GSA Fleet: Information on the Effect of Donating Cars to YouthBuild USA and Potential Benefits to Rural Youthbuild Participants
Published: 2006-12-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To assist youth who live in high poverty rural areas obtain and retain jobs, YouthBuild USA, a national nonprofit organization, has proposed providing donated used cars to selected low-income youth in rural communities. YouthBuild USA's proposed program hinges on receiving donations of used cars from the federal government's General Services Administration (GSA). This report discusses (1) the effect of donating 1 to 5 percent of selected GSA used cars on GSA's fleet vehicle sales operations, (2) what studies have shown with respect to the benefits that car ownership or access may hold for low-income individuals, and (3) what studies of selected low income car ownership programs and experiences of these programs have shown with respect to the benefits of participant car ownership. In conducting this study, GAO examined auction data from GSA, reviewed academic studies on the benefits of car access in gaining employment, and interviewed officials of six existing low income car ownership programs.
section_title: What GAO Found
paragraphs: If GSA annually donated 1 to 5 percent of the compact sedans available for auction from its Fleet program (112 to 559 cars), its annual sales revenue would be reduced by $600,000 to $3 million. To donate cars directly to YouthBuild USA, GSA would need new statutory authority to deviate from the existing process for disposing of surplus federal property. If it were given this authority, GSA would likely first seek appropriations to recover the loss in sales revenue from the donations but would also consider increasing its leasing rates for compact sedans. However, GSA would also require new legislative authority to increase its rates for this purpose because the current statute governing its Fleet program does not allow it to pass on these costs to the agencies that lease vehicles from it. The seven studies GAO reviewed consistently found that owning a car or having access to one increases the likelihood that low-income individuals (such as rural Youthbuild participants) find a job. One reason for this is that a car allows a person to search for a job over a wider geographic area. Differences between the populations in these studies and rural Youthbuild participants did not allow GAO to use this research to identify the degree to which participants in YouthBuild USA's proposed program would benefit from having a car. Six studies of low income car ownership programs and the experiences of those operating the programs indicated that participants got and retained jobs, earned higher wages, and spent more time with their families as a result of owning a car. However, it is difficult to project the results of these studies to rural Youthbuild participants because of limitations in the methodologies of the studies, differences between individuals served by the programs and YouthBuild USA, and differences in the designs of the existing programs and the YouthBuild USA proposal.

section_title: Letter
paragraphs: Youth between the ages of 16 and 24 who live in high poverty areas can face  significant obstacles to finding employment and receiving job training,  including low levels of academic achievement, limited work experience,  and a scarcity of jobs in their communities. In rural communities, these  youth may face the additional challenge of a lack of transportation to get to  available job opportunities because of scarce public transportation and,  according to job training and other social service providers, having a car is  often a necessity for obtaining and keeping a good job. To address this  challenge, YouthBuild USA, a national nonprofit organization working to  increase the number of youth transitioning out of poverty, has proposed  providing donated vehicles to selected low-income youth in rural  communities to travel to job training sites and to work. YouthBuild USA’s  proposed Rural Initiative Low Income Car Ownership (LICO) program  hinges on receiving donations of used cars from the federal government’s  General Services Administration (GSA).
GSA purchases new vehicles and then leases them to federal agencies  through its Fleet program. Each year, GSA sells at auction approximately  40,000 of these vehicles, most of which are 3 to 4 years old. The proceeds  from these auctions help fund purchases of new vehicles for the Fleet  program. Under its proposed LICO program, YouthBuild USA is seeking  donations of 1 to 5 percent of the vehicles GSA auctions off annually, which  it would then provide to participants in selected rural Youthbuild programs.  Because GSA’s Fleet program is currently self-sustaining and YouthBuild  USA does not yet have experience operating a LICO program, you asked us  to report on the implications of YouthBuild USA’s proposal. Specifically,  this report (1) assesses the effect of donating 1 to 5 percent of selected GSA  used cars on GSA’s fleet vehicle sales operations, (2) describes what  studies have shown with respect to the benefits that car ownership or  access may hold for low-income individuals, and (3) describes what studies  of selected LICO programs and experiences of these programs have shown  with respect to the benefits of participant car ownership.
To assess the effect on GSA’s fleet vehicle sales operations from donating  vehicles, we focused our analysis on GSA compact sedans to determine the  average opportunity cost—the reduction in revenue for each compact  sedan GSA would donate—and the total reduction in sales revenue GSA  would face by donating 1 to 5 percent of its used compact sedans (112 to  559 cars) to YouthBuild USA’s proposed Rural Initiative LICO program. To  describe the results studies have shown with respect to benefits of car  access (that is, owning a car or having access to one), we identified and  reviewed academic studies that had been subject to a peer review and  spoke with experts. To describe what some LICO programs have shown  with respect to the benefits of participant car ownership, we identified six  LICO programs that had been the subjects of external reviews of their  programs’ outcomes. We also met with officials from these LICO programs  to learn about how their programs operated and how they reported  outcomes. Appendix I provides additional details on our objectives, scope,  and methodology. We conducted our work from May 2006 to November  2006 in San Francisco, California, and Washington, D.C., in accordance  with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: GSA purchases about 35,000 to 40,000 vehicles annually for its Fleet  program and manages an inventory of almost 200,000 vehicles, including  sedans, passenger vans, trucks (light, medium, and heavy), buses,  ambulances, alternative fuel vehicles, and limited special purpose vehicles.  GSA then leases these vehicles to 75 participating federal agencies in the  United States, Europe, and Puerto Rico. As part of its leasing arrangement  with these agencies, GSA provides maintenance, repairs, fuel, and  management of accident claims and gets reimbursed for these costs by the  participating agencies. As part of a regular replacement schedule, GSA  sells older vehicles in its fleet.  The agency uses a nationwide network of  commercial auction firms to dispose of and sell about 35,000 to 40,000 of its  used vehicles annually. Federal agencies may dispose of property, such as  GSA’s vehicles, only in the manner authorized by statute. Specifically, GSA  auctions vehicles from the Fleet program under the “exchange/sale”  authority contained in the Federal Property and Administrative Services  Act (Federal Property Act). Under this authority, an executive agency may  acquire personal property by exchanging or selling similar items and  applying the exchange allowance or proceeds of sale, in whole or in part payment, for the property acquired. GSA uses the sales proceeds from  these auctions to help purchase new vehicles. Figure 1 illustrates GSA’s  process for leasing and subsequently auctioning vehicles.
