008, and about 33 percent ($455 billion) in 2017 (see fig. 6). Conversely, private-label MBS issuance since 2008 has been minimal, as many private-label issuers left the market and nonprime originations declined. The growth in the market share of Ginnie Mae and the enterprises resulted in part from actions by Congress and the Board of Governors of the Federal Reserve System (Federal Reserve). Congress increased the loan limits for FHA-insured loans and loans eligible for securitization by the enterprises. The federal government also made its backing of securities issued by the enterprises explicit by committing to provide them financial assistance, and Ginnie Mae continued to provide guarantees for securities backed by federally insured mortgages. According to several mortgage originators, securitizers, investors, and researchers with whom we spoke, the enterprises will continue to dominate the MBS market because the federal guarantee through conservatorship offers a competitive advantage over other participants without such a guarantee. In response to the financial crisis, the Federal Reserve provided additional support for the mortgage market, becoming one of the largest purchasers of MBS issued by the enterprises and guaranteed by Ginnie Mae. Among other impacts, this action made these securities somewhat more attractive to secondary market participants. In June 2017, when the Federal Reserve’s MBS holdings had peaked at $1.78 trillion, it announced plans to gradually reduce its MBS holdings as part of its efforts to reduce the size of its balance sheet. As of November 2018, the Federal Reserve had $1.66 trillion in MBS holdings. Recent Trends in the Housing Market May Present Risks and Challenges Recent trends—particularly changes in underwriting standards and borrowers’ credit risk profiles, the rise of nonbank mortgage lenders and servicers, and limited access to affordable housing and homeownership— pose risks and challenges to the housing market and participants, including the enterprises. Underwriting Standards and Borrower Credit Risk Indicators of borrower credit risk and surveys of loan officers indicate a loosening of underwriting standards in recent years. More specifically, indicators of borrower credit risk for mortgages the enterprises purchased suggest underwriting standards tightened in 2008 but loosened slightly since 2012, which could pose increased risk to the enterprises. Specifically, average combined loan-to-value ratios (for all loans on the property) and debt-to-income ratios have increased, while average borrower credit scores have declined. The enterprises and FHA include assessments of these measures in setting their underwriting standards. As discussed earlier in the report, mortgages originated since 2009 have performed much better than those originated before 2008, but remain untested by a large-scale stressful economic event. Furthermore, mortgages to refinance an existing mortgage (as opposed to mortgages for purchasing a home) declined since 2012. According to FHFA officials, credit scores, loan-to-value ratios, and debt-to-income ratios tend to be stronger for refinance mortgages than purchase mortgages. FHFA and HUD officials also told us that reduced refinancing volume due to rising interest rates may put additional pressure on lenders to maintain volume and profitability by offering more relaxed credit terms to borrowers. Average combined loan-to-value ratios for mortgages purchased by the enterprises peaked in 2014 and have remained roughly similar to pre- crisis levels (see fig.7). In December 2014, FHFA began allowing the enterprises to purchase mortgages with loan-to-value ratios up to 97 percent. In the first three quarters of 2018, 22 percent of mortgages Fannie Mae purchased included a loan-to-value ratio over 90 percent, which is higher than shares in 2005–2008. FHA’s loan-to-value ratio is limited to 96.5 percent, and the average among borrowers has remained relatively consistent around 93 percent since 2008. The higher the loan- to-value ratio when a loan is originated, the less equity borrowers will have in their homes and the more likely they are to default on mortgage obligations, especially during times of financial stress or falling home values. Additionally, house price valuation—measured by the price-to- rent ratio—has increased substantially since 2012 to levels last seen in 2004. Higher valuations could increase the risk of future price decreases—which would reduce collateral values that protect the enterprises against losses in the event of default—or more modest price increases. This could signal increased risk when associated with higher loan-to-value ratios. Average credit scores for enterprise-purchased loans rose significantly from their pre-crisis lows and remained historically high through 2012 but have since slightly declined (see fig. 8). The average credit score of FHA-insured borrowers, while lower than those for loans purchased by the enterprises, followed a trend similar to those of the enterprises. Generally, a higher score indicates a greater credit quality and potentially lower likelihood of default. Lenders continue to use credit scores as a primary means of assessing whether to originate a loan to a borrower. Average debt-to-income ratios for mortgages purchased by the enterprises remained below their pre-crisis levels but have deteriorated since 2012, and the share of high debt-to-income mortgages rose. Additionally, according to Fannie Mae financial reports, in the first three quarters of 2018, roughly 25 percent of mortgages it purchased included a borrower debt-to-income ratio over 45 percent, up from roughly 7 percent of mortgages in the first three quarters of 2017. The share of high debt-to-income ratios for FHA-insured borrowers also has risen significantly. For example, nearly half (49 percent) of FHA- insured borrowers in fiscal year 2017 had high debt-to-income ratios, surpassing the previous high of 45 percent of borrowers in 2009. According to FHA, as of March 2018, about 24 percent of mortgages included debt-to-income ratios above 50 percent, up from 20 percent of mortgages in March 2017. The Dodd-Frank Act requires mortgage lenders to make “a reasonable, good faith determination” of a borrower’s ability to repay the loan. A lender that originates a “qualified mortgage” is presumed to have met this requirement. All qualified mortgages must meet mandatory requirements including restrictions on points and fees, and loan structure. In addition, the borrower’s debt-to-income ratio must be 43 percent or less; however, loans eligible for purchase by the enterprises or to be insured by the FHA, VA or USDA are not subject to a specific debt-to-income ratio. Additionally, according to results from the October 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices, more loan officers reported loosening than tightening their underwriting standards for enterprise-eligible mortgages every quarter from 2015 through the second quarter of 2018. More officers reported loosening their standards for government-insured mortgages during 12 of the last 16 quarters. Nonbank Mortgage Lenders and Servicers Our review found that the increased role of nonbank mortgage lenders and servicers in recent years has helped provide liquidity and access to mortgage credit but also presented additional liquidity risks. FHFA and HUD officials reported that the share of nonbanks mortgage originators and servicers grew since the financial crisis. According to data from Inside Mortgage Finance, nonbanks originated roughly half of all mortgages sold to the enterprises in 2017 and the first three quarters of 2018. Of the top 10 mortgage sellers to the enterprises in the first three quarters of 2018, six were nonbanks that originated more than 20 percent of all enterprise purchases during that period. Nonbank servicers of loans backing enterprise MBS have grown from 25 percent in 2014 to 38 percent as of the third quarter of 2018. For FHA-insured mortgages, nonbank originations represented 74 percent in 2003, declined to 56 percent in 2010, and then increased to 86 percent in fiscal year 2017. While FHFA and HUD officials told us nonbanks have helped provide access to mortgage credit, several stakeholders and experts in all four of our panels identified the increased presence of nonbank lenders as a current risk in the housing finance system. A 2018 paper published by the Brookings Institution cited that nonbanks are exposed to significant liquidity risks in their funding of mortgage originations and servicing of mortgages, because nonbank lenders rely more on credit lines provided mostly by banks, securitizations involving multiple players, and more frequent trading of mortgage servicing rights than banks. For instance, during times of financial stress, lenders to nonbanks have the right to quickly pull their lines of credit and seize and sell the underlying collateral if nonbanks do not maintain certain levels of net worth. HUD officials identified similar risks and added that this may reduce borrower access to credit in the event of financial stress or a liquidity crisis. Additionally, while nonbanks are subject to some federal and state oversight, they are not federally regulated for safety and soundness. State regulators may require nonbanks to be licensed and may examine their financial soundness and compliance with relevant state laws, but there are no such federal regulations, unlike with banks. The Conference of State Bank Supervisors has a series of initiatives with the goal of all state regulators adopting a nationwide nonbank licensing and supervisory system by 2020. CFPB oversees nonbank issuers for compliance with consumer financial protection laws but not for financial safety and soundness. We reported in 2016 that incomplete information on the identity of nonbank servicers may hinder those responsible for their oversight. The lack of federal safety and soundness oversight of nonbank lenders and servicers may pose risks for the enterprises and federal housing finance entities. The enterprises conduct financial and operational reviews of their counterparties in accordance with FHFA guidance. But, as we reported in 2016, FHFA does not have the authority to independently evaluate the safety and soundness of entities that conduct business with the enterprises. In 2014, the FHFA Office of Inspector General found that nonbank lenders may have limited financial capacity and are not subject to federal safety and soundness oversight, creating an increased risk that these counterparties could default on their financial obligations. They also found that rapid business growth among specialty servicers could put stress on their operational capacity or overrun their quality control procedures, potentially increasing representation and warranty claims and credit losses on mortgages they sell to the enterprises. Representation and warranty claims allow the enterprises and other federal entities to recover some losses from lenders in the event of misrepresentation by the seller. From 2009 through 2013, the enterprises received $98.5 billion through repurchase requests to sellers (that is, they required sellers to repurchase the enterprises’ interests in the loans). According to the FHFA Office of Inspector General, due to lower capital levels, nonbanks may be less able to honor these representation and warranty commitments. FHFA and HUD officials also told us nonbanks have helped increase servicing capacity. We previously reported that nonbank servicers provide benefits to the housing market through increased capacity to service delinquent loans and contribute to liquidity by broadening participation in the market for mortgage servicing rights. In particular, larger numbers of individual servicers also can reduce market concentration, suggesting that servicers may be more likely to behave competitively and can, for instance, increase innovation. Furthermore, large nonbanks are generally not as interconnected with the financial system as large banks, potentially limiting broader market effects in the event of the failure of a single large nonbank servicer. But the enterprises and Ginnie Mae likely would incur costs in the event of a failure of a large nonbank servicer whose portfolio cannot be easily absorbed by others. Mortgage servicers must continue making payments to investors when borrowers do not make payments. For mortgages backed by the enterprises, servicers can be reimbursed for principal and interest and certain other expenses, but they must finance them in the interim. Servicers of mortgage pools guaranteed by the enterprises must advance payments until the borrower is 120 days delinquent on the loan. Servicers of Ginnie Mae-guaranteed pools are not limited in how long they must advance principal and interest on delinquent loans, and they additionally may be required to absorb losses not covered by FHA insurance or VA guarantees. In the event of a failure of a large nonbank servicer with a not readily absorbable portfolio, Ginnie Mae and the enterprises likely would bear most of the associated costs, and consumers also likely would see some effects, such as service interruptions. In 2015, FHFA and Ginnie Mae raised their minimum financial eligibility requirements for sellers and servicers (including for net worth, capital ratio, and liquidity criteria for counterparties), but these requirements may not fully account for the high interest rate and default risks that nonbanks face. Affordable Housing Challenges related to affordable housing and access to homeownership also remain. Fannie Mae and Freddie Mac are subject to affordable housing goals for their purchases of single-family and multifamily mortgages that benefit families with lower incomes. However, a number of factors affect the development of affordable housing and access to homeownership. For example, according to a 2018 study on the state of the nation’s housing, competition for the historically low supply of existing homes on the market has pushed up home prices in most metropolitan areas, raising concerns about affordability. The study also noted that although better housing quality accounts for some of the increase in housing prices, sharply higher costs for building materials and labor, among other factors, have made housing construction considerably more expensive. Land prices also increased as population growth in metropolitan areas increased demand for well-located sites. Along with rising housing costs, the study also reported that weak income growth among low- and moderate-income households contributed to affordability pressures. As homeownership becomes less affordable with house price increases, the enterprises’ affordable housing goals become more difficult to achieve. For example, for calendar year 2016, Freddie Mac met all of its affordable housing goals, and Fannie Mae met most of its affordable housing goals, but failed to meet its goal for the single-family home purchase, very-low income category. For calendar year 2017, based on FHFA’s preliminary determinations, Fannie Mae met all of its affordable housing goals, but Freddie Mac missed its single-family home purchase goals for both the very low-income and low-income categories. Experts and stakeholders we interviewed identified other contributing challenges. For example, a few experts and stakeholders cited lower levels of lending in minority communities and to low- and moderate- income borrowers, which are typically most in need of affordable housing, as contributing challenges. A few other experts and stakeholders stated that borrowers increasingly have been holding other types of debt, such as student loan debt, which makes it more difficult for them to obtain an affordable mortgage. Lastly, the qualified mortgage rule exception, which may have helped some borrowers with a debt-to-income ratio above 43 percent to obtain a mortgage, expires in 2021 or earlier if conservatorship of the enterprises ends before then. When this happens, this could also hinder the ability of certain borrowers with a debt-to-income ratio higher than 43 percent to obtain mortgages. Enterprises Have Expanded or Plan to Expand Activities That Could Present Challenges for Other Market Participants Fannie Mae and Freddie Mac have taken actions in recent years that could further increase the scope of their activities and present challenges or barriers to entry for other market participants. Mortgage Insurance Both enterprises have recently introduced pilot programs that affect mortgage insurance decisions and terms typically made by lenders. In 2018, Fannie Mae introduced a pilot program to offer an enterprise-paid mortgage insurance option—an alternative to the borrower-paid and lender-paid options currently available. Under the program’s structure, Fannie Mae is the entity responsible for purchasing mortgage insurance on loans with high loan-to-value ratios. To do so, Fannie Mae secures an insurance arrangement from a qualified insurer, which in turn transfers the risk to a panel of approved reinsurers. Fannie Mae pays the mortgage insurance premiums, while the lender is responsible for paying an additional, loan-level price adjustment. Freddie Mac launched a similar pilot program earlier in 2018 known as the Integrated Mortgage Insurance program. Under this program, simultaneous with purchasing single-family mortgages, Freddie Mac purchases mortgage insurance from a panel of pre-approved reinsurance companies that it has allocated risk among. In addition, the reinsurers post collateral to provide further assurance that claims will be paid, and they cannot deny or rescind coverage. According to Fannie Mae and Freddie Mac documents, these pilot programs allow the enterprises to better manage their counterparty risk and streamline the operational requirements of participating lenders. For example, each participating reinsurer undergoes a thorough counterparty review in order to be approved for participation in the programs. Additionally, under the programs, lenders are not required to purchase mortgage insurance for loans with loan-to-value ratios above 80 percent, which would simplify the process of selling loans to the enterprises. However, according to several experts and stakeholders with whom we spoke, by allowing the enterprises to play a role in selecting the mortgage insurer, these pilot programs widen the scope of activities of the enterprises. They also allow them to become more dominant by potentially growing their role beyond the secondary market and into the primary market. They explained that these programs promote greater vertical integration of private-sector activities into the enterprises, and create challenges for market participants. For example, they stated that they promote an uneven playing field in the private market by allowing for different terms and standards for enterprise-paid mortgage insurance versus other sources of private capital. Other Activities Experts and stakeholders also identified other enterprise pilot programs or activities, such as Freddie Mac’s financing of nonbank mortgage servicers and the enterprises’ standardization efforts, as potential challenges. Freddie Mac’s Mortgage Servicing Rights pilot program provides financing to nonbank servicers, with some limitations, secured by the servicers’ mortgage servicing rights. The program is intended to address impediments nonbank mortgage servicers face in obtaining financing and extends credit to nonbank mortgage servicers when they need access to cash. However several experts and stakeholders with whom we spoke stated that this could lead to certain servicers having a competitive advantage. For example, they stated that under this program, Freddie Mac may target its financing at the biggest servicers and charge comparatively low interest rates, putting small lenders and servicers at a disadvantage. The enterprises also have efforts to standardize appraisal data, loan applications, and closing disclosures. While these efforts are intended to streamline and standardize aspects of the mortgage process, several experts and stakeholders explained that the results of these activities can be costly to smaller lenders and servicers who have to bear the costs of adapting their systems to enterprise requirements. They also indicated that participants in the primary market have become reliant on the enterprises for standards and innovation. Several experts and stakeholders also stated that the cost for market participants to adopt new programs or standards set by the enterprises can be high and could inhibit other participants from entering the housing finance market. In addition, the enterprises are currently developing a common securitization platform to support the issuance of a common single mortgage-backed security by both enterprises. The platform will support the enterprises’ single-family mortgage securitization activities, including issuance by both enterprises of a common mortgage-backed security to be known as the uniform mortgage-backed security. FHFA expects the issuance of the uniform mortgage-backed security to improve the overall liquidity of the enterprises’ securities and promote liquidity of the nation’s housing finance markets. The common securitization platform also would integrate the various securitization infrastructure systems within each enterprise, which is expected to lower costs and increase efficiency. However, several stakeholders we interviewed explained that the platform presents concerns. For example, mortgage securitizers and investor stakeholders who participated on our panels expressed concern about the platform and its availability to other market participants. Specifically, they stated that the goal of the project has, at times, been unclear and that it has been difficult to tell to what extent or when the platform will be accessible to other secondary market participants. They also stated that if the platform would not be accessible to other secondary market participants, it would take away opportunities from participants willing and able to pool eligible securities. FHFA officials told us the platform currently is intended for use only by Fannie Mae and Freddie Mac, but that the agency is aware that potential reforms to the housing finance system may bring about the inclusion of other guarantors. As such, the platform is being designed to be adaptable for use by other participants in the secondary market in the future. (We discuss recent proposals to reform the housing finance system in detail later in this report.) FHFA Has Taken Actions to Reduce the Enterprises’ Exposure, but Risks, Uncertainty, and Challenges Remain FHFA Has Taken Actions to Reduce the Enterprises’ Risk Exposure FHFA-directed actions (including retained mortgage portfolio reductions, credit risk transfer, and foreclosure prevention) have improved the condition of the enterprises by mitigating some of the enterprises’ exposures to potential losses. Continued Treasury Support Presents an Ongoing Federal Fiscal Exposure Treasury’s remaining funding commitment through the senior preferred stock purchase agreements leaves taxpayers exposed to risk, especially in the event of adverse market or other external conditions and considering the recent growth in the enterprises’ guarantee business. Total MBS outstanding guaranteed by the enterprises and held by external investors has increased each year since 2012. As of the end of 2017, the enterprises’ combined MBS outstanding held by external investors peaked at $4.8 trillion (see fig. 12). Under the terms of the senior preferred stock purchase agreements with Treasury, Fannie Mae and Freddie Mac do not maintain a capital cushion—as a private financial institution would—to guard against the risk of unexpected losses such as those that might occur during a recession or downturn in the housing market. Instead, Treasury, through taxpayer funds, committed $445.6 billion of financial support to the enterprises. As of August 2018, Treasury had provided the enterprises with $191.4 billion of the total amount since they were placed under conservatorship in 2008, leaving $254.1 billion in potential taxpayer exposure should Treasury need to provide additional support. In return, the enterprises must pay to Treasury as dividends all of their quarterly positive net worth amount (if any) over $3 billion. Thus, any losses on this amount not recovered through loss-mitigation efforts or covered by private investors or insurers would be borne by taxpayers through additional financial support from Treasury. While private institutions could absorb a share of losses on mortgages covered by credit risk transfer and private mortgage insurance (discussed earlier in this section), any additional losses would come from Treasury’s remaining funding commitment through the senior preferred stock purchase agreements. Because of this arrangement, credit rating agencies have linked the enterprises’ strong long-term credit ratings directly to that of the U.S. government and their equity to Treasury’s remaining funding commitment. Since the second quarter of 2012, Fannie Mae and Freddie Mac have not required additional support from Treasury, with the exception of the first quarter of 2018, when both enterprises required Treasury support due to devaluation of their deferred tax assets as a result of changes to the tax code. As of the end of September 2018, the enterprises had cumulatively returned $285.8 billion to Treasury through senior preferred stock agreement dividend payments. However, in addition to economic circumstances, changes in market conditions or other external factors— such as changes in interest rates, house prices, accounting standards, or events such as natural disasters—could lead to volatility in the enterprises’ quarterly financial results, potentially requiring additional taxpayer support. Duration of Conservatorships Leaves Future Role of Enterprises Uncertain and Presents Challenges The extended duration of the conservatorships continues to create uncertainty about the goals and future role of the enterprises. We previously reported that FHFA’s priorities can shift, sometimes due to changes in leadership. For example, FHFA initially outlined its understanding of its conservatorship obligations and how it planned to fulfill those obligations in a 2010 letter to Congress. In February 2012, FHFA sent Congress a strategic plan that set three strategic goals for conservatorship and elaborated on how FHFA planned to meet its conservatorship obligations. However, under a new Director in 2014, FHFA issued an updated strategic plan that reformulated its three strategic goals. This same Director’s term expired in early January 2019, and the process is underway for a new, permanent Director to be confirmed. The upcoming change in leadership could shift priorities for the conservatorships again and change enterprise goals. Continuing conservatorship also presents challenges to FHFA, as it has to balance its role as conservator with its role as regulator. FHFA must follow the mandates assigned to it by statute and the missions assigned to the enterprises by their charter. This entails consistently balancing governing of the enterprises, ensuring they employ sound risk-management practices, and ensuring they continue to serve as a reliable source of liquidity and funding for housing finance. In our interviews with experts and stakeholders, at least one expert or stakeholder from each of the groups (mortgage originators, mortgage securitizers and investors, academics and researchers, and consumer advocates) also identified the duration of the conservatorships as a challenge. For example, they said that the duration of the conservatorship has led to a more substantial role for the enterprises than envisioned when they were placed under conservatorship, which could make potential changes to their structure more difficult to implement. The duration of the conservatorships also has led to uncertainties in the housing finance market. As we previously reported, under conservatorship, the enterprises are subject to agency policy decisions and are insulated from competition and other market forces. As a result, according to several mortgage originators and securitizers, and consumer groups with which we spoke, uncertainty about the future of the enterprises also makes it challenging for them to develop their own strategic plans and goals. They explained that they hesitate to make longer-term strategic plans and goals due to potential housing finance reform changes, particularly to the enterprises, that could markedly affect their industries. Additionally, the dominant role of the federal government in guaranteeing MBS since the crisis has continued, and private capital generally has not been positioned to absorb losses in the secondary mortgage market during a potential economic downturn. The current structure of the secondary mortgage market will continue to leave taxpayers at risk to potential losses. The significant federal role in the housing market likely will continue if the enterprises remain under conservatorship and without a defined future role. Reform Proposals We Reviewed Aim to Manage Fiscal Exposure, but Some Do Not Have Clear Goals or a System- Wide Approach We assessed 14 proposals for housing finance reform against our framework to assess potential changes to the housing finance system. The framework consists of nine elements we determined to be critically important, such as recognition and control of federal fiscal exposure, protections for investors and borrowers, and clear goals (see the Background for more information). We found that the proposals generally aim to manage fiscal exposure—the risk the housing finance system poses to the federal government and taxpayers—but only six have clear goals and only seven consider other federal housing finance entities, such as FHA or Ginnie Mae, in addition to the enterprises. Each Type of Reform Proposal Has Strengths and Limitations Reform proposals we reviewed generally fit into four different models: (1) reconstituted enterprises, (2) multiple guarantor, (3) government corporation, or (4) privatization (termination of the enterprises). Based on our review of the proposals, relevant literature, and expert interviews, each model has potential strengths and limitations. Reconstituted Enterprises Four proposals we reviewed call for the enterprises to be recapitalized and then released from conservatorship, retaining their federal charters. Under these proposals, the enterprises would be regulated by an independent regulator that would oversee their safety and soundness. These proposals also recommend a federal guarantee on MBS under the senior preferred stock purchase agreement or by legislation. To mitigate fiscal exposure from the enterprises, the proposals include the continuation of credit risk transfer programs, and also require the enterprises to have risk-based capital reserves. In its report analyzing alternative housing finance market structures, CBO reported that under this model, taxpayers would have a higher exposure to risk compared with the multiple-guarantor and privatization models. According to industry stakeholders, potential strengths of this model include feasibility, minimal market disruption, and the continuation of policies familiar to key stakeholders. For example, one proposal argues that its reforms could be completed under existing legal authority, with no new legislation required. Five primary market stakeholders in our panels also stated that they would prefer a system similar to the current model with minor reforms because larger changes might disrupt the market and have unforeseen consequences. Industry stakeholders that rely on specific policies of the enterprises also generally support a recapitalization and release model. For example, four associations of small lenders have released statements in support of reconstituting the enterprises to ensure the continuation of the cash window. In addition, groups that advocate for financial inclusion and civil rights also have expressed support for reconstituting the enterprises to ensure the continuation of the affordable housing goals and other policies to help low-income borrowers. However, this model may not include sufficient safeguards to mitigate the risk that the enterprises—even in a reconstituted form—could pose to the stability of the mortgage market. As previously discussed, as of 2017, the enterprises issue more than half of new MBS and, in our panels, two participants from industry groups criticized the enterprises for their expansion into other areas of the housing market. In 2018, a former FHFA director stated in Congressional testimony that the enterprises were more entrenched in the market than ever before, the market depended entirely on them, and any weaknesses in their risk management could disrupt the entire housing market. If the enterprises were recapitalized without sufficient safeguards, shareholders again might have incentive to take on excessive risk. To mitigate these concerns, two of the four proposals recommend that the reconstituted enterprises operate as utilities. Utilities have a regulated rate of return, which supporters say would limit profit-maximizing motivations and encourage more prudential behavior and underwriting standards. The utility model is traditionally used in industries that tend to operate as monopolies or near monopolies, such as the electric power industry. Some industry experts believe that the securitization market operates similarly to a monopoly. Three industry stakeholders, two researchers, and one participant from a consumer protection group we interviewed also supported restructuring the enterprises as utilities. Additionally, three industry groups representing small lenders endorsed turning the enterprises into utilities. Multiple-Guarantor Model Six of the proposals we reviewed recommend transitioning to a system with multiple guarantors operating in the secondary market. Under this model, multiple private-sector firms would purchase eligible mortgages and aggregate them into MBS. The MBS would be eligible for an explicit federal guarantee if the guarantor arranged for private credit enhancements to absorb a certain amount of loss and if it met certain regulatory criteria, such as securitizing mortgages that comply with all qualified mortgage standards. A federal agency—FHFA or a successor— would charge and collect guarantee fees from the guarantors and set capital requirements. The six proposals use the guarantee fees to fund a mortgage insurance fund that would provide the federal guarantee. According to CBO’s analysis, under this model, taxpayers would have less exposure to risk compared with models for reconstituted enterprises or a government corporation, but more than under a fully private market. Proposals within this model vary in a few key ways: Enterprises: Four of the six proposals call for the enterprises to become guarantors in the new system, while two call for them to be put into receivership and replaced with successor entities. One of the proposals that would keep the enterprises recommends that they and other guarantors operate as utilities and another suggests the enterprises remain in the new system but transition to be mutually owned by lenders instead of shareholders. Securitization: Three of the six proposals would retain the common securitization platform, while one proposal would rely on Ginnie Mae- approved issuers, allowing them to issue securities including mortgages that obtained credit enhancement from a private guarantor (instead of just federal programs). One proposal that retains the common securitization platform would convert the platform into a government corporation that issues securities from any regulator- approved entity. The fifth proposal would rely on both Ginnie Mae issuers and the common securitization platform to issue securities. The sixth proposal does not specify an entity to issue securities. Number of guarantors: Proposals vary in the number of guarantors needed in the new system. For example, the Mortgage Bankers Association’s proposal suggests having more than two guarantors, while Moody’s Chief Economist said in a congressional testimony that from five to seven would be feasible (using the private mortgage insurance industry as a guide). The potential strengths of this model include the benefits arising from competition and replacing reliance on two large firms with multiple smaller guarantors. The Mortgage Bankers Association’s proposal stated that, while subject to strong regulations, guarantors can compete on price, products, and service. Multiple guarantors could provide lenders with a variety of options to sell their loans, instead of just the enterprises. More competition also could encourage innovation in the secondary market. The secondary mortgage market also might reduce its reliance on two “too-big-to-fail” entities with multiple guarantors. Because credit risk would be more dispersed across a number of entities, the failure of one firm would be less likely to disrupt the broader system, thus reducing the likelihood the government would have to rescue a struggling firm. According to four representatives of investor groups and a former HUD official we interviewed, a potential limitation of the multiple-guarantor model is that it could be difficult for new firms to enter the market and compete with the enterprises. One proposal addresses this concern by terminating the enterprises. However, if there are only a few guarantors, the failure of any one firm could pose a systemic risk and might require federal assistance. In addition, two researchers we interviewed said that because the guarantors would operate in the same market and thus would face the same market trends, having multiple guarantors might not diversify risk. For example, in a financial crisis, it is possible that all the guarantors would struggle and in such a scenario, the government would have to assist many firms. Some industry experts expressed concern that competition could have negative consequences. We previously reported that leading up to the financial crisis, the enterprises faced new competition from private-label securitizers and, in the absence of strong federal oversight, they relaxed their underwriting standards to regain market share. Thus, two researchers, four primary market stakeholders, and a former HUD official we interviewed warned that a system dependent on competing entities could face similar risks, particularly if oversight and regulation were not strong. Five of the proposals we reviewed would require all guaranteed securitized mortgages to meet qualified mortgage standards, limiting potential reductions in underwriting standards, and one of the five also would address this concern by regulating the guarantors as utilities. Government Corporation Two proposals would replace Fannie Mae and Freddie Mac with a single government corporation that would issue MBS. For example, in one proposal we reviewed, lenders would sell loans meeting certain requirements (such as qualified mortgages) to the corporation, which would operate the common securitization platform to issue MBS with a federal guarantee. The government corporation would manage fiscal exposure by transferring credit risk to the private sector and through capital requirements set by an independent regulator. The two proposals also would use guarantee fees to fund a mortgage insurance fund that would add an additional level of taxpayer protection. Based on its analysis, CBO reported that under this model, taxpayers would have more exposure to financial risk than under the multiple guarantor or privatization models. The potential benefits of a government corporation include stable lending during financial crises, equitable lender access, and better targeting of underserved groups. According to CBO, a government agency is more likely than private actors to promote stable mortgage lending during financial crises due to federal support. Additionally, according to a proposal by a think tank, a government corporation could provide lenders of all sizes with equal access to securitization, potentially reducing barriers to entry for new firms in the primary market. We previously reported that compared with other models, a government corporation would be well-positioned to facilitate lending to targeted groups because it does not have potentially conflicting priorities, such as maximizing shareholder value. Finally, a key benefit of creating a government corporation would be to mitigate the potential challenges posed by relying on private-sector entities (reconstituted enterprises, multiple guarantors, or a fully private market). For example, we previously reported that as for-profit corporations with government sponsorship, the enterprises had an incentive to engage in potentially profitable but risky business practices, in part because of the perception of an implied federal guarantee. In contrast, a government corporation would not be motivated by profit and thus should have less incentive to engage in potentially risky actions. The government corporation also could end reliance on a few large private firms by transferring securitization to a single entity in the public sector. There are potential limitations to relying on a government agency to support the secondary market. According to CBO, under this model, the government would still retain most credit risk and thus originators might not have a strong incentive to thoroughly vet borrowers’ credit risk, which could lead to potential losses. We also reported in 2009 that because of the limitations on government entities relative to private firms, a government corporation might have more difficulty in attracting and retaining capable staff, responding to market developments, or promoting innovation. If unaddressed, these issues could pose safety and soundness concerns because the agency might not have the skills and capabilities to assess risks and manage a complex industry. Privatization Two proposals we reviewed would terminate the enterprises and completely privatize the housing finance industry, with no federal guarantee on MBS. Under these proposals, the enterprises’ charters would be revoked and the enterprises would be wound down over a multiyear transition period during which their guarantee fees would increase and their loan limits decrease until they no longer guaranteed new mortgages. One proposal would keep the common securitization platform and make it available to all market participants, but it would operate as a nongovernmental entity and would be prohibited from guaranteeing MBS. The main benefit of this model would be to minimize fiscal exposure by having private firms form the secondary market for mortgages that are not federally insured, similar to the private-label MBS sector before the crisis. CBO noted that private actors should have a stronger incentive to control lending risk without a government backstop. Additionally, if a number of firms replaced the enterprises, then a largely private market likely would reduce the systemic risk of relying on a few large firms. However, a fully privatized market has some potential limitations related to an implied federal guarantee, and credit availability. CBO reported that although taxpayers’ would have less explicit exposure to risk compared to the other models, risk exposure could be very high even without an explicit guarantee. That is, the government likely would assist or prevent the failure of private firms in an economic downturn to ensure financial stability (also known as an implicit federal guarantee). We previously reported that private-sector actors may benefit from an implicit guarantee and this may incentivize firms to engage in potentially risky actions and expose the government to potential losses. Additionally, privatizing the market could increase fiscal exposure through FHA. The CBO report noted that a privatized model could reduce the availability of credit to marginal borrowers, and predicted it would lead to a large increase in FHA-insured loans. A largely private market also might not sustain mortgage lending during periods of economic stress. For example, the private-label market largely disappeared after the 2007–2009 financial crisis and has yet to recover, as previously discussed. Finally, CBO reported that during a financial crisis, there could be large increases in mortgage interest rates, large declines in house prices, and limited availability of 30-year fixed-rate mortgages. Proposals Generally Meet Some Key Reform Elements The 14 proposals we reviewed generally meet the following elements of our housing finance reform framework: recognizing and controlling federal fiscal exposure, protecting mortgage investors, adhering to an appropriate regulatory framework with government entities that have the capacity to manage risks, emphasizing the implications of the transition to a new housing finance system, protecting mortgage borrowers and addressing market barriers, and considering market cyclicality and impacts on financial stability. Legislative proposals and those from other sources generally address these elements in similar ways. Fiscal Exposure and Government Guarantee Every reform proposal we reviewed attempts to recognize and control federal fiscal exposure—the risk that the federal government and taxpayers will have to provide financial support to the housing finance system. Twelve of the 14 proposals we reviewed support an explicit government guarantee on MBS. Some supporters of a federal guarantee maintain that if the government were to support the mortgage industry in a crisis, then such support should be explicit, which will allow it to be priced and reflected in the federal budget. In addition, every expert with whom we spoke—including industry stakeholders, consumer advocates, researchers, and former agency officials—supported an explicit government guarantee on MBS. In 11 proposals, the federal guarantee would be administered through a mortgage insurance fund managed by a federal regulator and funded through guarantee fees. To manage and limit fiscal exposure, the 12 proposals structure the federal guarantee so that it would only be accessed after a certain amount of private-sector loss. Private capital would be introduced through increased, risk-based capital requirements for the enterprises, successor entities, or new market entrants (such as guarantors). The proposals also would continue to transfer credit risk to the private sector. These proposals vary in how much private capital would be required ahead of the government guarantee. For example, one proposal would require 10 percent but another proposal would require 5 percent. In its proposed rule for enterprise capital requirements, FHFA reported that capital reserves of about 5.5 percent would have covered the enterprises’ losses during the financial crisis. However, according to CBO, the initial increases in capital requirements could increase mortgage interest rates. The two proposals without an explicit federal guarantee aim to address fiscal exposure by eliminating the enterprises and relying entirely on the private sector. However, some industry experts have asserted that there likely will always be an implied federal guarantee for the housing finance market (even without the enterprises) as the federal government will not allow the market to fail. These experts stated that they believe that this guarantee should be explicitly recognized and accounted for in the federal budget. Protections for Mortgage Securities Investors Thirteen of 14 proposals fully meet the element of providing protections for mortgage securities investors. We previously reported that investors need to receive consistent, useful information to assess risks. We also reported that prior to the crisis, MBS investors may have lacked reliable information to accurately assess the credit risk of their investments. Twelve reform proposals we reviewed attempt to remedy these weaknesses by first providing an explicit federal guarantee on MBS. In a 2017 testimony, a former FHFA Director said that a federal guarantee signaled to MBS investors that they were protected from credit risk and a meaningful segment of investors would not continue to invest in this market without the guarantee. In addition to the federal guarantee, proposals would aim to protect investors in the following ways: Increased transparency: Proposals recommend providing investors with more information on the mortgages underlying MBS. If investors had more information about asset quality, it would help them to more accurately price risk. For example, one proposal would require market participants to make available to investors all documents (including servicing reports) related to the mortgage loans collateralizing the security. Standard securitization platform: Currently, the enterprises each have their own platforms to issue MBS and different rules governing their MBS. To improve investor protections, FHFA and others recommend a standard platform for issuing securities. As previously discussed, FHFA has been developing such a platform, which will result in a both enterprises issuing a uniform security. Federal Regulators and Regulatory Framework Twelve of 14 proposals emphasize an appropriate regulatory framework with federal regulators that have the capacity to manage risk. Proposals generally recommend that an independent federal agency, such as FHFA or a successor, regulate housing finance market participants. The regulator also may oversee the securitization platform. Three proposals that would expand Ginnie Mae recommend that Ginnie Mae become an independent agency to strengthen its counterparty oversight capabilities. The proposals also generally recommend that the regulator have risk- management capabilities to determine market participants’ capital requirements. The regulator also would be able to adjust these and other requirements, such as credit risk transfer targets, based on market circumstances. In 11 proposals, the regulator would set and collect guarantee fees and use these fees to create a fund for mortgage insurance that would act as the federal guarantee on MBS. However, we previously noted that federal agencies sometimes have faced challenges in accurately pricing risk in other insurance programs, such as deposit or flood insurance. Emphasis on the Implications of the Transition Eleven of the 14 proposals we reviewed fully consider the implications of transitioning to a new system and mitigating potential disruptions. Because transitioning to a new system could disrupt market operations and consumers’ access to mortgage credit, we previously noted the importance of a deliberate, well-defined transition. In our expert panels, participants from investor groups noted that unless there is a clear transition plan (particularly one that addresses any changes to the enterprises), it would be difficult for new market entrants and investors to plan accordingly. The 11 proposals that meet this element include multiyear transitions to help minimize disruption. For example, one proposal that would eliminate the enterprises would allow for a 10-year transition to a new fully privatized system and create a temporary federal entity to oversee the transition. Five primary market stakeholders and a representative from a consumer advocacy group we interviewed emphasized the importance of minimizing market disruption and maintaining market liquidity. These industry experts noted that some parts of the system currently work well, and these aspects should be maintained and transitioned in reform. The 11 proposals would transition the enterprises to the new market structure or transition their personnel and facilities to successor entities. One proposal that does not meet this element does not discuss transition plans. Two other proposals do not fully meet this element because they do not address what would happen to the enterprises’ current assets, human capital, and intellectual property. Protecting Mortgage Borrowers and Addressing Barriers to the Mortgage Market Nine of 14 reform proposals explicitly address protections for mortgage borrowers. The relevant policy mechanisms to protect mortgage borrowers include maintaining CFPB’s qualified mortgage and ability-to- repay rules, as well as additional services to support borrowers. For example, one proposal would increase support for programs that help prepare renters to become homeowners. Another proposal recommends modifying servicing guidelines for nonperforming loans to ensure consumers are treated fairly and would establish consistent procedures for servicers. The five proposals that do not fully meet this element do not address it at all or do not describe specific programs or policies. Eleven of 14 proposals explicitly address barriers to accessing the mortgage market. For example, eight proposals aim to maintain access to 30-year fixed-rate mortgages, a key instrument for promoting access to homeownership. Eleven proposals would support funds dedicated to affordable housing, such as the Housing Trust Fund and Capital Magnet Fund, through fees on securitized loans. Five proposals also would collect fees for a new Market Access Fund dedicated to increasing the number of families able to achieve homeownership and access credit. However, two proposals would eliminate the Housing Trust Fund. Proposals vary in their support of the enterprises’ affordable housing goals. Eight proposals call for the affordable housing goals to be eliminated and eight industry stakeholders we interviewed doubted the effectiveness of such goals, stating that homeownership should not be addressed through the secondary market. In 2009, we reported that there was limited evidence to support the effectiveness of the enterprises’ affordable housing goals in supporting homeownership for the targeted groups. However, affordable housing and consumer advocates we interviewed stated that they want to maintain the goals because they believe that the goals improved access to credit for minority and low- to moderate-income borrowers. Regardless of their position on the affordable housing goals, we found that proposals with a federal guarantee generally would require market participants to serve all eligible borrowers in all markets to receive the guarantee. Thirteen proposals also recommend policies that would promote small lender access to the market, such as maintaining the enterprises’ cash windows or creating a similar structure in their successors. Through the cash windows, lenders can sell individual loans directly to the enterprises and retain servicing rights. According to the Center for Responsible Lending, keeping loan servicing within community-based financial institutions often results in better loan performance and customer service outcomes. One former HUD official we interviewed stated that minority communities are often served by smaller lenders and these lenders need the cash window as a way to continue making affordable loans. Ten experts in our panels—including housing advocates, primary and secondary market participants, and researchers—said that reform plans should give fair treatment to all lenders, regardless of size. Market Cyclicality and Financial Stability Nine of 14 reform proposals fully meet the element relating to consideration of the cyclical nature of the housing finance market and its impact on financial stability. We previously reported that the housing finance market is characterized by cyclical fluctuations and its market cycles may pose risks to overall financial and economic stability because housing is a significant part of the economy. The five proposals that do not fully meet this element do not address how the reformed system would attempt to mitigate market cycles. We previously reported that financial regulatory action or inaction can exacerbate housing finance cycles, and thus reform proposals should consider the potential impact of new regulations on market cyclicality. To mitigate market cycles, the nine proposals that meet this element generally include policies that would allow the regulator to adjust regulations based on market cycles. In one proposal, the regulator would establish risk-based capital requirements for the enterprises or successor entities and could adjust the requirements temporarily based on market cycles. One proposal that would create a government corporation also would allow the corporation to maintain a small portfolio to manage distressed loans. Some Proposals Do Not Have Clearly Defined Goals or a System-Wide Focus Eight of the proposals we reviewed do not have clearly defined goals and seven do not fully consider other entities in the housing finance system— two key elements in our housing finance reform framework. Clearly Defined Goals Eight of 14 proposals we reviewed do not have clearly defined goals for the housing finance system, including four legislative proposals. Additionally, none of the proposals prioritize their goals. Among the six proposals with clearly defined goals, we identified some common goals, such as minimizing the risk of taxpayer-funded bailouts, supporting market liquidity, and maintaining a level playing field for lenders of all sizes. We also identified different goals among the proposals, reflecting differences in reform models. For example, proposals similar to the multiple-guarantor model explicitly include market competition as a goal, while a proposal for reconstituting the enterprises includes stable transition as a goal. As we reported in 2015, clearly defined and prioritized goals are a key element to consider when assessing changes to the housing finance system. Clear goals help guide agencies’ activities and establish accountability. Experts with whom we spoke also emphasized the importance of clearly defined goals in housing finance reform proposals. For example, one researcher said it would be difficult to discuss any necessary policy changes until the government clearly articulated goals for its role in the housing finance system. Furthermore, prioritizing goals can help guide agencies’ actions and provide clarity to market participants, particularly if there are conflicting goals. For example, three proposals we reviewed include the goals of both minimizing risks to taxpayers and promoting affordable homeownership, but there is a trade-off between these goals—promoting homeownership may mean encouraging lending to riskier borrowers. As of early January 2019, Congress had not enacted legislation that establishes clear and prioritized objectives for the future federal role in housing finance. The lack of such goals in many of the proposals we reviewed raises questions as to whether the proposals that Congress may consider in the future will give adequate attention to these critical elements of housing finance reform. Without clearly defined and prioritized goals, agencies’ housing finance activities may lack focus and consistency. We previously reported that because Congress did not provide clearly defined and prioritized goals to FHFA for conservatorship, each FHFA director has been able to shift agency priorities within statutory requirements. For instance, the first FHFA director raised guarantee fees to encourage the return of private capital to the MBS market, while the next director stopped the increase out of concern for its effect on credit availability. Additionally, we reported that FHFA’s shifting priorities for conservatorship contributed to uncertainty among market participants. Therefore, by identifying a primary objective for housing finance reform, Congress would be better positioned to determine appropriate steps and policies and provide clarity to market participants. System-Wide Focus Seven of 14 proposals we reviewed—including proposed legislation—do not consider if and how they would affect other federal entities in the housing finance system, such as FHA and Ginnie Mae. The proposals that consider other federal entities include policies to help them manage the effects of reform and ensure agencies’ policies are consistent with overarching goals. For example, proposals that would expand Ginnie Mae’s guarantee to include the enterprises’ market also recommend that Ginnie Mae become an independent agency to better manage its expanded role. Another proposal with the broad goal of reducing the federal role in the mortgage market by terminating the enterprises also aims to manage fiscal exposure through FHA by increasing its capital reserve ratio from 2 to 4 percent. Finally, one proposal with a goal of promoting market liquidity recommends that FHA should become an independent agency to buttress its countercyclical role (that is, its ability to provide credit availability across market cycles). We previously reported that aligning policies and mechanisms with goals is a key element of housing finance reform, and that reform should have a comprehensive approach that considers all relevant entities. A comprehensive approach would help to promote consistency, transparency, and reduce unnecessary overlap and duplication between the enterprises and other federal entities. As of early January 2019, Congress had not enacted legislation with a system-wide approach to housing finance reform that considers the enterprises and other federal entities. The lack of a comprehensive approach in half of the proposals we reviewed highlights the need for policymakers to consider these key elements when reforming the housing finance system. Housing finance reform that does not consider all federal entities or participants may not account for how changes in the enterprises’ activities could affect risk exposure of other federal entities. For example, CBO reported that transitioning to a fully private market likely would lead to large increases in the volumes of loans insured by FHA. Industry experts with whom we spoke—including stakeholders from the primary and secondary markets, researchers, and former agency officials—also stated that any reforms to the enterprises must consider FHA too. Thus, considering the impacts of potential reforms on other federal entities would help ensure consistency and avoid unintended consequences. Conclusions The enterprises have remained in conservatorship since 2008 (over 10 years), perpetuating uncertainty about their future and the federal role in the housing finance market. Determining those future roles and the enterprises’ structures has become both more urgent and more challenging as federal fiscal exposures have grown and new risks emerged in the housing finance markets (such as the growing role of nonbank lenders and servicers). Congress and industry stakeholders have introduced a number of proposals to reform the housing finance system, including addressing the prolonged conservatorship of the enterprises, but several proposals lack clearly defined and prioritized goals or do not consider all relevant federal entities in the housing finance system. By incorporating these key elements in future reform efforts, Congress could facilitate a more focused and comprehensive transition to a new housing finance system. Moreover, reform efforts that are both focused and comprehensive could allow market participants to confidently engage in long-term planning and help increase private-sector participation in the markets. Matter for Congressional Consideration Congress should consider legislation for the future federal role in housing finance that addresses the structure of the enterprises, establishes clear, specific, and prioritized goals and considers all relevant federal entities, such as FHA and Ginnie Mae. (Matter for Consideration 1) Agency Comments We provided a draft of this report to FHFA, Treasury, and HUD for review and comment. FHFA provided a technical comment that we incorporated. We also received technical comments from HUD and Treasury on sections of the draft report, which we incorporated as appropriate. Further comments on the full draft report from HUD and Treasury were not available due to the partial government shutdown. We are sending copies of this report to the appropriate congressional committees and FHFA, Treasury, and HUD. This report will also be available at no charge on our website at http://www.gao.gov. Should you or your staff have questions concerning this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. Appendix I: Objectives, Scope, and Methodology Our objectives in this report were to examine (1) recent developments in the housing and financial markets that could affect the safety and soundness of Fannie Mae and Freddie Mac, two government-sponsored enterprises (enterprises); (2) risks and challenges that the ongoing conservatorships pose to the status and operations of the enterprises and other aspects of the housing finance system, and (3) housing finance reform options that have been proposed and their relative strengths and limitations. To examine trends in the housing market and assess related risks, we reviewed and analyzed data that we considered relevant to various aspects of risk and developments in the housing market. Specifically, we reviewed and analyzed: house prices from the Federal Housing Finance Agency (FHFA) and Standard and Poor’s (a financial services company); mortgage delinquency rates from FHFA; the Board of Governors of the Federal Reserve System (Federal Reserve); the Bureau of Consumer Financial Protection, also known as the Consumer Financial Protection Bureau (CFPB); and Inside Mortgage Finance (a housing market data provider); mortgage origination and securitization data from Inside Mortgage Finance, FHFA, the Mortgage Bankers Association, and the Securities Industry and Financial Markets Association; and measures of underwriting standards from Fannie Mae, Freddie Mac, the Department of Housing and Urban Development (HUD), and the Senior Loan Officer Opinion Survey on Bank Lending Practices (conducted by the Federal Reserve). We adjusted house prices for inflation using the Bureau of Labor Statistics’ Consumer Price Index and mortgage origination and securitization volume using the Bureau of Economic Analysis’s Implicit Price Deflator for gross domestic product to make dollar amounts reflective of real 2017 dollars. To further inform our assessment of these developments and risks, we reviewed prior GAO work on these issues. Specifically, we reviewed prior GAO work that identified and analyzed key national housing market indicators, including house prices and loan performance, since the 2007– 2009 financial crisis. To examine risks and challenges that conservatorship poses to the status of the enterprises and other aspects of the housing finance system, we reviewed FHFA reports and Fannie Mae and Freddie Mac financial statements. Specifically, we reviewed progress reports and program updates from FHFA regarding its credit risk transfer and foreclosure prevention actions, and reviewed FHFA’s scorecard progress and other FHFA reports (such as the 2017 Report to Congress), strategic plans, and FHFA Office of Inspector General reports. For financial information on Fannie Mae and Freddie Mac, we reviewed filings with the Securities and Exchange Commission, quarterly financial supplements, and reports from credit rating agencies. We also reviewed selected academic literature that reported on risks and challenges identified in these sources and the potential effectiveness of risk-mitigation efforts. We also reviewed our prior work on the enterprises’ instability during the financial crisis. We took a number of steps to assess the reliability of the data, including interviewing agency officials; corroborating trends across data from multiple sources that we analyzed for these two objectives; reviewing related documentation; and reviewing relevant, prior GAO work. We used data that had been collected for prior GAO reports and reviewed the data reliability assessments that had been completed for those reports to determine if the data were reliable for our purposes. Based on these actions, we determined the data were sufficiently reliable to report on recent trends in the housing market and developments under the conservatorships of the enterprises. To address our third objective, we reviewed 14 proposals proposed by Congress, federal agencies, industry groups, or think tanks for reforming the single-family housing finance system. We selected proposals for review based on the following criteria: Time frame: We selected proposals that were released from 2014 through 2018. Source of proposal: We selected proposals from the following sources: (1) Congress (either proposed legislation or discussion drafts by members), (2) federal agencies, and (3) industry groups or think tanks (limited to those that were discussed in congressional hearings). We excluded some proposed legislation that only would modify certain aspects of the conservatorships of the enterprises and did not contain broader reforms. For example, three proposed legislative acts would have amended the terms of the senior preferred stock purchase agreements but did not address other aspects of housing finance and thus we excluded them from our review. We also excluded documents that outlined principles and objectives for reform but did not include specific policies, such as reform principles documents that some industry and advocacy groups released. We used elements of GAO’s framework for assessing potential changes to the housing finance system to analyze the content and assess the potential strengths and limitations of the reform proposals. For each element, we defined a series of responses to determine if the proposal fully, partially, or did not meet the element and provided examples of relevant policies for each element. Generally, a proposal fully met an element if it described specific policies and programs relevant to that element, partially met an element if it the element was addressed but the proposal did not describe specific policies or programs relevant to it, or did not meet an element if it did not address it at all. We also gathered descriptive information on the policies and programs on which the proposals relied. We used the information we collected from the proposals to determine the potential strengths and limitations of the proposals. We generally considered a proposal’s strengths to be the elements it fully met and its limitations to be elements that were partially met or not met. We did not make an individual, overall determination about each proposal, but instead examined whether each proposal fully considered key elements of housing finance reform. For example, a proposal could have useful ideas for reform but had yet to consider some key elements. Using this information, we used the number of proposals that fully met each element to determine which elements were most frequently met. We noted which elements were met least often to determine the gaps in the reform proposals as a whole. We also grouped the individual proposals into the different reform models. We determined the main reform models and their potential strengths and weaknesses based on our review of the proposals, prior GAO reports, Congressional Budget Office reports, industry stakeholder reports, and information we obtained during panels and interviews we conducted. To address all three objectives, we convened four, 2-hour panels of experts and stakeholders representing (1) mortgage originators and insurers, (2) securitizers and investors, (3) consumer and affordable housing advocates, and (4) researchers. We selected the experts and stakeholders based on the extent to which they developed reform proposals, testified before Congress on housing finance reform, or had participated in prior GAO studies of housing finance issues. Each panel had from three to five participants. In cases in which key experts or stakeholders could not attend our discussion panels, we interviewed them separately. We also interviewed officials at FHFA, HUD, and the Department of the Treasury. We conducted this performance audit from March 2018 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Housing Finance Reform Proposals Reviewed For this report, we reviewed the following housing finance reform proposals released between 2014 and September 2018 (see appendix I for more information about how we selected the proposals): Bipartisan Housing Finance Reform Act of 2018 (discussion draft). Released by House Financial Services Chairman Jeb Hensarling, Representative John Delaney, and Representative Jim Hines on September 6, 2018. Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217). Released by Senate Banking Committee Chairman Tim Johnson and Ranking Member Michael Crapo on March 16, 2014. Housing Opportunities Move the Economy (HOME) Forward Act of 2014 (discussion draft). Released by House Financial Services Committee Ranking Member Maxine Waters on March 27, 2014. Mortgage Finance Act of 2015 (S. 495). Introduced by Sen. Johnny Isakson on February 12, 2015. Partnership to Strengthen Homeownership Act of 2014 (H.R. 5055). Introduced by Representative John Delaney on July 10, 2014. Protecting American Taxpayers and Homeowners Act of 2018 (H.R. 6746). Introduced by House Financial Services Chairman Jeb Hensarling on September 7, 2018 (originally introduced on July 22, 2013). Bright, Michael, and Ed DeMarco. Toward a New Secondary Mortgage Market. Washington, D.C.: Milken Institute, September 2016. Federal Housing Finance Agency. Perspectives on Housing Finance Reform. Washington, D.C.: January 2018. Independent Community Bankers of America. ICBA Principles for GSE Reform and a Way Forward. Washington, D.C.: 2017. Moelis & Company LLC. Blueprint for Restoring Safety and Soundness to the GSEs. June 2017. Mortgage Bankers Association. GSE Reform: Creating a Sustainable, More Vibrant Secondary Market. Washington, D.C.: April 2017. National Association of Home Builders. Why Housing Matters: A Comprehensive Framework for Reforming the Housing Finance System. Washington, D.C.: September 2015. Office of Management and Budget. Delivering Government Solutions in the 21st Century: Reform Plan and Reorganization Recommendations. Washington, D.C.: June 2018. Parrott, Jim, Lewis Ranieri, Gene Spalding, Mark Zandi, and Barry Zigas. A More Promising Road to GSE Reform. Washington, D.C.: Urban Institute, March 2016. Appendix III: GAO Contact and Staff Acknowledgements GAO Contact Staff Acknowledgements In addition to the contact named above, Karen Tremba (Assistant Director), Tarek Mahmassani (Analyst in Charge), Miranda Berry, M’Baye Diagne, Michael Hoffman, Risto Laboski, Melanie Magnotto, Marc Molino, Matthew Rabe, Barbara Roesmann, Jessica Sandler, and Andrew Stavisky made significant contributions to this report.

Since 2008, the federal government has greatly increased its role in financially supporting housing markets. In September 2008, FHFA placed Fannie Mae and Freddie Mac under conservatorship, which created an explicit fiscal exposure for the federal government. As of October 2018, the dollar amounts of their outstanding MBS have grown by more than $800 billion since the end of 2008. Since 2013, GAO has designated the federal role in housing finance as a high-risk area. GAO examines (1) recent housing market developments, (2) risks and challenges posed by the current federal role, including ongoing conservatorship, and (3) housing finance reform proposals and their strengths and limitations. To address these issues, GAO reviewed housing finance data; FHFA and enterprise reports; and 14 housing finance reform proposals introduced in Congress or proposed by industry stakeholders since 2014. GAO also convened panels with housing finance experts and stakeholders (including consumer advocates, mortgage originators, insurers, and investors), who developed reform proposals, testified before Congress, or participated in prior GAO studies. Federal support of the housing finance market remains significant even though the market has largely recovered since the 2007–2009 financial crisis. While down from the peak in 2009, in 2017, the federal government directly or indirectly guaranteed about 70 percent of single-family mortgage originations. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)—two government-sponsored enterprises (enterprises) that purchase and securitize mortgages into mortgage-backed securities (MBS)—securitized and guaranteed about 46 percent of mortgage originations in 2017. In 2017, federal programs, such as those offered by the Federal Housing Administration (FHA), insured about 25 percent of mortgage originations. Together, the enterprises and the Government National Mortgage Association (Ginnie Mae)—a federally owned corporation that guarantees MBS backed by federally insured mortgages—have issued or guaranteed 95 percent or more of all MBS issued annually since 2008 (see figure). However, recent market trends pose risks to these entities and the housing finance system. For example, mortgage lending standards have loosened slightly in recent years, which could increase the risk of borrower default—especially in a recession or downturn in the housing market—and losses to federal entities. Nonbanks have increased their presence in mortgage lending and servicing, which involves collecting monthly mortgage payments, among other duties. For instance, the share of nonbank originations of FHA-insured mortgages increased from 56 percent in fiscal year 2010 to 86 percent in 2017. The share of nonbank servicers of mortgages in enterprise MBS also grew from 25 percent in 2014 to 38 percent as of the third quarter of 2018. While nonbank lenders and servicers have helped provide access to mortgage credit, they are not subject to federal safety and soundness regulations. The Federal Housing Finance Agency (FHFA) has taken actions to lessen some of Fannie Mae and Freddie Mac's risk exposure. For example, under FHFA's direction, the enterprises have reduced the size of their riskier retained mortgage portfolios which hold assets that expose them to considerable interest rate and other risks from a combined $1.6 trillion in 2008 to $484 billion in 2017. Since 2013, the enterprises also have transferred increasing amounts of risk on their guaranteed MBS to private investors and insurers through credit risk transfer programs. However, federal fiscal exposure remains significant. The Department of the Treasury's remaining funding commitment through the senior preferred stock purchase agreements—which provide financial support to the enterprises—leaves taxpayers exposed to risk, especially in the event of adverse market or other conditions and given the recent growth in the enterprises' guarantee business. The value of outstanding MBS on which the enterprises guarantee principal and interest payments to investors grew from about $2.1 trillion in 2003 to about $4.8 trillion in 2017. The long duration of the conservatorships also raises uncertainty among market participants. Several experts and stakeholders GAO interviewed said that they have hesitated to make longer-term strategic plans and goals due to potential housing finance reforms that could markedly affect their industries. The figure below shows 2003–2017 trends in the enterprises' guarantee business and retained mortgage portfolios. GAO reviewed 14 housing finance reform proposals from Congress, agencies, industry groups, and think tanks. The proposals generally fit into four different models: reconstituted enterprises, a multiple guarantor system with an explicit federal guarantee, a government corporation, and a completely privatized market without an explicit federal guarantee. The 14 proposals generally meet key elements of GAO's framework for assessing potential changes to the housing finance system, such as addressing fiscal exposure, protecting investors, and considering the implications of the transition to a new system. However, many proposals lack clearly defined and prioritized goals or do not address the role of other federal entities in the housing finance system, such as FHA and Ginnie Mae—two key elements in GAO's framework. By incorporating these elements, policymakers could facilitate a more focused and comprehensive transition to a new housing finance system and provide greater certainty to market participants.

GAO_GAO-20-374T

The Coast Guard Has Taken Actions to Help Mitigate Arctic Capability Gaps but Has Not Yet Systematically Assessed Its Progress in This Effort The Coast Guard is a multimission, maritime military service that is responsible for maritime safety and security, environmental protection, and national security, among other missions. Given the Arctic region’s expansive maritime domain, the Coast Guard plays a significant role in Arctic policy implementation and enforcement. Therefore, as we have reported, as more navigable ocean water has emerged in the Arctic and human activity increases, the Coast Guard has faced, and will continue to face, expanding responsibilities in the region. In June 2016, we found that the Coast Guard assessed its capability to perform its missions in the Arctic in fiscal year 2012 and identified various capability gaps, including the following: Communications: including the lack of communications architecture. Harsh weather conditions, high latitude disturbances, and geomagnetic storms combine to make communications in the Arctic difficult. Arctic maritime domain awareness: including limited nautical charting, inadequate navigation systems, and insufficient surveillance. Extremely limited operational assets and support infrastructure in the Arctic, as well as the harsh operating environment, make achieving maritime domain awareness a challenge. Infrastructure: including limited aircraft infrastructure on the North Slope in northern Alaska and limited logistical support. Facilities located below the Arctic Circle, and even those within Alaska, provide limited capability to support Arctic missions due to the long transits to the Arctic region. No deepwater ports currently exist on the North Slope or near the Bering Strait that are capable of refueling and re- provisioning polar capable cutters. This forces the Coast Guard’s polar capable cutters to expend significant time transiting long distances to and from replenishment ports. Development of infrastructure to support operations is challenging, in part, due to the high cost of transporting materials to the Arctic and short construction seasons. Training and exercise opportunities: including a limited pool of Arctic-trained and experienced Coast Guard personnel, and limited training, exercise, and educational opportunities to enhance Arctic skills among staff. According to Coast Guard officials, few opportunities exist to train in the Arctic, in part, because of limited Coast Guard icebreaking capacity. Icebreaking: including limited icebreaking capacity given the Coast Guard’s existing active inventory of one medium and one heavy polar icebreaker, as discussed later in this testimony. At the time of our June 2016 review, Coast Guard officials stated that the capability gaps were not the sole responsibility of the Coast Guard to mitigate and did not completely impair or eliminate their ability to perform operations. For example, while communications can be a challenge in remote regions, the risk of lost communications can be mitigated by using multiple assets working together to mitigate risk if lost communications is anticipated. Coast Guard officials also stated that given its activity levels at the time, the mobile and seasonal nature of its Arctic presence, and its ability to leverage partners’ resources, the Coast Guard has had sufficient resources to fulfill its Arctic responsibilities. However, Coast Guard officials stated they would reassess their approach as Arctic activity and resulting mission requirements change over time. As we reported in June 2016, if Arctic activity continues to increase, as anticipated, the Coast Guard may have insufficient resources to meet expanded Arctic requirements. In June 2016, we also found that the Coast Guard worked with its Arctic partners—such as other federal agencies—to carry out actions to help mitigate Arctic capability gaps. For example, the Coast Guard took steps to enhance Arctic maritime domain awareness by testing communications equipment belonging to DOD during a 2015 annual operation in the Arctic, extending communications capabilities further north than previously possible. However, we found that the Coast Guard did not systematically assess how its actions helped to mitigate these gaps. Such an assessment—which includes developing measures for gauging its progress, when feasible—is critical to the Coast Guard’s understanding of its progress towards addressing these gaps. By systematically assessing and measuring how its actions have helped to mitigate capability gaps, the Coast Guard will be better positioned to effectively plan its Arctic operations, including its allocation of resources and prioritization of activities to target the gaps. As a result, we recommended in June 2016 that the Coast Guard (1) develop measures for assessing how its actions have helped to mitigate Arctic capability gaps and (2) design and implement a process to systematically assess its progress on this. DHS concurred with our recommendations. As of January 2020, the Coast Guard had not yet taken action to implement these two recommendations, in part because the Coast Guard issued its Arctic strategic outlook in April 2019 and is currently updating its corresponding implementation plan for this strategy. The plan is expected to provide the foundation for systematically assessing efforts to address Arctic capability gaps. Coast Guard officials stated that they are also developing a strategic metrics framework for measuring progress in addressing the capability gaps. Coast Guard officials did not identify when they plan to complete the plan and framework, stating that these are longer-term efforts. The Coast Guard highlighted the Arctic capability gaps in its 2013 Arctic Strategy and again in its 2019 Arctic strategic outlook. The 2019 strategy highlighted the need to elevate the Arctic region’s prominence as a strategically competitive space due to (1) the resurgence of nation-state competition from the United States’ two nearest-peer powers, Russia and China, and (2) reduced ice conditions in the Arctic which have led to increased human and economic activity in the region. In addition, the 2019 Arctic strategy highlighted three overarching goals: enhance capability to operate effectively in a dynamic Arctic domain, strengthen the rules-based order, and innovate and adapt to promote resilience and prosperity. Further, the 2019 Arctic strategy noted that the Coast Guard is the sole provider and operator of the U.S. polar icebreaking fleet—a critical component in achieving the Coast Guard’s overarching goals in the strategy—but currently does not have the capability or capacity to ensure access in the Arctic region. The Coast Guard’s polar icebreaking fleet comprises two operational polar icebreakers—the Polar Star and Healy— of which only the Healy is currently active and operating in the Arctic. The Healy is a medium icebreaker that primarily supports Arctic research, and while it is capable of carrying out a wide range of activities, it cannot ensure timely access to some Arctic areas in the winter given that it does not have the icebreaking capabilities of a heavy polar icebreaker. See figure 1 for photographs of the Coast Guard’s active icebreakers. In November 2018, the Coast Guard Assistant Commandant for Acquisition testified that the Coast Guard’s current polar icebreaking fleet provides minimal capacity to carry out current icebreaking missions and that the nation must take swift action to rebuild and enhance this critical national capability. To this end, DHS approved the Coast Guard’s Polar Security Cutter acquisition program’s cost, schedule, and performance baselines in February 2018. The Coast Guard Has Taken Steps to Address Technology, Design, Cost, and Schedule Risks for the Polar Security Cutters In September 2018, we found that the Coast Guard did not have a sound business case when it established the acquisition baselines for the Polar Security Cutter program in March 2018 due to risks in four key areas: technology, design, cost, and schedule. Our prior work has found that successful acquisition programs start with solid, executable business cases before setting program baselines and committing resources. A sound business case requires balance between the concept selected to satisfy operator requirements and the resources—design knowledge, technologies, funding, and time—needed to transform the concept into a product, which in this case is a ship with polar icebreaking capabilities. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and performance baselines set when the program was initiated—in other words, experiencing cost growth, schedule delays, and reduced capabilities. To address the key risks we identified and help establish a sound business case for the Polar Security Cutter program, we made six recommendations to DHS, Coast Guard, and the Navy in our September 2018 report. The agencies concurred with all six recommendations and have taken steps to address some of the risks, as noted below. Technology. The Coast Guard planned to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines. As a result, the Coast Guard did not have full insight into whether these technologies were mature and was potentially underrepresenting the technical risk of the program. We recommended that the program conduct a technology readiness assessment, which DHS completed in June 2019. DHS determined that two of the three key technologies were mature and the remaining technology was approaching maturity. The Coast Guard now has plans in place to use testing results to increase the maturity and reduce risks for the remaining technology—the hull form. Design. The Coast Guard set program baselines before conducting a preliminary design review. This review is a systems engineering event intended to verify that the contractor’s design meets the requirement of the ship specifications and is producible. By not conducting this review before establishing program baselines, the program is at risk of having an unstable design, thereby increasing the program’s cost and schedule risks. We recommended that the program update its baselines prior to authorizing lead ship construction and after completion of the preliminary design review. DHS and the Coast Guard agreed and plan to take these steps by fiscal year 2022. Cost. The cost estimate that informed the program’s $9.8 billion cost baseline—which includes life cycle costs for the acquisition, operations, and maintenance of three polar icebreakers—substantially met our best practices for being comprehensive, well-documented, and accurate. But the estimate only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program, such as the period of operations and support. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program. We recommended that the program update its cost estimate to include risk and uncertainty analysis on all phases of the program life cycle, among other things. Subsequently, in December 2019, we found that while the Coast Guard updated the cost estimate in June 2019 to inform the budget process, the estimate did not reflect cost changes resulting from the contract award two months prior. Coast Guard officials acknowledged these cost risks and plan to address them as part of the next update to the program’s cost estimate. Coast Guard officials told us that they plan to update the cost estimate by the end of February 2020. Schedule. The Coast Guard’s initial planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities. Rather, these dates were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating heavy polar icebreaker—the Polar Star—reaches the end of its service life. In addition, our analysis of selected lead ships for other Coast Guard and Navy shipbuilding programs found the icebreaker program’s estimated construction time of 3 years to be optimistic. An unrealistic schedule puts the Coast Guard at risk of not delivering the icebreakers when promised. As a result, the potential gap in icebreaking capabilities could widen. We recommended that the program develop a realistic schedule, including delivery dates, and determine schedule risks during the construction phase of the program. In response, the Coast Guard is now tracking additional schedule risks for the program and is in the process of updating its program schedule. Further, in December 2019, we found that the contract delivery date for the lead ship, May 2024, is 2 months after the delivery date in the program’s schedule baseline. Coast Guard officials said they plan to address this risk when they update the program’s schedule by the end of March 2020. In summary, the Arctic region has increased in strategic importance in recent years, and with the increase comes more responsibility for the Coast Guard. The Coast Guard has emphasized that as the Arctic continues to open and strategic competition drives more actors to look to the Arctic for economic and geopolitical advantages, the demand for Coast Guard leadership and presence will continue to grow. As the Coast Guard embarks on the acquisition of its new polar icebreakers, it faces a number of key acquisition risks. The Coast Guard has begun to take steps to address these risks and must remain committed to executing a sound business case for the program to mitigate capability gaps in the Arctic. To this end, we will continue to monitor the Coast Guard’s progress in addressing our recommendations. Chairman Correa, Ranking Member Lesko, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Claire Li, Analyst-in-Charge; Peter Anderson; Jay Berman; Tracey Cross; Laurier Fish; Miranda Riemer, and Roxanna Sun. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The Coast Guard—a component of the Department of Homeland Security (DHS)—is a multimission, maritime military service that is responsible for maritime safety and national security, among other missions. Given the Arctic region's expansive maritime domain, the Coast Guard plays a significant role in Arctic policy implementation and enforcement. The Coast Guard is also the sole provider and operator of the U.S. polar icebreaking fleet—a critical component in ensuring year-round access to the Arctic. The Coast Guard is developing the first of three heavy polar icebreakers—the Polar Security Cutter—it has acquired in over 40 years. This statement addresses (1) the Coast Guard's assessment of capability gaps in the region, and (2) key risks facing the Polar Security Cutter acquisition. This statement is primarily based on GAO's June 2016 report examining capability gaps in the Arctic and its September 2018 report examining the Coast Guard's polar icebreaker acquisition. In fiscal year 2012, the Coast Guard—the primary federal maritime agency in the Arctic—assessed its capability to perform its missions in the region and identified a number of capability gaps. These gaps, which still exist today, include communications, infrastructure, maritime domain awareness, and icebreaking. The Coast Guard has worked to mitigate these gaps with its Arctic partners, such as other federal agencies. For example, during a 2015 annual operation in the Arctic, the Coast Guard took steps to enhance maritime domain awareness by testing the Department of Defense's communications equipment, extending communications capabilities further north than previously possible. However, in June 2016, GAO found that the Coast Guard did not systematically assess the extent to which its actions helped to mitigate these gaps. In response to GAO's recommendation, the Coast Guard is currently developing an implementation plan and corresponding metrics for its April 2019 Arctic Strategy. In September 2018, GAO found that the Coast Guard faced four key risks when it established the Polar Security Cutter program in March 2018: technology, design, cost, and schedule. For example, the Coast Guard's initial planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities. The schedule was driven, instead, by the potential gap in icebreaking capabilities once the Coast Guard's only operating heavy polar icebreaker—the Polar Star —reaches the end of its service life (see figure). GAO recommended in September 2018 that the program develop a realistic schedule and determine schedule risks for the program. In response, the Coast Guard is now tracking additional schedule risks for the program and is in the process of updating its program schedule. GAO will continue to monitor the Coast Guard's progress in addressing this recommendation and other recommendations GAO made to address key risks, such as design and cost, facing the Polar Security Cutter program.

