Recovery Act: States' Use of Highway and Transit Funds and Efforts to Meet the Act's Requirements
Published: 2009-12-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act) included more than $48 billion for the Department of Transportation's (DOT) investment in transportation infrastructure, including highways, rail, and transit. This testimony--based on Government Accountability Office (GAO) report GAO-10-231 , issued on December 10, 2009, in response to a mandate under the Recovery Act--addresses (1) the uses of Recovery Act highway funding, including the types of projects states have funded and efforts by DOT and the states to meet the requirements of the act, and (2) the uses of Recovery Act transit funding and how recipients of Recovery Act funds are reporting information on the number of jobs created and retained under section 1512. In GAO-10-231 , GAO continues to examine the use of Recovery Act funds by 16 states and the District of Columbia (District), representing about 65 percent of the U.S. population and two-thirds of the federal assistance available through the act. GAO also obtained data from DOT on obligations and reimbursements for the Recovery Act's highway infrastructure and public transportation funds. GAO updates the status of agencies' efforts to implement previous GAO recommendations to help address a range of accountability issues as well as a matter for congressional consideration. No new recommendations are being made at this time. The report draft was discussed with federal and state officials, who generally agreed with its contents.
section_title: What GAO Found
paragraphs: Three-quarters of Recovery Act highway funds have been obligated, and reimbursements from the Federal Highway Administration (FHWA) are increasing. As of November 16, 2009, $20.4 billion had been obligated for just over 8,800 highway projects nationwide and $4.2 billion had been reimbursed nationwide by FHWA. States continue to dedicate most Recovery Act highway funds for pavement projects, but use of funds may vary depending on state transportation goals. Almost half of Recovery Act highway obligations nationally have been for pavement improvements--including resurfacing, rehabilitating, and reconstructing roadways. About 10 percent of funds has been obligated to replace and improve bridges, while 9 percent has been obligated to construct new roads and bridges. States are taking steps to meet Recovery Act highway requirements; for example, both state and federal officials believe the states are on track to obligate all highway funds by the March 2010 1-year deadline. However, two factors may affect some states' ability to meet the requirement. First, many states are awarding contracts for less than the original cost estimates; this allows states to have funds deobligated and use the savings for other projects, but additional projects must be identified quickly. Second, obligations for projects in suballocated areas, while increasing, are generally lagging behind obligations for statewide projects in most states and lagging considerably behind in a few states. In the weeks ahead, FHWA and the states have the opportunity to exercise diligence to both promptly seek deobligation of known savings and to identify projects that make sound use of Recovery Act funding. The Federal Transit Administration reports that the majority of transit funds have been obligated. As of November 5, 2009, almost $6 billion of the $6.9 billion appropriated for the Transit Capital Assistance Program had been obligated nationwide. Almost 88 percent of these obligations are being used for transit facilities, bus fleets, and preventive maintenance. The remaining funds are being used for rail car purchases, leases, and training, among other things--all of which are eligible expenses. Through our ongoing audit work, GAO continued to find confusion among recipients about how to calculate the numbers of jobs created and saved that is required by Recovery Act reporting requirements. First, a number of transit agencies continue to express confusion about calculating the number of jobs resulting from Recovery Act funding, especially with regard to using Recovery Act funds for purchasing equipment, such as new buses. The second area of confusion GAO found involved the methodology recipients were using to calculate full-time equivalents for the recipient reporting requirements. For example, in one state, four transit entities used a different denominator to calculate the number of full-time equivalent jobs they reported on their recipient reports for the period ending September 30, 2009. In its September 2009 report, GAO recommended that DOT continue its outreach to transit agencies regarding reporting requirements and provide additional guidance, as appropriate. DOT officials stated that they are continuing outreach to transit agencies and will continue to assess the need to provide additional information.

section_title: Letter
paragraphs: I am pleased to be here to discuss our work examining selected states’ use  of funds made available for highway infrastructure projects and public  transportation under the American Recovery and Reinvestment Act of  2009 (Recovery Act). Congress and the administration have fashioned a  significant response to what is generally considered to be the nation’s  most serious economic crisis since the Great Depression. The Recovery  Act’s combined spending and tax provisions are estimated to cost $787  billion, including more than $48 billion in spending by the U.S. Department  of Transportation (DOT) for investments in transportation infrastructure  such as highways, passenger rail, and transit. The Recovery Act specifies  several roles for GAO, including conducting ongoing reviews of selected  states’ and localities’ use of funds made available under the act. We  recently completed our fourth review, being issued today, which examined  a core group of 16 states, the District of Columbia (District), and selected  localities. Our review of transportation programs focused on the  Recovery Act funding provided for highway and transit programs.