Welfare reform experts contend that transportation is an important  element in assisting former welfare recipients with finding employment.    However, they also contend that public transportation is not always  convenient or accessible and, for some families receiving assistance,  driving is the best option. To address this issue, several communities  started LICO programs as highly individualized initiatives designed to meet  local transportation needs. In 2002, the National Economic Development  and Law Center documented at least 60 LICO programs across the country  serving welfare recipients and the working poor by helping with the high  costs associated with car ownership, including maintenance, repairs, and  insurance. Typically, these programs rely on older cars received through  donations from individuals. They employ a number of strategies that  include making affordable and reliable used vehicles directly available to  customers or providing low-cost loans to enable individuals to buy  vehicles. Today, there are over 160 documented programs across the  country serving the car ownership needs of low-income individuals.
YouthBuild USA, which to date has not operated its own LICO program, has  proposed a Rural Initiative LICO program that would rely on 3- to 4-year-old  vehicles donated by GSA to provide affordable and reliable transportation  for rural youth. YouthBuild USA is a national nonprofit organization that  provides staff training and technical assistance to the nationwide network  of almost 200 local Youthbuild programs. The local programs serve youth  between the ages of 16 and 24 and focus primarily on providing training in  the building trades. YouthBuild USA is proposing to obtain donated  vehicles directly from GSA Fleet and provide these vehicles to eligible  youth so that they can continue in the job training program or have reliable  transportation to work sites or college after they have graduated from the  program. Under the proposal, YouthBuild USA will identify eligible rural  Youthbuild programs and youth at these sites who would benefit from a  donated vehicle. The program would have several requirements for  participants, including possession of a valid driver’s license, eligibility for  insurance, good attendance in the Youthbuild program, and successful  completion of a 6-week car ownership course.  According to program  officials, YouthBuild USA would hold the title of the car for 3 years, during  which the participant would have to demonstrate a good track record for  preventative maintenance in order to fully own the vehicle. Rural  Youthbuild sites participating in the program would have to demonstrate  financial stability and the capacity to administer and provide project  oversight on the local level. Figure 2 presents a diagram of the proposed  YouthBuild USA Rural Initiative LICO program.
section_title: GSA Fleet Would Face Reduced Revenues and Need Legislative Authority to Donate Cars
paragraphs: If GSA were required to donate 1 to 5 percent of its compact sedans to  YouthBuild USA (112 to 559 cars), its annual sales revenue would be  reduced by an estimated $600,000 to $3 million. GSA Fleet, which manages  the agency’s program, receives no direct appropriations and depends on  the sale of these vehicles to sustain its operations. GSA does not currently  donate Fleet vehicles. Furthermore, it would need new statutory authority  to be able to donate them directly to YouthBuild USA because this would  deviate from the existing process for disposing of excess federal property.  If GSA were required to donate cars directly to YouthBuild USA, it would  seek an appropriation to recover the reduction in revenues this would  cause and consider increasing its leasing rates to federal agencies.  However, GSA would need additional new statutory authority to allow it to  increase its leasing rates for the purpose of recovering costs associated  with donating cars.
subsections: section_title: GSA Faces Reductions in Revenues from Donating Cars It Would Normally Auction
paragraphs: GSA would face reduced sales revenues of an estimated $600,000 to $3  million per year if it donated 1 to 5 percent of its used compact sedans from  its Fleet program (112 to 559 cars) to YouthBuild USA’s proposed Rural  Initiative LICO program rather than sell these cars through selected auction  houses around the country. From fiscal year 2002 through fiscal year 2006  (as of August 2006), GSA, on average, auctioned 11,171 compact sedans  each year, with a mean sales price of $5,511. GSA officials indicated that  they base their decision to sell their used cars on a combination of factors  intended to maximize their revenues. For example, they look at the  expected sales proceeds of the vehicle based on its age and mileage to  determine at what point they will get the maximum value for selling their  used cars. They currently use the following age and mileage guidelines for  selling their used cars:     3 years old and 36,000 or more miles, or   4 years old and any miles, or   any age and 60,000 or more miles.
In addition, GSA tracks the resale market to determine the high and low  points of the market to help decide when to sell and what types of vehicles  to sell. Finally, they look at events that could affect the used car market.  For example, Hurricane Katrina increased the demand for used vehicles in  parts of the country that were not affected by the hurricane.
If GSA donated to YouthBuild USA 1 percent of the compact sedans it  normally sells at auctions, this would be about 112 cars with a total  reduction in estimated sales revenues of about $600,000. If GSA donated 5  percent of the compact sedans it normally auctions, this would be about  559 cars with a total reduction in estimated sales revenues of about $3  million. Figure 3 shows the range of reduction in sales revenue from GSA  donating 1 to 5 percent of its compact sedans to YouthBuild USA (112 to  559 cars).