GAO_GAO-19-401T

Background Confucius Institutes are entities that seek to promote Chinese language and culture in foreign countries. Their establishment is guided by Hanban, which is headquartered in Beijing, China, and, according to various sources, is affiliated with the Chinese government’s Ministry of Education. The first Confucius Institute in the United States was established in 2004, and there were approximately 525 institutes worldwide as of September 2018, according to Hanban’s website. Most Confucius Institutes in the United States are based at colleges and universities. We identified 96 Confucius Institutes in operation at U.S. colleges and universities in 44 states and the District of Columbia as of January 2019. See our February 2019 report on Confucius Institutes for a full list of the schools and their locations. Figure 1 shows U.S. states with one or more Confucius Institute on college or university campuses. Additionally, in recent years, some U.S. universities have partnered with Chinese universities to establish degree-granting institutions in China approved by the country’s government. The Chinese government requires that U.S. universities seeking to establish such an education arrangement in China partner with a Chinese university, and establish written agreements with the Chinese university defining the academics, governance, operations, finances, and other aspects of the arrangement. At the time of our review in August 2016, the 12 institutions we reviewed ranged from fewer than 40 to more than 3,000 students. More than 90 percent of the students across the 12 institutions were Chinese, and less than 6 percent were U.S. citizens. Confucius Institute Arrangements Vary Across Universities, and Stakeholders Have Identified Related Benefits, Concerns, and Suggestions for Improvement Confucius Institute Management, Operations, and Agreements Vary by School Management In February 2019, we reported that Confucius Institutes in the United States that we reviewed were established as a partnership between a U.S. school and a Chinese college or university, funded and arranged in part by Hanban. Management of the institutes varies by school. Some Confucius Institutes at U.S. schools are part of an academic department or an administrative office, while others report directly to the school president or other school leadership. Confucius Institute personnel generally consist of a Confucius Institute director or directors, Confucius Institute teachers, and a board of directors. At the 10 case study schools that were part of our review, the Confucius Institute director was a U.S. school employee—either a school administrator, faculty member, or professional hired to manage the Confucius Institute. In addition, several case study schools had a Chinese assistant director, who reported to the Confucius Institute director from the United States, and often was an employee at the Chinese partner university. School Officials, Researchers, and Others Identified Both Benefits and Concerns, and Suggested Ways to Improve Confucius Institutes Perspectives on Institute Benefits In February 2019, we reported that officials we interviewed from case study schools stated that Confucius Institutes’ benefits include opportunities for schools to forge international connections and receive funding and other resources for China-related programs. These officials noted that because Hanban pays the salaries of Confucius Institute teachers who teach language and assist with Chinese programs at schools, sparing the schools these costs, these schools could offer Chinese language courses even when enrollment was low. Case study school officials also stated that Confucius Institutes provide valuable resources and opportunities to increase knowledge of and exposure to China and Chinese culture within the school and in the broader community. Perspectives on Concerns Related to Institutes Case study school officials, researchers, and others we interviewed also offered various perspectives on whether having Confucius Institutes on campuses could bring about undue Chinese influence. These parties discussed the potential for or absence of Chinese interference in events and activities at the institute and on campus. They also expressed views on Confucius Institute teacher hiring, and quality of those teachers. Several school officials, researchers, and others we interviewed expressed concerns that hosting a Confucius Institute could limit events or activities critical of China—including events at the institute and elsewhere on campus. Two officials who expressed these concerns were faculty members at one case study school who have not applied for Confucius Institute funding for a research project because they believed Hanban would not approve of the topic. In contrast, officials at multiple case study schools noted that U.S. school faculty members make all decisions regarding conference themes, guest speakers, and topics for events at their institute. Officials at some schools offered examples of events and activities their Confucius Institute had sponsored that addressed topics that could be considered critical of China. Specifically, they reported hosting a conference discussing intellectual property in relation to China and events on Tibet, territorial disputes in the South China Sea, and religion in China. In addition, multiple researchers and others we spoke with expressed concerns with the Confucius Institute teacher selection process whereby Hanban or the Chinese partner school accepts initial applications from potential Confucius Institute teachers and proposes candidates to the U.S. school. These individuals noted that the Chinese entities could use such a process to effectively screen out candidates based on inappropriate criteria, such as political or religious affiliation. Officials we interviewed at multiple case study schools that had Confucius Institute teachers, however, expressed no concerns about the process for hiring teachers. School officials stated that they believed their school generally controlled the hiring process and were thus satisfied with it. Most officials emphasized that while institute teachers often come from the Chinese partner university, and are referred by the partner or Hanban, the U.S. school makes the final hiring selection. Suggestions for Improvement Case study school officials, researchers, and others also suggested ways to improve the institutes, including changing the language in agreements governing Confucius Institutes and policies for sharing these agreements. These parties stated that schools should remove the confidentiality section of their agreements and make the agreements publicly available online. Several researchers and others also emphasized that making the agreements publicly available would dispel questions and concerns over their contents. Several representatives of higher education institutions told us that they believed the confidentiality language in agreements was unnecessary and schools should consider removing it from their agreements. A few case study school officials, researchers, and others we interviewed stated that schools should include stronger language in the agreements to make it clearer that the U.S. school has executive decision-making authority. School officials and others we interviewed suggested other steps that schools could take to ensure they protect against undue Chinese influence. Several school officials stated that the schools should clearly delineate between the Confucius Institutes’ programs and their own Chinese language programs, such as by locating the institute apart from these departments within the school’s organizational structure. A few school officials and others noted that Confucius Institute teachers should not teach credit-bearing courses, even if those courses use curriculum developed by the school’s language department. One school administrator, who stated that his school’s Confucius Institute would never have a Chinese assistant director because the position suggests an excessive degree of Chinese influence, recommended that other schools remove the Chinese assistant director position from their institutes. Officials from two case study schools and others we interviewed stated that schools should organize events through the institute specifically intended to address what some might perceive as a topic sensitive to Chinese interests to demonstrate the school and institute were not subject to undue Chinese influence. U.S. Universities in China Emphasized Academic Freedom but Faced Internet Censorship and Other Constraints U.S. Universities Reported Receiving Support from Chinese Entities, with Limited U.S. Support In August 2016, we reported that the 12 U.S. universities we reviewed generally reported receiving support for their institutions in China from their Chinese partner universities and from Chinese government entities, with limited funding from U.S. government agencies and private donors. Most universities reported being granted land, resources for construction of buildings, and the use of the Chinese university’s campus facilities. The amount of support reported by the universities varied widely and was in some cases substantial. For example, one university reported receiving nearly 500 acres of land and a commitment from the Chinese provincial and local governments to spend about $240 million for construction and development of facilities. Five of the 12 universities reported receiving federal funding, which in most cases consisted of federal financial aid to U.S. students. Agreements between U.S. and Chinese Partners and Other Policies Generally Outlined Academic Freedom Protections At the time of our review, most universities we reviewed included language in their written agreements or other policies that either embodied a protection of academic freedom or indicated that the institution in China will adhere to academic standards commensurate with those at their U.S. campus. Six universities in our review included language in either their written agreements or other university policies that indicated a protection of academic freedom, such as permitting students to pursue research in relevant topics and allowing students to freely ask questions in the classroom. For example, one university’s agreement stated that all members of and visitors to the institution in China will have unlimited freedoms of expression and inquiry and will not be restricted in the selection of research, lecture, or presentation topics. Another three universities’ written agreements included language indicating that the institution in China will adhere to academic standards commensurate with either the U.S. campus or the university’s accrediting agency or other authoritative bodies. Fewer agreements addressed other types of protections at the time of our review. About half of the universities GAO reviewed addressed access to information, such as providing faculty and students with access to physical or online libraries, though a few universities’ agreements and policies include language protecting internet access. Written agreements and policies for about half of the universities we reviewed included language that suggested a protection of at least one of the freedoms of speech, assembly, and religion or worship, though the number of universities addressing each freedom varies. For example, regarding freedom of speech, student and faculty handbooks at a few of these universities contained language indicating that students have the ability to discuss sensitive topics. Regarding freedom of religion or worship, several of the universities included language in their policy documents indicating that religious practices will be protected. U.S. University Members Generally Indicated They Experienced Academic Freedom, but Internet Censorship and Other Factors Posed Challenges The more than 130 faculty and students we interviewed from universities’ institutions in China during our 2016 review generally reported that academic freedom had not been restricted. Faculty told us they did not face academic restrictions and could teach or study whatever they chose. For example, several faculty members asserted that neither they nor their colleagues would tolerate any academic restrictions, and one faculty member told us he and his colleagues intentionally introduced class discussions on politically sensitive topics to test whether this would trigger any complaints or attempted censorship. Students also generally indicated that they experienced academic freedom and could study or discuss any topic. Some students who had also studied or knew others who studied at Chinese universities contrasted their experiences at a U.S. institution in China, noting that they could have interactive dialogue with faculty, discuss sensitive topics, and freely access information at the U.S. institution but not at a Chinese university. Through interviews and responses to our questionnaire, university administrators reported that academic freedom was integral to their institutions in China. Administrators at several universities told us that academic freedom was nonnegotiable, while others noted that the same curriculum used in the United States also applied to their institution in China. However, fewer than half of the universities we reviewed had uncensored internet access at the time of our review. We visited universities with and without uncensored internet access, and observed university members accessing search engines, newspapers, and social media sites that have been blocked in China—such as the New York Times, Google, and Facebook—at some universities but not others. At several universities that lacked uncensored internet access, students and faculty told us that, as a result, they sometimes faced challenges teaching, conducting research, and completing coursework. For example, one faculty member told us that she sometimes asked others outside of mainland China to conduct internet research for her because they can access information she could not. Several students at another university told us their ability to conduct academic research was constrained by the internet limitations. We also reported in August 2016 that additional factors that could create obstacles to learning at U.S. universities in China, including self- censorship and constraints specific to Chinese students. Administrators, faculty, and students representing more than half of the universities we reviewed gave examples of self-censorship, including some cases where individuals were advised by teachers or others in positions of authority to avoid certain topics. For example, an administrator at one university noted that he believed it was advisable, as a guest of China, to refrain from insulting China, while an administrator at another university noted that the university advised teachers to avoid discussing sensitive subjects in class. In addition, we found that some conditions specific to Chinese students may constrain their academic experience. For example, some noted that Chinese students may know or suspect that their Chinese classmates are government or Communist Party monitors and will report on whatever the students say. An administrator at one university told us that he assumed there were Chinese students and faculty in the institution who reported to the government or the Communist Party about the activities of other Chinese students. Faculty members at several universities told us that they understood there were Chinese students in class who intended to report on the speech of faculty or Chinese students. Finally, we also observed that three of the 12 universities we reviewed that were approved by the Chinese Ministry of Education as having independent legal status shared characteristics that may be correlated with greater academic and other freedoms on campus. We found that these three universities had campuses built specifically for the joint institution that were located relatively far away from their Chinese university partner’s campus, generally controlled their own day-to-day operations, had uncensored internet access, and offered extensive campus and student life programs. In contrast, the other nine universities we reviewed did not consistently share these characteristics at the time of our review. Chairman Portman, Ranking Member Carper, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgements If you or your staff have any questions about this testimony, please contact Jason Bair, Acting Director, International Affairs and Trade at (202) 512-6881 or bairj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Joseph Carney (Assistant Director), Caitlin Mitchell (Analyst in Charge), Joyce Kang, Neil Doherty, Melissa Emrey-Arras, Meeta Engle, Elizabeth Repko, Aldo Salerno, Michael Silver, and Nicole Willems. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Numerous U.S. universities and colleges have partnered with Chinese entities to establish (1) Confucius Institutes in the United States and (2) degree-granting institutions in China. Confucius Institutes are partnerships between Chinese entities and schools in other countries, arranged and funded in part by Hanban, which seek to promote Chinese language and culture. There were 96 institutes located at colleges and universities in the United States as of January 2019. U.S. universities have also partnered with Chinese universities to establish degree-granting institutions in China approved by the Chinese government. School officials have noted these types of partnerships provide valuable educational, cultural, and other benefits. Some researchers, government officials, and others, however, have raised concerns about them, including about the contents of written agreements and the role of the Chinese government, which, according to the Department of State, has made efforts to restrict academic freedom and impose censorship at Chinese universities and other institutions. Some have expressed concern that U.S. universities partnering with the Chinese government may face similar restrictions. This testimony discusses funding, agreements, and operations of (1) Confucius Institutes in the United States and (2) U.S. universities in China. This testimony is based on GAO's February 2019 report on Confucius Institutes in the United States and GAO's August 2016 report on U.S. universities in China. GAO reviewed 90 agreements establishing Confucius Institutes and spoke to officials about benefits and concerns related to the institutes. Agreements between Hanban—an affiliate of the Chinese Ministry of Education—and U.S. colleges and universities generally describe similar activities, funding, and management, though institute operations vary in practice. Confucius Institutes receive funding from Hanban and U.S. schools, and do not receive direct federal funding. While 42 of 90 agreements contained language about the document being confidential, some were available online or upon request, and one-third of the 90 agreements explicitly addressed how U.S. school policies apply to the institutes. Officials GAO interviewed at 10 case study schools noted U.S. school policies apply to institutes at their schools. GAO also interviewed some researchers and others who expressed concern that the presence of Confucius Institutes could constrain campus activities and classroom content. For example, several suggested schools with institutes might avoid hosting events on topics that could include criticism of China, such as Taiwan or Tibet, so as to not offend Chinese partners. School officials offered examples to illustrate that these concerns did not apply to their institute, noting institutes had sponsored events on such topics. Nonetheless, school officials and others suggested ways schools could improve institute management, such as renegotiating agreements to clarify U.S. schools' authority and making agreements publicly available. In August 2016, GAO reported that U.S. universities that have partnered with Chinese universities to establish degree-granting institutions in China emphasize academic freedom, but face internet censorship and other challenges. The 12 U.S. universities GAO reviewed generally reported receiving support for their institutions in China from Chinese government entities and universities, and 5 reported receiving U.S. government funding, mostly federal financial aid to U.S. students. Universities' agreements with Chinese partners or other policies GAO reviewed generally included language protecting academic freedom or indicating their institution in China would adhere to U.S. standards. University members generally indicated that they experienced academic freedom, but also stated that internet censorship, self-censorship, and other factors presented constraints. At several universities that lacked uncensored internet access, faculty and students noted that, as a result, they faced challenges teaching, conducting research, and completing coursework at that time.

GAO_GAO-19-557

Background Medicare’s Physician Fee Schedule CMS uses the Medicare Physician Fee Schedule to pay physicians and other providers for services delivered to beneficiaries. Physicians and other providers bill Medicare for their services using various five-digit billing codes based in part on codes developed by an AMA panel. Each year, the panel receives proposals from provider groups and others to revise existing billing codes or create new codes. The panel requires those who submit proposals to develop a clinical vignette that describes the typical patient who would receive the service, the diagnosis and relevant conditions, and estimates of time that physicians might spend in providing the service for the typical patient. The panel applies several criteria in reviewing these proposals. For example, a new code should represent a unique, well-defined procedure or service clearly identified and distinguished from existing procedures and services; should not fragment an existing procedure or service represented by one or more existing codes; should reflect the typical (not extraordinary) circumstances related to the delivery of the service; should be performed by many physicians or other qualified health care professionals across the United States; and should be consistent with current medical practice. CMS pays providers a fixed amount known as the Medicare fee for each code. The fees are based on relative values—estimates of resources for the physician’s work (time, skill, and level of training), and practice expenses (the costs of running a practice such as salaries of non- physician employees, rent, and overhead) required to provide a service relative to all other services. In setting fees, CMS also does not allow certain codes to be billed together if it deems that payment for one code is already included in another. CMS establishes and updates relative values annually. By law, the effect of any changes to its payment rates generally must be budget neutral. That is, if total spending increases by more than $20 million each year, including due to the creation of new billing codes, fees for all services would have to be reduced accordingly. Services billed under the physician fee schedule may be provided in a variety of settings, including physicians’ offices and institutional settings such as hospitals, skilled nursing facilities and hospices. Non-physicians may also bill or be reimbursed by Medicare for services under certain circumstances. For example, some types of non-physicians practicing independently—such as physician assistants and nurse practitioners— may bill Medicare for certain services that they are legally authorized to perform under their respective state laws. In other instances, physicians may bill as if they had furnished services that were provided by non- physician staff that they employ or with whom they have a contractual relationship as long as the physician has an established relationship with the beneficiary, and is on the premises to provide supervision if necessary. Care Planning Services in Medicare Providers and other stakeholders have noted that they care for an elderly population with increasingly complex medical conditions who receive care from multiple providers across different sites of care including physicians’ offices, hospitals, nursing homes, and hospices. As such, the focus of primary care has shifted from treating specific medical conditions to increased care coordination and planning. CMS also noted that a new trend in care planning is the use of shared care plans between the beneficiary and the provider rather than those created solely by the provider. These jointly developed care plans can be particularly important to improving overall beneficiary outcomes for beneficiaries with serious illnesses and also allow other providers involved in the beneficiary’s care access to timely information that supports planned care. However, stakeholders have suggested that Medicare’s payment system does not fully reimburse providers for such care planning services. For example, some note that the E/M billing codes that primary care physicians generally use to bill for their services were developed at a time when care coordination and planning was not part of the standard practice of medicine; as such, these codes do not reflect time spent on activities that do not require a face-to-face encounter with the beneficiary, including medical conferences with other physicians, or telephone calls to coordinate care with other providers. Some primary care physicians have requested that CMS conduct a comprehensive review of existing E/M codes to ensure they account for time spent on these services, or develop new codes that primary care physicians may exclusively use to bill for these services. However, others have noted that E/M codes have been reviewed and valued by the AMA, and the codes account for the time spent on these services. Moreover, they have stated that care coordination and planning services are delivered by multiple specialties, not just primary care physicians. Medicare’s Physician Fee Schedule Contains at Least 58 Billing Codes That Providers May Use to Bill for LCCP-Type Services Our analysis identified at least 58 Medicare Physician Fee Schedule billing codes that providers may use to bill for LCCP-type services. These 58 billing codes generally contain components we determined to be equivalent to the five key components of the LCCP service as defined in the 2018 BBA. For example, all 58 codes included a provision for the development of a care plan that addresses the beneficiary’s goals, values, and preferences, and a provision for coordination with other providers, which is equivalent to the LCCP component related to interdisciplinary care. Providers may choose a single code or a combination of these codes to account for the time, skill, and resources needed to deliver the service based on the unique health needs of each patient. (See app. IV for more information on the 58 codes and the LCCP components they contain as defined in the 2018 BBA.) The 58 billing codes for LCCP-type services include 45 longstanding, broadly-defined codes and 13 narrowly-defined codes that were more recently introduced starting in 2013. Broadly-defined codes. Of the 45 broadly-defined codes, 39 are E/M codes that have existed for decades. E/M codes are broadly defined to include services provided to treat a variety of illnesses (for example, treatment of a particular medical complaint), but they may also be used to bill for LCCP-type services. In general, the E/M codes range in complexity from low to high depending on the amount of time the provider spends with a patient as well as the complexity of the medical condition(s) being treated. E/M codes may also be billed if more than 50 percent of the time allotted for the service is spent on counseling and care coordination—for example, explaining treatment options and ways to mitigate the patient’s health risks—which are key components of the LCCP service as defined in the 2018 BBA. The E/M codes we identified as representing LCCP-type services were the more complex codes that had estimates of time that may be spent providing the service to a typical patient ranging from 30 to 120 minutes of physician time and 3 to 71 minutes of non-physician time. While the majority of E/M codes have existed for decades, CMS added six new E/M codes starting in 2008—referred to as “prolonged” E/M codes—allowing payment for additional time for care planning and care management services for complex conditions. Narrowly-defined codes. Starting in 2013, CMS added 13 narrowly- defined LCCP-type codes to better account for the time spent coordinating care for patients with complex treatment needs. CMS implemented these more narrowly-defined care planning codes largely in response to provider complaints that E/M codes did not sufficiently account for extensive care management/coordination of care that was required across multiple providers and settings. Unlike broadly-defined codes, these narrowly-defined codes can only be used for LCCP-type services. The 13 narrowly-defined LCCP-type codes fall into four types: transitional care management (TCM), chronic care management (CCM), advance care planning (ACP), and behavioral health integration (BHI). (See table 1.) While some pertain to patients with specific types of health conditions or in certain settings, others are more general and may be used for a range of health conditions. The estimates of physician and non-physician time that may be spent on the broadly-defined and narrowly-defined codes vary, as does Medicare’s 2019 fees for these billing codes—see examples of commonly used LCCP-type billing codes in table 2 and see appendix IV for related information on all 58 LCCP-type billing codes. For example, some stakeholders told us they might bill a complex E/M code (99214) along with a CCM code (99487). As our analysis shows, this combination could result in the provider spending 66 minutes of physician time and 113 minutes of non-physician time for a typical beneficiary, and receiving total Medicare fees of about $203 in 2019. Medicare Spending Increased for All LCCP-Type Services and Increased More Rapidly for New Narrowly-Defined Services That Were Furnished to More Beneficiaries by More Providers Medicare Spending on All LCCP-Type Services Increased by 11 Percent from 2013 through 2017, While Spending on Narrowly-Defined Services Grew More Rapidly Overall Medicare spending on LCCP-type services represented by the 58 billing codes we identified increased from $26 billion in 2013 to $29 billion in 2017, an 11 percent increase. The vast majority of this spending— about $28.3 billion in 2017—was on services represented by the 45 broadly-defined codes we identified earlier (henceforth we refer to these services as “broadly-defined services.”) By comparison, Medicare spending on LCCP-type services represented by the 13 narrowly-defined codes (henceforth referred to as “narrowly-defined services”) was about $467 million in 2017. Though smaller in terms of total dollars, spending on narrowly-defined services grew at a higher rate than spending on broadly-defined services, from about $2 per beneficiary in 2013 to $14 per beneficiary in 2017. This higher rate in growth can mostly be attributed to these four new types of services being introduced during this 4 year period. For example, as Table 1 shows, two TCM codes were introduced in 2013 and four CCM codes were introduced from 2015 to 2017. In contrast, spending growth for broadly-defined services was much smaller, increasing from about $785 per beneficiary in 2013 to $844 per beneficiary in 2017. For all other Medicare Physician Fee Schedule services combined, per-beneficiary spending decreased from about $1,488 in 2013 to $1,426 in 2017. Spending on CCM and TCM services accounted for most of the total spending on narrowly-defined LCCP-type services from 2013 to 2017. (See fig. 1.) For example, in 2017, TCM services accounted for almost half ($213 million of the total spending of $467 million), while spending on CCM services accounted for over a third ($162 million of the $467 million). The growth in spending on narrowly-defined services was driven by increased utilization—that can be attributed in part to the development of new codes for these services—rather than increases in Medicare fees for these services. Specifically, utilization of narrowly-defined services increased from about 9 services per 1,000 beneficiaries in 2013 to about 177 services per 1,000 beneficiaries in 2017. Average Medicare fees for these services remained flat during this period. More Beneficiaries Received and More Providers Billed for Narrowly-Defined LCCP- Type Services, with a Small Share of Beneficiaries and Providers Accounting for Most of the Services The number of beneficiaries receiving narrowly-defined LCCP-type services increased substantially from 2013 to 2017, as more of these Medicare billing codes were added and began to be utilized during this time. Specifically, in 2017, about 2.5 million beneficiaries received narrowly-defined LCCP-type services, representing an 839 percent increase from about 267,000 beneficiaries in 2013. (See fig. 2.) While the overall number of beneficiaries receiving narrowly-defined services increased, these services were concentrated among a relatively small share of Medicare beneficiaries. Specifically, one-quarter of beneficiaries who received any of the narrowly-defined services in 2017 received 62 percent of the approximately 6 million services that were provided that year. (See fig. 3.) In 2017, of the total 2.5 million beneficiaries that received narrowly- defined services, 90 percent received only one type of narrowly-defined LCCP-type service. (See fig. 4.) In contrast, only 10 percent of beneficiaries received multiple types of narrowly-defined LCCP-type services, the most common combination being CCM and ACP. Mirroring beneficiary trends, the number of Medicare providers billing for narrowly-defined LCCP-type services also increased significantly from 2013 through 2017, as these Medicare billing codes were established and began to be utilized during this time. In 2017, a total of about 100,000 providers billed for narrowly-defined services, representing a 227 percent increase from about 31,000 providers in 2013. (See fig. 5.) As with beneficiary trends, while the overall number of providers billing narrowly-defined services grew from 2013 to 2017, billing for these services was also increasingly concentrated among a small share of providers. Specifically, in 2017, 10 percent of providers who billed for any narrowly-defined services billed about 76 percent of the approximately 6 million services that were provided in that year. (See fig. 6.) Each year from 2013 through 2017, physicians specializing in internal medicine accounted for the largest share of spending on narrowly-defined LCCP-type services. In 2017, internal medicine accounted for 45 percent of the $467 million in total Medicare spending on narrowly-defined services. (See fig. 7.) Family practice and nurse practitioners were the other specialties accounting for the greatest shares of spending. In terms of the setting in which narrowly-defined LCCP-type services were provided, the majority were provided in nonfacility settings such as physicians’ offices. Specifically, in 2017, 94 percent of narrowly-defined services were provided in nonfacility settings. This trend was consistent over each of the 5 years from 2013 to 2017. Stakeholders Had Mixed Views on Whether a New Billing Code for an LCCP Service Is Needed Six Stakeholders Did Not Support Creating a New Billing Code for an LCCP Service Six of the 19 stakeholders we interviewed did not support the creation of a new billing code for an LCCP service as defined in the 2018 BBA. Two of these—representing physician specialties that together accounted for almost one-fifth of total spending on LCCP-type services in 2017—stated that the existing billing codes were sufficient for them to provide and bill for the full range of the LCCP service. They stated that billing either a single code or a combination of an E/M code and one or more of the 13 narrowly-defined LCCP-type codes we identified allowed them to account for the full range of the LCCP service as defined in the BBA. As such, the two stakeholders said, there was no need for a new billing code. The remaining four stakeholders expressed concerns about creating a new billing code for an LCCP service. These concerns included the following: Overlap with existing codes that require the development of care plans: While not explicitly stating that existing codes were sufficient, some stakeholders said that if a new billing code were created for the LCCP service as defined in the 2018 BBA, it would overlap with or duplicate existing billing codes. For example, three stakeholders noted potential overlap with existing billing codes, such as the ACP and CCM. Three stakeholders said that the care plan that would be required under the new LCCP code would duplicate existing care plans that are required by law for beneficiaries in hospices or skilled nursing facilities. In addition, two stakeholders noted that providers in their specialty already prepare detailed care plans as a standard practice of care when evaluating their patients and billing for these services using existing E/M billing codes. They stated that these care plans exceed the components of the care plan specified in the 2018 BBA. Stakeholders noted that the existence of multiple overlapping codes that include the development of a care plan could create confusion for providers in choosing the most appropriate billing code. Concerns about code proliferation or code fragmentation: Several stakeholders were concerned that adding another code to Medicare’s billing system could result in increased Medicare spending and less, rather than more, care coordination. Specifically, two stakeholders stated that having multiple billing codes for care planning and care management, respectively, would have the potential to increase spending because multiple providers could start billing the new codes even though one provider may have primary responsibility for the beneficiary. (In contrast, under the existing billing codes a single code that encompassed both types of services could be billed.) For example, one of these stakeholders said that primary care physicians generally referred beneficiaries with complex treatment needs to a surgeon or specialist who then both planned and managed the beneficiary’s care, yet the primary care physician might also bill the care planning billing code. In addition to the potential for increased Medicare spending, three stakeholders said that code fragmentation—splitting existing billing codes into multiple codes for services that were previously bundled together—was contrary to the comprehensive patient-centered model of care that Medicare was moving towards. Specifically, one provider stated that under such a model, rather than billing multiple different codes for care planning and coordination, a primary care practice is paid a monthly management fee to (among other things) improve care coordination for patients who receive most of their primary care services from that practice. Thirteen Stakeholders Stated That a New LCCP Code Could Address Concerns Regarding Interdisciplinary Care Reimbursement and Other Limitations They Identified in Existing Billing Codes While six of the stakeholders we interviewed did not support creating a new LCCP code, the remaining 13 stakeholders told us that such a billing code is needed. According to the stakeholders, a new LCCP code as defined in the 2018 BBA could address several concerns they identified in Medicare’s existing billing codes related to the provision of the LCCP service. However, some of these concerns could be addressed under the current Medicare billing framework, as shown by our analysis of available data. For example, stakeholders identified the following limitations that could be addressed by a new LCCP code: Inadequate reimbursement for time spent on interdisciplinary care: The 13 stakeholders stated that Medicare’s existing billing codes either did not require or did not sufficiently reimburse them for the time spent on interdisciplinary care. They stated there should be a separate code to reimburse this type of care. However, stakeholders representing two specialties told us they had proposed such a code to the AMA but the AMA had rejected their proposals because interdisciplinary care is already accounted for in the existing billing codes. Moreover, as our analysis of the 58 billing codes shows, the majority of these codes include a provision for consultation and coordination among providers that is equivalent to input from an interdisciplinary team. With regard to inadequate reimbursement, as another stakeholder noted, providers may bill a complex E/M service along with a narrowly-defined LCCP-type service such as CCM. The total reimbursement for such a combination of codes would be about $203 as of 2019. (See table 2.) Insufficient physician time for care planning: Six stakeholders representing a mix of primary care and medical specialties stated the existing billing codes (including the more complex E/M codes) had insufficient physician time to provide both care planning and care management, which they maintained are separate and distinct activities. They stated a new code could include the appropriate time needed. One stakeholder said that care planning requires at least 30 minutes of time, and the complex E/M codes do not allow providers to bill for the time it takes to provide both the care management of a complex patient as well as care planning for the patient. According to the stakeholder, for example, if a provider bills a complex E/M code that allows for 40 minutes of physician time, that is insufficient to provide both types of services. While CMS has recently established new prolonged E/M codes (which allow for an additional 60 minutes of time), the stakeholder noted that they do not address the problem of insufficient time because a prolonged E/M code may only be billed with a companion E/M code, and the threshold of time needed to bill the two codes together is now too high—specifically 40 minutes for the complex E/M code plus 60 minutes for the prolonged E/M code. However, our review of CMS guidance on billing of prolonged E/M codes shows that providers do not have to meet the full 60 minutes of time in order to bill a prolonged E/M code; they may bill it as long as the total time spent on the visit exceeds the typical time for the E/M visit plus 30 minutes. Documentation requirements: Three stakeholders, largely representing primary care and medical specialties, stated that burdensome documentation requirements for the more complex E/M codes hampered their ability to bill these codes. They suggested that a new billing code could be structured similar to the new ACP or CCM codes which do not have the same documentation requirements. While these stakeholders expressed concern regarding documentation as a discouraging factor, our analysis of 2017 Medicare claims data showed that certain specialties, including some that had expressed this concern, billed the more complex codes at a significantly higher rate than the average across all specialties. This may indicate that these documentation requirements do not necessarily preclude providers from billing these codes. For example, 83 percent of all the E/M new patient visits billed by geriatricians in 2017 were billed using the more complex E/M codes, compared to 48 percent on average. Similarly, 80 percent of all the E/M established patient visits billed by clinical psychologists in 2017 were billed using the more complex E/M codes compared to 50 percent on average. See appendix V for details on billing patterns for all medical specialties. Inability of non-physician staff to independently bill for care planning: Seven stakeholders expressed concerns that non-physician staff such as nurses and social workers cannot independently bill the existing Medicare billing codes that we identified as being LCCP-type services. As one stakeholder explained, non-physician staff may spend time providing coordination and care planning services separately rather than concurrently with the physician, but they cannot bill for this time independently because the physician was not present. These stakeholders stated that a new LCCP code that could be billed by physicians and non-physicians that participated in the care planning process could address this issue. However, other stakeholders expressed concerns about the effect on Medicare spending if multiple providers billed for an LCCP service. Moreover, reimbursement for non-physicians is built into Medicare fees. Specifically, Medicare’s fee for each billing code includes reimbursement for physician’s time as well as their practice expenses (which cover the costs of non-physician staff), and when the AMA panel develops resources estimates for each billing code (upon which Medicare fees are based), it considers the amount of non-physician time spent on that code. Certain non-physician practitioners, such as nurse practitioners and physician assistants, may also independently bill services under the Medicare Physician Fee Schedule subject to certain requirements, and as specified in their scope of practice under state law. Stakeholders generally concurred that if a new LCCP code were implemented, the definition of interdisciplinary care should be flexible and not require a social worker. Currently, the LCCP billing code as defined in the 2018 BBA requires that the interdisciplinary team providing care planning services include a social worker. However, 13 stakeholders stated that a typical practice did not include a social worker, but rather included a nurse who might perform the functions of a social worker. They stated that smaller office-based medical practices could not afford to hire a social worker. The stakeholders concurred that social workers were generally available in larger integrated practices (such as a single or multiple groups aligning with each other or with a larger hospital system) and in facility settings such as hospitals or skilled nursing facilities. (Stakeholders also provided other comments on the structure of a potential new billing code for the LCCP service should such a code be established by CMS, which we summarize in app. VI.) Agency Comments We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. Appendix I: Example of an American Medical Association Vignette Appendix II: Longitudinal Comprehensive Care Planning Service Components in the Balanced Budget Act of 2018 Appendix II: Longitudinal Comprehensive Care Planning Service Components in the Balanced Budget Act of 2018 Pub. L. No. 115-123, § 50342(c)(4), 132 Stat. 211. Appendix III: Stakeholder Groups Interviewed by GAO Appendix IV: Medicare Physician Fee Schedule Billing Codes for Longitudinal Comprehensive Care Planning (LCCP)-Type Services We identified 58 billing codes in Medicare’s physician fee schedule that may be used to bill for LCCP-type services as defined in the Balanced Budget Act of 2018 (2018 BBA). Figure 9 shows relevant information on these billing codes including the short descriptor, beneficiary eligibility criteria, our analysis of whether the billing code’s components are equivalent to the components of an LCCP service as defined in the 2018 BBA, and Medicare’s 2019 fee. Appendix V: Specialty Billing of Complex Evaluation and Management Codes in 2017 Medicare’s physician fee schedule contains evaluation and management (E/M) codes that providers may use to bill for face-to-face visits in their offices or other settings such as hospitals. These codes range in complexity from low to high depending on the amount of time the provider spends with a patient as well as the complexity of the medical decision- making and the medical condition(s) being treated. Table 4 shows the percentage of each specialty’s E/M visits that were billed as complex visits (moderate or high complexity). In general, primary care and medical sub-specialties tended to bill complex visits at a higher rate than the all- specialty average, while surgical specialties tended to bill complex visits at a lower rate than the all-specialty average. Appendix VI: Longitudinal Comprehensive Care Planning (LCCP) Services: Stakeholder Perspectives on Potential New Billing Code We interviewed 19 stakeholders including national umbrella groups of physicians and other providers to obtain their perspectives on the structure of a new billing code for LCCP-type services as defined in the Balanced Budget Act of 2018 (2018 BBA), regardless of whether they supported the creation of a new code. Stakeholders were generally in agreement that a new billing code for LCCP-type services as defined in the 2018 BBA, if implemented, should be broadly defined. Specifically, stakeholders stated that it should not be tied to a specific condition, should allow for both in-person and non-face-to-face services performed when the beneficiary was not present, should be billable more than once, should be available for billing by both primary care physicians and specialists, and should have restrictions to avoid duplicative billing with existing billing that provided overlapping services. However, stakeholders had more mixed views about what these specific restrictions should be. Stakeholder views about the various structural components or restrictions included the following: Applicable medical conditions: The majority of stakeholders (13 of the 17 who responded to this question) stated that the new code should be broadly defined although they differed in their opinions of what broadly-defined meant; one stakeholder cautioned against an overly broad definition, and one suggested pilot testing with a discrete list of conditions. Of the 13 stakeholders in favor of a broad definition, 12 stated that the new billing code should not be tied to any particular specific illness or medical condition but should be flexible in structure. Three stakeholders stated that the extent of beneficiaries’ daily functioning or quality of life should also be considered when defining applicable medical conditions. For example, a beneficiary who is not necessarily suffering from a life-threatening illness but is unable to perform the functions of daily living (such as bathing and eating) needs extensive care planning and should therefore be covered under the new LCCP-type service. Three stakeholders stated that the new code should be billable if a beneficiary’s existing diagnosis of a serious illness changed. Three stakeholders stated that a potential new code could be modeled along the lines of existing billing codes—specifically the advance care planning (ACP) or chronic care management (CCM) codes— which do not specify any particular medical condition. Two stakeholders said that a new code should not be so broad that it could apply to a vast majority of beneficiaries. For example, one stakeholder stated that the American Medical Association would likely not approve a code for a generic serious condition because it would be difficult to differentiate that code from an existing billing code, such as an evaluation and management (E/M) code, which may be used for any medical condition including serious, life-threatening conditions. One stakeholder suggested pilot testing the code with a discrete list of conditions, with the intention of expanding the list afterwards. In-person or non-face-to-face: The majority of stakeholders (12 of the 15 that responded to this question) stated that a potential new code should allow for both in-person and non-face-to-face activities (such as virtual or telehealth—providing clinical care remotely by two-way video, phone calls with the beneficiary or to arrange referrals or coordinate care with other providers when the beneficiary was not present); three said it should only include face-to-face activities. Twelve stakeholders stated that the visit should include both types of activities. For example, one stakeholder said the initial visit for LCCP-type services should be in-person, and follow up activities such as updating a care plan or remote patient monitoring (monitoring of patients outside of conventional settings) could be non-face-to-face. Three stakeholders said it should only include face-to-face activities either because of concerns about the potential for overbilling if the new code included non-face-to-face activities which might be difficult to verify or because other existing codes, such as CCM, already cover non-face-to-face activities. Frequency of billing: All of the 16 stakeholders responding to this question concurred that the new code should be billable more frequently than on a one-time basis, although opinions varied on the exact frequency. Nine stakeholders said the code should be billable on an ongoing basis as the beneficiary’s condition changes. For example, one said that the new code should be on-going because the care planning and treatment would continue to evolve over time as the beneficiary’s condition changes. Seven other stakeholders said that while it should not be an ongoing service, it should be billable more frequently than once. For example, one stakeholder specified that it could be billed once per month or over every three months, but that a target end date must be specified; otherwise, it would be too similar to existing billing codes such as the CCM code that may be billed monthly. Two other stakeholders said it could be billed up to 4-5 times a year. Other billing restrictions: All 12 stakeholders responding to this question indicated that restrictions would be necessary to avoid overlap with existing billing codes. For example, three stakeholders suggested that the new code could be billed along with an E/M code for additional services not covered by the E/M code as long as it does not overlap with other existing codes that account for additional time beyond an E/M visit (such as the prolonged E/M visit billing codes). One suggested that it should not be billed along with any of the existing narrowly-defined LCCP-type codes, including CCM, transitional care management, or the ACP codes. One did not specify any particular code with which the new code should not be billed, but cautioned that care should be taken to ensure that time spent with the beneficiary was reported only once. Providers eligible to bill the code: The majority of stakeholders (13 of the 15 that responded to this question) stated that both primary care physicians and specialists should be eligible to bill the new code. Two of these stakeholders said that there should also be a requirement that the billing physician has an established relationship with the beneficiary. Two stakeholders said that only specialists should bill since they are generally the ones attending to the beneficiary’s serious illness. Two stakeholders stated that non-physicians (including social workers) should also be able to bill the code as long as they are currently allowed to bill separately under the Medicare Physician Fee Schedule. Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Karen Doran, Assistant Director; Iola D’Souza, Analyst-in-Charge; Sarah Belford; Krister Friday; John Lalomio; and Daniel Ries made key contributions to this report. Also contributing were George Bogart and Muriel Brown.

Medicare's physician fee schedule contains over 8,000 billing codes for office visits, surgical procedures, or other services provided to beneficiaries. Some provider groups have concerns that these codes do not sufficiently account for the LCCP-type services they provide to Medicare beneficiaries with complex medical needs. The BBA included a provision that GAO examine billing codes that may be used for LCCP-type services for beneficiaries with a serious or life-threatening illness. GAO identified, among other things, (1) existing Medicare physician fee schedule billing codes that can be used to bill LCCP-type services; and (2) trends in Medicare spending on these services from 2013 through 2017. GAO reviewed Centers for Medicare & Medicaid Services (CMS) billing code manuals and American Medical Association (AMA) code descriptors to identify existing codes containing key components of LCCP-type services; analyzed Medicare Part B claims data from 2013 to 2017 (the most recent available at the time of GAO's review); and interviewed officials from CMS and 19 stakeholders, including the AMA, national physician groups, and other provider groups that had previously given input on the topic to Congress. GAO provided a draft of this report to the Department of Health and Human Services (HHS). In response, HHS provided technical comments, which GAO incorporated as appropriate. The 2018 Bipartisan Budget Act (BBA) defined longitudinal comprehensive care planning (LCCP) as services involving an interdisciplinary team of providers who develop and communicate a care plan to Medicare beneficiaries diagnosed with a serious or life-threatening illness. GAO identified at least 58 billing codes in Medicare's physician fee schedule that could be used by providers to bill for services that cover some or all of the LCCP service components as defined in the 2018 BBA —referred to by GAO as LCCP-type services. The 58 billing codes may be used individually or in combination, depending on a beneficiary's medical needs. Stakeholders representing providers told GAO their members generally use one or a combination of these codes to bill for LCCP-type services. Forty-five of the 58 codes are broadly-defined longstanding codes that can be used for LCCP-type services as well as other services such as the treatment of a specific medical complaint. The remaining 13 codes are more recent narrowly-defined codes introduced starting in 2013 that only cover LCCP-type services. They include transitional care management services introduced in 2013, chronic care management starting in 2015, advance care planning in 2016, and behavioral health integration in 2017. GAO found that overall Medicare spending on LCCP-type services that were billed to the 58 codes increased from $26 billion in 2013 to almost $29 billion in 2017. While narrowly-defined services accounted for a small share of this total spending ($467 million in 2017), spending on these narrowly-defined services such as chronic care management increased rapidly. Moreover, spending growth on narrowly-defined services was driven by increased use of these services rather than increases in reimbursement rates. From 2013 through 2017, more beneficiaries received and more providers billed for narrowly-defined services. The number of Medicare beneficiaries receiving these services grew from about 267,000 to about 2.5 million. The number of providers billing these services grew from about 31,000 to about 100,000.

GAO_GAO-20-308

Background JOM Program Eligibility and Administration The JOM program provides supplementary financial assistance, through contracts, to meet the unique and specialized educational needs of eligible American Indian and Alaska Native students. Eligible students, under Interior’s regulations, are generally Indian students age 3 through grade 12 who are either a member of an Indian tribe or at least one- quarter degree Indian blood descendant of a member of an Indian tribe. BIE contracts with tribal organizations, Indian corporations, school districts, and states—which we collectively refer to as JOM contractors as that is the term used by Interior—that administer local JOM programs and disburse funds to schools or other programs providing JOM services. Most JOM funds are distributed through tribal contractors, according to BIE. BIE generally relies on BIA officials to disburse JOM funds, as noted previously (see fig. 1). BIE’s director is generally responsible for directing and managing JOM functions, including establishing policies and procedures, coordinating technical assistance, and approving the disbursement of JOM funds. In 2014, BIE established one centralized position dedicated solely to administering JOM as part of a broader re-structuring initiative and the position has been consistently staffed since 2018. The current JOM program specialist is responsible for planning, developing, administering, and coordinating the JOM program. It is the federal government’s policy to fulfill its trust responsibility for educating Indian children by working with tribes to ensure that education programs are of the highest quality. In 2016, Congress found in the Indian Trust Asset Reform Act that “through treaties, statutes, and historical relationship with Indian tribes, the United States has undertaken a unique trust responsibility to protect and support Indian tribes and Indians.” As further stated in the Act, the fiduciary responsibilities of the United States to Indians are also founded in part on specific commitments made in treaties and agreements, in exchange for which Indians surrendered claims to vast tracts of land. JOM Program Requirements and Implementation The JOM program is the only federally-funded Indian educational program that allows for student, parent, and community involvement in identifying and meeting the educational needs of American Indian and Alaska Native students, according to the National Johnson-O’Malley Association—a tribally led organization which advocates for JOM programs. The JOM regulations require prospective contractors to formulate an education plan in consultation with an Indian Education Committee, generally made up of parents of American Indian and Alaska Native students, and to submit the plan to BIE. Indian Education Committees have the authority to, among other things, participate fully in planning, developing, implementing, and evaluating their local JOM programs. According to BIE officials, JOM funds can be used to support a wide variety of supplemental education programs. For example, these funds support programs providing Native cultural and language enrichment; academic support; dropout prevention; and the purchase of school supplies, according to BIE (see fig. 2). JOM programs, particularly for students who are not living near tribal land, may be the only way students can access tribal language and cultural programs. According to BIE officials, JOM funding is primarily disbursed to contractors through three different funding mechanisms: self- determination contracts, self-governance compacts, and 477 plans. Most JOM contractors—over 200—are funded through self-determination contracts, according to data provided by BIE. These three funding mechanisms result in different oversight authority for Interior. However, the Johnson-O’Malley Supplemental Indian Education Program Modernization Act (Modernization Act)—enacted on December 31, 2018—requires all JOM contractors to submit annual reports to the Secretary of the Interior with the number of eligible Indian students during the previous fiscal year, an accounting of the amounts expended, and the purposes for which those amounts were expended. BIE officials said some contractors can also be subject to site visits to oversee the program. JOM Program Funding Under regulations, JOM funds are to be distributed to contractors by a formula that factors in the number of eligible students to be served and average per-student operating costs. Interior conducted its most recent official JOM student count in 1995. As a result, subsequent JOM distributions have been based on the number of students served by contractors in 1995—271,884 students. BIE officials said that the total number of eligible students has increased since 1995, although no official count has been completed. As a result, the funding contractors receive may not reflect changes in the number of students served by contractors. The size of JOM contracts currently ranges from less than $1,000 to nearly $4 million, according to data provided by BIE. The Modernization Act requires BIE to determine the number of eligible students served or potentially served and to complete a rulemaking process to, among other things, modernize program rules. BIE published a preliminary report on its initial determination of eligible students in October 2019 and is continuing to work on finalizing its count of eligible students. Additionally, in response to the Modernization Act, Interior promulgated new final JOM program regulations that became effective March 26, 2020. BIE Lacks Key Information on the JOM Program Needed for Oversight BIE Does Not Have a Complete and Accurate List of JOM Contractors BIE does not maintain a complete and accurate list of all JOM contractors. BIE officials said JOM funds are disbursed by awarding officials in various BIA offices in different locations, and there is no systematic process to identify and collect information on all the awarded contracts. BIE began efforts to identify all the contractors and the amount of their awards in May 2019 after we asked for this information. As of December 2019, BIE said they identified more than 340 contractors. BIE officials said they have not verified the accuracy and completeness of their current list of contractors. According to federal internal control standards, an agency should have relevant, reliable information to run and control its operations. BIE officials said their current list of JOM contractors is incomplete because some Interior officials responsible for administering and disbursing JOM funds did not respond to their requests for information. In addition, BIE officials said they may not have contacted all the relevant officials within Interior when they developed the list. BIE officials also said they do not know how many contractors may be missing from their list. Further, they said they did not validate the accuracy of the information they received on JOM contractors. Our analysis of BIE’s list of JOM contractors identified data reliability concerns. For example, we found 19 contractors that were listed twice, meaning the total number of contractors provided by BIE contained duplicates and was not an accurate count. BIE officials said that maintaining a complete list of contractors would be very helpful in their efforts to oversee and administer the JOM program, including allowing them to share program information more effectively with all contractors. For example, BIE did not inform all contractors about four consultation sessions it was holding in July 2019 on a proposed rule to change JOM regulations because BIE did not have contact information for all contractors, according to a BIE official. As a result, some contractors may have missed the opportunity to participate in the consultation sessions. Two JOM school contractors we interviewed told us they were not informed by BIE about the consultation sessions that took place in their state. These contractors said they had to create their own networks of contractors to inform each other about JOM-related developments and events because they cannot rely on communication from BIE. In addition, BIE officials said that a complete and accurate list of contractors would help them determine the number of eligible JOM students, as mandated by the Modernization Act. In the two previous efforts to update the count, BIE relied on contractors to submit the number of eligible students they serve. However, BIE officials acknowledged that the last effort to complete a count in 2014 failed, in part, because some contractors never received any communication that BIE was conducting a count. As a result, these contractors never submitted a count of students. Without a systematic process for maintaining a complete and accurate list of contractors, BIE may continue to face barriers administering the program. BIE Does Not Routinely Track the Timeliness of Payments to Contractors BIE does not have a process for tracking and monitoring the timeliness of JOM disbursements to contractors. According to BIE officials, the bureau does not establish a target date for disbursing funds to JOM contractors. JOM contractors and BIA and BIE officials we interviewed said the disbursements of JOM funds to some contractors are routinely provided later than expected based on contractors’ past experience. For example, 27 school contractors did not receive a portion of their calendar year 2018 funding until September 2019, according to the BIA official primarily responsible for disbursing the contractors their funds. Further, some of these contractors did not receive any disbursement in the 2019 calendar year until August, months after funds are typically disbursed. Delays in disbursing funds can hinder contractors’ ability to effectively manage their JOM programs and serve students. For example, the three JOM school contractors we interviewed told us that delays in disbursements have negatively affected their ability to plan their JOM activities because they do not know when they will receive their funding. The contractors also said their JOM programs are not as robust as they could be because they regularly delay spending and retain prior disbursements to use in the following year in anticipation of future delays in disbursements. Even with these carry-over funds, contractors said they have had to delay JOM programs for students due to late disbursements of funds, which negatively affect students who depend on JOM for educational support. We were unable to determine the full extent to which Interior disburses JOM funds in a timely manner because BIE and other Interior offices do not track and monitor the timeliness of JOM disbursements to contractors. Federal internal control standards state that agency management should design control activities to achieve objectives and respond to risks, such as by comparing actual performance to planned or expected results and analyzing significant differences. BIE, however, has not established target disbursement dates for contracts and therefore has no standard against which to measure the timeliness of disbursements. Furthermore, BIE does not systematically track the time between receiving its appropriation and the disbursement of contractor funds. BIE officials acknowledged that establishing a target date for disbursing funds to contractors and tracking progress in meeting that date could help ensure funds are provided in a timely manner. In an effort to monitor the disbursement of contractor funds, BIE officials said they have recently started to track the balance of JOM funds at each Education Resource Center. However, they acknowledged that tracking the balance of funds has limited usefulness in tracking the timeliness of disbursements because the information about fund balances does not include whether or not individual contractors have received their funds. BIE officials said having more detailed information on the disbursement of JOM funds would be helpful to ensure funds are provided in a timely manner. In addition, we recently reported that funds associated with self- determination contracts and self-governance compacts for tribes, which include JOM funds, are not always disbursed in a timely manner. We recommended that the Assistant Secretary of Indian Affairs should establish a process to track and monitor the disbursement of funds to tribes that are associated with self-determination contracts and self- governance compacts. However, this recommendation does not address all JOM contractors because non-tribal contractors are not eligible for self-determination contracts or self-governance compacts, and not all tribal contractors receive JOM funds through these mechanisms. Without also establishing a process for tracking and monitoring the disbursement of JOM funds through multiple funding mechanisms, BIE does not have reasonable assurance that funds will be disbursed in a timely manner. BIE Has Not Formally Assessed the JOM Information It Collects from Contractors or Updated Its Related Forms BIE has not formally assessed the usefulness of the information it has collected from JOM contractors for over 25 years. One contractor questioned whether the information was useful for the agency’s administration of the program because they never received any feedback or comments from BIE about the information they submitted. The contractor said they spent a considerable amount of time completing their annual report, which totaled over 60 pages and included information and signatures from over 40 different Indian Education Committees that oversee local JOM programs funded by the contract. In addition, all four contractors we interviewed that submitted annual reports said the information requested in the forms could be streamlined. For example, BIE’s annual report form asks each school or project site to report both the “number of eligible students actually served” and “the number of students actually served.” No instructions are provided to distinguish between the two populations, and the contractors said the reported number is identical since students must be eligible to be served by JOM. All four contractors we met with that said they submitted an annual report and renewal application also told us the information collection forms were burdensome to complete. For example, they said the forms were difficult to fill out, in part because they are not compatible with computer word processing programs, and as a result, responses have to be handwritten or completed with a typewriter. All of the forms BIE uses to collect information from contractors subject to JOM reporting requirements are also out of date. For example, the JOM renewal application form expired in 1993, meaning the Office of Management and Budget’s (OMB) approval to collect the information has lapsed. Agencies are required to submit all proposed information collections to OMB for approval. OMB reviews the proposal to assess the need for collecting the information and whether its collection minimizes burden on the public, among other things. Federal internal control standards also state that management should have a process to continually identify information requirements. In a 2015 presentation, BIE officials recognized the need to update the outdated forms to reflect technological developments and reduce the paperwork burden for contractors, but no revisions to the forms have been made. BIE officials said they plan to update the JOM application and reporting documents through the formal OMB review and approval process, but they do not have a timeline for doing so. We have previously reported that outdated forms may not be necessary or useful and may be an unnecessary burden on the public. Until BIE updates the forms, some contractors will continue to struggle to complete them. Further, by assessing the usefulness of the information they are collecting from JOM contractors, BIE may identify opportunities to both collect information that could improve program management and streamline information requests. BIE Has Not Developed JOM Training BIE has not provided or developed training for JOM contractors, according to BIE officials. National Johnson-O’Malley Association officials told us that BIE and BIA used to provide training that was helpful to JOM contractors on topics such as filling out annual reports and applications for JOM contracts, particularly to new staff managing these programs, but they no longer do so. A nonprofit organization for Indian education we interviewed also said JOM contractors need training on a range of issues, including how to complete JOM annual reports and other documentation, and on how to operate following implementation of the Modernization Act. According to the nonprofit organization, regular training on JOM is particularly important because certain aspects of the program, such as conducting annual assessments to determine the learning needs of Indian children served by the program, can be technically challenging. Officials from one tribal contractor we interviewed said the tribe provides its own training to school staff that implement local JOM programs on such topics as how to conduct Indian Education Committee meetings, how to fill out reimbursement claims, and how to organize and maintain financial records for program administrators and parents on Indian Education Committees. The contractor said that BIE training on topics, including how to conduct and how often to hold Indian Education Committee meetings, would be particularly helpful. Another tribal contractor we interviewed, which BIE data identified as receiving among the largest amount of JOM funds of all contractors, said that other contractors they interact with do not have sufficient program knowledge or resources to provide training and could benefit from BIE training. According to a BIE official, a former JOM Program Specialist, the need for training for JOM contractors is particularly important as there is frequent turnover among contractor staff responsible for administering programs. Officials from the nonprofit organization for Indian education also told us that high turnover rates among administrators of local JOM programs necessitates regular training for new staff. They added that more senior staff working on local JOM programs would also benefit from regular training because they may be implementing their programs inefficiently or ineffectively. BIE officials told us they have provided program updates and answered questions at conferences hosted by organizations representing JOM contractors. Not all contractors, however, are able to attend these conferences given their limited resources, according to three contractors we interviewed. Internal controls standards state that management should develop training based on the needs of individuals’ roles. BIE officials acknowledged that developing and providing training is needed, but they told us they are currently focused on other aspects of managing the JOM program and have not prioritized training. For example, the agency has set a goal in its strategic plan to develop a JOM program handbook by July 1, 2020. By providing training, BIE can ensure that contractors have the information they need to better serve their students. BIE Has Not Clearly Defined or Identified All the Roles and Responsibilities of BIE and Other Interior Staff Involved in Administering the Program BIE has not clearly defined roles and responsibilities or identified the staff necessary for conducting critical JOM functions. According to federal internal control standards, management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives. BIE’s lack of defining or identifying roles and responsibilities related to administering contracts, reviewing the appropriateness of contract types, and conducting program oversight is described in the following bullets. Administering contracts. BIE did not identify staff to administer some contracts, which has contributed to some JOM programs affected by these contracts going unfunded. According to BIE and BIA officials, BIE did not assign any staff to administer at least 20 contracts in California, including helping contractors renew their contracts when they expired, typically after 3 years. As a result, these contracts—totaling over $300,000—expired and were not renewed, disrupting JOM services. A BIE official informed us there were lapses in administering these contracts because BIE closed the office responsible for administering them as a result of its reorganization which began in 2014, and never assigned anyone to assume responsibility for the contracts associated with that office. BIE has not assessed whether similar lapses in coverage may have occurred in other states or regions. BIE officials identified the unallocated funds from California in September 2019. In October 2019, BIE officials began efforts to identify and contact officials responsible for all the JOM programs whose contracts lapsed in California due to gaps in BIE’s administration of the program and began the process to start new JOM programs in the future. However, without identifying staff to administer all JOM contracts, problems with renewing and awarding contracts may persist. Reviewing the appropriateness of contract types. Interior’s Office of the Solicitor does not have a role in reviewing the issuance of new JOM contracts, according to a senior attorney in that office. The Office of the Solicitor’s lack of a role in reviewing JOM contracts increases the risk that contracts are not used appropriately. For example, we found that BIE has been using self-determination contracts to disburse JOM funds to non-tribal contractors, which is not authorized by the Indian Self Determination and Education Assistance Act. Under the Act, only Indian tribes and tribal organizations are eligible to enter into self-determination contracts; these contracts may not be used for non-tribal entities, such as school districts and states. The use of self- determination contracts for contractors that are not eligible to receive them can result in costs to the government. Self-determination contracts include provisions that would not otherwise be included in non-tribal JOM contracts, according to a senior attorney in the Office of the Solicitor. For example, self-determination contracts may include contract support costs and extend the Federal Tort Claims Act to tribal government employees administering the federal program(s) under these contracts. Therefore, school contractors that were disbursed JOM funds through self-determination contracts may have received contract support costs and legal protections they would not have been eligible to receive, according to the senior attorney. BIE officials told us that they have not determined how long self- determination contracts have been used to disburse JOM funds to non-tribal entities, how many non-tribal contractors were awarded these contracts, or whether the government has incurred costs as a result of using the wrong types of contracts. They said this information will be difficult to obtain because it is not systematically collected. After we found that BIE was using self-determination contracts to disburse JOM funds to school contractors, a senior attorney in the Office of the Solicitor said that her office would provide assistance as requested to BIE in transitioning these contracts to appropriate contracts. By systematically including the Office of the Solicitor in the process for reviewing JOM contracts, BIE can ensure that its contracts are the appropriate type and can minimize the risk of future inappropriate costs to the federal government. Conducting JOM oversight activities. BIE has not defined the roles and responsibilities related to overseeing JOM programs or identified staff dedicated to this function. For example, BIE has not identified staff at Education Resource Centers or other BIE offices with the capacity to conduct site visits and review JOM annual reports submitted by contractors. As a result, the bureau’s oversight of JOM contractors is done on an ad-hoc basis and sometimes not done at all, according to BIE officials. For example, in an internal memo addressed to BIE’s Director, a senior BIE official said that because the bureau has not identified staff with the capacity to conduct site visits, most Education Resource Centers have not conducted any site visits in at least 5 years. Officials from one tribal JOM contractor that said it is subject to BIE oversight told us that BIE has not conducted a site visit of their program in 10 years. They noted that BIE’s past site visits resulted in recommendations that improved their program activities and procedures and changed how they defined student eligibility. In addition, the head of an Education Resource Center said that JOM oversight activities are collateral duties that his staff do not have time to fulfill. Further, the responsibilities of officials who are charged with overseeing JOM programs have not been clearly defined. For example, BIE has not defined the responsibilities related to conducting site visits, such as what aspects of the program should be reviewed and which contractors should be selected for site visits. This lack of clearly defined responsibilities has resulted in inconsistencies in how officials are conducting oversight activities and potential gaps in coverage of contractors that are subject to oversight. BIE’s lack of oversight may also increase the risk of misuse and abuse of JOM funds. According to Interior’s Office of Inspector General, there have been three identified cases of theft related to the JOM program that occurred between 2004 and 2010. For example, a program coordinator of a JOM contract stole program funds as part of an embezzlement fraud scheme and was ordered to pay nearly $36,000 in restitution. By identifying staff who have the capacity to carry out oversight activities and clearly defining related responsibilities such as conducting site visits and reviewing JOM annual reports, BIE could provide support to contractors in improving their program activities and procedures and reduce the risk of potential fraud and abuse of JOM funds. Senior BIE officials acknowledged that they have not identified the staff necessary for conducting these critical JOM functions and, in November 2019, the Director of BIE approved hiring three additional JOM specialists. The core responsibilities of the new specialist positions, according to a knowledgeable BIE official, will be to support the administration of contracts, oversee contractors, and provide technical assistance. However, the exact roles and responsibilities for the new employees and the extent to which BIE staff in the Education Resource Centers will continue their role in providing programmatic support have not yet been determined. An official knowledgeable about the new JOM specialist positions added that defining the specific roles and responsibilities for these positions will be an iterative process in which BIE will assess the new staffs’ capacity to assume all the JOM responsibilities that are currently assigned to other staff. Until all the roles and responsibilities related to JOM program management have been identified and clearly defined, challenges in administering contracts, reviewing the appropriateness of contract types, and overseeing the program may persist. Conclusions American Indian and Alaska Native students have unique educational and cultural needs, which can include learning Native languages, cultures, and histories, and obtaining additional academic support. The JOM program is intended to address these needs that may not otherwise be provided through the public school system. BIE plays a critical role in administering the JOM program, which is central to the bureau’s mission of providing Indian students quality education opportunities starting in early childhood in accordance with a tribe’s needs for cultural and economic well-being. However, BIE lacks key JOM program information necessary for effective oversight, including complete information on which contractors are participating in JOM. BIE also has not assessed the usefulness of the information it collects from contractors, and relies on outdated forms to collect data. Without improved program data, BIE cannot effectively oversee the program. In addition, BIE does not provide training for JOM contractors. This lack of training may result in contractors misinterpreting JOM regulations and managing their programs inconsistently. Further, BIE has not clearly defined the roles and responsibilities of staff involved in administering the JOM program, which has resulted in gaps in program management and oversight. Until staff roles and responsibilities are clearly defined and identified, gaps in managing and overseeing the program may persist, resulting in an increased risk of potential misuse or abuse of JOM funds. Without taking steps to improve the management and oversight of the JOM program in these key areas, BIE cannot ensure that the program is truly serving the educational needs of eligible American Indian and Alaska Native students. Recommendations for Executive Action We are making the following five recommendations to Interior: The Director of the Bureau of Indian Education should develop a systematic process for identifying JOM contractors and maintaining an accurate and complete list of contractors and other relevant information about contractors, such as the amount of JOM funds they receive and their current points of contact. (Recommendation 1) The Director of the Bureau of Indian Education, in coordination with the Bureau of Indian Affairs as needed, should establish a process to track and monitor the timeliness of JOM disbursements to non-tribal contractors, including identifying a target date for disbursing funds to these contractors. (Recommendation 2) The Director of the Bureau of Indian Education should develop a timeline to assess the usefulness of the information they are collecting from JOM contractors and update JOM information collection forms, including converting them to an electronic format to reduce the burden on contractors to complete them. (Recommendation 3) The Director of the Bureau of Indian Education should develop and provide training to contractors on administering the JOM program. (Recommendation 4) The Director of the Bureau of Indian Education should clearly define the roles and responsibilities and identify the staff necessary for conducting critical JOM functions, including administering contracts, reviewing the appropriateness of contract types, and overseeing those contractors that are subject to BIE oversight. (Recommendation 5) Agency Comments and Our Evaluation We provided a draft of this report to Interior for review and comment. We also provided relevant report sections to and requested technical comments from the National Indian Education Association and the National Johnson-O’Malley Association. In its comments reproduced in appendix I, Interior concurred with our five recommendations and described actions BIE and BIA plan to take to address them. In our draft report, we recommended that BIE needs to clearly define the roles and responsibilities and identify the staff necessary for conducting technical assistance, among other critical JOM functions. We removed reference to technical assistance from our report because, after we provided our draft report, Interior promulgated new, final JOM program regulations that include a new process for requesting and providing technical assistance. We did not receive any comments from the nonprofit organizations. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Appendix I: Comments from the Department of the Interior Appendix II: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Beth Sirois (Assistant Director), Brian Schwartz (Analyst-in-Charge), Ben DeYoung, and Alex Galuten made key contributions to this report. Additional assistance was provided by Edward Bodine, Gina M. Hoover, Thomas M. James, Grant M. Mallie, Sheila R. McCoy, Anna Maria Ortiz, Jeanette M. Soares, Joy K. Solmonson, Curtia O. Taylor, and William T. Woods.

American Indian and Alaska Native students enrolled in public schools have performed consistently below other students on national assessments from 2005-2019. The JOM program provides academic and cultural supports, through contracts, to meet the specialized and unique educational needs of American Indian and Alaska Native students enrolled in public schools and select private schools. In fiscal year 2019, Interior allocated about $23 million for the JOM program, according to Interior's budget documentation. GAO was asked to review issues related to Interior's JOM program, administered by BIE. This report examines the extent to which BIE (1) has key program information, (2) provides training to JOM contractors, and (3) clearly defines and identifies JOM roles and responsibilities. GAO reviewed relevant federal laws, regulations, and both BIE and JOM contractor documents; analyzed existing data and information on JOM; and interviewed agency officials, five JOM contractors of different types, and two nonprofit organizations selected for their knowledge of the JOM program. The Department of the Interior's (Interior) Bureau of Indian Education (BIE) does not have key information to manage the Johnson-O'Malley (JOM) program which provides supplemental education services to meet the specialized and unique needs of American Indian and Alaska Native students. For example, BIE does not maintain a complete and accurate list of all its JOM contractors, who provide services including targeted academic supports, Native language classes, and cultural activities. In May 2019, BIE began to identify all the contractors, but officials acknowledged that their list is still incomplete, and GAO found problems with the list, such as duplicate entries. Federal internal control standards state that an agency should have relevant, reliable information to run its operations. Maintaining a complete list of contractors would improve BIE's administration of the JOM program. BIE does not provide any training for JOM contractors. For example, BIE does not provide training to contractors on how to effectively manage their JOM programs or meet program requirements. By providing training for contractors, BIE could ensure that contractors understand the program and are equipped to provide services to meet the educational needs of their students. In addition, BIE has not clearly defined the roles and responsibilities or identified the staff needed to effectively administer the JOM program (see figure). For example, when BIE closed a field office in California, staff were not identified to administer the office's contracts, including helping contractors renew their contracts when they expired. Also, BIE has not identified a role for Interior's attorneys in reviewing the contracts and some contractors have types of contracts for which they are not eligible. Further, BIE has not identified staff to conduct consistent program oversight, which is important to mitigating the risk of misuse and abuse of JOM funds. Until all JOM roles and responsibilities have been defined and identified, challenges may persist.