My statement today is based largely on our fourth review and addresses  (1) the uses of Recovery Act highway funding, including the types of  projects states have funded and efforts by DOT and the states to meet the  requirements of the act, and (2) the uses of Recovery Act transit funding  and how recipients of Recovery Act funds are reporting information on the  number of jobs created and retained. The states selected for our review  contain about 65 percent of the U.S. population and are estimated to  receive collectively about two-thirds of the intergovernmental federal  assistance funds available through the Recovery Act. We selected these  states and the District on the basis of federal outlay projections,  percentage of the U.S. population represented, unemployment rates and  changes, and a mix of states’ poverty levels, geographic coverage, and  representation of both urban and rural areas. We also obtained data from  DOT on obligations and reimbursements for the Recovery Act’s highway  infrastructure funds. We conducted performance audits for our fourth  review from September 2009 to December 2009 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.
subsections: section_title: Background
paragraphs: The Recovery Act provides funding to states for restoration, repair, and  construction of highways and other activities allowed under the Federal- Aid Highway Surface Transportation Program and for other eligible  surface transportation projects. In March 2009, $26.7 billion was  apportioned to all 50 states and the District for highway infrastructure and  other eligible projects. The Recovery Act requires that 30 percent of these  funds be suballocated, primarily based on population, for metropolitan,  regional, and local use. Highway funds are apportioned to states through  federal-aid highway program mechanisms, and states must follow existing  program requirements, which include ensuring the project meets all  environmental requirements associated with the National Environmental  Policy Act (NEPA), paying a prevailing wage consistent with federal Davis- Bacon Act requirements, complying with goals to ensure disadvantaged  businesses are not discriminated against in the awarding of construction  contracts, and using American-made iron and steel in accordance with Buy  America program requirements. While the maximum federal fund share of  highway infrastructure investment projects under the existing federal-aid  highway program is generally 80 percent, under the Recovery Act, it is 100  percent.
The Recovery Act appropriated $8.4 billion to fund public transit  throughout the country mainly through three existing Federal Transit  Administration (FTA) grant programs, including the Transit Capital  Assistance Program and the Fixed Guideway Infrastructure Investment  program. The majority of the public transit funds—$6.9 billion (82  percent)—was apportioned for the Transit Capital Assistance Program,  with $6 billion designated for the urbanized area formula grant program  and $766 million designated for the nonurbanized area formula grant  program. Under the urbanized area formula grant program, Recovery Act  funds were apportioned to large and medium urbanized areas—which in  some cases include a metropolitan area that spans multiple states— throughout the country according to existing program formulas. Recovery  Act funds were also apportioned to states for small urbanized areas and  nonurbanized areas under the formula grant programs using the program’s  existing formula. Transit Capital Assistance Program funds may be used  for such activities as facilities renovation or construction, vehicle  replacements, preventive maintenance, and paratransit services. Up to 10  percent of apportioned Recovery Act Transit Capital Assistance funds may  also be used for operating expenses. The Fixed Guideway Infrastructure  Investment program was appropriated $750 million, of which $742.5  million was apportioned by formula directly to qualifying urbanized areas.  The funds may be used for any capital projects to maintain, modernize, or  improve fixed guideway systems. The maximum federal fund share for  projects under the Recovery Act’s Transit Capital Assistance Program and  the Fixed Guideway Infrastructure Investment program is 100 percent; the  federal share under the existing programs is generally 80 percent.
As they work through the state and regional transportation planning  process, designated recipients of funds apportioned for transit—typically  public transit agencies and metropolitan planning organizations (MPO)— develop a list of transit projects that project sponsors (typically transit  agencies) submit to FTA for Recovery Act funding. FTA reviews the  project sponsors’ grant applications to ensure that projects meet eligibility  requirements and then obligates Recovery Act funds by approving the  grant application. Project sponsors must follow the requirements of the  existing programs, which include ensuring the projects funded meet all  regulations and guidance pertaining to the Americans with Disabilities Act  (ADA), pay a prevailing wage consistent with federal Davis-Bacon Act  requirements, and comply with goals to ensure disadvantaged businesses  are not discriminated against in the awarding of contracts.
section_title: Most Highway Recovery Act Funding Has Been Obligated, and DOT and the States Are Taking Steps to Meet the Act’s Requirements
subsections: section_title: Most Highway Funds Have Been Obligated, and Reimbursements Are Increasing
paragraphs: Three quarters of Recovery Act funds provided for highway infrastructure  investment has been obligated nationwide and in the 16 states and the  District that are the focus of our review. For example, as of November 16,  2009, $20.4 billion of the funds had been obligated for just over 8,800  projects nationwide and $4.2 billion had been reimbursed. In the 16 states  and the District, $11.9 billion had been obligated for nearly 4,600 projects  and $1.9 billion had been reimbursed.
Table 1 shows the funds apportioned and obligated nationwide and in  selected states as of November 16, 2009.
As of November 16, 2009, $4.2 billion had been reimbursed nationwide by  the Federal Highway Administration (FHWA), including $1.9 billion  reimbursed to the 16 states and the District. These amounts represent 20  percent of the Recovery Act highway funding obligated nationwide and 16  percent of the funding obligated in the 16 states and the District. As we  reported in our September report, because it can take 2 or more months  for a state to bid and award the work to a contractor and have work begin  after funds have been obligated for specific projects, it may take months  before states request reimbursement from FHWA. However  reimbursements have increased considerably over time, from $10 million  in April to $4.2 billion in mid-November. Reimbursements have also  increased considerably since we reported in September, when $604 million  had been reimbursed to the 16 states and the District and $1.4 billion had  been reimbursed nationwide. See figure 1.