GSA Fleet, which manages the agency’s program, does not receive direct  appropriations from Congress; therefore, GSA officials indicated that GSA  Fleet would need to replace the reduction in sales revenues from donating  cars in order to continue to sustain its operations. Currently, to support its  Fleet operations, GSA relies on the proceeds of its auction of used vehicles  and the income it receives from the rates it charges agencies that lease  vehicles from it. According to GSA officials, in setting its leasing rates, it is  allowed to include an increment to these rates to cover inflation on its  current inventory of vehicles, as well as to cover the estimated replacement  cost of these vehicles to meet the demand of agencies that lease from the  Fleet program. This increment is known as replacement cost pricing. GSA  officials indicated that a revolving fund sustains the Fleet program, with  the revenues it receives from auctioning and from leasing vehicles,  offsetting the expenditures for operating the entire fleet of vehicles.
section_title: GSA Would Need Statutory Authority to Donate Vehicles Directly to YouthBuild USA
paragraphs: In order for GSA to donate cars from its Fleet program directly to  YouthBuild USA, it would need new statutory authority to deviate from the  existing process for disposing of surplus federal property. GSA Fleet does  not participate in this process. Specifically, under the process for disposing  of surplus federal property, federal agencies must determine if any property  under their control is excess, or no longer needed, within the agency. If this  is the case, they must then report this to GSA, which first determines if any  other federal agency needs the property. If no other agency needs it, GSA  declares the property to be “surplus” and can dispose of it in a number of  ways, such as by selling it or destroying it. GSA also has authority to donate  this property but may not do so directly to specific private organizations,  such as YouthBuild USA. Instead, it must donate the property through state  agencies, which, in turn, donate it to public agencies or certain nonprofit  educational or public health institutions or organizations.
According to GSA officials, if they were given the statutory authority  explicitly allowing them to donate vehicles from their Fleet program to  YouthBuild USA, they would likely first seek appropriations to the General  Supply Fund to make up for the reductions in revenues associated with  donating the vehicles. In addition, they would consider increasing the  rates they charge federal agencies to lease vehicles, in order to recover this  reduction in revenues. However, GSA currently lacks authority to pass on  the costs of donations to its client agencies. Specifically, the Federal  Property Act specifies how GSA is to set prices to recover the costs of  operating the fleet. The pricing formula (through which GSA sets its leasing  rates) specifies that prices should cover the costs of operating the fleet and  may include an increment for the cost of replacing fleet vehicles and  related equipment.  Because the costs associated with donations of fleet  vehicles would not be costs of operating or replacing the fleet and related  equipment, statutory authority would be needed in order to increase the  rates GSA charges its client agencies to recover the costs of donating cars  to YouthBuild USA.
GSA officials indicated there are different ways they might consider raising  leasing rates if given authority to do so but also expressed concerns about  the effect such an increase might ultimately have on the viability of the  Fleet program. For example, GSA could raise its rates only for those  agencies that lease compact sedans; this would result in a 1 percent  increase in order to recover the reduction of $600,000 in sales revenue. To  recover the reductions from donating 5 percent of its compact sedans ($3  million in sales revenue), GSA might raise its leasing rates by about 5  percent. Another option GSA could pursue would be to raise its rates  across all agencies that lease vehicles from it, regardless of car type. In this  case, all agencies that lease vehicles from GSA Fleet (not just those leasing  compact sedans) would subsidize the vehicle donations.
GSA officials indicated that if the agency raised its rates too high, this could  affect the economic viability of the Fleet program. Nothing requires federal  agencies to lease vehicles from GSA; they can lease from private  companies if they choose to do so. GSA officials told us that the agency is  currently less expensive than the private sector in terms of leasing rates.  GSA officials indicated that, while raising the rate GSA charges to lease  vehicles in order to recover the reduced sales revenue from donating 1 to 5  percent of its compact sedans to YouthBuild USA would probably not  cause the federal agencies to stop leasing from GSA, the officials are more  concerned that donating vehicles would inspire other nonprofit  organizations to seek donations from GSA Fleet. According to GSA  officials, they have received such requests in the past. If GSA were required  to donate a greater percentage of its Fleet vehicles to nonprofit  organizations, then GSA’s leasing rates could eventually become higher  than its competitors in the private sector and eventually drive GSA out of  the leasing business.
Another option GSA officials cited does not require a legislative change.  Specifically, GSA officials indicated that it could decrease the amount of  funds it uses to buy new cars each year. Because GSA would have less sales  revenue due to donating some of the cars it normally would sell, GSA  would have less funds to buy new cars. According to GSA officials, to  compensate for the purchase of fewer new cars, GSA would keep its cars in  the Fleet program longer than the current 3- to 5-year time period.  Furthermore, because these cars would be older than GSA’s current fleet,  they would require more maintenance, which would result in higher  maintenance costs. Due to the prospective nature of a donation program,  GSA officials indicated that they did not have sufficient information to give  a precise estimate of the increased maintenance costs GSA would incur.  Finally, GSA officials indicated that keeping cars longer might mean more  downtime for some of these cars, which might also result in a reduction of  revenues from leasing.
section_title: Available Research Suggests That Car Access Leads to Jobs and Other Benefits
paragraphs: Taken as a whole, the seven studies we reviewed consistently indicated  that owning a car or having access to one increases the likelihood that low- income individuals (such as rural Youthbuild participants) get a job (see  app. II for more information on each of the studies we reviewed).   According to recent research, this is because a car likely allows a person to  search for a job over a wider geographic area and to work during hours  when public transit is not available. While each of the studies had some  methodological limitations, they all produced fairly consistent results on  the effects of car access on employment and hours worked. Differences  between the populations in these studies and rural Youthbuild participants  did not allow us to use the studies’ results to identify the degree to which  participants in YouthBuild USA’s LICO program would benefit from having  a car.
subsections: section_title: Studies Reported Employment Benefits from Car Access
paragraphs: Taken as a whole, the seven studies we examined consistently indicated  that owning a car or having access to one increased the likelihood that  someone would get a job. For example, a 2005 study surveyed about 2,000  urban and rural welfare recipients in Tennessee starting in January 2001.   Researchers interviewed the same people every 6 months and asked  questions about car access and employment. The study indicated that  individuals with access to a car increased their chance of finding a job and  leaving welfare by about 59 percent. Another study obtained data from a  survey of a random sample of Alameda County, California, residents who  received welfare benefits in fiscal years 1992 to 1993. Researchers  surveyed these same individuals again in fiscal years 1994 and 1995 and  reported that private automobiles were more effective than increased  public transit in moving participants from welfare to work. Another study  estimated that owning a car increased the likelihood of being employed by  about 20 percent.