CRS_R46328

Introduction Significant recent coastal and riverine flood events, as well as concerns about changing hydrologic conditions, have prompted interest in using a suite of approaches to reduce flood risk and improve flood resilience , which is the ability to adapt to, withstand, and rapidly recover from floods. Traditional options to reduce flood risk include constructing levees and dams. Some stakeholders and Members of Congress support protecting, restoring, and enhancing natural features and processes to reduce flood and storm damages. Examples include floodplains that can store excess water and coastal wetlands that may attenuate storm surge. Congress has directed the U.S. Army Corps of Engineers (USACE)—the primary federal agency constructing projects to reduce flood risks—to evaluate the use of natural and nature-based features (NNBFs) when conducting its flood risk reduction activities along the nation's rivers and coasts. As part of a USACE authority, Congress defined a nature-based feature as "a feature that is created by human design, engineering, and construction to provide risk reduction by acting in concert with natural processes." It defined a natural feature as a feature "created through the action of physical, geological, biological, and chemical processes over time." Although NNBFs may provide flood risk reduction and resilience benefits in some circumstances, they may be unable to replicate the risk reduction provided by traditional structural and nonstructural measures for some communities. How to effectively incorporate natural features and processes into planning of and investments in reliable flood risk management is an area of evolving policy and research. Part of the challenge is to identify where to use NNBFs and to determine how much flood risk reduction NNBFs can provided either on their own or in combination with structural and nonstructural measures. Whether to adjust—and, if so, how—USACE's consideration and use of NNBFs for flood risk reduction is an ongoing policy issue. Although Congress has authorized consideration of NNBFs, examples of USACE using NNBFs in its flood risk reduction activities remain limited. In November 2019, the Subcommittee on Water Resources and Environment of the House Transportation and Infrastructure (T&I) Committee held a hearing as part of preparations for developing water resource authorization legislation. At the hearing, multiple witnesses referenced interest in facilitating the use of NNBFs for managing flood risks and improving resilience. Congress has requested various reports related to NNBFs, but the reports have not been delivered to the authorizing committees. When available, these reports may inform congressional deliberations on NNBFs as part of authorization and appropriations legislation. USACE considers NNBFs to include wetlands, such as salt marshes and certain submerged aquatic vegetation; oyster, mussel, and coral reefs; maritime forests/shrubs; and the combination of these natural features with engineered components, such as rock gabions (i.e., a basket or other container filled with rocks or other hard materials), stone toes (i.e., stones placed on the lower portion of an eroding streambank), and concrete reef balls (which are shown in Figure 1 along with other NNBFs). In some contexts, NNBFs that stabilize banks and shores also may be referred to as living shorelines . Efforts to enhance natural management of floodwaters often include attempts to restore disturbed natural features. For example, the ability of coastal mangroves, wetlands, and reefs to function as buffers of erosion or storm surge may be reduced if these features are degraded or improved if they are protected or restored. This report introduces NNBFs in the context of USACE flood risk reduction activities. It first discusses how NNBFs relate to USACE authorities for structural and nonstructural measures. It next discusses the primary flood-related activities for which USACE has NNBF-related authority: (1) federal flood risk reduction projects and (2) a program for the repair of damaged nonfederal flood control works. The report then addresses challenges and opportunities for use and incorporation of NNBFs within USACE's flood risk reduction and resilience efforts. It concludes with questions pertinent to the future of use of NNBFs as part of USACE's flood risk reduction activities. Natural and Nature-Based Features (NNBFs) in the USACE Flood Risk Reduction Context Evolution of the USACE Authorities USACE has been involved in efforts to reduce the nation's flood risk for over a century. The agency's early efforts involved building dams and levees along rivers. In the mid-20 th century, Congress began directing USACE involvement in coastal storm risk reduction projects, which have primarily consisted of engineered dunes and beaches, and in some instances, storm surge gates and levees. Congressional direction on USACE flood risk reduction activities has evolved to include authorities to use other means to reduce flood risk. Congress expanded USACE authorities related to nonstructural alternatives; then, starting in the mid-2010s, it directed the consideration of NNBFs. Since 1974, Congress has required that USACE evaluate nonstructural alternatives, such as elevation of structures and acquisition of floodplain lands, during its planning of flood risk reduction projects. Following widespread flooding in the Midwest in 1993, many experts encouraged USACE, other agencies, and policy decisionmakers to support greater use of nonstructural approaches to mitigate flooding. In 1996, Congress amended USACE's authority to repair damage to certain nonfederal flood control works to allow use of nonstructural alternatives in lieu of repairs. In 2016, in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), Congress defined such nonstructural alternatives to the repair of nonfederal flood control works to include restoring and protecting natural resources (e.g., floodplains, wetlands, and coasts), if those alternatives reduce flood risk. Although nonstructural measures (including natural features as part of nonstructural measures) have been part of the discussion of and authorities for USACE flood risk reduction for decades, the focus on natural processes and use of terms such as NNBF or natural infrastructure are more recent developments. USACE began its Engineering With Nature initiative in 2010 to explore ways to align natural and engineering processes in USACE project planning. In 2015, USACE incorporated NNBF concepts into its North Atlantic Coast Comprehensive Study , which Congress required as part of the agency's response to Hurricane Sandy. In 2016 in the WIIN Act, Congress altered USACE authorities to specifically direct the agency to consider NNBFs in its planning of water resource projects. This was Congress's first use of the terms natural feature and nature-based featu res in USACE authorities. In the WIIN Act, Congress directed USACE to evaluate NNBFs as part of the agency's planning of flood risk reduction and ecosystem restoration projects. Congress required that USACE consider each of the following: natural features; nature-based features; nonstructural measures; and structural measures. In 2018, Congress also required that USACE feasibility reports for flood risk reduction projects "consider the use of both traditional and natural infrastructure alternatives, alone or in conjunction with each other, if those alternatives are practicable." NNBFs in the Context of Nonstructural and Structural Authorities Congress has included references to nonstructural alternatives and measures in USACE authorities since at least 1974. Nonstructural measures generally are those that alter the human exposure or vulnerability to flooding with little effect on the characteristics of the flood (e.g., elevating a structure, floodproofing the lowest floor of a structure, or purchasing a structure for purposes of removing it which is referred to as a buyout ). S tructural measures are those that alter a flood's characteristics and reduce the probability of flooding at the location (e.g., a levee or berm that diverts flood water away from a community). Congress has not identified NNBFs as structural or nonstructural features for purposes of USACE planning of federal water resources projects and federal and nonfederal sharing of project costs. Current USACE practice considers measures that change the character of the flood as structural measures, which may include most NNBFs. However, in the agency's role in repairing nonfederally operated flood control works damaged by floods, Congress has included the following definition: Nonstructural alternatives defined. - In this subsection, the term 'nonstructural alternatives' includes efforts to restore or protect natural resources, including streams, rivers, floodplains, wetlands, or coasts, if those efforts will reduce flood risk. Therefore, some NNBFs may fall within Congress's definition of nonstructural alternatives for the repair program. It is unclear if the classifications of NNBFs as structural or nonstructural are consistent across the two sets of USACE activities that may use NNBFs for flood risk reduction―the USACE repair program and USACE's planning of projects. For purposes of planning a USACE flood risk reduction project, an NNBF may be structural or nonstructural, depending on whether the NNBF affects the character of the flood. USACE considers most NNBFs to be structural measures because the NNBFs alter the flood hazard and are cost shared as structural measures (see " Cost Sharing of USACE Flood Risk Reduction Measures "). Nonstructural NNBFs could include the restoration or expansion of a floodplain through acquisition of structures and lands, especially when combined with an aquatic ecosystem restoration project. Engineered dunes and beaches also have a role in NNBF discussions. USACE considers engineered dunes and beaches as NNBFs. However, traditional engineered dunes and beaches and other types of NNBFs may not face the same challenges when it comes to being incorporated into USACE planning and construction as more novel NNBFs, such as living shorelines. USACE has more than half a century of involvement in constructing engineered dunes and beaches (sometimes referred to as dune-and-berm beach nourishment systems ) as components of coastal storm risk reduction projects. The agency has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches, which is not the case for other NNBFs (see section entitled " Evaluation of NNBFs' Benefits "). In addition, unlike other NNBFs, engineered dunes and beaches often are not designed to rely primarily on natural processes (e.g., engineered dunes and beaches often require regular renourishment of sand to maintain storm damage reduction benefits). Additionally, while engineered dunes and beaches may support habitat for certain species, some researchers and stakeholders have raised concerns about the potential for environmental harm associated with some engineered dune and beach projects (see " Incorporating More Natural Processes in Engineered Dunes and Beaches " for further discussion). Where appropriate, this report differentiates between the more novel applications of NNBFs and the more traditional engineered dunes and beaches. Levee setbacks are an example of combining a structural element—the levee—with natural features―a wider floodplain—to reduce flood risk. USACE considers levee setbacks as structural alternatives for purposes of its projects and its repairs to certain damaged nonfederal levees because levees alter the extent of the flood hazard. The extent to which USACE would classify some levee setbacks as NNBFs (e.g., levee setbacks that augment natural storage and reduce peak flows) is unclear. Where appropriate, this report discusses levee setbacks activities that would include natural features and processes to reduce flood risks. USACE Projects and NNBFs Through the Engineering With Nature initiative and comprehensive studies such as the post-Hurricane Sandy North Atlantic Coast Comprehensive Study , USACE has identified ways in which NNBFs could be incorporated into flood risk reduction and resilience efforts. Incorporating NNBFs into USACE feasibility reports and their recommended plans for flood risk reduction is a step that would move NNBFs from concepts into potential USACE project features. Statutory direction in 2016 and 2018 requires that NNBFs be considered as part of feasibility studies and their reports. The discussion below provides examples of how USACE has incorporated NNBFs into completed feasibility reports and how NNBFs are evaluated and cost shared as part of USACE flood risk reduction projects. Evaluation of NNBFs in USACE Project Planning USACE has an extensive planning process for its flood risk reduction projects; part of the process consists of an evaluation of whether the project is economically justified as a federal investment. Generally, federal involvement in flood risk reduction projects is limited to projects that are determined to have national economic benefits exceeding their costs or to projects that address a public safety concern. As previously noted, Congress has required the evaluation of NNBFs as part of USACE flood risk reduction project planning. Under current Administration guidance, USACE's evaluation of NNBFs as part of a feasibility study is tailored to each project (i.e., it is not standardized but case-by-case). Economic Justification for Flood Risk Reduction Investments The Principles and Guidelines (P&G) broadly guide the planning process and the decision criteria for identifying the recommended plan in a USACE feasibility report. The P&G indicate that USACE is to select the plan with the greatest net economic benefit consistent with protecting the environment (referred to as the national economic development plan , or NED plan), unless the Assistant Secretary of the Army for Civil Works (ASACW) grants an exception. The P&G have been in effect for USACE since 1983. For a discussion of the status of the P&G and a set of guidelines developed to replace the P&G, see the box titled "Planning Guidance for Federal Water Resource Studies and Investments." According to the U.S. Government Accountability Office (GAO), the flood damage reduction of structures continues to dominate the evaluation of economics and the NED plan remains the main means for identifying the recommended plan for flood risk reduction alternatives. The effect is that most flood risk reduction projects are subject to a benefit-cost analysis. This means that for an NNBF to be found economically justified as a stand-alone flood risk reduction feature, the NNBF's effect on economic benefits (which for flood risk reduction projects is principally quantified as reduced flood damages to structures) would have to be quantified and found to exceed the cost of the NNBF. Part of the attraction of NNBFs is that they may provide some risk reduction benefits without some of the costs of traditional structures. NNBFs, compared with structures such as storm surge gates, levees, or dams, may not require as much investment in long-term maintenance in order to continue their flood risk reduction functions. In addition, NNBFs generally would not require replacement or removal at the end of their use. The consistency with which USACE is incorporating these reduced costs into the comparison of NNBFs with other alternatives in feasibility reports is unclear. Environmental and Social Benefits of NNBFs Another attraction of NNBFs is that they may support species habitat, water quality, or recreation, among other environmental and social benefits. Statute requires and the P&G and USACE planning guidance allow the agency's feasibility reports for flood risk reduction projects to include information on the environmental and other social benefits of NNBFs. Nonetheless, under the P&G, unless an exception is granted by the ASACW, USACE is directed to select the plan with the greatest net economic benefit consistent with protecting the environment (the NED plan) in its feasibility reports for flood risk reduction projects. For a discussion of how this approach to identifying recommended plans and evaluating the benefits of alternatives may be shaping the adoption of NNBFs, see the discussion under " Evaluation of NNBFs' Benefits ." The P&G have been the primary document guiding USACE planning and plan recommendations since 1983. In April 2020, the Administration described its plans to replace USACE's use of the P&G with new planning guidance. The new guidance is referred to as the Principles, Requirements, and Guidelines (PR&G) for federal water resource investments. Under the PR&G, USACE would strive to maximize public benefits relative to public costs. Public benefits encompass environmental, economic, and social goals, with no hierarchy among the three goals. In the interim, USACE continues to implement the P&G. For more details on the evolution of water resource planning guidance, see the text box titled "Planning Guidance for Federal Water Resource Studies and Investments." Examples of NNBFs in USACE Flood Risk Reduction Projects USACE is proposing using NNBFs (other than engineered dunes and beaches) often in combination with traditional structural measures. For example, the following USACE projects incorporate NNBFs as elements of broader flood risk reduction projects using structural elements. New York's East Rockaway Inlet to Rockaway Inlet and Jamaica Bay Reformulation Project . The recommended plan includes NNBFs consisting of stones and larger rocks with associated vegetative planting to attenuate wave action and reduce erosion ( Figure 2 ) as part of traditional structural measures. The feasibility report indicates that the NNBF was evaluated based on its cost effectiveness, rather than a benefit-cost analysis. That is, the cost of the NNBF per linear foot was compared to the cost per linear foot of a floodwall. The entire recommended plan, which consists of various components in addition to the NNBFs, was subject to a benefit-cost analysis and was found to be economically justified. Virginia's Norfolk Coastal Storm Risk Management Project . The feasibility report recommends NNBFs in combination with traditional structural measures, such as storm surge barriers and pump stations, and nonstructural features, such as elevation, floodproofing, and buyout of structures ( Figure 3 ). The NNBFs include "living shorelines to increase resiliency." According to the feasibility report, the recommended NNBFs are "economically justified by their ability to reduce maintenance costs associated with structural features of the [recommended plan]," as well as other benefits, such as recreation and education identified. A benefit-cost analysis was performed on the combined NNBFs and structural features, and the investment was found to be economically justified. The above projects use NNBFs as support for traditional structural features or in combination with traditional structural features. USACE has proposed several projects where the key components are traditional engineered dunes and beaches, which USACE considers to be NNBFs. The Congressional Research Service (CRS) has not identified a final USACE feasibility report in which NNBFs other than engineered dunes and beaches are the dominant means to reduce flood risk. Cost Sharing of USACE Flood Risk Reduction Measures Congress has established that USACE involvement in a flood risk reduction project generally requires both congressional study authorization and congressional construction authorization. Congress also has established that the planning and construction costs for most USACE projects are shared with a nonfederal sponsor, such as a municipality or levee district for flood risk reduction projects. Table 1 provides information on the nonfederal cost shares for USACE flood risk reduction, coastal storm damage reduction, and ecosystem restoration projects. Information about ecosystem restoration projects is included in Table 1 because some USACE projects may have dual purposes of flood risk reduction and ecosystem restoration. Nonfederal project sponsors are generally required to provide all real estate interests needed for a flood risk reduction project, such as the land, easements, rights-of-way, relocations, and disposal (LERRD). The value of the LERRDs are applied toward the nonfederal cost share. At times, these real estate costs may exceed the standard minimum nonfederal cost share established by Congress for the USACE project type. As shown in Table 1 , Congress has established different means for addressing LERRD costs that exceed the required nonfederal contribution for structural features and for nonstructural features. For some types of projects, Congress also has required that part of the nonfederal cost share must include a cash contribution, as shown in Table 1 . That is, the nonfederal share must consist of more than LERRDs and in-kind contributions. For structural measures, Congress has generally established that the maximum nonfederal construction cost share is 50% if the nonfederal LEERDs exceed the 35% minimum. For nonstructural projects, if the nonfederal costs exceed 35%, the remainder of the costs are federal. Although Congress has established how costs of structural and nonstructural measures are to be shared, Congress has not enacted cost sharing that applies specifically to NNBFs. USACE considers most NNBFs to alter the flood hazard and treats those features as structural measures in its planning processes. Therefore, the cost-sharing requirements for structural measures apply to the use of most NNBFs, like those in the coastal storm risk reduction projects in Norfolk, VA, and East Rockaway Inlet to Rockaway Inlet and Jamaica Bay. Some stakeholders have expressed interest in having NNBFs be eligible for nonstructural cost sharing. Congress has authorized numerous coastal storm damage reduction projects that use engineered dunes and beaches and the periodic renourishment of these features, which consists of multiple cycles of sand placement on beaches, dunes, or both. Statute allows for periodic nourishment over 50 years, with possibilities for extension, to be cost shared as shown in Table 1 . NNBFs in Program to Repair Damaged Nonfederal Flood Control Works USACE is authorized to fund the repair of certain nonfederal flood control works (e.g., levees, dams) and federally constructed hurricane or shore protection projects that are damaged by factors other than ordinary water, wind, or wave action (e.g., storm surge rather than high tide). To receive this assistance, damaged flood control works must be eligible for and active in the agency's Rehabilitation and Inspection Program (often referred to as the USACE P.L. 84-99 program or RIP) and have been in an acceptable condition at the time of damage, as determined by regular USACE inspections. The P.L. 84-99 program does not fund repairs associated with regular operation, maintenance, repair, and rehabilitation. As of 2018, around 1,200 nonfederal entities operating roughly 2,000 levee systems participate in the P.L. 84-99 program, and the nonfederal levees in the P.L. 84-99 program cumulatively span nearly 10,000 miles. Congress funds the P.L. 84-99 program and USACE's flood-fighting efforts through the agency's Flood Control and Coastal Emergencies (FCCE) account. In 1996, Congress amended the P.L. 84-99 program to authorize USACE to implement nonstructural alternatives for reducing flood risk—previously the authority was limited to the repair or restoration of the flood control structures. Congress made the nonstructural alternative authority available only if a nonfederal entity requests the nonstructural alternative. That is, USACE does not include nonstructural alternatives in its evaluation of repair alternatives unless requested to do so by the nonfederal sponsor. In 2014, Congress extended the nonstructural alternative option to authorized coastal storm damage reduction projects. In 2016, Congress defined the nonstructural alternative for the P.L. 84-99 program authority as including "efforts to restore or protect natural resources, including streams, rivers, floodplains, wetlands, or coasts, if those efforts will reduce flood risk." Congress also required USACE to notify and consult with the nonfederal sponsor about "the opportunity to request implementation of nonstructural alternatives to the repair or restoration of a flood control work" under P.L. 84-99 program. Table 2 provides information on how USACE shares the costs for the program. Under the P.L. 84-99 program, the costs for all LERRDs are 100% nonfederal. Most repairs would require few or no new LERRDs. Nonstructural alternatives may require significant new LERRD acquisition by the nonfederal sponsor. Also, if a nonstructural alternative is pursued, USACE will provide no further flood-related assistance anywhere within the formerly protected area, except for rescue operations, with some exceptions. For repairs under the P.L. 84-99 program, USACE primarily follows Engineer Regulation (ER) 500-1-1 from 2001, and updated agency policies for how to return coastal storm damage reduction projects to design levels of protection (e.g., how to reconstruct and renourish with sand and engineered dune and beach to the design level of protection). ER 500-1-1 includes nonstructural alternatives to repair, pursuant to the 1996 amendment to the repair authority, but, in practice, the P.L. 84-99 program appears to remain a "repair-in-place" program or for minor adjustments in levee alignments to avoid repeated erosive damage to a levee segment often referred to as scour . Repair-in-place planning often is more expeditious for USACE than the planning required for a nonstructural alternative. USACE does not appear to track the use of the nonstructural alternative authority within the P.L. 84-99 program. Selected uses of the nonstructural alternative authority include examples following the 1997 floods in California and the 2008 floods in the upper portion of the Mississippi River. In the P.L. 84-99 program, USACE may setback a damaged levee segment; USACE considers the setback a structural realignment of the levee to restore the damaged levee system. USACE does not consider levee setbacks as nonstructural alternatives. Because levee setbacks are considered as structural realignments for the repair of the damaged levee, the levee setbacks as part of the P.L. 84-99 program are designed for purposes of the levee's functioning and integrity (e.g., to decrease scour) rather than to enhance floodplain capacity or reduce peak flows. If a nonfederal entity pursues a nonstructural alternative, such as the acquisition of floodplain lands, the nonfederal sponsor also may choose to setback the levee. It appears that USACE would consider the setback of the levee not as part of the nonstructural alternative but as a complementary investment by the nonfederal entity. USACE and other federal agencies also may own and operate levees and other flood control projects. USACE is responsible for rebuilding flood-damaged levees that it operates. USACE has no authority to evaluate and implement nonstructural alternatives (or NNBFs) for congressionally authorized USACE-operated infrastructure. Challenges and Opportunities for NNBFs as Flood Risk Reduction Measures Some contend that traditional structural measures are institutionally easier for USACE to implement, which disadvantages use of NNBFs, especially in situations and contexts that favor expediency or are time-constrained. Although USACE has decades of experience planning and constructing structural levees and dams, and the authorities and policies to guide those measures, the agency's guidance and experience with NNBFs are less well-developed. For example, implementing NNBFs may require USACE to work with more federal and nonfederal agencies, landowners, and other stakeholders than the agency would with structural measures. Two factors that may shape the further adoption of NNBFs as part of USACE flood risk reduction activities are (1) the availability of information and evaluation procedures for using NNBFs as flood risk reduction measures and (2) the classification of some NNBFs as structural measures for flood risk management. Identifying whether and, if so, how to incorporate NNBF concepts more fully into USACE's engineered dunes and beaches presents another challenge. Evaluation of NNBFs' Benefits USACE's actions pursuant to congressional modifications to its NNBF authorities since the mid-2000s have led to the development of new procedures to evaluate the flood risk reduction benefits of NNBFs and to questions about what USACE is able to count as benefits. An attraction of NNBFs as flood risk reduction measures is that by using natural processes, NNBFs also may support species habitat, water quality, or pubic enjoyment, among other environmental and social benefits. Whether—and if so, how—to incorporate the environmental and social benefits of NNBFs into USACE decisionmaking remains an ongoing question. The discussion below first reviews the challenges related to evaluating the flood risk reduction benefits and then discusses the role of environmental and other social benefits in evaluating investments in NNBFs as flood risk reduction measures under the P&G. Under the P&G, which USACE has followed since 1983, flood risk reduction projects—whether they use traditional structural measures, nonstructural measures, or NNBFs—are to be economically justified based on the NED benefits from the reduced flood risk. The P&G requires the selection of the NED plan for USACE flood risk reduction projects, unless a waiver is provided by the ASACW. The P&G allows for USACE to document the environmental and social benefits; however, these benefits are not explicitly included in the agency's identification of the recommended plan for a project. In April 2020, the Administration indicated that during 2020 it plans to develop documents required for USACE to replace its use of the P&G with the PR&G. Unlike the NED-focused decision criteria of the P&G, the PR&G would direct USACE to strive to maximize public benefits toward environmental, economic, and social goals relative to public costs. Economic Benefits of NNBFs' Flood Risk Reduction In some circumstances, NNBFs may not be effective as flood risk reduction measures or provide the level of protection sought by a community. In circumstances where NNBFs may be able to reduce flood risk, NNBFs may be effective alone or in combination with traditional flood risk reduction measures. They also may assist with adjustments to changing hydrologic conditions (e.g., coastal wetlands adjustment to sea level rise) and provide a suite of environmental and social benefits (e.g., additional species habitat, water quality improvements, and recreation opportunities). Stakeholders and others have noted that knowledge gaps may affect USACE's ability to support federal NNBF investments. For example, in 2019, GAO found The Corps faces challenges in developing cost and benefit information for some types of natural infrastructure and has initiated some steps to address this. For example, a 2015 Corps report identified knowledge gaps in understanding how natural coastal infrastructure, such as wetlands may perform during coastal storms. These knowledge gaps make it challenging for the Corps to develop cost and benefit information for some natural infrastructure alternatives and compare them to other alternatives, such as those that use hard infrastructure. For USACE, the procedures to evaluate the potential benefits, limitations, and economic costs of traditional flood risk reduction structures are developed and standardized through various procedures and models. As GAO identified, this is not the case for NNBFs. GAO's report indicated that USACE was developing a research strategy to address some of the knowledge gaps. Although USACE has not finalized the strategic research plan referenced by GAO, USACE has research activities directed toward improving understanding of NNBF performance, directly or indirectly. Several of these research programs are developing numerical and analytical tools that can estimate performance (e.g., reduced erosion, wave impacts, and flood/storm surge inundation) for NNBF so trade-offs can be estimated in the planning, design, and maintenance process in the future. In addition to USACE, other researchers are attempting to document NNBFs' flood risk reduction benefits, limitations, and costs. Under the Administration's current guidance for the NNBF authority, the identification, evaluation, and justification of NNBF alternatives (other than engineered dunes and beaches) appears to remain a case-by-case process. Part of the challenge is how a feature's location may affect an NNBF's performance, which consequently may influence the NNBF's benefits and costs. Congress may consider how USACE's case-by-case approach to evaluating NNBFs may shape consideration and adoption of the features (e.g., adapting the NNBFs to local conditions) in a planning process that is constrained by time and funding. Another challenge to valuing the flood risk reduction benefits of NNBFs may be NNBFs' dynamic nature as the result of their use of natural processes, as compared to traditional flood control structures. For example, NNBFs consisting of mangroves or other wetlands may shift their extent and location in response to changing conditions. Other NNBFs may change over time as the living components—such as vegetation or oyster reefs—mature or their area expands or contracts. Floods or storms may temporarily or permanently damage some NNBFs and lessen their role in reducing flood risks. USACE is participating in interagency and international efforts aiming to fill knowledge gaps and develop best practices and concepts for NNBFs and to understand their benefits and limitations. For example, USACE is leading an international effort to develop and publish international guidelines on NNBFs, as discussed in the box titled "International and Interagency Efforts on Natural and Nature-Based Features." The extent to which the agency may be able to incorporate into its own planning some of the international guidance remains to be seen and may depend on the extent to which the guidance helps address questions of performance and economic benefits in various environmental and flood/storm conditions. Environmental and Social Benefits of NNBFs As previously noted, USACE may document environmental and social benefits of NNBFs, but its decision criteria under the P&G for flood risk reduction project remains the NED plan. The PR&G-based planning process may require greater consideration of environmental and social benefits; the impact of those additional considerations on USACE's development and selection of plans that use NNBFs is unknown. The question of whether to incorporate, in the planning process and related decisions, certain environmental and social benefits and costs of flood risk reduction measures is a recent development in a long-standing debate on federal water resource investments. USACE has adapted its project planning process before to meet changes in the agency's authorities. In the late 1990s, following Congress's enactment of various authorities for USACE ecosystem restoration projects, the agency developed procedures to evaluate ecosystem restoration investments (see box titled "Evaluation of an Ecosystem Restoration Project"). Whether and to what extent consideration of environmental and social benefits and costs of NNBFs, or for flood risk reduction projects more broadly, may be considered in the USACE planning and decision process is unclear. In addition to the use of NNBFs as part of USACE flood risk reduction activities, the agency, through its regulatory program, has authorized a general permit for the use of one NNBF type—coastal living shorelines. The permitted activities are not performed or funded by USACE; they are performed by the entities that apply for the permit, such as a town or a landowner. As more nonfederal entities use NNBFs such as living shorelines, USACE may draw additional knowledge, data, and experience from these nonfederal and non-USACE projects. For information on the living shoreline general permit, see the box titled "Facilitating Approval of Natural and Nature-Based Features: Living Shoreline Nationwide Permit." NNBFs as Structural Measures in USACE Planning As previously noted, current USACE practice in the planning of flood risk reduction projects is to consider measures that change the character of the flood as structural measures, which may include most NNBFs. NNBFs classified as structural measures are cost shared differently than those classified as nonstructural measures. Some stakeholders have proposed that legislation require NNBFs to be cost shared as nonstructural measures regardless of the NNBFs' effect on the flood hazard. This would cap the nonfederal construction costs at 35% rather than up to 50% for structural measures, thereby shifting more of the NNBF costs to the federal government. Levee setbacks, although not generally categorized as NNBFs by USACE, illustrate some of the challenges for NNBFs that are classified as structural measures. Examples of USACE's use of setback levees as part of the agency's flood risk reduction projects remain limited. Many potential levee setback projects do not have a sufficient benefit-cost ratio to be an economically justified investment as a structural measure for flood risk reduction, in part because of the costs associated with the additional land and other real estate interests that would need to be acquired. Nonfederal project sponsors generally would be responsible for 100% of these LERRD costs. The designation of an NNBF as a structural measure could require the nonfederal sponsor to pay a greater share of the cost than if the NNBF were considered nonstructural (as shown in Table 1 ). Classification of an NNBF as a structural measure also results in a difference between the cost sharing for the NNBF and the cost sharing for nonstructural measures (e.g., elevating structure in the floodplain). Incorporating More Natural Processes in Engineered Dunes and Beaches As discussed above, USACE has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches. Traditional USACE engineered dunes and beaches may not face the same challenges of being incorporated into USACE planning and construction as other features that USACE classifies as NNBFs. Although traditional engineered dunes and beaches may have social benefits and provide habitats for some species, engineered dunes and beaches have been shown in some circumstances to have some negative effects. For example, the construction and replenishment of these features can disrupt existing biological communities, such as benthic, fish, and shorebird communities, at the project site and where the sand is sourced. The cumulative effect of the projects and resulting environmental changes remains poorly understood. USACE has taken some steps to address these effects (e.g., the agency considers the compatibility of some sand characteristics, and for some projects, it avoids nourishing during ecologically significant periods), but some suggest that engineered dunes and beaches could incorporate natural processes or elements with more environmental benefits. For example, some researchers have suggested leaving gaps in sand placement or nourishing smaller areas at a time to allow species to recolonize from the edges of the nourishment area. Efforts to integrate resilience into approaches to flood risk reduction can raise questions about the role of traditional engineered dunes and beaches that rely heavily on regular renourishment through the engineered placement of sand on the beaches and dunes. NNBFs generally are intended to be developed by or to use natural processes. NNBFs are meant to be as self-sustaining as possible; that is, they are expected to recover, often without or with minimal human intervention, following a flood event. For example, natural dune and beach systems may experience large waves during storm events, which move sediment from the front of the beach (the foreshore) to the back of the beach system, effectively maintaining or raising the elevation behind the dune over time. The foreshore is built up by normal wave activity over time, thereby maintaining through natural processes the dune system, including its potential flood risk reduction benefits. Some dune and beach systems may recover quickly after a damaging storm; however, others may take decades to rebuild to previous heights and widths through natural processes. Conversely, engineered dunes are often built to not be overtopped and moved. Some engineered dunes also have cores or components that provide stability (e.g., synthetic membranes or clay) and may not allow for dune migration. To allow this natural movement to continue, some stakeholders have suggested that USACE consider constructing lower dunes and providing space behind dunes to accommodate sand movement. Other options may include designing dunes to be naturally shaped by the wind while decreasing overall sand loss by using features such as vegetation, screens made of natural materials, and variations in terrain elevation. Furthermore, dunes could be designed to specifically include habitat features, such as those that enable wetland development. Some stakeholders argue that USACE and its nonfederal partners could consider other ways to promote natural processes and their benefits into USACE coastal storm risk reduction projects, such as by allowing dune systems to spread out, limiting the raking or grading of incipient dunes, and restricting driving on the beach. These measures would allow dunes to widen or for additional dunes to form in front or behind the primary dune, providing some environmental and social benefits (e.g., greater protection for structures behind dunes and greater variety in available habitats) but could limit other social benefits (e.g., space for beach recreation). Although USACE has long-standing approaches for calculating the flood risk reduction benefits of engineered dunes and beaches, the agency's procedures for incorporating more natural processes and features (e.g., vegetation) into engineered dunes and beaches are being reconsidered in the context of the additional NNBF considerations. Incorporating more natural processes into engineered dunes and beaches may require additional efforts to secure the LERRDs for a dune that shifts. Statute not only allows for federally cost-shared periodic nourishment of USACE-constructed dunes and beaches over 50 years but also provides for the possibility of extending renourishment for an additional 15 years. It is unclear if USACE's evaluations for extending a project's federally cost-shared renourishment timeframe consider the role of more natural processes and elements (e.g., vegetation) in future renourishments. It also remains unknown whether more natural processes would be considered a reformulation, requiring congressional authorization, rather than an administrative extension. Similarly, the extent to which P.L. 84-99 program-funded repairs of coastal storm protection projects have been used to incorporate more natural processes into the designs of engineered dunes and beaches remains unknown. Congressionally Directed Reports Related to NNBFs Congress has directed that the Administration produce two reports that may provide information on NNBFs to decisionmakers and planners. One report relates to how USACE complies with the WIIN Act requirement to evaluate NNBFs as part of USACE flood risk reduction projects. The other report focuses on USACE's authorities related to repair of nonfederal flood control works, including the use of the authority to support a nonstructural alternative in lieu of repairing the damage. Report on NNBFs in USACE Projects In 2016, Congress directed the Secretary of the Army to evaluate NNBFs, nonstructural features, and structural features in its planning of flood risk reduction projects and ecosystem restoration projects. At that time, Congress also required the Secretary of the Army to report on the statute's implementation to the House T&I Committee and Senate Committee on Environment and Public Works (Senate EPW) by February 1, 2020 (and 5 and 10 years thereafter). At a minimum, the report was to include a description of the guidance or instructions issued, and other measures taken, by the Secretary and the Chief of Engineers to implement the requirement to evaluate NNBFs, nonstructural features, and structural features in the planning of flood risk reduction and ecosystem restoration projects; an assessment of the costs, benefits, impacts, and trade-offs associated with measures recommended by the Secretary for coastal risk reduction and the effectiveness of those measures; and a description of any statutory, fiscal, or regulatory barriers to the appropriate consideration and use of a full array of measures for coastal risk reduction. The committees have not received the report as of April 2020; however, USACE indicates that it has initiated development of the report. USACE implementation guidance from 2017 and 2018 indicates that the agency was making efforts at that time to collect data for the report. Report on NNBFs in Program to Repair Nonfederal Flood Control Works In June 2014, Congress required that the Secretary of the Army review the use and performance of the emergency authority for repairs of nonfederal flood control works. Congress required that a report on the findings of the review be delivered within 18 months to the House T&I Committee and Senate EPW Committee and for the report to be publicly available. USACE implementation guidance for the provision indicates that the agency would undertake the review when Congress provided funding for it. Congress has not yet funded the review. The Secretary is to, among other actions, review and evaluate the historic and potential uses, and economic feasibility for the life of the project, of nonstructural alternatives, including natural features such as dunes, coastal wetlands, floodplains, marshes, and mangroves, to reduce the damage caused by floods, storm surges, winds, and other aspects of extreme weather events, and to increase the resiliency and long-term cost-effectiveness of water resources development projects. Conclusion In 2010, USACE ramped up its efforts to identify opportunities to incorporate natural processes into its flood risk reduction activities with its Engineering With Nature initiative. Starting in the mid-2010s, Congress has authorized the consideration of NNBF alternatives in circumstances where NNBFs can reduce flood risk. The reliance on natural processes in NNBFs may provide flood resilience advantages compared with traditional structural measures or when used in combination with traditional structural measures. However, various challenges to the adoption of NNBFs as part of USACE projects remain. Among recently completed feasibility reports, USACE has recommended a few flood risk reduction projects that use NNBFs. Typically, the recommendation is to use the NNBFs in combination with structural measures if the combined alternative can be economically justified. The limited use of NNBFs in USACE flood risk reduction activities to date is shaped by various factors ranging from what is known about NNBF performance to how NNBFs are evaluated. In some circumstances, NNBFs may not be able to provide levels of flood risk reduction similar to traditional structural and nonstructural measures. In other circumstances, NNBFs may be able to reduce flood risks, but the ability to quantify the effectiveness and reliability of NNBFs as flood risk reduction measures in different environmental conditions and for different flood and storm conditions remains limited. In circumstances where NNBFs may be effective alone or in combination with traditional flood risk reduction measures, they can provide a suite of environmental and social benefits. The extent to which USACE considers NNBFs' environmental and social benefits, as well as their flood risk reduction potential, in agency feasibility reports and their recommendations and in decisions on repairing damaged flood control works remains unclear. USACE's evaluations and recent applications of NNBFs have raised questions about how environmental and social benefits are considered in USACE planning and the potential opportunities and limitations for USACE's use of NNBFs. Some questions related to NNBFs relevant to decisions about USACE authorities and policies include the following: What are the remaining knowledge gaps regarding the benefits and limitations of NNBFs in flood risk reduction? What are the options for decisionmakers to direct USACE or other federal agencies to address these gaps or otherwise support research that addresses these gaps? What is the impact of current decisionmaking processes on the accounting of NNBFs' benefits, costs, and performance over time? How do statutes, Administration guidance, and agency practice create disincentives and incentives for NNBF adoption for USACE and nonfederal project sponsors? The congressionally directed reports discussed in the previous section may inform USACE decisionmakers' and planners' understanding of the circumstances in which use of NNBFs may be beneficial. They also may inform congressional deliberations on whether—and, if so, how—to support use of NNBFs as part of USACE flood risk reduction and resilience efforts.

The U.S. Army Corps of Engineers (USACE) is the primary federal agency involved in federal construction to help reduce community flood risk. Congressional direction on USACE flood risk reduction activities has evolved from primarily supporting levees, dams, and engineered dunes and beaches. Since 1974, Congress has required that USACE evaluate nonstructural alternatives, such as elevation of structures and acquisition of floodplain lands, during its planning of projects. Since the mid-2010s, Congress also has directed the consideration of natural and nature-based features (NNBFs). Examples of potential NNBFs for reducing flood risk include wetlands; oyster, mussel, and coral reefs; and the combination of these natural features with hard components, such as rock and concrete. Various factors are shaping how USACE is incorporating NNBFs into its flood risk reduction projects and post-flood repair activities. NNBFs in Flood Risk Reduction Projects Congress specifically included NNBFs as a planning requirement for USACE flood risk reduction projects in 2016. In 2018, Congress required that USACE feasibility reports for flood risk reduction projects consider using traditional and natural infrastructure, alone or in conjunction with each other. In recent feasibility reports, USACE primarily has proposed using NNBFs (other than engineered dunes and beaches) in combination with traditional structural measures rather than having the NNBFs as the primary means for reducing flood risk. To be recommended for congressional construction authorization, a USACE flood risk reduction project generally must have national flood risk reduction benefits that exceed the project's costs. Under current Administration guidance, USACE's evaluation of NNBFs is tailored to each project (i.e., it is case-by-case rather than standardized). NNBFs in Program to Repair Damaged Nonfederal Flood Control Works In 1996, Congress amended USACE's program to repair damage to certain nonfederal flood control works. Congress allowed for the program to fund nonstructural alternatives in lieu of USACE making repairs if a nonfederal entity requests and assumes responsibility for the nonstructural alternative. In 2016, Congress defined the program's nonstructural alternatives to include restoring and protecting natural resources (e.g., floodplains, wetlands, and coasts), if those alternatives reduce flood risk. In practice, the program continues to predominantly repair the damaged flood control works. That is, there remain a limited number of nonfederal entities pursuing nonstructural alternatives under this program. Identifying Challenges and Opportunities for NNBFs as Flood Risk Reduction Measures Quantifying the effectiveness and reliability of NNBFs as flood risk reduction measures in different environmental conditions and for different floods and storms is an area of ongoing research. In some circumstances, NNBFs may provide flood risk reduction and a suite of environmental and social benefits. In other applications, NNBFs may be unable to replicate the level of flood risk reduction provided by traditional structural and nonstructural measures. Congress may consider the following issues for NNBFs in USACE flood risk reduction activities: knowledge gaps in measuring the benefits and limitations of NNBFs and the research to fill these gaps; how USACE processes account for NNBFs' benefits, costs, and performance; and effects of agency practice, Administration guidance, and statutory authority on the consideration and adoption of NNBFs for flood risk reduction. Congress has requested two reports related to NNBFs from USACE. These reports, when available, may inform congressional deliberations on whether—and, if so, how—to support the use of NNBFs as part of USACE flood risk reduction efforts.

CRS_R45946

Introduction In 1883, following the assassination of President James A. Garfield by disgruntled job seeker Charles Guiteau, the Pendleton Act was signed into law by President Chester A. Arthur to ensure that "government jobs be awarded on the basis of merit…." The Pendleton Act ended the spoils system to ensure that qualified individuals were hired into federal service and to prevent the President from being "hounded by job seekers." With the advent of the merit system, federal employees found themselves serving longer in government while also being attracted to private-sector jobs related to their federal employment. The movement of employees between the private sector and government is often referred to as the revolving door . Generally, the revolving door is described as the movement of individuals between the public and private sector, and vice versa. Individuals may move because they possess policy and procedural knowledge and have relationships with former colleagues that are useful to prospective employers, either in government or in the private sector. Some observers see the revolving door as potentially valuable to both private-sector firms and the government; other observers believe that employees leaving government to join the industries they were regulating, or leaving the private sector to join a relevant government agency, could provide an unfair representational advantage and create the potential for conflicts of interest. While Congress has passed laws regulating the revolving door phenomenon in the executive branch, there has to date been little data available about the underlying phenomenon. This report provides data on the movement into and out of government by executive branch personnel in President George W. Bush's and President Barack Obama's Administrations. Using a dataset of executive branch Cabinet department officials compiled by graduate students at the Bush School of Government and Public Service at Texas A&M University in partnership with CRS, this report provides empirical data about the use of the revolving door by a subset of federal officials, with a particular focus on those who were registered lobbyists either before or after their government service. This report begins with an overview of existing revolving door laws and regulations that affect executive branch personnel. It next examines the potential advantages and disadvantages of the revolving door phenomenon. Data collected in partnership with the Bush School of Government and Public Service at Texas A&M University are then presented and analyzed. The data provide an empirical picture of the executive branch revolving door as it relates to registered lobbyists. This analysis is followed by a discussion of select issues for potential congressional consideration. The Revolving Door in the Executive Branch Revolving door provisions, which can include laws, regulations, and executive orders, are often considered as a subset of conflict-of-interest provisions that govern the interaction of government and nongovernmental individuals. While most historic revolving door provisions generally addressed individuals exiting government for work in the private sector, some have also addressed individuals entering government. Overall, revolving door conflict-of-interest laws have existed since the late 19 th century. The first identified conflict-of-interest provision was enacted in 1872. This provision generally prohibited a federal employee from dealing with matters in which they were involved prior to government service. In 1919, the first restrictions were placed on individuals who had specifically served as procurement officials from leaving government service "to solicit employment in the presentation or to aid or assist for compensation in the prosecution of claims against the United States arising out of any contracts or agreements for the procurement of supplies … which were pending or entered into while the said officer or employee was associated therewith." Similarly, the Contract Settlement Act of 1944 (58 Stat. 649) included a provision making it Unlawful for any person employed in any Government agency … during the period such person is engaged in such employment or service, to prosecute or to act as counsel attorney or agent for prosecuting, any claim against the United States, or for any such person within two years after the time when such employment or serve has ceased, to prosecute, or to act as counsel, attorney, or agent for prosecuting, any claim against the United States involving any subject matter directly connected with which such person was so employed or performed duty. In 1962, portions of the current statutory provision at 18 U.S.C. §207 were enacted as part of a major revision of federal conflict-of-interest laws. Since the 1960s, postemployment restriction laws have been amended several times, including by the Ethics in Government Act of 1978 to add certain one-year "cooling off" periods for high-level executive branch personnel and limit executive branch official postemployment advocacy (i.e., lobbying) activities; by the Ethics Reform Act of 1989; and by the Honest Leadership and Open Government Act of 2007, which extended the "cooling off" period to two years for "very senior" executive branch officials. Revolving door provisions, including conflict-of-interest laws and "cooling off" periods, were initially designed to protect government interests against former officials using proprietary information on behalf of a private party and current officials against inappropriately dealing with matters on which they were involved prior to government service. Additionally, they attempted to limit the possible influence and allure of potential private arrangements by federal officials when they interact with prospective private clients or would-be future employers while still employed by the government. Historically, the decision to adopt, or amend, revolving door and conflict-of-interest provisions has been balanced against the potential deterrent of restricting the movement of individuals between the public and private sector. For example, in 1977, the Senate Committee on Governmental Affairs reported a bill that would have amended the existing revolving door provisions. As part of its justification for the measure, the committee explained the need to balance the appearance of impropriety against the need to attract skilled government workers. Its report noted the following: 18 USC §207, like other conflict of interest statutes, seeks to avoid even the appearance of public office being used for personnel or private gain. In striving for public confidence in the integrity of government, it is imperative to remember that what appears to be true is often as important as what is true. Thus government in its dealings must make every reasonable effort to avoid even the appearance of conflict of interest and favoritism. But, as with other desirable policies, it can be pressed too far. Conflict of interest standards must be balanced with the government's objective in attracting experienced and qualified persons to public service. Both are important, and a conflicts policy cannot focus on one to the detriment of the other. There can be no doubt that overly stringent restrictions have a decidedly [sic] adverse impact on the government's ability to attract and retain able and experienced persons in federal office. The revolving door allows movement in both directions, with individuals both entering and exiting government. Some past researchers have argued that those who enter government with prior industry experience are more supportive of regulated industry than those without industry experience. Similarly, two studies have concluded that the lure of private-sector employment has led regulators to support the regulated industry during their time in government. Whether or not the revolving door on net helps or hinders the functioning of government agencies may depend, however, on the potential benefits of transitioning individuals between government and the private sector versus the potential for conflicts of interest to develop on the part of those individuals. Some studies have identified positive aspects of the revolving door and the relationships developed between regulators and the regulated. Other studies find that government agencies are better run with stable leadership that does not often utilize the revolving door and keeps some distance between the agency and the regulated industry. Existing Revolving Door Laws and Executive Orders Current laws and regulations generally govern the movement of federal employees from the government to the private sector and vice versa. These provisions can be divided into three categories: broadly applicable postemployment laws, supplemental regulations, and executive order requirements. Revolving door provisions, however, do not necessarily apply to all instances of an employee leaving government service. Rather, they are specific to covered officials (see below) who leave government and are then involved with an issue they were also involved in while a federal employee. For some circumstances, the Office of Government Ethics (OGE) "has emphasized that the term [ particular matter ] typically involves a specific proceeding affecting the legal rights of the parties, or an isolatable transaction or related set of transactions between identified parties." Postemployment Laws Initially enacted in 1962, 18 U.S.C. §207 provides a series of postemployment restrictions and was enacted "to prevent former Government employees from leveraging relationships forged during their Government service to assist others in their dealings with the Government." These include a lifetime ban on "switching sides" on a particular matter involving specific parties on which any executive branch employee had worked personally and substantially while with the government; a two-year ban on "switching sides" on a somewhat broader range of matters that were under the employee's official responsibility; a one-year restriction on assisting others on certain trade or treaty negotiations; a one-year "cooling off" period for certain "senior" officials, barring representational communications before their former departments or agencies; a two-year "cooling off" period for "very senior" officials, barring representational communications and attempts to influence certain other high-ranking officials in the entire executive branch of government; and a one-year ban on certain officials performing some representational or advisory activities for foreign governments or foreign political parties. Current law focuses on postemployment restrictions of former federal employees rather than on individuals entering government. These postemployment laws focus on "representational" activities of former federal employees and are "designed to protect against the improper use of influence and government information by former employees, as well as to limit the potential influence that a prospective employment arrangement may have on current federal officials when dealing with prospective private clients or future employers while still in government service." One study found the appeal of postemployment contact with the government to be strong, especially when there is a "demand for the personnel credentials" of former officials within an industry, and when former officials can move from a regulatory agency to the regulated industry. The revolving door restrictions are in addition to statutes that apply more broadly to all individuals engaged in certain representational activities, regardless of whether they ever worked for the federal government. These restrictions, found primarily in the Foreign Agents Registration Act (FARA) and the Lobbying Disclosure Act (LDA), however, do not prohibit any particular behavior. Rather, they require registration as a foreign agent or lobbyist and the periodic disclosure of information about influence activities. Supplemental Regulations Regulations for the implementation of revolving door provisions are issued by OGE. Found at 5 C.F.R. §2641, these regulations provide an overview and definitions for current revolving door, postemployment conflict-of-interest restrictions; list prohibitions covered by the regulations and the law; and provide a summary of statutory exceptions and waivers. The OGE regulations pertain only to postemployment restrictions found at 18 U.S.C. §207 and only to executive branch employees. In some cases, agencies have issued additional regulations that supplement OGE's regulations. For example, the Office of Management and Budget (OMB) provides guidance on the application of postemployment restrictions to all government employees, whereas the Federal Housing Finance Agency provides specific additional postemployment restrictions for its employees. Executive Order Ethics Pledges In several instances, the President has issued an executive order to influence the interactions and relationships between the public and the executive branch. For example, President John F. Kennedy issued an executive order (E.O. 10939) that included provisions for behavior by government employees. In the years after President Kennedy's Administration, other Presidents also issued ethics executive orders to address postgovernment revolving door restrictions. These executive orders were issued by President Lyndon Johnson, President Richard Nixon, President Ronald Reagan, and President George H. W. Bush. In more recent Administrations, three Presidents have each issued an executive order that included additional revolving door restrictions for certain Administration appointees. They are President Clinton (1993), President Obama (2009), and President Trump (2017). Each of these executive orders contained an ethics pledge that provided additional conflict-of-interest requirements for executive branch personnel leaving the government and for individuals entering government. Each also extended statutory and regulatory revolving door provisions, included additional restrictions on lobbyists entering government and lobbying back government upon departure, and in two instances (Clinton and Trump) contained restrictions on former appointees leaving the government to represent a foreign principal. For a more detailed discussion of executive order ethics pledges, see CRS Report R44974, Ethics Pledges and Other Executive Branch Appointee Restrictions Since 1993: Historical Perspective, Current Practices, and Options for Change , by Jacob R. Straus. Revolving Door: Advantages and Disadvantages Discussion of whether revolving door restrictions are positive or negative generally focuses on whether former government employees, when they switch jobs, have an inherent or perceived conflict of interest. Though legislation often treats the revolving door as a negative trend, the movement of individuals between the government and private sector may also present multiple potential benefits. One argument in favor of the revolving door, for example, is that the promise of future private-sector employment could potentially improve the quality of candidates applying for government jobs. Further, direct connections with government officials are important, but a close relationship is not necessarily what drives postemployment activities. Although some believe that government employees contemplating a move to the private sector will be friendly to industry interests at the expense of the public interest, two studies have also concluded that regulators instead may engage in more aggressive actions, regardless of their future job prospects. Additionally, the flow of personnel between the public and private sectors may increase the knowledge base of both sectors. Critics of the revolving door and the movement of employees between the government and private sector often advocate for longer "cooling off" periods and stronger restrictions related to conflicts of interest. Additionally, critics often assert that the revolving door has negative effects for the transparency and efficiency of government. These critics see existing bias between those in government and their connections with lobbying firms and the potential for those connections to be exploited when the individual is employed by the private sector. Additional criticism of the revolving door focuses on the worth of a former government employee over time. One study has concluded that a majority of revenue generated by private lobbying firms was directly attributable to employees with previous government experience. Another study found that "'who you know' rather than 'what you know' drives a good proportion of lobbying revenues." Research Design and Methodology In every Administration, executive branch officials arrive from, and depart to, the private sector. The movement between the government and the private sector touches on many industries and professions. When such movement occurs, it is possible that conflicts of interest could arise for current and former government officials. Data on executive branch employees entering and exiting the government have historically been difficult to compile. During the 2017-2018 academic year (September 2017 to May 2018), CRS partnered with graduate students at the Bush School of Government and Public Service at Texas A&M University to collect and analyze data on the revolving door. Data were collected on the subset of former executive branch officials who were listed in the United States Government Policy and Supporting Positions (the Plum Book ). Published every four years, the Plum Book "lists over 7,000 Federal civil service leadership and support positions … that may be subject to noncompetitive appointment, nationwide. Data covers positions such as agency heads and their immediate subordinates, policy executives and advisors, and aides who report to these officials." The positions listed in the Plum Book are political appointments, which represent a subset of executive branch employees. Therefore, this report presents data on that subset of individuals who have worked in these executive branch positions. Additionally, since the Plum Book is published only once every four years, it is a "snapshot" of a given Administration's appointees and includes only individuals who were serving at the time of publication. Four Plum Books were used to build a dataset of political appointees who served in President George W. Bush's and President Barack Obama's Administrations. Overall, 6,665 federal appointees were included spanning the two Administrations. Table 1 reports the number of appointees from each Administration included in this dataset. If an appointee served in more than one Administration, data reported are for the most recent Administration served. Appointees were not included in the dataset twice. Further, if an appointee left the Administration prior to the Plum Book 's publication, then they do not appear in the data. Political appointees included in the dataset represented 15 Cabinet departments and were paid at the GS-13 level or higher—a pay rate generally considered to have supervisory authority in the executive branch. Table 2 lists the Cabinet departments included in this study and the number of employees from that Cabinet department included in the dataset. For most individuals and industries, data on both pregovernment and postgovernment service is not readily obtainable from public sources. Therefore, this report uses official Lobbying Disclosure Act (LDA) data on registered lobbyists to gain insight into the revolving door phenomenon. Administered by the Clerk of the House of Representatives and the Secretary of the Senate, LDA registration data are required by law to be published online. The LDA database includes all registration and disclosure statements for lobbyists and is searchable by name, lobbying firm, or lobbying client. Since the Plum Book provides the names of former executive branch officials, the LDA database was searched to match pregovernment and postgovernment service of individuals registered as lobbyists. Appointees were classified as lobbyists if they were registered under LDA at any time before or after their government service, regardless of the duration of their registration. These data, which reflect a subset of people who move between employment in the private sector and government in either direction, are the focus of this report's analysis. Revolving Door Lobbyists in the Executive Branch Overall Patterns Of Bush and Obama Administration executive branch appointees in the dataset, approximately 92% (6,159) were never registered as lobbyists, while 8% (506) were registered either before, after, or both before and after their government service. Of those registered as lobbyists, approximately 36.5% registered before joining the government, 55.1% registered after leaving their executive branch jobs, and 8.3% registered both before and after their federal service. Overall, these numbers generally appear to be in line with other studies of the executive branch, which suggest that most high-level federal appointees were not employed as lobbyists either prior to, or after, their government service. Examining the number and percentage of lobbyists in the dataset by Administration ( Table 3 ) shows that the overall levels of registered lobbyists either before or after government service is relatively low in both the Bush Administration and the Obama Administration. The Obama Administration, however, had more of its appointees who were registered lobbyists before their government service than after their government service, while the Bush Administration had more of its appointees who were registered lobbyists after their government service than before their government service. As shown in Table 3 , the total number of registered lobbyists in the dataset from the Bush Administration (340) was higher overall than from the Obama Administration (166), although the number of lobbyists serving in either Administration is not particularly large compared to the total number of appointees included in the dataset. During his Administration, President Obama instituted an executive order to restrict the number of lobbyists entering the Administration, a policy that did not exist in the Bush Administration. The number of individuals who were registered lobbyists before serving in President Obama's first term is similar to the first term of the Bush Administration. The number of lobbyists entering government, however, was higher in President Obama's second term than in either the Bush Administration or President Obama's first term. For individuals leaving the Administration, the number of registered lobbyists is lower in the Obama Administration than in the Bush Administration. Department Trends In the dataset, Cabinet departments differed greatly in the number of officials who were registered lobbyists either before or after their federal service. Some departments had few individuals who were registered lobbyists either before or after their time in government, whereas others had more. Figure 1 reports the percentage of registered lobbyists by department in the dataset collected by the Bush School of Government and Public Service and CRS. As shown in Figure 1 , the percentage of federal appointees in the dataset who registered as lobbyists before their government service, after their government service, or both ranges from a high of 18% (Department of Commerce) to a low of 1% (Department of Justice). The figures for other agencies ranges between 2% and 17%. The overall percentages of Cabinet department officials in the dataset who have ever been registered lobbyists might raise some questions for future research on the connections between government agencies and regulated industries. For example, some agencies appear to have a higher percentage of lobbyists than other agencies. Could a high percentage of lobbyists indicate stronger links to regulated industries? Similarly, how might lobbyists entering government differ in their government-industry connection than lobbyists leaving government? Might maintaining government-industry connections allow for better outreach by government agencies and access to information and resources by interest groups? The timing of when lobbyists registered may provide additional insight into how often federal officials in the dataset utilized the revolving door between government and lobbying. Figure 2 shows the percentage of LDA-registered officials at various agencies divided by when they registered—before their service, after their service, or both. As Figure 2 shows, every Cabinet department for which data were gathered had some number of officials listed in the Plum Book who registered as lobbyists either before or after their government service, or both. The number of officials in the dataset identified as registered lobbyists is noted on the left-hand side of Figure 2 next to the name of the federal department at which they worked. As the figure shows, each department had a different mix of the percentage of its officials in the dataset identified as registered lobbyists who registered to lobby before their government service, after their government service, or both. The percentage of the total number of lobbyists who worked at a particular agency who were registered lobbyists before their government service ranged from 10% in the Department of Labor to 61% in the Department of Veterans Affairs. The percentage of the total number of lobbyists who worked at a particular agency who were registered lobbyists after their government service ranged from 39% in the Department of Veterans Affairs to 82% in the Department of Transportation. Additionally, all departments included in the data except the Department of Veterans Affairs had individuals who were registered lobbyists before and after their government service. For the Department of Labor, half of officials who were lobbyists registered both before and after their government service. For other agencies, the percentages ranged from 1% (Department of State) to 19% (Department of Housing and Urban Development). Conclusions and Selected Considerations for Congress In every Administration, individuals move between the public and private sectors. In recent years, there has been greater focus on potential additional restrictions that might be placed on individuals entering and exiting government through the introduction of legislation to amend current revolving door restrictions and the issuance of executive orders to temporarily increase the "cooling off" period for executive branch appointees. Current law compartmentalizes the revolving door by placing distinctive postemployment restrictions on different types of government employees. For example, restrictions on government officials engaged in contracting do not necessarily apply to nonprocurement or noncontracting employees. Such varying restrictions were enacted because "the present complexity and size of Executive departments require occasional separate treatment of certain departmental agencies and bureaus. It would be patently unfair in some cases to apply the one year no contact prohibition to certain employees for the purpose of an entire department—when, in reality, the agency in which he worked was separate and distinct from the larger entity." Amending "Cooling Off" Periods In past Congresses, legislation has been introduced to lengthen revolving door "cooling off" periods. Those measures often propose extending "cooling off" periods to as few as two years to instituting a lifetime ban. If enacted, increased restrictions could serve to diminish the interaction between former government officials and government agencies and could reduce the appeal of leaving the government for a private-sector position. Additionally, such additional restrictions might "eliminate the appearance of favoritism a former official may have in lobbying his or her former office, and … prevent a former official from financially benefiting from the use of confidential information obtained while working for the Federal Government." Conversely, extending the "cooling off" period could possibly be seen as an unreasonable restriction on postemployment and "curtailing an individual's constitutional right of free association." Alternatively, Congress could reduce or eliminate the "cooling off" period. Having a shorter "cooling off" period, or eliminating it altogether, might arguably increase the talent pool available both inside and outside the government. Finally, Congress could codify past executive branch ethics pledges that generally placed additional restrictions on executive branch appointees. Codifying ethics pledge provisions would have the effect of making those changes permanent, and not subject to being revoked by a future executive order. This could allow for permanent changes to existing ethics and conflict-of-interest provisions. Administration of the Revolving Door Administration and enforcement of revolving door provisions are spread among several entities. For example, each agency is responsible for collecting financial disclosure statements from individual employees and ensuring that they comply with conflict-of-interest provisions, including revolving door restrictions. Potential violations of revolving door laws, however, would likely be prosecuted by the Department of Justice. Congress could amend current law to consolidate the administration and enforcement of conflict of interest and revolving door provisions. Consolidation could provide a single office to help ensure compliance and enforcement of existing laws. Consolidation, however, would potentially add an additional layer to the collection and evaluation documents used to identify potential conflicts-of-interest or revolving door concerns. Since each agency collects financial disclosure forms from its employees, those forms would still need to be transmitted to a central location. Ethics enforcement, including the review of financial disclosure forms for potential conflicts of interest, has historically been conducted at the agency level, as each agency is often in the best position to determine whether a real or perceived conflict exists for its employees. Maintain Current Revolving Door Standards Congress might determine that current revolving door laws and regulations are effective or that the potential costs of changes outweigh potential benefits. Instead of amending existing revolving door provisions, Congress could continue to use existing law and regulations to govern the movement of individuals between the federal government and private sector. Changes to the revolving door could be made on an as-needed basis through modifications to executive branch regulations or executive orders.

Individuals may be subject to certain restrictions when leaving the government for private employment or joining the government from the private sector. These restrictions were enacted in response to what is often referred to as the revolving door . Generally, the revolving door is described as the movement of individuals between the public and private sector. Individuals may move because they possess policy and procedural knowledge and have relationships with former colleagues that are useful to prospective employers. Laws attempting to restrict the movement of individuals between the government and the private sector have existed since at least the late 1800s. Today's revolving door laws focus on restricting former government employees' representational activities that attempt to influence federal officials with whom they used to work. Found at 18 U.S.C. §207, revolving door laws for executive branch officials include (1) a lifetime ban on "switching sides" (e.g., representing a private party on the same "particular matter" involving identified parties on which the former executive branch employee had worked while in government); (2) a two-year ban on "switching sides" on a broader range of issues; (3) a one-year restriction on assisting others on certain trade and treaty negotiations; (4) a one-year "cooling off" period for certain senior officials on lobbying; (5) two-year "cooling off" periods for very senior officials from lobbying; and (6) a one-year ban on certain former officials from representing a foreign government or foreign political party. In addition to laws, executive orders have been used to place further restrictions on executive branch officials, including officials entering government. For example, President Trump issued an executive order (E.O. 13770) to lengthen "cooling off" periods for certain executive branch appointees both entering and exiting government. To date, much of the empirical work concerning the revolving door has focused on former Members of Congress or congressional staff leaving Capitol Hill, especially those who become lobbyists in their postcongressional careers. This report provides some empirical data about a different aspect of the revolving door—the movement into and out of government by executive branch personnel. Using research conducted by the Bush School of Government and Public Service at Texas A&M University's capstone class over the 2017-2018 academic year, this report presents data about the revolving door in the executive branch through the lens of President George W. Bush's and President Barack Obama's Administrations. The analysis includes Cabinet department officials who were listed, for either Administration, in the United States Government Policy and Supporting Positions (the Plum Book ). Through an examination of appointees in President Bush's and President Obama's Administrations, several findings emerge. First, approximately 92% of executive branch officials in the examined dataset were never registered lobbyists, while 8% were registered lobbyists at some point before or after their government service. Second, Cabinet departments differed greatly in the number of officials who were registered lobbyists either before or after their federal service. Although every Cabinet department surveyed had some percentage of officials registered as lobbyists either before or after their government service, the percentage of officials included in the dataset who registered as lobbyists before their government service, after their government service, or both ranged from a high of 18% (Department of Commerce) to a low of 1% (Department of Justice). Third, the data also show that for lobbyists entering government, the percentage of officials in the dataset who had been lobbyists before government serving in the Bush and Obama Administrations ranged from 10% in the Department of Labor to 61% in the Department of Veterans Affairs. The analogous percentages for government employees in the dataset leaving to become lobbyists ranged from 39% in the Department of Veterans Affairs to 82% in the Department of Transportation. Finally, the report identifies several areas for potential congressional consideration. In recent years, several bills have been introduced in Congress to address many of these potential areas. These include options to amend existing "cooling off" periods and evaluate the administration and enforcement of revolving door regulations. Alternatively, Congress may choose to maintain current "cooling off" periods, administration, and enforcement practices.

GAO_GAO-20-108

Background The 340B Program was created in 1992 following the creation of the Medicaid Drug Rebate Program and gives 340B covered entities—certain eligible hospitals, clinics, and other entities—discounts on covered outpatient drugs comparable to those made available to state Medicaid agencies. According to HRSA, which administers and oversees the 340B Program, the program’s purpose is to enable participating hospitals and other providers to stretch scarce federal resources to reach more eligible patients and provide more comprehensive services. In addition to realizing substantial savings through 340B Program price discounts— which HRSA estimates as 25 to 50 percent of the cost of drugs—covered entities can generate revenue through their participation in the 340B Program. For example, they can purchase covered outpatient drugs at the 340B Program price for all eligible patients regardless of the patients’ income or insurance status and generate revenue by receiving reimbursement from patients’ insurance that may exceed the 340B prices paid for the drugs. Covered Entities Entities are generally eligible for the 340B Program—that is, are covered entities—if they receive one of 10 federal grants or are one of six types of hospital. Hospitals must also meet additional requirements, such as being owned or operated by a state or local government, being formally granted governmental powers, or being nongovernmental. The 340B statute requires nongovernmental hospitals to be nonprofit and to have contracts with state or local governments to provide health care services to the 340B-specified low-income population. However, the requirement does not specify criteria for these contracts, such as the amount or type of services to be provided to these low-income individuals. Generally, hospitals must also meet other requirements to participate, such as treating a disproportionate number of low-income Medicare and Medicaid patients. Hospital participation in the 340B Program has more than tripled over the last decade, due, in part, to the enactment of the Patient Protection and Affordable Care Act in 2010, which expanded the types of hospitals that could qualify for the program. According to data from HRSA, in 2009, prior to the law’s enactment, there were more than 800 340B-participating hospitals, compared to more than 2,500 in 2019. The majority of participating hospitals are nongovernmental hospitals. Specifically, 1,690, or 67 percent, of the hospitals participating as of January 1, 2019 were nongovernmental hospitals. (See figure 1.) HRSA Oversight HRSA is responsible for verifying hospitals’ and other covered entities’ eligibility to participate in the 340B Program. HRSA reviews nongovernmental hospitals’ eligibility for the 340B Program at registration, recertification, and through audits. Registration. Prior to participation in the 340B Program, hospitals must register with HRSA, at which point they must self-attest to meeting the program’s eligibility requirements. Additionally, HRSA’s hospital registration instructions specify that, at the time of registration, a nongovernmental hospital must have documentation that shows it is nonprofit (such as copies of Internal Revenue Service documentation) and a copy of its contract with a state or local government to serve the 340B-specified low-income population. This documentation must be provided to HRSA upon request. During each quarterly registration period, HRSA conducts contract integrity checks for a random sample of 20 percent of newly registering nongovernmental hospitals. For the selected hospitals, HRSA requests a copy of the hospital’s contract with the state or local government, which it reviews to verify that the contract is signed by officials from both organizations, is in effect, and does not expire before program participation would begin. HRSA policy states that a hospital that cannot provide a state or local government contract when selected for a contract integrity check at registration will not be registered for the 340B Program. Recertification. To remain in the 340B Program, hospitals must annually recertify their eligibility. During recertification, hospitals are to ensure that their information (e.g. name, address, point of contact) is correct in HRSA’s internal 340B Program database and self-attest that the hospital still meets program requirements. HRSA collects documentation from the hospital if it reports changes to its name, classification (i.e., whether it is government owned or operated, delegated governmental powers, or nongovernmental), or nonprofit status. Audits. HRSA audits 200 covered entities—a combination of hospitals and federal grantees—per year. HRSA’s audits include covered entities (including hospitals) that are selected based on risk-based criteria (approximately 90 percent of the audits conducted each year), and entities that are targeted based on, for example, stakeholder allegations of noncompliance (10 percent of audits conducted). The criteria for risk- based audits include a covered entity’s changes in the volume of 340B Program drug purchases, time in the program, complexity of its program, and history of violations or allegations of noncompliance. Among other things, HRSA’s audits include assessments of each hospital’s 340B eligibility status. For a nongovernmental hospital, HRSA’s guidance indicates that auditors are expected to review the hospital’s contract with the state or local government to ensure that it is for serving the 340B-specified low-income population and is signed by both a hospital and state or local government official. Auditors are also expected to review the contract’s start and end dates to ensure that it is effective during a specific period of review. HRSA defines the audit’s period of review as the time frame beginning the first day of the audit’s sample period—a six-month period that predates and is not contiguous with the beginning of the onsite audit—and ending on the last day of the onsite audit. For example, a hospital with an onsite audit in March of 2017 may have a sample period from July 1, 2016 through December 31, 2016, which means that auditors should verify that the hospital’s contract was in effect from at least July 1, 2016 through the end of the March 2017 onsite audit. If HRSA identifies deficiencies in hospitals’ contracts, the agency may issue (1) findings of noncompliance, which are made public on HRSA’s website, or (2) areas for improvement, which are not made public. When an audit results in a finding of noncompliance, the hospital is required to submit a corrective action plan within 60 days of the audit report being finalized for HRSA’s approval. HRSA closes the audit once the hospital attests that the corrective action plan has been fully implemented, and any necessary repayments have been made to affected manufacturers. For example, if a nongovernmental hospital were unable to demonstrate that it had a contract with a state or local government when audited, HRSA policy states that the hospital would be issued a finding of noncompliance and may be subject to termination from the 340B Program for not meeting eligibility criteria. In addition, the hospital may be responsible for repayment to manufacturers for discounts it received during the period it lacked a contract. Contracts Reviewed Included Few Details on Nongovernmental Hospitals’ Obligations to Serve Low-Income Individuals Most of the contracts we reviewed between nongovernmental hospitals and state or local governments obligated the hospitals to provide health care services to low-income individuals, but they included few details about those obligations. The 340B statute requires participating nongovernmental hospitals to have state or local government contracts to provide health care services to the 340B-specified low-income population, but does not otherwise specify details for the content of these contracts. Of the 240 contracts we reviewed, 224 (93 percent) required the hospital to provide services to low-income individuals. Of these 224 contracts, 169 (75 percent) specifically mentioned providing services to the 340B-specified low-income population (low-income individuals not eligible for Medicaid or Medicare). 55 (25 percent) specified a more general obligation to provide services to individuals who are likely low-income, uninsured, or underinsured, such as enrollees in a county program for the medically indigent, inmates at a local detention center, or individuals receiving treatment through a county mental health program. Less than one-third of the contracts we reviewed defined “low-income” or included detailed requirements for the amount or type of services to be provided. Of the 224 contracts that contained an obligation to provide services to low-income individuals, 14 (6 percent) specified what was considered low income. Of these contracts, the specific income threshold varied, generally ranging from 100 percent to 400 percent of the federal poverty level. 71 (32 percent) specified the amount of services the hospitals were to provide to low-income individuals. The contracts generally defined the amount of services as a range in the cost of care the hospital was expected to provide; the amount varied by contract. For example, one contract specified that the hospital would provide $60,000 to $100,000 of services per year, while another included a range of $62 million to $85 million per year. Contracts that did not specify dollar amounts included, for example, provisions regarding the number of staff available to provide services or requirements to provide services at certain times. One such contract required a hospital to provide at least one full-time-equivalent behavioral health provider for specified sites, while another required a hospital to administer influenza vaccines at two clinics on two Fridays each year during influenza season. 53 (24 percent) identified specific types of services that hospitals were to provide, often specifying multiple categories of services. For example, one contract required a hospital, among other things, to provide inpatient and outpatient services, obstetrics, and cardiovascular surgery. Other contracts only identified a single category of service that the hospital was required to provide. For example, nine of the 53 contracts specified that the hospitals were required to provide emergency services, although hospitals that operate emergency departments are already required, as a condition of participating in Medicare, to screen, and if necessary stabilize patients who seek emergency care, regardless of their ability to pay. Additionally, four of the contracts reviewed required the provision of behavioral health services, two specified the provision of vaccinations, and one was for the evaluation and treatment of tuberculosis. 46 of the 224 contracts (21 percent) specified that state or local governments would pay hospitals for the services provided. In some cases, the contracts specified that the hospitals would be paid to provide care for low-income individuals at rates established under other programs–such as the state’s Medicaid program. Others established rates specifically for services provided to the population covered under the contract. Finally, approximately one-third of the contracts reviewed included provisions that would allow the state and local governments contracting with hospitals to ensure that the contractually required services are being provided. Specifically, 68 of the 224 contracts (30 percent) included provisions for reporting, monitoring or enforcement, as shown below in Figure 2; some contracts included more than one type of provision. Of the 68 contracts, 56 required hospitals to report information to the state or local government. Of these 56, 40 required reporting on the services provided under the contract, including types, dollar amounts, or number of services provided to certain populations, such as “medically indigent,” “uninsured persons,” and “underinsured persons.” For example, one contract required the hospital to provide the government with an annual report containing information about the value of free care provided to indigent persons, the total value of discounted care provided to uninsured patients, and the number of declined requests for free or discounted care. The remaining 16 contracts included more general reporting requirements, such as to provide copies of any reports requested by state or federal licensing, regulatory, or accrediting entities, to the state or local government. 29 contracts included provisions for governments to monitor the hospitals’ provision of care. Specifically, 10 contracts required regular reviews, with some of those at specific time intervals (e.g. annually, quarterly), while 19 contracts required that hospitals be available for periodic audits or to provide the government access, upon request, to medical records and documents which could be used to review or evaluate the services being provided under the contract. 34 contracts included enforcement mechanisms for the government to apply consequences if the hospital did not meet the terms of the agreement. For example, one contract allowed the state government to terminate the contract 90 days after providing notice of the state’s determination that the hospital was not providing sufficient services to low-income individuals. Contracts for eight hospitals provided for monetary fines or withholding of funds if hospitals were found to be in breach of the contract. HRSA’s Processes Do Not Provide Reasonable Assurance That Participating Nongovernmental Hospitals Meet 340B Program Eligibility Criteria HRSA uses self-reported data to determine whether hospitals are nonprofit without assessing whether the data are reliable for that purpose. Additionally, HRSA relies primarily on nongovernmental hospitals’ self- attestations to verify the existence of state or local government contracts, and weaknesses in the reviews of contracts it does conduct hamper the identification of potential eligibility issues. HRSA Uses Self-Reported Data That May Not Be Reliable to Assess Hospitals’ Nonprofit Status HRSA uses Medicare cost report data from CMS to determine whether hospitals are nonprofit, but these data may not be sufficiently reliable for this purpose. Specifically, HRSA relies on self-reported information from cost reports on whether hospitals operate as nonprofit, proprietary, or governmental organizations. HRSA reviews this information at registration to check that hospitals have indicated that they are nonprofit organizations. Additionally, in April 2019, HRSA began conducting quarterly checks of cost report data to identify hospitals that list themselves as proprietary for further review, as this designation could be used by for-profit, rather than nonprofit, hospitals, contrary to 340B Program eligibility requirements. HRSA officials told us that the agency has not independently evaluated the reliability of the cost report data for determining nonprofit status. Additionally, a CMS official responsible for oversight of Medicare cost reports told us that CMS does not have any formal processes to assess the reliability of the data on whether a hospital is nonprofit, proprietary, or governmental, because these data do not affect Medicare reimbursement. The official added that the question on the cost report used to collect these data was not intended to assess nonprofit status, is not clearly defined, and may not be reported accurately. For example, the cost report instructions do not include definitions of nonprofit and proprietary for providers to refer to when they are completing their cost reports. HRSA requires hospitals to maintain additional documentation, such as Internal Revenue Service forms for tax-exempt organizations or documents from the state, to demonstrate their nonprofit status, but does not collect or review this documentation if hospitals indicate that they are nonprofit on their cost reports. In August 2019, HRSA submitted a proposal to the Office of Management and Budget to require hospitals registering for the 340B Program to submit documentation supporting the hospital classification that they select during registration, which would include requiring nongovernmental hospitals to submit documentation of their nonprofit status. However, this requirement, if it goes into effect, would apply only to newly registering hospitals and would not affect the nearly 1,700 nongovernmental hospitals currently participating in the 340B Program. For those hospitals, HRSA would continue to rely on the Medicare cost report data. Relying on the self-reported data from Medicare cost reports is inconsistent with federal internal control standards related to information and communication, which state that management should use quality information to achieve the entity’s objectives, such as by obtaining relevant data, based on identified information requirements, that are reasonably free from error and bias, and that management should evaluate the data for reliability. Without ensuring that the information it uses on hospitals’ nonprofit status is reliable, HRSA cannot effectively determine if nongovernmental hospitals participating, or seeking to participate, in the 340B Program meet the statutory eligibility requirements, creating a risk that for-profit hospitals could receive discounted pricing for which they are not eligible. HRSA Primarily Relies on Hospitals’ Self-Attestations to Verify the Existence of Contracts with State or Local Governments HRSA primarily relies on self-attestations from nongovernmental hospitals to verify that they have contracts in place with state or local governments as required to participate in the 340B Program. Specifically, HRSA relies on the attestations that hospitals are required to make during registration and recertification that they meet the program’s eligibility requirements. Although HRSA requires nongovernmental hospitals to have copies of their contracts, and to provide them upon request, it does not require most hospitals to submit those contracts at either registration or recertification. Additionally, while HRSA previously required each nongovernmental hospital to submit a certification of contract form during registration that was signed by a government official and attested to the existence of a contract to serve the 340B-specified low-income population, officials said the agency stopped requiring submission of this form in July 2014. At that time, officials said HRSA initiated a process of contacting government officials directly through an online certification process to confirm that newly registering hospitals had contracts in place. However, that process was eliminated in September 2017, and HRSA no longer has a process that requires state and local government officials to confirm the existence of contracts with nongovernmental hospitals. HRSA does collect and review contracts with state or local governments for a sample of nongovernmental hospitals through its audit and contract integrity check processes, but these reviews are currently limited in number and scope. Specifically, in fiscal years 2017 and 2018, HRSA audited about 7 percent of nongovernmental hospitals per year (108 and 109 hospitals in fiscal years 2017 and 2018, respectively). Additionally, at the time of our review, HRSA conducted contract integrity checks for 20 percent of newly registering hospitals; this equated to 41 hospitals in calendar years 2017 and 2018 combined. HRSA’s August 2019 proposed information collection request, if approved, would require all newly registering nongovernmental hospitals to submit their state or local government contracts at registration. However, as previously mentioned, this new requirement would only affect newly registering hospitals and not those already participating. Consequently, for the large majority of nongovernmental hospitals already registered for the 340B Program, self-attestations made electronically at registration and recertification would remain HRSA’s sole method of verifying that hospitals have state or local government contracts as required by the 340B statute. Additionally, HRSA officials told us that when the agency does collect documents from nongovernmental hospitals through its audits or contract integrity checks, they do not review them to determine if they are contracts (i.e., mutually binding agreements to provide services or supplies in exchange for something of value). Based on our review of documentation submitted to HRSA from 258 hospitals, 18 hospitals submitted documents that did not appear to meet this common definition of a contract; examples included certification of contract forms without accompanying contracts, articles of incorporation, and descriptions of community programs. Nevertheless, these hospitals were permitted to participate in the 340B Program. HRSA’s reliance on hospitals to attest that the required contracts are in place is contrary to federal internal control standards related to information and communication, which state that management should use quality information to achieve the entity’s objectives, such as by obtaining relevant data from external sources in a timely manner based on the identified information requirements. Without a process to verify that all nongovernmental hospitals have contracts in place, HRSA does not have reasonable assurance that nongovernmental hospitals participating in, or seeking to participate in, the 340B Program have contracts with state and local governments. Consequently, this increases the risk that nongovernmental hospitals that do not have the statutorily required contracts and are thus ineligible may register for, and participate in, the program. Weaknesses in HRSA’s Contract Reviews Hamper the Identification of Potential Eligibility Issues In addition to not determining whether the documentation provided by nongovernmental hospitals during contract integrity checks and audits are contracts, weaknesses in HRSA’s reviews hamper its ability to identify and address issues that affect the hospitals’ eligibility for the 340B Program. Specifically, we identified three weaknesses: (1) contract integrity checks do not assess whether contracts require hospitals to serve the 340B-specified low-income population; (2) guidance for auditors’ review of contracts has not been consistently documented and lacks detail; and (3) HRSA allows hospitals to avoid audit findings by entering into new contracts with state and local governments while audits are being conducted. HRSA’s contract integrity checks for newly registering hospitals do not assess whether the contracts require the provision of services to the 340B-specified low-income population. HRSA’s contract integrity checks for newly registering nongovernmental hospitals are limited to verifying that contracts clearly list the names of the hospital and unit of government and have appropriate signatures and dates; procedures for conducting these checks do not instruct staff to review whether the contracts require hospitals to provide health care services to the 340B-specified low-income population, as required to participate in the 340B Program. Of the 38 contracts submitted to HRSA for contract integrity checks in 2017 and 2018, two (5 percent) did not appear to require the hospitals to serve the 340B-specified low-income population, yet HRSA allowed the hospitals to begin participating in the 340B Program. Specifically, one hospital submitted a contract with a state government that was limited to providing services to beneficiaries of the state’s Medicaid program, although nongovernmental hospitals are to have contracts to provide services to individuals who are not entitled to Medicaid benefits. The other hospital submitted an agreement with a nonprofit company for management services, including accounting and payroll services, for their hospital and nursing home facilities. To participate in the 340B Program, nongovernmental hospitals must have a contract with a state or local government to provide health care services to the 340B-specified low-income population. Thus, allowing hospitals to participate when the state or local government contracts they submitted for review do not require them to serve this population is inconsistent with HRSA’s responsibilities for oversight of the 340B Program, including ensuring that participating hospitals meet the statutory eligibility requirements. Without amending its contract integrity checks to include verifying that newly registering hospitals have contracts that meet statutory eligibility requirements, HRSA risks allowing hospitals that are not eligible, and which may not be providing services to the 340B- specified low-income population, to participate in the 340B Program. Guidance for contract reviews during audits has not been consistently documented over time and lacks detailed instructions. Although HRSA officials told us they have always expected auditors to look for a contract through which a nongovernmental hospital would be eligible for the 340B Program, we found that HRSA’s guidance for auditors has not clearly documented these expectations and lacks detailed instructions. HRSA did not document key elements to look for— signatures, dates, and a requirement to serve the 340B-specified low- income population—in its guidance for auditors until August 2018. Further, the agency has made frequent changes to its guidance and procedures. For example, between November 2017 and July 2019, HRSA modified its guidance for auditors at least six times. In addition, HRSA’s guidance states that auditors are expected to perform a “simple logic test” to determine whether contracts require the hospital to serve the 340B- specified low-income population, but HRSA has not provided any additional information about how auditors are expected to conduct such a test. The guidance also advises auditors not to “dive too deep” when reviewing contracts. Of the 202 contracts submitted by hospitals as part of HRSA’s audits that we reviewed, 11 contracts (5 percent) did not appear to require hospitals to provide care to the 340B-specified low- income population, yet HRSA allowed the hospitals to continue their participation in the program. One such contract was a consent order that stated that the state’s attorney general would defer enforcement action based on the hospital’s agreement to abide by certain medical debt collection practices, such as adopting a zero tolerance policy for abusive, harassing, oppressive, false, deceptive, or misleading language or collections conduct. Furthermore, HRSA’s procedures for audits do not require auditors to separately affirm and record their review of the dates, signatures, and services required in the contracts. Thus, HRSA has no way of knowing whether auditors have checked and verified each of these elements. In addition to the 11 contracts that did not appear to obligate the hospitals to provide health care services to the 340B-specified low-income population, our review of 202 contracts submitted to HRSA by audited hospitals found 16 contracts (8 percent) were missing one or both signatures; 15 contracts (7 percent) were missing effective dates or were expired; at least 8 contracts had dates that did not cover the audit’s period of review, which includes a 6-month sample period before the start of the audit. For at least some of these contracts, HRSA was unaware of the issues we identified; HRSA did not issue audit findings in response to any of these contracts. HRSA has taken steps to address expired contracts. Specifically, in May 2019, HRSA revised its procedures for hospital registration and contract integrity checks to include language specifying that a hospital should not be approved for registration unless a contract is currently in place and that the contract must not expire before the participation start date. In addition, HRSA officials told us that in January 2020 the agency plans to implement a quarterly check of its 340B database to identify hospitals with expired state or local government contracts. However, these efforts do not address other date-related issues such as missing effective dates, or the issues with signatures or contract service requirements. Federal internal control standards related to control activities and enforcing accountability state that agencies should (1) implement control activities through policies, such as by documenting policies in the appropriate level of detail to allow management to effectively monitor the control activity; and (2) evaluate performance and hold individuals accountable for their internal control responsibilities, such as by communicating with the service organizations contracted to perform roles about the agency’s objectives and related risks, assigned responsibilities and authorities, and the expectations of competence to enable the service organization to perform its responsibilities. Without more specific guidance for auditors’ review of contracts, and procedures requiring auditors to separately document their review of each contract element, HRSA lacks reasonable assurance that the audits are appropriately identifying deficiencies in nongovernmental hospitals’ contracts with state or local governments. As a result, some hospitals appear to be participating in the 340B Program based on contracts that are inconsistent with program requirements or HRSA’s guidance. HRSA allows audited hospitals to avoid audit findings by entering into new contracts with state and local governments while audits are being conducted. As previously noted, our review of contracts submitted to HRSA by audited hospitals found that eight hospitals provided contracts that did not appear to cover the audit’s period of review. Three of the eight hospitals entered into the contracts while the audit was ongoing. According to HRSA policy, a hospital that does not demonstrate that it had a contract for the entire audit period should be issued a finding of noncompliance and held responsible for repayment to manufacturers for any discounts received improperly during the period for which it did not have a contract. However, HRSA did not issue such findings or penalties for any of the hospitals we identified with contracts that did not cover the audit’s period of review. For example, in one case, officials said HRSA had included a finding in its draft audit report, but withdrew it when presented with a new contract with an effective date made retroactive to cover the audit’s entire period of review. in another case, a hospital that had been government-owned was sold to a private company in 2013, but did not switch its classification to nongovernmental until 2015, and did not sign a contract with a state or local government until it was audited in fiscal year 2018. The hospital’s contract, signed in 2018, included a retrospective attestation that the hospital had been providing care for the 340B-specified population since 2013. HRSA officials told us that they accept such retroactive documentation in conjunction with current, valid contracts on a case-by-case basis. As such, a hospital may avoid findings, and potential repayments to manufacturers, by asserting that it had been providing care even when a contract was not in place. To participate in the 340B Program, a nongovernmental hospital is required by statute and HRSA policy to have a contract with state or local government to serve the 340B-specified low-income population. Allowing hospitals to submit retroactive contracts after they have already begun participation in the program is inconsistent with HRSA’s responsibilities for oversight of the 340B Program, including ensuring that participating hospitals meet the statutory eligibility requirements. Further, allowing hospitals that are unable to demonstrate that they have contracts in place that cover the audit’s period of review to continue to participate in the 340B Program without consequence undermines the effectiveness of HRSA’s audit process and increases the risk that ineligible hospitals will receive discounts under the program. Conclusions The 340B Program allows hospitals and certain other providers to stretch federal resources to reach more eligible patients and provide more comprehensive services. Participation in the 340B Program also can be beneficial for hospitals and other covered entities as they can realize substantial savings on covered outpatient drugs and generate revenue on those drugs. Hospital participation in the 340B Program, and hospital purchases of discounted drugs through the 340B Program, has risen rapidly over time. However, HRSA’s current processes and procedures do not provide reasonable assurance that nongovernmental hospitals seeking to participate and benefit from the 340B Program meet the program’s eligibility requirements. Given the weaknesses in HRSA’s oversight, some hospitals that do not appear to meet the statutory requirements for program eligibility are participating in the 340B Program and receiving discounted prices for drugs for which they may not be eligible. Although HRSA has initiated some efforts to strengthen its processes for assessing hospitals’ eligibility, continued growth in the number of participating hospitals and 340B- purchased drugs highlights the need for HRSA to improve its oversight processes. This is critical to safeguarding the integrity of the 340B Program. Recommendations for Executive Action We are making the following six recommendations to HRSA: The Administrator of HRSA should ensure that the information it uses to verify nonprofit status for all nongovernmental hospitals that participate in the 340B Program is reliable—for example, by requiring and reviewing the submission of official documentation hospitals must already maintain or by ensuring the reliability of the data the agency uses. (Recommendation 1) The Administrator of HRSA should implement a process to verify that every nongovernmental hospital that participates in the 340B Program has a contract with a state or local government as required by statute. (Recommendation 2) The Administrator of HRSA should amend its contract integrity check procedures for the 340B Program to include a review of whether hospitals’ contracts with state and local governments require the provision of health care services to low-income individuals not eligible for Medicaid or Medicare as required by statute, and should provide guidance for staff to conduct these reviews. (Recommendation 3) The Administrator of HRSA should provide more specific guidance for 340B Program auditors on how to determine if nongovernmental hospitals’ contracts with state and local governments require the provision of health care services to low-income individuals not eligible for Medicaid or Medicare. (Recommendation 4) The Administrator of HRSA should revise its 340B Program audit procedures to require auditors to document their assessments of whether nongovernmental hospitals’ contracts with state and local governments are appropriately signed, cover the time periods under review, and require hospitals to serve low-income individuals not eligible for Medicaid or Medicare, such as by requiring auditors to separately affirm and record their review of each of these elements. (Recommendation 5) The Administrator of HRSA should require nongovernmental hospitals participating in the 340B Program to demonstrate that they have contracts with state or local governments in effect prior to the beginning of their audits’ periods of review and should apply consistent and appropriate consequences for hospitals that are unable to do so. (Recommendation 6) Agency Comments and Our Evaluation HHS provided written comments on a draft of this report, which are reproduced in appendix II, and technical comments, which we have incorporated as appropriate. In its written comments, HHS concurred with five of our six recommendations; it did not concur with one of them. In concurring with five of our recommendations, HHS stated that HRSA is evaluating its audit process and other program integrity efforts, and noted that HRSA has made improvements to strengthen its program integrity efforts that align with some of our recommendations. With respect to our recommendation to require auditors to document their assessments of the required elements of contracts, HHS concurred and noted that HRSA updated its audit procedures. Specifically, HRSA’s draft procedures for fiscal year 2020 audits require auditors to specify if the hospital provided a contract that includes the names and signatures for both the hospital and government agency, effective dates that cover the entire audit period, and that requires the provision of services to the 340B-specified low- income population. We are pleased that HRSA has already taken this step to implement our recommendation. To fully implement this recommendation, HRSA should incorporate these changes into its final audit procedures for fiscal year 2020. HHS also concurred with our recommendation to require nongovernmental hospitals to demonstrate that they have contracts in effect prior to the beginning of the audits’ periods of review, and to apply consistent and appropriate consequences if they do not. Also, as noted above, HRSA has updated its draft audit procedures to specify that auditors should look for effective dates that cover the entire audit period. While this is an important step, HRSA must also show that it has applied consistent and appropriate consequences when auditors find that nongovernmental hospitals did not have contracts in effect prior to the beginning of their audit periods. On a related issue, HHS expressed concern over and disagreed with our finding that HRSA allows hospitals to avoid audit findings by entering into new contracts while audits are being conducted, noting that HRSA assesses potential audit findings on a case-by-case basis to ensure that any necessary steps are taken to address issues. However, as we reported, HRSA officials have indicated that they accept retroactive contract documentation on a case-by-case basis; we continue to believe that this practice—accepting new contracts that are retroactive— effectively allows hospitals to avoid audit findings. In addition, while we agree that working with hospitals to address noncompliance is appropriate, we continue to believe that such efforts should be in addition to, not instead of, documenting noncompliance by issuing findings and applying appropriate consequences, in accordance with HRSA’s audit policies and procedures. To do otherwise undermines the integrity of HRSA’s audits, and increases the risk that ineligible hospitals will receive discounts under the program. HHS also concurred with our recommendation to ensure that the information HRSA uses to verify nonprofit status is reliable, but stated that HRSA believes that the information it uses from hospitals’ Medicare cost reports is reliable, because hospital administrators attest to the accuracy of their cost reports. However, as discussed in our report, neither HRSA nor CMS has evaluated the reliability of the cost report data for verifying nonprofit status, and a CMS official responsible for oversight of the cost reports told us that the question on the cost report is not clearly defined and may not be reported accurately. As such, we continue to believe that HRSA needs to assess the reliability of the Medicare cost report data should it continue to use those data for determining hospitals’ nonprofit status. Alternatively, HRSA could require hospitals to submit documentation of their nonprofit status, such as Internal Revenue Service documents, which HRSA acknowledged hospitals are required to maintain as part of their auditable records. HHS did not concur with our recommendation to implement a process to verify that every nongovernmental hospital that participates in the 340B Program has the statutorily required contract with a state or local government. HHS noted that it has requested authority to require hospitals registering for the 340B Program to submit documentation supporting the hospital classification that they select during registration. According to HHS, if approved, HRSA would begin collecting and reviewing contracts from all newly registering nongovernmental hospitals. However, HHS stated that HRSA does not have the resources to collect, review, and verify that every participating nongovernmental hospital has a contract with a state or local government. While we understand that verifying the existence of contracts for all participating nongovernmental hospitals would require additional effort on HRSA’s part, our review found that relying on hospitals’ attestations is not sufficient to ensure hospitals’ eligibility. Additionally, implementing a process to verify the existence of a contract does not necessarily require that HRSA collect and review contracts from every hospital. There are other potential options, such as obtaining confirmation from the state or local government that they indeed have a contract with the hospital to provide services to the 340B-specified low-income population. HHS also commented that implementing our recommendation would create a significant burden on covered entities. However, as we noted in our report, HRSA already requires hospitals to maintain copies of their state or local government contracts. Therefore, it is unclear how implementing a process to verify the existence of those contracts would represent a significant burden for nongovernmental hospitals already registered for the program. Ensuring the eligibility of covered entities that participate in the 340B Program is essential for program integrity. As such, we continue to believe that HRSA needs to take action, beyond relying on hospitals’ self-attestations, to verify that all participating nongovernmental hospitals have contracts with state or local governments that meet the statutory requirements of the program. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS, the Administrator of HRSA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other major contributors to this report are listed in appendix III. Appendix I: Characteristics of the Contracts Reviewed Table 1 provides information about the 240 contracts between hospitals and state or local governments that were included in our review, including information about the type of hospital and the level of government that were parties to the contract. In at least two cases, the hospitals contracted with other health care providers who were themselves 340B Program participants, such as a community health center operated by a local health department. Officials signing on behalf of state and local governments included individuals with executive positions, such as the heads of state agencies, mayors, and county executives, but also included a city alderman, a vice-chancellor for finance at a state university health system, and a juvenile court judge. Appendix II: Comments from the Department of Health and Human Services Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Michelle Rosenberg, Assistant Director; Hannah Locke, Analyst-in-Charge; Jennie Apter; George Bogart; Kaitlin Farquharson; Matthew Green; Vikki Porter; Daniel Ries; Brienne Tierney; and William T. Woods made key contributions to this report.