While reimbursement rates have been increasing, wide differences exist  across states. Some differences we observed among the states were  related to the complexity of the types of projects states were undertaking  and the extent to which projects were being administered by local  governments. For example, Illinois and Iowa have the highest  reimbursement rates—36 percent and 53 percent of obligations,  respectively—far above the national average. Illinois and Iowa also have a  far larger percentage of funds devoted to resurfacing projects than other  states—as discussed in the next section, resurfacing projects can be  quickly obligated and bid. Florida and California have among the lowest  reimbursement rates, less than 2 percent and 4 percent of obligations respectively. Florida is using Recovery Act funds for more complex  projects, such as constructing new roads and bridges and adding lanes to  existing highways. Florida officials also told us that the pace of award ing  contracts has been generally slower in areas where large numbers of  projects are being administered by local agencies. In California, state  officials said that projects administered by local agencies may take longe to reach the reimbursement phase than state projects due to additional  steps required to approve local highway projects. For example, highway  construction contracts administrated by local agencies in California call  for a local public notice and review period, which can add nearly 6 weeks to the process. In addition, California state officials stated that localit tend to seek reimbursement in one lump sum at the end of a project,   reimbursement rates not matching levels of  which can contribute to ongoing construction.
section_title: States Continue to Dedicate Most Recovery Act Highway Funds for ut Pavement Projects, b Use of Funds Varies Depending on State Transportation Goals
paragraphs: Almost half of Recovery Act highway obligations nationally have bee pavement improvements—including resurfacing, rehabilitating, and  reconstructing roadways—consistent with the use of Recovery Act fundin our previous reports. Specifically, $4.5 billion, or 22 percent, is being used for road resurfacing projects, while $5.2 billion, or 26 percent, is  being used for reconstructing or rehabilitating deteriorated roads. As we  have reported, many state officials told us they selected a large percentag of resurfacing and other pavement improvement projects because those  projects did not require extensive environmental clearances, were quick t design, could be quickly obligated and bid, could employ people q uickly,  and could be completed within 3 years. In addition to pavement  improvement, other projects that have significant funds obligated include  pavement widening (reconstruction that includes adding new capa city to  existing roads), with $3 billion (15 percent) obligated, and bridge  replacement and improvements, with $2 billion (10 percent) obligated. Construction of new roads and bridges accounted for 6 percent and 3  percent of funds obligated, respectively. Figure 2 shows obligations by the  types of road and bridge improvements being made.
According to California officials, under a state law enacted in March 200 62.5 percent of funds went directly to local governments for projects of  their selection, while the remaining 37.5 percent is being used main state highway rehabilitation and maintenance projects that, due to  significant funding limitations, would not have otherwise been funded.  According to California officials, distributing a majority of funds to  localities allows a number of locally important projects to be funded.
Mississippi used over half its Recovery Act funds for pavement  improvement projects and around 14 percent of funds for pavement  widening. The Executive Director of the state transportation department  told us the Recovery Act allowed Mississippi to undertake needed projects and to enhance the safety and performance of the state’s highway system.  However, the Executive Director also said that the act’s requirements that  priority be given to projects that could be completed in 3 years resulted  in  missed opportunities to address long-term needs, such as upgrading a  state roadway to interstate highway standards, that would have likel a more lasting  development.  impact on Mississippi’s infrastructure and economic  In Florida, 36 percent of funds have been obligated for pavement-w projects (compared with 15 percent nationally) and 23 percent for  construction of new roads and bridges (compared with 9 percent  nationally), while in Ohio, 32 p road and bridge construction.  ercent of funds have been obligated for new    Pennsylvania targeted Recovery Act funds to reduce the number of  structurally deficient bridges in the state. As of October 2009, 31 per of funds in Pennsylvania were obligated for bridge improvement and  replacement (compared with 10 percent nationally), in part because a  cent  significant percentage (about 26 percent, as of 2008) of the state’s bridges  are structurally deficient.
Massachusetts has used most of its Recovery Act funds to date for  pavement improvement projects, including 30 percent of funds for  resurfacing projects and 43 percent of funds for reconstructing or  rehabilitating deteriorated roads.  A Massachusetts official told us that the  focus of its projects for reconstructing and rehabilitating roads, as well as  the focus of future project selections, is to select projects that promote the  state’s broader long-term economic development goals. For example,  according to a Massachusetts official, the Fall River development park  project supports an economic development project and includes  construction of a new highway interchange and new access roadways to a  proposed executive park. FHWA officials expressed concern that  Massachusetts may be pursuing ambitious projects that run the risk of not  meeting Recovery Act requirements that all funds be obligated by March  2010.
section_title: States Are Taking Additional Steps to Meet Recovery Act Highway Requirements, Including the Obligation Deadline and the Economically Distressed Area and Maintenance-of-Effort Requirements
paragraphs: Recovery Act highway funding is apportioned under the rules governing  the Federal-Aid Highway Program generally and its Surface Transportation  Program in particular, and states have wide latitude and flexibility in  which projects are selected for federal funding. However, the Recovery  Act tempers that latitude with requirements that do not exist in the regular  program, including the following requirements:    States are required to ensure that all apportioned Recovery Act funds— including suballocated funds—are obligated within 1 year (before Mar. 2,  2010). The Secretary of Transportation is to withdraw and redistribute to  eligible states any amount that is not obligated within this time frame.  Any Recovery Act funds that are withdrawn and redistributed are available  for obligation until September 30, 2010.