Three of the seven studies reported that car access led to more work hours  (the other four studies did not address this issue). For example, one study  examined the effects of car access on weekly hours worked and estimated  that access to a car increased the number of hours worked by nearly 9  hours per week. Two other studies, focusing on car ownership, estimated  increases of 5 to 11 hours per week in the number of hours those they  studied worked.
The literature gives several explanations for these results. For example, a  car likely allows a person to search for a job over a wider geographic area,  expanding the number of employment opportunities and the chances he or  she will find a job. Also, a car likely allows a person to work hours that are  not traditionally supported by public transit, increasing not only the hours  he or she can work, but the job openings that may be considered.
section_title: Studies Could Not Be Used to Estimate How Much Youthbuild Participants Would Benefit from Having a Car
paragraphs: Because there are several major differences between the individuals that  the researchers studied and those in the rural Youthbuild population, we  could not extrapolate from this research to identify the degree to which the  rural YouthBuild USA population would benefit from having a car. For  example, the studies generally reviewed welfare recipients who tended to  be older and better educated than the rural Youthbuild population.  Research has shown that older, more educated individuals are more likely  to find employment (with or without a car) than younger and less educated  individuals.
In addition, four of the studies we reviewed were based on data from  mainly urban populations, while two others used national data without  controlling for urban/rural locations. Controlling for differences such as  urban and rural populations would be necessary to extrapolate from these  studies for the Youthbuild population because of various differences  between the two groups. For example, we have reported in the past that  rural residents generally have fewer public transportation options and live  in less densely populated areas than urban residents, making them more  dependent on car access or ownership. Consequently, the effect of car  access in rural areas may be more difficult to discern and different than in  urban areas because rural residents have fewer transportation options  from which to choose. Also, rural unemployment rates are higher on  average than urban areas; as a result, the effect of increasing car access on  new employment may be substantially different than in urban areas.  Consequently, the research that did not distinguish rural and urban  populations did not allow us to gauge whether the rural YouthBuild USA  population would experience greater, equal, or lesser benefits than the  studies reported.
section_title: LICO Programs Report Positive Results, but Limitations Restrict Projecting Results to YouthBuild USA’s Program
paragraphs: Six studies of LICO programs, as well as the managers of these programs,  reported that participants were able to get a job or retain their current jobs,  received higher wages, and spent more time with their families as a result  of getting a car through the LICO programs. However, determining the  extent that Youthbuild participants would benefit from such a program is  not possible because of limitations in the methodologies of these studies,  differences between individuals served by these programs compared with  YouthBuild USA, and differences in the designs of the existing programs  and the YouthBuild USA proposal. For example, most of the studies had  low response rates from the participants, which prevented us from  projecting their results to all participants. In addition, in terms of program  design, the LICO programs studied are largely loan programs that provide  additional tools to aid participants, such as financial literacy training,  whereas YouthBuild USA proposes to donate cars and does not envision  additional support services. As a result, managers of the existing LICO  programs believed their participants’ outcomes may be different than  YouthBuild USA’s because the loan commitment, the financial literacy  training, and the low-risk profile of their participants altogether increase  the likelihood of success.
subsections: section_title: Studies and Experiences of Six LICO Programs Report Positive Results for Participants
paragraphs: Six LICO programs that had been subject to an external formal evaluation  study and officials of these programs reported that participants found jobs,  retained their current ones, or increased their income as a result of  obtaining a car through the program. For example, one of the studies  reported that 60 percent of the participants found a job after getting the car,  and another study reported that 97 percent of the participants surveyed  attributed their ability to find a job or retain their current one to the car  they obtained through the program. With respect to increasing participant  income, all six of the studies reported gains in earnings, and four of the six  studies reported that from 72 to 80 percent of the LICO program  participants secured or reported receiving higher wages. These studies  reported that participants believed that their increased wages were  attributable to the vehicle they received from the LICO program. Another  study reported that the participants experienced annual average income  increases from nearly $5,500 to $7,900 after getting a car. Additionally,  officials of the LICO programs told us their participants reported that  having a dependable and affordable car helped them find or retain their  jobs, helped them receive higher wages and work more hours, or find  better jobs.
The LICO program studies and the LICO officials reported that the program  participants benefited from an improved quality of life as a result of  obtaining a car through the LICO programs. According to the studies,  participants reported that having a car enabled them to improve their  education and training, find better quality day care for their children, and  spend more time with their families. One official of a LICO program added  that participants stated that having a car was a life transforming event,  increasing their financial stability and allowing them to obtain better  housing or become homeowners. Other LICO program officials stated that  participants reported that the car had a positive effect on their self-esteem  or gave them hope for the future. LICO program studies and officials stated  that their participants reported that the car they got through the program  allowed them to shop at discount centers rather than nearby more  expensive convenience stores.