The number of nongovernmental hospitals participating in the 340B Program has grown over time. HRSA requires participating hospitals to register and annually recertify their eligibility. HRSA also reviews hospitals' eligibility through audits of a small sample each year. GAO was asked to provide information on 340B-participating hospitals' contracts with state and local governments. This report (1) describes any obligations in selected nongovernmental hospitals' contracts to serve low-income individuals, and (2) examines HRSA's processes to assess nongovernmental hospitals' eligibility. GAO examined contract documentation from all 258 nongovernmental hospitals HRSA reviewed in 2017 and 2018; and HRSA's policies, procedures, and guidance related to 340B hospital eligibility. GAO also interviewed HRSA officials. Under the 340B Drug Pricing Program (340B Program), administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), drug manufacturers provide discounted prices on outpatient drugs to certain hospitals and other entities. About two-thirds of hospitals participating in the 340B Program (approximately 1,700) are nongovernmental hospitals (private, nonprofit hospitals), which qualify for the program, in part, based on having contracts with state or local governments to provide health care services to the 340B-specified low-income population—low-income individuals not eligible for Medicaid or Medicare. GAO's review of contract documentation for 258 nongovernmental hospitals found that most contracts obligated these hospitals to provide health care services to low-income individuals. However, few of the contracts reviewed included details about those obligations, such as the amount or type of care hospitals were required to provide. The statute does not require the contracts to contain such details. GAO found that HRSA's processes do not provide reasonable assurance that participating nongovernmental hospitals meet eligibility requirements. For example, HRSA primarily relies on hospitals' self-attestations to verify the existence of contracts with state and local governments. The agency reviewed contract documentation for less than 10 percent of nongovernmental hospitals per year in 2017 and 2018. GAO also identified several weaknesses in HRSA's review of the nongovernmental hospital contracts: HRSA does not conduct reviews to determine whether the documents submitted by nongovernmental hospitals are actual contracts, namely that they are mutually binding agreements to provide services or supplies in exchange for something of value. GAO found that 18 of the 258 hospitals reviewed submitted documents that did not appear to be contracts, such as descriptions of community programs, yet all of these hospitals were permitted to participate in the program. When audits have identified hospitals that did not have contracts in place throughout the audits' periods of review, HRSA has allowed hospitals to avoid audit findings by, for example, entering into new contracts with retroactive start dates. This practice undermines the integrity of HRSA's audits. HRSA's contract reviews do not always include assessments of whether contracts are consistent with the statutory requirement to provide health care services to the 340B-specified low-income population and HRSA's guidance for conducting such assessments, when required, lacks detailed instructions. As a result, GAO found that contracts for 13 hospitals reviewed did not appear to require hospitals to serve the 340B-specified low-income population. Despite this, these 13 hospitals were permitted to participate in the program. Given these weaknesses, some nongovernmental hospitals that do not appear to meet the statutory requirements for program eligibility are participating in the 340B Program and receiving discounted prices for drugs for which they may not be eligible.

CRS_R46234

Background The child nutrition programs (listed in Table 1 ) support meals and snacks served to children in schools, child care, summer programs, and other institutional settings in all 50 states, the District of Columbia, and the U.S. territories. The programs are administered by the U.S. Department of Agriculture's (USDA's) Food and Nutrition Service (FNS), which provides federal aid to state agencies (often state departments of education) for distribution to school districts and other participating institutions. In general, the largest subsidies are provided for free and reduced-price meals served to eligible children. The institutional nature of child nutrition programs distinguishes them from other federal nutrition assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provide benefits directly to households. WIC is typically reauthorized with the child nutrition programs but is not considered a child nutrition program and is not discussed in this report. The federal child nutrition programs date back to the National School Lunch Act of 1946, which created NSLP. The act formalized federal support for school lunches following early federal aid beginning in the 1930s. Other child nutrition programs were added in the decades to follow as policymakers expanded feeding programs beyond the school setting. The Child Nutrition Act of 1966 formalized SMP and created SBP as a pilot program. Soon after, a program for child care and summer meals was piloted in 1968 and separated into the Child Care Food Program (now CACFP) and SFSP in 1975. More recently, FFVP was piloted in 2002 and expanded to all states in 2008. (See the Appendix for a brief legislative history of child nutrition programs.) Historically, the child nutrition programs have been aimed at both improving children's nutrition and supporting U.S. agriculture, with the dual missions "to safeguard the health and well-being of the Nation's children and to encourage the domestic consumption of nutritious agricultural commodities and other food." The child nutrition programs are currently authorized under the Richard B. Russell National School Lunch Act (NSLA) and the Child Nutrition Act of 1966. Section 32 of the Act of August 24, 1935, also provides a portion of child nutrition funding. Congressional jurisdiction over the underlying three laws has typically been exercised by the Senate Agriculture, Nutrition, and Forestry Committee, the House Education and Labor Committee, and, to a limited extent (relating to Section 32), the House Agriculture Committee. Congress periodically amends the child nutrition programs' authorizing laws and reauthorizes expiring authorities. The child nutrition programs were most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ). Some of the authorities created or extended in the HHFKA expired on September 30, 2015; however, these expirations have had a minimal impact on program operations. The 114 th Congress began but did not complete a 2016 child nutrition reauthorization, and there was no significant reauthorization activity in the 115 th Congress. In the 116 th Congress, leadership on the committees of jurisdiction have announced plans to work on child nutrition reauthorization. This report starts with an overview of child nutrition programs' funding and then provides detail on each program, including a discussion of how the programs are administered at the federal, state, and local levels; eligibility rules for institutions and participants; nutritional and other program requirements; and recent policy changes. Child Nutrition Funding Federal Funding Most funding for child nutrition programs is considered mandatory spending. However, unlike some mandatory programs, child nutrition programs require an appropriation of funding. This is because the programs' authorizing laws include benefit and eligibility criteria that create the requirement for a certain level of spending, but the statute does not provide the funding directly. Such programs are sometimes referred to as "appropriated entitlements" or "appropriated mandatories." If the necessary funds are not appropriated, entitled recipients (e.g., states, institutions, and participants) may have legal recourse. The benefit and eligibility criteria that governs much of the appropriated mandatory spending for child nutrition programs is open-ended. Because there is no specified limit on the number of beneficiaries or the total amount of benefits that will be paid, spending will fluctuate based on the number of meals and snacks served in the programs, as well as statutorily set, annually adjusted per-meal reimbursement rates. Congress typically considers USDA's forecast for program needs in its appropriations decisions. Appropriated mandatory funding in child nutrition programs is generally for per-meal cash reimbursements, commodity assistance, and administrative funds. The programs also have a smaller amount of discretionary funding (provided in annual appropriations acts) and mandatory funding directly provided in the authorizing law (not provided in annual appropriations acts). These funding streams are discussed in further detail below. Child nutrition appropriations totaled $23.6 billion in FY2020 ( P.L. 116-94 ). Close to $13.5 billion of these funds were transferred to the child nutrition programs from Section 32 of the Act of August 24, 1935. Table 2 lists FY2020 child nutrition funding by program and activity. Child nutrition appropriations may not match expenditures because most child nutrition funds carry over (they are available for two fiscal years) and because spending fluctuates with the number of meals served. Per-Meal Cash Reimbursements The majority of federal funding in child nutrition programs (including in NSLP, SBP, CACFP, SFSP, and SMP) takes the form of per-meal cash reimbursements. These rates are specified in the programs' authorizing laws with an annual inflation adjustment. Although all (including full-price) meals/snacks served by participating providers are subsidized, those served for free or at a reduced price to lower-income children earn higher rates. Meals must meet federal nutritional requirements in order for the school or institution to receive reimbursement. Reimbursement rates differ by program based on different criteria. For example, in SBP, schools in high-poverty areas receive an extra 36 cents per meal. Differences in reimbursement rates are highlighted within the subsequent discussions of each program. In general, FNS distributes per-meal reimbursements to state agencies, which distribute them to participating schools and institutions. Schools and institutions must record daily counts of meals in each category and report monthly counts to the state agency in order to receive reimbursement. Once they receive federal funds, participating institutions are allowed to spend these funds on most aspects of their food service operations. Table 3 provides an example of the per-lunch reimbursement rate for schools and the per-child benefit in NSLP. Reimbursement rates for each child nutrition program are listed in the sections to follow. Commodity Assistance Federal support for child nutrition programs is also provided in the form of USDA-purchased commodity foods ("USDA Foods") and some cash in lieu of commodities. USDA Foods are foods purchased by USDA for distribution to federal nutrition assistance programs, including child nutrition programs. States, schools, and other institutions are entitled to a certain amount of commodity assistance under the law, referred to as "entitlement commodity" assistance. In NSLP and CACFP, statute provides a per-meal commodity reimbursement (an inflation-adjusted rate of 23.75 cents per meal in school year 2019-2020). (Note: Commodity assistance is not a formal part of SBP funding; however, commodities distributed through NSLP may be used for school breakfasts.) A smaller amount of commodity assistance is also provided to certain types of institutions participating in SFSP. Schools and institutions use entitlement commodity funds to select commodities from a USDA Foods catalog. USDA then purchases the commodities and works with a state distribution agency to distribute the foods to schools. Schools/institutions and state agencies can elect to receive a certain amount of commodity assistance in the form of cash, as the majority of CACFP centers do. According to statute, entitlement commodity assistance must equal at least 12% of the total funding provided for lunch reimbursements and child nutrition commodities. Child nutrition entitlement commodity expenditures totaled nearly $1.5 billion in FY2019. Most of this assistance was for NSLP. The child nutrition programs can also receive "bonus commodities," which are commodities that are purchased at USDA's discretion throughout the year to support the agricultural economy using separate budget authority. In recent years, there have been few bonus commodities distributed to the child nutrition programs; however, there was an uptick in FY2019. Administrative Funds State agencies receive federal funds for expenses related to the administration of child nutrition programs. According to statute, federal funding for states' administrative expenses must equal at least 1.5% of federal expenditures on NSLP, SBP, CACFP, and SMP in the second preceding fiscal year. The majority of these funds are allocated to states based on their share of spending on the four programs. Any remaining funds are allocated by the Secretary of Agriculture on a discretionary basis; per program regulations, states receive additional amounts for CACFP, commodity distribution, and administrative reviews of schools/institutions. Once states receive administrative funds, they can apportion them among child nutrition programs and activities as they see fit. In addition, states receive separate administrative payments through SFSP that equal at least 2.5% of their summer meal aid. States may also retain a portion of FFVP aid for their administrative expenses. At the local level, schools and institutions may use per-meal reimbursements to cover their administrative costs. In CACFP, institutions that oversee day care homes receive separate monthly payments for administrative expenses based on the number of day care homes under their jurisdiction. Other Federal Funding A few child nutrition programs and activities have mandatory funding provided directly in the authorizing law. For example, FFVP receives mandatory funding from Section 32 and the Farm to School Grant Program receives mandatory funding under the NSLA. There are also a few child nutrition activities that are funded on a discretionary basis, including the Summer EBT demonstration, the Team Nutrition initiative, and school meals equipment grants. Nonfederal Funding Federal subsidies do not necessarily cover the full cost of meals and snacks prepared by schools and institutions. Child nutrition programs may also receive funds from participants, states, school districts, local governments, and other entities. NSLP is the only child nutrition program with a cost sharing requirement for states, which amounts to a contribution of roughly $200 million from all states combined annually. Some states provide additional funding for NSLP and other child nutrition programs beyond the required amount, including some states that provide their own per-meal reimbursements. An FNS study of the school meals programs in school year 2014-2015 found that 63% of school food service revenues came from federal funds, 30% came from student payments for paid and reduced-price meals and other school foods, and 6% came from state and local funds. National School Lunch Program (NSLP) and School Breakfast Program (SBP) The National School Lunch Program (NSLP) and School Breakfast Program (SBP) (the "school meals programs") provide federal support for meals served in approximately 94,300 public and private elementary and secondary schools nationwide in FY2019. They also support meals in a smaller number of residential child care institutions. Schools receive federal aid in the form of cash reimbursements for every meal they serve that meets federal nutritional requirements (limited to one breakfast and lunch per child daily). The largest subsidies are provided for free and reduced-price meals served to eligible students based on income eligibility and categorical eligibility rules. Schools also receive a certain amount of commodity assistance per lunch served (discussed previously). Schools participating in NSLP have the option of providing afterschool snacks through the program, and schools participating in NSLP or SBP have the option of providing summer meals and snacks through the Seamless Summer Option (discussed in the " After-School Meals and Snacks " and " Seamless Summer Option " sections). Schools are not required by federal law to participate in NSLP or SBP; however, some states require schools to have a school lunch and/or breakfast program, and some states require schools to do so through NSLP and/or SBP. Some states also provide state funding for the school meals programs. Approximately 91% of public schools participate in NSLP. Schools that do not participate in the federal school meals programs may still operate locally funded meal programs. The Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ) made several changes to the school meals programs. Among those changes was a requirement that USDA update the nutrition standards for school meals and create new nutritional requirements for foods sold in NSLP and SBP schools within a certain timeframe. The law also created the Community Eligibility Provision, through which eligible schools can provide free meals to all students. These changes are discussed further within this section. NSLP and SBP are two separate programs, and schools can choose to operate one and not the other. The programs are discussed together in this report because they share many of the same requirements. Differences between the programs are noted where applicable. Figure 1 displays average daily participation in NSLP and SBP in participating schools. Participation in SBP tends to be lower for several reasons, including the traditionally required early arrival by students in order to receive a meal before school starts. Administration Locally, the school meals programs are usually administered by school districts. Statute and regulations designate "school food authorities" as the local authorities in charge of operating the school meal programs; typically, these are food service departments within school districts. Local educational agencies—the broader school district or school board—also play a role in administering the school meal programs. This report sometimes uses the term "school district" to refer to the local administrative body of the school meals programs. In general, school food authorities handle food service and accounting responsibilities, such as food preparation and tracking meals for reimbursement, while local educational agencies handle administrative duties, such as processing applications and certifying children for free and reduced-price school meals. At the state level, the school meals programs are most often administered by state departments of education. State administrative agencies are responsible for distributing federal reimbursements to school food authorities and overseeing school districts' administration of the school meal programs, including by conducting administrative reviews of school districts. At the federal level, FNS provides ongoing guidance and technical assistance to state agencies and school food authorities through seven regional offices. FNS also provides oversight of state agencies, including by conducting management evaluations. Figure 2 depicts the federal, state, and local roles in administering the school meals programs. Eligibility and Reimbursement The school meals programs do not exclusively serve low-income children. Any student in an NSLP or SBP participating school may purchase a school meal; however, children must meet program eligibility rules in order to receive a free or reduced-price meal. In most schools (excluding schools that participate in the Community Eligibility Provision or other special options), children are certified for free or reduced-price school meals through one of two pathways: (1) income eligibility for free and reduced-price meals (information typically collected via household application) and (2) categorical eligibility for free meals (information collected via household application or direct certification). Each year, schools must verify a sample of household applications for accuracy. The pathways through which children are certified for free or reduced-price school meals are shown in Figure 3 . If children are certified for free meals, the school food authority (through the state agency) receives the free meal reimbursement for those meals. If children are certified for reduced-price meals, the school food authority receives a slightly lower reimbursement. School food authorities also receive a much smaller paid-rate reimbursement for meals served to children who pay for "full price" meals. School food authorities must follow federal guidelines in setting the price of paid meals. Certain schools follow different eligibility and reimbursement procedures because they participate in the Community Eligibility Provision (CEP) or other special options (discussed below in the " Special Options " section). Income Eligibility Children are eligible for free or reduced-price meals if their household's income falls within the following ranges: Free meals: household income at or below 130% of the federal poverty guidelines. Reduced-price meals (charges of no more than 40 cents per lunch and 30 cents per breakfast): household income above 130% and less than or equal to 185% of the federal poverty guidelines. These thresholds are based on the annual federal poverty guidelines established by the U.S. Department of Health and Human Services, and are updated annually for inflation. FNS publishes the corresponding income limits by household size for free and reduced-price meals in the Federal Register on an annual basis. Table 4 provides an example of the income limits for free and reduced-price meals in school year 2019-2020 for a household of four. To become income eligible for school meals, a parent or guardian must complete a paper or online application that includes the income of each household member, the household size, and other information. Households only need to fill out one application if they have multiple children in the same school district. School district officials then determine if children in the household are eligible for free meals, reduced-price meals, or neither. Categorical Eligibility As an alternative to income eligibility, children can become eligible for free school meals if they fall into a certain category ("categorical eligibility"). Per statute, children are automatically eligible for free lunches and breakfasts (without consideration of household income) if they are in a household receiving benefits through the following programs: SNAP (Supplemental Nutrition Assistance Program); FDPIR (Food Distribution Program on Indian Reservations, a program that operates in lieu of SNAP on some Indian reservations); or TANF (Temporary Assistance for Needy Families); enrolled in Head Start; in foster care; a migrant; a runaway; or homeless. Categorical eligibility for free meals may be determined via a household application (households provide a case number on the application) or through direct certification (discussed in the next section). As of school year 2014-2015, the vast majority of categorically eligible children were certified for free meals through direct certification. Categorical eligibility for free school meals with SNAP and TANF began in the 1980s (then, the Food Stamp and Aid to Families with Dependent Children programs, respectively). Categorical eligibility enabled schools to make use of other programs' more in-depth certification processes and reduced the number of applications that families had to fill out. Other programs and categories were added over time. Direct Certification Direct certification is a process through which state agencies and school districts automatically certify children for free meals based on documentation of the child's status in a program or category without the need for a household application. States are required to conduct direct certification for SNAP and have the option of conducting direct certification for the other programs and categories that convey categorical eligibility. For SNAP and other federal programs, the direct certification process typically involves state agencies (e.g., state SNAP and state educational agencies) cross-checking program rolls. A list of matched children is sent to the school district, which certifies children for free meals without the need for a household application. For foster, homeless, migrant, and runaway children, direct certification typically involves school district communication with a local or state official who can provide documentation of the child's status in one of these categories. The 2004 child nutrition reauthorization act ( P.L. 108-265 ) required states to conduct direct certification with SNAP, with nationwide implementation taking effect in school year 2008-2009. As of school year 2016-2017, USDA reported that 92% of children in SNAP households were directly certified for free school meals. The HHFKA made further policy changes to expand direct certification. One of those changes was the initiation of a demonstration project to test direct certification with Medicaid (see text box). The law also funded performance incentive grants for high-performing states and authorized corrective action plans for low-performing states in direct certification activities. Verification of Eligibility Each fall, districts are required to verify a sample of approved household applications on file, with a focus on applications close to the eligibility threshold ("error-prone" applications). School districts may also conduct verification of questionable applications. Verification is not required for children who are directly certified for free or reduced-price meals. (Note that districts participating in " Provisions 1, 2, and 3 " must meet verification requirements for the years in which they administer household applications.) Many districts employ "direct verification" (matching data from other low-income programs) to conduct their verification activities, but if data cannot be verified in this way, schools must contact households to verify the information provided on the application. A child's eligibility status may stay the same or change (e.g., from free meals to reduced-price meals or loss of eligibility) as a result of verification of household income, or if the household does not respond to verification outreach (in which case eligibility would be lost, though that decision can be appealed). Reimbursement School food authorities must keep track of the daily number of meals they serve in each category (free, reduced-price, and paid) that meet federal nutrition requirements. School food authorities then submit claims for reimbursement to the state agency, which submits the claims to FNS. Approved reimbursements are distributed to school food authorities by the state agency, usually on a monthly basis. Per statute, reimbursement rates are adjusted for inflation annually. Table 5 shows NSLP and SBP reimbursement rates in school year 2019-2020. (Note that school food authorities also receive a per-lunch commodity reimbursement, discussed previously.) The law provides a higher reimbursement for meals meeting certain criteria. For example, school food authorities that are compliant with the updated federal nutrition standards for school meals receive an additional 7 cents per lunch. School food authorities also receive an additional 2 cents per lunch if they serve 60% or more of their lunches at a free or reduced price. For breakfasts, school food authorities receive higher reimbursements if they serve 40% or more lunches at a free or reduced price (referred to as "severe need" schools). Once school food authorities receive the cash reimbursements, they can be used to support almost any aspect of the school food service operation. However, federal cash reimbursements must go into a nonprofit school food service account that is subject to federal regulations. Payments for non-program foods (e.g., vending machine sales) must also accrue to the nonprofit school food service account. FNS periodically studies the costs of producing a reimbursable meal. In April 2019, FNS released a School Nutrition and Meal Cost Study , which found that the average reported cost of producing a reimbursable lunch was $3.81 in school year 2014-2015 (reported costs were defined as those charged to the school food service account). This exceeded the average federal cash reimbursement ($3.32) for lunches in school year 2014-2015. When unreported costs were included (costs outside of the food service account; for example, labor costs associated with processing applications), the cost of producing the average reimbursable lunch was $6.02. As noted previously, children's payments and state and local funds may also cover meal costs. Special Options Community Eligibility Provision (CEP) The HHFKA authorized the Community Eligibility Provision (CEP), an option that allows eligible schools, groups of schools, and school districts to offer free meals to all enrolled students. To participate in CEP, the school(s) must have an identified student percentage (ISP) of at least 40%. The ISP is the percentage of students in the school(s) who are certified for free meals without a household application (i.e., who are directly certified for free meals through SNAP or another program/category). In addition, the school(s) must operate both NSLP and SBP in order to participate in CEP, and they must opt-in to CEP. Based on the statutory parameters, FNS piloted CEP in various states over three school years, and expanded the option nationwide in school year 2014-2015. Eligible schools, groups of schools, and entire school districts may participate; if participation is as a group, the ISP is calculated on a group basis. Local educational agencies have until June 30 of each year to notify USDA of the schools in their jurisdiction that will participate in CEP. According to a database maintained by the Food Research and Action Center, nearly 28,500 schools participated in CEP in school year 2018-2019, up from 18,220 schools in school year 2015-2016. Though CEP schools serve free meals to all students, they are not reimbursed at the free rate for every meal served. Instead, the law provides a funding formula: the ISP is multiplied by a factor of 1.6 to estimate the proportion of students who would be eligible for free or reduced-price meals had they been certified via application. The result is the percentage of meals served that will be reimbursed at the free-meal rate, with the remainder reimbursed at the much lower paid-meal rate. For example, if a CEP school has an ISP of 40%, then 64% of its meals served would be reimbursed at the free-meal rate and 36% would be reimbursed at the paid-meal rate. Schools that identify 62.5% or more students as eligible for free meals receive the free-meal reimbursement for all meals served (62.5% multiplied by 1.6 equals 100%). Figure 4 provides a visual representation of the CEP eligibility criteria and reimbursement formula. CEP participating schools must recalculate their ISP at least once every four years, but they can choose to do so more frequently if desired. While eligibility determinations occur every four years, schools can drop out of CEP at any time. CEP is intended to reduce paperwork for families and schools and enable schools to provide more free meals. However, the option may or may not be financially beneficial for schools depending on their proportion of identified students. Provisions 1, 2, and 3 Schools, groups of schools, and school districts can also use Provisions 1, 2, and 3 to establish alternative certification and reimbursement procedures. These options are intended to reduce paperwork for school administrators and families. The options predate CEP, and unlike CEP, they still require some household applications. A school's decision to participate in a special option may depend on financial considerations. Provision 1 allows schools with high proportions (80% or more) of students eligible for free and reduced-price meals to make free meal eligibility determinations that remain in effect for two school years. This reduces the number of applications they have to process (though they still have to process reduced-price meal applications annually). Provision 2 and Provision 3 are open to all schools. Similar to CEP, schools, groups of schools, or school districts must agree to provide free meals (lunches or lunches/breakfasts) to all students in order to participate in Provision 2 or Provision 3. Under Provision 2, schools are reimbursed over a four-year period using the proportion of meals served at a free/reduced-price/paid rate during the first year. Eligibility determinations in the first year are based on direct certification and household applications (a difference from CEP). Under Provision 3, schools are similarly required to make eligibility determinations in the first year of a four-year period. However, in this case, schools receive the same level of federal assistance over the next three years, which is adjusted for enrollment and inflation (there are no separate payments for free/reduced-price/paid meals). Nutrition Standards and Food Service Nutrition Standards for School Meals Nutritional requirements for school meals have changed throughout the history of the school meal programs. The most recent child nutrition reauthorization, the HHFKA in 2010, required USDA to update the nutrition standards for school meals within 18 months of the law's enactment based on recommendations from the Food and Nutrition Board at the National Academies of Sciences, Engineering, and Medicine. The law also provided a "performance-based" bonus reimbursement of 6 cents per lunch (adjusted annually for inflation) for schools certified as compliant with the updated standards (the rate was 7 cents in school year 2019-2020). USDA published the updated nutrition standards for school meals in 2012. They were based on the 2010 Dietary Guidelines for Americans (per an existing statutory requirement) as well as the recommendations from the National Academies of Sciences, Engineering, and Medicine. The standards required increased servings of fruits, vegetables, whole grains, and meats/meat alternates in lunches and breakfasts. They also restricted milk to unflavored low-fat (1%) and flavored and unflavored fat-free varieties, set limits on calories and sodium in school meals, and prohibited trans fats in school meals, among other changes. Separate from the final rule, USDA also implemented a requirement in the HHFKA that schools make water available to children during meal service in the cafeteria. The revised nutrition standards largely took effect in school year 2012-2013 for lunches and in school year 2013-2014 for breakfasts. A few requirements phased in over multiple school years. Some schools experienced difficulty implementing the new standards, and subsequent changes to the whole grain, sodium, and milk requirements were made through appropriations acts and USDA rulemaking. For school year 2019-2020 and onwards, schools are operating under the regulations as amended by a final rule published by FNS on December 12, 2018, which allows flavored 1% milk, requires at least 50% of grains offered weekly in school meals to be whole grain-rich, and delays the implementation of stricter sodium limits for school meals. Table 6 provides an overview of the nutrition standards for school lunches as of September 2019. States and school districts are allowed to implement additional nutritional requirements for school meals, as long as they meet the federal standards. Nutrition Standards for Competitive Foods The HHFKA also required USDA to develop nutrition standards for other foods sold in NSLP- and SBP-participating schools on campus during the school day. These foods are known as "competitive foods" (i.e., foods sold in competition with school meals). Competitive foods include foods and drinks sold in vending machines, a la carte lines, snack bars and concession stands, and school fundraisers. These foods do not receive a federal reimbursement. The HHFKA required USDA to publish proposed nutrition standards for competitive foods within one year of the law's enactment and align the standards with the most recent Dietary Guidelines for Americans. Relying on recommendations made by the National Academies of Sciences, Engineering, and Medicine, FNS promulgated a proposed rule in April 2013 and then an interim final rule in June 2013, which went into effect in school year 2014-2015. The interim final rule created nutrition standards for all non-meal foods and beverages that are sold during the school day (defined as midnight until 30 minutes after dismissal). The final rule, published in July 2016, maintained the interim final rules with minor changes. Under the final standards, competitive foods must have certain primary ingredients, meet whole-grain requirements, and comply with calorie, sugar, sodium, and fat limits, among other criteria. Schools are also limited to a list of zero- and low-calorie beverages they may sell (with larger portion sizes and caffeine allowed in high schools). Fundraisers held outside of the school day and fundraisers in which the food sold is clearly not intended for consumption on campus during the school day are not subject to the competitive food nutrition standards. In addition, the law and the final rule provided states with discretion to exempt infrequent fundraisers selling foods or beverages that do not meet the nutrition standards. The rule did not limit foods brought from home—only foods sold at school during the school day. The federal standards are minimum standards, and states and school districts are permitted to issue more stringent policies. Many districts already had local competitive food standards in place prior to the HHFKA because of the 2004 child nutrition reauthorization law ( P.L. 108-265 ), which required local educational agencies to implement local school wellness policies that included nutritional guidelines for foods sold in schools (local school wellness policies are discussed in the " Other Child Nutrition Activities " section). Local School Wellness Policies Local educational agencies participating in the school meals programs are required to have a local school wellness policy, which sets nutrition and health-related goals and guidelines for schools within the jurisdiction. Local school wellness policies must include goals related to nutrition and physical activity, nutrition standards for school foods that meet or exceed federal nutrition standards (discussed previously), and an implementation plan, among other content. Local educational agencies must provide opportunities for input from parents, students, school nutrition professionals, physical education teachers, school health professionals, school administrators, and the general public in developing and updating local school wellness policies. Other Food Service Topics This section discusses food procurement and service topics specific to the school meals programs. Other food service topics relevant to child nutrition programs more broadly, including NSLP and SBP (e.g., the farm to school initiative), are discussed in the " Other Child Nutrition Activities " section. Food Procurement and Preparation The majority of foods used in the school meal programs are purchased by school food authorities using federal cash reimbursements or other school district funds. School food authorities also receive USDA Foods (as discussed previously). School food authorities must comply with federal procurement rules when purchasing foods for the school meals programs. In addition, there is a "Buy American" requirement in statute that requires schools participating in the school meal programs to purchase domestic commodities and products "to the maximum extent practicable." Purchases may include local foods, as long as they comply with federal, state, and local procurement regulations. Many school food authorities purchase and prepare their own meals, either at a centralized district kitchen or onsite at individual schools. Alternatively, school food authorities may contract with a private food service management company to contract out procurement and/or meal preparation. The contracted company must comply with all school meal regulations and the school food authority must retain general control over the operation of the school meals programs, including financial oversight and compliance with nutrition standards. Food Safety Foods served in any child nutrition program must comply with state or local health, safety, and sanitation standards for food storage, preparation, and service. Schools participating in the school meals programs must obtain food safety inspections by a state or local government agency at least twice a year. There are also food safety inspections for USDA Foods. School food authorities may allow children to place leftover whole food or beverage items on a "share table" in schools operating NSLP and other child nutrition programs, as long as such sharing complies with food safety standards. Meal Time and Setting In general, lunches and breakfasts are intended to be consumed onsite during the school day. Surveys have found that schools typically provide roughly 20 minutes for breakfast and 25-30 minutes for lunch. Under SBP, students were traditionally required to arrive early for breakfast and eat it in the cafeteria. However, in recent years, schools and states have increasingly adopted alternative models of breakfast service such as breakfast in the classroom, grab-and-go carts, and breakfast during morning breaks. Anti-hunger advocacy groups have encouraged the adoption of new models of breakfast service as a way to increase SBP participation. According to a 2018 survey by the School Nutrition Association (SNA), a member and advocacy organization, more than half of surveyed school districts offered both a traditional cafeteria line and alternative modes of breakfast service, while 43% of schools offered a cafeteria line only. Common alternatives were grab-and-go stations (particularly in middle and high schools) and breakfast in the classroom (particularly in elementary schools). Child and Adult Care Food Program (CACFP) CACFP provides federal reimbursements for meals and snacks served in nearly 156,500 child care centers, day care homes, and adult day care centers nationwide in FY2019 (see Table 7 for participation by type of institution). In these settings, reimbursements are limited to meals and snacks served to children ages 12 and under, children of any age with disabilities, and chronically disabled and elderly adults. CACFP also supports free meals and snacks for children ages 18 and under in emergency shelters and afterschool programs in low-income areas (discussed in the " After-School Meals and Snacks " section). In general, CACFP provides cash reimbursements for up to two meals and one snack or one meal and two snacks per participant daily (a meal may be a breakfast, lunch, or supper). A smaller share of federal aid takes the form of commodity assistance or cash in lieu of commodities and funds for administrative costs (discussed previously). The eligibility and funding rules of CACFP differ for centers (facilities or institutions) and day care homes (private homes). Day care homes must be overseen by sponsoring organizations, which handle the financial and administrative functions of the program for a number of local providers. Centers have the option of operating independently or under a sponsor. Both centers and day care homes must comply with government-established standards for other child care programs and meet federal CACFP nutrition standards. Administration At the local level, sponsor organizations administer CACFP for all participating day care homes and centers that elect to have a sponsor. Sponsors are responsible for conducting audits of providers, distributing federal reimbursements, and in some instances, preparing and distributing meals. They can be public or nonprofit institutions or, in some cases, for-profit institutions. Centers that choose to handle their own administrative responsibilities are referred to as independent centers. Unlike centers, day care homes are required to have a sponsor organization. Sponsors receive monthly federal administrative payments based on the number of homes for which they are responsible (sponsors, on average, have more than 100 day care homes under their supervision). They may also receive a portion of the per-meal reimbursement if they have an agreement with the day care home to prepare meals. If a center opts to have a sponsor, the sponsor may retain a portion of the per-meal reimbursements for its administrative expenses. In CACFP, the state administering agency is typically the state department of education or department of health and/or human services. The state agency distributes federal funds and conducts reviews of CACFP sponsor organizations and independent centers. Similar to the school meals programs, FNS provides oversight of state agencies and issues guidance and regulations to states and providers. Eligibility and Reimbursement CACFP Centers The following institutions are eligible to participate as centers in CACFP: public or private nonprofit (tax exempt) organizations providing nonresidential child care or adult day care (including school food authorities and Head Start centers), private for-profit organizations providing nonresidential child care or adult day care that enroll a certain proportion of low-income participants, and emergency shelters for homeless families. Adult day care centers and outside school hour centers fall under the first two categories, but they are subject to specific federal regulations. Income eligibility rules for CACFP centers are the same as the school meals programs: participants in households at or below 130% of the poverty line qualify for free meals and snacks and those between 130% and 185% of the poverty line qualify for reduced-price meals and snacks (a charge of no more than 40 cents for a lunch or supper, 30 cents for a breakfast, and 15 cents for a snack). CACFP centers also use similar categorical eligibility criteria, including participation in Head Start, foster child status, and household participation in SNAP, FDPIR, or TANF assistance. Adults are categorically eligible if they participate in SNAP, FDPIR, Supplemental Security Income (SSI), or Medicaid. Eligibility is determined through paper applications or, in some states, direct certification-like processes. For CACFP centers, the reimbursement rates for breakfasts and lunches/suppers are the same as the SBP breakfast reimbursement rate and NSLP lunch reimbursement rate, respectively. The largest subsidies are provided for free and reduced-price meals and snacks, while paid meals receive a lower reimbursement. Unlike the school meals programs, CACFP allows centers certain flexibilities for tracking meal counts and submitting claims for reimbursement. Compared to school meals, CACFP centers are also less likely to collect meal payments from participants and more likely to incorporate meal costs into tuition. Centers are not required to adjust tuition and fees to account for CACFP funding. Centers are also allowed to charge families separately for meals and snacks, as long as there are no charges for children who qualify for free meals and limited charges for those who qualify for reduced-price meals. CACFP Day Care Homes Day care homes are private homes that provide nonresidential child care services. In general, any day care home that meets local, state, or federal child care standards may participate in CACFP. Unlike centers, day care homes generally do not make eligibility determinations and receive the same reimbursement rate for every meal served. Day care homes located in a low-income area or with a low-income provider receive a higher, Tier I reimbursement rate (shown in Table 8 ). To receive the Tier I rate, the home must be located in an area in which at least 50% of children are eligible for free or reduced-price meals or be operated by a provider whose household income level meets the free or reduced-price income standards. Day care homes that do not qualify for Tier I rates receive Tier II (lower) rates. However, Tier II providers may seek the higher Tier I subsidies for individual low-income children for whom household income information is collected and verified. Like centers, day care homes may incorporate meal costs into tuition. Unlike centers, federal rules prohibit any separate meal charges. Nutrition Standards and Food Service Nutrition Standards In addition to nutrition standards for school foods, the HHFKA required the Secretary of Agriculture to update CACFP's meal patterns. USDA's final rule, effective October 1, 2017, revised the meal patterns for meals and snacks served in centers and day care homes. It also aligned nutrition standards for meals served to preschool-aged children through NSLP and SBP. For infants (under 12 months of age), the new meal patterns eliminated juice, encouraged breastfeeding, and set guidelines for the introduction of solid foods, among other changes. For children ages one and older and adult participants, the new meal patterns increased whole grains, fruits, and vegetables, limited milk to unflavored 1% and unflavored or flavored fat-free varieties, limited sugar in cereals and yogurts, and prohibited deep-fried foods. They also required that potable water be available to children throughout the day. Subsequent rulemaking by USDA allowed flavored 1% milk to be served to children ages six and older in CACFP in school year 2018-2019 and forward. Procurement and Meal Service CACFP institutions may purchase their own foods and prepare their own meals, or they may contract with a school or a food service management company that prepares meals for them. In either case, institutions must comply with federal, state, and local procurement regulations. As noted previously, CACFP institutions also receive a certain amount of USDA Foods. Meals must comply with state or local health, safety, and sanitation requirements for storing, preparing, and serving food, and institutions must acquire annual food safety inspections. Family-style meal service is encouraged in CACFP. Summer Meals The Summer Food Service Program (SFSP) and the Seamless Summer Option provide federal reimbursements for summer meals. SFSP is open to school food authorities, local public agencies, and private nonprofit organizations, while the Seamless Summer Option is specifically for school food authorities, allowing them to continue operating under certain NSLP/SBP requirements into the summer. Both programs require children to consume meals onsite (known as the "congregate feeding" requirement). In recent years, the federal government has tested alternatives to congregate feeding through the Summer Electronic Benefits Transfer for Children (Summer EBT) demonstration in select states. Summer Food Service Program (SFSP) The Summer Food Service Program (SFSP) provides federal aid to school food authorities and other local public and nonprofit organizations that serve meals and snacks to children during the summer months. Federal aid is provided in the form of per-meal cash reimbursements and a smaller amount of commodity foods and administrative funds (discussed previously). The program serves roughly 2.7 million children annually at nearly 46,600 meal sites. Similar to CACFP, SFSP is administered at the local level by sponsor organizations that operate the program at one or more meal sites (the physical location where food is served and eaten). All SFSP meal sites are required to have a sponsor. Sponsors may operate meal sites at a variety of locations, including schools, recreation centers, parks, churches, and public libraries. Unlike the other child nutrition programs, SFSP participation is generally limited (with the exception of camps) to meal sites that serve children from "areas in which poor economic conditions exist"—defined as areas or sites in which at least 50% of children are eligible for free and reduced-price school meals (discussed further below). Administration The following public and private nonprofit institutions are eligible to participate in SFSP as sponsors: nonprofit organizations, school food authorities, state and local governments (including tribal governments), public or nonprofit summer camps (overnight and day camps), and public or nonprofit colleges and universities participating in the National Youth Sports Program. Eligible sponsors must also provide year-round services to the community, with limited exceptions. According to statute, when selecting sponsors, states must give priority to school food authorities, public and nonprofit organizations that have demonstrated successful program performance in a prior year, new public sponsors, and new nonprofit sponsors (in that order). States must also prioritize sponsors located in rural areas. Sponsors are responsible for selecting meal sites, distributing meals to sites, and monitoring sites. Officials at meal sites are responsible for distributing meals to children, monitoring the food service, and keeping track of meals served for reimbursement. At times, a sponsor may also be a site (for example, camps are both sponsors and meal sites). An FNS analysis of a nationally representative sample of SFSP sponsors and meal sites in summer 2015 found that the majority of sponsors were school food authorities and nonprofit organizations, and common meal sites included schools, recreation centers, and parks/playgrounds. State administering agencies (often state departments of education) approve sponsors, distribute federal funds, and conduct reviews of sponsors and sites. State agencies receive SFSP funds for administrative costs in addition to general child nutrition program administrative funds (discussed previously in the " Administrative Funds " section). FNS distributes funds and commodities to state agencies, oversees states' implementation of SFSP, and provides guidance and technical assistance to states and participating institutions. Eligibility and Reimbursement According to statute, all sponsors except camps must "conduct a regularly scheduled food service for children from areas in which poor economic conditions exist." SFSP regulations establish different eligibility rules for different types of meal sites. Open sites are meal sites that are open to all children in the community. In order to participate in SFSP, open sites must be located in an area in which at least 50% of the children would be eligible for free or reduced-price school meals as demonstrated through school data, Census data, or other approved data sources. Meals must be served free to all children at these sites, and the sponsor of the site receives reimbursement for every meal served (up to two meals or one meal and one snack per child daily). Closed enrolled sites are meal sites (other than camps) that only serve enrolled children. In order for the site to participate in SFSP, at least 50% of the enrolled children must qualify for free or reduced-price school meals based on the submission of a household application or other documentation. Like open sites, meals are served free to all children and the sponsor receives reimbursement for every meal served (up to two meals or one meal and one snack per child daily). Camps include residential and day camps that provide organized programs for enrolled children. Unlike open and closed enrolled sites, camps do not have to demonstrate that a certain percentage of children meet the free and reduced-price eligibility standards in order to participate in SFSP. Instead, eligibility works like NSLP and SBP: camps make eligibility determinations using similar income and categorical eligibility criteria for free and reduced-price meals. However, unlike the school meals programs, camps receive the same reimbursement rate for free and reduced-price meals. Camps may receive reimbursement for up to three meals or two meals and one snack per eligible child daily. Camps are not required to serve meals for free to all children, and there is no paid reimbursement provided for full-price meals. National Youth Sports Program (NYSP) sites , run by the National Collegiate Athletic Association, are enrolled sites; however, like open sites, they qualify for SFSP based on area eligibility data showing that at least half of the children in the area would qualify for free or reduced-price school meals. Sponsors of NYSP sites serve meals free to all enrolled children and receive reimbursement for all meals served (up to two meals or one meal and one snack per child daily). Migrant sites must demonstrate that they predominantly serve migrant children as certified by a migrant organization or a sponsor. They follow the same eligibility and reimbursement rules as open sites, except that they may receive reimbursement for up to three meals or two meals and one snack per child daily. According to the FNS study of SFSP sites, in summer 2015 the majority (59%) of sites were open sites, 29% were closed enrolled sites, 9% were camps, and 4% were another type of site. The SFSP reimbursement rate (the total rate displayed in Table 9 ) is composed of two parts: an operating cost (food, storage, labor) reimbursement and an administrative cost (planning, organizing, and managing) reimbursement. While operating and administrative rates are calculated separately, once sponsors receive the funds they can use them for any allowable program cost. Higher administrative reimbursements are provided for sponsors of rural meal sites and "self-preparation" sites (meal sites in which a sponsor rather than vendor prepares food). Nutrition Standards Meals and snacks served through SFSP must meet federal nutrition standards. In contrast to the child nutrition programs discussed thus far, SFSP's nutrition standards are not required to align with the Dietary Guidelines for Americans, but are "prescribed by the Secretary on the basis of tested nutritional research." Program regulations outline the nutrition standards for breakfasts, lunches/suppers, and snacks. The standards prescribe minimum servings of fruits and vegetables, meats/meat alternatives, breads/bread alternatives, and milk. Unlike school meals and CACFP, there are no limits on calories, saturated and trans fats, and milk varieties in SFSP. Participating school food authorities may choose instead to use the NSLP and/or SBP nutrition standards for SFSP. Procurement and Meal Service As noted, children are required to consume meals onsite in SFSP. There are also requirements around the timing of meals in SFSP: there must be at least three hours between meal or snack services and four hours between lunch and dinner if there is no snack served. Like the other child nutrition programs, SFSP sponsors must comply with local or state health and sanitation requirements. Seamless Summer Option School food authorities may participate in SFSP, or they can choose to offer summer meals through the Seamless Summer Option. The Seamless Summer Option allows school food authorities to continue operating under certain NSLP/SBP requirements into the summer. For example, it allows them to use the school meals programs' nutrition standards, administrative review process, and reimbursement rates (see Table 5 for NSLP/SBP reimbursement rates). Other requirements are the same as SFSP, including site eligibility rules. School food authorities are the only eligible sponsor in the Seamless Summer Option, but they can operate the program at a variety of meal sites (e.g., parks, recreation centers, libraries). The school lunch and breakfast reimbursement rates used in the Seamless Summer Option are slightly lower than SFSP's reimbursement rates. However, school food authorities participating in the Seamless Summer Option also receive the NSLP commodity reimbursement (discussed in the " Commodity Assistance " section). School food authorities may also have a reduced administrative burden under the Seamless Summer Option. Summer EBT and Other Demonstration Projects Beginning in summer 2011 and each summer since (as of the date of this report), USDA has operated Summer Electronic Benefit Transfer for Children (Summer EBT) demonstration projects in a limited number of states and Indian Tribal Organizations. The project provides electronic food benefits to households with children eligible for free or reduced-price school meals. Depending on the site and year, either $30 or $60 per month is provided on an EBT card. States and jurisdictions may apply to administer the project through SNAP or WIC. Participants in jurisdictions providing benefits through SNAP can redeem benefits for SNAP-eligible foods at any SNAP-authorized retailer, while participants in the WIC EBT jurisdictions are limited to a smaller set of eligible foods at WIC-authorized retailers. Summer meal demonstration projects were first authorized and funded by the FY2010 appropriations law ( P.L. 111-80 ). Although a number of approaches were tested, findings from Summer EBT were among the most promising, showing significant impacts on reducing food insecurity and improving nutrient intake. Summer EBT grantees in prior years include Connecticut, the Cherokee and Chickasaw nations, Delaware, Michigan, Missouri, Nevada, Oregon, Tennessee, Texas, Virginia, and Washington. In October 2018, FNS announced a new strategy for determining grant recipients in FY2019 that prioritized states that had not participated before, statewide projects, and projects that could operate in the summers of 2019 through 2021. Other summer demonstrations projects have included food backpacks, food boxes, and meal delivery for children in rural areas. In addition, since summer 2015 there has been a demonstration project to provide exemptions from the congregate feeding requirement to SFSP and Seamless Summer Option outdoor meal sites experiencing excessive heat. Special Milk Program (SMP) The Special Milk Program (SMP) subsidized milk in approximately 3,000 schools, child care institutions, summer camps, and other institutions in FY2019. Generally, schools and other participating institutions may not participate in another child nutrition meal service program along with SMP. However, schools may administer SMP for pre-kindergartners and kindergartners who are in part-day sessions and do not have access to the school meals programs. In SMP, participating institutions provide milk to children for free and/or at a subsidized paid price. Institutions are reimbursed differently based on whether they decide to provide milk for free to all children, sell milk to all children, or combine these options (providing free milk to eligible children and selling milk to other children) (see Table 10 ). If institutions choose the combined option, they must establish eligibility rules for free milk. USDA updated the nutritional requirements for milk served in SMP alongside changes to the CACFP nutrition standards. The final rule, which took effect on October 1, 2017, required unflavored whole milk for one-year-olds, unflavored low-fat (1%) or unflavored fat-free milk for children ages 2-5, and unflavored low-fat (1%) or flavored/unflavored fat-free milk for children ages six and older. The regulations also allowed for reimbursement of non-dairy milk substitutes in cases of medical or special dietary needs. In 2017, USDA changed the milk requirements for six-year-olds in SMP alongside corresponding changes to milk in school meals programs and CACFP. The change allowed the option of flavored low fat (1%) milk for children ages six and older in SMP for school year 2018-2019 forward. After-School Meals and Snacks CACFP and NSLP both provide federal support for snacks and meals served during after-school programs. The CACFP At-Risk Afterschool component provides reimbursement for up to one snack and one meal (usually supper) per child daily, whereas the NSLP Afterschool Snack option provides reimbursement for snacks only. Reimbursement rates for CACFP At-Risk Afterschool meals/snacks and NSLP afterschool snacks are the same as CACFP reimbursement rates (listed in Table 8 ). CACFP At-Risk Afterschool Meals and Snacks The CACFP At-Risk Afterschool component was authorized as a demonstration project in 1994 ( P.L. 103-448 ), expanded over time, and made available to all states by the HHFKA. The institutional eligibility rules are the same for At-Risk Afterschool providers as CACFP centers (see the " CACFP Centers " section); additionally, CACFP At-Risk Afterschool providers must be located in areas where at least 50% of children in the community are eligible for free or reduced-price school meals. The afterschool program must have "an educational or enrichment purpose." Participating institutions receive reimbursement for up to one snack and one meal (e.g., supper) per child daily, and meals and snacks are provided for free to all children. Meals and snacks must meet federal nutrition standards. Institutions may operate the At-Risk Afterschool program in the after-school hours and on weekends, holidays, and breaks during the school year. Unlike the traditional CACFP, which is only available to children ages 12 and under, the At-Risk Afterschool component allows participation through age 18. In FY2019, the CACFP At-Risk Afterschool component served a daily average of 2.2 million children. NSLP Afterschool Snacks The NSLP Afterschool Snack option was authorized in the 1998 child nutrition reauthorization act ( P.L. 105-336 ). It allows NSLP-participating schools to receive federal reimbursement for one snack per child daily in eligible afterschool programs during the school year. According to USDA guidance, eligible afterschool programs must provide "organized, regularly scheduled activities in a structured and supervised environment," including an educational or enrichment activity. Schools that choose to operate the NSLP Afterschool Snack component may do so in one of two ways: (1) like the CACFP At-Risk Afterschool component, if at least 50% of children are eligible for free and reduced-price meals, the schools may provide free snacks to all children, or (2) if this criterion is not met, the schools may offer free, reduced-price, or full price snacks, based on household income eligibility (like the school meals programs). The vast majority of snacks provided through this program represent the first option. Snacks served through the NSLP Afterschool Snack component must comply with federal nutrition standards. In FY2019, the NSLP Afterschool Snack component served a daily average of 1.2 million children. Fresh Fruit and Vegetable Program (FFVP) The Fresh Fruit and Vegetable Program (FFVP) provides formula grants to states to fund fresh fruit and vegetable snacks in selected elementary schools. Under a statutory formula, about half the funding is distributed equally to each state and the remainder is allocated by state population. States must prioritize funding for schools with high proportions of students who are eligible for free or reduced-price meals. Schools must participate in NSLP in order to receive a FFVP grant. States set annual per-student grant amounts (between $50 and $75). Schools may provide fresh fruit and vegetable snacks to students at any time of day outside of the breakfast or lunch service. Schools offer snacks to all children in attendance (regardless of family income). As noted previously, FFVP's funding structure differs from the other child nutrition programs. FFVP is funded by a mandatory transfer of funds from Section 32. The authorizing law provided $150 million for school year 2011-2012, which is adjusted annually for inflation. In FY2019, FNS allocated approximately $171.5 million in FFVP funds to states. FFVP has been amended over time by both farm bills and child nutrition reauthorization bills. FFVP was created by the 2002 farm bill ( P.L. 107-171 ) as a pilot project. The 2004 child nutrition reauthorization act ( P.L. 108-265 ) made the program permanent and provided funding for a limited number of states and Indian reservations. The 2008 farm bill ( P.L. 110-246 ) expanded FFVP's mandatory funding through Section 32 and enabled all states to participate in the program. The 2014 farm bill ( P.L. 113-79 ) essentially made no changes to FFVP but provided $5 million for a demonstration project to test offering frozen, canned, and dried fruits and vegetables in the program. Four states (Alaska, Delaware, Kansas, and Maine) participated in the pilot in school year 2014-2015 and an evaluation was published in 2017. Other Child Nutrition Activities Federal child nutrition laws authorize and child nutrition funding supports several additional initiatives and activities, such as studies and evaluations, training and technical assistance, technology improvements, and food safety initiatives. Selected initiatives and activities are discussed below. Farm to School Program The farm to school program, which includes the Farm to School Grant Program, was authorized by the HHFKA. It expanded upon FNS's existing farm to school efforts, defined broadly as "efforts that bring regionally and locally produced foods into school cafeterias," with a focus on enhancing child nutrition. The goals of these efforts include increasing fruit and vegetable consumption among students, supporting local farmers and rural communities, and providing nutrition and agriculture education. One component of the farm to school program is farm to school grants, which have annual mandatory funding of $5 million. The grants are awarded by FNS on a competitive basis to schools, nonprofit entities, and agricultural producers/processors for the purpose of establishing programs that improve schools' access to locally produced foods. They may be used for training, supporting operations, planning, purchasing equipment, developing school gardens, nutrition education, developing partnerships, and other activities. Institute of Child Nutrition The Institute of Child Nutrition provides technical assistance, instruction, and materials for nutrition and food service professionals and other local administrators of child nutrition programs on a variety of topics. The institute receives $5 million a year in mandatory funding appropriated in statute. The institute is currently located at the University of Mississippi. Team Nutrition The Team Nutrition initiative supports federally and state-developed nutrition education and promotion initiatives. This includes grants for state agencies to develop programs to improve school meal quality, such as by training school nutrition professionals. From 2004 to 2018, Team Nutrition also included the HealthierUS Schools Challenge, which was a voluntary certification initiative designed to recognize schools that create a healthy school environment through the promotion of nutrition and physical activity. Further Information CRS reports: CRS In Focus IF10266, An Introduction to Child Nutrition Reauthorization CRS Report R45486, Child Nutrition Programs: Current Issues CRS Report R42353, Domestic Food Assistance: Summary of Programs CRS Report R41354, Child Nutrition and WIC Reauthorization: P.L. 111-296 (summarizes the Healthy, Hunger-Free Kids Act of 2010) CRS Report R44373, Tracking Child Nutrition Reauthorization in the 114th Congress: An Overview CRS Report R45743, USDA Domestic Food Assistance Programs: FY2019 Appropriations CRS Report RL34081, Farm and Food Support Under USDA's Section 32 Program CRS Report RL33299, Child Nutrition and WIC Legislation in the 108th and 109th Congresses (summarizes the Child Nutrition and WIC Reauthorization Act of 2004) Other resources: USDA FNS website, https://www.fns.usda.gov/ USDA FNS Healthy, Hunger-Free Kids Act page, http://www.fns.usda.gov/school-meals/healthy-hunger-free-kids-act The FNS page of the Federal Register , https://www.federalregister.gov/agencies/food-and-nutrition-service USDA FNS Congressional Budget Justifications, https://www.obpa.usda.gov/explan_notes.html Appendix. A Brief History of Federal Child Nutrition Programs The Emergence of School Lunches and the National School Lunch Program When the first federal aid for school lunches was provided in the 1930s, local school lunch programs were already operational in many cities and localities across the U.S. Many of these early lunch programs were started by charitable women's organizations at the turn of the century in an effort to feed hungry children. Over time, they transitioned to school boards and school districts. These programs received a combination of private, local, and state funding. The federal government became involved in school lunch programs during the Great Depression both as a way to feed hungry children and support the farm economy. Initially, federal aid was provided in the form of cafeteria equipment and labor. In 1932, the Reconstruction Finance Corporation began providing loans to states and school districts to cover the cost of cafeteria space and equipment for school lunch programs. In 1935, the Works Progress Administration, a New Deal agency, began sponsoring women's employment in school lunchrooms. Federal food support for school lunches began that same year, when Section 32 of the Act of August 24, 1935 (P.L. 74-320) was enacted. The act provided 30% of customs receipts to USDA to purchase surplus commodities from farmers impacted by the depression. These commodities were donated through various outlets for domestic consumption, including school lunch programs. With commodity aid came the first federal regulations for school lunch programs. USDA required recipient organizations, through their agreements with state agencies, to operate school lunch programs on a nonprofit basis, maintain any existing local funding for school lunches, keep records of foods received, serve meals free to poor children, and ensure that such children would not be identified to their peers, among other requirements. The availability of federal aid contributed to a rapid increase in the number of school lunch programs. However, in 1943, federal commodity aid declined as Section 32 surplus commodities were diverted to feed U.S. armed forces in World War II. In addition, federal support for lunchroom labor disappeared with the elimination of the Works Progress Administration. In the midst of declining aid, Congress provided the first cash assistance—$50 million in Section 32 funds—for "a school milk and lunch program" in the 1944 Department of Agriculture Appropriation Act (P.L. 78-129). The introduction of cash assistance marked a shift in the lunch program. For the first time, schools could purchase their own foods in addition to receiving federally purchased commodities. Annual appropriations acts continued cash support for school lunches until 1946, when the National School Lunch Act (P.L. 79-396) was enacted. Signed into law on June 4, 1946, by President Truman, the National School Lunch Act permanently authorized appropriations of "such sums as may be necessary" for the National School Lunch Program. (The act would later be renamed the "Richard B. Russell National School Lunch Act," recognizing Senator Russell's role in the passage of the legislation and his earlier support for the school lunch program within New Deal programs and during his tenure as the Chairman of the Agriculture Appropriations subcommittee. ) The law required participating schools to serve lunches for free or at a reduced price to students who were deemed by local school authorities as unable to pay the full cost of a lunch. Funds were to be distributed to states based on the number of school-aged children in the state and the state's need, as measured by per-capita income, and states were to match federal funds dollar-for-dollar. States were to distribute funding on a monthly basis to schools based on the number of meals served that met "minimum nutritional requirements prescribed by the Secretary on the basis of tested, nutritional research" (P.L. 79-396). Cash assistance could not be used for cafeteria equipment, and separate funds were authorized for this purpose ($10 million annually); however, Congress subsequently prohibited appropriations for equipment assistance from FY1948 to FY1967. NSLP remained relatively unchanged from 1946 to 1960. However, during this timeframe, concerns emerged over the funding formula. One concern was that the formula prioritized funding for schools with large numbers of school-aged children rather than actual participants in the program. There was also concern that schools with high proportions of needy children received the same amount of aid as those with wealthier families, even though they had to serve a larger number of meals for free or at a reduced-price. In 1962, P.L. 87-823 changed the funding formula to be based on the number of school lunches served in the state in the preceding school year instead of the number of school-aged children. The law also authorized additional "special assistance" for state-selected schools in poor economic areas (however, special assistance was not funded until 1966). Other notable changes to NSLP occurred in the 1970s. In 1970, P.L. 91-248 extended special assistance to all schools participating in NSLP. The law also reduced the state matching requirement and established the first national eligibility guidelines for free and reduced-price meals at 100% of the federal poverty level (later in the decade increased to 125% for free lunches and 195% for reduced-price lunches). In 1971, another significant change occurred with the enactment of P.L. 92-153, which guaranteed states a certain level of federal cash assistance by specifying average per-meal reimbursement rates for free, reduced-price, and paid lunches. The Addition of Other Child Nutrition Programs In the 1960s, federal child nutrition efforts expanded beyond school lunches. On October 11, 1966, the Child Nutrition Act of 1966 (P.L. 89-642) was enacted. It formally authorized the Special Milk Program (SMP) and authorized the School Breakfast Program (SBP) as a pilot program. The SMP was based on predecessor USDA school milk programs that had operated since the 1940s. SBP was a newer concept that USDA had piloted in the 1965-1966 school year. In a House Agriculture Committee hearing on the Child Nutrition Act, then-Secretary of Agriculture Orville L. Freeman testified that These proposals will permit us to begin a comprehensive effort to broaden child nutrition programs in this country. They are based on what we have learned in 20 years of administration of the National School Lunch Act, and they reflect a careful assessment of gaps which now exist in the nutritional needs of children in this country. The SMP provided reimbursements for milk in schools, nonprofit child care centers, summer camps, and other nonprofit institutions. At the time, schools and institutions could participate in both SMP and NSLP. Meanwhile, SBP was authorized for two fiscal years and required states to prioritize funds for "schools drawing attendance from areas in which poor economic conditions exist and to those schools to which a substantial proportion of the children enrolled must travel long distances daily" (P.L. 89-642). (Congress later expanded priority to include "schools in which there is a special need for improving the nutrition and dietary practices of children of working mothers and children from low-income families" (P.L. 92-32).) The Child Nutrition Act of 1966 also gave the Secretary the authority to provide higher reimbursements to schools with "severe need." Like NSLP, the law specified that breakfasts "meet minimum nutritional requirements prescribed by the Secretary on the basis of tested nutritional research," and be served for free or at a reduced price to children unable to pay the full price of a meal, as determined by local school authorities (P.L. 89-642). In 1968, child nutrition efforts were further expanded with the authorization of the Special Food Service Program for Children (SFSPC), a pilot program to fund meals in summer and child care settings (P.L. 90-302). SFSPC provided the first federal assistance for summer meals for children and the first dedicated assistance for meals served in child care settings. Similar to SBP, SFSPC was targeted to areas with poor economic conditions and a high number of working mothers. In 1975, the program was split into the separate Child Care Food Program (CCFP) and the Summer Food Service Program (SFSP) ( P.L. 94-105 ). CCFP was open to public and nonprofit institutions that met child care licensing or other official child care standards, while SFSP retained a focus on institutions in low-income areas. Meals were provided for free to all children at SFSP sites, whereas CCFP conducted free and reduced-price eligibility determinations like NSLP. Recent History (1980 to 2010) The longstanding growth of child nutrition programs was contrasted with budget cuts in the early 1980s, which were part of larger efforts to reduce federal domestic spending. The Omnibus Reconciliation Act of 1980 ( P.L. 96-499 ) reduced FY1981 funding for child nutrition programs by approximately $400 million (9%) of the child nutrition budget. The law achieved savings by lowering reimbursement rates in the programs and eliminating commodity assistance for breakfast, among other changes. Larger spending cuts followed with the Omnibus Reconciliation Act of 1981, which made changes that collectively cut $1.4 billion (25%) of the child nutrition budget (Title VIII of P.L. 97-35 ). Many of the policy changes made by the law remain in place today. For example, the law restricted eligibility from 195% of poverty to 185% of poverty for reduced-price meals and set eligibility at 130% for free meals in the NSLP, SBP, and CCFP. It also raised allowable charges for reduced-price lunches from 20 cents to 40 cents and for reduced-price breakfasts from 10 cents to 30 cents. In a major change to SMP, the law excluded schools/institutions that participated in another child nutrition meals program from participating in SMP—cutting SMP's budget by 77 percent. In CCFP, the law restricted participation from children ages 18 and under to children ages 12 and under, and reduced the maximum number of reimbursable meals from three meals and two snacks per child daily to two meals and one snack per child daily. The law also eliminated equipment assistance for school meals. Child nutrition programs were subsequently excluded from budget deficit reduction measures in the late 1980s and 1990s, and new policies led to the expansion of the programs during this timeframe. For example, amendments to the programs in these years authorized start-up grants for school breakfast programs, expanded CCFP to adult day care centers (and renamed the Child and Adult Care Food Program, or CACFP), and provided new funding for afterschool snacks through NSLP and CACFP. But what had potentially the longest-term impact on expansion was a policy change intended to reduce paperwork in the school meals programs: automatic (categorical) eligibility for free meals for children in food stamp (now SNAP) and Aid to Families with Dependent Children (now TANF) households, which was enacted in 1986—and direct certification of such children for free meals without household applications, which was enacted in 1989. Other policies in the late 1980s and 1990s focused on improving program integrity. The 1989 child nutrition reauthorization ( P.L. 101-147 ) required USDA to create a standardized process through which states would review school food authorities' administration of NSLP and SBP (known as administrative reviews). In CACFP, following USDA Office of the Inspector General (OIG) audits in the 1990s that found instances of abuse and mismanagement, the Agricultural Risk Protection Act of 2000 ( P.L. 106-224 ) made a number of changes aimed at improving program integrity in CACFP. The act required CACFP sponsors to conduct more frequent and unannounced site visits of sponsored centers and homes, restricted nonprofit institutions' eligibility to those with tax-exempt status, and excluded institutions deemed ineligible to participate in any other public program based on violations of program requirements. Other legislation was aimed at improving program integrity in the school meals programs. Program integrity continued to be a focus in the 2004 child nutrition reauthorization ( P.L. 108-265 ), which made changes to school food authorities' verification of household applications for free and reduced-price meals. Specifically, the law set a sample size of applications that schools must review, established a focus on "error-prone" applications (applications near the income eligibility thresholds), and authorized direct (automatic) household application verification processes. In addition, the law required states to conduct additional administrative reviews of school food authorities with a high level of administrative error or risk of error. The 2004 child nutrition reauthorization also continued the expansion of free school meals to new categories of children. Specifically, the law extended categorical eligibility and direct certification for free school meals to homeless children, migrant children, and children served under the Runaway and Homeless Youth Act. The most recent child nutrition reauthorization as of the date of this report was the Healthy, Hunger-Free Kids Act of 2010 (HHFKA; P.L. 111-296 ). The HHFKA continued the expansion of school meals in a few ways. It made foster children categorically eligible for free school meals, and allowed direct certification of such children. It also included a pilot project for direct certification (but not categorical eligibility) of children in Medicaid households for free and reduced-price meals based on an income test. In addition, the HHFKA created the Community Eligibility Provision (CEP), through which eligible schools can provide free meals to all students. As discussed in this report, the HHFKA also made changes to nutritional requirements in the school meals programs and CACFP. Specifically, the law required USDA to update the nutrition standards for school meals within a certain timeframe and align the standards with the Dietary Guidelines for Americans (per an existing statutory requirement). The law also required USDA to issue new nutrition standards regulating all foods sold on school campuses during the school day ("competitive foods"). (Previous standards applied only to competitive foods sold during meal service.) In addition, the HHFKA required USDA to update the nutrition standards for CACFP meals and snacks within a certain timeframe and align them with the Dietary Guidelines for Americans. USDA and Congress have made subsequent changes to the nutrition standards for school meals and CACFP meals and snacks, and the standards remain a source of debate in the programs.

The federal government has a long history of investing in programs for feeding children, starting with federal aid for school lunch programs in the 1930s. Today, federal child nutrition programs support food served to children in schools and a variety of other institutional settings. Administered by the U.S. Department of Agriculture's (USDA's) Food and Nutrition Service (FNS), child nutrition programs include the National School Lunch Program (NSLP), School Breakfast Program (SBP), Child and Adult Care Food Program (CACFP), Summer Food Service Program (SFSP), Fresh Fruit and Vegetable Program (FFVP), and Special Milk Program (SMP). The child nutrition programs vary in terms of size and target populations. The largest programs are NSLP and SBP (the "school meals programs"), which subsidize meals for nearly 30 million children in approximately 94,300 elementary and secondary schools nationwide. The other child nutrition programs serve fewer children. CACFP supports meals served to children in child care, day care, and afterschool settings; SFSP provides funding for summer meals; FFVP sponsors fruit and vegetable snacks in elementary schools; and SMP subsidizes milk in schools and institutions that do not participate in other child nutrition programs. In general, the largest subsidies are provided for free or reduced-price meals and snacks served to children in low-income households. Federal spending on child nutrition programs and activities totaled approximately $23 billion in FY2019, the majority of which was mandatory spending. Most child nutrition programs are considered "appropriated entitlements," meaning that their authorizing statutes establish a legal obligation to make payments, but that obligation is fulfilled through funding that is provided in annual appropriations acts. Most of the funding is provided in the form of per-meal cash reimbursements that states distribute to schools and institutions. A smaller amount of federal funding is provided in the form of federally purchased commodity foods and cash for states' administrative expenses. The child nutrition programs are primarily governed by two statutes: the Richard B. Russell National School Lunch Act and the Child Nutrition Act of 1966 as amended. These laws were most recently reauthorized by the Healthy, Hunger-Free Kids Act of 2010 (HHFKA, P.L. 111-296 ), which made several changes to the child nutrition programs. For example, the act created the Community Eligibility Provision, an option for eligible schools to provide free meals to all students. It also required USDA to update nutrition standards in the school meals programs and CACFP within a certain timeframe. Certain provisions of the HHFKA expired at the end of FY2015. However, these expirations have had a minimal impact on program operations, which continue with annual appropriations. The 114 th Congress began but did not complete a reauthorization of child nutrition programs. In the 115 th Congress, there was no significant reauthorization activity. As of the date of this report, leadership on both committees of jurisdiction (the Senate Agriculture, Nutrition, and Forestry Committee and the House Committee on Education and Labor) have announced plans to work on reauthorization in the 116 th Congress. Selected legislative issues are discussed in CRS Report R45486, Child Nutrition Programs: Current Issues .