Give priority to projects that can be completed within 3 years and to  projects located in economically distressed areas. Distressed areas are  defined by the Public Works and Economic Development Act of 1965, as  amended. According to this act, to qualify as an economically distressed  area, the area must (1) have a per capita income of 80 percent or less of  the national average; (2) have an unemployment rate that is, for the most  recent 24-month period for which data are available, at least 1 percent  greater than the national average unemployment rate; or (3) be an area the  Secretary of Commerce determines has experienced or is about to  experience a “special need” arising from actual or threatened severe  unemployment or economic adjustment problems resulting from severe  short- or long-term changes in economic conditions. In response to our  recommendation, FHWA, in consultation with the Department of  Commerce, issued guidance on August 24, 2009, that provided criteria for  states to use for designating “special need” areas for the purpose of  Recovery Act funding.
Certify that the state will maintain the level of spending for the types of  transportation projects funded by the Recovery Act that it planned to  spend the day the Recovery Act was enacted. As part of this certification,  the governor of each state is required to identify the amount of funds the  state plans to expend from state sources from February 17, 2009, through  September 30, 2010.
The first Recovery Act requirement is that states have to ensure that all  apportioned Recovery Act funds—including suballocated funds—are  obligated within 1 year. Over 75 percent of apportioned Recovery Act  highway funds had been obligated as of November 16, 2009, both  nationwide and among the 16 states and the District. Nine states and the  District have higher obligation rates than the national average, including  Iowa and the District—for which FHWA has obligated 96 percent and 86  percent of funds, respectively. Conversely, Arizona, Massachusetts, Ohio,  and Texas have obligation rates of between 52 percent and 62 percent of  apportioned funds. Officials at FHWA and state department of  transportation officials in the states we reviewed generally believe that  these states are on track to meet the March 2010 1-year deadline.
However, two factors may affect some states’ ability to meet the 1-year  requirement. First, many state and local governments are awarding  contracts for less than the original estimated cost. This allows states to  use the savings from lower contract awards for other projects, but  additional projects funded with deobligated funds must be identified  quickly. In order to use the savings resulting from the lower contract  awards, a state must request FHWA to deobligate the difference between  the official estimate and the contract award amount and then obligate  funds for a new project.
Our analysis of contract award data shows that for the 10 states and the  District, the majority of contracts are being awarded for less than the  original cost estimates. While there is a variation in the number of  contracts being awarded for lower than their original estimates, every  state we collected information from awarded at least half of its contracts  for less than the original cost estimates. Some states had an extremely  high number of contracts awarded at lower amounts. For example,  California, Georgia, and Texas awarded more than 90 percent of their  contracts for less than their cost estimates. We also found a significant  variation in both the average amount and the range of the savings from  contracts awarded at lower amounts. For example, in the District and  Georgia, such contracts averaged more than 30 percent less than original  state estimates, while in Colorado and Massachusetts, such contracts  averaged under 15 percent less than original state estimates. In addition,  there is also a significant range in individual projects, with the savings  ranging from less then 1 percent under estimates in a number of states to  almost 55 percent under estimates in New York and over 90 percent under  in Illinois.
Federal regulations require states to promptly review and adjust project  cost estimates on an ongoing basis and at key decision points, such as  when the bid is approved. Many state officials told us that their state has  already started the process of ensuring funds are deobligated and  obligated to other highway programs and projects by the 1-year deadline.  For example, in Colorado, officials are planning to use Recovery Act funds  that are being deobligated by FHWA for 5 new projects, while in  California, FHWA deobligated approximately $108.5 million and the state  has identified 16 new projects for Recovery Act funding. FHWA officials  told us they recognize the need to develop a process to monitor and  ensure deobligation of Recovery Act funds from known savings before the  1-year deadline.
A second factor that may affect some states’ ability to meet the 1-year  requirement is that obligations for projects in suballocated areas, while  increasing, are generally lagging behind obligations for statewide projects  in most states and lagging considerably behind in a few states. In the 16  states and the District, 79 percent of apportioned statewide funds had  been obligated as of October 31, 2009, while 65 percent of suballocated  funds had been obligated. Figure 3 shows obligations for statewide and  suballocated areas in the 16 states and the District.