section_title: Limitations in Studies Do Not Allow for Outcomes to Be Projected to YouthBuild USA’s Proposed LICO Program
paragraphs: Limitations in the methodologies in the six studies, such as low survey  response rates, restrict applying their employment outcomes to the entire  populations of the LICO programs studied or to participants in YouthBuild  USA’s proposed LICO program. For example, three studies reported  positive outcomes for participants, but these outcomes were based on low  response rates from LICO program participants. Specifically, these  studies reported the following:   A study of one LICO program that helps its participants obtain low- interest loans to purchase a used car reported that, among the  participants surveyed, 75 percent said that they found a job that paid  higher wages, and 55 percent reported obtaining better quality day care  for their children as a result of obtaining a car through the program.  Officials of this LICO program noted that participants found jobs (and  kept them longer) and improved their quality of life as a result of  obtaining a car from the LICO program. However, while the study of this  program attempted to contact the 90 participants, it only received  responses from 34 participants (38 percent). This raises the possibility  that the 56 nonrespondents, nearly two-thirds of those in the program,  may have had different experiences from the 34 who responded.
Another study of a LICO program that relied on data on participants’  earnings and employment reported that 63 percent retained their jobs  for 12 months after obtaining a car loan. However, data were not  available for all participants for the time periods of interest to the  researchers, and the study had to rely on samples of the 511 for whom  data were available. For example, there were only data on 131 program  participants that went back a full year before their loans were issued,  which raises the possibility that those for whom data was not available  had different outcomes from those for whom data was available.
Another study of a LICO loan program reported that 339 out of 353  participants surveyed experienced an improved quality of life in that  they were able to spend more time with their families. However, these  353 respondents were drawn from a pool of 2,200 that the study authors  created because they anticipated very high nonresponse rates, which  raises the possibility that the participants surveyed experienced very  different outcomes from those that were not surveyed.
section_title: Differences in Design and Participants the Programs Serve Also Limit Application of Study Results to YouthBuild USA’s Proposed Program
paragraphs: Officials of the LICO programs studied also told us that differences in  program design and population served to restrict the extent to which their  outcomes could be applied to YouthBuild USA’s proposed LICO program.  One of the major differences between the design of the LICO programs  studied and YouthBuild USA’s proposal is that most LICO programs we  consulted require participants to obtain a loan to purchase the car, while  YouthBuild USA proposes to give cars to participants for a one-time fee of  $450. Four of these six programs require participants to obtain a low- interest loan to purchase a car, while YouthBuild USA proposes donating  cars to participants. The other two programs obtain used cars, repair them  (if necessary), and then sell them to the participants at the cost of repairs  or at a very low cost. One of these two programs may also assist the  participants in obtaining a loan, and the other requires the participants to  make payments for the purchase of the car. In order to qualify for the loans,  the programs require participants to have adequate income to support car  payments and meet creditworthiness standards. Once they obtain the car,  participants must make the loan payments for the term of the loan.  Because of these requirements, as well as participants’ greater reliance on  their own resources, officials of these LICO programs told us that they  believe that their participants have greater incentives toward ensuring that  they realize the benefits of car ownership than do individuals who receive a  donated vehicle. Additionally, they believe that their participants become  more invested in getting jobs and achieving other results that are consistent  with the programs’ goals than would participants in a car donation program  such as what YouthBuild USA proposes.
These LICO programs provide additional support to their participants, such  as financial literacy training and car repair assistance, which might also  limit the application of the studies’ results because YouthBuild USA’s  proposal does not presently envision providing such services. Officials of  these LICO programs stated that, before allowing participants to obtain a  loan, it was important for them to understand how to budget their money  and deal with credit responsibly. They indicated that the financial literacy  training and subsequent counseling was an essential component of their  programs and tied to the success of participants fulfilling their obligations  on their loans, as well as getting or keeping their jobs.
Furthermore, most of the LICO programs implemented various  arrangements for costs of repairs as part of their programs. For example,  two programs developed plans to enable participants to cover the costs of  minor repairs by establishing accounts to which participants make small  monthly deposits, which they later may use for repair costs. Also, one of  these programs required participants to contribute a one-time fee of $250 to  a pool that could later be used to cover the costs of major repairs above  $700. Additionally, an official of one LICO program told us that it addressed  the issue of budgeting for repair costs by securing favorable rates in  advance at specific auto shops and requiring participants to go to these  specific vendors for repairs.
Finally, similar to the studies we reviewed related to car access in general,  the differences between the populations served by these LICO programs  and those YouthBuild USA proposes to serve also might limit the extent to  which the outcomes of these LICO programs could be applied to  YouthBuild USA’s proposal. Our reviews of the participants’ profiles of the  LICO programs studied found that more than half of the participants were  single women in their mid-20s to 30s, with children, and with some  education beyond high school. In contrast, participants in YouthBuild USA’s  LICO program would primarily be men between the ages of 16 and 24 who  would have not completed high school upon entering the Youthbuild  program. Officials of the LICO programs believed that the demographics of  a LICO program can influence the programs’ outcomes. For example, these  officials indicated that participants who have responsibilities, such as  those with children, are more likely to have a lower risk profile and be  motivated toward getting a job and reaching other goals consistent with  those of the LICO programs.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided GSA a draft of this report for its review and comment. In a  letter from the Assistant Commissioner for the Office of Vehicle Acquisition  and Leasing Services (see app. III), GSA described our report as accurate as  it pertains to our description of the GSA Fleet program. GSA expressed  concerns with the potential use of its Fleet for a car donation program— namely, that the revenue lost would require direct appropriations from the  Congress or cost increases to its customer agencies in the form of higher  lease rates, potentially affecting the viability of the GSA Fleet program.  Additionally, GSA stated a concern that creating a donation program to  YouthBuild USA could lead other organizations to seek donated vehicles as  well.