CRS_R45736

Introduction The 2017 tax revision, P.L. 115-97 , often referred to as the Tax Cuts and Jobs Act, and referred to subsequently as the Act, was estimated to reduce taxes by $1.5 trillion over 10 years. The Act permanently reduced the corporate tax rate to 21%, made a number of revisions in business tax deductions (including limits on interest deductions), and provided a major revision in the international tax rules. It also substantially revised individual income taxes, including an increase in the standard deduction and child credit largely offset by eliminating personal exemptions, along with rate cuts, limits on itemized deductions (primarily a dollar cap on the state and local tax deduction), and a 20% deduction for pass-through businesses (businesses taxed under the individual rather than the corporate tax, such as partnerships). These individual provisions are temporary and are scheduled to expire after 2025. The Act also adopted temporary provisions allowing the immediate deduction for equipment investment and an increase in the exemption for estate and gift taxes. The Congressional Budget Office (CBO) estimated in April of 2018 that the Act would result in a $65 billion reduction in individual income taxes, a $94 billion reduction in corporate taxes, and a $3 billion reduction in other taxes, for a total of $163 billion (after rounding) for FY2018. Numerous effects of the Act were projected during consideration of the law and shortly after, including an increase in output and investment; an increase in the debt to GDP ratio; possible benefits for workers from tax cuts for businesses; the repatriation of income held abroad by U.S. subsidiaries in the form of dividends; and a decreased likelihood of inversions (U.S. companies moving their headquarters abroad). Some claimed that business investment would increase because of (1) the flow of investment from abroad due to the lower corporate tax rate and (2) no longer imposing a tax penalty on paying dividends from foreign subsidiaries would free up resources. This analysis examines the preliminary effects of the Act during the first year, 2018. In some cases it is difficult to determine the effects of the tax cuts (e.g., on economic growth) given the other factors that affect outcomes. In other cases, such as the level of repatriation and use of repatriated funds, the evidence is more compelling. This report discusses these potential consequences in light of the data available after the first year. Effects on Output and Investment Projections of Output Effects During consideration of the Act and subsequently, various claims were made about the growth effects of the tax change. A variety of organizations, including private and government forecasters, projected economic growth rates that tended to be modest. In its April 2018 report on the budget outlook, CBO projected the tax change to increase GDP by 0.3% in calendar year 2018. Prorating the FY2019 revenue loss estimate indicated that the tax cut in calendar year 2018 accounted for about 1.2% of GDP. Assuming a tax rate on marginal output of around 20%, this projection would imply a feedback effect of 5%. The Joint Committee on Taxation (JCT) also projected the economic effects of the proposal, and while it did not report year-by-year estimates, its revenue feedback effect for calendar year 2018 was larger than that suggested by the CBO numbers—around 20%, which in turn indicates a projected increase in GDP four times larger, 1.2%. Given the baseline prior to the Act, that effect would have suggested a growth rate of 4.2% in 2018. The CBO output estimate (i.e., the amount of GDP growth attributed to the tax change) was compared with projections by other forecasters and organizations. Of the seven other forecasts projecting the effects of the Act for 2018, five ranged from 0.3% to 0.5%, one was for 0.1%, and another for 0.8%. CBO also disaggregated its output effect into an increase in potential GDP of 0.2%, with the remaining 0.1% reducing the gap between output with and without full employment. The increase in potential output reflects increases in investment and in the labor supply. The 0.1% increase might be characterized as a demand-side effect and the remainder as a supply-side effect. Because the economy was at full employment and most of the tax cut went to businesses and higher-income individuals who are less likely to spend the increases, a small demand-side effect would be expected. Demand-side effects are transitory, whereas supply-side effects are permanent. CBO and other organizations also produced longer-term forecasts. CBO projected output effects rising to 0.6% in 2019, then rising slightly and peaking in 2022, and finally declining, with an estimated 0.5% effect in 2028, the last year reported. The decline in later years might be partially traced to the expiration of some provisions. Compared with other forecasts for the average over the 10-year period 2018-2027, CBO's 0.7% effect was similar to other forecasts. For the 10 th year, 2027, CBO projected an effect of 0.6%; there was considerably more divergence in the estimates for this year, with one organization projecting a negative effect by that time. This divergence presumably reflected competing views of the effects on capital formation due to lower tax rates on returns to investment and crowding out of private investment due to accumulating debt. During the debate, some argued for much larger growth effects, including arguments that the tax cuts would produce so much growth that they would largely or entirely pay for themselves, or even raise revenues. These statements, however, were not supported by most of the published analysis. Output Growth in 2018 In April 2018, CBO projected real GDP growth for the calendar year 2018 of 3.3% (indicating a projected 3% growth rate without the tax cut). According to the National Income and Product Accounts (NIPA), actual growth rate was 2.9%, which is consistent with a small effect of the tax revision, perhaps even smaller than projected by most analysts. Quarterly growth rates are shown in Figure 1 . The revenue loss from the tax cut without incorporated growth effects was estimated at about 1.2% of GBP in 2018. The 2.9% annual growth rate for 2018 was higher than the 2.2% growth rate in 2017 and the 1.6% growth rate in 2016. In previous years, output grew by 2.9% in 2015 and 2.5% in 2014, thus the increase in growth is in line with the trend in growth over the period examined in Figure 1 . Forecasters had already projected an increase in growth rates in most cases that was similar to CBO's. In addition to the effect from the tax cuts, there was also some stimulus due to the increase in spending enacted in the Consolidated Appropriations Act of 2018 ( P.L. 115-141 ) and the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). Growth may have also been negatively affected by tariffs. The high rate of growth in the second quarter of 2018 shown in Figure 1 may have been due to the demand-side stimulus of the tax cuts, which began to be reflected in withholding beginning in the first quarter, as well as the possibly delayed receipt of tax refunds. On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy. Although examining the growth rates cannot indicate the effects of the tax cut on GDP, it does tend to rule out very large effects in the near term. The data appear to indicate that not enough growth occurred in the first year to cause the tax cut to pay for itself. Assuming a tax rate of 18% (based on CBO estimates), and estimating the tax cut to reduce revenue in calendar year 2018 by about 1.2% of GDP, a 6.7% GDP increase due to the tax cuts alone would be required. Rather, the combination of projections and observed effects for 2018 suggests a feedback effect of 0.3% of GDP or less—5% or less of the growth needed to fully offset the revenue loss from the Act. Contribution of Consumption Growth Consumption grew at 2.6% in 2018 in real terms, as shown in Figure 2 , about the same as 2017 (which was 2.5%) and below 2014-2016 (although higher than 2013). As shown in Figure 2 , there was a drop in the first quarter followed by a rise in the second quarter that was unexpected by most forecasters and may have reflected a delay in tax refunds. The initial effect of a demand side is likely to be reflected in increased consumption and the data indicate little growth in consumption in 2018. Much of the tax cut was directed at businesses and higher-income individuals who are less likely to spend. Fiscal stimulus is limited in an economy that is at or near full employment. Contribution of Investment Growth Although it is difficult to determine the Act's overall first-year impact on GDP, other than to confirm that the evidence is consistent with a small projected first-year effect, it is possible to discuss supply-side effects on investment in more detail. CBO estimated that the 0.3% increase in growth from the Act is the result of a 0.4% increase in GDP due to private consumption and a 0.2% increase due to nonresidential fixed investment (with a negligible effect on residential investment and government consumption and investment). This 0.6% increase was projected to be offset by a decrease in net exports of 0.3% of GDP (from both a decline in imports and an increase in exports). This decrease is expected as a consequence of net capital flowing in from abroad to finance the deficit or due to capital inflows used for investment in response to tax changes. Given the shares of GDP that went to consumption (70%) and investment in nonresidential fixed investment (14%) in 2017, these growth contributions indicated an additional growth in consumption of 0.7% and in fixed nonresidential investment of 1.5%. In 2018, consumption grew at 2.6% and nonresidential investment grew at 7%. Such numbers might suggest a supply-side effect. There are reasons, however, not to necessarily view that growth as a supply-side effect of the tax change. First, the growth rates of investment and its subcomponents are much more volatile than the growth rates of GDP, as shown in Figure 3 , making it hard to assign causation. Second, the largest effects occurred in the first and second quarters of 2018, which allowed very little time to be the result of investments that must be planned in advance (even if the tax cut was anticipated in late 2017). Furthermore, structures growth rates were negative in the last two quarters. Third, real growth in the subcategories of equipment, structures, and intellectual property products is inconsistent with the incentive effects of the tax change. Over the entire year, intellectual property products grew at the fastest rate (7.7%), equipment at a slightly lower rate (7.5%), and structures at 5.0%. To assess the incentive effects of the tax changes (which included a lower tax rate and faster depreciation for equipment), consider the change in the user cost of capital (or rental price of capital). It is the equivalent of the "price" of capital as an input (just as the wage is the price of labor input). It includes two costs of using capital: the opportunity cost of using funds (i.e., the required pretax rate of return on the asset) and depreciation (i.e., the cost of using up the asset). The user cost reflects the required rate of return at the margin (i.e., for an investment that earns just enough to be worth making). Estimates indicate that the user cost of capital for equipment declined by 2.7% and the user cost of structures declined by 11.7%, but the user cost of R&D (intellectual property products) increased by 3.4%. (See the Appendix for details on the derivation of these results.) The user cost of capital for equipment declined by less than that of structures primarily because more of the cost for equipment is for depreciation. The decline in the required rate of return was somewhat smaller for equipment as well because it was already favorably treated (eligible for expensing half of the cost). The benefits of lower rates are also moderated by the use of debt-financed capital, where a lower tax rate reduces the subsidy (or negative tax rate) that applies to debt-financed investment because of the deduction of nominal interest by businesses. Thus, while it is possible that the Act increased the investment due to supply-side effects, it would be premature to conclude that the higher rate of growth of nonresidential fixed investment was due to the tax changes. Looking at changes in the user cost of capital, effects of investments in structures would be expected to be largest, with small (or negative) effects on intellectual property. To date this pattern has not been observed. Effects on Revenues Overall revenue changes were close to projections, with revenues only $9 billion smaller than projected, due to a $45 billion increase in individual income tax revenues, but a $7 billion decrease in payroll taxes, along with a $40 billion decline in corporate revenues. As noted above, data on GDP are not consistent with a large growth effect in 2018, and thus the tax cut is unlikely to provide enough growth to significantly offset revenue losses in 2018. Data from FY2018 suggest that the tax cut for corporations may have been larger than the $94 billion CBO projected in its April 2018 baseline. That baseline projected corporate revenues of $243 billion, but actual corporate revenues were $38 billion lower at $205 billion, 16% lower than projected. CBO's January 2019 report on the budget and economic outlook indicated that these lower corporate tax revenues could not be explained by economic conditions and stated that the causes will not be apparent until information from tax returns becomes available over the next two years. CBO also expected this decline in revenues to dissipate over time. With little evidence of whether the decline will actually be temporary or permanent, CBO may have relied on the historical tendency of unexplained changes to dissipate over time. It is also possible that estimated revenue losses from the corporate tax changes were too low in their earlier estimates. The overall revenues were close to those projected as the lower corporate revenues were offset by gains from other taxes: a $45 billion increase in individual income tax revenues and a $7 billion decrease in payroll taxes. These differences, particularly for payroll taxes, are much smaller as a percentage of revenue, and CBO does not indicate any need for an explanation of these changes outside of economic forces. Effects on Effective Tax Rates Effective tax rates fell, with corporate effective tax rates declining significantly and individual effective income tax rates by a small amount. Effective Corporate Tax Rate Much of the tax revision was focused on corporations. Although the statutory corporate tax rate was reduced from 35% to 21%, the average effective tax rate decline (taxes divided by profits) would be smaller because of existing tax benefits (which lead to a smaller initial effective tax rate) and base-broadening effects. Such an effective tax rate can be calculated using aggregate data from the national income and products accounts, which attempt to measure economic income. The effective average tax rate for corporations was 17.2% in calendar year 2017, and fell to 8.8% in calendar year 2018. This estimate includes worldwide income, but not worldwide taxes. Although actual data on the division of domestic and worldwide income are not available for 2018, using the ratios projected by CBO to eliminate foreign-source income from the measure results in an average effective tax rate of 23.4% in 2017, falling to 12.1% in 2018. Either scenario suggests that the ratio of effective to statutory tax rate dropped following the tax revision. The statutory tax rate dropped by 40%, but the effective rate dropped by 48% (although the percentage point drop was smaller for the effective tax rate). Another measure of effective rate is the marginal effective tax rate on income, a tax rate that is a component of the user cost of capital. These tax rates are prospective and capture the main elements of the tax code: tax rates, depreciation, and research credits. They also apply to domestic investment. Using a weighted average of equipment, structures, and intangibles, the effective marginal tax rate on equity investment was estimated to fall from 15.6% to 3.2% from 2017 to 2018. If the effects of reducing subsidies for debt-financed investment are accounted for, marginal tax rates are lower (actually slightly negative) and change less, from a -0.3% rate in 2017 to a -6.6% rate in 2018. Marginal tax rates are likely to be below average tax rates because they capture timing benefits (e.g., accelerated depreciation). Marginal effective tax rates are relevant to economic growth effects because they measure the incentive effects for investment. Effective Individual Income Tax Rates The individual income tax changes for 2018 were smaller than the corporate tax changes in absolute size and substantially smaller as a percentage of income. The effective individual tax rate for federal income taxes as a percentage of personal income is estimated at 9.6% in 2017 and 9.2% in 2018, based on data in the National Income and Product Accounts. This change constitutes a reduction in effective tax rate of 4%. The Treasury Department's Office of Tax Analysis estimates a larger reduction in effective tax rate as a percentage of adjusted family cash income, with the rate falling from 10.1% in 2017 to 8.9% in 2019, although this estimate is based on projected rather than actual data. Both of these declines are smaller than the corporate tax rate decline. As noted earlier, the increase in the standard deduction and child and dependent credit was roughly offset by the elimination of the personal exemption. Statutory rate reductions for individuals were relatively small compared with the corporate rate reduction (the top rate of 39.6% was reduced by 2.6 percentage points, compared with 14 percentage points for the corporate rate), and the benefits of rate reductions were offset by restrictions on itemized deductions. Business income was in some cases eligible for a 20% reduction, which was more significant (an additional 20% deduction at the 37% rate is 7.4 percentage points), but not all business income qualified. There are also effective marginal tax rates, although these are generally divided into rates on labor income and capital income. The marginal tax rate for labor income is typically above the average tax rates because of graduated tax rates and lack of timing benefits. CBO estimates that marginal tax rates on labor income fell from 29.4% to 27.2%. CBO also estimates the marginal tax rate for all capital income (which would include unincorporated businesses, owner-occupied housing, and taxes on interest, dividends, and capital gains, as well as corporate taxes). This value is estimated to fall from 16.5% to 14.7%. Although different from the marginal rates reported above for corporations, both estimated measures find small changes in marginal tax rates, which is consistent with an expected small behavioral response. Effects on Wages Distributional analyses of the tax change suggested that the tax revision favored higher-income taxpayers, in part because most of the tax cut benefited corporations and in part because the individual income tax cut largely went to higher-income individuals. During the debate about taxes, however, arguments were made that these corporate tax cuts would benefit workers due to growth in investment and the capital stock. After enactment, CBO projected these effects to be relatively small, with increases in labor productivity (which should affect the wage rate) negligible in 2018 and growing to 0.3% of GDP after 10 years. CBO projected that the total wage bill would grow because of the increase in employment and hours per worker of 0.2% in 2018. The labor supply response would rise through 2024, peaking at 0.8% and then decline as the individual tax cuts expired. A Council of Economic Advisors (CEA) October 2017 study suggested a corporate rate reduction from 35% to 20%, if enacted, would eventually increase the average household's income by a conservative $4,000 a year. This was a longer-run estimate, but the study also estimated that workers would immediately get a significant share (30%) of the profits repatriated from abroad due to tax changes. Another CEA October 2017 report suggested wages could increase by up to $9,000 with such a corporate rate change using more optimistic assumptions. While the CEA study with respect to the $4,000 to $9,000 amounts referred to a long-term effect, the study was portrayed by the Administration as indicating an immediate effect. The amounts associated with repatriation were short term. A $4,000 to $9,000 effect per household, given the 126 million households that were estimated at that time, would produce a total effect ranging from $504 billion to $1,134 billion, or between 2.5% and 5.7% of GDP in 2018. The corporate rate cut from 35% to 21% cost about $125 billion over a full year, and it would cost about $133 billion with the additional percentage point rate reduction (to 20%) considered at that time. Thus, in these scenarios, the effects of the tax cuts would be many times (3.8 to 8.5) larger than the costs. The projections for long-run growth in the CEA study relied on a range of empirical economics literature, including the effects of changes in user cost on investment cost and corporate tax incidence. The econometric estimates of corporate tax incidence are problematic for a number of reasons, and the effects on investment considering user cost did not appear to take into account the direct effect of the tax rate change on the interest. In the absence of the tax cuts, wages should grow with the economy and wage rates should grow as the capital stock grows. In addition, tight labor markets resulting from the approach to full employment should have put upward pressure on wage rates in any case. Evidence from 2018 indicated that labor compensation, adjusted to real values by the price indices for personal consumption expenditures, grew slower than output in general, at a 2.3% rate compared with a 2.9% growth rate overall. If adjusted by the GDP deflator, labor compensation grew by 2.0%. With labor representing 53% of GDP, that implies that the other components grew at 3.8%. Thus, pretax profits and economic depreciation (the price of capital) grew faster than wages. Figure 4 shows the growth rate of real wages compared with the growth rate of real GDP for 2013-2018, indicating that wage growth has sometimes been faster than GDP growth and sometimes slower. There is no indication of a surge in wages in 2018 either compared to history or relative to GDP growth. This finding is consistent with the CBO projection of a modest effect. The Department of Labor reports that average weekly wages of production and nonsupervisory workers were $742 in 2017 and $766 in 2018. Wages, assuming full-time work, increased by $1,248 annually. But this number must account for inflation and growth that would otherwise have occurred regardless of the tax change. The nominal growth rate in wages was 3.2%, but adjusting for the GDP price deflator, real wages increased by 1.2%. This growth is smaller than overall growth in labor compensation and indicates that ordinary workers had very little growth in wage rates. Effects on Repatriation and International Investment Flows One of the major sources of anticipated increased investment through supply-side effects is international capital flows, particularly in the short and medium term. Savings rates tend to be relatively unresponsive to changes in the rate of return and savings accumulate slowly. Thus the increased investment in the United States (in the aggregate) would need to come from abroad. Some expected foreign investment to flow due to the reduction in the user cost of capital. Some also argued that eliminating the tax barrier to repatriating funds (as was done with the tax revision) would lead to reinvestment in the United States of unrepatriated earnings held abroad in U.S. subsidiaries. Under prior law, these earnings would have been taxed at 35%, adjusted for credits on foreign taxes paid, if paid as dividends to the parent company. The tax change exempted dividends from tax, imposed a transition tax on deemed repatriations of existing untaxed earnings at a rate lower than the new corporate rate of 21% (15.5% on liquid assets and 8% on illiquid assets), and imposed a global minimum tax on intangible income. These changes meant paying dividends resulted in no tax consequences. Although estimates varied, they indicated close to $3 trillion of unrepatriated earnings. There were a number of criticisms of the possibility that repatriation of these earnings would stimulate investment, considering the evidence that a repatriation holiday in 2004 had not affected investment. Not all of these amounts were held in cash, as some were earnings reinvested in physical assets (such as plant and equipment) and some might be invested in other assets that were not cash equivalents. A Federal Reserve study estimated that $1 trillion was held in cash. A significant amount of repatriations occurred in 2018, as compared both to history and 2017. Dividends in the previous three years ranged from $144 billion to $158 billion, as shown in Figure 5 , whereas $664 billion was repatriated in 2018. Simultaneously, reinvested earnings declined sharply before returning to more normal levels in the 4 th quarter of 2018. It is important, however, to measure international capital flows in true terms that reflect the inflow of resources for capital investment and not by financial transactions, such as repatriation of income earned abroad through dividend payments from foreign subsidiaries. Capital investment involves resources that reflect actual investment in the United States. It could involve imports of investment goods directly, or it could involve imports of consumption goods that free up other resources for investment. In either case, the true capital invested in the United States is largely measured by the excess of exports over imports, or more precisely by the current account, which can also include a small amount of net income payments. In more fundamental terms, investment from abroad occurs in a real sense only when the amount of imported goods exceeds the amount of U.S. exports. To measure this aggregate change in net capital inflows, examine the balance on the current account, which is generally negative, indicating a net capital inflow (imports exceed exports, or a trade deficit). Adjusting these amounts by the GDP deflator and looking at the change, there was a small increase that amounted to 0.8% of private investment. This change is relatively small and is not out of line with historical fluctuations; see Figure 6 . Again, many factors can affect net capital inflows, including domestic borrowing by the government and domestic saving, but the evidence does not suggest a surge in investment from abroad in 2018. Use of Funds for Worker Bonuses and Share Repurchase Increased funds, whether accessed from abroad or through tax cuts, could be used in several ways: investment, paying down debt, increasing wages, paying wage bonuses, paying dividends, or repurchasing shares. During the passage of the tax revision and in the immediate aftermath, some argued that firms would use these funds to pay worker bonuses (as discussed in the previous section on wages). Subsequently, a number of firms announced bonuses, which in some cases they attributed to the tax cut. One organization that tracks these bonuses has reported a total of $4.4 billion. With US employment of 157 million, this amount is $28 per worker. This amount is 2% to 3% of the corporate tax cut, and a smaller share of repatriated funds. It is consistent with what most economists would expect that a small percentage of increased corporate profits or repatriated funds (if any) would be used to compensate workers, as economic theory indicates that firms would pay workers their marginal product, a result of fundamental supply and demand forces. The bonus announcements could have reflected a desire to pay bonuses when they would be deducted at 35% rather than 21% (in late 2017 for firms with calendar tax years but in 2018 for firms with different tax years). Worker bonuses could also be a result of a tight labor market and attributed to the tax cut as a public relations move. Much of these funds, the data indicate, has been used for a record-breaking amount of stock buybacks, with $1 trillion announced by the end of 2018. A similar share of repurchases happened in 2004, when a tax holiday allowed firms to voluntarily bring back earnings at a lower rate. Effects on Inversions During the discussion of corporate tax revision over a number of years, one important issue repeatedly raised was the effect of the current tax system on incentives for firms to relocate abroad, or "invert." Inversions involved firms relocating their headquarters to low-tax jurisdictions that generally had territorial taxes, allowing firms to shift profits out of their U.S. operations (so-called earnings stripping) as well as providing potential paths to repatriate earnings without taxes. The earliest of these inversions, beginning in the early 1980s, were called "naked inversions," where a company simply relocated its headquarters without otherwise changing its activities. A number of legislative and regulatory actions largely ended these types of inversions. In 2004, the American Jobs Creation Act ( P.L. 108-357 ) required that any firm in which the former U.S. owners owned 80% or more of the new firm would continue to be treated as a U.S. firm. Firms with 60% to 80% ownership by former shareholders of the U.S. firm were considered inverted firms and subject to certain penalty taxes. This legislation allowed naked inversions in cases where the firm had substantial business activity in the new headquarters country, but regulations issued in 2012 tightened these requirements after a series of inversions used this rule to relocate. In 2014, a new wave of inversions that involved mergers with smaller foreign firms began, with one of the most prominent being an announcement that Pfizer, the pharmaceutical company, would acquire Astra-Zeneca with a UK headquarters (although this merger never took place). These inversions gave rise to a number of legislative proposals, but also led to numerous regulatory proposals, which were released in 2014, 2015, and 2016. These regulations addressed a number of issues, including restricting the use of serial inversions to allow a firm to fall under the ownership limits, limiting the ability to access earnings of subsidiaries abroad, and limiting earnings stripping through locating debt in the United States. The 2017 Act contained several provisions that made inversions less attractive (aside from the lower corporate tax rate). One notable provision required firms that inverted in the next 10 years to pay a deemed repatriation tax at 35%, rather than at the lower rates of 8% for non-cash holdings and 15.5% for cash or cash equivalents. The Act introduced a new minimum tax to address international profit shifting, the base erosion and anti-abuse tax (BEAT), which adds back payments between related domestic and foreign companies to base income and then taxes that base at a lower rate. BEAT excludes payments which reduce gross receipts with the result that payment for the cost of goods sold is not included under BEAT. An exception applies for firms that invert after November 9, 2017, where payments to a foreign parent or any foreign firm in the affiliated group for cost of goods sold is included in BEAT. The legislation also contained some other provisions making inversions less attractive. The Act also modified asset attribution rules. The constructive ownership rules for purposes of determining 10% U.S. shareholders, whether a corporation is a Controlled Foreign Corporation (CFC), and whether parties satisfy certain relatedness tests, which can trigger certain tax provisions including restrictive ones, were expanded in the 2017 tax revision. Specifically, the new law treats stock owned by a foreign person as attributable to a U.S. entity owned by the foreign person (so-called "downward attribution"). As a result, stock owned by a foreign person may generally be attributed to (1) a U.S. corporation, 10% of the value of the stock of which is owned, directly or indirectly, by the foreign person; (2) a U.S. partnership in which the foreign person is a partner; and (3) certain U.S. trusts if the foreign person is a beneficiary or, in certain circumstances, a grantor or a substantial owner. The downward attribution rule was originally conceived to deal with inversions. In an inversion, without downward attribution, a subsidiary of the original U.S. parent could lose CFC status if it sold enough stock to the new foreign parent so the U.S. parent no longer had majority ownership. With downward attribution, the ownership of stock by the new foreign parent in the CFC is attributed to the U.S. parent, so that the subsidiary continues its CFC status, making it subject to any tax rules that apply to CFCs (such as Subpart F and repatriation taxes under the old law, and Subpart F and Global Low-Taxed Income (GILTI) under the new law). The Act also contained other provisions affecting stockholders and stock compensation. These provisions were intended to discourage inversions. Dividends (like capital gains) are taxed at lower rates than ordinary income. The rates are 0%, 15%, and 20% depending on the rate bracket that ordinary income falls into. Certain dividends received from foreign firms (those that do not have tax treaties and Passive Foreign Investment Companies (PFICs)) are not eligible for these lower rates. Dividends paid by firms that inverted after the date of enactment of P.L. 115-97 are added to the list of those not eligible for the lower rates. Also, in 2004, an excise tax of 15% was imposed on stock compensation received by insiders in an expatriated corporation; the 2017 Act increased it to 20%, effective on the date of enactment for corporations that first become expatriated after that date. These new laws did not change the definition of inverted firms but rather the consequences of inversions. Although the legislative changes in the 2017 Act contributed to making inversions less attractive, announced inversions had already slowed substantially following the regulatory changes implemented in 2014, 2015, and 2016. In addition, data released by the Bureau of Economic Analysis indicated that foreign acquisitions of US companies, which rose substantially in 2015, fell by 15% in 2016 and 32% in 2017 (data not available for 2018). Some of the largest declines were in inversion-associated countries, such as Ireland, where acquisitions fell from $176 billion in 2015, to $35 billion in 2016, and to $7 billion in 2017. Appendix. The User Cost of Capital The user cost of capital is the sum of the pretax required return for a marginal investment and the economic depreciation, or (1) C = R/(1-t)+d Where C is the user cost, R is the required after-tax return, t is the effective marginal rate, and d is the economic depreciation rate. Economic depreciation is the decline in the value of the asset in real terms, and belongs in the cost term because it compensates the investor for the wearing away, or using up, of the asset. The user cost calculations use a weighted pretax rate of return that reflects both debt and equity finance to simplify the analysis. The effective marginal tax rate, in turn, depends on the statutory tax rate, the present value of economic depreciation, the inflation rate, the return on equity, the share debt-financed, and the nominal interest rate. Table A-1 reports the effective tax rate for corporate and non-corporate investment before and after the 2017 changes for the basic types of nonresidential fixed capital. The overall user cost also depends on the economic depreciation rates and the relative sizes of each type of capital stock in the corporate and non-corporate sector. For equipment, the economic depreciation rate is 12.95% per year, and corporate equipment comprises 67% of all equipment. Structures are composed of two types: (1) public utility structures (accounting for 23% of the total) with a depreciation rate of 2.24% and (2) buildings with a depreciation rate of 2.8%. Within public utility structures, corporations account for 84%; within buildings, corporate structures account for 55%. Intangible assets have a depreciation rate of 17%, and corporations account for 86%. User costs and their percentage changes are shown in Table A-2 .

The 2017 tax revision, P.L. 115-97, often referred to as the Tax Cuts and Jobs Act, and referred to subsequently as the Act, substantially revised the U.S. tax system. The Act permanently reduced the corporate tax rate to 21%, made a number of revisions in business tax deductions (including limits on interest deductions), and provided a major revision in the international tax rules. It also substantially revised individual income taxes, including an increase in the standard deduction and child credit largely offset by eliminating personal exemptions, along with rate cuts, limits on itemized deductions (primarily a dollar cap on the state and local tax deduction), and a 20% deduction for pass-through businesses (businesses taxed under the individual rather than the corporate tax, such as partnerships). These individual provisions are temporary and are scheduled to expire after 2025. The Act also adopted temporary provisions allowing the immediate deduction for equipment investment and an increase in the exemption for estate and gift taxes. The Joint Committee on Taxation (JCT) estimated that these changes would reduce tax revenue by $1.5 trillion over 10 years. In 2018, gross domestic product (GDP) grew at 2.9%, about the Congressional Budget Office's (CBO's) projected rate published in 2017 before the tax cut. On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy. Although growth rates cannot indicate the tax cut's effects on GDP, they tend to rule out very large effects particularly in the short run. Although investment grew significantly, the growth patterns for different types of assets do not appear to be consistent with the direction and size of the supply-side incentive effects one would expect from the tax changes. This potential outcome may raise questions about how much longer-run growth will result from the tax revision. CBO, in its first baseline update post enactment, initially estimated that the Act would reduce individual income taxes by $65 billion, corporate income taxes by $94 billion, and other taxes by $3 billion, for a total reduction of $163 billion in FY2018. Corporate revenues were about $40 billion less than projected whereas individual revenues were higher, with an overall revenue reduction of about $9 billion. From 2017 to 2018, the estimated average corporate tax rate fell from 23.4% to 12.1% and individual income taxes as a percentage of personal income fell slightly from 9.6% to 9.2%. Real wages grew more slowly than GDP: at 2.0% (adjusted by the GDP deflator) compared with 2.9% for overall real GDP. Such slower growth has occurred in the past. The real wage rate for production and nonsupervisory workers grew by 1.2%. Although significant amounts of dividends were repatriated in 2018 compared with previous years, the data do not appear to show a significant increase in investment flows from abroad. While evidence does indicate significant repurchases of shares, either from tax cuts or repatriated revenues, relatively little was directed to paying worker bonuses, which had been announced by some firms. Although the legislation contained a number of provisions that discouraged inversions (shifting headquarters of U.S. firms abroad), these inversions had apparently already been significantly slowed by regulations adopted in 2014, 2015, and 2016.

GAO_GAO-20-152T

VA Medical Centers Took Action against Some Selected Providers with Disqualifying Information in the NPDB but Overlooked Others In our review of 57 providers selected for our February 2019 report, we found that the responsible VA medical centers took action against some providers with disqualifying information in the NPDB but overlooked others. We found that VA medical centers took administrative or disciplinary actions against some providers, such as removing them from patient care, after becoming aware of adverse information in the NPDB. However, many of these actions were taken following our review and a VHA-wide licensure review, both of which occurred in 2018, rather than at the time of the NPDB report. Specifically, the responsible VA medical centers removed five providers who they determined did not meet VA licensure requirements following our inquiries. For example, one of these five providers had surrendered a license in 2014, while employed at VA, but was not removed by the VA medical center until after our inquiries in 2018. Additionally, another provider was reported to the Drug Enforcement Administration (DEA) by a VA medical center after we inquired about the provider prescribing controlled substances without appropriate registration. We also found that VA medical centers hired or retained some of the 57 providers who they acknowledged had disqualifying adverse information in the NPDB, which is inconsistent with VHA policy. Specifically, these providers had licenses that were revoked or surrendered for cause, but VA medical center officials overlooked or were unaware of this information. However, none of these providers still worked at VHA at the time we completed our review. For example, one VA medical center hired a provider who had a state license revoked for patient neglect and substandard care. VA medical center officials stated that they received the NPDB report about the revoked license at the time the provider was hired in 2014 but it was inadvertently overlooked by multiple staff. This provider voluntarily resigned in 2017. In our February 2019 report, we found that three factors were largely responsible for inconsistent adherence to VHA policies that disqualify providers from employment. First, some medical center officials are not aware of key VHA policies, such as the requirement that a provider who has had a license revoked or surrendered for cause is ineligible for employment unless the license is reinstated. For example, in the case of the provider who surrendered a license in 2014, documentation shows that the medical center staff became aware of the surrendered license in 2015, but VHA staff stated that the removal was stalled due to confusion about policies. This lack of awareness of key policies may be linked to a lack of mandatory training for credentialing staff. Second, gaps in VHA policy allow for inconsistent interpretation. For example, VHA has not issued policies pertaining to employing providers who have had their DEA registration for prescribing controlled substances revoked or surrendered for cause. While the DEA requires registrants, like VHA, to obtain a waiver before employing such providers, VHA policy is silent on the requirement to obtain a waiver; we found that VA medical center officials were unclear on the DEA requirement and had hired providers without obtaining the required DEA employment waiver. Further, we found that two providers inappropriately prescribed controlled substances without a DEA waiver. Third, VHA’s oversight of VA medical centers’ reviews of adverse information is inadequate. Under VHA policy, VISN officials are responsible for reviewing providers with certain adverse licensure actions. However, we found that this review was not always conducted or documented. Further, although VHA-wide reviews of provider licenses have been completed and have identified providers with licensure issues, VHA officials indicated that these types of reviews are not routinely conducted because they are labor intensive. In our February 2019 report, we also found that some VA medical centers had taken steps to improve the credentialing process and identify providers who do not meet the licensure requirements. For example, one medical center completed a periodic review of all licensed providers to identify providers who may have had an expired licensure issue. Another VA medical center updated its policies to require providers with adverse actions to be reviewed by management. However, we found that VHA does not routinely assemble and disseminate information about initiatives that medical centers have undertaken to improve the oversight of providers. In our February 2019 report, we concluded that without consistent adherence to VHA employment policies and adequate oversight, VHA lacks assurance that all VA providers have the appropriate professional qualifications and clinical abilities to care for patients. To address these shortcomings, in our February 2019 report we made seven recommendations to VA. VA concurred with these recommendations. Table 1 summarizes these recommendations and the steps VA has taken to address them. Selected VA Medical Centers’ Reviews of Providers’ Clinical Care Were Not Always Documented or Timely As we reported in November 2017, we found that from October 2013 through March 2017, the five selected VA medical centers required reviews of a total of 148 providers’ clinical care after concerns were raised about their care. However, for almost half of these reviews, officials at these medical centers could not provide documentation to show that the reviews had been conducted. We found that all five VA medical centers lacked at least some documentation of the reviews they told us they conducted, and in some cases, we found that the required reviews were not conducted at all. For example, we found that the medical centers lacked documentation showing they conducted a prospective review of 26 providers. Additionally, VA medical center officials confirmed that they failed to conduct this required review for an additional 21 providers. We also found that the five selected VA medical centers did not always conduct reviews of providers’ clinical care in a timely manner. Specifically, of the 148 providers, the VA medical centers did not initiate reviews of 16 providers for 3 or more months, and in some cases, for multiple years, after concerns had been raised about the providers’ care. For three of these 16 providers, additional concerns about the providers’ clinical care were raised before the reviews began. In our November 2017 report, we found that two factors were largely responsible for the inadequate documentation and untimely provider reviews. First, VHA policy does not require VA medical centers to document all types of reviews of providers’ clinical care, including retrospective reviews, and VHA has not established a timeliness requirement for initiating reviews of providers’ clinical care. Second, VHA’s oversight of the reviews of providers’ clinical care is inadequate. Under VHA policy, VISN officials are responsible for overseeing the credentialing and privileging processes at their respective VA medical centers. While reviews of providers’ clinical care after concerns are raised are a component of credentialing and privileging, we found that none of the VISN officials we spoke with described any routine oversight of such reviews. This may be in part because the standardized tool that VHA requires the VISNs to use during their routine audits does not direct VISN officials to ensure that all reviews of providers’ clinical care have been conducted and documented. Further, some of the VISN officials we interviewed told us they were not using the standardized audit tool as required. In our November 2017 report, we concluded that without adequate documentation and timely completion of reviews of providers’ clinical care, VA medical center officials lack the information they need to make decisions about providers’ privileges, including whether or not to take adverse privileging actions against providers. Furthermore, because of its inadequate oversight, VHA lacks reasonable assurance that VA medical center officials are reviewing all providers about whom clinical care concerns have been raised and are taking adverse privileging actions against the providers when appropriate. To address these shortcomings and improve VA medical center reviews of provider quality and safety concerns, we made three recommendations to VA in our November 2017 report. VA concurred with these recommendations. Table 2 summarizes these recommendations and the steps VA has taken to address them. Selected VA Medical Centers Did Not Report All Providers to the NPDB or to State Licensing Boards as Required In our November 2017 report, we found that from October 2013 through March 2017, the five VA medical centers we reviewed had only reported one of nine providers that should have been reported to the NPDB as required by VHA policy. Furthermore, none of these nine providers were reported to state licensing boards as required by VHA policy. These nine providers either had adverse privileging actions taken against them or resigned or retired while under investigation before an adverse privileging action could be taken. The VA medical centers documented that these nine providers had significant clinical deficiencies that sometimes resulted in adverse outcomes for veterans. For example, the documentation shows that one provider’s surgical incompetence resulted in numerous repeat surgeries for veterans. Similarly, the documentation shows that another provider’s opportunity to improve had to be halted and the provider was removed from providing care after only a week due to concerns that continuing the review would potentially harm patients. In addition to these nine providers, one VA medical center terminated the services of four contract providers based on deficiencies in the providers’ clinical performance, but the facility did not follow any of the required steps for reporting providers to the NPDB or relevant state licensing boards. This is concerning, given that the VA medical center documented that one of these providers was terminated for cause related to patient abuse after only 2 weeks of work at the facility. At the time of our review, two of the five VA medical centers we reviewed each reported one provider to the state licensing boards for failing to meet generally accepted standards of clinical practice to the point that it raised concerns for the safety of veterans. However, we found that the medical centers’ reporting to the state licensing boards took over 500 days to complete in both cases, which was significantly longer than the 100 days suggested in VHA policy. Across the five VA medical centers, we found that providers were not reported to the NPDB and state licensing boards as required for two reasons. First, VA medical center officials were generally not familiar with or misinterpreted VHA policies related to NPDB and state licensing board reporting. For example, at one VA medical center, we found that officials failed to report six providers to the NPDB because they were unaware that they were responsible for NPDB reporting. Officials at two other VA medical centers incorrectly told us that VHA cannot report contract providers to the NPDB. Second, VHA policy does not require the VISNs to oversee whether VA medical centers are reporting providers to the NPDB or state licensing boards when warranted. We found, for example, that VISN officials were unaware of situations in which VA medical center officials failed to report providers to the NPDB. As a result of VHA staff misinterpretation of VHA policy and insufficient oversight, we concluded that VHA lacks reasonable assurance that all providers who should be reported to the NPDB and state licensing boards are reported. Consequently, the NPDB and state licensing boards in other states where the providers we identified held licenses were not alerted to concerns about the providers’ clinical practice. We reported that this could allow a provider who delivered substandard care at one VA medical center to obtain privileges at another VA medical center or at hospitals outside of VA’s health care system. In our November 2017 report, we noted several cases of this occurring among the providers who were not reported to the NPDB or state licensing boards by the five VA medical centers we reviewed. For example, We found that two of the four contract providers whose contracts were terminated for clinical deficiencies remained eligible to provide care to veterans outside of that VA medical center. At the time of our review, one of these providers held privileges at another VA medical center, and another participated in the network of providers that can provide care for veterans in the community. We also found that a provider who was not reported as required to the NPDB during the period we reviewed had their privileges revoked 2 years later by a non-VA hospital in the same city for the same reason the provider was under investigation at the VA medical center. Officials at this VA medical center did not report this provider following a settlement agreement under which the provider agreed to resign. A committee within the VA medical center had recommended that the provider’s privileges be revoked prior to the agreement. There was no documentation of the reasons why this provider was not reported to the NPDB. To improve VA medical centers’ reporting of providers to the NPDB and state licensing boards and VHA oversight of these processes, we made one recommendation in our November 2017 report. VA concurred with this recommendation. Table 3 summarizes the recommendation and the steps VA has taken to address it. Chairman Pappas, Ranking Member Bergman, and Members of the Subcommittee, this concludes my statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-7114 (silass@gao.gov). Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Marcia A. Mann (Assistant Director), Kaitlin M. McConnell (Analyst-in-Charge), Summar C. Corley, Cathy Hamann, Jacquelyn Hamilton, and Vikki Porter. Other contributors include David Bruno, Julia DiPonio, Ranya Elias, Kathryn A. Larin, and Joy Myers. Appendix I: Veterans Health Administration Credentialing, Privileging, and Monitoring Processes According to Department of Veterans Affairs’ (VA) Veterans Health Administration (VHA) policies, all licensed health care providers must be credentialed before they are permitted to work. Credentialing is the process of screening and evaluating qualifications and other credentials— including licensure, education, and relevant training—that is the first step in the process of determining whether the provider has appropriate clinical abilities and qualifications to provide medical services. Credentialing processes and requirements differ for independent licensed providers, such as doctors—who are permitted by law and the facility to deliver patient care services independently, without supervision—and dependent providers, such as nurses—who deliver patient care under the supervision or direction of an independent provider. Additionally, VHA policy states that only licensed independent providers may be granted clinical privileges. Privileging is a process through which a provider is permitted by a facility to independently provide medical or patient care that is in alignment with the provider’s clinical competence. Figure 1 provides a summary of the VHA credentialing and privileging processes for independent and dependent providers. VHA facilities are also required to monitor providers’ licenses after they are hired to ensure the licenses are current and review any licensure actions, in accordance with VHA policy. Figure 2 provides a summary of VHA’s processes for monitoring independent and dependent providers’ licenses. Related GAO Reports Veterans Health Administration: Greater Focus on Credentialing Needed to Prevent Disqualified Providers from Delivering Patient Care. GAO-19-6. Washington, D.C.: February 28, 2019. Department of Veterans Affairs: Actions Needed to Address Employee Misconduct Process and Ensure Accountability. GAO-18-137. Washington, D.C.: July 19, 2018. VA Health Care: Improved Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns. GAO-18-260T. Washington, D.C.: November 29, 2017. VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns. GAO-18-63. Washington, D.C.: November 15, 2017. Veterans Health Care: Improved Oversight of Community Care Physicians’ Credentials Needed. GAO-16-795. Washington, D.C.: September 19, 2016. VA Health Care: Improvements Needed in Processes Used to Address Providers’ Actions That Contribute to Adverse Events. GAO-14-55. Washington, D.C.: December 3, 2013. Veterans Health Care: Veterans Health Administration Processes for Responding to Reported Adverse Events, GAO-12-827R. Washington, D.C.: August 24, 2012. VA Health Care: Improved Oversight and Compliance Needed for Physician Credentialing and Privileging Processes. GAO-10-26. Washington, D.C.: January 6, 2010. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Nearly 165,000 licensed health care providers, such as physicians and nurses, provide care in VHA's VA medical centers and outpatient facilities. Medical center staff must determine whether to hire and retain health care providers by reviewing and verifying information about their qualifications and practice history. The NPDB is a key source of information about a provider's clinical practice history. Medical center staff must also investigate any concerns that arise about the clinical care their providers deliver. Depending on the findings from these reviews, medical centers may take an adverse privileging action against a provider. VA medical centers are required to report providers to the NPDB and state licensing boards under certain circumstances. Failing to adhere to these requirements can negatively affect patient safety. This testimony is primarily based on GAO's 2019 and 2017 reports on VHA processes for reviewing and reporting quality and safety concerns about VA providers. It addresses VA medical centers' implementation and VHA's oversight of (1) reviews of adverse information about providers in the NPDB; (2) reviews of providers' clinical care after concerns are raised; and (3) reporting of providers to the NPDB and state licensing boards. For the 2019 report, GAO reviewed a nongeneralizable sample of 57 VA providers who had an NPDB report. For the 2017 report, GAO reviewed providers whose clinical care was reviewed after a concern was raised about that care at a nongeneralizable selection of five VA medical centers. The Department of Veterans Affairs (VA) needs to take action to ensure its health care providers have the appropriate qualifications and clinical abilities to deliver high quality, safe care to veterans, as GAO recommended in its February 2019 and November 2017 reports. Specifically, GAO found the following: VA medical centers took action against some providers who did not meet VA licensure requirements, but overlooked others . In its 2019 report, GAO found that some VA medical centers took administrative or disciplinary actions against these providers, such as removing them from employment, after becoming aware of disqualifying information in the National Practitioner Data Bank (NPDB). The NPDB is an electronic repository that contains information on providers who have been disciplined by a state licensing board, among other information. However, in some cases VA medical centers overlooked or were unaware of disqualifying information in the NPDB. For example, officials told GAO they inadvertently overlooked a disqualifying adverse action and hired a provider whose license had been revoked for patient neglect. GAO found three reasons for this inconsistency: lack of mandatory training for key staff, gaps in Veterans Health Administration (VHA) policies, and inadequate oversight. Selected VA medical centers' reviews of providers' clinical care were not always documented . The five selected VA medical centers that GAO included in its 2017 report were required to review 148 providers' clinical care after concerns were raised about their care from October 2013 through March 2017. However, officials at these medical centers could not provide documentation to show that almost half of these reviews had been conducted. GAO found two reasons for inadequate documentation of these reviews: gaps in VHA policies and inadequate oversight of the reviews. Selected VA medical centers did not report providers to the NPDB or to state licensing boards as required . The five selected VA medical centers that GAO included in its 2017 report had reported one of nine providers to the NPDB that they were required to report from October 2013 through March 2017. None of these providers were reported to state licensing boards, as required by VHA policy. These nine providers either had adverse privileging actions taken against them—actions that limit the care providers can deliver at a facility or prevent the providers from delivering care altogether—or resigned or retired while under investigation before such an action could be taken. GAO found two reasons providers were not reported: lack of awareness or understanding of VHA policies and inadequate oversight of this reporting. GAO made 11 recommendations in its 2019 and 2017 reports to address the deficiencies identified. VA implemented two of these 11 recommendations, and provided action plans to address the other nine recommendations.

GAO_GAO-19-448

Background State, USAID, and UNRWA Fund Education Assistance in the West Bank and Gaza. State Two State entities play key roles in education assistance in the West Bank and Gaza—State’s Bureau of Population, Refugees, and Migration (State/PRM) and State’s U.S. Consulate General in Jerusalem (State/ConGen). State/PRM has an important role in funding and overseeing education assistance provided by UNRWA in the West Bank and Gaza. State contributes funds to and manages the institutional relationship with UNRWA on behalf of the U.S. government, while recognizing UNRWA’s independence and commitment to upholding humanitarian principles, including neutrality. This relationship is guided by the U.S.-UNRWA Framework for Cooperation, annually negotiated between State/PRM and UNRWA. The framework includes UNRWA’s commitment to meet the condition on U.S. contributions to UNRWA that U.S. funds do not support terrorism, pursuant to section 301(c) of the Foreign Assistance Act of 1961, as amended. The framework also sets forth the activities used to evaluate UNRWA’s conformance with this condition. According to State/PRM officials, some educational materials fit into the framework’s section involving broader U.S. priorities for UNRWA’s education sector. For example, continuing support for mutually identified special projects such as UNRWA’s Human Rights, Conflict Resolution, and Tolerance education program in all of UNRWA’s five fields of operation fit into the latter category. UNRWA’s five fields of operations are the West Bank (including East Jerusalem), Gaza, Jordan, Lebanon, and Syria. The framework also defines U.S. priorities for UNRWA’s education sector. The frameworks for fiscal years 2016 and 2017 state, “The United States is particularly interested in ongoing curriculum review process, which enables UNRWA’s educators to use consistent criteria in analyzing and enriching local textbooks, in order to promote UN values and principles in UNRWA classrooms.” The Secretary of State is required under Section 7048(d) of the Department of State, Foreign Operations, and Related Programs Appropriations Acts for fiscal years 2015 and 2016 to submit a report in writing to the Committees on Appropriations not less than, and for fiscal year 2016 no later than, 45 days after enactment. Section 7048(d) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2017 states that this report must be submitted prior to initial obligation of funds. This report is to cover seven topics. One of the required topics in the report is whether UNRWA is taking steps to ensure that the content of all educational materials currently taught in UNRWA-administered schools and summer camps is consistent with the values of human rights, dignity, and tolerance, and does not induce incitement. State/ConGen also has a key role in funding and overseeing U.S. educational assistance. State/ConGen is responsible for the U.S. bilateral relationship with the Palestinian Authority, including efforts to combat incitement to violence and address problematic content in textbooks. In addition, according to the Consulate General’s Education Statement of Purpose, State/ConGen funds and implements education projects to improve the quality of education to equip Palestinians with the skills to grow their economy and build a democratic, secular, politically moderate, and outward-focused Palestinian civil society as a driver for peace. USAID funds education projects that support Palestinian Authority- administered schools, teacher and administrator training in the West Bank, and scholarships. USAID did not identify or address potentially problematic content in Palestinian Authority textbooks between fiscal years 2015 and 2017 because, according to USAID and State officials, reviewing textbooks is outside the scope of the work of USAID’s partners, including nongovernmental organizations, that implement projects in the West Bank and Gaza. USAID officials told us that they defer discussion of any potentially problematic content in textbooks to State as a bilateral policy issue. UNRWA is to provide humanitarian assistance to Palestine refugees in accordance with its mandate provided by the UN General Assembly. UNRWA provides education, health care, social services, microfinance, and emergency assistance to Palestine refugees; infrastructure and camp improvement within Palestine refugee camps; and protection. When UNRWA began operations in 1950, it was responding to the needs of about 860,000 Palestine refugees. UNRWA reports that over 5 million Palestine refugees are registered with UNRWA in the West Bank, Gaza, Jordan, Lebanon, and Syria and are currently eligible for its services. UNRWA administers its education system of more than 700 schools across its five fields of operation, educating approximately 526,000 children, according to UNRWA officials. This includes 370 schools in the West Bank and Gaza for grades 1 through 9 (and grade 10 in two East Jerusalem schools) serving over 300,000 children. UNRWA uses the curricula and textbooks of host governments. In keeping with this practice, UNRWA schools in the West Bank and Gaza use the Palestinian Authority curriculum and textbooks. This practice helps to ensure that UNRWA students can continue their education at government secondary schools and universities and can take national exams. According to UNRWA officials, using the host country curricula is also in line with good practice—affirmed by other UN agencies, such as United Nations High Commissioner for Refugees. The Palestinian Authority provides all textbooks used in UNRWA and Palestinian Authority schools in the West Bank and Gaza except for English language textbooks. Figure 1 shows an UNRWA girls’ school in Shufat refugee camp, located in East Jerusalem. Prior to the release of the first set of Palestinian Authority textbooks developed by the Palestinian Authority in 2000, schools in Gaza used Egyptian textbooks, and schools in the West Bank used Jordanian textbooks. The Palestinian Authority developed its first curriculum in the mid-1990s in cooperation with the United Nations Educational, Scientific and Cultural Organization. Since then, the Palestinian Authority has developed multi-year strategies to improve its educational system, including by modernizing its curriculum and improving its textbooks. The Palestinian Authority worked to implement its early strategies but could not fully do so because responding to other events took priority, according to Palestinian Authority documents. These events included the second Palestinian Intifada (uprising) that began in 2000, the government of Israel’s subsequent tightening of security, the rise of Hamas to power in the Palestinian government in 2006, and the resulting delays in donor funding. After donors resumed their support, the Palestinian Authority developed an education strategy for 2008 through 2012. This strategy’s stated goals include improving the quality of education by reviewing the curriculum and revising textbooks, among other things. Beginning in 2013 the Palestinian Authority undertook a multi-year effort to revise its curriculum and issue new textbooks to provide students with skills such as problem solving and analysis. As a result, the Palestinian Authority Ministry of Education and Higher Education issued new pilot textbooks for grades 1 through 4 in 2016 and 2017. The Palestinian Authority issued textbooks for the first semester of these grades in summer 2016 and textbooks for the second semester later in the year with the start of that semester. The Palestinian Authority issued the final textbooks for grades 1 through 4 and new pilot textbooks for grades 5 through 10 in 2017. As of August 2017, Palestinian Authority public schools and UNRWA schools in the West Bank and Gaza use these textbooks, according to State and UNRWA officials. Figure 2 shows examples of the pilot textbooks for grades 1 through 3. The U.S. Government Funded an Estimated $243 Million for Education Assistance in the West Bank and Gaza for Fiscal Years 2015 through 2017, and UNRWA Purchased English Language Textbooks with Contributions from Donor Countries, including the United States The U.S. government provided an estimated $243 million for education assistance in the West Bank and Gaza—State provided an estimated $193 million, and USAID provided about $50 million—for fiscal years 2015 through 2017, according to State and USAID data and UNRWA- provided information. Of State’s estimated $193 million contributions to education assistance in the West Bank and Gaza, UNRWA estimated that about $187 million went to its education assistance. State provided the remaining approximately $6 million to non-UNRWA education programs. UNRWA reported expending about $877 million for education in the West Bank and Gaza for fiscal years 2015 through 2017, including contributions from the United States and other donors. According to UNRWA officials, UNRWA used some of these funds to purchase English language textbooks that were used in UNRWA schools in the West Bank and Gaza. State, UNRWA, and USAID funds were not used to purchase or produce other textbooks used in the West Bank or Gaza, according to officials from these agencies. State Funded an Estimated $193 Million for Education Assistance in the West Bank and Gaza for UNRWA and Non- UNRWA Projects for Fiscal Years 2015 through 2017 Of the estimated $243 million that the United States provided for education assistance in the West Bank and Gaza for fiscal years 2015 through 2017, State funded an estimated $193 million for UNRWA and non-UNRWA projects, according to State and UNRWA information. For UNRWA, State contributed an estimated $187 million for education in the West Bank and Gaza for fiscal years 2015 through 2017, out of a total contribution to UNRWA of about $1 billion for that timeframe. U.S. contributions support UNRWA’s core programs of education, health, relief and social services, microfinance, and infrastructure and camp improvement across its five fields of operation. State does not earmark the majority of its contributions to UNRWA’s program budget by either program area or field of operation. Rather, State contributes funds to UNRWA’s program budget, which UNRWA pools with contributions from other donors to provide general support to UNRWA’s core programs, according to State and UNRWA officials. State earmarks a small portion of its contributions to the program budget to support special projects of mutual priority to State and UNRWA, according to State officials. For each fiscal year from 2015 through 2017, State earmarked funds for the Human Rights, Conflict Resolution, and Tolerance project, an agency-wide, education-related project implemented in all five of UNRWA’s fields of operations, including in the West Bank and Gaza. UNRWA officials stated that UNRWA aims to support teachers in integrating human rights, conflict resolution, and tolerance into the regular curriculum. As part of its education reform, UNRWA developed a Human Rights, Conflict Resolution, and Tolerance Policy and Teacher Toolkit to further strengthen human rights education in UNRWA. According to UNRWA officials, UNRWA has built on international best practices to better integrate human rights education in all UNRWA schools. The United States exclusively funds the Human Rights, Conflict Resolution, and Tolerance project activities, according to State officials. UNRWA estimated expending about $0.3 million on the Human Rights, Conflict Resolution, and Tolerance project in the West Bank and Gaza for fiscal years 2015 through 2017. In addition to State’s funding for UNRWA, State’s U.S. Consulate General in Jerusalem (ConGen) officials said that State/ConGen provided about $6 million in funding for three non-UNRWA education programs focused on youth in grades 1 through 10 in the West Bank and Gaza for fiscal years 2015 through 2017. These three education programs include (1) a program that provides secondary school students in the West Bank and Gaza an opportunity to study at American high schools and live with American host families; (2) an afterschool English language program that targets academically gifted and economically disadvantaged high school students; and (3) a 2-week summer camp program for at-risk Palestinian youth ages 8 through 14 residing in refugee camps and other marginalized areas throughout the West Bank, Gaza, and Jerusalem. USAID Obligated about $50 Million for Education Projects Active in the West Bank and Gaza for Fiscal Years 2015 through 2017, and Did Not Fund Textbooks Of the estimated $243 million that the United States provided for education assistance in the West Bank and Gaza for fiscal years 2015 through 2017, USAID obligated about $50 million for active non- construction education projects for this timeframe, and it did not fund textbooks, according to USAID officials. USAID funds supported six education projects, of which four were scholarship projects. Two projects—the School Support Program and the Leadership and Teacher Development program—provided support directly to Palestinian Authority public schools in the West Bank. The School Support Program offers assistance to 50 schools, including infrastructure rehabilitation of schools, in-kind assistance (e.g., science lab equipment and school supplies), extracurricular activities (sports, arts and music, career counseling, and psychosocial support), and leadership and teacher development for the school administration. The Leadership and Teacher Development program supports teacher, principal, and supervisor training to make teaching and learning practices more learner-centered, in addition to the introduction of information technology in education (e.g., internet connectivity, equipment, teaching of coding), classroom assessment and testing methods, and administrative reform at the school, district, and central levels. UNRWA Reported Expending about $877 Million for Education in the West Bank and Gaza for Fiscal Years 2015 through 2017 and Purchased English Textbooks with Funds That Consist of Contributions from Donor Countries, including the United States According to UNRWA-provided information, UNRWA expended about $877 million on education for fiscal years 2015 through 2017 in the West Bank and Gaza with funds from the United States and other donors. These funds were expended for UNRWA’s education program, including the purchase of English language textbooks and other educational materials. Education Program Of the approximately $877 million UNRWA reported expending on education, it expended about $671 million for education in Gaza and $206 million for education in the West Bank. UNRWA’s expenditures for Gaza are significantly higher because, as of June 30, 2017, UNRWA operated 275 schools in Gaza serving approximately 270,000 students compared to 95 schools in the West Bank serving approximately 48,000 students. UNRWA’s largest reported expenditure within the education sector in fiscal years 2015 and 2016 was personnel-related expenditures, which represented about 85 percent of all education expenditures, according to UNRWA. English Language Textbooks and Other Educational Materials Between fiscal years 2015 and 2017, including estimated expenditures in 2017, UNRWA reported that it expended about $2 million on educational materials—including about $1 million on English language textbooks for fiscal years 2015 through 2017 for UNRWA schools in the West Bank and Gaza. Of the approximately $1 million expended on English language textbooks, UNRWA estimates that the U.S. contributions totaled about $587,369, with about $28,763 for the West Bank and about $558,606 for Gaza. Educational materials made up less than one percent of UNRWA’s reported education expenditures in the West Bank and Gaza in part because UNRWA does not purchase or fund textbooks for use in its schools in the West Bank and Gaza, with the exception of English language textbooks. The Palestinian Authority provides UNRWA with textbooks for all but one academic subject (English) as an in-kind contribution, according to UNRWA officials. As such, U.S. funds do not contribute to the textbooks that are published by the Palestinian Authority, according to UNRWA information. However, to purchase English language textbooks used in Gaza, UNRWA sent payment from its program budget, which includes commingled donor funds, directly to the Palestinian Authority Ministry of Education and Higher Education, for which they subsequently paid a private publisher. According to information provided by UNRWA, doing so lowered the per unit cost through bulk ordering. According to UNRWA, UNRWA staff work on complementary teaching materials—educational materials that UNRWA develops to use alongside host government textbooks, as part of their regular course of work. They also work on student summer learning materials based on the textbooks. Therefore, the expenditures for these materials cannot be disaggregated from staff wages and salaries and are not included in UNRWA’s expenditures for educational materials. UNRWA and State Have Taken Actions to Identify and Address Potentially Problematic Textbook Content UNRWA has reviewed Palestinian Authority textbooks for the first semester of grades 1 through 10 to identify content it deemed not aligned with UN values and has developed complementary teaching materials to address this content when considered necessary. However, UNRWA did not train teachers on the materials or distribute materials to classrooms; as a result, these materials were not used in UNRWA classrooms. Since at least 2015, State has used several means to identify and address Palestinian Authority textbook content it deemed problematic, including examining nongovernmental organizations’ allegations about problematic Palestinian Authority textbook content, engaging with Palestinian Authority officials, and monitoring UNRWA’s efforts. UNRWA Reported Taking Steps to Identify Textbook Content Not Aligned with UN Values and Efforts to Address Such Content Are Ongoing UNRWA reported that it had reviewed 111 textbooks used in its West Bank and Gaza schools during three sessions since 2016 to identify content it deemed not aligned with UN values. UNRWA reported that it had developed specific complementary teaching materials for any page identified to address this content following each of the reviews. In addition, UNRWA reported that it had trained some field-level education staff but had not trained teachers on the materials or distributed materials to classrooms for several reasons including staff refusal to attend training and workshops. Actions UNRWA Reported Taking to Identify Content Not Aligned with UN Values in Textbooks UNRWA reported that it reviewed the Palestinian Authority and English language textbooks in part based on the values contained in its Framework for the Analysis and Quality Implementation of the Curriculum (Curriculum Framework), through which UNRWA aims to ensure that the curricula taught in its schools reflect UN values, such as neutrality, tolerance, equality, and nondiscrimination, and human rights with regard to race, gender, language, and religion. However, UNRWA explained that, given the urgency of reviewing any newly issued textbooks, it developed a “rapid review” process. Appendix II provides an overview of the Curriculum Framework and rapid review processes. UNRWA reported conducting three rapid reviews of all newly released Palestinian Authority textbooks since 2016, in each case using the rapid review criteria as a guide: beginning in October 2016, for textbooks for the first semester of grades 1 through 4; beginning in January 2017, for textbooks for the second semester of grades 1 through 4; and beginning in August 2017, for all textbooks used in UNRWA schools for the first semester of grades 1 through 10. UNRWA slightly revised the criteria used over the course of its three rapid reviews. UNRWA officials noted that for the first rapid review, they reviewed textbooks to determine if the textbooks were aligned with UN values and the UN commitment to neutrality. For the second rapid review, UNRWA developed three criteria: (1) neutrality/bias, (2) gender, and (3) aggressiveness. For the third rapid review, UNRWA renamed the criterion of aggressiveness to age-appropriateness to better reflect the types of issues it was intended to capture. The criteria for the third rapid review are 1. neutrality/bias: taking sides or engaging in controversies of a political, racial, religious, or ideological nature 2. gender: gender stereotypes 3. age-appropriateness (formerly aggressiveness): content that is violent, frightening, or inappropriate for the student’s age. Appendixes II and III provide more detail on UNRWA’s textbook reviews. In fall 2017, UNRWA reported to donors that, based on its rapid review criteria, its August 2017 review identified issues on 3.1 percent of the pages in the 75 textbooks for the first semester of grades 1 through 10 used during the school year 2017-2018. In particular, UNRWA identified 203 issues covering a total of 229 pages (out of a total of 7,498 pages reviewed), the majority of which they identified as related to neutrality/bias. According to UNRWA-provided information, UNRWA found no cases of incitement to violence in the Palestinian Authority grades 1 through 10 textbooks during the August 2017 rapid review. More than half of the neutrality/bias issues it found were related to one of the following three categories—maps, Jerusalem, and cities—for example, regional maps that exclude Israel and refer to Israeli cities as Palestinian. Additional details about the issues UNRWA identified and the complementary teaching materials it developed have been omitted from this report because the information is classified. In addition to issues UNRWA identified using the three rapid review criteria, it identified positive attributes in the textbooks newly issued by the Palestinian Authority, such as promoting active learning, life skills, gender equality, higher-order thinking, and problem-solving skills, according to UNRWA officials. Actions UNRWA Reported Taking to Address Content It Deems Not Aligned with UN Values in Textbooks but Did Not Complete For the content that UNRWA identified as not aligned with UN values during all three rapid reviews, UNRWA officials reported that they developed specific complementary teaching materials for any page with issues identified, such as alternate photos, examples, and guidance for teachers, as needed, to use with the textbooks in UNRWA schools. UNRWA also developed training guides and presentations to support training on the complementary teaching materials for each of the reviews. According to UNRWA, it developed these materials to ensure that the lessons taught in UNRWA schools adhere to UN core values, such as neutrality. In addition, UNRWA officials reported that they trained some field-level education officials but were not able to train teachers or distribute materials to classrooms. UNRWA officials told us that UNRWA did not change the content of Palestinian Authority textbooks and that they do not have the authority or mandate to do so. UNRWA developed complementary teaching materials to address the following issues it identified, among others, during its rapid review process of pilot textbooks for the second semester of grades 1 through 4 textbooks. Details about these complementary teaching materials were omitted because the information is classified. For details about the issues UNRWA addressed, see appendix IV. UNRWA officials told us that as of April 2018 they have reviewed all textbooks for the second semester of grades 1 through 10. UNRWA did not train teachers or complete distributing complementary teaching materials after its first rapid review for several reasons. In a January 2017 briefing note to the United States and other donors, UNRWA reported that it had completed training for professional support staff on the complementary teaching materials for the pilot textbooks for the first semester of grades 1 through 4. However, UNRWA officials told us that UNRWA was not able to deliver the training for school staff, including principals or teachers, or disseminate these materials to classrooms before the end of the first semester of the 2016-2017 school year. They noted that this was due to collective employment actions between August 2016 and January 2017, including staff walkouts and a refusal to attend training and workshops, that were unrelated to the curriculum reform and having to complete the school exam period immediately following the resolution of these collective employment actions. For similar reasons, UNRWA was unable to distribute materials or train teachers after the second rapid review of pilot textbooks for the second semester of the 2016-2017 school year. UNRWA reported to the United States and other donors in March 2017 that it anticipated completing training on the complementary teaching materials for all professional support staff and teachers by the end of that month in the West Bank and by the end of the following month in Gaza, according to State/PRM officials. However, UNRWA officials told us that UNRWA halted the training following a Palestinian Authority announcement of suspension of ties with UNRWA in response to UNRWA’s use of complementary teaching materials, and the UNRWA staff union reactions. UNRWA then determined that these materials would be outdated because the Palestinian Authority planned to issue revised textbooks in August 2017, before the start of the new school year. UNRWA’s efforts to train teachers and issue complementary teaching materials as a result of the third rapid review were ongoing as of December 2017. As of that date, UNRWA officials told us that UNRWA had finalized the complementary teaching materials for the final textbooks for the first semester of grades 1 through 4 and pilot textbooks for grades 5 through 10, as well as the English Language textbooks for the first semester of grades 1 through 10, all of which are being used during the 2017-2018 school year. UNRWA officials told us that UNRWA has developed training materials for the final textbooks for first semester grades 1 through 4 and pilot textbooks for grades 5 through 10 and planned to begin training of all relevant professional support staff, who will, in turn, train teachers using a cascaded training model. In addition, UNRWA officials reported sharing the complementary teaching materials in PDF format with field education staff in the West Bank and Gaza for distribution to all teachers. However, in commenting on a draft report, UNRWA officials told us in April 2018 that they did not disseminate the training or the complementary teaching materials for the third rapid review for various reasons. For example, some UNRWA staff opposed the use of these materials in classrooms while other staff boycotted the training. In addition, UNRWA faced deteriorating operational and political environments during that time period, such as financial shortfalls, as well as an increased number of violent confrontations between Palestinians and Israeli Security forces in the West Bank and Gaza. According to UNRWA, these factors heightened sensitivities and risks associated with the training and curriculum enrichment materials. As a result, these materials were not used in UNRWA classrooms. State Reported Taking Steps to Identify and Address Content Deemed Problematic To promote appropriate content in Palestinian Authority textbooks, State/ConGen officials have examined nongovernmental organizations’ studies and allegations about potentially problematic Palestinian Authority textbook content and confirmed instances of problematic material since fiscal year 2015. State/ConGen officials told us that the studies they reviewed raised concerns with a range of content, and they will continue their reviews of these studies in the future. In examining Palestinian Authority textbooks, State/ConGen has found material that ignores Israeli narratives, includes militaristic and adversarial imagery, and preaches the values of resistance, according to State officials. Although according to State officials there has been a general agreement in these studies on the absence of anti-Semitic content or explicit incitement to violence in Palestinian Authority textbooks, State/ConGen nonetheless has confirmed instances of inappropriate language, content, and imagery based on the grade level of certain textbooks. State/ConGen also noted that the textbooks do not mention Israel or Judaism, and they continue to include regional maps that exclude Israel. In response to allegations that two textbooks in particular—the National and Social Education (civics) textbooks for grades 3 and 4—contained problematic content, State/ConGen officials reported that they translated them into English and then analyzed two new pilot civics textbooks for grade 4 for the first and second semesters as well as previous versions of the same books and contracted for an external review of the textbooks. State/ConGen officials selected these textbooks for translation and analysis to examine a smaller subset of material reviewed in one independent study. State/ConGen officials told us in September 2017 that they had received the results of the external review and that these results informed their advocacy efforts and provided external perspective on additional material. To address incitement to violence, such as the inclusion of problematic content in textbooks, State/ConGen officials have engaged the highest levels of the Palestinian Authority officials, according to State officials. State/ConGen officials reported that, since 2015, they have encouraged Palestinian officials during these meetings to address incitement to violence in textbooks, and Palestinian officials have done so. Officials also noted that the Palestinian Authority President has publicly condemned incitement to violence and vowed to combat it. A case study of a particularly problematic lesson illustrates State/ConGen’s role and approach. State/ConGen officials reported that a specific math problem using the number of Palestinian casualties in the First and Second Intifadas (uprisings) was clearly objectionable even if it did not demonstrate a call for violence against Israel. The Consulate and Consul General subsequently raised this concern with Palestinian officials, including the Minister of Education. To discuss the Palestinian Authority’s ongoing textbook reform and address potential concerns, State/ConGen officials reported that they also convened a meeting in April 2017 of international donor groups and members of the international community that participate in the Palestinian-led Education Sector Working Group. A State official said that the group conducted a wide-ranging discussion about incitement to violence and agreed to discuss incitement bilaterally with the Palestinian Authority as appropriate. State/ConGen continued to raise the issue with the Palestinian Authority following the meeting. In accordance with State/PRM’s role in monitoring UNRWA’s efforts to identify and address potentially problematic content in Palestinian Authority textbooks, State/PRM reports that it engages regularly with UNRWA. It does so through reviews of UNRWA reports, site visits to UNRWA schools and classrooms when and where security permits, regular communication with UNRWA staff at UNRWA headquarters and in the field, and by attending UNRWA’s briefings on the status of its textbook reviews. In addition, State/PRM officials aim to ensure that UNRWA takes adequate steps to ensure neutrality in UNRWA’s operations. To do so, State/PRM meets regularly with UNRWA officials to ensure that UNRWA operates in a fully neutral way in line with UN standards across all sectors of operation, including education and content of textbooks. State Submitted Required Reports to Congress, but One Contains Inaccurate Information and Reports Do Not Include Some Information That Could Be Useful for Congressional Oversight State/PRM submitted annual reports to Congress in response to provisions in the annual appropriations acts for fiscal years 2015, 2016, and 2017; however, these reports have several limitations regarding educational assistance. First, we found that State/PRM’s 2017 report inaccurately described certain UNRWA actions to address textbook content not aligned with UN values. Inaccurate information about UNRWA’s actions could limit the transparency of State’s and UNRWA’s activities and the usefulness of State’s reports as tools for congressional decision making and oversight. Second, while State’s reports explain generally how UNRWA is taking steps to ensure that educational materials in UNRWA schools are consistent with certain values, we found that the reports did not include some information about UNRWA’s textbook review that could be useful for congressional oversight. Specifically, State’s reports did not specify whether the educational materials are consistent with the value of dignity or not inducing incitement. In addition, we found that in its 2017 report, State did not include information provided by UNRWA about the nature and extent of content that UNRWA identified in Palestinian Authority textbooks as not aligned with UN values. This information, while not required by law to be included in State’s reports, could be useful to congressional decision- makers. State’s Reports Generally Explain UNRWA’s Actions to Address Textbook Content Not Aligned with UN Values, but Its 2017 Report to Congress Inaccurately Described Certain Actions State submitted reports to Congress each year in a timely manner in accordance with the requirements of the appropriations acts. In the annual appropriations acts for fiscal years 2015 through 2017, Congress required State to report on seven different topics, including whether UNRWA is taking steps to ensure that the content of all educational materials taught in UNRWA schools and summer camps is consistent with the values of human rights, dignity, and tolerance, and does not induce incitement. State’s reports explain that UNRWA applied its Curriculum Framework in reviewing textbook content and that the Curriculum Framework will help ensure all materials used in UNRWA classrooms reflect UN values and principles. These UN values address issues related to neutrality, human rights, tolerance, and non-discrimination. These values are aligned with the ones that are included in the laws, according to State officials. However, we found that State’s 2017 report to Congress inaccurately described some of UNRWA’s actions to address content that is not aligned with UN values. State correctly reported that UNRWA completed several actions related to its second rapid review, including that UNRWA reviewed 18 new Palestinian Authority pilot textbooks, with a particular focus on the issues of neutrality and bias, gender, and aggressiveness. However, State reported that UNRWA trained teachers on the application of the complementary teaching materials they developed and disseminated the materials to classrooms, actions that UNRWA officials told us they did not complete. State/PRM officials stated they became aware that UNRWA’s classroom training and dissemination of complementary teaching materials had been delayed in June 2017, after the school year ended and after submitting the report to Congress in May 2017. State/PRM officials stated that, based on conversations they had with UNRWA during tense discussions between UNRWA and the Palestinian Authority in March and April 2017, they believed UNRWA would train teachers and disseminate complementary teaching materials after the tensions dissipated. These officials said they did not provide the congressional report to UNRWA for it to review because it is considered an internal U.S. government document. While State/PRM officials stated they verified facts related to other aspects of the reporting requirement, they did not verify the implementation of training and dissemination of complementary teaching materials because they believed this information to be current given ongoing dialogue with UNRWA. In addition, State/PRM officials told us that they were not aware of the inaccuracy in their report to Congress until we brought it to their attention, although they were aware that the trainings had not been implemented in June 2017. In November 2017—about 6 months after the 2016-2017 school year ended—State/PRM officials told us that their understanding remained that UNRWA had trained some education staff on the application of the complementary teaching materials, though not all teachers, and that UNRWA had disseminated the materials to some education staff and schools, though not to all classrooms. From State’s perspective, the statement in its report to Congress about UNRWA training teachers and disseminating complementary teaching material was partly accurate. However, UNRWA officials confirmed that they did not disseminate the training or the complementary teaching materials related to the second rapid review to any school staff, including principals and teachers. In October 2017, State noted that it has taken, or plans to take, action to address the accuracy of reporting in the future. First, subsequent to learning that the training had been halted in June 2017, State/PRM officials reiterated to UNRWA the need to keep them informed in a timely manner when the situation in the field shifts with regard to textbooks and other issues. State/PRM officials also said that they would likely avoid misreporting facts in the future by taking additional actions, such as including specific dates of the actions taken in their reports and verifying key facts with UNRWA. Further, they said they plan to address the issue of inaccuracy in the fiscal year 2018 report, if needed. Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity’s objectives. Incomplete and inaccurate information about UNRWA’s actions could limit the transparency of UNRWA’s activities and usefulness of State’s reports as tools for congressional decisionmaking and oversight. State’s Reports Do Not Include Some Information That Could Be Useful for Congressional Oversight Our analysis also showed that State’s required reports did not include some information that could be useful for congressional oversight of whether UNRWA is taking steps to ensure that all the content of all educational materials currently taught in UNRWA schools and summer camps is consistent with the values of human rights, dignity, and tolerance, and does not induce incitement. In particular, our analysis showed that while State’s reports partly explain how certain educational materials are consistent with two elements included in the law (human rights and tolerance), they do not address the other two elements (dignity and not inducing incitement). In addition, State’s reports do not include details about the nature and extent of content UNRWA identified in Palestinian Authority textbooks as not aligned with UN values. State’s reports for all 3 years partly explain how certain educational materials are consistent with the values of human rights and tolerance but do not specifically say whether the Palestinian Authority textbooks are consistent with these values. In particular, the reports discuss the U.S.- funded Human Rights, Conflict Resolution, and Tolerance project and accompanying teacher toolkit. The toolkit aims to ensure that teachers have the skills and resources to implement human rights education across UNRWA classrooms. The reports note that in Gaza, UNRWA students use a dedicated human rights curriculum anchored in the Universal Declaration of Human Rights. While the Human Rights, Conflict Resolution, and Tolerance project is relevant to the congressional reporting requirement, it is supplemental to the Palestinian Authority textbooks—the core educational materials used in UNRWA’s schools. State’s reports do not discuss whether these Palestinian Authority textbooks are consistent with the values of human rights and tolerance. Moreover, none of State’s reports for these 3 years explicitly state that the UN values UNRWA applied in reviewing textbooks encompass the value of dignity or not inducing incitement. State/PRM officials said that these topics are addressed implicitly, in that the value of “dignity” is encompassed by the concepts of human rights and non-discrimination, which are among the elements encapsulated by the “UN values” applied as part of the Curriculum Framework. State/PRM officials further assert that reporting to Congress on UNRWA’s application of “UN values” via the Curriculum Framework necessarily encompasses the concept of non- inducement of incitement. In State’s view, materials reviewed through the lens of UN values and principles as defined by the UN imply that such review is taking into consideration whether the materials include incitement to violence. However, State did not include language about dignity or not inducing incitement explicitly in its reports to Congress. Regarding the nature and extent of content UNRWA identified in Palestinian Authority textbooks as not aligned with UN values, State did not include details provided by UNRWA about UNRWA’s reviews of Palestinian Authority textbooks in its May 2017 report to Congress that, while not required by law to be included in State’s reports, could be helpful for congressional oversight. The May 2017 report states that UNRWA reviewed pilot textbooks for the first and second semesters of grades 1 through 4 and identified a “limited amount of problematic content in the Palestinian Authority materials.” However, State’s report did not cite the percentage of all pages UNRWA deemed as including content not aligned with UN values, the percentage of issues UNRWA identified in relation to each of the three rapid review criteria, or examples of such content (e.g., frightening pictures that they considered inappropriate for children), which UNRWA had reported to State/PRM and other donors at least 2 months earlier. We have previously reported that agencies should consider the differing information needs of various users to ensure that performance information will be useful in decision making. Standards for Internal Control in the Federal Government states that information should be communicated in a way that is useful to internal and external users. Less thorough information in State’s annual reporting could limit its usefulness as a tool for congressional oversight. In addition, the lack of certain relevant information may limit Congress’ ability to fully assess the nature and extent of material that may not be aligned with UN values in Palestinian Authority textbooks. Conclusions The United States has funded education for Palestinian children for decades, including an estimated $243 million for fiscal years 2015 through 2017. State funds education projects to improve the quality of education to equip Palestinians with the skills to grow their economy and build a democratic, secular, politically moderate, and outward-focused Palestinian civil society as a driver for peace, according to the Consulate General’s Education Statement of Purpose. Congress remains interested in the role UNRWA plays in educating children under its purview, requiring State to report on steps UNRWA is taking to ensure that the content of all educational materials currently taught in UNRWA- administered schools is consistent with the values of human rights, dignity, and tolerance, and that those materials do not induce incitement. State’s 2017 report inaccurately describes certain UNRWA actions to address content not aligned with UN values. In addition, State’s reports to Congress did not specify whether the educational materials used in UNRWA schools are consistent with the value of dignity or not inducing incitement. Although State’s reports generally discuss whether UNRWA is taking certain steps, the lack of certain relevant information in State’s reports could limit their usefulness as a tool for congressional decision making and oversight. Accurate and complete information would help Congress more fully understand and assess the nature and extent of content in textbooks that is not aligned with UN values, as well as UNRWA’s actions to address this content. Recommendations for Executive Action We are making the following four recommendations that could further enhance State’s annual reports to Congress: The Secretary of State should direct the Assistant Secretary for Population, Refugees, and Migration to establish a process to ensure that State’s reporting to Congress on the actions UNRWA has taken is accurate. (Recommendation 1) The Secretary of State should direct the Assistant Secretary for Population, Refugees, and Migration to provide information in its reports to Congress that could be useful for congressional oversight, including information that: discusses whether Palestinian Authority textbooks used in UNRWA schools are found to be consistent by UNRWA with the values of human rights and tolerance. (Recommendation 2) explicitly states whether the UN values UNRWA applied as part of the Curriculum Framework encompass dignity and do not induce incitement. (Recommendation 3) describes the nature and extent of textbook content that UNRWA identified as not aligned with UN values, including in the English language textbooks purchased by UNRWA. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of our April 2018 classified report to State and USAID for comment. We also provided UNRWA with relevant information for comment. In response, State and UNRWA provided written comments on the classified report. We have reprinted State’s updated written comments in appendix V and UNRWA’s original written comments in appendix VI. All three also provided technical comments, which we incorporated as appropriate throughout our report. In its written comments on this report, State noted that it has implemented all four of our recommendations contained in the classified report we issued in April 2018. To ensure the accuracy of information in its reports, State has developed standard operating procedures for drafting and verifying the information contained in its annual report to Congress on UNRWA, including clearly sourcing all information contained in the report and seeking written verification from UNRWA on any information previously obtained via oral communication. State implemented our recommendation that it discuss whether Palestinian Authority textbooks used in UNRWA schools are found to be consistent by UNRWA with the values of human rights and tolerance. State included additional qualitative details from UNRWA on its evaluation of the Palestinian Authority materials, and the degree to which UNRWA assesses that these materials are consistent with human rights and tolerance. State implemented the recommendation to explicitly state in its reports to Congress whether the UN values UNRWA applied as part of the Curriculum Framework encompass dignity and do not induce incitement. In addition, State implemented the recommendation to describe the nature and extent of textbook content that UNRWA identified as not aligned with UN values, including in the English language textbooks purchased by UNRWA. State provided additional qualitative and quantitative details from UNRWA’s evaluation of Palestinian Authority textbooks in its fiscal year 2018 report based on information provided by UNRWA. In its written comments, UNRWA said, among other things, that while using the curricula and textbooks of host nations, UNRWA’s education program strives to realize the potential of all its Palestine refugee students, to help them develop into confident, innovative, questioning, thoughtful, tolerant and open-minded critical thinkers, who uphold human values and tolerance, and contribute positively to the development of their society and the global community. In addition, UNRWA noted that it appreciates our understanding of the role of the Curriculum Framework and how UNRWA takes specific measures to rapidly review newly issued textbooks, including the large number of new textbooks released by the Palestinian Authority Ministry of Education and Higher Education throughout 2016 and 2017. UNRWA also commented that while it does not have authority to determine or alter national curricula, UNRWA is committed to taking all measures within its control to ensure that the delivery of its educational services is fully aligned with the values of the United Nations. UNRWA did not comment on our recommendations, since they were not directed to UNRWA. We are sending copies of this product to the appropriate congressional committees, as well as the Secretary of State, the Administrator of USAID, the Commissioner-General of UNRWA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII. Appendix I: Objectives, Scope, and Methodology This report examines (1) the amount of funding Department of State (State) and U.S. Agency for International Development (USAID) provided for education assistance to the West Bank and Gaza for fiscal years 2015 through 2017 and how it was used; (2) how the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) and State have identified and addressed potentially problematic content in educational materials used by schools in the West Bank and Gaza; and (3) whether State has submitted required annual reports to Congress including information on whether UNRWA is taking steps to ensure that the content of all educational materials currently taught in UNRWA- administered schools is consistent with the values of human rights, dignity, and tolerance, and do not induce incitement. To determine which U.S. government agencies provide education assistance for the West Bank and Gaza, we reviewed documents and conducted interviews with State, USAID, and the Overseas Private Investment Corporation (OPIC). We initially conducted an interview with OPIC because it was included in a previous report we issued on a similar topic. We excluded OPIC from the scope of this engagement because they did not provide relevant education assistance to the West Bank or Gaza between fiscal years 2015 and 2017. We focused our review on State and USAID because these agencies provided education assistance to the West Bank and Gaza during this timeframe. For this review, we refer to State and USAID when we refer to the U.S. government. To examine the amounts of funding State and USAID provided for education assistance to the West Bank and Gaza and how it was used for fiscal years 2015 through 2017, we took the following steps. We examined actual funding where it was available and estimated funding where it was not. We obtained and analyzed financial data from State and USAID and expenditure data from UNRWA for education assistance to the West Bank and Gaza in fiscal years 2015 through 2017. We used these data to describe how much and for what types of activities State contributed funds to UNRWA. We also obtained and analyzed expenditure and contributions data from State and obligations data from USAID to describe non-UNRWA education programs that they administered in the West Bank and Gaza. We reported the amount of funds UNRWA expended in general on education in the West Bank and Gaza, including the amounts that UNRWA expended on educational materials and specifically on textbooks. We define educational materials to primarily include curriculum, textbooks, select videos and web-based tools, and any complementary teaching materials, including those developed by UNRWA that aim to supplement, replace, or mitigate materials that UNRWA deems not aligned with UN values. We exclude posters, library books, educational technology, education administration materials, extracurricular materials, handouts and worksheets, and teacher training materials, with limited exceptions, from materials produced by UNRWA and used to mitigate material that UNRWA deemed not aligned with UN values or to supplement the curriculum. According to UNRWA officials, the financial information they provided pertains to educational materials, including textbooks, complementary teaching materials, and costs related to an interactive learning portal in Gaza and UNRWA TV. Finally, we reported the amount of funds USAID obligated for education programs in the West Bank and Gaza during this timeframe. To analyze these data, we reviewed State-UNRWA contribution agreements, State reports on UNRWA emergency appeals expenditures, and USAID award documents. We examined the two types of funding that State contributed to UNRWA—program budget funding and emergency appeals. We also examined the three ways in which UNRWA expends that funding—through program budget expenditures, emergency appeals expenditures, and special project expenditures. We supplemented these data by interviewing State, UNRWA, and USAID officials about funding. While the majority of UNRWA data are actual expenditures, some UNRWA data are estimates. According to UNRWA officials, they estimated all UNRWA expenditure data for fiscal year 2017 because, as of December 2017, when we finished collecting data, UNRWA’s 2017 fiscal year was ongoing. In addition, UNRWA estimated its education expenditures provided by the United States because U.S. contributions to UNRWA are generally not earmarked. Rather, UNRWA’s core budget, its program budget, pools funding from all UNRWA donors. For this reason, we reported all UNRWA expenditure data on education assistance based on information UNRWA officials provided us. To make these estimates, UNRWA officials informed us that they calculated U.S. funding as a proportion of all UNRWA funding, and applied that proportion to their educational expenditures. Data on State’s contributions to UNRWA and USAID’s funding to education programs in the West Bank and Gaza active between fiscal years 2015 and 2017 are obligations; according to State, all funds disbursed to UNRWA were through contributions. Data on State’s funding for non-UNRWA education programs are expenditures. For the purposes of this report, we use the U.S. fiscal year (October 1 through September 30) for all State and USAID contributions data, while we use UNRWA’s fiscal year (January 1 through December 31) for all UNRWA expenditure data. In addition, State and USAID awarded several grants for additional years not included in our scope. For example, the USAID’s first obligation to the Leadership and Teacher Development program occurred in fiscal year 2011 and the latest obligation to that program occurred in fiscal year 2017. As a result, the data presented in this report may include additional contributions of funds beyond what State and USAID obligated for fiscal years 2015 through 2017. To determine the reliability of the obligations and expenditure data, we requested information from State, UNRWA, and USAID officials regarding the processes they used to collect and verify data, and we checked the data for reasonableness and completeness. When we found discrepancies or missing data fields, we worked with relevant agency officials to correct the discrepancies and missing fields. We compared State’s contribution data with UNRWA’s expenditure data to ensure consistency. We discussed UNRWA’s financial data for educational expenditures with knowledgeable officials, reviewed audited financial statements for confirmation, and reviewed vouchers they provided. However, we did not independently audit their financial data. To ensure completeness of the data, we reviewed initial grant documents or contribution agreements and all associated amendments for the (1) six education projects USAID funded in the West Bank and Gaza, and (2) annual UNRWA contributions State made between fiscal years 2015 and 2017. We discussed UNRWA’s procedures for estimating the proportion of U.S. funds that went to educational expenditures with knowledgeable officials. Based on our initial assessments of the data, we determined that the State and USAID funding data we collected were sufficiently reliable for the purposes of this report. In addition, we determined that the actual expenditure data we collected from UNRWA were sufficiently reliable for our purposes, and that the estimated expenditures it provided were reasonable for the purposes of this review. (To examine how UNRWA and State have identified and addressed potentially problematic content in educational materials used by schools in the West Bank and Gaza, we reviewed the policies and procedures that UNRWA and State have established and implemented. We focused on actions agencies took in response to the (1) pilot textbooks for grades 1 through 4 that the Palestinian Authority issued in 2016 and that UNRWA used during the 2016-2017 school year; (2) final textbooks for grades 1 through 4, and pilot textbooks for grades 5 through 10 the Palestinian Authority issued in in 2017 and used during the first semester of the 2017-2018 school year; and (3) English language textbooks that UNRWA and the Palestinian Authority purchased for grades 1 through 10 published in 2011 through 2014 and used during the 2017-2018 school year. According to UNRWA officials, these textbooks do not include the second semester Palestinian Authority textbooks for the 2017-2018 school year (released in late 2017) and the second semester English language textbooks, and therefore do not cover all the textbooks used in UNRWA and Palestinian Authority schools for grades 1 through 10. We examined how UNRWA and State have implemented their policies and procedures. We reviewed State’s cables and agencies’ policy documents and reports and met with officials from State, UNRWA, and USAID in Washington, D.C., and overseas. In addition, we interviewed international donors overseas and officials from the government of Israel, the Palestinian Authority, and Jerusalem municipality. We only interviewed official government entities and public international organizations and did not meet with non-governmental interest groups. We followed up with relevant officials on multiple occasions to assess the progress of textbook review and the status of implementation of other policies and procedures. We interviewed UNRWA officials about the methods they used to conduct the rapid reviews of textbook content and reviewed documents they provided that outline their procedures. While the methods and procedures described seemed generally reasonable, we did not independently review UNWRA’s underlying documents to fully assess the reliability of the rapid review results it reported because UNRWA is an international organization. Moreover, it was beyond the scope of our review to examine the underlying documents and textbooks themselves, most of which are written in Arabic. There can be a number of challenges to analyzing and coding content as UNRWA did in its rapid reviews, such as the need for those performing the review to exercise judgment, and while the overall process officials outlined generally appeared reasonable, we cannot comment on the extent to which it successfully overcame all of the potential challenges. We are presenting the results of the textbook reviews, attributed to UNRWA, to help support our finding that the agency has developed procedures to review textbooks, and that it found some concerns in its recent reviews. In addition, we are providing details about these reviews for context because the State Department summarized the results of the first two reviews in its May 2017 report to Congress, which we discuss in the third section of this report. This report is a public version of a classified report that we issued in April 2018. The Department of State deemed some of the information in our April 2018 report to be classified, which must be protected from loss, compromise, or inadvertent disclosure. Therefore, this report omits classified information about neutrality/bias, gender issues, and other textbook content identified in English language textbooks by UNRWA as not aligned with UN values. Although the information provided in this report is more limited, the report addresses the same objectives as the classified report and uses the same methodology. To examine whether State has submitted required annual reports to congressional committees, including information on whether UNRWA is taking steps to ensure that the content of all educational materials currently taught is consistent with the UN values of human rights, dignity, and tolerance, and do not induce incitement, we took the following steps. We reviewed the legal requirements for State to report on the steps UNRWA is taking to ensure that the content of all educational materials currently taught is consistent with the UN values. These requirements are found in the annual appropriations acts; for fiscal year 2017, the requirement is located in Section 7048(d)(5) of the Consolidated Appropriations Act, 2017. We reviewed State’s reports to Congress in 2015, 2016, and 2017, and compared data State reported regarding education assistance with data we gathered through meetings with State and UNRWA officials in in Washington, D.C., and overseas. We also reviewed UNRWA documents. The performance audit upon which this report is based was conducted from January 2017 to April 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with State from February 2019 to June 2019 to prepare this unclassified version of the original classified report for public release. This public version was also prepared in accordance with these standards. Appendix II: Overview of UN Relief and Works Agency for Palestine Refugees in the Near East’s (UNRWA) Curriculum Framework Review and Rapid Review Processes UNRWA’s Framework for Analysis and Quality Implementation of the Curriculum (Curriculum Framework) provides the overarching structure for the review and enrichment of educational materials used in UNRWA schools in all of its fields of operation, including the West Bank and Gaza. The Curriculum Framework, developed as part of UNRWA’s education reform process, aims to ensure that the curricula taught in its schools support the development of skills and competencies that are considered important for individual development in the 21st century. In addition, the Curriculum Framework aims to ensure that the delivery of the host country’s curriculum reflects UN values, such as neutrality, tolerance, equality, and nondiscrimination, and human rights with regard to race, gender, language, and religion as well as the development of respect for a child’s own cultural identity, language, and values in line with UN values. According to UNRWA officials, neutrality is one of the four “humanitarian principles” formally adopted by the UN General Assembly and endorsed by UNRWA and is a core obligation and value of UN staff as spelled out in the UN’s regulatory framework. According to UN humanitarian principles, the concept of neutrality means that, irrespective of their personal beliefs and opinions, “umanitarian actors must not take sides in hostilities or engage in controversies of a political, racial, religious or ideological nature.” The Curriculum Framework includes 10 Curriculum Framework principles and five student competencies against which UNRWA reviews educational materials used in its schools: Principle 1—Focuses on understanding and application and not just memorization Principle 2—Is active, practical, and encourages independent thinking Principle 3—Is relevant to students’ lives and situation, particularly as Principle 4—Provides a variety of teaching and learning approaches Principle 5—Integrates learning and emphasizes connections to other Principle 6—Is inclusive and provides learning opportunities for Principle 7—Provides for students’ personal development and well- Principle 8—Is free of biases (such as gender, disabilities, and ethnicity) Principle 9—Enables students to value their Palestinian culture, Principle 10—Reflects UN values Curriculum Framework Student Competencies: 1. Critical and creative thinking 3. Communication and literacy UNRWA’s Curriculum Framework includes tools to guide the analysis and review of host country textbooks and other learning material at the school and field levels, and remains the overarching framework for the review and enrichment of educational materials used in UNRWA schools agency-wide. However, given the urgency of reviewing any newly issued textbooks for use during the 2016-2017 school year, UNRWA developed a rapid review process. The rapid review process does not replace the Curriculum Framework process, as the Palestinian Authority textbooks reviewed through the rapid review process are also subject to the regular Curriculum Framework review process at the field and school levels, as follows: At the field level, field education staff are to use the Field-Level Analysis Tool of the Curriculum Framework to review textbooks against all five student competencies and 10 principles of the Curriculum Framework. At the school level, all UNRWA teachers and school principals in the West Bank and Gaza and UNRWA’s other fields of operations are to use the School-Level Analysis Tool of the Curriculum Framework to review their own teaching programs and lessons, including curriculum materials they use, while considering their context and diversity of needs. The School-Level Analysis Tool focuses on the five Student Competencies and select Curriculum Framework Principles: (1) Principle 4—provides a variety of teaching and learning approaches; (2) Principle 6—is inclusive and provides learning opportunities for students of all abilities; (3) Principle 8—is free of biases (such as gender, disabilities, and ethnicity); (4) Principle 9—enables students to value their Palestinian culture, heritage, and identity; and (5) Principle 10—reflects UN values. The Curriculum Framework is a more comprehensive pedagogical review—one that relates more directly to the theory and practice of education—than the rapid review process, which focuses specifically on three rapid review criteria linked to the UN values in the Curriculum Framework. According to UNRWA documents, UNRWA employed a multi-stage rapid review process to identify textbook content not aligned with UN values, and its efforts to address this content were ongoing as of November 2017. Figure 3 summarizes UNRWA’s process. Complementary teaching materials are educational materials that UNRWA developed to use alongside host government textbooks to ensure that the lessons taught in UNRWA schools adhere to UN core values, such as neutrality, according to UNRWA officials. UNRWA’s Agency Task Force is composed of the Chief of Staff and headquarters officials from the departments of Education and Legal Affairs, according to UNRWA officials. The cascade training model involves training groups of individuals who in turn train other individuals. UNRWA has established strategic support units in the fields that train educational specialists who then train school principals and teachers using a cascade model, according to UNRWA officials. Professional support staff include field-level strategic support unit staff, education specialists, and Chiefs of the Field Education Programs, according to UNRWA officials. Appendix III: 2016-2017 Rapid Review, as Reported by the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) Appendix III: 2016-2017 Rapid Review, as Reported by the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) UNRWA reported that it has reviewed newly issued Palestinian Authority textbooks during three rapid review sessions since 2016 to identify content it deems not aligned with UN values and that it has developed complementary teaching materials to specifically address this content for any page with issues identified. Throughout the 2016-2017 school year, UNRWA reported reviewing pilot textbooks newly issued by the Palestinian Authority for grades 1 through 4 in two separate reviews. In August 2017, UNRWA reported reviewing the final textbooks for grades 1 through 4 for the first semester, pilot textbooks for grades 5 through 10 for the first semester, and English language textbooks funded with contributions from donor countries, including the United States, for grades 1 through 10 for the first semester. For the August 2017 review, UNRWA reported reviewing 75 textbooks (7,498 pages) in aggregate. Table 1 provides details on the number of textbooks and number of pages UNRWA reported reviewing between 2016 and 2017 for the textbooks used in its schools in the West Bank and Gaza. Table 2 provides detail on the academic subjects for which UNRWA reported reviewing Palestinian Authority textbooks in 2016 and 2017. Table 2. Select Academic Subjects for Which the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) Reported Reviewing Content of Palestinian Authority and English Language Textbooks, 2016-2017 recitation) Legend: =UNRWA reviewed textbook for this subject. N/A= Not applicable because Palestinian Authority and UNRWA schools do not use these textbooks for the grades listed. Appendix IV: Textbook Content Issues Identified by the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) Appendix IV: Textbook Content Issues Identified by the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) During its August 2017 review of textbooks for grades 1 through 10 for the first semester, UNRWA identified 203 issues covering a total of 229 pages (out of a total of 7,498 pages reviewed), the majority of which it identified as related to neutrality/bias. Specific details about the percentage of pages with issues UNRWA identified in relation to each of the three rapid review criteria subjects, as well as the types and percentages of neutrality/bias issues UNRWA reported finding were omitted because the information is classified. Of the 203 issues UNRWA identified in the textbooks for the first semester of grades 1 through 10 for the 2017-2018 school year, UNRWA officials reported that they identified the largest number of issues in social studies textbooks (105 issues), followed by Arabic grammar (30 issues), Islamic education (20 issues), mathematics (18 issues), science and life (15 issues), English language (14 issues), and vocational education (1 issue). The 14 issues that UNRWA identified in the English language textbooks purchased by UNRWA for the first semester of grades 1 through 10 cover a total of 22 pages out of 664 textbook pages (3.3 percent), according to UNRWA officials. Of the 14 issues, UNRWA officials identified 10 of the 14 as neutrality/bias issues and 4 as gender issues. The neutrality/bias issues that UNRWA identified include issues related to maps, Jerusalem, and the Islamic religion. Details about the neutrality/bias and gender issues that UNRWA identified and the complementary teaching materials it developed were omitted because the information is classified. UNRWA officials identified four examples in the English language textbooks for the first semester of grades 1 through 10 that show a lack of gender balance in sports, hobbies, and professions. In response, they developed complementary classroom discussion questions to discuss gender bias with UNRWA students. Details about the gender issues that UNRWA identified and the complementary teaching materials UNRWA developed were omitted from this report because they included classified information. Appendix V: Comments from the State Department Appendix VI: Comments from the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) Appendix VI: Comments from the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Thomas Melito at (202) 512-9601 or melitot@gao.gov. Staff Acknowledgments In addition to the contact named above, Cheryl Goodman (Assistant Director), Jaime Allentuck (Analyst in Charge), Ashley Alley, Martin de Alteriis, and Lynn Cothern made key contributions to this report. Other contributors to this report include Neil Doherty, Mark Dowling, Aldo Salerno, and Mona Sehgal.