As shown in figure 3, and as we reported in September 2009, FHWA has  obligated substantially fewer funds suballocated for metropolitan and  local areas in three states. While the national average for obligations of  Recovery Act funds for suballocated areas is 63 percent, as of October 31,  New Jersey, Massachusetts, and Arizona had obligation rates of 34  percent, 31 percent, and 18 percent of these funds, respectively. Officials  in these three states cited a number of reasons for this—including lack of  familiarity by local officials with federal requirements and increased staff  workload associated with Recovery Act projects—and reported they were  taking a number of actions to increase obligations, such as imposing  internal deadlines on local governments to identify and submit projects. As  of October 2009, Arizona had awarded four contracts (one more than it  had as of September 2009) representing $29 million of the $157 million of  suballocated funds. This represents 18 percent of suballocated funds—a  decline from the 21 percent of suballocated funds that had been obligated  when we reported in September 2009. Arizona Department of  Transportation officials told us that although one new contract had been  awarded, the state’s total obligation of suballocated funds had declined  because some suballocated funds were deobligated after more contracts  were awarded for less than the estimated amount. Officials also told us  that if local governments are not able to advertise contracts for  construction in suballocated areas prior to the March 2010 deadline, the  state would use Recovery Act funds on “ready-to-go” statewide highway  projects in those areas. Similarly, officials in two localities told us that if  projects intended for Recovery Act funds were in danger of not having  funds obligated by the deadline, they would use those funds on projects  now slated to be funded with state dollars and use state funding for other  projects.
Although states are working to have all of their suballocated funds  obligated before March 2010, failure to do so will not prohibit them from  participating in the redistribution of Recovery Act funds after March 2,  2010. The Secretary of Transportation is to withdraw highway funds,  including suballocated funds, that are not obligated before March 2, 2010.  A state that has obligated all of the funds that were apportioned for use by  the state (those that were not suballocated) is eligible to participate in this  redistribution, regardless of whether all of the state’s suballocated funds  have been obligated. FHWA has stated that it is in the process of  developing guidance on how the redistribution of any Recovery Act  funding that remains unobligated 1 year after apportionment. According to  DOT officials, consistent with guidance in the Recovery Act, FHWA  currently plans to model this redistribution after the process used each  year in the regular federal-aid highway program to redistribute obligation  authority, allowing Recovery Act funds redistributed to the states to be  available for any qualified project in a state.
The second Recovery Act requirement is to give priority to projects  located in economically distressed areas. In July and September 2009, we  identified substantial variation in the extent to which states prioritized  projects in economically distressed areas and how they identified these  areas. For example, we found instances of states developing their own  eligibility requirements for economically distressed areas using data or  criteria not specified in the Public Works and Economic Development Act  (Public Works). State officials told us they did so to respond to rapidly  changing economic conditions. In response to our recommendation,  FHWA, in consultation with the Department of Commerce, issued  guidance to the states in August 2009 on identifying and giving priority to  economically distressed areas and criteria to identify “special need”  economically distressed areas that do not meet the statutory criteria in the  Public Works act. In its guidance, FHWA directed states to maintain  information as to how they identified, vetted, examined, and selected  projects located in economically distressed areas and to provide FHWA’s  division offices with documentation that demonstrates satisfaction of the  “special need” criteria. FHWA issued additional questions and answers  relating to economically distressed areas in November 2009.
Widespread designations of special needs areas gives added preference to  highway projects for Recovery Act funding; however, they also make it  more difficult to target Recovery Act highway funding to areas that have  been the most severely impacted by the economic downturn. Three of the  states we reviewed—Arizona, California, and Illinois—had each developed  and applied its own criteria for identifying economically distressed areas,  and in two of the three states, applying the new criteria increased the  number of areas considered distressed. In California, the number of  counties considered distressed rose from 49 to all 58 counties, while in  Illinois, the number of distressed areas increased from 74 to 92 of the  state’s 102 counties. All 15 counties in Arizona were considered distressed  under the state’s original determination and remained so when the state  applied the revised criteria. FHWA officials told us they expected the  number of “special need” distressed areas to increase when the new  guidance was applied. We plan to continue to monitor the states’  implementation of DOT’s economically distressed area guidance.
The third Recovery Act requirement is for states to certify that they will  maintain the level of state effort for programs covered by the Recovery  Act. As we reported in September 2009, most states revised the initial  explanatory or conditional certifications they submitted to DOT after  DOT’s April 22, 2009, guidance required states to recertify without  conditions. All states that submitted conditional certifications submitted a  second maintenance-of-effort certification to DOT without conditions, and  DOT concluded that the form of each state certification was consistent  with its April guidance. In June 2009, FHWA began to review each state’s  maintenance-of-effort calculation to determine whether the method of  calculation was consistent with DOT guidance and the amounts reported  by the states for planned expenditures for highway investment was  reasonable. For example, FHWA division offices evaluated, among other  things, whether the amount certified (1) covered the period from February  17, 2009, through September 30, 2010, and (2) included in-kind  contributions. FHWA division staff then determined whether the state  certification needed (1) no further action, (2) further assessment, or (3)  additional information. In addition, according to FHWA officials, their  assessments indicated that FHWA needed to clarify the types of projects  funded by the appropriations and the types of state expenditures that  should be included in the maintenance-of-effort certifications. As a result  of these findings, DOT issued guidance in June, July, and September 2009  and plans to issue additional guidance on these issues.
In August 2009, FHWA staff in headquarters reviewed the FHWA division  staff findings for each sate and proceeded to work with each FHWA  division office to make sure their states submit revised certifications that  will include the correct planned expenditures for highway investment— including aid to local agencies. FHWA officials said that of the 16 states  and the District that we reviewed for this study, they currently expect to  have 12 states submit revised certifications for state highway spending,  while an additional 2 states are currently under review and may have to  revise their certifications. DOT officials stated they have not determined  when they will require the states to submit their revised consolidated  certification. According to these officials, they want to ensure that the  states have enough guidance to ensure that all programs covered by the  Recovery Act maintenance-of-effort provisions have completed their  maintenance-of-effort assessments and that the states have enough  guidance to ensure that this is the last time that states have to amend their  certifications.