GSA also stated that the report does not clearly address the question as to  why YouthBuild USA should receive donated GSA vehicles over other  worthy charitable organizations. In our review, we focused on the effect of  donating 1 to 5 percent of selected GSA cars on GSA’s fleet vehicle sales  operations and the potential benefits to rural Youthbuild participants from  such donations. We did not, however, evaluate the merits of providing  vehicles to other charitable organizations.
GSA officials also provided a number of technical clarifications to our  report, which we have incorporated, as appropriate.
We are sending copies of this report to the Chairman of the Subcommittee  on Financial Institutions and Consumer Credit of the House Committee on  Financial Services and other interested congressional committees. We also  are sending copies to the Administrator of GSA. We also will make copies  available to others upon request. In addition, the report will be available at  no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions regarding this report, please contact  me 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 report. GAO staff who made major contributions to the report are  listed in appendix IV.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to (1) assess the effect of donating 1 to 5  percent of selected General Services Administration (GSA) used cars on  GSA’s fleet vehicle sales operations, (2) describe what studies have shown  with respect to the benefits that car ownership or access may hold for low- income individuals, and (3) describe what studies of selected Low Income  Car Ownership (LICO) programs and experiences of these programs have  shown with respect to the benefits of participant car ownership.
To assess the effect on GSA’s fleet vehicle sales operations from donating  vehicles, we  obtained data from GSA on the total number of compact  sedans its Fleet program sold and the average sales proceeds for these  vehicles for fiscal years 2001 through 2005 and for 2006 (up to August  2006). We focused our analysis on GSA compact sedans sales because this  is the type of vehicle YouthBuild USA officials told us that they would  primarily need for their proposed Rural Initiative LICO program. We used  GSA’s data from fiscal years 2002 through 2006 to calculate the average  opportunity cost—the reduction in revenue for each compact sedan GSA  would donate—and the total reduction in sales revenue GSA would face by  donating 1 to 5 percent of its compact sedans. To determine how much  GSA might increase the rate it charges federal agencies that lease compact  sedans from it (in order to recover the reduction in sales revenues from  donating 1 to 5 percent of its compact sedans), we obtained data from GSA  on the number of compact sedans it currently leases and revenues it  receives from leasing these vehicles. This data allowed us to calculate the  amount (percentages) GSA would need to increase the rate it charges  federal agencies to make up the reduction in sales revenues from donating  1 to 5 percent of its compact sedans. We obtained written descriptions on  GSA’s computer systems and procedures for ensuring that the agency has  verified Fleet transactions. In addition, the agency provided us with a  written description of how GSA Fleet handles any discrepancies found in  the data in its system. Based on this information, we determined that the  data that GSA provided to us were sufficiently reliable for the purposes of  this report. In addition, we obtained information on the options the agency  might pursue to make up for the reduction in revenues from interviews  with GSA officials. To determine the legal issues that would be involved in  a car donation program, we reviewed the legislation that establishes GSA’s  authority to operate the Fleet program and for it to set prices to recover its  program costs. We also reviewed the legislation that established the  General Supply Fund and the purposes for which the fund can be used and  discussed these and related legal issues with officials from GSA’s General  Counsel.
To describe what studies have shown with respect to the benefits that car  ownership or access may hold for low-income individuals, we conducted a  literature search of relevant studies, reviewed a list of studies from the Web  site of the National Economic Development and Law Center (NEDLC), and  interviewed two individuals who had conducted research on this issue.  Based on these efforts, we identified a large body of research on car access  and employment. We limited our review to seven studies that used more  sophisticated economic models that distinguished between car access and  several other factors that could affect the likelihood that an individual  found a job, such as education, age, and gender. Our review of these seven  studies included an analysis of study methodologies, the individuals that  were studied, study results with respect to car access and employment, and  study limitations. In order to address the issue of the extent to which the  results of these studies could be applied to YouthBuild USA’s proposed  LICO program, we compared the individuals reviewed in these studies with  rural Youthbuild participants. For a more detailed summary of our review  of these seven studies, see appendix II.
To determine what studies of selected LICO programs have shown with  respect to the benefits of participants’ car ownership, we spoke with  experts in the field of LICO programs about the nature and extent of  existing studies of LICO programs. These experts identified several LICO  programs that had been subject to an independent evaluation of their  outcomes. Additionally, to identify other LICO programs that had been  subject to an independent evaluation and were located in rural areas, we  reviewed about 140 LICO programs listed on the NEDLC Internet Web site  and contacted those LICO programs on the NEDLC listing that appeared to  be located in rural and mixed rural-urban areas. From our discussions with  the experts and contacts with the LICO programs, we identified and  selected the following six LICO programs that had been subject to an  independent evaluation:    Good Wheels, Augusta, Maine  Good News Garage, Burlington, Vermont  West CAP JumpStart, Glenwood City, Wisconsin  New Leaf Services, Inc., Decatur, Georgia   Ways to Work, Inc., Milwaukee, Wisconsin  Working Wheels, Seattle, Washington Three of these programs were located in rural areas, two in urban areas,  and one in a mixed rural-urban area. Four of the six LICO programs were  loan programs, one was a car-donation and car-sales program, and the  other was a car sales program. We obtained and analyzed copies of the  studies for the six LICO programs in order to identify the reported  outcomes and potential limitations with these studies. Where possible, we  reviewed information from the LICO program Web sites to obtain  information on how these programs operate, what types of individuals they  serve, and how many cars they provide to their participants. We also  interviewed LICO program officials about their studies to gain a better  understanding of the reported outcomes and limitations with the studies.  During these interviews, we also obtained more background information  about the LICO programs’ designs, populations served, and challenges the  officials faced in running these LICO programs. We also obtained the views  of LICO program officials on the extent to which they believe their  programs’ reported outcomes could be applied to participants in  YouthBuild USA’s proposed LICO program.