The U.S. government has funded education assistance to Palestinians. The State Department oversees U.S. contributions to UNRWA, and USAID provides assistance to Palestinian Authority schools. UNRWA generally administers schools for Palestine refugees. The Palestinian Authority generally administers schools for non-refugee Palestinians who live in the WBG. During the 2016-2017 school year, it issued new pilot textbooks for grades 1 through 4 for use in both its and UNRWA's schools. GAO was asked to review issues related to U.S. education assistance to the WBG. This report examines (1) the funding the U.S. government provided for education assistance to the WBG for fiscal years 2015 through 2017, (2) how UNRWA and State have identified and addressed potentially problematic content in textbooks, and (3) whether State has submitted required annual reports to Congress including information on educational materials used in UNRWA schools. To address these objectives, GAO reviewed documents and interviewed U.S. government, UNRWA, and Palestinian Authority officials. For this report, GAO refers to potentially problematic content as that which State defined as inappropriate and that UNRWA defined as not aligned with UN values. The U.S. government funded an estimated $243 million for education assistance in the West Bank and Gaza (WBG) for fiscal years 2015 through 2017, including an estimated $193 million from the Department of State (State) and about $50 million from the U.S. Agency for International Development (USAID). Of State's contribution of approximately $193 million, the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) estimated that about $187 million was provided for its education assistance. State provided the remaining approximately $6 million for non-UNRWA education projects. UNRWA purchased English language textbooks used in UNRWA schools with funds that consist of contributions from donor countries, including the United States. The U.S. government and UNRWA did not fund textbooks published by the Palestinian Authority because the Palestinian Authority provided these textbooks free of charge, according to agency officials. UNRWA and State have taken steps to identify and address potentially problematic content of textbooks used in UNRWA schools, such as maps that exclude Israel. UNRWA reviewed textbooks, including English language textbooks, and took actions to address content it deemed as not aligned with UN values. For example, UNRWA created complementary teaching materials, such as alternate photos, examples, and guidance for teachers to use with the textbooks in UNRWA schools. However, due to financial shortfalls and other constraints, UNRWA officials told GAO that UNRWA did not train teachers or distribute the complementary teaching materials to classrooms. As a result, these materials were not used in UNRWA classrooms. To address textbook content deemed problematic, State examined nongovernmental organizations' studies, encouraged Palestinian Authority officials to address the issue, and monitored UNRWA's efforts. The annual appropriations acts for fiscal years 2015 through 2017 require State to report to Congress on several topics, including steps UNRWA has taken to ensure that the content of all educational materials taught in UNRWA schools is consistent with the values of human rights, dignity, and tolerance, and do not induce incitement. Although State submitted its required reports to Congress on time, State included inaccurate information in the 2017 report and omitted potentially useful information in all three reports. In its 2017 report, State noted incorrectly that UNRWA had completed training teachers and distributed complementary teaching materials to address textbook content that UNRWA deemed as not complying with UN values. In all three of the reports, State omitted information concerning whether UNRWA found that any educational materials used in its schools do not comply with two of four elements, dignity and not inducing incitement. Standards for Internal Control in the Federal Government states that management should use quality information to achieve the entity's objectives and communicate it in a way that is useful to users. Without a fuller explanation, Congress may not have the information it needs to oversee efforts to identify and address potentially problematic textbook content.

GAO_GAO-20-256T

Background VA’s mission is to promote the health, welfare, and dignity of all veterans by ensuring that they receive medical care, benefits, social support, and lasting memorials. In providing health care and other benefits to veterans and their dependents, VA relies extensively on IT systems and networks to receive, process, and maintain sensitive data, including veterans’ medical records and other personally identifiable information. Accordingly, effective information security controls based on federal guidance and requirements are essential to ensure that the department’s systems and information are adequately protected from loss, unauthorized disclosure, inadvertent or deliberate misuse, or improper modification, and are available when needed. Implementing an effective information security program and controls is particularly important for VA since it uses IT systems and electronic information to perform essential activities for veterans, such as providing primary and specialized health care services, medical research, disability compensation, educational opportunities, assistance with home ownership, and burial and memorial benefits. The corruption, denial, or delay of these services due to compromised IT systems and electronic information can create undue hardship for veterans and their dependents. Federal Law and Policy Set Requirements for Securing Federal Systems and Information The Federal Information Security Modernization Act of 2014 (FISMA) requires the head of each agency to provide information security protections commensurate with the risk and magnitude of harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of the information and information systems used by or on behalf of the agency. The act also requires federal agencies to develop, document, and implement an agency-wide information security program to provide security for the information and information systems supporting their operations and assets by implementing policies and procedures intended to cost-effectively reduce risks to an acceptable level. In May 2017, the president signed Executive Order 13800 on strengthening the cybersecurity of federal networks and critical infrastructure. The order sets policy for managing cybersecurity risk and directs each executive branch agency to use the National Institute of Standards and Technology’s (NIST) cybersecurity framework to manage those risks. The NIST cybersecurity framework identifies specific activities and controls for achieving five core security functions: Identify: Develop an understanding of the organization’s ability to manage cybersecurity risk to systems, people, assets, data, and capabilities. Protect: Develop and implement appropriate safeguards to ensure delivery of critical services. Detect: Develop and implement appropriate activities to identify the occurrence of a cybersecurity event. Respond: Develop and implement appropriate activities to take action regarding a detected cybersecurity incident. Recover: Develop and implement appropriate activities to maintain plans for resilience and to restore capabilities or services that were impaired due to a cybersecurity incident. According to NIST, these five functions provide a high-level, strategic view of the life cycle of an organization’s management of cybersecurity risk. The 23 Civilian CFO Act Agencies Have Spent Billions on Cybersecurity Activities In fiscal year 2018, the 23 civilian agencies covered by the Chief Financial Officers Act of 1990 (CFO Act), including VA, reported spending over $6.5 billion on IT security- or cybersecurity-related activities. The 23 civilian agencies individually reported spending between $9 million and almost $1.9 billion on these activities. Collectively, these 23 agencies spent on average about 14 percent of their total IT expenditures on cybersecurity-related activities. VA reported spending about $386 million on cybersecurity, which represented about 8 percent of its total IT expenditures. Federal Agencies Continue to Report Large Numbers of Security Incidents, Although VA Has Reported Fewer Incidents In Recent Years In fiscal year 2018, federal agencies continued to report large numbers of information security incidents. As we previously noted, federal agencies reported over 30,000 security incidents during each of the last three fiscal years. Specifically, agencies reported a total of 30,899, 35,277, and 31,107 information security incidents in fiscal years 2016, 2017, and 2018, respectively. During those same periods of time, VA reported an average of 2,415 incidents annually, although the number of reported incidents steadily decreased from 2,808 to 1,776, as shown in figure 1. In fiscal year 2018, VA reported 1,776 incidents involving several threat vectors. These threat vectors included web-based attacks, phishing attacks, and the loss or theft of computer equipment, among others. Figure 2 provides a breakdown of information security incidents, by threat vector, reported by VA in fiscal year 2018. Perhaps most concerning of the incidents reported by VA is the relatively large percentage of incidents (41 percent) for which VA identified “Other” as the threat vector. Government-wide, agencies identified approximately 27 percent of their incidents in the “Other” category in fiscal year 2018. A large percentage of these incidents may indicate a lack of agency awareness and ability to investigate and catalog incidents. Federal Agencies, Including VA, Continue to Have Deficient Information Security Programs FISMA requires IGs to determine the effectiveness of their respective agency’s information security programs. To do so, OMB instructed IGs to provide a maturity rating for agency information security policies, procedures, and practices related to the five core security functions— identify, protect, detect, respond, and recover—established in the NIST cybersecurity framework, as well as for the agency-wide information security program. The ratings used to evaluate the effectiveness of agency information security programs are based on a five-level maturity model, as described in table 1. According to this maturity model, Level 4 (managed and measurable) represents an effective level of security. Therefore, if an IG rates the agency’s information security program at Level 4 or Level 5, then that agency is considered to have an effective information security program. VA was one of 18 CFO Act agencies where the IG determined that the agency-wide information security program was not effectively implemented during fiscal year 2018. The VA IG also determined the department’s maturity level for each of the five core security functions: Level 2 (defined) for the Detect function; Level 3 (consistently implemented) for the Identify, Protect, and Level 4 (managed and measurable) for the Respond function. As shown in figure 3, VA’s ratings were generally consistent with the maturity level ratings of other CFO Act agencies. Most CFO Act Agencies, Including VA, Had Significant Security Control Deficiencies over Their Financial Reporting Agency IGs or independent auditors assess the effectiveness of information security controls as part of the annual audits of the agencies’ financial statements. The reports resulting from these audits include a description of information security control deficiencies related to the five major general control categories defined by the Federal Information System Controls Audit Manual (FISCAM): security management controls that provide a framework for ensuring that risks are understood and that effective controls are selected, implemented, and operating as intended; access controls that limit or detect access to computer resources, thereby protecting them against unauthorized modification, loss, and disclosure; configuration management controls that prevent unauthorized changes to information system resources and assure that software is current and known vulnerabilities are patched; segregation of duties controls that prevent an individual from controlling all critical stages of a process by splitting responsibilities between two or more organizational groups; and contingency planning controls that help avoid significant disruptions in computer-dependent operations. For fiscal year 2018, most of the 24 CFO Act agencies had deficiencies in most of the control categories, as illustrated in figure 4. VA’s IG reported deficiencies in each of these categories for the department. As a result of these deficiencies, the IGs at 18 of the 24 CFO Act agencies designated information security as either a material weakness (six agencies, including VA) or significant deficiency (12 agencies) in internal control over financial reporting for their agency. For VA, fiscal year 2018 was the 17th year in a row that the department had reported a material weakness in information security. In addition, IGs at 21 of the 24 agencies, including VA, cited information security as a major management challenge for their agency for fiscal year 2018. Most Civilian CFO Act Agencies, Including VA, Have Reported Meeting Many Cybersecurity Implementation Targets The administration has developed key milestones and performance metrics for agency chief information officers (CIO) to use to assess their agency’s progress toward achieving outcomes that strengthen federal cybersecurity. The milestones and metrics have specific implementation targets, most of which are expected to be met by the end of fiscal year 2020. As of fiscal year 2018, most civilian CFO Act agencies, including VA, had reported meeting most of the implementation targets for that year. VA reported meeting six of 10 targets. Table 2 shows the number of agencies meeting their targets as of fiscal year 2018, as well as VA’s status in doing so. VA Faces Key Security Challenges As It Modernizes and Secures Its Information Systems In several reports issued since fiscal year 2016, we described deficiencies related to key challenges that VA has faced in safeguarding its information and information systems. The challenges we reported related to effectively implementing information security controls; mitigating known security deficiencies; establishing elements of its cybersecurity risk management program; and identifying critical cybersecurity staffing needs. Our work stresses the need for VA to address these challenges as well as manage IT supply chain risks as it modernizes and secures its information systems. Effectively Implementing Information Security Controls VA has been challenged to effectively implement security controls over its information and information systems. As previously mentioned in this statement, the VA IG reported that the department did not have an effective information security program and has had deficient information security controls over its financial systems. The weaknesses described by the IG are consistent with the control deficiencies we identified during an examination of VA’s high-impact systems that we reported on in 2016. In those reports, we described deficiencies in VA’s implementation of access controls, patch management, and contingency planning. These deficiencies existed, in part, because the department had not effectively implemented key elements of its information security program. Until VA rectifies reported shortcomings in its agency-wide information security program, it will continue to have limited assurance that its sensitive information and information systems are sufficiently safeguarded. Adequately Mitigating Known Security Deficiencies VA has not consistently mitigated known security deficiencies in a timely manner. As mentioned earlier, VA has reported a material weakness in information security for financial reporting purposes for 17 consecutive years. In fiscal year 2016, we recommended 74 actions for the department to take to improve its cybersecurity program and remedy known control deficiencies with selected high-impact systems. However, as of October 2019, over 3 years later, VA had implemented only 32 (or 43 percent) of the 74 recommendations. One of the remaining unimplemented recommendations calls for the department to consistently and comprehensively perform security control assessments. This recommended activity is an important element of a cybersecurity program and helps to provide assurance that controls are operating as intended and to detect controls that are not functioning correctly. VA has also been challenged in assuring that its actions to mitigate vulnerabilities and implement recommended improvements are effective. The department has asserted that it had implemented 39 of the 42 remaining open recommendations from our fiscal year 2016 reports. However, the evidence VA provided was insufficient to demonstrate that it had fully implemented the recommendations. The department subsequently provided additional evidence, which was also insufficient, indicating that its remedial action process was not validating the effectiveness of actions taken to resolve known deficiencies. Until VA adequately mitigates security control deficiencies, the sensitive data maintained on its systems will remain at increased risk of unauthorized modification and disclosure, and the systems will remain at risk of disruption. Fully Establishing Elements of a Cybersecurity Risk Management Program VA has been challenged in managing its cybersecurity risk. In July 2019, we reported that the department had fully met only one of the five foundational practices for establishing a cybersecurity risk management program. Although VA established the role of a cybersecurity risk executive, the department had not fully: developed a cybersecurity risk management strategy that addressed key elements, such as risk tolerance and risk mitigation strategies; documented risk-based policies that required the department to perform agency-wide risk assessments; conducted an agency-wide cybersecurity risk assessment to identify, assess, and manage potential enterprise risks; or established coordination between cybersecurity and enterprise risk management. VA concurred with our four recommendations to address these deficiencies and asserted that it is acting to do so. Nevertheless, until VA fully establishes a cybersecurity risk management program, its ability to convey acceptable limits regarding the selection and implementation of controls within the established organizational risk tolerance will be diminished. Identifying Critical Cybersecurity Staffing Needs VA has been challenged to accurately identify the work roles of its workforce positions that perform IT, cybersecurity, or cyber-related functions—a key step in identifying its critical cybersecurity staffing needs. In March 2019, we reported that the department had likely miscategorized the work roles of many of these positions in its personnel system. Specifically, VA had reported that 3,008 (or 45 percent) of its 6,636 positions in the 2210 IT management occupational series— positions that most likely performed IT, cybersecurity, and cyber-related functions—were not performing these functions. VA concurred with our recommendation to review the work roles for positions in the 2210 IT management occupational series and assign the appropriate work roles, and stated that it had begun to do so. Nevertheless, until VA completely and accurately categorizes the work roles of its workforce positions performing IT, cybersecurity, and cyber- related functions, the reliability of the information needed to improve workforce planning will be diminished and its ability to effectively identify critical staffing needs will be impaired. Managing IT Supply Chain Risks as Part of IT Modernization Programs Assessing and managing supply chain risks are important considerations for agencies, including VA, when operating and modernizing IT systems. In July 2018, we reported that reliance on a global IT supply chain introduces risks to federal information systems. We noted that supply chain threats are present during various phases of a system’s development life cycle and we identified the following threats: Installation of malicious or intentionally harmful hardware or software; Installation of counterfeit hardware or software; Failure or disruption in the production or distribution of critical Reliance on a malicious or unqualified service provider; and Installation of hardware or software that contains unintentional vulnerabilities, such as defects in code that can be exploited. These threats can have a range of impacts, including allowing adversaries to take control of systems or decreasing the availability of materials or services needed to develop systems. Accordingly, agencies such as VA need to take appropriate measures to assess and manage IT supply chain risks as they operate and modernize their information systems. Failure to do so could result in data loss, modification, or exfiltration; loss of system availability; and a persistent negative impact on the agency’s mission. In summary, similar to other federal agencies, VA continues to be challenged in implementing an effective agency-wide program and controls for securing its information and information systems. As VA pursues efforts to modernize and secure its IT systems, it will need to successfully address multiple challenges in order to achieve effective outcomes. Chair Lee, Ranking Member Banks, and Members of the Subcommittee, this completes my written statement. I would be pleased to answer your questions. GAO Contact and Staff Acknowledgments If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-6244 or wilshuseng@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Jeffrey Knott (Assistant Director), Di’Mond Spencer (Analyst-in-Charge), Chris Businsky, Nancy Glover, Franklin Jackson, and Daniel Swartz. Also contributing were Melina Asencio, Scott Pettis, and Zsaroq Powe. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

In providing health care and other benefits to veterans and their dependents, VA relies extensively on IT systems and networks to receive, process, and maintain sensitive data, including veterans' medical records and other personally identifiable information. Accordingly, effective security controls based on federal guidance and requirements are essential to ensure that VA's systems and information are adequately protected from loss, unauthorized disclosure, inadvertent or deliberate misuse, or improper modification, and are available when needed. For this testimony, GAO summarized the status of information security across the federal government and particularly at VA. It also discusses the security challenges that VA faces as it modernizes and secures its information systems. To develop this statement, GAO reviewed its prior reports and relevant Office of Management and Budget, IG, and agency reports. , detect , respond , and recover —established by the National Institute of Standards and Technology's cybersecurity framework. VA's ratings were generally consistent with the ratings of other major agencies (see figure) and its information security program was one of 18 agency programs that IGs deemed ineffective. Most major agencies, including VA, had significant security control deficiencies over their financial reporting. For example, for fiscal year 2018, VA's IG reported deficiencies in control areas, such as security management, access control, configuration management, segregation of duties, and contingency planning. Additionally, as of fiscal year 2018, VA reported meeting six of the 10 cybersecurity performance targets set by the administration. VA faces several security challenges as it secures and modernizes its information systems. These challenges pertain to effectively implementing information security controls; mitigating known vulnerabilities; establishing elements of its cybersecurity risk management program; and identifying critical cybersecurity staffing needs. VA also faces the additional challenge of managing IT supply chain risks as the department takes steps to modernize its information systems.

GAO_GAO-20-107

Background Overview of Coast Guard’s Federal Fixed and Floating ATON Through its ATON mission, the Coast Guard promotes safe waterways and an efficient Marine Transportation System. The Coast Guard has statutory responsibility to operate and maintain a system of maritime aids to facilitate navigation and to prevent disasters, collisions, and wrecks. To fulfill this mission, the Coast Guard operates and maintains ATON that are placed along coasts and navigable waterways as guides to mark safe water and to assist mariners in determining their position in relation to land and hidden dangers. As mentioned earlier, this report focuses on two categories of ATON: fixed ATON that include lighthouses, towers, and other structures that are directly affixed to the ground or seabed; and floating ATON that include buoys and markers anchored to the sea bed by a concrete or metal sinker connected by a metal chain or mooring. See figures 1 and 2 for examples of fixed and floating ATON. The Coast Guard uses several types of vessels to place and service fixed and floating ATON. These ATON vessels include buoy tenders, construction tenders, and boats. As of October 2019, the Coast Guard had a fleet of 79 ATON cutters and 190 ATON boats—which varied in size from a 240-foot Great Lakes Icebreaker to 16-foot ATON boats. (See appendix I for additional details on the Coast Guard’s fleet of ATON vessels.) ATON Program Management The Coast Guard’s ATON program consists of several offices and units that work together to carry out the ATON mission: Office of Navigation Systems: Based at Coast Guard headquarters in Washington, D.C., the primary ATON-related roles and responsibilities of Office of Navigation Systems officials include providing oversight and approval for ATON operations and policy. Specifically, the Aids to Navigation and Positioning, Navigation, and Timing Division within the Office of Navigation Systems is responsible for establishing requirements and policy; providing program level guidance; and coordinating processes, platforms, and personnel necessary to establish, maintain, and operate the U.S. ATON system. Office of Civil Engineering: Based at Coast Guard headquarters in Washington, D.C., the primary ATON-related roles and responsibilities of Office of Civil Engineering officials include providing oversight and approval for ATON engineering and logistics policy, including supervision of the Shore Infrastructure Logistics Center. Shore Infrastructure Logistics Center (SILC): Based in Norfolk, VA, SILC supervises the Civil Engineering Units that execute fixed ATON depot-level maintenance and recapitalization projects; as well as the Waterways Operations Product Line. Waterways Operations Product Line (WOPL): A division of the Coast Guard’s Shore Infrastructure Logistics Center, WOPL was established by the Coast Guard in 2016 with the goal of serving as the focal point for implementing engineering and logistics solutions for ATON in order to enhance the mission while reducing costs. To do this, WOPL is to support the ATON mission by providing centralized guidance and oversight covering such issues as ATON acquisition, ATON configuration management (the proper mix of ATON) across the Coast Guard’s nine districts, ATON production and delivery, and ATON logistics and maintenance for the Coast Guard-wide inventory of ATON equipment and systems. WOPL’s support encompasses the entire lifecycle of ATON equipment and systems, from acquisition through disposal. Coast Guard Districts and Sectors: The Coast Guard has nine districts, which have overall responsibility for administration of the ATON within their district. Each district oversees the coordination of operations at the sectors and individual ATON units, which includes cutters, boats, and Aids to Navigation Teams. Figure 3 shows a map of the Coast Guard’s nine districts and the numbers of fixed and floating ATON in each district as of November 2019. ATON Servicing and Maintenance Procedures The ATON units are responsible for the servicing and maintenance of ATON by conducting both routine servicing based on the last-service dates of the ATON and non-routine servicing of ATON within their area of responsibility. The non-routine servicing process includes responding to and addressing discrepant ATON, which are aids that are not functioning properly due to, for example, a weather-related event such as a hurricane, or an equipment failure. Timely response to and correction of discrepant ATON is a high-priority task for the Coast Guard. According to internal guidance, the Coast Guard has a tiered approach to address ATON discrepancies that accounts for the importance of the ATON relative to the waterway and the nature of the discrepancy. In particular, according to Coast Guard guidance, the servicing unit response ranges from immediately after notification up to 72 hours or as soon thereafter as weather and resources permit. In some cases, the determining factors do not require responding within 72 hours and the servicing unit is to advise the district of future plans to correct the discrepancy. Coast Guard guidance states that during the routine servicing process for floating ATON (buoys), the primary purpose of the ATON units is to check the buoys’ positions, their condition, and ensure the correct operation of the buoys’ signal hardware. As part of this process, the Coast Guard may extract the buoys from the water and bring them onboard an ATON vessel to check the condition of their mooring chain, hull, and lighting equipment. If necessary, the mooring chains are cleaned and repaired and non-functioning lanterns (lights) are replaced. After the planned repairs are made, the buoys are placed back in their assigned position in the water. See figure 4 for an example of the process used by an ATON unit to service a steel buoy. When ATON units conduct routine or non-routine servicing of fixed and floating ATON, they also collect data on the condition of the ATON. These data provide a “snapshot” of the ATON’s condition at the time of servicing and include the aid’s geographic position; the last date that the ATON was serviced; the next-scheduled service date; and other detailed information about the aid, such as an assessment of the physical integrity of the ATON. If warranted, ATON units can initiate action for repair or replacement of ATON if necessary. The information gathered by ATON units during their servicing activities is entered into a Coast Guard database—the Integrated ATON Information System (I-ATONIS)—that is used to track and monitor fixed and floating ATON. A hardcopy record containing detailed information about each aid is subsequently generated from I-ATONIS and stored in local unit files to track and schedule future fixed and floating ATON servicing dates. ATON Program Budget According to Coast Guard officials, based on the multi-mission nature of its assets and workforce, the Coast Guard does not budget for, request, or receive funding organized by specific missions or program activities. In addition, Coast Guard financial systems are not structured to collect accounting data by specific missions or program activities, and the Coast Guard does not report expenditures by mission. Rather, the ATON mission receives funding through various sources within the Coast Guard’s annual budget. Specific to repairs and recapitalization of fixed ATON, in fiscal year 2018, $300,000 was allocated from Procurement, Construction, and Improvement funding while $10 million was allocated from the Coast Guard’s Operations and Support funds for depot-level ATON maintenance. Prior Work on Coast Guard Management of Shore Infrastructure We previously reported on the Coast Guard’s management and maintenance of its shore infrastructure, which—in addition to fixed and floating ATON—encompasses over 20,000 shore facilities such as piers, docks, boat stations, air facilities, and housing units at more than 2,700 locations. In July 2018, we found that the Coast Guard had not been able to address many shore infrastructure projects, primarily due to lack of funding, longstanding acquisition management challenges, and that previous Coast Guard leadership prioritized the acquisition of new operational assets to replace aging vessels and aircraft over maintaining and repairing shore infrastructure. We recommended, among other things, that the Coast Guard’s annual Capital Investment Plans reflect acquisition trade-off decisions and their effects. The Coast Guard agreed with this recommendation, and estimated implementing actions by March 2020. In February 2019, we found that almost half of the Coast Guard’s shore infrastructure is beyond its service life, and its current backlogs of maintenance projects, as of 2018, will cost at least $2.6 billion to address. We found that the Coast Guard’s process to manage its shore infrastructure recapitalization and deferred maintenance backlogs did not fully meet 6 of 9 leading practices we previously identified for managing public sector maintenance backlogs. We recommended, among other things, that the Coast Guard establish shore infrastructure performance goals, measures, and baselines to track the effectiveness of maintenance and repair investments and provide feedback on progress made; develop and implement a process to routinely align Coast Guard’s shore infrastructure portfolio with mission needs, including by disposing of all unneeded assets; and employ models for its asset lines for predicting the outcome of investments, analyzing trade-offs, and optimizing decisions among competing investments. The Coast Guard agreed with our recommendations and is taking steps to implement them. The Condition of Fixed and Floating ATON Declined Slightly, While the Costs for Repairing and Replacing Them Increased in Recent Years The Condition of the Coast Guard’s Fixed and Floating ATON Declined Slightly from Fiscal Years 2014 through 2018 The condition of fixed and floating ATON Coast Guard-wide declined slightly from fiscal years 2014 through 2018, as determined by the Coast Guard’s key ATON condition metric. In particular, according to data provided by the Coast Guard, the aid availability rate—the percentage of time ATON are functioning correctly—declined from 98.0 percent in fiscal year 2014 to slightly below the Coast Guard’s performance target percentage of 97.5 percent in fiscal years 2017 (97.4 percent) and 2018 (97.1 percent), as shown in figure 5. While the aid availability rate metric indicates that the condition of fixed and floating ATON Coast Guard-wide declined slightly from fiscal year 2014 through fiscal year 2018, other factors—such as the age of many ATON—have contributed to more significant declines in the condition of ATON for some locations. For example, an internal Coast Guard report states that, as of 2018, nearly a quarter (24 percent) of all floating ATON and over half (59 percent) of all fixed ATON are operating past their designed service lives. On a district level, the conditions of fixed and floating ATON differ from one geographical area to the next, and varying weather conditions often have an impact on the physical condition of ATON. For example, the frigid weather conditions of the Great Lakes in certain months frequently erode the condition of both fixed and floating ATON. Coast Guard officials stated that ATON with large steel hulls many times cannot withstand the pressure and weight of ice that can form on them in the winter months. They also stated that the icy waters delay routine servicing trips for personnel to adequately address ATON, which can contribute to the deterioration of the aids. In District 8’s area of responsibility, which includes much of the Gulf of Mexico, Coast Guard officials said that severe storms and hurricanes can adversely impact the condition of fixed and floating ATON and delay servicing trips for safety reasons. Extended periods of exposure to saltwater is another factor that contributes to the degraded condition of ATON in District 8 and elsewhere, as water salinity often corrodes the hulls of steel buoys. In addition to weather, geographic factors can affect the condition of ATON as well. Coast Guard officials in District 1 (headquartered in Boston) stated that the hard, rocky coast in their district makes it difficult to secure fixed ATON structures to the seabed. As a result, this district requires a higher percentage of floating ATON to mark the location of these hazards and these floating ATON are often damaged by the rocks. See figure 6 for examples of the deteriorating condition of some fixed and floating ATON. Total ATON Repair and Recapitalization Costs Increased During Fiscal Years 2014 through 2018 Our analysis of Coast Guard data shows that the Coast Guard’s overall repair and recapitalization expenditures for fixed and floating ATON increased during fiscal years 2014 through 2018. Specifically, our analysis of Coast Guard data shows that total ATON repair and recapitalization costs increased from about $12 million in fiscal year 2014 to about $20 million in fiscal year 2018. As shown in figure 7, the majority of the costs for fixed ATON were spent on repairs whereas the majority of the costs for floating ATON were spent on recapitalizations. The Coast Guard Has Faced Challenges in Managing ATON and Has Plans and Initiatives to Address Them, but Has Limited Assurance That They Will Be Effectively Implemented The Coast Guard Has Faced a Variety of Challenges in Managing its Fixed and Floating ATON Availability of ATON Cutters and Boats According to Coast Guard documents, data, and officials, the Coast Guard has faced a variety of challenges in managing its fixed and floating ATON. The reported challenges include the availability of ATON vessels, difficulty in conducting routine ATON servicing in a timely manner, and capacity limits at ATON major repair and refurbishment facilities. Our analyses of Coast Guard data on maintenance required of ATON cutters and boats during fiscal years 2014 through 2018 show that ATON cutter and boat availability varied by type and across classes. As described below, our data analyses showed that 10 of the 12 ATON cutter classes consistently met availability targets, whereas 4 of the 7 classes of ATON boats consistently met availability targets. The Coast Guard determines the condition of its ATON cutters and boats using the following measures—planned and unplanned maintenance days, maintenance hours, and achieved material availability rate. Specifically, Planned maintenance days are the number of days that a vessel is not mission capable due to scheduled maintenance. This measure is applicable to cutters. Unplanned maintenance days are the number of days that a vessel is not mission capable due to unforeseen maintenance issues and associated repair efforts. This measure is applicable to cutters. Maintenance hours are the total number of hours that a vessel spent in maintenance, including both planned and unplanned maintenance. This measure is applicable to boats. Achieved material availability rate is calculated based on a vessel’s availability and performance. For cutters, the target availability rate range is between 53 percent and 65 percent. For boats, the target availability rate target is 80 percent. According to our analysis of Coast Guard data, the number of maintenance days for ATON cutters generally decreased during fiscal years 2014 through 2018, as shown in Figure 8. In addition, our analysis shows that the biggest decrease was with planned maintenance days. The Coast Guard has established a target range for the achieved material availability rate for ATON cutters that includes a minimum rate of 53 percent to a maximum rate of 65 percent. According to our analyses of Coast Guard data, the achieved material availability rate for the ATON cutters varied by cutter class during fiscal years 2016 through 2018, with 10 of the 12 cutter classes having met or exceeded the minimum target material availability rate for all 3 years and the remaining 2 ATON cutter classes having met or exceeded the minimum target material availability rate for 2 of the 3 years analyzed. While most of the ATON cutters met Coast Guard availability rate targets during fiscal years 2016 through 2018, officials in 7 of the 9 districts noted that maintaining some older ATON cutters can take longer to repair because of old and obsolete equipment and the lack of available parts, which decreases their availability to conduct missions. Figure 9 shows the achieved material availability rate for ATON cutters for fiscal years 2016 through 2018. According to our analysis of Coast Guard data, we found that the total number of maintenance hours for ATON boats generally decreased during fiscal years 2014 through 2018, although there was an increase from fiscal year 2017 to 2018. Figure 10 shows the total maintenance hours for ATON boats during fiscal years 2014 through 2018. In comparison to ATON cutters, which have a target range for the achieved material availability rate, ATON boats have a material availability threshold of 80 percent. According to our analyses of Coast Guard data, 4 of the 7 classes of ATON boats consistently achieved the 80 percent availability threshold during fiscal years 2014 through 2018. In particular, we found that the four smaller classes of ATON boats—those 16 to 26 feet in length—consistently achieved the 80 percent availability threshold during fiscal years 2014 through 2018, whereas the three larger classes of ATON boats—those 49-feet in length and longer—failed to consistently meet the 80 percent availability threshold during this 5-year period. In addition to the data on achieved material availability rates, Coast Guard officials from 3 of the 9 districts noted they experienced challenges with the availability of ATON boats. Figure 11 shows the achieved material availability rate for seven classes of ATON boats. The Coast Guard Has Developed Plans and Initiatives to Address ATON Challenges, but There Is Limited Assurance that They Will Be Effectively Implemented The Coast Guard has taken positive steps to manage the ATON program, including issuing strategic plans and directions, creating a unit to provide a Coast Guard-wide perspective in managing ATON, and developing various initiatives to improve management of fixed and floating ATON. However, we found that some ATON-related initiatives to be implemented Coast Guard-wide, such as the foam buoy implementation initiative, do not contain certain elements that can provide better assurance that they will be effectively implemented, such as milestones and completion dates, and desired outcomes to be achieved. Strategic Plans to Improve ATON Program Management The Coast Guard has developed strategic plans and directions that provide guidance for addressing challenges faced in managing fixed and floating ATON. In June 2007, the Coast Guard issued the Maritime Short Range Aids to Navigation Strategic Plan to coordinate and standardize a number of ATON mission activities. According a Coast Guard official, at the time this strategic plan was issued, ATON units within the Coast Guard’s nine districts were operating largely independently in terms of planning and conducting ATON missions and activities. The 2007 plan changed this by developing a strategic approach to ATON management and it identified a number of initiatives to improve ATON program management, including reducing ATON lifecycle costs and maintenance needs, increasing efficiency and service intervals, and improving the performance and reliability of fixed and floating ATON. More recently, the Coast Guard issued the Navigation Systems Strategic Voyage Plan for Fiscal Years 2017-2022, which updates and expands on the 2007 strategic plan by identifying priorities that impact ATON program management broadly and the management of fixed and floating ATON in particular. The plan specifically identifies initiatives, including the use of non-steel floating ATON, development of year-round floating ice ATON, increased use of LED lighting, and the increased use of less expensive fixed ATON alternatives in lieu of lighthouses. In addition to the 2007 and 2017 strategic plans, the Coast Guard also issues annual Strategic Planning Directions. These annual directions outline the Coast Guard’s strategic commitments and are the primary mechanism for apportioning resources and providing guidance to field units on initiatives and actions to improve mission operations, including the ATON mission. For example, the Coast Guard has emphasized continuing to leverage electronic ATON technology where appropriate in an effort to reduce seasonal ATON workload, such as in districts with ATON in waters that are subject to freezing during a part of the year. Creation of the Waterways Operations Product Line In addition to developing a strategic approach to management of fixed and floating ATON through its strategic plans, the Coast Guard also created a new unit to provide a Coast Guard-wide, centralized perspective in managing fixed and floating ATON engineering and logistics. In particular, in 2016, the Coast Guard created the Waterways Operations Product Line (WOPL) to centrally manage the distribution, repair, and replacement of fixed and floating ATON and parts; as well as to formulate requests for ATON resources and funding. Since its creation, WOPL has coordinated and helped to implement various Coast Guard- wide initiatives to improve the management of fixed and floating ATON. These initiatives include centralized funding for ATON inspection and major repair services, changes in cost limits for floating ATON refurbishments, and expansion of commercial depot-level maintenance contracts to supplement the Coast Guard’s ATON major repair and refurbishment capacity. WOPL has also analyzed and recommended the transition from steel to foam buoys, where appropriate, to increase life cycle cost savings and reduce servicing times. In addition, WOPL has initiated changes to better manage and sustain the duration of floating ATON, including extending time in the water between major refurbishments from 6 to 9 years for some buoys and increasing the allowance for selected steel buoy hull repair weld hours. Initiatives to Address Specific ATON Management Challenges The Coast Guard has developed and is implementing a variety of initiatives to address specific ATON management challenges that were discussed earlier in this report. These initiatives include the following: Improving the Availability of ATON Cutters and Boats: The Coast Guard has ongoing initiatives to extend the service lives and to recapitalize certain ATON cutters and boats to improve their availability rates. For example, in fiscal year 2019, the Coast Guard continued the major maintenance availability efforts on the 225-foot Seagoing Buoy Tender fleet. In addition, from 2006 to 2016, a portion of the Coast Guard’s ATON fleet (River Tenders, Buoy Tenders, and Construction Tenders) underwent a limited maintenance program to act as a bridging strategy until replacement assets could be acquired. Our 2018 report on Coast Guard acquisitions noted that the designed service life for each of these tenders is 30 years, but as of the time of the report, their average age was 53 years. In 2018, we reported that the Department of Homeland Security approved the Waterways Commerce Cutter Program to replace aging River Tenders, Buoy Tenders, and Construction Tenders. While the acquisitions have been approved, it will likely be years before the new cutters are built and deployed. The Coast Guard has also had an ongoing initiative since 2007 that has recapitalized the boat fleet by 290 boats. Conducting Routine ATON Servicing in a Timely Manner: The Coast Guard has issued guidance to its districts to look for opportunities to reduce the number of ATON that do not significantly increase navigational risk and explore and leverage new technologies, such as the use of electronic ATON, where feasible. Collectively, these efforts should help to ease the servicing burden. In addition, the Coast Guard has also introduced initiatives focused on improving ATON servicing time. For example, officials in one district told us that they require their ATON units to send in monthly reports on ATON servicing due dates and plans. District officials review this information and may shift ATON servicing work to another unit when the primary servicing vessel or unit is not available to provide the needed service in a timely manner. Another ongoing initiative the Coast Guard is exploring is the use of year-round buoys for ice prone areas to reduce servicing requirements. The Coast Guard has received positive feedback in two of the three districts where such buoys have been in service. Improving Capacity Limits at ATON Major Repair and Refurbishment Facilities: According to a Coast Guard official, the Coast Guard has had commercial contracts in District 9 (the Great Lakes region) and District 13 (the Pacific Northwest) going back decades to provide floating ATON major repair and refurbishment services. Then, in March 2019, WOPL awarded four regional commercial contracts to provide increased capacity for ATON major repairs and refurbishments in an effort to help reduce the Coast Guard’s floating ATON major repair and refurbishment backlog. Specifically, the Coast Guard (1) renewed the contract in District 13; (2) awarded a contract covering California (part of District 11); (3) awarded a contract for a zone covering New England and the Mid-Atlantic (Districts 1 and 5); and (4) awarded a contract covering Guam (part of District 14). According to Coast Guard officials, the addition or renewal of these four regional contracts has resulted in greater capacity and flexibility to reduce the floating ATON major repair and refurbishment backlog. ATON Management Initiatives Lack Certain Elements While the Coast Guard has developed various initiatives to improve management of fixed and floating ATON, these initiatives do not contain certain elements, which limit assurance that the initiatives will be effectively implemented. For example, we found that many initiatives we evaluated do not contain milestone and completion dates for Coast Guard-wide implementation, which are elements that can guide decisions on the success of the initiatives. Under the foam buoy implementation initiative, the Coast Guard evaluated the use of foam buoys in lieu of steel buoys (which are more expensive to overhaul) and found that it was feasible to replace steel buoys with foam buoys in some locations but not in others. For example, the Coast Guard’s evaluations showed that foam buoys cannot stand up to ice conditions. On the basis of its evaluations, the Coast Guard plans to continue replacing certain classes of steel buoys with foam buoys where operationally feasible. However, the initiative does not contain milestone dates or desired outcomes for Coast Guard-wide implementation. According to guidance from the Program Management Institute, programs or projects—like the ATON-related initiatives being implemented by the Coast Guard—are to include specific, desired outcomes, along with the appropriate steps and time frames needed to achieve the final outcomes and results to implement the enhanced capabilities across the organization. In addition, our leading practices in capital decision- making state that such initiatives should include milestones and completion dates. According to Coast Guard officials, WOPL is a relatively new unit and is still developing ATON guidance and procedures for ATON-related initiatives and responsibilities to be performed by the districts. By updating its ATON-related initiatives to include the specific outcomes desired and timeframes for completing them, the Coast Guard would have better assurance that its initiatives to address ATON management challenges will be effectively implemented. Conclusions Available Coast Guard data indicate that despite some slight declines in the condition of fixed and floating ATON, and increasing repair and recapitalization costs for floating ATON, the Coast Guard’s ability to meet its ATON mission did not show a marked decline during fiscal years 2014 through 2018. However, the future of the fixed and floating ATON and the vessels used to service them bears close watching given the challenges the Coast Guard faces in managing its fixed and floating ATON. The fact that many of the ATON have reached, or will soon be reaching, the end of their designed service lives could lead to an increase in the number of ATON requiring major repairs or replacement in the near future. According to Coast Guard data, the Coast Guard’s ability to refurbish or replace its aging ATON is made more challenging by limited capacity for conducting major repairs and refurbishments of floating ATON. The Coast Guard has taken positive steps to develop strategic plans to guide the ATON program, and these plans have led to the development of various initiatives to improve management of fixed and floating ATON, but these initiatives would benefit from the inclusion of certain elements, such as desired outcomes to be achieved and associated milestone dates, to have better assurance that the initiatives will be effectively implemented. Recommendation The Commandant of the Coast Guard should direct the Assistant Commandant for Engineering and Logistics and Assistant Commandant for Prevention Policy to update the Coast Guard’s ATON-related initiatives to include the specific outcomes to be achieved and associated time frames. (Recommendation 1) Agency Comments We provided a draft of this report to DHS for review and comment. In its comments, reproduced in appendix II, DHS concurred with our recommendation and stated that the Coast Guard plans to review and update ATON-related initiatives to include specific outcomes with associated implementation milestones by December 31, 2020. DHS also provided technical comments that we incorporated into the report, as appropriate. We are sending copies of this report to the appropriate congressional committee, the Secretary of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (206) 287-4804 or AndersonN@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: The Coast Guard’s Fleet of Aids to Navigation Vessels Figure 14 provides information on the cutters and boats that comprise the Coast Guard’s fleet of aids to navigation (ATON) vessels. Appendix II: Comments from the Department of Homeland Security Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact name above, Christopher Conrad (Assistant Director), Hugh Paquette (Analyst in Charge), Chuck Bausell, Breanne Cave, Benjamin Crossley, Dorian Dunbar, Michele Fejfar, Tracey King, Joshua Lanier, and Adam Vogt made significant contributions to this report.

One of the Coast Guard's statutory missions is the care and maintenance of ATON. Much like drivers need signs and universal driving rules, mariners need equivalent nautical “rules of the road.” As of November 2019, the Coast Guard managed 45,664 federal fixed and floating ATON that are designed to assist those operating in the U.S. Marine Transportation System, which includes about 25,000 miles of waterways, 1,000 harbor channels, 300 ports, and 3,700 terminals. According to the Coast Guard, as of July 2018, these ATON had a collective replacement value of about $1.6 billion. The Coast Guard has faced an array of challenges in managing its ATON, such as deteriorating buoys, and questions have been raised regarding the extent to which the Coast Guard is addressing these challenges. This report (1) describes what is known about the condition and costs of maintaining the Coast Guard's ATON, and (2) examines challenges the Coast Guard has experienced in managing its ATON and how it is addressing them. To address these issues, GAO reviewed ATON regulations and guidance, analyzed data on ATON condition and cost measures, collected input from all nine Coast Guard districts on ATON challenges, accompanied ATON units on mission activities, assessed agency initiatives using leading program management practices, and interviewed headquarters and field unit officials. The condition of the Coast Guard's aids to navigation (ATON), both fixed (e.g., lighthouses) and floating (e.g., buoys), have declined slightly while the overall costs for repairing or replacing them increased in recent years. According to Coast Guard data, its key metric for ATON condition—the Aid Availability Rate, or percentage of time that ATON are functioning correctly—declined from 98.0 to 97.1 percent during fiscal years 2014 through 2018, dipping slightly below the 97.5 percent target rate in fiscal years 2017 and 2018. During this time period, the overall costs to repair and replace ATON increased from about $12 million in fiscal year 2014 to about $20 million in fiscal year 2018. According to Coast Guard data, the majority of the costs for fixed ATON were spent on repairs whereas the majority of the costs for floating ATON were spent on replacements. The Coast Guard faces challenges in managing its fixed and floating ATON and has developed plans and initiatives to address them, but it has limited assurance that the plans and initiatives will be effectively implemented. According to Coast Guard officials, the challenges include decreased availability of vessels to service ATON, reduced ability to provide routine ATON servicing in a timely manner due to severe weather, among other factors, and limited capacity at ATON major repair and refurbishment facilities. The Coast Guard has developed plans to guide the ATON program, and these plans have led to the development and implementation of various initiatives at the headquarters and field unit levels to address these challenges. However, GAO found that the initiatives do not contain certain elements that help ensure effective implementation—such as desired outcomes and schedule milestones and completion dates—as recommended by leading program management practices. According to Coast Guard officials, they are still developing guidance and procedures for ATON-related initiatives that are to be implemented by the districts. By updating these initiatives to include certain elements, such as the specific outcomes desired and timeframes for completing them, the Coast Guard would have better assurance that its initiatives to address ATON management challenges will be effectively implemented.