Most state officials we spoke with are committed to trying to meet their  maintenance-of-effort requirements, but some are concerned about  meeting the requirements. As we have previously reported, states face  drastic fiscal challenges, and most states are estimating that their fiscal  year 2009 and 2010 revenue collections will be well below estimated  amounts. Although the state officials we spoke with are committed to  trying to meet the maintenance-of-effort requirements, officials from seven  state departments of transportation told us the current decline in state  revenues creates major challenges in doing so. For example, Iowa, North  Carolina, and Pennsylvania transportation officials said it may be more  difficult for their departments to maintain their levels of transportation  spending if state gas tax and other revenues, which are used to fund state  highway and state-funded transportation projects, decline. In addition,  Georgia officials also stated that reduced state gas-tax revenues pose a  challenge to meeting its certified level of effort. Lastly, Mississippi and  Ohio transportation officials stated that if their state legislatures reduce  their respective department’s budget for fiscal year 2010 or 2011, the  department may have difficulty maintaining its certified spending levels.
section_title: FTA Reports That the Majority of Transit Funds Have Been Obligated, with Most Funding Being Used for Transit Facilities, Bus Fleets, and Preventive Maintenance
paragraphs: For Recovery Act transit funds, we focused our review on the Transit  Capital Assistance Program and the Fixed Guideway Infrastructure  Investment program, which received approximately 91 percent of the  Recovery Act transit funds, and on seven selected states that received  funds from these programs. As of November 5, 2009, about $6.7 billion of  the Recovery Act’s Transit Capital Assistance Program and the Fixed  Guideway Infrastructure Investment program funds had been obligated  nationwide. Almost 88 percent of Recovery Act Transit Capital Assistance  program obligations are being used for upgrading transit facilities,  improving bus fleets, and conducting preventive maintenance.
In March 2009, $6.9 billion was apportioned to states and urbanized areas  in all 50 states, the District, and five territories for transit projects and  eligible transit expenses under the Recovery Act’s Transit Capital  Assistance Program and $750 million was apportioned to qualifying  urbanized areas under the Recovery Act’s Fixed Guideway Infrastructure  Investment program. As of November 5, 2009, almost $6 billion of the  Transit Capital Assistance Program funds had been obligated nationwide  and $738 million of the Fixed Guideway Infrastructure Investment  program funds has been obligated nationwide.
Almost 88 percent of Recovery Act Transit Capital Assistance Program  obligations are being used for upgrading transit facilities, improving bus  fleets, and conducting preventive maintenance. Figure 4 shows Recovery  Act Transit Capital Assistance Program obligations for urbanized and  nonurbanized areas, by project type. As we reported in September 2009,  many transit agency officials told us they decided to use Recovery Act  funding for these types of projects since they are high-priority projects  that support their agencies short- and long-term goals, can be started  quickly, improve safety, or would otherwise not have been funded. This  continues to be the case. Following are some examples:    Transit infrastructure facilities: $2.8 billion, or 47 percent, of these funds  obligated nationally have been for transit infrastructure construction  projects and related activities, which range from large-scale projects, such  as upgrading power substations, to a series of smaller projects, such as  installing enhanced bus shelters. For example, in Pennsylvania, the Lehigh  and Northampton Transportation Authority will implement a new  passenger information technology system, install enhanced bus shelters  and signage, and fund a new maintenance facility. Elsewhere, in North  Carolina, the Charlotte Area Transit System will renovate its operating and  maintenance facilities. In addition, in California, the San Diego Association  of Governments plans to upgrade stations on a light-rail line and replace a  section of a railroad trestle bridge.
Bus fleets: $2 billion, or 33 percent, of Recovery Act funds obligated  nationally have been for bus purchases or rehabilitation to replace aging  vehicles or expand an agency’s fleet. For example, in Pennsylvania, the  Lehigh and Northampton Transportation Authority plans to purchase 5  heavy-duty hybrid buses and the Southeastern Pennsylvania  Transportation Authority plans to purchase 40 hybrid buses. In Iowa, the  state’s smaller transit agencies are combining bus orders through the  state’s department of transportation for 160 replacement buses and 20  buses to expand bus fleets in areas of growth around the state. In  Colorado, both the Regional Transportation District in Denver and the  Fort Collins-Transfort agency plan to purchase 6 buses each.
Preventive maintenance: Another $515 million, or 9 percent, has been  obligated for preventive maintenance. FTA considers preventive  maintenance projects eligible capital expenditures under the Transit  Capital Assistance Program.
The remaining obligations have been used for rail car purchases and  rehabilitation, leases, training, financing costs, and, in some limited cases,  operating expenses—all of which are eligible expenditures. In particular,  transit agencies reported using $5.2 million, or less than 1 percent, of the  Transit Capital Assistance Program funds obligated by FTA for operating  expenses. For example, the Des Moines transit agency has proposed to use  approximately $788,800 for operating expenses, such as costs associated  with personnel, facilities, and fuel.