We conducted our work from May 2006 to November 2006 in San  Francisco, California, and Washington, D.C., in accordance with generally  accepted government auditing standards.
section_title: Summary of Studies on the Effect of Car Access on Employment
subsections: section_title: “The Effects of Car Access on Employment Outcomes for Welfare Recipients.”
paragraphs: To assess how car access affects  employment outcomes (e.g., employment,  weekly hours worked, and hourly wages).
Urban and rural welfare recipients, as of  January 2001, from Tennessee.
Researchers from the state of Tennessee  and the University of Tennessee surveyed a  random sample of welfare recipients (as of  January 2001) in two waves. During the first  wave, they sampled 1,935 welfare  recipients, and during the fourth wave they  sampled 1,919 of these individuals. The  researchers achieved a response rate of  over 70 percent.
The first wave respondents had the following  characteristics: they were, on average, 29  years old; had a high school education; and  had, on average, 2.28 children under 18  living in household. In addition, 34 percent  lived in rural counties, and 10 percent were  married.
Car access generally increases the  probability of welfare recipients getting a job,  working more hours, getting a higher paying  job, and leaving welfare.
Car access was measured by whether  anyone in the household had a car, which  could somewhat overstate a person's ability  to use the car for work.
The researchers used multinomial logits  and “Heckman selection” regressions for  employment and program participation  models.
There may be some bias in the results  because the study was based on surveys  done over two time periods, and some of the  welfare recipients who were part of the initial  survey did not participate in the second  survey.
Selection models were used to estimate the  effect of car access on hours and wages.
Panel data were used to mitigate  simultaneity concerns— that is, the  possibility that car access and employment  outcomes might be determined at the same  time and depend on each other.
Data only from one state—Tennessee—  which could have different demographics  and welfare systems than other states.
The study accounted for differences  between urban and rural welfare recipients  and areas.  ue used to address outcomes where there are two possible  categories, such as employed or not employed. The multinomial logit is an extension of the logit  method to cases where there are more than two outcomes.  ue used to address concerns about obtaining  biased estimates in cases where an outcome is not observed unless a given event occurs. For  example, hours and wages are not observed unless someone is employed. Therefore, nonworkers  given greater access to jobs may not have the same outcome as someone who is already employed.
To assess whether the positive relationship  of car ownership on employment outcomes  (e.g., employment, weekly hours worked,  and hourly wages) observed in past  research are causal—that is, whether  owning a car was the reason for the positive  employment benefits.
Data on employment, car ownership, and  basic demographics were from the 1992 and  1993 “Surveys of Income and Program  Participation,” Wave 4, which is a U.S.  Bureau of the Census survey. Authors  restricted sample to civilians 16-65 years of  age with no work-preventing disabilities.
Nationally representative sample of the U.S.  population from ages 16 to 65 with no work- preventing disabilities.
The wage sample was restricted to those  with complete information.
As a proxy for car ownership, data on state  gasoline taxes were obtained from the  American Petroleum Institute and data on  state-level auto insurance premiums were  obtained from the National Association of  Insurance Commissioners.
The study was based on a maximum sample  size of 47,244. The respondents had the  following characteristics: 52 percent were  female; they were, on average, 36 years old;  55 percent were married; and they averaged  more than a high school education.
Owning a car increases the likelihood that  someone finds a job and works more hours.  However, owning a car leads to lower  wages.
The study only observed the employment  outcomes for those individuals who work,  which could introduce some bias because  the characteristics of those who work could  be different from that of those who do not.
The researchers used a two-stage least  squares modelto estimate car ownership in  the first stage and employment outcomes  estimated in the second stage.
The study was based on a national sample  but did not control for individuals in urban  and rural areas. This could partially explain  the negative wage results.
The researchers used data from the early  1990s, prior to when welfare reform was  implemented, which has stricter  requirements for participants to find a job  than under the old welfare system. Thus, the  effect of owning a car on current welfare  participants may be greater because they  have stricter requirements (and greater  incentives) to find a job.  uares model is a regression techniue used to address concerns about  simultaneity bias. For example, the concern that car access may result from having a job rather than  the job resulting from car access.
section_title: “On the Way to Work: Welfare Participants and Barriers to Employment.”
paragraphs: To assess the effects of employment  barriers, including transportation, on the  employment levels of welfare participants.
Data are from a 1996 job-readiness survey  of California welfare participants conducted  by the California Department of Social  Services in May, June, and July 1996.
Welfare recipients, as of 1996, from  California.
The sample size of 1,319 represents a 68  percent response rate (total sample of  1,622).
The respondents had the following  characteristics: 80 percent were female; 50  percent had less than a high school  diploma; 27 percent relied on public  transportation, and 48 percent had two or  more young children.
Reliance on public transportation (rather  than car access) is one of the barriers  welfare recipients face in finding a job. In  addition, the more barriers present in the  lives of welfare participants, the harder it is  to find a job.
The study did not control for factors such as  age, which is a factor in whether someone is  employed.
The researcher used a logit model to  assess the probability of employment,  controlling for barriers to employment, such  as transportation and child care.
The study did not attempt to address the  potential simultaneity of employment and  car decisions. That is, the possibility that the  car and employment decisions might be  made at the same time.
A transportation barrier to employment was  defined as typically traveling by public  transit.
As in the prior study (Raphael and Rice),  researchers used data from the early 1990s  prior to welfare reform.
Data only from one state—California—  which could have different demographics  and welfare systems than other states. ue used to address outcomes where there are two possible  categories, such as employed or not employed. The multinomial logit is an extension of the logit  method to cases where there are more than two outcomes.
To assess the relative importance of private  and public transportation in obtaining  employment. “Transportation as a Stimulus of Welfare-to- Work-Private Versus Public Mobility.”