CRS_R45970

Introduction The Federal Bureau of Investigation (FBI) administers a computer system of systems that is used to query federal, state, local, tribal, and territorial criminal history record information (CHRI) and other records to determine if an indiv idual is eligible to receive and possess a firearm. This FBI-administered system is the National Instant Criminal Background Check System (NICS). This system, or parallel state systems, must be checked and the transfer approved by an FBI NICS examiner or state point of contact (POC) before a federally licensed gun dealer may transfer a firearm to any customer who is not similarly licensed federally as a gun dealer. Under current law, persons who buy and sell firearms repeatedly for profit and as a principal source of their livelihood must be licensed federally as gun dealers. Federally licensed gun dealers—otherwise known as federal firearms licensees (FFLs)—are permitted to engage in interstate and, by extension, intrastate (i.e., within a state) firearms commerce with certain restrictions. For example, they may not transfer a handgun to an unlicensed, out-of-state resident. Conversely, persons who occasionally buy and sell firearms for personal use, or to enhance a personal collection, are not required to be licensed federally as a gun dealer. Those unlicensed persons, however, are prohibited generally from making interstate firearms transactions—that is, engaging in interstate firearms commerce—without engaging the services of a federally licensed gun dealer. On the other hand, current law does not require background checks for intrastate, private-party firearms transactions between nondealing, unlicensed persons, though such checks might be required under several state laws. Nevertheless, it is unlawful for anybody, FFLs or private parties, to transfer a firearm or ammunition to any person they have reasonable cause to believe is a prohibited person (e.g., a convicted felon, a fugitive from justice, or an unlawfully present alien). In the 116 th Congress, the House of Representatives has passed three bills that would significantly expand the federal firearms background check requirements and the current prohibitions on the transfer or receipt and possession of firearms related to domestic violence. Those bills are the Bipartisan Background Checks Act of 2019 ( H.R. 8 ), a bill to expand federal firearms recordkeeping and background check requirements to include private-party, intrastate firearms transfers; Enhanced Background Checks Act of 2019 ( H.R. 1112 ), a bill to extend the amount of time allowed to delay a firearms transfer, pending a completed background check to determine an individual's eligibility; and Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ), a bill to expand firearms transfer or receipt and possession prohibitions to include dating partners with histories of domestic violence and stalking misdemeanors. In addition, several multiple-casualty shootings have highlighted possibly systemic vulnerabilities in the NICS-related federal background check procedures, particularly with regard to making records on prohibited persons accessible to federal data systems queried as part of the federal background check process. This report provides an overview of federal firearms statutes related to firearms transactions in interstate and intrastate commerce, dealer licensing, receipt and possession eligibility, NICS background check procedures, analysis of recent legislative action, and discussion about possible issues for Congress. Federal Firearms Statutes Two major federal statutes regulate firearms commerce and possession in the United States. The Gun Control Act of 1968 (GCA; 18 U.S.C. §921 et seq.) regulates all modern (nonantique) firearms. In addition, the National Firearms Act, enacted in 1934 (NFA; 26 U.S.C. §5801 et seq.), regulates certain other firearms and devices that Congress deemed to be particularly dangerous because they were often the weapons of choice of gangsters in the 1930s. Such weapons include machine guns, short-barreled rifles and shotguns, suppressors (silencers), a catch-all class of concealable firearms classified as "any other weapon," and destructive devices (e.g., grenades, rocket launchers, mortars, other big-bore weapons, and related ordnance). Congress passed both the NFA and GCA to reduce violent crimes committed with firearms. More specifically, the purpose of the GCA is to assist federal, state, local, tribal, and territorial law enforcement in the ongoing effort to reduce crime and violence. It is not intended to place any undue or unnecessary federal restrictions or burdens on citizens in regard to lawful acquisition, possession, or use of firearms for hunting, trapshooting, target shooting, personal protection, or any other lawful activity. Many observers have long noted that the assassinations of President John F. Kennedy and his brother, Senator Robert F. Kennedy, and civil rights leader Martin Luther King provided the impetus to pass the GCA. Perhaps equally compelling were the August 1, 1966, University of Texas tower mass shooting and social unrest that accompanied the 1960s. Under the Attorney General's delegation, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the principal agency that administers and enforces these statutes. In addition, ATF administers several provisions of the Arms Export Control Act of 1976 (AECA) with regard to the importation of certain firearms, firearms parts, and ammunition that are also regulated under the GCA and NFA. For the most part, however, the FBI maintains NICS and administers the background check provisions of the GCA. Nonetheless, as discussed below, ATF is charged with investigating whether denied persons made false statements in connection with a firearms transfer; when filling out federal firearms transaction forms. In addition, ATF is also charged with firearms retrieval actions, whenever delayed transactions and incomplete background checks possibly result in prohibited persons acquiring firearms. Firearms and Ammunition Ineligibility The GCA sets firearms eligibility age restrictions under certain circumstances, as well as prohibits various categories of persons from firearms receipt and possession, among other factors. For example, as enacted, the GCA prohibits federally licensed gun dealers (i.e., FFLs) from transferring a long gun (shoulder-fired rifle or shotgun) or ammunition to anyone under 18 years of age; and a handgun or ammunition suitable for a handgun to anyone under 21 years of age. In 1994, Congress amended the GCA to prohibit anyone from transferring a handgun to a juvenile, or anyone under 18 years of age. Congress also made it unlawful for a juvenile to possess a handgun. Congress also provided exceptions to these juvenile transfer and possession prohibitions. Exceptions include temporary transfers in the course of employment in ranching or farming, in target practice, or hunting, all with the written consent of the parents or guardians and in accordance with federal and state laws; for self- or household-defense; or in other specified situations. Under the GCA, as amended, there are 10 categories of persons prohibited from receiving firearms. For 9 of those categories, those persons are also prohibited from possessing a firearm. More specifically, under 18 U.S.C. §922(g), there are nine categories of persons prohibited from shipping, transporting, receiving, or possessing a firearm or ammunition, which has been shipped or transported in interstate or foreign commerce: 1. persons convicted in any court of a felony crime punishable by imprisonment for a term exceeding one year and state misdemeanors punishable by imprisonment for a term exceeding two years; 2. fugitives from justice; 3. unlawful users or addicts of any controlled substance; 4. persons adjudicated as "a mental defective," found not guilty by reason of insanity, or committed to mental institutions; 5. unauthorized immigrants and nonimmigrant visa holders (with exceptions in the latter case); 6. persons dishonorably discharged from the U.S. Armed Forces; 7. persons who have renounced their U.S. citizenship; 8. persons under court-order restraints related to harassing, stalking, or threatening an intimate partner or child of such intimate partner; and 9. persons convicted of a misdemeanor crime of domestic violence. Under 18 U.S.C. §922(n), there is a 10 th class of persons prohibited from shipping or transporting firearms or ammunition, or from receiving (but not possessing) firearms or ammunition that had been shipped or transported in interstate or foreign commerce: 1. persons under indictment in any court of a crime punishable by imprisonment for a term exceeding one year. It is unlawful for any person under any circumstances to sell or otherwise dispose of a firearm or ammunition to any of the prohibited persons enumerated above, if the transferor (seller, federally licensed or unlicensed) has reasonable cause to believe that the transferee (buyer/recipient) is prohibited from receiving those items. Firearms Commerce as a Business Under the GCA as enacted, persons who, or firms that, are "engaged in the business" of importing, manufacturing, or selling firearms must be federally licensed. In 1986, Congress amended the GCA to define the term "engaged in the business." For dealers it means: a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms. ATF issues federal firearms licenses to firearms importers, manufacturers, dealers, pawnbrokers, and collectors. As summarized by ATF in January 2016 guidance: A person engaged in the business of dealing in firearms is a person who "devotes time, attention and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms." Conducting business "with the principal objective of livelihood and profit" means that "the intent underlying the sale or disposition of firearms is predominantly one of obtaining livelihood and pecuniary gain, as opposed to other intents, such as improving or liquidating a personal firearms collection." Consistent with this approach, federal law explicitly exempts persons "who make occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms." Under the GCA, only FFLs are allowed to transfer firearms commercially from one state to another, that is, to engage in interstate (or foreign) firearms commerce. At the same time, it would be highly improbable for any firearms business to compete successfully in the U.S. civilian gun market by only selling firearms manufactured in the state in which it does business; that is, to engage exclusively in intrastate commerce. As a practical matter, any person who deals in firearms as a business, either in interstate or intrastate commerce, needs to be federally licensed firearms manufacturer, importer, or dealer. FFLs may transfer a long gun—a shoulder-fired rifle or shotgun—to unlicensed persons from another state as long as such transfers are legal in both states and they meet in person to make the transfer. However, FFLs may not transfer a handgun to any unlicensed resident of another state. Since 1986 there have been no similar restrictions on the interstate transfer of ammunition, because Congress repealed those restrictions at the request of ATF. Furthermore, a federal firearms license is not required to sell ammunition; however, such a license is required to either manufacture or import ammunition. In addition, FFLs are required to maintain bound logs of firearms acquisitions and dispositions to and from their business inventories by date, make, model, and serial number of individual firearms and transactions records for firearms sales to unlicensed, private persons. ATF periodically inspects these FFLs to monitor their compliance with federal and state law. Under current law, there are statutory prohibitions against ATF, or any other federal agency, maintaining a registry of firearms or firearms owners. Nevertheless, the system of recordkeeping described above allows ATF agents to trace, potentially, the origins of a firearm from manufacturer or importer to a first retail sale and buyer. ATF agents assist other federal agencies, as well as state and local law enforcement, with criminal investigations. The ATF also makes technical judgements about firearms, including the appropriateness of manufacturing and importing certain makes and models of firearms and firearms parts. As described in greater detail below, since November 30, 1998, all FFLs are required to initiate a background check for both handguns and long guns on any prospective firearms purchaser who is otherwise unlicensed federally to engage in firearms commerce as a business. The FBI facilitates these background checks nationwide through NICS. However, for some states, these FBI-facilitated background checks are routed to state or local authorities (points of contact, or POCs) for all firearms (handguns and long guns), or just for handgun transfers or permits for other states. Private Party Transfers For the most part, the GCA does not regulate firearms transactions between two unlicensed persons, who reside in the same state; that is, private-party, intrastate firearms transfers. Such transfers are not covered under current federal law as long as the parties are: not "engaged in the business" of dealing in firearms "as a regular course of trade or business with the principal objective of livelihood and profit"; residents of the same state, where the transfer is made; not prohibited from receiving or possessing firearms; and the recipients are of age (at least 18 years old). It follows, therefore, that private firearms transactions between persons who are not "engaged in the business" of firearms dealing and, thus, who are not required to be federally licensed, are not covered by the recordkeeping or the background check provisions of the GCA if those parties reside in the same state. The meaning of "state of residence" is not defined in the GCA, but ATF has defined the term to mean: The State in which an individual resides. An individual resides in a State if he or she is present in a State with the intention of making a home in that State. If an individual is on active duty as a Member of the Armed Forces, the individual's State of residence is the State in which his or her permanent duty station is located. An alien who is legally in the United States shall be considered to be a resident of a State only if the alien is residing in the State and has resided in the State for a period of at least 90 days prior to the date of sale or delivery of a firearm. However, these intrastate, private firearms transactions and other matters such as possession, registration, and the issuance of licenses to firearms owners may be covered by state laws or local ordinances. As noted above, unlicensed persons are prohibited generally from engaging in interstate and intrastate firearms commerce as a business; however, they are permitted to change state residences and take their privately owned non-NFA firearms with them under federal law, but they must comply with the laws of their new state of residence. The GCA generally prohibits an unlicensed person from directly transferring any firearm—handgun or long gun—to any other unlicensed person who resides in another state. Similarly, it is unlawful for an unlicensed person to receive a firearm from any unlicensed person who resides in another state. On the other hand, the GCA does not prohibit an unlicensed person from transferring a firearm to an out-of-state FFL, who may be willing to serve as a proxy for an unlicensed person to transfer a firearm or firearms to another unlicensed person who resides in the state where the FFL is licensed federally to do business. The facilitating, out-of-state FFL, in turn, must treat that firearm as if it were part of his business inventory, triggering the recordkeeping and background check provisions of the GCA. Generally, the facilitating FFL will charge a fee for such transactions conducted on behalf of an unlicensed person, which would likely be passed on to the unlicensed buyer/transferee in most cases. According to a 2015 survey, about one-in-five firearms transfers (22%) are conducted privately between unlicensed persons. In addition, a 2016 survey of state and federal prisoners—conducted by the Department of Justice (DOJ), Bureau of Justice Statistics (BJS)—who possessed a firearm during the offense for which they were serving time suggested that more than half (56%) had either stolen the firearm (6%), found it at the scene of the crime (7%), or obtained it off the street or from the underground market (43%); most of the remainder (25%) had obtained the firearm from a family member or friend, or as a gift; and seven percent had purchased the firearm under their own name from a licensed firearm dealer, or FFL. Based on this survey data, private firearms sales at gun shows or any similar venue did not appear to be a significant source of guns carried by these offenders, while private transfers among family members, friends, and acquaintances did appear to account for a significant source of such firearms. ATF Form 4473, Firearms Transaction Record The ATF Form 4473 and bound log of firearms acquisitions and dispositions are the essential federal documents underlying the recordkeeping process mandated by the GCA. Both FFLs and prospective, federally unlicensed purchasers must truthfully and completely fill out, and sign, an ATF Form 4473. Prospective purchasers attest to three things: 1. they are not prohibited persons, 2. they are who they say they are, and 3. they are the actual buyers. Straw purchases are a federal crime. It is illegal for anybody to pose as the actual buyer, when in fact he is buying the firearm for someone else. Making any materially false statement to an FFL is punishable by a fine and/or up to 10 years imprisonment. There is also a lesser penalty for making any false statement or representation in any record (e.g., the Form 4473) that an FFL is required to maintain. Some straw purchases are also prosecuted under this provision. Violations are punishable by a fine and up to five years imprisonment. For their part, FFLs must verify a prospective purchaser's name, date of birth, state residency, and other information by examining government-issued identification, which most often include a state-issued driver's license. FFLs must also file completed Form 4473s in their records. If a purchased firearm from FFLs should be recovered at any crime scene, ATF can trace a firearm from its original manufacturer or importer to the first-time FFL retail seller and the first-time private buyer (by the make, model, and serial number of the firearm). Successful firearms traces have generated leads in criminal investigations. In addition, aggregated firearms trace data provide criminal intelligence on illegal firearms trafficking patterns. 1993 Brady Act and Background Checks After six years of debate, Congress passed the Brady Handgun Violence Prevention Act, 1993 (Brady Act). Sponsors of the Brady Act initially proposed requiring a seven-day waiting period for handgun transfers. Instead, Congress amended the GCA with the Brady Act to require electronic background checks on any federally unlicensed individual seeking to acquire a firearm from an FFL. The Brady Act included both interim and permanent provisions. Under the interim provisions, FFLs were required to contact local chief law enforcement officers (CLEOs) to determine the eligibility of prospective customers to be transferred a handgun. CLEOs were given up to five business days to make such eligibility determinations. From February 28, 1994, to November 29, 1998, under the interim provisions, 12.7 million firearms background checks (for handguns) were completed, resulting in 312,000 denials. The permanent provisions of the Brady Act became effective when the FBI activated the National Instant Criminal Background Check System (NICS) on November 30, 1998. Under these provisions, FFLs are required to initiate a background check through NICS on any prospective unlicensed customer, who seeks to acquire a firearm from them through a sale, trade, or redemption of firearms exchanged for collateral. Failure to conduct a NICS check is punishable by a fine of up to $1,000 and one year imprisonment, or both. FFLs may engage in firearms transfers among themselves without conducting background checks. The Brady Act includes a provision that prohibits the establishment of a registration system of firearms, firearms owners, or firearms transactions or dispositions with NICS-generated records, except for records on NICS denials for persons who are prohibited from receiving or possessing firearms under the GCA. In addition, in the FY2012 Consolidated Appropriations Act, Congress included a permanent appropriations limitation that requires the FBI to destroy background check records within 24 hours on persons who are eligible to receive firearms. From November 30, 1998, through 2018, the FBI NICS Section facilitated nearly 305 million firearms-related background checks transactions. Corresponding data on individual background checks and denials under the permanent provisions of the Brady Act are given and discussed below for both the FBI and for point of contact states that have chosen to either fully or partially implement the Brady Act. NICS Process Under Federal Law Building on the GCA firearms transaction recordkeeping process, the completed and signed ATF Form 4473 serves as the authorization for an FFL to initiate a check through NICS. The FFL submits a prospective firearms transferee's name, sex, race (or ethnicity), complete date of birth, and state of residence to the FBI through NICS. Social security numbers and other numeric identifiers are optional, but the submission of these data could possibly increase the timeliness of the background check and reduce misidentifications. NICS Responses The NICS Section is to respond to an FFL or POC state official with a NICS Transaction Number (NTN) and one of four outcomes as follows, as described in greater detail below: 1. "proceed" with transfer or permit/license issuance, because a prohibiting record was not found; 2. "denied," indicating a prohibiting record was found; 3. "delayed proceed," indicating that the system produced information that suggested the prospective purchaser could be prohibited; or 4. "canceled" for insufficient information provided. In the case of a "proceed," the background check record is purged from NICS within 24 hours; "denied" requests are kept indefinitely. Under the third outcome, "delayed proceed," a firearms transfer may be "delayed" for up to three business days while NICS examiners or state designees (i.e., POCs) attempt to ascertain whether the person is prohibited. "Delayed proceeds" are often the result of partial, incomplete, and/or even ambiguous criminal history records. The FBI NICS Section often must contact state and local authorities to make final firearms eligibility determinations. Under federal law, at the end of the three-business-day period following a "delayed proceed," FFLs may proceed with the transfer at their discretion if they have not heard from the NICS Section about those matters. The NICS Section, meanwhile, will continue to work the NICS adjudications for up to 30 days, at which point the background checks will drop out of the NICS examiner's queue if unresolved. At 88 days, all pending background check records are purged from NICS, even when they remain unresolved. About two-thirds of FBI NICS Section-administered background checks are completed within hours, if not minutes. Nearly one-fifth are delayed, but are completed within the three-business-day delayed transfer period. If the FBI ascertains that the person is not in a prohibited status at any time within this 88-day period, then the FBI contacts the FFL through NICS with a "proceed" response. If the person is subsequently found to be prohibited, the FBI also contacts the FFL to ascertain whether a firearms transfer had been completed following the three-business-day "delayed transfer" period. If so, the FBI makes a referral to ATF. In turn, ATF initiates a firearms retrieval process. Such circumstances are referred as a "delayed denial," or more colloquially described as "lying and buying." By comparison, standard denials are known as "lying and trying," under the supposition that most persons knew they were prohibited before they filled out the ATF Form 4473 and underwent a background check. ATF is also responsible for investigating standard denials based on FBI NICS Section referrals. As noted above, making any false statement to an FFL in connection with a firearms transfer is punishable under two GCA provisions. As part of the NICS process, under no circumstances are FFLs informed about the prohibiting factor upon which denials are based. However, denied persons may challenge the accuracy of the underlying record(s) upon which their denials are based. They would initiate this process by requesting (usually in writing) the reason for their denial from the agency that initiated the NICS check (the FBI or POC). Under the Brady Act, the denying agency has five business days to respond to the request. Upon receipt of the reason and underlying record for their denials, the denied persons may challenge the accuracy of that record. If the records are found to be inaccurate, the denying agency is legally obligated under the Brady Act to correct that record. If the denials are overturned within 30 days, the transfers in question may proceed. Otherwise, FFLs must initiate another background check through NICS on the previously denied prospective purchaser. NICS-Queried Computer Systems and Files The feasibility of establishing NICS was largely founded upon the interstate sharing of federal, state, local, tribal, and territorial criminal history record information (CHRI) electronically through FBI computer systems and wide area network (WAN). Based on the prospective customer's name and other biographical descriptors, NICS queries four national data systems for records that could disqualify a customer from receiving and possessing a firearm under federal or state law. Those systems include the: Interstate Identification Index (III) for records on persons convicted or under indictment for felonies and serious misdemeanors; National Crime Information Center (NCIC) for files on persons subject to civil protection orders and arrest warrants, immigration law violators, and known and suspected terrorists; NICS Indices for federal and state record files on persons prohibited from possessing firearms, which would not be included in either III or NCIC; and Immigration-related databases maintained by the Department of Homeland Security's Immigration and Customs Enforcement (ICE) for non-U.S. citizens. An internal FBI inspections report found that access to N-DEx could have helped reveal that the individual, who later shot and killed nine people in a Charleston, SC, church, had an arrest record that was possibly sufficient grounds to deny him a firearms transfer. N-DEx is a repository of unclassified criminal justice files that can be shared, searched, and linked across jurisdictional boundaries. For more information about these computer systems and files see Appendix B . NICS Participation: POCs and Non-POCs As shown in Figure 1 , under the Brady Act, states may opt to conduct firearms-related background checks entirely or partially for themselves through state and local agencies serving as POCs, or they may opt to have such checks handled entirely by the FBI, through its NICS Section, which is part of the FBI's Criminal Justice Information Services (CJIS) Division. In 13 full POC states, an FFL initiates a firearms-related background check under the Brady Act by contacting a state or local agency serving as a POC for both long gun- and handgun-related transfers. These states are CA, CO, CT, FL, HI, IL, NJ, NV, OR, PA, TN, UT, and VA. In four partial POC states, an FFL initiates a firearms-related background check by contacting the state and local agencies serving as POCs for handgun transfers, and by contacting the NICS Section through a call center for long gun transfers. These states are MD, NH, WA, and WI. In three partial POC states, an FFL initiates a firearms-related background check under the Brady Act by contacting the state and local agencies serving as POCs for handgun permits, and contacts the NICS Section through a call center for long gun transfers. These states include IA, NC, and NE. In 36 jurisdictions (30 states, the District of Columbia, and the five U.S. territories), an FFL initiates a firearms-related background check by contacting the NICS Section through a call center for all firearms-related background checks, both long gun and handgun transfers. These thirty states are AK, AL, AR, AZ, DE, GA, ID, IN, KS, KY, LA, MA, ME, MI, MN, MO, MS, MT, ND, NM, NY, OH, OK, RI, SC, SD, TX, VT, WY, and WV. The five territories are AS, GU, MP, PR, and VI. Twenty-five states are "Brady exempt," meaning that certain valid, state-issued handgun and concealed carry weapons (CCW) permits may be presented to the FFL in lieu of a background check for firearms transfers through the NICS Section or state and local agencies serving as POCs. Those states are AK, AR, AZ, CA, GA, HI, IA, ID, KS, KY, LA, MI, MS, MT, NC, ND, NE, NV, OH, SC, SD, TX, UT, WV, and WY. For further information, see Appendix C . NICS Transactions, November 30, 1998, Through 2018 Figure 2 shows annual NICS transactions from November 30, 1998, through 2018 (20 years and one month). FBI transactions are shown on the base of the columns and the state and local POC transactions are shown on the top of the columns. Over this period, the FBI NICS Section and state and local agencies serving as POCs made 304.6 million NICS transactions. The NICS Section handled 128.6 million of these transactions (42.2% of all NICS transactions), whereas POCs initiated 176 million transactions (57.8% of all NICS transactions). There is a one-to-one correspondence between FBI NICS transactions and individual background checks, and the 128.6 million FBI transactions—that is, background checks—resulted in 1.6 million denials (1.24%). Some of these FBI NICS Section-administered background checks were for firearms transactions involving multiple firearms; consequently, NICS transactions/background checks serve as an imperfect proxy for firearms sales. Unlike FBI NICS background checks, some state background checks involved more than one background check transaction. In some states, for example, there may be permitting or licensing processes that could take several weeks and administrators would run multiple NICS queries on a single applicant. In other cases, a background check administrator might be unclear about an applicant's first and last name and would run two NICS queries on the applicant, reversing both names as first and last names. More fundamentally, some states are running periodic NICS queries on concealed carry permit holders. These periodic rechecks are not considered individual background checks. The FBI does not have the state data to report on how many state and local background checks correspond with those transactions. Nor does the FBI report the total number of state and local firearms transfer or license denials. The Bureau of Justice Statistics (BJS), however, collects and analyzes the data as part of its Firearm Inquiry Statistics Program and reports annually on the total number of firearms-related background checks and related denials conducted under the Brady Handgun Violence Prevention Act ( P.L. 103-159 ). In June 2017, BJS reported that state and local POCs had conducted 81.7 million firearms-related background checks from November 30, 1998, through 2015. According to the FBI, these POC-conducted background checks corresponded with 123.3 million NICS transactions. About 54.9% of these state transactions involved background checks related to firearms permits/licenses, an unreported percentage of which were for concealed carry permits. It is also noteworthy that some state-issued concealed-carry permits exempt the holder from any further background checks for non-NFA firearms. Hence, state and local NICS transactions also serve as an imperfect proxy for firearms sales. See Appendix C for a list of state permits that have been certified by ATF as Brady exempt. From 2006 through 2018, total NICS transactions more than doubled from 10 million to 26 million or more, peaking in 2016 at 27.5 million and then dropping to 25.2 million in 2017, and rising again to 26.2 million in 2018. For the same years, total NICS transactions/checks handled entirely by the FBI NICS Section increased from 5.3 million to 9.4 million from 2006 to 2016, then dropped to 8.6 million in 2017, and dropped again to 8.2 million in 2018. In addition, NICS transactions handled by state and local agencies increased from 4.8 million to 18.2 million from 2006 to 2016, then dropped to 16.6 million in 2017, but rose again to 17.9 million in 2018. In Figure 2 POC transactions account for an increasing proportion of all NICS transactions, but as discussed above some POC background checks involve more than one NICS transaction, whereas each NICS Section transaction corresponds with a single background check. As shown in Figure 3 , for the years 1999 through 2015, the FBI CJIS Division's NICS Section conducted as many or more background checks than state or local POC agencies. Figure 3 also shows the number of annual denials made pursuant to federal or state law. As noted above, over the 20 years and one month, the FBI CJIS Division's NICS Section conducted 128.7 million background checks, resulting in nearly 1.6 million denials, for an overall initial denial rate of 1.2%. As discussed below, about 2.7% of those denials were appealed and eventually overturned. BJS reported that state and local POC agencies conducted nearly 81.7 million background checks from November 30, 1998, through 2015 for firearms transfers and permits. To date, BJS has not published any data for state and local POC agencies for 2016, 2017, and 2018. Nevertheless, for those 17 years and one month, POC checks resulted in nearly 1.46 million denials, for an overall denial rate of 1.8%, according to BJS. For the same years (and one month), the FBI NICS Section processed 102.4 million background checks, resulting in 1.27 million denials of firearms transfers, for an overall denial rate of 1.2%. See Appendix A for the data shown in Figure 3 , as well as FBI and POC denials by prohibiting categories. FBI NICS Section Brady Denials Appealed and Overturned As with other screening systems, particularly those that are largely name-based, false positives occur as part of the NICS process, but the frequency of these misidentifications is unreported. Nevertheless, the FBI has taken steps to mitigate false positives (i.e., denying a firearms transfer to an otherwise eligible person). In July 2004, DOJ issued a regulation that established the NICS Voluntary Appeal File (VAF), which is part of the NICS Indices (described above). DOJ was prompted to establish the VAF to minimize the inconvenience incurred by some prospective firearms transferees (purchasers) who have names or birth dates similar to those of prohibited persons. So as not to be misidentified in the future, these persons agree to authorize the FBI to maintain personally identifying information about them in the VAF as a means to avoid future delayed transfers. As noted above, current law requires that NICS records on approved firearm transfers, particularly information personally identifying the transferee, be destroyed within 24 hours. Figure 4 shows annual NICS Section denials, denials appealed but sustained, and denials overturned from November 30, 1998, through 2018. During this time, it appears that about one-fifth of NICS Section denials were appealed, and about one-tenth of those appealed denials were overturned, or an estimated 2.7% of NICS Section denials, according to the annual CJIS Division's NICS operations reports. The majority of these overturned denials were due to misidentifications. In any screening system, such as NICS, there is a balance between false positives and false negatives. Misidentifications and improperly interpreted criminal history and other records would constitute false positives. Allowing an otherwise prohibited person to acquire a firearm would constitute a false negative. Under the GCA, there is also a provision that allows the Attorney General (previously, the Secretary of the Treasury) to consider petitions from a prohibited person for "relief from disabilities" and to have his firearms transfer and possession eligibility restored. Since FY1993, however, a limitation (or "rider") on the ATF annual appropriations for salaries and expenses has prohibited the expenditure of any appropriated funding for ATF to process such petitions from individuals. Conversely, under the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ), any federal agency that submits any records on individuals considered to be too mentally incompetent to be trusted with a firearm under the GCA must provide an avenue of administrative relief to those individuals, so if their mental health or other related conditions improve, their firearms rights and privileges may be restored. As a condition of grant eligibility, as described below, states must provide similar administrative avenues of relief for those purposes, that is, "disability relief." See Appendix D for a list of states that have enacted and implemented ATF-certified relief from disability programs under P.L. 110-180 . NICS Denials and Firearm Retrieval Actions Figure 5 shows annual NICS denials and firearm retrieval action from November 30, 1998, through 2018. For the 20 years and one month, the NICS section made an average of 3,600 firearm retrieval action referrals to the ATF annually for follow-up. In many of these cases, an otherwise prohibited person had been transferred a firearm. According to the Government Accountability Office (GAO), following up on these possibly illegal firearms receipts—or "delayed denial investigations"—consumes an increasing and considerable amount of ATF resources. For example, such investigations accounted for 32% of ATF investigations opened in FY2003 and 53% in FY2013. It appears that in a relatively small percentage of cases the suspected offenders have been prosecuted federally for what is commonly known as either "lying and buying" or "lying and trying." According to the Government Accountability Office (GAO), ATF processed 3,933 delayed denials in FY2017. Of those denials, 38 cases were referred to U.S. Attorney's Offices for prosecution. Nine of those cases were federally prosecuted. Also in a relatively small percentage of cases, an FFL could potentially proceed with a firearms transfer after the three-business-day delayed transfer period has expired, but never receive a final NICS determination; or the FFL could potentially decline to transfer the firearm to an unlicensed customer until he received a definitive NICS Section response, which the FFL may not receive from the FBI. NICS Section Budget NICS is maintained and administered by the FBI Criminal Justice Information Services (CJIS) Division and its NICS Section, located in Clarksburg, WV. Recent increases in the volume of firearms-related commerce and attendant background checks have strained the NICS Section and additional staff and funding has been requested by the FBI, which Congress has provided through appropriated funding. For FY2016, the NICS Section program budget allocation was $81 million and 668 funded permanent positions. As described below, for FY2019, the FBI anticipated that the NICS Section program budget would be allocated $103 million and 679 positions, representing a $22 million and 11 position increase over FY2016. The Administration's FY2020 request would increase FY2020 NICS Section program budget to $115 million and 719 positions. For FY2017, the Obama Administration requested $121.1 million for the NICS program, including an additional $35 million. Of this budget increase $15 million was requested to sustain 75 professional support positions funded for FY2016; and another $20 million was requested to hire 160 contractors to support NICS firearms background checks and related activities. The remaining $5.1 million was requested to annualize operational costs associated with the NICS base budget. Report language accompanying both the Senate- and House-reported FY2017 Commerce, Justice, Science, and Related Agencies appropriations bills ( S. 2837 and H.R. 5393 ) indicated that those bills would have provided the requested $35 million for NICS. The Explanatory Statement accompanying H.R. 244 , submitted by the House Committee on Appropriations Chair, Representative Rodney Frelinghuysen, indicated that P.L. 115-31 included $511.3 million for CJIS, and that this amount would fully support CJIS programs, including NICS. For FY2018, the Trump Administration requested $79.2 million for the NICS program, including an additional $8.9 million to fund an additional 85 permanent positions. Such an increase would have brought the number of funded permanent positions for the NICS program to 676. According to the FBI, the enacted NICS budget allocation for FY2018 was $111.3 million and 679 positions. For FY2019, the Administration did not request any budget increases for the FBI or NICS. The FBI anticipated that the FY2019 NICS budget and staff allocation would be about $103 million and 679 positions. For FY2020, the Administration has requested a NICS budget increase of $4.23 million and 40 positions and $7.8 million in base budget increases, which would bring the total FY2020 NICS budget to $115 million and 719 positions. House-report language accompanying the FY2020 Commerce, Justice, Science, and Related Agencies Appropriations Act ( H.R. 3055 ) indicates that this bill would fully support the NICS Section operations and activities for the upcoming fiscal year. Improving NICS Access to Prohibiting Records The efficacy of NICS and firearms-related background checks is dependent in large part on state and local governments making criminal history record information (CHRI), as well as other disqualifying records (e.g., mental incompetency records), accessible electronically to several different national data sharing systems maintained by the FBI. As described above, those systems include principally the III, NCIC, and the NICS Indices. Congress, meanwhile, has authorized two grant programs to incentivize state and local governments to maintain CHRI and other disqualifying records and make them accessible to NICS in a timely manner. Under the Brady Act, Congress authorized a grant program known as the National Criminal History Improvement Program (NCHIP), the initial goal of which was to improve electronic access to firearms-related disqualifying records, felony indictment, and conviction records, for the purposes of both criminal and noncriminal background checks. Congress passed the NICS Improvement Amendments Act (NIAA) of 2007 ( P.L. 110-180 ) following the April 16, 2007, Virginia Tech tragedy. Along the lines of the Brady Act, the NIAA included provisions designed to encourage states, tribes, and territories to make available to the Attorney General certain records related to persons who are disqualified from acquiring a firearm, particularly records related to domestic violence misdemeanor convictions and restraining orders, as well as mental health adjudications. As a framework of incentives and disincentives, the Attorney General was authorized to make grants, waive grant match requirements, or reduce law enforcement grant assistance depending upon a state's compliance with the act's goals of bringing firearms-related disqualifying records online. The Attorney General was required to report annually to Congress on federal department and agency compliance with the act's provisions. The Attorney General, in turn, has delegated responsibility for grant-making and reporting to DOJ's Bureau of Justice Statistics (BJS). BJS designated the grant program under the act as the "NICS Act Record Improvement Program (NARIP)," although congressional appropriations documents generally referred to it as "NICS improvement" or the "NICS Initiative" program. Figure 6 shows annual congressional appropriations for NCHIP and NARIP for FY1995-FY2019. Over this 25-year period, Congress has appropriated nearly $859 million for NCHIP and $201 million for NARIP, for a total of $1.06 billion. During this time period, NCHIP grants were made available to states for purposes other than just identifying persons ineligible to receive firearms, such as identifying persons ineligible to hold positions involving vulnerable populations (e.g., children, disabled, and elderly). Nevertheless, the principal purpose of NCHIP was to improve the accuracy and timeliness of background checks, particularly those administered pursuant to the Brady Act. For FY2009 through FY2013, Congress authorized $1.3 billion in appropriations for NARIP. Actual appropriations, however, fell short of such authorizations. For those fiscal years, Congress appropriated $63.6 million for NARIP, although neither the House nor Senate Committee on Appropriations adopted "NARIP" as a grant program designation. Instead, the appropriations statute provided such funding for the grant-making activities authorized under P.L. 110-180 . For FY2014 through FY2019, Congress continued to appropriate funding for both NCHIP and the grant-making activities authorized under P.L. 110-180 (i.e., NARIP) under the "NICS Initiative," even though the authorization for appropriations under P.L. 110-180 had lapsed. For those years, Congress appropriated $429.5 million for NCHIP and NARIP, or the "NICS Initiative," of which $137 million was set aside for purposes authorized under NIAA, bringing total appropriated NARIP funding for FY2009 through FY2019 to $200.6 million. Under the NICS Initiative, BJS has awarded a total of $142 million in NARIP grants to 30 states and one Native American tribe from FY2009 through FY2018. To date, however, BJS has not levied any of the reward and penalty provisions of NIAA, possibly because of methodological difficulties in ascertaining state progress towards meeting the goals of this act. With NICS Initiative grants (NCHIP and NARIP) in part, state and local governments have increased the availability of mental health- and domestic violence-related records to NICS Indices and other data systems queried by NICS. For example, from CY2007 to CY2018, the number of mental health records in the NICS Indices increased from 518,499 to 5,419,894, a 9.5-fold increase. The number of misdemeanor crime of domestic violence (MCDV) records in the NICS Indices increased from 46,286 to 175,376, nearly tripling (a 278.9% increase). Many instances domestic violence misdemeanor crimes are serious enough in nature that the records are deposited in the III, meaning the offenders were fingerprinted. A Department of Justice-sponsored report found that in many cases such criminal records are not adequately flagged in the III for firearms eligibility determination purposes, leading to NICS delayed transfers in some cases. Inadequately flagged records in the III increase the possibility that a prohibited person might be transferred a firearm after the NICS three-business-day delayed transfer period expires. Similarly, it was reported that domestic violence protection orders are increasingly being placed in the NICS Indices, even though the authors of the report argued that it would probably be most appropriate to place such records in the National Crime Information Center (NCIC), so that such records would be available to law enforcement for purposes besides firearms-related background checks. Responding to these issues in part, Congress passed the Fix NICS Act of 2018 ( P.L. 115-141 ). The act reauthorized NARIP, as well as authorized appropriations of $125 million annually for FY2018 through FY2022. It also reauthorized NCHIP itself, as well as authorized appropriations of $250 million annually for FY2018 through FY2022. For FY2018, Congress appropriated $75 million for the "NICS Initiative," of which $25 million was set aside for purposes authorized under NIAA, as amended by the Fix NICS Act (or NARIP). For FY2019, Congress appropriated the same amount and set aside. For FY2020, the Administration has requested $65 million for NCHIP and $10 million for NARIP. The House-reported Commerce, Justice, Science, and Related Agencies Appropriations bill ( H.R. 3055 ; H.Rept. 116-101 ) would provide $80 million for these grant programs under the "NICS Initiative," of which $27.5 million would be set aside for purposes authorized under NIAA, as amended by the Fix NICS Act (or NARIP). 116th Congress and NICS Operations-Related Legislation This final section of the report briefly summarizes NICS-related legislative action to date in the 116 th Congress. It then provides a summary and some analysis of three bills that have passed the House and await Senate action. In the 116 th Congress, the House has passed three bills that would expand federal firearms-related background check requirements. On January 8, 2019, Representative Mike Thompson introduced the Bipartisan Background Checks Bill of 2019 ( H.R. 8 ), a bill that would require a background check for most private-party, intrastate firearms sale, or "universal" background checks. On February 6, 2019, the House Committee on the Judiciary held a hearing on "Preventing Gun Violence in America." On February 8, 2019, Representative James Clyburn introduced the Enhanced Background Checks Act of 2019 ( H.R. 1112 ), a bill to lengthen the number of days a firearms transfer could be delayed pending a final firearms eligibility determination. On February 13, 2019, the House Committee on the Judiciary amended and ordered reported both bills: H.R. 8 ( H.Rept. 116-11 ) and H.R. 1112 ( H.Rept. 116-12 ). On February 27 and 28, 2019, respectively, the House amended and passed H.R. 8 and H.R. 1112 . On March 7, 2019, Representative Karen Bass introduced the Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ). On March 27, 2019, the House Committee on the Judiciary amended and reported H.R. 1585 . This bill includes provisions that would expand existing firearms transfer/receipt and possession prohibitions to include dating partners with histories of domestic violence and persons convicted of stalking-related misdemeanor offenses. The House passed H.R. 1585 on April 4, 2019. Also, of note, on March 13, 2019, the House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies held a hearing on "Gun Violence Prevention and Enforcement." On March 18, 2019, the Federal Bureau of Investigation (FBI) released its FY2020 congressional budget request that includes a $4.2 million increase for the NICS, which would bring the total program budget to $114.7 million for FY2020. On the same date, the Office of Justice Programs (OJP) released its congressional budget request that includes $75 million for state, local, tribal, and territorial governments to upgrade criminal and mental incompetency records and make those records accessible to NICS for firearms eligibility determination purposes. On June 3, 2019, the House Committee on Appropriations reported an FY2020 Commerce, Justice, Science, and Related Agencies (CJS) Appropriations bill ( H.R. 3055 , H.Rept. 116-101 ). House report language indicates that the bill would fully support the FBI request for increased NICS funding. The bill would also provide $80 million for OJP-administered NICS improvement grants under NCHIP and NARIP. On September 26, 2019, Senate Committee on Appropriations reported an FY2020 CJS Appropriations bill ( S. 2584 ; S.Rept. 116-127 ). Senate report language indicates that the bill $131 million to increase NICS capacity and efficacy. This amount is $16.3 million above the Trump Administration's FY2020 request. The bill would also provide $78.3 million for OJP-administered NICS improvement grants under NCHIP and NARIP, of which $25 is for the latter program. In addition, on March 26, 2019, the Senate Committee on the Judiciary held a hearing on "Red Flag Laws: Examining Guidelines for State Action." Seventeen states and the District of Columbia have passed "Red Flag" laws. These laws essentially allow concerned persons, including family members in some cases, to petition a court to file an extreme risk protection order against an individual that would allow for the suspension of that individual's firearms eligibility under certain circumstances. These state laws vary considerably from state to state. Related proposals in the 116 th Congress would make subjects of such protective orders ineligible to receive or possess firearms under federal law in any state or would establish grant programs to encourage states to adopt such laws. On September 10, 2019, the House Committee on the Judiciary ordered reported such a bill, the Extreme Risk Protection Order Act ( H.R. 1236 ). In addition, this Committee also ordered reported the Disarm Hate Act ( H.R. 2708 ), which make persons convicted of a misdemeanor hate crime ineligible to receive or possess a firearm or ammunition. The Bipartisan Background Checks Act of 2019 (H.R. 8) The Bipartisan Background Checks Act of 2019 ( H.R. 8 ), a "universal" background check bill, would expand federal firearms background checks and, hence, recordkeeping requirements under the Gun Control Act of 1968 (GCA; 18 U.S.C. §921 et seq.) to include firearms transfers made in the same state (intrastate) between unlicensed persons. H.R. 8 would essentially prohibit unlicensed persons from transferring a firearm to any other unlicensed person, unless a federally licensed firearms dealer, or FFL, takes possession of such firearm and facilitates such a transaction by running a background check on the unlicensed prospective transferee (buyer). H.R. 8 includes exceptions for transfers between immediate family members; U.S. military, law enforcement members, or armed private security professionals in the course of official duties; temporary transfers under circumstances involving an imminent threat of bodily harm or death; and legitimate activities involving target shooting, hunting, trapping, or fishing. H.R. 8 would prohibit any implementing regulations that would (1) require FFLs to facilitate private firearms transactions; (2) require unlicensed sellers or buyers to maintain any records with regard to FFL-facilitated background checks; or (3) place a cap on the fee FFLs may charge for facilitating a private firearms transfer. H.R. 8 would also prohibit FFLs from transferring possession of, or title to, any firearm to any unlicensed person, unless the FFL provides notice of the proposed private firearm transfer prohibition under this bill. Further, H.R. 8 would extend a provision of current law that prohibits the DOJ from charging a fee for a NICS background check. Under H.R. 8 , facilitating FFLs would be required to treat firearms to be transferred on behalf of any unlicensed persons as if they were part of their business inventory. Thus, they would be required to comply with the GCA recordkeeping and background check requirements. As part of this process, FFLs would enter the firearm(s) to be exchanged into their bound log of firearms acquisitions and dispositions. The FFLs and unlicensed prospective transferees would then complete and sign a firearms transaction forms (ATF Form 4473) under penalty of law that everything entered onto that form was truthful. FFLs would then initiate a background check on the intending transferee through NICS. And either the FBI NICS Section or a state or local authority—point of contact (POC)—would conduct a background check to determine an intending transferee's firearms eligibility. Such a requirement, if enacted, would close off what some have long characterized as the "Gun Show loophole." For the past two decades, many gun control advocates have viewed the legal circumstances that allow individuals to transfer firearms intrastate among themselves without being subject to the licensing, recordkeeping, and background check requirements of the GCA as a "loophole" in the law, particularly within the context of these intrastate, private transactions at gun shows and other public venues or through the internet. Gun control advocates also maintain that expanding background checks to cover intrastate, private-party firearms sales would help stem gun trafficking; that is, the illegal diversion of firearms from legal channels of commerce to the black market, where federal, state, local, tribal, and territorial laws could be evaded. They maintain that prohibited persons or their friends or acquaintances could easily buy a firearm at a gun show, from an online seller, or in a person-to-person "private" sale. They also point to studies that suggest that there is moderate evidence that expanded background checks might reduce firearms-related homicides and suicides. Gun control advocates underscore that 20 states and the District of Columbia (DC) currently have laws that require background checks for certain types of firearms transfers not currently covered by federal law. Although these laws vary considerably from state to state, 11 states and DC require background checks for nearly all firearms transfers. Gun rights advocates contend that intrastate, private transfers are regulated already under federal law, in that it is a felony to transfer a firearm or ammunition knowingly to an underage or prohibited person. They contend further that most criminals would not submit to a background check. They ask, "Why would anyone submit to a background check unless they believed they were not prohibited and would pass?" Moreover, they argue that making private-party, intrastate transfers subject to the recordkeeping and background check provisions of the GCA could potentially criminalize firearms transfers under circumstances that could be characterized as legitimate and lawful. For example, it has been argued that H.R. 8 might prohibit a person from sharing a firearm with another person while target shooting on one's own property. Although H.R. 8 would provide exceptions for "temporary transfers" for target shooting and other related activities, some gun rights advocates argue that such exceptions are too narrow. For example, they argue further that H.R. 8 would prohibit a person from loaning a neighbor a firearm for a hunting trip with a background check being required for both the loan to the neighbor and the return of the firearm to its lawful owner. Perhaps more fundamentally, H.R. 8 would prohibit a person from loaning a firearm to another person—who may be facing some threat of death or serious bodily injury—for self-defense purposes, unless that threat were "imminent." Gun rights advocates might also see such a measure as a significant step towards a national—albeit decentralized—registry of firearms and firearms owners, since its practical implementation would likely necessitate recordkeeping on such transfers. Such advocates cite an Obama Administration, Department of Justice official who observed that "universal background checks" are unenforceable without a comprehensive registry of firearms. Legislation to expand federal recordkeeping and background check requirements to cover private, intrastate firearms transfers saw action in the 106 th and 108 th Congresses following the April 20, 1999, Columbine, CO, high school mass shooting; in the 113 th Congress following the December 14, 2012, Newtown, CT, elementary school mass shooting; and in the 114 th Congress following the December 2, 2015, San Bernardino, CA, social services center all-staff meeting and June 12, 2016, Orlando, FL, Pulse night club mass shootings. Over time, related legislative proposals have varied in the scope and type of intrastate, private party (nondealer) firearms exchanges between federally unlicensed persons that would fall under their respective background check provisions. Since the 113 th Congress, such proposals fall under two basic types that, respectively, have been labeled as either "Universal" or "Comprehensive" background check bills. "Comprehensive" background checks would cover transfers at gun shows and similar public venues (e.g., flea markets and public auctions) and firearms that are advertised via some public fora, including newspaper advertisements and the Internet. "Universal" background checks would cover private transfers under a much wider set of circumstances (sales, trades, barters, rentals, or loans), with more limited exceptions. In the Senate, from the 113 th Congress forward, the principal sponsors of "universal" background check bills have been Senators Charles Schumer, Christopher Murphy, and Richard Blumenthal. The principal sponsors of "comprehensive" background check amendments have been Senators Joe Manchin and Pat Toomey. "Universal" background check bills were introduced in the House in the 113 th and 114 th Congresses. While Representatives Peter King and Mike Thompson introduced proposals that were similar to Manchin-Toomey "comprehensive" background check bills in the past three Congresses, they have sponsored and supported a "universal" background check proposal ( H.R. 8 ) in the 116 th Congress. Enhanced Background Checks Act of 2019 (H.R. 1112) The House-passed Enhanced Background Checks Act of 2019 ( H.R. 1112 ) would revise the GCA background check provision to lengthen the delayed sale period, which is three business days under current law. Under H.R. 1112 , for background checks that do not result in a "proceed with transfer" or "transfer denied," the FBI NICS Section and POC state officials would have 10 business days to place a hold on a firearms-related transaction. At the end of 10 business days, the prospective transferee could petition the Attorney General for a final firearms eligibility determination. If the FFL does not receive a final determination within 10 days of the date of the petition, he or she could proceed with the transfer. The timeliness and accuracy of FBI-administered firearms background checks through NICS—particularly with regard to "delayed proceeds"—became a matter of controversy following the June 17, 2015, Charleston, SC, mass murder at the Emanuel African Methodist Episcopal Church. The assailant had acquired a handgun from an FFL in the Columbia, SC, area. According to press accounts, the NICS check on the assailant was initiated on April 11, 2015 (a Saturday). The FBI found an arrest record for him, but the arrest record was ambiguous with regard to the arrest's final disposition and the assailant's firearms receipt and possession eligibility. Therefore, the NICS response to the FFL was to delay the transfer for three business days as required under federal law. At his discretion, the FFL made the transfer on April 16, 2015 (a Thursday) as allowed under federal law. According to FBI, the NICS check would have remained active in the NICS examiner's queue for 30 days (until May 11, 2015), and would have remained in an "active status" in the NICS system for 88 days (until July 8, 2015). According to the assailant's arrest record, he had been processed for arrest by the Lexington County, SC, Sheriff's Department, so the FBI contacted the Lexington County court, sheriff's department, and prosecutor's office. The Lexington County Sheriff's Department responded that it did not have a record on the alleged assailant and advised the NICS examiner to contact the City of Columbia, SC, Police Department. However, the NICS examiner contacted the West Columbia, SC, Police Department, because it was listed on the NICS contact sheet for Lexington County. In turn, the West Columbia Police Department responded that it did not have a record on the alleged assailant either. The NICS examiner reportedly focused on Lexington County and missed the fact that the City of Columbia, SC, Police Department was listed as the contact for Richland County, the county in which most of the City of Columbia, SC, is located. Consequently, the NICS examiner did not contact the Columbia, SC, Police Department, the agency that actually held the arrest record for the assailant. If the FBI had ascertained during the 88 days that this person was prohibited, the NICS examiner would have likely contacted the FFL to verify whether a firearms transfer had been made after the three-business-day delay, and then would have notified the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and a firearms retrieval action would have possibly been taken by that agency. In this case, the FBI did not ascertain that the assailant was possibly a prohibited person until after the June 17, 2015, mass shooting. Some gun control advocates have characterized these circumstances as the "Charleston loophole." In addition to the "Charleston loophole," gun control advocates sometimes refer to "delayed proceeds" that could result in a possibly prohibited person acquiring a firearm after three business days have expired as "default proceeds." They argue that extending the delayed proceed period would reduce the chance that an otherwise prohibited person might inadvertently be transferred a firearm, a circumstance that would likely necessitate an ATF firearms retrieval action had more time been allotted to complete the background check. According to data acquired by a gun control advocacy group, about 3.59% of FBI-administered background checks in 2017 were unresolved after a delayed proceed response and the three-business-day window had passed. To this advocacy group, this suggested that a relatively small number of people (310,232) would be affected, and any inconvenience to them would be outweighed by increasing the probability that a prohibited person might be prevented from acquiring a firearm. According to the FBI, it referred 6,004 "delayed denial" cases to the ATF in 2017 that could have possibly resulted in a finding of ineligibility and subsequent firearms retrieval action. In addition, the FBI reported that 4,864 of those cases involved individuals who were possibly prohibited and had probably acquired a firearm. Gun rights advocates would counter that a large percentage (98.1%) of background checks that resulted in a delayed proceed response involved persons who were not actually ineligible, prompting them to refer to such default proceed responses as "default infringements." They maintain that the "delayed proceeds" should be viewed as an indicator of understaffing and incomplete recordkeeping on prohibited persons. Gun rights advocates underscore further that if the overall timeliness and accuracy of FBI background checks were improved, the process would be less likely to inconvenience an otherwise eligible person and, at the same time, less likely to allow a firearm to be transferred to a prohibited person. According to the GAO, ATF processed 3,933 delayed denials in FY2017. Of those denials, 38 cases were referred to U.S. Attorney's Offices for prosecution. Nine of those cases were federally prosecuted. Violence Against Women Reauthorization Act of 2019 (H.R. 1585) The House-passed Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ) includes several provisions that seek to reduce firearms-related intimate partner violence (homicides and injury) by amending federal law to prohibit persons convicted of misdemeanor stalking crimes from receiving or possessing a firearm or ammunition. This bill would also revise provisions related to domestic violence protection orders and a definition of "intimate partner" under current law. The bill also includes other provisions related to leveraging state, local, tribal, and territorial resources to increase federal investigations and prosecutions of firearms-related eligibility offenses related to domestic violence and stalking. As discussed earlier, there are nine categories of persons prohibited under current law (18 U.S.C. §922(g)) from receiving or possessing firearms or ammunition (e.g., convicted felons, fugitives from justice, and unlawfully present aliens). Under 18 U.S.C. §922(n), a tenth category of prohibited persons—those under felony indictment—are prohibited from receiving, but not possessing firearms. In addition, under 18 U.S.C. §922(d), it is unlawful for any person to transfer or otherwise dispose of a firearm or ammunition to any person, if the transferor has reasonable cause to believe the transferee would be prohibited under one of those 10 categories. Two of the categories speak directly to domestic violence: persons under court-order restraints related to harassing, stalking, or threatening an intimate partner or child of such intimate partner (18 U.S.C. §§922(d)(8) and (g)(8)); and persons convicted of a misdemeanor crime of domestic violence (MCDV) (18 U.S.C. §§922(d)(9) and (g)(9)). Qualifying Domestic Violence Protection Order (DVPO) According to ATF, a qualifying DVPO order includes the following elements. The defendant/respondent must receive actual notice and opportunity to participate in a hearing before a judge, magistrate, or other judicial official. After such hearing, a DVPO may be issued by a criminal or civil court, such as a divorce court, family court, magistrate, or general jurisdiction court. The plaintiff/petitioner is an "intimate partner" of the defendant/respondent (subject). An intimate partner includes: 1. a spouse or former spouse of the subject; a person who cohabitates or cohabitated with the subject, who resides or resided in a sexual/romantic relationship with the subject, or 2. a person with whom the subject has or had a child in common (regardless of whether they ever married or cohabitated). A qualifying court order must also restrain the subject from harassing, stalking, or threatening an intimate partner or child of that intimate partner, or engaging in conduct that would place either of them in reasonable fear of bodily injury. There must also be a finding that the subject is a credible threat to the physical safety of the intimate partner or child, or explicitly prohibit the use of physical force. Qualifying Misdemeanor Conviction of Domestic Violence (MCDV) According to ATF, a qualifying misdemeanor conviction of domestic violence (MCDV) must include the following elements. Such offense is a misdemeanor crime under federal, state, or tribal law and involves the use or attempted use of physical force, or the threatened use of a deadly weapon. At the time of the offense, the offender must have been: 1. A current or former spouse, parent, or guardian of the victim; 2. A person with who the victim shared a child in common; 3. A person who was cohabitating with or had cohabitated with the victim as a spouse, parent, or guardian; or 4. A person who was or had been similarly situated to a spouse, parent, or guardian of the victim. "Intimate Partner" Definition Under current law, the term "intimate partner" means, with respect to a person, the spouse of the person, a former spouse of the person, an individual who is a parent of a child of the person, and an individual who cohabitates or has cohabitated with the person (18 U.S.C. §921(a)(32)). H.R. 1585 would expand the "intimate partner" definition to include a dating partner or former dating partner (as defined in section 2266 [of Title 18, United States Code]); and any other person similarly situated to a spouse who is protected by the domestic or family violence laws of the State or tribal jurisdiction in which the injury occurred or where the victim resides. Under 18 U.S.C. §2266(a)(10), the term "dating partner" refers to a person who is or has been in a social relationship of a romantic or intimate nature with the abuser; and the existence of such a relationship is based on a consideration of (1) the length of the relationship; (2) the type of relationship; and (3) the frequency of interaction between the persons involved in the relationship. "Misdemeanor Crime of Stalking" H.R. 1585 would make any person convicted of a "misdemeanor crime of stalking" a tenth category of persons prohibited from receiving and possessing a firearm under 18 U.S.C. §922(g). The bill would define such a crime as any misdemeanor stalking offense under federal, state, tribal, or municipal law; and one that in a course of harassment, intimidation, or surveillance of another person, places that person in reasonable fear of material harm to the health or safety of her- or himself, an immediate family member of that person, a household member of that person, or a spouse or intimate partner of that person; or that causes, attempts to cause, or would reasonably be expected to cause emotional distress to any of those persons. The proposed definition is subject to certain mitigating factors. A person would not be considered to have been convicted of a misdemeanor crime of stalking unless (1) the person was represented by counsel in the case, or (2) they knowingly and intelligently waived the right to counsel in the case. In the case of a prosecution for a misdemeanor crime of stalking for which a person was entitled to a jury trial, a person would not be considered convicted in the jurisdiction in which the case was tried, unless (1) the case was tried by a jury; or (2) the person knowingly and intelligently waived the right to have the case tried by a jury, by guilty plea, or otherwise. "Protection Orders" or "Court-Order Restraints" H.R. 1585 would also expand the scope of "protection orders" or "court-order restraints" under 18 U.S.C. §§922(d)(8) and (g)(8). Under current law these provisions prohibit any person from firearms receipt, possession, or transfer, who is subject to a court order that: (A) was issued after a hearing of which such person received actual notice, and at which such person had an opportunity to participate; (B) restrains such person from harassing, stalking, or threatening an intimate partner of such person or child of such intimate partner or person, or engaging in other conduct that would place an intimate partner in reasonable fear of bodily injury to the partner or child; and (C) includes a finding that such person represents a credible threat to the physical safety of such intimate partner or child; or by its terms explicitly prohibits the use, attempted use, or threatened use of physical force against such intimate partner or child that would reasonably be expected to cause bodily injury. H.R. 1585 would substantively amend the domestic violence protection order prohibition (18 U.S.C. §922(g)(8), and §922(d)(8), by reference) to specifically include restraining orders under state, tribal, or territorial law that are issued after an "ex parte" hearing, and to expand it to include restraining orders related to "witness intimidation." The legal term "ex parte" ("for one party") refers generally to court motions, hearings, or orders granted on the request of and for the benefit of one party only without the respondent/defendant being present. H.R. 1585 would add the following at the end of 18 U.S.C. §922(g)(8)(A): in the case of an ex parte order, relative to which notice and opportunity to be heard are provided—(I) within the time required by State, tribal, or territorial law; and (II) in any event within a reasonable time after the order is issued, sufficient to protect the due process rights of the person. Notwithstanding the reference to "due process" in the amending language, this language could potentially generate considerable debate about the balance between due process and public safety. In addition, at the end of clause 18 U.S.C. §922(g)(8)(B), it would add, "intimidating or dissuading a witness from testifying in court," which may appear less controversial, but critics might argue that such language has little to do with domestic violence. As discussed in the body of this report, Congress has passed legislation to encourage states to make DVPO and MCDV records accessible promptly to NICS. Progress has been made, but many state, tribal, and territorial authorities still find such reporting challenging, if not daunting. Gun control advocates, meanwhile, have argued that the definition of "intimate partner" ought to be expanded under the DVPO and MCDV definitions of "intimate partner" to include current and former dating partners, as well as persons convicted of misdemeanor stalking offenses. Expanding the grounds for firearms transfer or receipt and possession ineligibility is one avenue along which intimate partner gun violence could be addressed, perhaps effectively, but such an expansion could also strain ongoing federal-state efforts to ensure that prohibiting records under current law are accurate and reported to NICS in a timely manner in order to be accessible electronically during background checks. Appendix A. FBI and POC Firearms-Related Background Checks Pursuant to the Brady Act FBI NICS Section Checks and Denials, November 30, 1998, Through 2018 As Table A-1 shows, from November 30, 1998, through 2018, the FBI CJIS Division's NICS Section conducted 128.7 million background checks, resulting in nearly 1.6 million denials, for an overall initial denial rate of 1.2%. About 2.7% of those denials were appealed and eventually overturned. Table A-2 shows FBI NICS Section denials by prohibiting category. Over the 20-year and one month period (November 30, 1998, through 2018) that NICS has been in operation, over half of FBI firearms transfer denials were based on a prior felony conviction. For 2018, by comparison, a smaller percentage (45.1%) were based on a felony conviction. This percentage decrease can be attributed to at least two factors. One, over time, persons with past felony convictions could be less likely to risk a background check through NICS. Two, since the establishment of NICS, state and local government submissions of prohibiting records—particularly those related to mental incompentency—have increased. As shown in Table A-2 , such records accounted for 2.5% of denials over the 20-year period, but accounted for 6.1% of denials for 2018. As discussed below, Congress prioritized such reporting as part of the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ), in the aftermath of the April 20, 2007, VA Tech mass shooting. Ten years later, Congress passed the Fix NICS Act of 2017 in an effort to strengthen and streamline provisions previously enacted under P.L. 110-180 , and authorize future appropriations for grant and other programs designed to assist state, tribes, and territories with improving the quality of prohibiting records and increasing their accessibility to NICS ( P.L. 115-141 , Div. S, Title VI). State and Local POC Background Checks and Denials, November 30, 1998, Through 2015 As shown in the Table A-3 below, the Bureau of Justice Statistics (BJS) has reported that state and local POC agencies conducted nearly 81.7 million background checks from November 30, 1998, through 2015 for firearms transfers and permits. These checks resulted in nearly 1.46 million denials, for an overall denial rate of 1.8%, according to BJS. Over the same time period, the FBI NICS Section processed 102.4 background checks, resulting in 1.27 million denials of firearms transfers, for an overall denial rate of 1.2%. BJS also reports on the reasons (prohibitors) for some, but not all, state and local POC denials. For example, as shown in Table A-3 , while state and local POCs made 119,368 denials for firearms transfers and permits in 2015, BJS reported the reason for 84,199 (70.5%) of such denials. Similarly, state and local POCs made 102,468 denials in 2014, but BJS reported the reason for 57,001 (55.6%) of them. In addition, over the years, BJS sometimes reported for both state and local POC agencies, and in other years only for state POC agencies. Moreover, BJS's methodology for making estimates about state and local POC background checks and denials over the years has been revised. Notwithstanding these data limitations, Table A-4 shows the BJS-reported reasons for some, but not all denials made by state and local POCs for 2014 and 2015. Looking at the data in Table A-4 , it is notable that there either appears to be no denials based upon dishonorable discharges or renounced U.S. citizenship, or such denials were not estimated by BJS based on data submitted by state and local POC agencies. In addition, the percentages of felony conviction denials for either year, 2014 or 2015, are roughly half of the percentages of federal denials made by the FBI NICS Section. As a percentage of the total, it could be that these percentages are based on incomplete data and, therefore, are not particularly comparable with the percentages for federal denials, which are based on complete data. Appendix B. NICS-Queried Computer Systems and Files As part of a NICS check, the transferee's information is crosschecked against three computerized databases/systems to determine firearms transfer and possession eligibility. Those systems are the Interstate Identification Index (III), the National Crime Information Center (NCIC), and the NICS Indices. If prospective transferees indicate that they are non-U.S. citizens, then their information is also checked against the immigration and naturalization databases maintained by the Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE). Interstate Identification Index (III) The III, or "Triple I," is a computerized criminal history index pointer system that the FBI maintains so that records on persons arrested and convicted of felonies and serious misdemeanors at either the federal or state level can be shared nationally. This criminal history records exchange system includes arrest and disposition information on individuals charged with felonies and certain misdemeanors. Felony crimes generally include any offense that is punishable by a term of imprisonment exceeding one year. Under state law, there are misdemeanor crimes that are punishable by a term of imprisonment exceeding two years, which are also shared nationally through the III. By virtue of this record sharing, other information accessible through III also includes records on persons under felony indictment, fugitives from justice, persons found not guilty by reason of insanity or adjudicated incompetent to stand trial, persons convicted of misdemeanor crimes of domestic violence, and persons subject to domestic violence protection orders. All records in III are supported by fingerprint records which are exchanged through the Interstate Automated Fingerprint Identification System (IAFIS), though NICS checks do not entail fingerprint-based background checks under current law. National Crime Information Center (NCIC) The NCIC is a database of documented criminal justice information that is made available to law enforcement and authorized agencies, with the goal of assisting law enforcement in apprehending fugitives, finding missing persons, locating stolen property, and further protecting law enforcement personnel and the public. NCIC includes 21 files, 10 of which are queried by NICS. Those 10 NCIC files include Wanted Persons; Protection Orders; Immigration Violators; Protective Interest; Foreign Fugitive; Supervised Release; National Sex Offender Registry; Gang File; Known/Appropriately Suspected Terrorist (KST); and Violent Person. NICS Indices The NICS Indices contain records of persons prohibited from receiving or possessing firearms under federal, state, local, tribal, or territorial law that are not shared nationally in either the III or NCIC. Those records include felony arrest and disposition records (not included in the III); felony indictments; fugitives from justice; addicts and other unlawful users of controlled substances; involuntary commitments to mental institutions and other related adjudications; illegal or unlawful aliens; dishonorable discharges; renunciations of U.S. citizenship; domestic violence protection orders; domestic violence misdemeanor convictions; previous NICS denials under state laws (by POCs); and previous NICS denials made federally (by NICS Section). Appendix C. ATF-Certified Permanent Brady Permits Appendix D. ATF-Certified State Relief from Disabilities Statutes

The Federal Bureau of Investigation (FBI) administers a computer system of systems that is used to query federal, state, local, tribal, and territorial criminal history record information (CHRI) and other records to determine an individual's firearms transfer/receipt and possession eligibility. This FBI-administered system is the National Instant Criminal Background Check System (NICS). NICS, or parallel state systems, must be checked and the pending transfer approved by the FBI or state point of contact before a federally licensed gun dealer may transfer a firearm to any customer who is not also a federally licensed gun dealer. Current federal law does not require background checks for intrastate (same state), private-party firearms transactions between nondealers, though such checks are required under several state laws. In the 116 th Congress, the House of Representatives passed three bills that would expand federal firearms background check requirements and firearms transfer/receipt and possession ineligibility criteria related to domestic violence. The Bipartisan Background Checks Act of 2019 ( H.R. 8 ), a "universal" background check bill, would make nearly all intrastate, private-party firearms transactions subject to the recordkeeping and NICS background check requirements of the Gun Control Act of 1968 (GCA). For the past two decades, many gun control advocates have viewed the legal circumstances that allow individuals to transfer firearms intrastate among themselves without being subject to the licensing, recordkeeping, and background check requirements of the GCA as a "loophole" in the law, particularly within the context of gun shows. Gun rights supporters often oppose such measures, underscoring that it is already unlawful to knowingly transfer a firearm or ammunition to a prohibited person. In addition, some observers object to these circumstances being characterized as a loophole, in that the effects of the underlying provisions of current law are not unintended or inadvertent. The Enhanced Background Checks Act of 2019 ( H.R. 1112 ) would lengthen the amount of time firearms transactions could be delayed pending a completed NICS background check from three business days under current law to several weeks. The timeliness and accuracy of FBI-administered firearms background checks through NICS—particularly with regard to "delayed proceeds"—became a matter of controversy following the June 17, 2015, Charleston, SC, mass shooting at the Emanuel African Methodist Episcopal Church. The assailant in this incident had acquired a pistol following a three-business-day-delayed sale under current law and an unresolved background check. While it has never been definitely determined whether the assailant's arrest record would have prohibited the firearms transfer, this incident prompted gun control advocates to label the three-business-day delayed transfer provision of current law as the "Charleston loophole." Gun rights supporters counter that firearms background checks should be made more accurate and timely, so that otherwise eligible customers are not wrongly denied a firearms transfer, and ineligible persons are not allowed to acquire a firearm. The Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ) would expand federal firearms ineligibility provisions related to domestic violence to include former dating partners under court-ordered restraints or protective orders and persons convicted of misdemeanor stalking offenses. Gun control advocates see this proposal as closing off the "boyfriend loophole." Gun rights supporters are wary about certain provisions of this proposal that would allow a court to issue a restraining order ex parte ; that is, without the respondent/defendant having the opportunity for a hearing before a judge or magistrate. This report provides an overview of federal firearms background check procedures, analysis of recent legislative action, discussion about possible issues for Congress, and related materials.