Funds from the Recovery Act Fixed Guideway Infrastructure Investment  program may also be used for transit improvement projects; however this  is limited to fixed guideway transit facilities and equipment. Recipients  may use the funding on any capital purpose to include purchasing of  rolling stock, improvements to rail tracks, signals and communications,  and preventive maintenance. For example, in New York, FTA approved a  $254.4 million grant from Recovery Act Fixed Guideway Infrastructure  Investment funds for the Metropolitan Transportation Authority for a  variety of maintenance and safety improvement projects, including the  Jackson Avenue Vent Plant Rehabilitation project in Long Island City. In  addition, northeastern Illinois’s Regional Transportation Authority is  planning on using $95.5 million that was obligated from the Fixed  Guideway Infrastructure Investment program to provide capital assistance  for the modernization of existing fixed guideway systems. Metra (a  regional commuter rail system that is part of the authority) plans to use  these funds, in part, to repair tracks and rehabilitate stations.
section_title: Some State Transit Officials and Bus Manufacturers Are Using Different Criteria to Measure Job Creation and Retention
paragraphs: As we reported in September, recipients of transit Recovery Act funds,  such as state departments of transportation and transit agencies, are  subject to multiple reporting requirements. First, under section 1201(c) of  the Recovery Act, recipients of transportation funds must submit periodic  reports to DOT on the amount of federal funds appropriated, allocated,  obligated, and reimbursed; the number of projects put out to bid, awarded,  or for which work has begun or been completed; and the number of direct  and indirect jobs created or sustained, among other things. DOT is  required to collect and compile this information for Congress, and it  issued its first report to Congress in May 2009. Second, under section 1512,  recipients of Recovery Act funds, including but not limited to  transportation funds, are to report quarterly on a number of measures,  such as the use of funds and the number of jobs created or retained.
To help recipients meet these reporting requirements, DOT and the Office  of Management and Budget (OMB) have provided training and guidance.  For example, DOT, through FTA, conducted a training session consisting  of six webinars to provide information on the 1201(c) reporting  requirements, such as who should submit these reports and what  information is required. In addition, FTA issued guidance in September  2009 that provided a variety of information, including definitions of data  elements. OMB also issued implementing guidance for section 1512  recipient reporting. For example, on June 22, 2009, OMB issued guidance  to dispel some confusion related to reporting on jobs created and retained  by providing, among other information, additional detail on how to  calculate the relevant numbers. Despite this guidance, we reported in  September that transit officials expressed concerns and confusion about  the reporting requirement, and therefore we recommended that DOT  continue its outreach to transit agencies to identify common problems in  accurately fulfilling reporting requirements and provided additional  guidance, as appropriate. In responding to our recommendation, DOT said  it had conducted outreach, including providing technical assistance  training and guidance, to recipients and will continue to assess the need to  provide additional information.
Through our ongoing audit work, we continued to find confusion among  recipients about how to calculate the numbers of jobs created and saved  that is required by DOT and OMB for their reporting requirements. First, a  number of transit agencies continue to express confusion about  calculating the number of jobs resulting from Recovery Act funding,  especially with regard to using Recovery Act funds for purchasing  equipment, such as new buses. For the section 1201(c) reporting  requirement, transit agencies are not to report any jobs created or  sustained from the purchase of buses. However, for the section 1512  recipient reporting requirement, transit agencies were required to report  jobs created or retained from bus purchases, as long as these purchases  were directly from the bus manufacturers and not from dealer lots. FTA  held an outreach session in September 2009 with representatives from bus  manufacturers and the American Public Transportation Association in an  effort to standardize 1512 reporting methods and clarify recipient  responsibilities under the federal recipient reporting requirements. FTA,  the represented manufacturers, and American Public Transportation  Association discussed a standardized methodology that was established by  OMB for calculating the number of jobs created or retained by a bus  purchase with Recovery Act funds. Under the agreed-upon methodology,  bus manufacturers are to divide their total U.S. employment by their total  U.S. production to determine a standard “full-time equivalents” (FTE)-to- production ratio. The bus manufacturers would then multiply that FTE-to- production ratio by a standard full-time schedule in order to provide  transit agencies with a standard “direct job hours”-to-production ratio.  This ratio is to include hours worked by administrative and support staff,  so that the ratio reflects total employment. Bus manufacturers are to  provide this ratio to the grantees, usually transit agencies, which the  grantee then can use to calculate the number of jobs created or retained  by a bus purchase. FTA officials told us that the selected group of bus  manufacturers and FTA agreed that this methodology—which allows  manufacturers to report on all purchases, regardless of size—simplifies  the job reporting process. According to guidance, it is the responsibility of  the transit agency to contact the manufacturer and ask how many jobs  were related to that order. The manufacturers, in turn, are responsible for  providing the transit agencies with information on the jobs per bus ratio at  the time when buses are delivered. If the manufacturers cannot give the  agencies a jobs estimate, the transit agencies must develop their own  estimate.