Data are from a survey of a random sample  of Alameda County, California, residents  who received welfare benefits in fiscal years  1992 and 1993. Survey data were compiled  again for the same individuals in 1994-95.
Alameda County, California, residents who  received welfare benefits in fiscal years  1992 and 1993.
The study had 466 respondents with  complete information (response rates not  reported based on initial random sample).
Respondents’characteristics included:  99  percent were women; they were 36 years  old, on average; 48 percent were married;  the average highest grade completed was  9.5; 54 percent spoke English; and, they had  an average of 2.6 children younger than age  20 living at home.
Car ownership and educational attainment  significantly increased the probability that  the individual moved from welfare to work.
Public transportation (compared with car  access) did not have a significant effect on  helping individuals move from welfare to  work.
The study was based on a small number of  individuals (66) who found employment. The  study further separated individuals into  employed on welfare, and employed off  welfare categories; thus, the sample sizes in  the most relevant categories were quite  small.
The researchers used a multinomial logit  model to predict the probability that  someone found a job and left welfare as a  function of car ownership, transit service  quality, regional job accessibility by different  transportation modes, human-capital  factors, and various control variables, such  as age and education.
As in the prior two studies, researchers used  data from the early 1990s prior to welfare  reform.
Data only from one state—California—  which could have different demographics  and welfare systems than other states. ue used to address outcomes where there are two possible  categories, such as employed or not employed. The multinomial logit is an extension of the logit  method to cases where there are more than two outcomes.
To assess the role of car ownership in  facilitating employment. “Work and Car Ownership Among Welfare  Recipients.”
Recipients of public assistance in urban  California.
The data are from a survey sponsored by  California’s Department of Social Services.  A total of 2,214 interviews were completed,  but only 1,112 met the criteria of healthy,  adult aged, female-headed households  (White, Latino, or African-American), that  were receiving welfare at the time of the  study.
Information on car ownership is based on  the following question: "Do you own a  reliable car?" Over a quarter (27 percent) of  the sample responded positively to this question.
The probability of finding a job and working  more hours was higher for those individuals  with a car.
The researcher used a multinomial logit  model to assess the effect of  employment  and welfare participation, based on car  ownership and other variables.
There was no effect on wages after  controlling for demographic variables such  as age and education.
The survey was administered under the Aid  to Families with Dependent Children  program, which did not have as many  employment incentives as the current  Temporary Assistance for Needy Families  program.
Both age and education had positive effects  on employment outcomes.
Selection models were not used for hour  and wage regressions to account for the fact  that these outcomes are only observed for  those gaining employment.
The study did not address the potential  simultaneity of employment and car  decisions. That is, the car and employment  decisions might be made at the same time.
Data only from one state—California—  which could have different demographics  and welfare systems than other states. ue used to address outcomes where there are two possible  categories, such as employed or not employed. The multinomial logit is an extension of the logit  method to cases where there are more than two outcomes.
section_title: Brookings-Wharton Papers on Urban Affairs 99-145 (2001).
paragraphs: To assess whether boosting minority car- ownership rates would narrow inter-racial  employment rate differentials. The analysis  first addresses whether car effects are  greater for more segregated groups and  then addresses whether these differences  are more pronounced in more decentralized  locations.
The data to address whether the car effect  differs by race or ethnicity are from 1992 and  1993 “Surveys of Income and Program  Participation,” Wave 4, which is a U.S.  Bureau of the Census survey. Authors  restricted sample to civilians 16-65 years of  age, with no work-preventing disabilities.
Nationally representative sample of the U.S.  population from ages 16 to 65 with no work- preventing disabilities.
Data for 242 U.S. Primary Metropolitan  Statistical Areas were from the 1990 5  percent Public Use Microdata Sample. This  data was used to address whether the car  effects are greater in more decentralized  areas.
The study did not control for urban and rural  areas.
The researchers used a linear probability  modelto test whether car ownership  accounted for the observed differences in  employment between races and ethnicities.
The effects of car ownership on  unemployment are largest when individuals  are more isolated from job opportunities.
As in some of the prior studies, this one  used data from the early 1990s prior to  welfare reform and did not attempt to  address the potential simultaneity of  employment and car decisions.
Households with four or more cars were  eliminated from the sample because  ownership was not observable for the fourth  or more car. This represents 6 percent of the  observations, and it is likely that these  households are disproportionately rural. ue that is used to estimate the probability that  someone is in one of two categories—for example, employed or not employed. This approach is less  desirable for categorical outcomes than logit analysis because the latter has more desirable statistical  characteristics that increase the precision of regression estimates.
section_title: Holzer, Harry, Keith Ihlandfedlt, and David Sjoquist.
paragraphs: To assess the effects of the use of a car on  employment, periods of unemployment, and  wages.
The data are from the National Longitudinal  Survey Youth Cohort for 1981 and 1982 and  the 1980 census of population. “Work, Search, and Travel Among White and  Black Youth.”
Black and White youth.
Journal of Urban Economics, 35: 320-345  (1994).
As in some of the prior studies, this research  did not address simultaneity concerns.
The authors assumed that the unobserved  factors that influence travel cost,  unemployment, and wages are not related.
Regression equations were used to examine  the determinants of travel costs and the  effects of travel costs on job search,  commute distance, the duration of  unemployment spells, and wages.
A selection model (that would account for  the fact that wages are only observed for  those who are employed) was not used to  estimate wages.
section_title: Comments from the General Services Administration
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Bill MacBlane, Assistant  Director; Harold J. Brumm Jr.; Martin H. De Alteriis; Tami Gurley; Marc M.  Molino; Elizabeth A. Olivarez; José R. Peña; Diana Pietrowiak; David M.  Pittman; Paul G. Thompson; and James D. Vitarello made key contributions  to this report.