GAO_GAO-20-153

Background According to FCC, caller ID services became commonplace due to technology developed in the 1980s, and caller ID information transmitted with the call could generally be trusted by the call recipient. However, FCC found as voice service providers migrated to Internet Protocol (IP) networks, these technologies lessened the overall accuracy and reliability of the information presented to the call recipient. Caller ID allows the recipient of an incoming call to determine the telephone number of the caller and, in some cases, the name. This information helps the recipient make informed decisions about which calls to accept or ignore. While the number and name displayed on the caller ID may be associated with the caller, a caller can also deliberately falsify or “spoof” the information transmitted to the caller ID display to disguise the source of the call. Under the current telephone system, this information, true or false, is conveyed to the call recipient unless the caller requests that such information not be conveyed. Caller ID spoofing is widespread. Many instances of spoofing are legal. For example, spoofing is legally used by professionals such as doctors who want to use their cell phones to return calls to patients but choose to transmit their office number instead. Spoofing also often accompanies robocalls—an automated telephone call which delivers a recorded message. Certain types of robocalls are illegal, such as robocalls for sales pitches unless companies have consumers’ express written permission to call. In addition, telemarketers may not call home or mobile numbers that consumers have registered in the National Do Not Call Registry, which was established through legislation and is maintained by FTC—and they must transmit their telephone number and, if possible, their name, to the call recipient’s caller ID. According to FCC, advancements in technology have made it inexpensive and easy to make robocalls. As telecommunications systems have transitioned from traditional wireline services, to IP networks, the cost of making phone calls has dramatically decreased. IP-based voice services use existing internet connections to send phone calls, which may be cheaper than long distance phone charges associated with traditional phone service. Autodialers can be programmed to dial a long list of phone numbers in order to deliver millions of calls in a short period of time. These dialing systems, coupled with IP-based voice services, such as Voice over Internet Protocol (VoIP), enable telemarketers and scammers to make high volumes of calls from anywhere in the world. IP-based voice services have also made it inexpensive and easy to spoof caller IDs. According to an industry stakeholder, historically, the router systems used to spoof calls were physical devices located on site, which could be prohibitively expensive. However, software that is available for free can now be downloaded to enable a computer to function as a router. According to stakeholders, telemarketers and scammers can, with minimal cost, configure a router to display either a single spoofed number or a constantly changing set of numbers, making it appear as though calls originated in the United States even if they did not. (See fig. 1.) FCC, FTC, and DOJ each enforce different rules or laws related to caller ID spoofing. FCC enforces rules prohibiting anyone from causing the transmission of misleading or inaccurate caller ID information with the intent to defraud, cause harm, or wrongfully obtain anything of value. FCC also enforces rules requiring telemarketers to transmit caller ID information. FTC protects consumers against unfair or deceptive business acts or practices. FTC, similar to FCC, enforces rules requiring telemarketers to transmit their telephone number, and when available, the name of the telemarketer to a consumer’s caller ID service. DOJ enforces federal fraud statutes under which fines or imprisonment can be imposed against anyone who uses interstate telecommunications as part of a fraud scheme. DOJ can also take civil enforcement actions on FTC’s behalf. FCC and FTC each manage consumer complaint databases where consumers can file complaints about unwanted calls, robocalls, and violations of the Do Not Call Registry. In addition to government efforts, the telecommunications industry, including voice service providers and third party companies, have taken steps to counteract illegal spoofing. For example, some of these companies have developed or deployed applications (i.e., software programs, often referred to as apps) to defend against robocalls and other unwanted calls. This includes call blocking devices for landline telephones and various mobile applications that can label and block robocalls and other unwanted calls based on call patterns, consumer complaints or other means. While some carriers provide these services free, others may charge a fee. In addition, some carriers also work with analytics providers to analyze traffic on their networks. Beginning in 2017, FCC authorized voice service providers to block certain categories of unwanted calls before they reach consumers’ phones. Recently, FCC clarified that service providers can also, as a default, block calls identified as likely unwanted based on the provider’s reasonable analysis of call data unless consumers opt out of this service. Caller ID Spoofing Is Used in a Variety of Financial Fraud and Other Schemes, and Consumer Complaints Suggest a Substantial Increase in Its Use Caller ID Spoofing Schemes Seek to Obtain Money or Valuable Financial and Personal Information, Generate Telemarketing Leads, or Harass Scammers use caller ID spoofing to facilitate a variety of financial fraud and other schemes, often in combination with robocalling. Based on our analysis of FCC, FTC, and DOJ enforcement cases and alerts from federal and state government agencies, as well as interviews with stakeholders, we identified three types of caller ID spoofing schemes. To Obtain Money or Information: Scammers have used caller ID spoofing to trick consumers into providing their financial or personal information or sending money such as via a debit or gift card. These scammers may spoof a name and phone number that looks familiar and trustworthy, such as that of a government agency, a company you do business with, or local number. Scams include telling call recipients they may be arrested or they owe money. For example, spoofed robocalls have been used as part of a wide-reaching scam in which callers spoofed IRS phone numbers and impersonated IRS staff to trick people into sending the scammers money for supposed unpaid taxes. IRS reported that from October 2013 through March 2019, the agency was contacted more than 2.4 million times by taxpayers who reported such calls, and more than 15,453 taxpayers reported losing about $75.1 million. (See fig. 2.) To Generate Telemarketing Leads: Unscrupulous telemarketers have used spoofing as part of an attempt to sell goods or services. In this scheme, consumers may receive a pre-recorded robocall with a sales pitch and be instructed to “press 1” to indicate interest, at which point the call recipient is transferred to a live operator. In one such scheme, more than 96-million spoofed robocalls were made over a 3- month period. These calls included pre-recorded messages falsely claiming to be from Hilton and other well-known travel companies; once consumers were transferred, live operators attempted to sell vacations not affiliated with the brands presented during the prerecorded message. To Harass: People have used spoofing to harass others. In some of these cases, people have used spoofing to cause another person’s caller ID to display a familiar or trusted phone number. In one case, an individual apparently placed 31 spoofed calls as part of a personal campaign to harass and stalk another person. These spoofed numbers appeared to be from the victim’s child’s school, among others. Spoofing is also one of several techniques used to place false calls to emergency response centers to elicit a police response to an address where no emergency exists. Callers have used spoofing to make it appear as if their call originated at or near the reported address. This practice, known as swatting, has resulted in death. For example, in one swatting case, a man was shot and killed by police who believed he was holding others at the address hostage. Available Data Suggest That Caller ID Spoofing Is a Growing Issue FCC and FTC consumer complaint data both show dramatic increases in recent years in the number of unwanted call complaints that specifically mention the term spoofing. According to our analysis of FCC and FTC complaint data, from 2015 through 2018, complaints to FCC that specifically referred to spoofing more than doubled and those received by FTC increased by more than four times. (See fig. 3). Several industry stakeholders we spoke with noted a growing trend in one particular type of spoofing, neighbor spoofing. Neighbor spoofing occurs when the caller ID is manipulated to display a phone number matching the area code and prefix (the first six digits) of the consumer’s phone number. Consumers may be more inclined to answer these calls because they appear to be local—perhaps from someone they know. Among FCC’s complaints that included both the caller’s and the call recipient’s phone numbers, the percentage that were indicative of 6-digit neighbor spoofing increased from 10 percent in 2015 to 15 percent in 2018; for similar FTC complaints, the percentage increased from 2 percent in 2015 to 16 percent in 2018; and a call blocking provider told us that its percentage of neighbor-spoofed robocalls increased from 2 percent in January 2016 to 23 percent in December 2018. One analytics provider told us there has been a shift recently from spoofing the first six digits to spoofing the first four and five, which the provider believed to be a reflection of scammers adjusting their methods as more people become aware of the original six-digit form of neighbor spoofing. From 2015 to 2018, FCC and FTC data show substantial increases in complaints indicative of four and five digit neighbor spoofing, with FCC complaints nearly doubling and FTC complaints increasing more than 10 times during this time period. FCC and prior GAO work have described several limitations with using complaint data as a means of measuring the extent of unwanted calls. For example, complaints might increase following consumer outreach regarding how to file a complaint or after news media coverage of a particular scam. In addition, not all consumers who experience problems file complaints, and not all complaints are necessarily legitimate or categorized appropriately. Further, a consumer could submit a complaint more than once, or to more than one agency, potentially resulting in duplicate submissions. Finally, while some consumers may use the term “spoof” when describing the complaint, others may not, either because they do not know they have been spoofed or are not familiar with the term. According to our analysis of FCC data, in 2018, 66 percent of all complaints that were indicative of neighbor spoofing did not include the term “spoof” in the complaint description. Nonetheless, FCC, FTC, and DOJ officials told us they use this complaint data to identify specific trends in types of scams that may help the agencies’ enforcement and public education efforts, which we discuss later in this report. Although we could not find industry data that estimated the total number of spoofed calls, available industry data suggest that the volume of unwanted calls and robocalls (of which illegally spoofed calls are a subset) has increased over the past several years. Using call patterns on their own networks or other means, voice service providers, call blocking applications and analytics providers track data on unwanted calls and robocalls. According to one company, these companies may have limited ability to detect or isolate spoofed calls, in part, because scammers may frequently change the numbers they use. In addition, stakeholders told us, because each of these companies analyzes their specific user base and may use different methods to identify and label robocalls and other unwanted calls, the number of unwanted calls each company estimated may be substantially different. For example, while one analytics company estimated 26.3 billion robocalls nationwide in 2018, another company estimated the number at nearly 48 billion. Similarly, one company estimated a 46 percent increase in robocalls from 2017 to 2018, while another estimated a 57 percent increase for the same time period. Despite these differences, all analytics and call blocking companies we interviewed reported that their estimates of the number of unwanted calls and robocalls have increased in recent years. Because there is no comprehensive data source on unwanted calls, robocalls, or spoofed calls, it is not possible to reliably estimate national trends. FCC has taken steps to seek input from industry and other stakeholders on how to better measure the extent of the unwanted call and spoofing problem. In a November 2017 Further Notice of Proposed Rulemaking, FCC sought comment on, among other things, what information should be collected to evaluate the effectiveness of efforts to combat these calls and whether FCC should adopt a reporting obligation for providers. FCC received numerous comments from voice service providers, their associations, and other stakeholders in response to this notice. One commenter expressed concern that a reporting obligation would be burdensome to providers or of little benefit to FCC, and other commenters stated the agency should instead continue to monitor trends in consumer complaints. More recently, in a June 2019 Declaratory Ruling, FCC adopted a recommendation from 2017 to prepare two reports—one in 2020 and a second in 2021—to measure the effectiveness of efforts to combat illegal robocalls. The ruling explicitly delegates authority to FCC staff to collect any and all relevant information and data from voice service providers necessary to complete these reports and states that the report should include authoritative data about the number of illegal robocalls. Agencies Consider Risk of Harm to Public and Generally Follow Key Collaboration Practices in Their Enforcement Efforts, but Face Significant Challenges Agencies Reported Taking Risk-Based Approach to Prioritizing Spoofing- Related Investigations and Enforcement Actions, but Collecting Evidence Can Be Difficult FCC, FTC, and DOJ officials all said that their agencies must prioritize which illegal spoofing activity to investigate and take enforcement action against because they do not have sufficient resources to pursue all such activities. FCC and FTC officials stated that while they review complaint data and other information, it would not be practical to open investigations related to every complaint. According to officials at all three agencies, given their limited resources, the agencies prioritize investigations based on the level of harm being perpetrated and the likelihood of being able to effectively bring an enforcement case. Such prioritization is consistent with standards for internal control in the federal government. Those standards call for agencies to estimate the significance of risks to achieving agency objectives—in this case objectives related to protecting the public from harm—and to use those estimates as a basis for responding to the risks. More specifically: In a 2015 letter to several members of Congress, the Chairman of the FCC stated that the agency is more likely to pursue enforcement action when a problem appears to be pervasive, represents a trend, involves an agency priority, affects many consumers, reflects particularly egregious abuse, or presents a security or safety concern. Focusing specifically on investigations and enforcement action related to caller ID spoofing, FCC officials told us that the agency’s three highest priorities are events that (1) threaten public safety; (2) involve very large numbers of spoofed calls; or (3) involve malicious scams or threats. FTC’s strategic plan for fiscal years 2018 to 2022 calls for the agency to target its enforcement efforts on those areas that cause the greatest amount of consumer harm. In line with this objective, FTC officials told us that the agency decides which consumer complaints to investigate based on the level of harm being perpetrated, as well as the likelihood of being able to effectively bring an enforcement case. DOJ’s Justice Manual states that serious violations of federal law must be prosecuted. DOJ officials told us that for fraud schemes that employ caller ID spoofing, the agency is more likely to charge a violation of one of the fraud statutes, such as mail fraud, wire fraud, computer fraud, or conspiracy, as well as the money laundering and identity theft statutes. Specifically with regard to wire and mail fraud cases, the Justice Manual states that serious consideration should be given to the prosecution of any scheme which in its nature is directed to defrauding a class of persons or the general public with a substantial pattern of conduct. FCC and FTC officials stated that there are significant challenges related to investigating spoofing cases that can affect which investigations they choose to pursue and limit the number of enforcement cases they are able to bring. For example, FTC officials stated that the use of VoIP technology enables fraudsters to easily change both their physical locations and the numbers they spoof, making it harder for FTC and other law enforcement agencies to track them down. An industry stakeholder said that the use of VoIP technology makes it difficult to determine even whether the call originated domestically or from overseas. Moreover, FCC officials stated that when spoofed calls originate wholly from a foreign jurisdiction, a lack of foreign cooperation can make it exceptionally difficult to follow a trail back to either the service provider that originated the call or the person or company making the calls. The officials explained that foreign cooperation may be lacking when the calls come from countries with which the United States does not have strong diplomatic relationships. The officials stated that because of this challenge, they are less likely to bring an enforcement case when calls originate wholly from a foreign jurisdiction, due to the low likelihood of successfully resolving such cases and the heightened use of limited staff resources required by such cases. Regardless of these challenges, FCC and FTC officials stated that their agencies have taken steps to improve their ability to investigate cases based overseas. For example, both agencies cited their outreach to the Indian government and the U.S.-India Business Council as well as their participation in the Unsolicited Communications Enforcement Network, a global network of law enforcement authorities and regulatory agencies that works to combat unsolicited communications. FCC, FTC, and DOJ Identified 62 Spoofing or Caller-ID-Blocking-Related Enforcement Cases Brought since 2006 FCC, FTC, and DOJ officials identified 62 enforcement cases that they said involved spoofing or blocking of caller ID information, though DOJ officials stated that their list of enforcement cases was not comprehensive because DOJ’s enforcement database does not include an indicator for whether spoofing was employed as part of a fraud scheme. (For a description of these 62 cases, see app. II.) As noted below, these 62 cases are not representative of all of the cases the agencies have brought related to illegal robocalling. FCC officials provided us information on six cases—each of which the officials said involved spoofing or a caller’s blocking of their caller ID information—that the agency brought from April 2011 to September 2018. For example, one case involved a company that used spoofed robocalls to target elderly and low-income individuals to generate sales of health insurance coverage. The company’s high numbers of robocalls also disrupted an emergency medical paging service. FCC issued fines in five of these cases, and one pending case includes a proposed fine. FCC officials told us that since January 2004, the agency has initiated approximately 20 additional enforcement cases and has issued approximately 1,000 warnings, all for robocalling or Do-Not-Call violations under the Telephone Consumer Protection Act of 1991. FTC officials provided us information on 31 cases—each of which the officials said involved spoofing—that FTC brought—or that DOJ brought on FTC’s behalf—from April 2006 to June 2019. Examples of cases include several involving numerous calls to numbers on the National Do Not Call Registry and an incident in which a company impersonated government officials and help centers to make a sales pitch with false and misleading claims about an English-language learning course to Spanish-speaking U.S. consumers. Monetary judgments were issued in all but one of these cases. FTC officials told us that as of November 2019 the agency had brought 147 enforcement cases against Do Not Call and robocall violators. FTC officials also stated that FTC obtains injunctive relief in their Do Not Call, robocall, and spoofing cases, including court orders prohibiting the defendants from engaging in similar conduct, and in some cases, banning defendants from any telemarketing activity. Further, they stated the injunctive relief also includes reporting and compliance requirements to help FTC monitor defendants. FTC officials told us that the agency has obtained injunctive relief in all of its completed spoofing cases and that these injunctions provide strong deterrence and help stop illegal spoofing. DOJ officials provided us information on 25 cases—each of which the officials said involved spoofing—that the agency brought from May 2010 to August 2018. Several of these cases involved companies or individuals that used spoofing as part of a scheme to swindle money from people. For example, in one case, defendants used spoofing as part of a scheme to defraud and extort money from victims who were falsely told they had failed to accept and pay for products they had never ordered. Twenty cases had judgments that included prison time; 18 cases had monetary judgements. FCC and FTC have collected far less than has been assessed in fines or monetary judgements, but officials at both agencies stated that the amounts they have collected still serve both punitive and deterrent purposes. Specifically, FCC officials stated that thus far, FCC has collected $25,970 of the approximately $205 million in fines it assessed. This mostly represents full payment of a $25,000 fine FCC issued in January 2017, but FCC has yet to collect any portion of the more recent fines it has issued: a fine of $120 million it issued in May 2018 and a fine of approximately $82 million it issued in September 2018. FCC has referred both of these cases to DOJ for collection action. FCC officials noted that these large fines may not represent the amount that the defendants are able to pay, and that even payment of a fairly small fraction of a large fine could be enough to put a scammer out of business and serve as a substantial deterrent. FTC officials said that FTC has obtained a total of about $363 million in monetary judgments in its 31 spoofing cases. The officials said that many of these judgements were partially suspended based on the defendants’ ability to pay determined by a defendant’s net worth and assets. Further, the officials said if the defendant misrepresents his or her financial position, the entire judgment can become due under a clause that is part of the judgement. The officials said that as of August 14, 2019, FTC had collected about $31 million in its spoofing cases, and that this amount represents all or substantially all of the unsuspended judgments in those cases. Officials with DOJ’s Consumer Protection Branch said that the branch views monetary judgments as one piece of the deterrence equation for caller-ID-spoofing offenses. The officials stated that the low amounts collected suggest that other preventative measures, such as injunctive relief and imprisonment, must be employed to deter continued unlawful activity. FCC, FTC, and Others Have Proposed Various Legal Changes to Strengthen Enforcement against Illegal Spoofing and Robocalling FCC and FTC both favor some changes to law to enhance the effectiveness of their enforcement efforts. Specifically: In May 2019, FTC officials testified that the agency’s enforcement efforts are hindered by a statutory provision that prohibits the agency from taking action against telecommunications carriers, to the extent they are engaged in common carriage activities. FTC further testified that it would like this provision removed so that the agency could take enforcement action against carriers engaged in illegal telemarketing activities. In 2018, an FCC official publicly stated that a longer statute of limitations for enforcement of the Telephone Consumer Protection Act of 1991 would improve the agency’s enforcement efforts against knowing and willful violators of the act. Currently, that act has a 1-year statute of limitations, while the Truth in Caller ID Act of 2009 has a 2-year statute of limitations. FCC officials told us that harmonizing the two acts’ statutes of limitations to 2 years would help FCC’s enforcement efforts since spoofing often occurs with robocalling and the agency often uses the two statutes in tandem. A February 2019 FCC staff report on robocalls notes that FCC’s enforcement efforts can be hindered by the requirement that in many instances FCC must warn a party of apparent robocalling violations and can only proceed with a monetary penalty if the party subsequently commits the same type of violation, a requirement in the Communications Act that applies to the Telephone Consumer Protection Act of 1991. According to the report, this requirement enables a warned offender to incorporate under a new name to evade further detection and begin illegal activity anew. In contrast, the report notes, the Truth in Caller ID Act of 2009 allows FCC to directly issue a proposed monetary penalty without first issuing a warning. Similar to the statutes of limitations just discussed, FCC officials told us that since spoofing often occurs with robocalling and the agency often uses the two statutes in tandem, their enforcement efforts would benefit from the elimination of this statutory requirement. In 2019, bills were introduced in Congress that, if passed, would implement the changes in law that FCC and FTC have recommended and could potentially help address other challenges faced by FCC and FTC. For example, in July 2019, a bill was introduced in the Senate that would remove the provision prohibiting FTC from taking action against common carriers. Also in 2019, two different bills were introduced, one in the House and one in the Senate, that would, among other things, address issues with harmonization of the FCC statute of limitations and eliminate the FCC pre-penalty warning requirement with respect to illegal robocalling. In addition, one of these bills, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), would require DOJ, in consultation with FCC, to assemble an interagency working group to study and report to Congress on how to enhance enforcement against robocalls by examining issues like the types of laws, policies, or constraints that could be inhibiting enforcement of the Truth in Caller ID Act of 2009. The interagency working group would also be tasked with identifying existing and potential international policies and programs that could encourage and improve coordination between countries. We have reported in past work that collaborative mechanisms such as interagency working groups can help the federal government achieve many of the meaningful results it seeks to achieve, and that such mechanisms all benefit from certain key features, which raise issues to consider when implementing these mechanisms. As of November 2019, no federal legislation had been enacted on these issues. Agencies’ Efforts to Collaborate on Enforcement Efforts Generally Align with Key Practices We found that FCC’s and FTC’s efforts to collaborate on spoofing investigations and enforcement actions align with seven key practices we have previously identified to enhance and sustain interagency collaboration. FCC and FTC officials explained that their close collaboration helps ensure that they share relevant information and avoid duplicating efforts. In addition, we found that DOJ’s collaboration with FCC and FTC aligns with five of the seven key practices. Although we did not find evidence that DOJ had taken steps in line with the other two key practices, officials at all three agencies stated that DOJ’s collaborative efforts were appropriate given its broader jurisdiction and wider focus. More specifically, we found that all three agencies have incorporated five key practices. Our prior work has found that one way agencies can incorporate three of these practices — (1) defining and articulating a common outcome, (2) establishing mutually reinforcing or joint strategies, and (3) agreeing on roles and responsibilities—is through a memorandum of understanding. In 2003, FCC and FTC agreed to a memorandum of understanding that calls for the agencies to cooperate and coordinate to implement consistent, comprehensive, efficient, and non-redundant enforcement of federal telemarketing statutes and rules. The memorandum also calls for the agencies to meet quarterly to discuss matters of mutual interest, share consumer complaints, and engage in joint enforcement actions when necessary. Consistent with the memorandum, FTC officials told us that FTC and FCC hold quarterly meetings to discuss how they are targeting robocalls and spoofing investigations and enforcement cases to avoid duplication. FTC and FCC officials stated that in addition, their collaboration with DOJ is enhanced through the participation of all three agencies in a monthly conference call hosted by the National Association of Attorneys General to coordinate efforts to combat illegal robocalls across the government. Although DOJ officials told us that DOJ does not have a memorandum of understanding with FCC or FTC regarding spoofing or robocall-related enforcement, officials we interviewed at all three agencies identified collaborative efforts that DOJ engages in that are consistent with the three key practices cited above. FCC and DOJ officials stated they are developing procedures to share information on a particular enforcement case, and that these procedures could be used on other cases as needed in the future. In addition, officials from all three agencies stated that DOJ’s participation in the monthly conference calls and additional informal outreach as needed was sufficient to ensure effective collaboration. With regard to the fourth and fifth key practices (4) identifying and addressing needs by leveraging resources, and (5) establishing compatible policies, procedures, and other means to operate across agency boundaries, FCC and FTC officials described regularly sharing information from their complaint databases, which is in line with these practices. FTC officials stated they regularly review FCC’s complaint information to help their enforcement efforts. Moreover, FTC has established policies and procedures whereby DOJ and FCC and other law enforcement entities have access to FTC’s complaint database, and FCC and DOJ officials stated that they frequently analyze FTC’s complaint database to inform their investigative decisions. Furthermore, DOJ officials stated that DOJ recently contributed funds to FTC to enhance capabilities to analyze the database. FCC and FTC have also leveraged resources by co-hosting a public event in 2018 on reducing robocalls and spoofing that included discussions of recent policy changes and enforcement actions to stop illegal robocalls. We found that FCC and FTC follow two additional key practices for collaborating on spoofing-related investigations and enforcement actions that DOJ does not: (1) developing mechanisms to monitor, evaluate, and report the results of collaborative efforts, and (2) reinforcing agency accountability for collaborative efforts through agency plans and reports. For example, FCC and FTC collaborated on a robocall report published by FCC in 2019 that discussed both agencies’ enforcement actions related to robocalls and spoofing, and each discussed their collaborative efforts related to robocalls in key agency documents related to accountability and performance. DOJ officials stated that they would be unlikely to have such materials specifically related to spoofing given the agency’s focus on fraud itself rather than spoofing or robocalling, which it views as a means to fraud. DOJ officials stated that DOJ’s general commitment to interagency collaboration is emphasized in its fiscal year 2020 budget submission to Congress and many press releases related to its enforcement cases. We reviewed DOJ’s budget submission and several DOJ press releases and found that they mention collaboration between DOJ and other agencies. FCC and FTC Have Robust Consumer Education Efforts That Follow Key Practices for Consumer Education and Interagency Collaboration FCC and FTC use a number of methods to educate consumers on ways to protect themselves against spoofed and other unwanted calls. According to FCC documentation, the agency has made combatting illegal robocalls and caller ID spoofing its top consumer protection priority and uses consumer education as a means to address this priority. Similarly, according to FTC’s chairman, consumer education is a critical element of FTC’s efforts to fulfill its consumer protection mission. The methods that FCC and FTC use—both independently and collaboratively—to educate consumers on ways to combat caller ID spoofing and unwanted calls include the following. Posting online consumer alerts, videos, blog posts, and other informative materials: Both FTC and FCC post information and warnings about caller ID spoofing scams on their websites. FTC, for example, developed Pass It On, a print- and web-based campaign to educate seniors about various types of scams that target seniors, including spoofing. FCC launched an animated video initiative on how to avoid spoofing scams and also posted a consumer alert about neighbor spoofing scams. The alert explains that scammers use such spoofing to increase the likelihood that consumers pick up the phone and provides tips such as to not answer calls from unknown numbers and to not provide any personal information to such callers. Additionally, FCC and FTC post other information, including tip cards and graphics such as those illustrated in figure 4. Visiting vulnerable communities: FCC has conducted speaking tours, such as tours through rural Appalachia and the Pacific Northwest in 2018 to educate communities about spoofing, and to build partnerships to help improve the effectiveness of future outreach efforts. Similarly, FTC has hosted briefings in underserved communities with law enforcement, consumers, and community advocates to place more attention on consumer protection issues such as spoofing and other types of fraud. We found that FCC’s and FTC’s consumer education efforts related to spoofing and other unwanted calls aligned with nine key practices for consumer education that we identified in our prior work (see table 1). For example, FCC and FTC have developed consistent and clear consumer education messages related to spoofing and unwanted calls: specifically, consumers: should not answer unknown calls; should not push any numbers if directed to do so; and should hang up immediately once it is clear that the caller is unknown. In addition, FCC and FTC officials have worked with credible messengers to help disseminate consumer education messages, including to potentially vulnerable populations. For example, since 2017, FCC has worked with the National Asian American Coalition to train grassroots volunteers to engage local community members and distribute educational tip cards printed by FCC in languages such as Mandarin Chinese, Korean, Vietnamese, and Tagalog. In addition, FTC has collaborated with AARP to develop three videos for Asian American and Pacific Islander communities on robocall, IRS, and Medicare scams. In addition, we found that, similar to their enforcement efforts, FTC and FCC’s efforts to collaborate on public education in this area are consistent with the seven key collaboration practices we discussed earlier in this report. For example, FCC and FTC agreed to a second memorandum of understanding in 2015 that states that the agencies will collaborate with each other on consumer and industry outreach and education efforts, as appropriate. FCC and FTC also collaborate with other entities, including federal, local, and private entities, to educate consumers on ways to combat spoofing. For example, FCC officials told us that beginning in October 2018, they collaborated with Department of Veterans Affairs officials to send out three joint emails (from November 2018 through March 2019) to veterans and veterans’ organizations on ways to protect themselves against illegal robocalls, including spoofed calls. These officials also noted that each email reached approximately 5.5 million targeted recipients. Industry-Led Technical Effort to Reduce Spoofing Is Moving Forward, with FCC’s Support in Line with Federal Guidance Some Providers Are Deploying a Caller ID Verification System with a December 2019 Implementation Target According to officials with industry groups, voice service providers, and FCC, the voice service provider industry has taken key steps towards successfully putting in place a caller ID verification system throughout much of the IP-based U.S. telephone network by the end of 2019. As discussed previously, the system is commonly referred to as STIR/SHAKEN or SHAKEN/STIR. According to the Alliance for Telecommunications Industry Solutions (ATIS), which spearheaded this industry-led effort along with the Session Initiation Protocol (SIP) Forum, the system is intended to enable voice service providers to verify that a caller has a right to use the caller ID transmitted with the call. Under the system, the voice service provider that first initiates the call onto the network (originating service provider) generates a digital signature that attaches to the phone call indicating that the caller has this right. This occurs only when the originating provider knows this information and is considered the highest level of verification, referred to by the industry as “attestation.” The signature is transmitted along with the call as it is routed from one service provider to another. The terminating service provider, which passes the call onto the call recipient, can verify that the signature was not tampered with before sending the call to the call recipient (see fig. 5). According to an FCC Notice of Proposed Rulemaking, as of June 2019, several major providers had deployed or were in the process of deploying the system on their own networks, and a few had started exchanging signed calls with a second provider. In addition, ATIS has announced a number of key steps taken to fully implement the system’s framework. For example, in September 2018, ATIS launched the system’s governance authority, whose board consists of representatives from a variety of U.S. voice service providers and relevant industry associations, and which, according to ATIS, is overseeing the system to ensure that it is effective and secure. In August 2019, ATIS issued a press release stating that the governance authority board had determined the requirements service providers must meet in order to get certificates to digitally sign calls and had contracted a private firm tasked with ensuring that only authorized service providers get these certificates. According to an industry official who worked on this effort, once most U.S. carriers deploy the system and are sharing information across their networks, the technical experts who developed the standards will be able to see how it works and improve and enhance the system through additional technical developments. Because it is not always possible for the originating service provider to determine whether the caller has a right to use the phone number that will be displayed, in addition to the top level of verification, the system was designed with a middle level and a lowest level of verification. The originating service provider digitally signs the call with the middle level of attestation when the provider has an established relationship with the caller but does not know whether the caller has the right to use the phone number it will display. According to ATIS officials, the originating service provider may use this level of attestation, for example, when a call comes from a corporate call center, which displays all outbound calls as originating from a central number or set of numbers. The originating service provider signs the call with the lowest level of attestation when it is responsible for originating the call onto its network but it does not have a relationship with the caller (such as when the call comes in from another country). When using either the middle or lowest level of attestation, the provider cannot determine if the call is spoofed. However, according to ATIS officials, the information that provided the basis for the attestation level is still likely to be helpful. For example, this information may better position the terminating service provider or call blocking and analytics apps to determine, in combination with other data the terminating service provider or such apps may have analyzed, whether to block or warn the consumer about the call. According to officials from several carrier associations or voice service providers, the new system should substantially improve the industry’s ability to combat spoofing and block unwanted calls by providing carriers with immediate verification information. These stakeholders, as well as FCC officials, also stated that enabling voice service providers to instantly identify the provider that initiated the call onto the network—through the digital signature attached to the call— could help facilitate federal investigations by accomplishing in an instant what can now take significant time and effort as the call must be traced back from provider to provider. One stakeholder who played a key role in the development of the system stated that as some U.S. service providers deploy this system and more calls are able to be verified, it is likely to incentivize other U.S. providers to deploy verification systems so that their calls will not stand out as unverified. This stakeholder said that the hope is that other countries, including those with many legitimate call centers that send calls to the United States, such as India, will also implement verification systems that eventually can be integrated with the U.S. system. And as more calls are able to be verified, the stakeholder explained that the system will become more valuable and useful. An ATIS representative and other stakeholders identified other examples of ongoing technical challenges and open issues: Information provided to consumers: The industry has not reached agreement about what, if any, information should be presented to call recipients to inform them that the call has or has not been verified. Stakeholders we spoke with noted that it is important to educate consumers on the limitations of any such information. For example, although a call may be verified, the provider cannot guarantee that the caller is not trying to defraud the call recipient—just that the caller is not using a spoofed phone number to do so. Further, if a provider is unable to verify the caller ID information, it does not necessarily mean the call is fraudulent or the caller has malicious intent. For these reasons, several industry stakeholders we spoke with emphasized that the information provided by this system can be most useful when combined with other methods service providers use to analyze call traffic to identify unwanted or illegal calls. IP-only system: Several stakeholders also emphasized that the system only works for calls carried entirely over IP networks, not those using traditional wireline networks. One industry group representing smaller providers that may use traditional wireline networks expressed concerns that its members may need more time to deploy the caller ID verification system because of the resources needed to transition to an IP network. This issue was discussed by industry stakeholders at FCC’s July 2019 summit on the caller ID verification system. One industry stakeholder stated that when calls that begin on a traditional wireline network are uploaded to an IP network, the originating service provider on that IP network will sign the call with the lowest level of verification, and that that information, in combination with analytics, will help providers to know whether these calls can be trusted. Verification of certain calls: As of June 2019, ATIS and industry stakeholders were also working to determine how to ensure that calls from 911 operators or video relay service calls for deaf and hard of hearing users are not blocked if providers are unable to verify the caller is authorized to use the phone number. FCC Has Actively Encouraged Deployment of the Caller ID Verification System and Been Engaged with Its Development Since 2013, FCC has taken several steps to encourage the industry’s caller ID verification initiative. In doing so, FCC’s efforts have aligned with federal guidance for agency participation in private-sector standards activities to help address national priorities. That guidance states that federal engagement in standards activities should aim to produce timely, effective standards that address legitimate regulatory, procurement, and policy objectives. The guidance also states that the federal government should assume an active role where necessary to ensure a rapid, coherent response to national challenges. Key steps FCC took to initiate and accelerate industry efforts—in line with the OMB guidance to produce timely and effective standards— are summarized below. In March 2013, FCC’s Chief Technology Officer presented a vision of developing a caller ID verification system to combat spoofing at an Internet Engineering Task Force meeting, later referred to as a “call to action” by a technology stakeholder who played a key role in developing this system. In July 2016, FCC’s Chairman issued a call to action for providers to accelerate their efforts to develop this system. FCC also called for responses detailing provider efforts. In December 2017, FCC directed one of its advisory bodies to, among other things, define criteria for selecting the system’s governance authority and recommend milestones for system deployment. Consistent with the guidance that federal engagement should aim to produce timely, effective standards, FCC’s Chairman urged service providers and standards groups to accelerate the development and deployment of these technical standards. In November 2018, the FCC Chairman sent letters to 14 U.S. providers and publicly demanded that that they adopt the caller ID verification system by the end of 2019. While the demand did not legally require providers to deploy the system, the Chairman stated that if industry’s progress lagged in 2019, FCC would take action to ensure widespread deployment. This demand and warning represent preliminary steps consistent with the guidance’s call for the federal government to assume an active role where necessary to ensure a rapid, coherent response to national challenges. In June 2019, FCC issued a notice of proposed rulemaking that would require all providers to implement the technical system if major providers fail to do so by the end of 2019. The notice also requested comments on how FCC should determine whether it is necessary to mandate implementation of the technical system and how to evaluate whether major voice service providers have met the FCC’s end of 2019 deadline for implementation. According to FCC officials and consistent with the federal guidance, FCC has engaged with ATIS, providers, and relevant technical stakeholders throughout their caller ID verification efforts. For example, FCC officials attended key meetings, and an FCC official submitted technical suggestions on standards development related to the caller ID verification system. ATIS representatives told us that FCC’s engagement in these technical efforts was helpful, as FCC was able to ask questions and prompt those working on the standards to consider some of the broader issues that various stakeholders would be concerned about and needed to be addressed. Furthermore, FCC is considering how, if at all, its role should evolve in the future. Notably, FCC’s June 2019 notice also requested comments on what role FCC should have in the governance of the caller ID verification system, how to encourage carriers that maintain some portion of their network on legacy technology to implement elements of the system, and how FCC and industry can best leverage this system to combat illegal calls originating outside of the United States. FCC also directed staff to develop two reports over the next 2 years that, among other things, provide information on the state of deployment of this caller ID verification system. FCC officials stated that their efforts related to these issues encompass more than what is in the proposed regulations, as FCC will continue to monitor the work of the governance authority, the progress of service providers’ implementation of the system, and industry’s efforts to improve the effectiveness of the system and address remaining technical issues. Moreover, at FCC’s July 2019 summit on the caller ID verification system, FCC’s Chairman stated that FCC is prepared to issue rules in 2020 mandating that major providers implement the caller ID verification system if these major providers do not meet the 2019 deadline. Agency Comments We provided a draft of this report to FCC, FTC, and DOJ for review and comment. Each agency provided technical and editorial comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Chairman of the FCC, the Chairman of the FTC, the Attorney General, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff any have questions about this report, please contact me at (202) 512-2834 or VonahA@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: List of Stakeholders GAO Interviewed Appendix II: Summary of Federal Agencies’ Enforcement Actions Involving Telephone Calls that Allegedly Used Spoofed Caller ID Appendix II: Summary of Federal Agencies’ Enforcement Actions Involving Telephone Calls that Allegedly Used Spoofed Caller ID alleged conduct. We selectively mention spoofing in this column to provide additional context for some of these cases. Appendix III: GAO Contact and Staff Acknowledgments GAO Contact: Andrew Von Ah, (202) 512-2834 or VonahA@gao.gov. Staff Acknowledgments: In addition to the individual named above, other key contributors to this report were Alwynne Wilbur, Assistant Director; David Goldstein, Analyst- in-Charge; Mark Canter; Joshua Cicala; Jennifer Clayborne; Kristen Farole; Jeffery Haywood; Gina Hoover; Delwen Jones; Jenna Lada; Hannah Laufe; Harold Podell; Cheryl Peterson; and Malika Rice.

Unwanted phone calls, which may also involve spoofing, consistently rank among the top consumer complaints to FCC and FTC. In recent years, consumers have lost millions of dollars—and been deceived into providing financial or other sensitive information or purchasing falsely advertised products—due to schemes using these calls. FCC, FTC, and DOJ have efforts aimed at combatting the fraudulent use of caller ID spoofing. Recently enacted federal legislation included a statutory provision for GAO to review federal efforts to combat the fraudulent use of caller ID spoofing. This report examines (1) what is known about caller ID spoofing schemes, including any recent trends; (2) federal agency enforcement and consumer education efforts; and (3) the status of industry efforts to develop technologies to combat spoofing, and FCC's role in these efforts. To address these objectives, GAO reviewed consumer complaint data from FCC and FTC from 2015 through 2018; reviewed investigation and enforcement information from FCC, FTC, and DOJ; and interviewed agency officials and representatives from 23 nonfederal stakeholders, including industry associations, voice service providers, call blocking and analytics services, mobile phone manufacturers, consumer groups, and a standards body. GAO also reviewed relevant agency documentation and assessed agency efforts against key practices for consumer education and interagency collaboration identified in GAO reports. Transmitting fake caller ID information with a phone call, also referred to as “spoofing,” is in many cases illegal—and is used in schemes to obtain money and personal information or generate telemarketing leads. Complaints submitted to the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC), both of which work to protect consumers from spoofing, suggest that spoofing is a growing issue. FCC, FTC, and the Department of Justice (DOJ) identified 62 enforcement cases they have brought since 2006 involving spoofing. Enforcement can be challenging, as it can be difficult to identify the source of spoofed calls, and scammers may be based overseas. Nevertheless, GAO found that the agencies prioritize their spoofing-related enforcement actions based in part on the level of harm perpetrated against the public and generally follow key practices identified by GAO for effective collaboration. Additionally, FCC and FTC have proposed changes to law to enhance the effectiveness of their enforcement efforts, such as a change that would allow FCC more time to bring certain enforcement actions. Furthermore, FCC's and FTC's consumer education efforts related to spoofing align with key practices for collaboration and consumer education. For example, FCC and FTC have developed consistent and clear messages related to spoofing. Several major telecommunications carriers are taking key steps to put an industry-developed technical system in place designed to reduce spoofing by December 2019, which FCC has encouraged in line with federal guidance. This system is intended to enable carriers to verify whether a caller has a right to use the caller ID being transmitted with the call. Carriers can use this information to better determine whether to block or warn consumers about the incoming call. Stakeholders cautioned that the system cannot determine whether a caller has fraudulent intentions but only whether the caller is using a spoofed number. FCC has followed relevant federal guidance in participating in the development of this system by, for example, encouraging industry to accelerate deployment of the system, monitoring industry's progress, and providing input into the process.

GAO_GAO-20-188

Background Types and Uses of Virtual Currency While there is no statutory definition for virtual currency, IRS guidance has described virtual currency as a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value. Some virtual currencies can be used to buy real goods and services and can be exchanged for U.S. dollars or other currencies. A cryptocurrency is a type of virtual currency that employs encryption technology and operates on distributed ledger technology, such as blockchain. Distributed ledger technology allows for users across a computer network to verify the validity of transactions potentially without a central authority. For example, a blockchain is made up of digital information (blocks) recorded in a public or private database in the format of a distributed ledger (chain). The ledger permanently records, in a chain of cryptographically secured blocks, the history of transactions that take place among the participants in the network. For the purposes of this report, we use the term virtual currency as a broad term that includes both cryptocurrencies, which use distributed ledger technology, and digital units of exchange that do not use that technology but still meet IRS’s definition of a convertible virtual currency, as defined in Notice 2014-21. Figure 1 shows a simplified representation of how distributed ledger technology is used to circulate virtual currencies. Bitcoin, which emerged in 2009, is the first and most widely circulated blockchain-based cryptocurrency. Bitcoins are created through a process called mining. Bitcoin miners download software to solve complex equations to verify the validity of transactions taking place on the network, and the first miner to solve a problem is awarded coins in return. Once a problem is solved, the transactions are added as a new block to the distributed ledger. Users transact in virtual currencies electronically through a network, and may use virtual wallets to manage their virtual currency. Some virtual currencies can be used as investments and to purchase goods and services in the real economy. For example, some retailers accept virtual currency as a form of payment. Virtual currency exchanges provide a platform where users can transact in different types of virtual currencies or exchange them for government-issued currencies or other virtual currencies. Estimates of the Size of the Virtual Currency Market The fair market value of some virtual currencies has changed dramatically over time. For example, according to one index, the average value of one bitcoin was just under $20,000 in mid-December 2017. By early February 2018, one bitcoin was valued at about $7,000, before falling below $4,000 in December 2018, and again rising to over $9,000 in November 2019. The size of the virtual currency market is unknown due to limitations in available data. For example, one recent analysis concluded that a widely cited source for data about bitcoin trading included exaggerated data that gave an inflated impression of the size of the actual market. Nonetheless, there are data that may provide some context for the size of this market: As of April 2019, 10 major virtual currency exchanges collectively handled an average daily trading volume in bitcoin of more than $500 million, according to Bitwise. For comparison, the Federal Reserve Banks’ Automated Clearing House (a traditional payment processor) processed $103 billion in payment transactions on average per day in 2018. According to one index, the total market capitalization of bitcoin, the most widely circulated virtual currency, is estimated to have ranged between $60 billion and $225 billion between December 2018 and October 2019. As of November 2019, Coinbase, a large U.S.-based cryptocurrency exchange, reports a user base of more than 30 million. According to economists at the Federal Reserve Bank of New York, a 2018 survey they conducted found that 85 percent of respondents had heard of cryptocurrencies, 5 percent currently or previously owned cryptocurrency, and 15 percent reported that they were considering buying cryptocurrency. Regulation of Virtual Currency Federal agencies, including CFTC, FinCEN, and SEC, have jurisdiction over various aspects of virtual currency markets and market participants. In May 2014, we reported on the federal financial regulatory and law enforcement agency responsibilities related to the use of virtual currencies and their associated challenges. These challenges include money laundering, transfers of funds across borders, and consumer and investor protection issues. We also reported on the regulatory complexity for virtual currencies and the approaches that federal and state regulators have taken to their regulation and oversight. For example, CFTC has taken the position that bitcoin and ether, another virtual currency, meet the definition of a commodity provided in the Commodity Exchange Act. SEC has determined that some virtual currencies may be designated as securities, based on the characteristics of how they are offered and sold. FinCEN determined that certain virtual currency businesses would be money transmitters under the Bank Secrecy Act, subject to regulation as money services businesses. Tax Treatment of Virtual Currency According to IRS guidance, convertible virtual currencies—which have an equivalent value in real currency or act as a substitute for real currency— are to be treated as property for tax purposes. Among other things, this classification means that income, including gains, from virtual currency transactions is reportable on taxpayers’ income tax returns. Therefore, a payment for goods or services made using virtual currency may be subject to tax to the same extent as any other payment made in property. Figure 2 illustrates examples of how virtual currency transactions can affect taxes. Taxpayers using virtual currency must keep track of transaction-level information, such as the fair market value of the virtual currency at the time it was obtained, to determine tax basis and calculate gains or losses. The gain or loss from the sale or exchange of virtual currency is characterized as either a capital gain or loss or an ordinary gain or loss, depending on whether the virtual currency is held as a capital asset. Taxpayers are required to report their gains or losses from virtual currency on their tax returns, including Form 1040, U.S. Individual Income Tax Return, and Form 8949, Sales and Other Dispositions of Capital Assets, for capital gains or losses. Figure 3 shows one example of how using virtual currencies could result in a capital gain or loss. Data on Tax Compliance for Virtual Currencies Are Limited Tax and Information Returns Do Not Specifically Capture Information on Virtual Currency Income and Transactions IRS has limited data on tax compliance for virtual currency use, partly because the forms taxpayers use to report their taxable income do not require them to identify whether the source of their income is from virtual currency use. Likewise, information returns that third parties, such as employers, financial institutions, or other entities, file to report taxpayer income or transactions do not include space for, or direction to, indicate if the income or transactions reported involved a virtual currency. In 2016, the Treasury Inspector General for Tax Administration (TIGTA) found that IRS had not developed a methodology for gathering data on virtual currency use in taxable transactions that would help to analyze the risk of noncompliance and to estimate its significance. TIGTA recommended that IRS revise third-party information returns to identify the amounts of virtual currency used in taxable transactions. IRS agreed with the recommendation, but stated that it faced other higher priority funding needs, and did not consider modifying information reporting forms to be a priority at the time. As of February 5, 2020, IRS has not implemented any changes to these information returns to include information about virtual currency use. However, IRS added a question about virtual currency to Schedule 1, Additional Income and Adjustments to Income, of Form 1040 for tax year 2019. Individual taxpayers use Schedule 1 to report additional income, such as capital gains, unemployment compensation, prize or award money, and gambling winnings. IRS added a question asking if taxpayers received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency during the tax year. Only taxpayers who are otherwise required to file Schedule 1 or who would answer “yes” to the question need to file this schedule. According to IRS officials responsible for examining tax returns, IRS’s focus is on ensuring taxpayers are reporting all of their taxable income and it is not necessary to distinguish between virtual currency transactions and other property transactions being reported. IRS Has Data on a Small Number of Taxpayers Because IRS forms have not required taxpayers to explicitly identify income from virtual currency, IRS uses data from other sources to inform compliance decisions and research. These sources include: Searches of tax return databases. For tax years 2013 to 2015, IRS searched electronically filed Forms 8949 to identify how often taxpayers included language in the property description to indicate the transaction likely involved bitcoin, the most widely traded virtual currency at the time. For the 3 years, IRS identified fewer than 900 taxpayers who reported virtual currency activity each year. IRS officials said that due to the time and resources required to generate these data, IRS did not generate these filing statistics for tax years 2016 or later. By comparing these data to the size of the bitcoin market, IRS concluded that many taxpayers were likely not reporting income from virtual currency use. Third party information reports. To address tax noncompliance risks for virtual currencies, in December 2016, IRS served a John Doe summons to Coinbase, a U.S.-based cryptocurrency exchange. After IRS later narrowed the scope of the summons, it requested identifying and transactional data for all Coinbase users with a U.S. address, U.S. telephone number, U.S. email domain, or U.S. bank account that transacted with Coinbase between January 1, 2013, and December 31, 2015 that had the equivalent of $20,000 in any one transaction type (a buy, sell, send, or receive) in any year during that period. According to an announcement posted on Coinbase’s website, on February 23, 2018, Coinbase notified approximately 13,000 customers that it expected to deliver information about their accounts to IRS within 21 days. In addition, IRS officials stated that IRS had received information returns from a small number of virtual currency exchanges for tax year 2017. Third-party reports of potential fraud. IRS also has access to information on potential fraud reported to IRS and FinCEN by third parties. Financial institutions and money services businesses, which could include virtual currency exchanges, are to file a Suspicious Activity Report (SAR) if they observe or identify suspicious financial activity. SAR reporting can help IRS in identifying potential income underreporting, money laundering, and other potential tax-related violations and crimes. IRS may also receive information about tax noncompliance involving virtual currencies from whistleblowers and other referral programs. Voluntary disclosures by taxpayers. In March 2019, IRS updated Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, to include a space specifically for taxpayers to disclose that they have unreported virtual currency income. IRS’s Criminal Investigation division (CI) reviews the forms IRS receives to ensure they meet criteria of eligibility and timeliness, and that the disclosure does not apply to illegal sources of income. CI sends forms that meet the criteria to two of IRS’s civil operating divisions—Large Business & International (LB&I) and Small Business/Self-Employed (SB/SE)—for review. According to IRS officials, the addition of virtual currency to the form was made to assist IRS employees in routing the forms to the correct subject matter experts in the civil operating divisions. IRS Included Virtual Currencies in Research Projects According to officials with IRS’s Research, Applied Analytics, and Statistics (RAAS) division, RAAS had begun some virtual currency research projects to better understand virtual currency tax compliance. One project, which RAAS completed, was to develop compliance profiles for taxpayers that LB&I had identified through its compliance efforts as having virtual currency activity. RAAS officials also said that they are enhancing their use of a range of third-party information reporting, including reporting of virtual currency activity, to improve IRS’s ability to assess compliance risks. These efforts focus on use of data from multiple sources to better understand evolving risks and improve estimates of compliance risk. These projects support LB&I, SB/SE, CI, and IRS’s broader research, analysis, and statistical reporting needs. Virtual currency has not been included in past National Research Programs (NRP)—IRS’s detailed study of voluntary tax compliance used as the basis for tax gap estimates. The most recent NRP study of individual tax returns was tax years 2011-2013, before virtual currencies became more widely used. RAAS officials said the time frame for the next NRP study of individual tax returns has not yet been determined, but virtual currency may be included in future NRP projects. IRS Has Taken Some Steps to Address Virtual Currency Compliance Risks and Has Shared Information across Multiple Agencies IRS Has Trained Staff on Virtual Currency and Begun Civil Enforcement Activities In December 2013, IRS established the Virtual Currency Issue Team (VCIT) to study virtual currencies and related compliance issues. According to IRS officials, the VCIT aimed to learn about virtual currencies, educate examiners about them, and develop examination techniques to identify and address virtual currency tax compliance risks. In 2015, the VCIT provided two training lessons for examiners on the terminology, technology, and audit issues related to virtual currencies. The VCIT is made up of about 30 individuals and continues to meet periodically to discuss virtual currency issues. In July 2018, IRS announced the launch of a virtual currency compliance campaign within LB&I to address noncompliance related to individual taxpayers’ use of virtual currency through multiple education and enforcement actions, including outreach and examinations. The goals of the compliance campaign include identifying causes of noncompliance using feedback from examination results, using information to identify additional enforcement approaches to increase compliance and decrease taxpayer burden, and improving examiner knowledge and skills as related to virtual currency transactions. According to IRS officials, the compliance campaign was initiated, in part, to analyze large amounts of data received from third-party sources. As part of the campaign, IRS developed and delivered several online and in-person training classes on blockchain technology and virtual currencies to its examiners and other staff. The trainings included details on how to identify and understand blockchain transactions and provide examiners with information on how to seek additional information from taxpayers about possible virtual currency use. According to LB&I officials, as examiners provide feedback on what new issues they are seeing in cases involving virtual currency, they will schedule follow-up training sessions to address these new issues. LB&I has also reached out to a number of external stakeholder groups to gather information and better understand the tax concerns within the virtual currency community. For example, LB&I and the IRS Office of Chief Counsel have spoken to tax practitioner groups, state tax authorities, IRS Nationwide Tax Forum participants, and tax preparation software companies. According to IRS officials, the discussions they had with tax preparation software companies led to some adding questions to their programs asking taxpayers to enter virtual currency income when preparing their tax returns. The compliance campaign also aims to assist in developing a comprehensive IRS virtual currency strategy. In addition to leading the compliance campaign, LB&I is also leading a working group focused on cryptocurrency that includes members from across IRS, including LB&I, SB/SE, CI, and the Office of Chief Counsel. This working group reports to the IRS Enforcement Committee, which includes the Deputy Commissioner for Services and Enforcement and the commissioners for each of the operating divisions and CI. CI has been assisting in analyzing data received from third-party sources to look for potential investigative leads. According to CI officials, CI first reviews the data to identify any taxpayers who are already targets of CI investigations so that LB&I does not use the information in its civil enforcement efforts. The officials also said that they were reviewing information from large virtual currency users to identify any ties to criminal activity. However, according to IRS officials, since some of the data IRS has received predate a major uptick in virtual currency activity in 2017, the data that predate these developments are less valuable than more recent data would be, other than to understand the history of an individual’s virtual currency usage. IRS has also begun civil enforcement activities to address virtual currency noncompliance as part of the compliance campaign. In April 2019, LB&I was forwarding cases identified as likely involving virtual currency for examination classification, the process IRS uses to determine which returns to select to examine. Due to the time needed to complete examinations and to allow taxpayers time to exercise their rights, IRS officials said they do not have outcome data from these efforts yet. In July 2019, IRS began sending out more than 10,000 letters to taxpayers with virtual currency transactions. These letters stated that IRS is aware that the taxpayer may have a virtual currency account. They instructed the taxpayer to ensure that virtual currency income, gains, and losses have been reported appropriately and to file or amend returns as necessary. The letters also provide taxpayers with information on where they can find resources to help them understand their reporting obligations. IRS Shares Information across Multiple Agencies, Focusing on Criminal Enforcement Efforts That Can Involve Virtual Currencies According to IRS officials, CI works with a number of federal partners, including FinCEN and the Federal Bureau of Investigation (FBI), among others, in the routine course of its work, which may involve virtual currency issues. According to CI officials, virtual currency does not constitute a new program area that would require a new specific set of policies and procedures. Instead, traditional crimes that CI might investigate may be intertwined with virtual currency use. CI participates in virtual currency issue information sharing efforts through a number of groups. For example, CI is a monthly participant in the FBI’s National Cyber Investigative Joint Task Force, which brings agencies together to share intelligence and work large-scale cases jointly. CI also has agents on site at the National Cyber-Forensics and Training Alliance, a public-private partnership, and at the European Union Agency for Law Enforcement Cooperation. Both entities work on a variety of issues, including virtual currency issues. CI also participates in some multinational information sharing groups to address virtual currency issues as part of its broader criminal enforcement goals. For example, CI participates in the Joint Chiefs of Global Tax Enforcement (J5), a group of criminal intelligence and tax officials from Australia, Canada, the Netherlands, the United Kingdom, and the United States that launched in mid-2018 to focus on shared cross-national tax risks, including cybercrimes and virtual currency. Among the goals of the J5 are to lead the international community in developing a strategic understanding of offshore tax crimes and cybercrimes, and raise international awareness that the J5 are working together to address international and transnational tax crimes. Within the Department of the Treasury (Treasury), IRS works with Treasury’s Office of Tax Policy when developing any guidance or regulation, including for virtual currency. IRS also works with FinCEN with regard to IRS’s delegated authority to administer parts of the Bank Secrecy Act, including Report of Foreign Bank and Financial Accounts (FBAR) filings. For example, FinCEN provides training materials to SB/SE examination staff who may come across virtual currency issues in the performance of a Bank Secrecy Act examination. IRS and FinCEN officials also periodically discuss how to apply the Bank Secrecy Act and its implementing regulations to virtual currency transactions. Given IRS’s unique role in administering the federal tax system, it generally does not need to coordinate with other agencies outside of Treasury in developing or issuing virtual currency guidance or taking civil enforcement actions. According to IRS officials, the work of the virtual currency compliance campaign does not involve any other federal agencies. IRS’s Virtual Currency Guidance Meets Some Taxpayer Needs, but IRS Did Not Address Applicability of Frequently Asked Questions IRS First Issued Virtual Currency Guidance in 2014 and Solicited Public Input to Identify Additional Guidance Needs IRS first issued virtual currency guidance in 2014, in response to our recommendation. In 2013, we found that IRS had not issued guidance specific to virtual currencies and that taxpayers may be unaware that income from transactions using virtual currencies could be taxable. We recommended that IRS provide taxpayers with information on the basic tax reporting requirements for transactions using virtual currencies. In response to this recommendation, IRS issued Notice 2014-21 in March 2014 and published it in the Internal Revenue Bulletin (IRB) in the form of answers to frequently asked questions (FAQs). IRS solicited public input on Notice 2014-21 through several means. Within the notice, IRS requested comments from the public regarding other aspects of virtual currency transactions that should be addressed in future guidance by providing a physical and email address to which comments could be submitted. IRS reviewed more than 200 public comments it received to identify topics that were in need of further guidance. Our analysis of the public comments found that the most common topics concerned tax forms and reporting (64 comments), realization of income (45 comments), cost basis (33 comments), and general tax liability (29 comments). Other topics included the tax implications of hard forks and airdrops, mining, and foreign reporting. Virtual currency stakeholders we spoke with, such as tax practitioners, executives at virtual currency exchanges, advocacy groups, and industry representatives also identified these topics as in need of further guidance. Additionally, LB&I officials said they held several sessions to gather information from external stakeholders, such as tax practitioner groups and state tax authorities, to develop a better understanding of what was happening in taxpayer communities. IRS’s 2019 Virtual Currency Guidance Answers Some Taxpayer Concerns, but Presents Additional Challenges for Taxpayers In October 2019, IRS issued two forms of additional virtual currency guidance, which answered some questions previously raised by the public comments and virtual currency stakeholders. According to IRS, these guidance documents were intended to supplement and expand upon Notice 2014-21. Revenue Ruling 2019-24 addresses the tax treatment of hard forks and airdrops following hard forks. Specifically, the guidance discusses whether taxpayers have gross income as a result of (1) a hard fork, if they do not receive units of a new virtual currency; or (2) an airdrop of a new virtual currency following a hard fork if they receive units of new virtual currency. Additional FAQs provide further examples of how tax principles apply to virtual currency held as a capital asset. Topics addressed include what tax forms to use when reporting ordinary income and capital gains or losses from virtual currency; how to determine fair market value of virtual currencies; when virtual currency use results in taxable income; how to determine cost basis in several scenarios; and when a taxpayer may use the First-In-First-Out accounting method, known as FIFO, to calculate their gains. However, some virtual currency and tax stakeholders with whom we spoke expressed concern that the 2019 revenue ruling and FAQs leave many questions unanswered and provide confusing responses to others. Their concerns include the following: Clarity: According to some stakeholders, Revenue Ruling 2019-24 is unclear, mostly due to confusion surrounding IRS’s usage of technical virtual currency terminology and the situations meant to illustrate IRS’s application of the law to hard forks and airdrops. Several tax and virtual currency stakeholders we spoke with said these examples do not accurately explain how virtual currency technology works and therefore may not be helpful to taxpayers looking for guidance on the tax implications of income received as a result of hard forks or airdrops. In public remarks on the new guidance in October 2019, IRS’s Chief Counsel stated that terms are not used in a uniform way in the virtual currency industry, but IRS is interested in receiving comments on how virtual currency technology should be described. Additional topics in need of guidance: The revenue ruling and additional FAQs do not address several topics raised in the public comments and by stakeholders. For example, the guidance does not clarify foreign asset reporting requirements for virtual currency. The statutory provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) require taxpayers and foreign financial institutions to report on certain financial assets held outside the United States. Regulations implementing the Bank Secrecy Act separately require taxpayers to report certain foreign financial accounts to FinCEN on the FBAR form. Some practitioners told us that it is unclear whether these requirements apply to virtual currency wallets and exchanges, as we discuss later in this report. Other topics not addressed in the 2019 guidance include mining, like-kind exchanges, and retirement accounts. According to an official from the IRS Office of Chief Counsel, IRS’s focus when developing the 2019 guidance was to assist individual taxpayers. Therefore, the topics addressed by the revenue ruling and FAQs were limited to the most common issues that would be applicable to most individual taxpayers. The official told us that if IRS were to develop additional virtual currency guidance in the future, it may focus on a different audience, such as taxpayers involved in virtual currency businesses or exchanges that could be subject to third-party information reporting. Another official stated that issuing guidance on certain topics, including like-kind exchanges, would have taken additional time, and these topics were therefore left unaddressed. IRS Did Not Include That the 2019 FAQs Are Not Legally Binding IRS issues thousands of publications in a variety of different forms to help taxpayers and their advisors understand the law; however, IRS has stated that only guidance published in the IRB contains IRS’s authoritative interpretation of the law. Unlike with the virtual currency FAQs IRS issued in 2014 in the form of a notice, the 2019 FAQs were not published in the IRB. Therefore, the 2019 FAQs are not binding on IRS, are subject to change, and cannot be relied upon by taxpayers as authoritative or as precedent for their individual facts and circumstances. For FAQs not published in the IRB, tax practitioners have noted that sometimes IRS has included a disclaimer noting that the FAQs do not constitute legal authority and may not be relied upon. The new virtual currency FAQs do not include such a disclaimer. According to IRS officials, they did not include a disclaimer along with the new FAQs because the FAQs do not contain any substantial new interpretation of the law. IRS officials did not feel that a disclaimer about the limitations of the FAQs was necessary or that it would be helpful to taxpayers. However, the FAQs provide new information, such as a definition of the term “cryptocurrency” and an explanation of how taxpayers can track cost basis for virtual currency. As we have previously reported, clarity about the authoritativeness of certain IRS publications could be improved by noting any limitations, especially when FAQs provide information to help taxpayers comply with tax law. Additional explanatory language would help taxpayers understand what type of IRS information is considered authoritative and reliable as precedent for a taxpayer’s individual facts and circumstances. The first article in IRS’s Taxpayer Bill of Rights—“The Right to Be Informed”—states that taxpayers have the right to know what they need to do to comply with tax laws. The article further states that taxpayers are entitled to clear explanations of the laws and IRS procedures in all forms, instructions, publications, notices, and correspondence. As we have previously reported, just as taxpayers have the right to clear explanations in IRS instructions and publications, taxpayers should be alerted to any limitations that could make some IRS information less authoritative than others. Failing to note any limitations associated with particular guidance could lead to misinterpretation of nonauthoritative information from IRS. If taxpayers make decisions based on guidance that is nonauthoritative, including FAQs, those taxpayers’ confidence in IRS and the tax system could be undermined if the content is later updated and IRS challenges taxpayers’ positions. As we have noted in prior reports, taxpayers’ perception that IRS is fairly and uniformly administering the tax system helps further overall voluntary compliance and lowers IRS’s administrative costs. Third-Party Information Reporting on Virtual Currency Is Limited, and Foreign Account Reporting Requirements Are Unclear Limited Third-Party Information Reporting Makes It Difficult for IRS to Address Compliance Risks IRS does not receive information returns on some potentially taxable transactions involving virtual currency, which limits its ability to detect noncompliance. Some virtual currency exchanges send information returns to IRS and to customers that provide information about customers’ trading activity, but others do not. Financial institutions and other third parties are to report interest payments, property sales, and other transactions to both taxpayers and IRS using forms known as information returns. Form 1099-K, Payment Card and Third Party Network Transactions. Third parties that contract with a substantial number of unrelated merchants to settle payments between the merchants and their customers are required to issue a Form 1099-K for each merchant that meets the threshold of having more than 200 transactions totaling more than $20,000 in a year. Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Brokers use Form 1099-B to report transactions such as sales or redemptions of securities, regulated futures contracts, and commodities. For certain types of property, brokers must also report cost basis information on Form 1099-B if the information is required. Form 1099-MISC, Miscellaneous Income. Certain payments made in the course of a trade or business—including rents, prizes, and various other types of income—must be reported by the payer on Form 1099-MISC. For most types of income subject to reporting on Form 1099-MISC, payers must file the form only if they made payments totaling at least $600. According to our review of websites for nine major U.S.-based virtual currency exchanges, as of November 2019, two exchanges have policies posted online stating that they report information for some of their customers’ virtual currency transactions to IRS on Form 1099-K. One exchange states that it reports customers’ transactions on Form 1099-B, a more detailed information return that provides a breakdown of individual virtual currency transactions. Another exchange’s website states that it provides Forms 1099, but does not identify the form more specifically. Three exchanges’ websites have policies stating that the exchanges do not report customers’ transactions on tax forms. The remaining two exchanges do not state on their websites whether or not they file information returns or provide customers with tax forms. When transactions handled by third parties, such as virtual currency exchanges, go unreported on information returns, it is difficult for IRS to identify and address compliance risks. According to IRS officials and tax practitioners we interviewed, it is difficult for IRS to find out when taxable transactions involving virtual currency are occurring. As discussed earlier in this report, IRS’s virtual currency compliance campaign has identified more than 10,000 taxpayers who may not have properly reported virtual currency transactions on tax returns. However, the campaign likely has not identified all taxpayers with underreported virtual currency income. In addition, according to IRS officials, examining tax returns is more resource intensive than the automated processes IRS uses to match tax returns against information returns. For taxpayers, limited information reporting by third parties can make it difficult to complete tax returns. Tax practitioners told us that recordkeeping is a challenge for taxpayers who buy and sell virtual currencies. To report virtual currency income accurately under IRS guidance, taxpayers need to report information about each transaction, including cost basis and fair market value at the time virtual currency is disposed of, such as by selling it for cash or another virtual currency on an exchange. Some taxpayers may not keep their own records of virtual currency transactions, and as a result may lack easy access to the information that would be provided in third-party information returns. When taxpayers do keep these records, they may not know how to report virtual currency transactions on tax forms. As discussed earlier in this report, 64 of the public comments IRS received on Notice 2014-21 were about forms and reporting. For example, some of these 64 comments expressed uncertainty about how to calculate the fair market value of virtual currency at the time of sale; others requested assistance in determining which tax forms to use to report income from virtual currency transactions. Some virtual currency transactions are not subject to third-party reporting requirements. For example, unless owned by a U.S. payor (including a controlled foreign corporation), virtual currency exchanges operating outside the United States are not required to file information returns such as Forms 1099-K or 1099-B unless the customer or transaction has certain connections to the United States. Some transactions, such as transferring virtual currency directly to a merchant in exchange for goods, generally create no obligation to file any information returns. Other virtual currency transactions, such as sales of virtual currency for cash through virtual currency exchanges, may be subject to third-party reporting requirements. However, those requirements are not entirely clear, and people have interpreted them differently. Tax practitioners we spoke with generally stated that it is not clear whether current regulations require virtual currency exchanges to report customers’ trading activity on Forms 1099-K or 1099-B. According to IRS officials, virtual currency exchanges may be subject to the 1099-K reporting requirement if they fall into the legal category of “third party settlement organizations.” Exchanges are subject to the 1099-B requirement only if they are brokers or barter exchanges. IRS does not have an official position on whether virtual currency exchanges are required to report customers’ trading activity on Form 1099-B. There may also be ambiguity regarding when, if at all, reporting on virtual currency sales is required on Form 1099-MISC. Furthermore, even if exchanges are subject to the 1099-K, 1099-B, or 1099-MISC reporting requirements, these requirements do not cover all taxable transactions. Third-party settlement organizations are required to file Form 1099-K only for customers who make more than 200 transactions in a year that total more than $20,000. Taxable transactions below that threshold may not be reported. Separately, some transactions carried out by brokers do not need to be reported on Form 1099-B unless they involve cash. For example, taxpayers must report trades between different virtual currencies on tax returns, but brokers may not be required to report such trades on Form 1099-B. According to IRS, a virtual currency exchange would be required to file Form 1099-MISC if it has sufficient information, such as the recipient’s basis in the virtual currency, to determine whether a payment made to a recipient in exchange for virtual currency gives rise to income for that recipient. In addition, Forms 1099-K, 1099-B, and 1099-MISC do not always contain all the information that taxpayers need to file accurate tax returns or that IRS needs to monitor compliance. Form 1099-K provides information on the number and gross amount of payments made to the recipient, but does not provide information about individual transactions. Some tax practitioners we interviewed stated that taxpayers who receive Form 1099-K for virtual currency transactions may find the form unhelpful or confusing. Because the form does not identify specific transactions, it may be difficult to match the aggregate amounts reported on the form with taxpayers’ own records of virtual currency transactions. Form 1099-B does provide information about individual transactions, but does not always include or require cost basis information. According to IRS, a Form 1099-MISC that reports a payee’s gain does not provide information about that payee’s gross proceeds and basis. Some stakeholders we interviewed mentioned challenges that could make it difficult to implement information reporting at the individual transaction level. For example, it could be difficult to distinguish between taxable dispositions of virtual currency—such as the sale of virtual currency for U.S. dollars—and nontaxable events such as the transfer of virtual currency from a taxpayer’s account on an exchange to a personal wallet controlled directly by the same taxpayer. These stakeholders also told us that if exchanges were required to report cost basis information, additional challenges could include tracking the cost basis of virtual currency transferred between exchanges. However, as we have previously reported, cost basis reporting can be particularly valuable for tax compliance. IRS officials told us that they are studying the issue of third-party information reporting, and it is included in IRS’s priority guidance plan as of October 2019. We have reported that, in general, the extent to which taxpayers accurately report their income is closely aligned with the amount of income that third parties report to them and to IRS. For example, according to IRS data for tax years 2011-2013, taxpayers misreported more than half of their income for types of income subject to little or no third-party information reporting (see figure 4). Taxpayers misreported a much lower percentage of their income for types of income subject to at least some information reporting. Information returns that include details about individual transactions can assist taxpayers by providing information about how to report virtual currency income correctly. For example, in addition to providing transaction details, Form 1099-B instructs recipients where to report transactions on Form 8949 or Schedule D, which are forms used to report capital gains. By contrast, Form 1099-K does not include similar instructions. One of IRS’s strategic goals is to protect the integrity of the tax system by encouraging compliance through administering and enforcing the tax code. This goal includes identifying and planning for compliance risks proactively, including risks associated with the increasing complexity of the tax base. Further, internal control standards state that management should use quality information to achieve the entity’s objectives. Using quality information requires identifying information requirements and obtaining relevant data from reliable sources. As discussed above, IRS does not have quality information on many potentially taxable transactions involving virtual currency, in part because information reporting requirements for virtual currency exchanges are unclear, and in part because some information reporting does not include detailed information about specific transactions. As a result, some taxpayers may not be reporting virtual currency transactions properly on their tax returns or paying the full amount of tax owed on those transactions, contributing to the tax gap. IRS and FinCEN Have Not Clarified Whether Foreign Account Reporting Requirements Apply to Virtual Currency As previously discussed, two overlapping reporting requirements apply to taxpayers who have foreign financial assets. These two requirements are the Report of Foreign Bank and Financial Accounts (FBAR) filings required under the Bank Secrecy Act and the separate reports required by the statutory provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). The federal agencies that administer these requirements have not clarified how taxpayers who hold virtual currency should interpret them. FATCA Requirements Under FATCA, taxpayers have an obligation to report certain foreign financial accounts and other assets on IRS Form 8938, Statement of Specified Foreign Financial Assets, if the value of those assets exceeds a certain amount. FATCA was enacted in 2010 to reduce offshore tax evasion, and it also requires foreign financial institutions to report detailed information to IRS about their U.S. customers. Tax practitioners we interviewed told us that there is no generally accepted view about whether FATCA filing requirements apply to virtual currency holdings, and IRS has not publicly stated a position on how, if at all, FATCA requirements apply to virtual currency holdings for either taxpayers or institutions. Some practitioners stated that in the absence of guidance or information from IRS specifically addressing virtual currency and FATCA, some of their clients report foreign virtual currency accounts because the potential penalties for failing to report, if deemed to be required, are high. Additionally, several public comments on IRS Notice 2014-21 requested clarification from IRS about whether virtual currency holdings must be reported under FATCA. The FATCA filing requirements can be difficult for individual taxpayers to interpret, in part because FATCA was enacted before the use of virtual currency became more widespread, and it was not designed to cover nontraditional assets such as virtual currencies. For example, under FATCA, taxpayers must report accounts at foreign financial institutions. A taxpayer who holds virtual currency with an exchange based outside the United States may not know whether the exchange counts as a foreign financial institution under FATCA because this determination involves applying legal criteria to specific facts about how the exchange operates. Taxpayers must also report foreign nonaccount assets held for investment (as opposed to held for use in a trade or business), such as foreign stock and securities, foreign financial instruments, contracts with non-U.S. persons, and interests in foreign entities. IRS officials told us that in some situations, virtual currencies could be foreign nonaccount assets, depending on specific facts about how an individual taxpayer holds the virtual currency. However, a taxpayer holding virtual currency may not know whether the virtual currency is considered a specified foreign financial asset because this determination involves applying legal criteria to specific facts such as whether the virtual currency has a foreign issuer, which the taxpayer may not have sufficient information to determine. According to IRS officials, they have not issued guidance about virtual currency and FATCA because the instructions for Form 8938 clearly explain how taxpayers are to interpret FATCA requirements. However, those instructions do not mention virtual currency and do not provide information needed to determine whether virtual currency holdings must be reported. For example, the instructions state that a financial account is any depository or custodial account maintained by a foreign financial institution, but do not explain under what circumstances, if any, an account that holds virtual currency could be considered a depository or custodial account. IRS’s Taxpayer Bill of Rights states that taxpayers are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. Furthermore, one of IRS’s strategic goals is to empower taxpayers by making it easier for them to understand and meet their filing, reporting, and payment obligations. Without information about how to interpret and apply FATCA requirements to situations involving virtual currency, taxpayers will not know whether they are required to report virtual currency held outside the United States. As a result, they may be underreporting, depriving IRS of data needed to address offshore tax evasion, or overreporting by filing forms that are not required. As we have previously reported, such overreporting creates unnecessary burdens, including financial costs, for taxpayers. FBAR Requirement Separate from the requirement to file Form 8938 under FATCA, regulations implementing the Bank Secrecy Act require reporting of financial accounts maintained with financial institutions located outside the United States on the FBAR form. FinCEN’s FBAR regulations predate the widespread use of virtual currency and do not specifically mention virtual currency. Consequently, tax practitioners have raised questions about whether taxpayers are required to include virtual currency holdings in FBAR filings. In correspondence and interviews, FinCEN officials have stated that, based on their understanding of the regulations, virtual currency does not need to be reported on the FBAR. For example, FinCEN officials told us that FinCEN provides a standard response when members of the public ask FinCEN’s Resource Center about reporting virtual currency on the FBAR. The response states, in part, “as of right now, reporting [virtual currency exchange accounts] on the FBAR is not required.” Likewise, in March 2019, FinCEN responded in writing to a question from the American Institute of Certified Public Accountants by stating that the FBAR regulations do not define virtual currency held in an offshore account as a type of reportable account. While FinCEN has provided responses to direct questions, it has not made information about whether foreign virtual currency accounts are subject to the FBAR requirement readily available, such as by posting this information on its website. FinCEN officials stated that FinCEN and IRS had issued a statement on IRS’s website in 2014 informing the public that virtual currencies did not need to be reported on the FBAR. However, the officials noted that the statement was no longer available on the website, but they did not say when it may have been removed or why. Neither IRS’s FBAR Reference Guide nor FinCEN’s instructions for filing the FBAR mention virtual currencies. Internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. As part of this standard, management should communicate information that allows external parties, including the general public, to assist the entity in achieving its objectives. In the absence of a readily available official statement from FinCEN that virtual currencies are not reportable on the FBAR, users of virtual currency may be filing reports that are not legally required. According to some tax practitioners we interviewed, some individuals may report foreign virtual currency accounts on the FBAR even if they believe it is unlikely that they are required to report, because of the high penalties for failing to file required FBARs. Such filings can create financial costs and unnecessary recordkeeping and other burdens for these individuals. Conclusions Virtual currencies can present challenges for enforcement of tax laws, both because they can be circulated without a central authority and because complying with current tax requirements can be confusing and burdensome. IRS has taken important steps to address these challenges, including issuing multiple sets of guidance to clarify how virtual currencies would be treated for tax purposes and carrying out a range of enforcement activities to address noncompliance. Although IRS’s 2019 virtual currency guidance addressed some issues left unresolved by its 2014 guidance, it did not address others, and it has also prompted new concerns among virtual currency stakeholders. Additionally, including information that the 2019 FAQs are not legally binding would enhance taxpayer understanding and could ultimately help enhance taxpayers’ confidence in IRS and the tax system. Currently, much trading activity in virtual currency goes unreported on information returns. In part, this lack of reporting may be because third parties are unclear about whether they are required to report. Limitations in what information returns report related to virtual currencies also constrain the utility of reported information. In general, information reporting is associated with high levels of compliance. Additionally, the rules for foreign asset reporting—specifically, the FBARs required by the Bank Secrecy Act and the separate reports required by FATCA—do not clearly address virtual currency, and tax professionals have raised questions about the applicability of these requirements to virtual currency. Clarifying the FATCA requirements and making a statement about the FBAR requirements readily available to the public would help reduce uncertainty about these rules and may result in reduced burden for some taxpayers who may be filing reports that are not required. Recommendations for Executive Action We are making a total of four recommendations, including three to IRS and one to FinCEN. Specifically, The Commissioner of Internal Revenue should update the FAQs issued in 2019 to include a statement that the FAQs may serve as a source of general information but cannot be relied upon by taxpayers as authoritative since they are not binding on IRS. (Recommendation 1) The Commissioner of Internal Revenue should take steps to increase third-party reporting on taxable transactions involving virtual currency, which could include clarifying IRS’s interpretation of existing third-party reporting requirements under the Internal Revenue Code and Treasury Regulations, or pursuing statutory or regulatory changes. (Recommendation 2) The Commissioner of Internal Revenue should clarify the application of reporting requirements under FATCA to virtual currency. (Recommendation 3) The Director of FinCEN, in coordination with IRS as appropriate, should make a statement about the application of foreign account reporting requirements under the Bank Secrecy Act to virtual currency readily available to the public. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to IRS, FinCEN, Treasury, SEC, and CFTC for review and comment. In its written comments, which are summarized below and reproduced in appendix II, IRS agreed with one and disagreed with two of the recommendations directed to it. In its written comments, which are summarized below and reproduced in appendix III, FinCEN agreed with the recommendation directed to it. IRS, Treasury, SEC, and CFTC provided technical comments, which we incorporated as appropriate. IRS agreed with the recommendation to take steps to increase third-party reporting on taxable transactions involving virtual currency (recommendation 2). IRS stated that it is working with Treasury to develop guidance on third-party reporting under section 6045 of the Internal Revenue Code for certain taxable transactions involving virtual currency. Such guidance, if it aims to increase third-party reporting, would address the intent of the recommendation. IRS disagreed with the recommendation to add a statement to the 2019 FAQs on virtual currency informing taxpayers that the FAQs provide general information but are not binding on IRS (recommendation 1). IRS stated that the FAQs are illustrative of how longstanding tax principles apply to property transactions. IRS also stated that IRS does not take positions contrary to public FAQs. We continue to believe that including such a statement would provide more transparency and help taxpayers understand the nature of the information provided in the FAQs. As we state earlier in this report, IRS has included disclaimer statements in other informal FAQs posted on its website. IRS could include a similar statement in the virtual currency FAQs at minimal cost. Alternatively, if IRS intends to be bound by the positions it takes in the current version of the virtual currency FAQs, as the response to this recommendation suggests, it could publish the FAQs in the Internal Revenue Bulletin. Doing so would render a disclaimer statement unnecessary and would satisfy the intent of the recommendation. IRS disagreed with the recommendation to clarify the application of FATCA reporting requirements to virtual currency (recommendation 3). IRS stated that U.S. exchanges and other U.S. businesses play a significant role in virtual currency transactions carried out by U.S. taxpayers, and therefore it is appropriate for IRS to focus on developing guidance for third-party reporting under section 6045, as discussed above. IRS also stated that guidance on FATCA may be appropriate in the future when the workings of foreign virtual currency exchanges become more transparent. We believe that, given the widespread uncertainty about the FATCA requirements among virtual currency stakeholders, it would benefit taxpayers for IRS to clarify these requirements to the extent possible with the information currently available. It may be appropriate to wait for future developments in the foreign virtual currency exchange industry before issuing detailed, thorough guidance on this issue. However, IRS could address the uncertainty about the FATCA requirements by clarifying in general terms how it believes they should be interpreted in situations involving virtual currency. In its comments, FinCEN agreed with the recommendation to make a public statement about whether virtual currency must be reported on the FBAR (recommendation 4). FinCEN confirmed in its letter that as of January 2020, its regulations do not require virtual currency held in an offshore account to be reported on the FBAR. Additionally, FinCEN stated that it will coordinate with IRS to determine the best approach to provide clarity to the public regarding the FBAR requirement. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of the Treasury, the Commissioner of Internal Revenue, the Director of the Financial Crimes Enforcement Network, the Chairman of the Securities and Exchange Commission, the Chairman of the Commodity Futures Trading Commission, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Objectives, Scope, and Methodology Our objectives were to (1) describe what is known about virtual currency tax compliance; (2) describe the steps the Internal Revenue Service (IRS) has taken to address virtual currency tax compliance risks; (3) evaluate the extent to which IRS’s virtual currency guidance meets taxpayer needs; and (4) evaluate whether additional information reporting could assist IRS in ensuring compliance. To describe what is known about virtual currency tax compliance and the steps IRS has taken to address virtual currency tax compliance risks, we reviewed IRS documentation on the agency’s virtual currency tax enforcement efforts, including information about the legal summons IRS issued to Coinbase and the Large Business and International (LB&I) division’s virtual currency compliance campaign. We interviewed IRS officials in the Small Business/Self Employed (SB/SE) and LB&I operating divisions, as well as the Research, Applied Analytics, and Statistics division about any data the agency had on virtual currency tax compliance, challenges in collecting such data, and plans for data analyses. We also reviewed IRS forms that taxpayers may use to report virtual currency use. We interviewed officials from the Financial Crimes Enforcement Network, Commodity Futures Trading Commission, and Securities and Exchange Commission about coordination efforts that have been made across agencies regulating virtual currencies. We also interviewed tax practitioners, tax attorneys, virtual currency industry advocates, and virtual currency exchange executives about virtual currency tax compliance issues. We took a snowball sampling approach to identify the outside stakeholders we interviewed, which involved asking stakeholders we interviewed for recommendations of others we should contact to gain additional insight into virtual currency tax compliance, and we assessed their qualifications and independence. In total, we interviewed five individual stakeholders in addition to representatives of 10 entities with expertise in tax issues related to virtual currency. Although results from these interviews are not generalizable, they provide insight into what is known about tax compliance and the steps IRS has taken to address virtual currency tax compliance risks. To evaluate the extent to which IRS’s virtual currency guidance meets taxpayer needs, we identified and analyzed all of the guidance and statements IRS has published about tax compliance for virtual currencies. To identify these documents, we searched IRS’s website and interviewed IRS officials. According to IRS officials, Notice 2014-21, issued in March 2014, and Revenue Ruling 2019-24 and Frequently Asked Questions (FAQs), issued in October 2019, are the only IRS guidance specific to virtual currencies. We also reviewed and analyzed all of the public comments IRS had received on Notice 2014-21 as of August 19, 2019, to determine the concerns raised about virtual currency tax compliance. IRS sent us 229 public comments. We identified 25 of the comments as not applicable because they were not related to Notice 2014-21, were duplicate comments, or were otherwise not relevant. Two reviewers coded the content of the 204 applicable public comments and grouped them into 13 different thematic categories. We developed these categories based on the topics or issues that commenters identified. We assigned each separate issue raised by a comment to an existing category unless it did not relate to any of the existing categories, in which case we created a new category. We also recorded the date the comment was submitted and the occupation of the commenter, if specified in the comment. To assess the reliability of these data, we reviewed relevant documentation and consulted knowledgeable IRS officials. Specifically, we requested information from IRS’s Office of Chief Counsel to identify the quality controls in place to help ensure all comments are processed. We determined that the data were sufficiently reliable for our purposes. The information we obtained from these comments may not be representative of the viewpoints of the entire U.S. public. In addition, we interviewed the stakeholders mentioned above before IRS released new guidance in October 2019 to identify any taxpayer concerns, any compliance challenges with virtual currency tax obligations, and the extent to which the guidance provided in IRS’s Notice 2014-21 was meeting taxpayer needs. We reached out to these same stakeholders in October 2019, after IRS issued a new set of FAQs and Revenue Ruling 2019-24, to determine how these new guidance documents addressed taxpayers’ concerns. Of the five individuals and 10 groups we initially interviewed, we received responses regarding the new IRS guidance from four individuals and six groups. The information we obtained from these practitioners and exchanges is not generalizable to all practitioners and exchanges because we took a snowball sampling approach, but the information provides insight into the extent to which IRS’s virtual currency guidance is meeting the needs of taxpayers. To evaluate whether additional information reporting could assist IRS in ensuring compliance, we reviewed IRS’s requirements for information reporting for virtual currency transactions, including the laws and regulations for foreign asset reporting. We interviewed IRS officials in the SB/SE and LB&I operating divisions about how IRS’s third-party and taxpayer information reporting processes and current forms assist in IRS’s work to detect noncompliance for virtual currencies. We reviewed the websites of a judgmental selection of nine virtual currency exchanges for policies or statements about tax reporting, including whether the exchanges file Forms 1099-B or 1099-K. For the website review, we selected virtual currency exchanges that were based in the United States and that were likely, because of their size or public profile within the virtual currency industry, to have established policies regarding information reporting. For each exchange, we identified and categorized any statements on the exchange’s website regarding tax or information reporting, such as a statement that the exchange does not provide any tax forms to customers or a statement that the exchange provides information on a specific form to customers and IRS. We also interviewed the stakeholders mentioned above to determine what information is being reported to IRS and whether additional information reporting would help IRS and taxpayers with ensuring tax compliance. We interviewed executives from two exchanges to determine what burden, if any, information reporting does or could impose on exchanges and virtual currency users. We attempted to contact four additional exchanges but did not receive a response. Because we used a snowball sampling approach, the information we obtained from these virtual currency industry participants is not generalizable to all virtual currency industry participants. We conducted this performance audit from October 2018 to February 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Internal Revenue Service Appendix III: Comments from the Financial Crimes Enforcement Network Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact: Staff Acknowledgments In addition to the contact named above, Jeff Arkin (Assistant Director), Danielle Novak (Analyst-in-Charge), Theodore Alexander, Michael Bechetti, David Blanding, Jacqueline Chapin, Ed Nannenhorn, Bruna Oliveira, Kayla Robinson, and Andrew J. Stephens made key contributions to this report.

Virtual currencies, such as bitcoin, have grown in popularity in recent years. Individuals and businesses use virtual currencies as investments and to pay for goods and services. GAO was asked to review IRS's efforts to ensure compliance with tax obligations for virtual currencies. This report examines (1) what is known about virtual currency tax compliance; (2) what IRS has done to address virtual currency tax compliance risks; (3) the extent to which IRS's virtual currency guidance meets taxpayer needs; and (4) whether additional information reporting on virtual currency income could assist IRS in ensuring compliance. GAO reviewed IRS forms and guidance and interviewed officials at IRS, FinCEN, and other federal agencies, as well as tax and virtual currency stakeholders. Taxpayers are required to report and pay taxes on income from virtual currency use, but the Internal Revenue Service (IRS) has limited data on tax compliance for virtual currencies. Tax forms, including the information returns filed by third parties such as financial institutions, generally do not require filers to indicate whether the income or transactions they report involved virtual currency. IRS also has taken some steps to address virtual currency compliance risks, including launching a virtual currency compliance campaign in 2018 and working with other agencies on criminal investigations. In July 2019, IRS began sending out more than 10,000 letters to taxpayers with virtual currency activity informing them about their potential tax obligations. IRS's virtual currency guidance, issued in 2014 and 2019, addresses some questions taxpayers and practitioners have raised. For example, it states that virtual currency is treated as property for tax purposes and that using virtual currency can produce taxable capital gains. However, part of the 2019 guidance is not authoritative because it was not published in the Internal Revenue Bulletin (IRB). IRS has stated that only guidance published in the IRB is IRS's authoritative interpretation of the law. IRS did not make clear to taxpayers that this part of the guidance is not authoritative and is subject to change. Information reporting by third parties, such as financial institutions, on virtual currency is limited, making it difficult for taxpayers to comply and for IRS to address tax compliance risks. Many virtual currency transactions likely go unreported to IRS on information returns, due in part to unclear requirements and reporting thresholds that limit the number of virtual currency users subject to third-party reporting. Taking steps to increase reporting could help IRS provide taxpayers useful information for completing tax returns and give IRS an additional tool to address noncompliance. Further, IRS and the Financial Crimes Enforcement Network (FinCEN) have not clearly and publicly explained when, if at all, requirements for reporting financial assets held in foreign countries apply to virtual currencies. Clarifying and providing publicly available information about those requirements could improve the data available for tax enforcement and make it less likely that taxpayers will file reports that are not legally required.