While representatives from three bus manufacturers we interviewed were  using the agreed-upon methodology, they highlighted a number of  different issues related to job estimates:    Representatives from two bus manufacturers reported not knowing about  the FTA methodology and used their own measures for jobs created or  retained. For example, representatives from two manufacturers told us  that the labor-hours required to produce a bus formed the basis for their  calculation of FTEs and was then pro-rated based upon the amount of  production taking place in the United States and the purchase amount  funded by Recovery Act dollars.
One bus manufacturer representative said it was difficult to prorate the  jobs calculation by the proportion funded by the Recovery Act, as the  agreed-upon methodology requires, since they did not always receive this  information from the transit agencies.
According to FTA officials, the manufacturer is only responsible for  reporting the ratio of jobs created or retained per bus produced; the  purchasing transit agencies are responsible for the prorating and final  calculation of jobs created or retained. However, even bus manufacturers  that were otherwise aware of FTA guidance and following FTA’s  methodology would sometimes calculate the total number of jobs created  or retained by a purchase.
The second area of confusion we found involved the methodology  recipients were using to calculate full-time equivalents for the recipient  reporting requirements. As we reported in our November 2009 report on  recipient reporting, the data element on jobs created or retained expressed  in FTEs raised questions and concerns for some recipients.  In section 5.2  of the June 22 guidance, OMB states that “the estimate of the number of jobs  required by the Recovery Act should be expressed as FTE, which is  calculated as the total hours worked in jobs retained divided by the number  of hours in a full-time schedule, as defined by the recipient.” Further, “the  FTE estimates must be reported cumulatively each calendar quarter.” In  addition to issuing guidance, OMB and DOT provided several types of  clarifying information to recipients as well as opportunities to interact and  ask questions or receive help with the reporting process. However, FTE  calculations varied depending on the period of performance the recipient  reported on, and we found examples where the issue of a project period of  performance created significant variation in the FTE calculation. For  example, in Pennsylvania, each of four transit entities we interviewed used a  different denominator to calculate the number of full-time equivalent jobs  they reported on their recipient reports for the period ending September 30,  2009. Southeastern Pennsylvania Transportation Authority in Philadelphia  used 1,040 hours as its denominator since it had projects under way in two  previous quarters. Port Authority of Allegheny County prorated the hours  based on the contractors’ start date, as well as to reflect that hours worked  from September were not included due to lag time in invoice processing;  Port Authority used 1,127 hours for contractors starting before April, 867  hours for contractors starting in the second quarter, and 347 hours for  contractors starting in the third quarter. Lehigh and Northampton  Transportation Authority in Allentown used 40 hours in the 1512 report they  tried to submit, but, due to some confusion about the need for corrective  action, the report was not filed. Finally, the Pennsylvania Department of  Transportation reported using 1,248 hours, which was prorated by  multiplying 8 hours per workday times the 156 workdays between February  17 and September 30, 2009. In several other of our selected states, this  variation across transit programs’ period of performance for the FTE  calculation also occurred. Our November report provided additional detail  and recommendations to address the problems and confusion associated  with how FTEs were calculated in the October recipient report.
In summary Mr. Chairman, obligation of Recovery Act funds continues,  and states are using these funds for a variety of purposes to address the  particular transportation challenges in their states. DOT and the states  remain confident that the March 2010 1-year deadline for obligating all  highway funds will be met. It seems likely that funds will be available for  obligation after the March deadline, although estimating precisely how  much is difficult. This is because states continue to realize savings from  contracts awarded at less than estimated costs, allowing the savings to be  deobligated and obligated to other projects. In the weeks ahead, FHWA  and the states have the opportunity to exercise diligence to both promptly  seek deobligation of known savings and to identify projects that make  sound use of Recovery Act funding. In addition, if any funds are  withdrawn, they will be redistributed to states that have had all of their  statewide funds obligated by March and will be available for obligation by  FHWA. States that do not have all of their suballocated funds obligated by  March will not be precluded from receiving redistributed funds. We will  continue to monitor states’ and localities’ use of Recovery Act funds,  including the rates of deobligation. In addition, there is a lack of  understanding among transit agencies and bus manufacturers regarding  the suggested methodology for calculating the number of jobs created or  saved through bus purchases and the manufacturer’s role in the reporting  process. We have previously recommended that OMB work with recipients  to enhance understanding of the reporting process and that DOT continue  its outreach to state departments of transportation and transit agencies to  ensure recipients of Recovery Act funds are adequately fulfilling their  reporting requirements. Implementing these recommendations will be key  to addressing the lack of understanding we found related to reporting the  number of jobs saved or created through bus purchases. We will continue  to monitor states’ and localities’ use of Recovery Act funds in our future  reviews.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or other Members of the Committee  might have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For further information regarding this statement, please contact Katherine  A. Siggerud at (202) 512-2834 or siggerudk@gao.gov, or A. Nicole Clowers  at (202) 512-2834 or clowersa@gao.gov. 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  statement are Lauren Calhoun, Steve Cohen, Catherine Colwell, Robert  Ciszewski, Dean Gudicello, Heather Halliwell, Bert Japikse, Delwen Jones,  Hannah Laufe, Les Locke, Tim Schindler, Raymond Sendejas, Tina Won  Sherman, Crystal Wesco, Carrie Wilks, and Susan Zimmerman.
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