Recovery Act: Recipient Reported Jobs Data Provide Some Insight into Use of Recovery Act Funding, but Data Quality and Reporting Issues Need Attention
Published: 2009-11-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act) requires recipients of funding from federal agencies to report quarterly on jobs created or retained with Recovery Act funding. The first recipient reports filed in October 2009 cover activity from February through September 30, 2009. GAO is required to comment on the jobs created or retained as reported by recipients. This report addresses (1) the extent to which recipients were able to fulfill their reporting requirements and the processes in place to help ensure data quality and (2) how macroeconomic data and methods, and the recipient reports, can be used to assess the employment effects of the Recovery Act. GAO performed an initial set of basic analyses on the final recipient report data that first became available at www.recovery.gov on October 30, 2009; reviewed documents; interviewed relevant state and federal officials; and conducted fieldwork in selected states, focusing on a sample of highway and education projects.
section_title: What GAO Found
paragraphs: On October 30, www.recovery.gov (the federal Web site on Recovery Act spending) reported that more than 100,000 recipients reported hundreds of thousands of jobs created or retained. Given the national scale of the recipient reporting exercise and the limited time frames in which it was implemented, the ability of the reporting mechanism to handle the volume of data from a wide variety of recipients represents a solid first step in moving toward more transparency and accountability for federal funds. Because this effort will be an ongoing process of cumulative reporting, GAO's first review represents a snapshot in time. While recipients GAO contacted appear to have made good faith efforts to ensure complete and accurate reporting, GAO's fieldwork and initial review and analysis of recipient data from www.recovery.gov , indicate that there are a range of significant reporting and quality issues that need to be addressed For example, GAO's review of prime recipient reports identified the following: Erroneous or questionable data entries that merit further review: (1) 3,978 reports that showed no dollar amount received or expended but included more than 50,000 jobs created or retained; (2) 9,247 reports that showed no jobs but included expended amounts approaching $1 billion, and (3) Instances of other reporting anomalies such as discrepancies between award amounts and the amounts reported as received which, although relatively small in number, indicate problematic issues in the reporting. Coverage: While OMB estimates that more than 90 percent of recipients reported, questions remain about the other 10 percent. Quality review: While less than 1 percent were marked as having undergone review by the prime recipient, over three quarters of the prime reports were marked as having undergone review by a federal agency. Full-time equivalent (FTE) calculations: Full-time equivalent (FTE) calculations: Under OMB guidance, jobs created or retained were to be expressed as FTEs. GAO found that data were reported inconsistently even though significant guidance and training was provided by OMB and federal agencies. While FTEs should allow for the aggregation of different types of jobs--part time, full time or temporary--differing interpretations of the FTE guidance compromise the ability to aggregate the data. Although there were problems of inconsistent interpretation of the guidance, the reporting process went relatively well for highway projects. Transportation had an established procedure for reporting prior to enactment of the Recovery Act. In the cases of Education and Housing, which do not have this prior reporting experience, GAO found more problems. Some of these have been reported in the press. State and federal officials are examining these problems and have stated their intention to deal with them.

section_title: Letter
paragraphs: Congress and the new administration crafted the American Recovery and  Reinvestment Act of 2009 (Recovery Act) with the broad purpose of  stimulating the economy. One of the express purposes of the act was to  preserve and create jobs. To help measure the progress of this effort,  Congress and the administration built into the act numerous provisions to  increase transparency and accountability over spending that require  recipients of Recovery Act funding to report quarterly on a number of  measures. Nonfederal recipients of Recovery Act funded grants, contracts,  or loans are required to submit reports with information on each project  or activity, including the amount and use of funds and an estimate of the  jobs created or retained. Neither individuals nor recipients receiving  funds through entitlement programs, such as Medicaid, or tax programs  are required to report. The first of these recipient reports cover cumulative  activity since the Recovery Act’s passage in February 2009 through the  quarter ending September 30, 2009. The Recovery Act requires GAO to  comment on the estimates of jobs created or retained in the recipient  reports no later than 45 days after recipients have reported. The final  recipient reporting data for the first round of reports were first made  available on October 30, 2009.
The transparency that is envisioned for tracking Recovery Act spending  and results is unprecedented for the federal government. Both Congress  and the President have emphasized the need for accountability, efficiency,  and transparency in the expenditure of Recovery Act funds and have made  it a central principle of the act. As Congress finished work on the  Recovery Act, the House Appropriations Committee released a statement  saying, “A historic level of transparency, oversight and accountability will  help guarantee taxpayer dollars are spent wisely and Americans can see  results for their investment.” In January, the new administration pledged  that the Recovery Act would “break from conventional Washington  approaches to spending by ensuring that public dollars are invested  effectively and that the economic recovery package is fully transparent  and accountable to the American people.” However, tracking billions of  dollars that are being disbursed to thousands of recipients is an enormous  effort. The administration expects that achieving this degree of visibility  will be an iterative process in which the reporting process and information  improve over time and, if successful, could be a model for transparency  and oversight beyond the Recovery Act.
This report, the first in response to the Recovery Act’s section 1512  mandate that GAO comment on the estimates of jobs created or retained  by direct recipients of Recovery Act funds, addresses the following: (1) the  extent to which recipients were able to fulfill their reporting requirements  and the processes in place to help ensure recipient reporting data quality  and (2) how macroeconomic data and methods, and the recipient reports,  can be used to assess the employment effects of the Recovery Act, and the  limitations of the data and methods.
To meet our objectives, we performed an initial set of edit checks and  basic analyses on the final recipient report data that first became available  at www.recovery.gov, the federal government’s official Web site on  Recovery Act spending, on October 30, 2009. We calculated the overall  sum, as well as sum by states, for the number of full-time equivalents  (FTE) reported, award amount, and amount received and found that they  corresponded closely with the values shown for these data on  Recovery.gov. We built on information collected at the state, local, and  program level as part of our bimonthly reviews of selected states’ and  localities’ uses of Recovery Act funds. These bimonthly reviews focus on  Recovery Act implementation in 16 states and the District of Columbia,  which 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. A detailed  description of the criteria used to select the core group of 16 states and the  District is found in appendix I of our April 2009 Recovery Act bimonthly  report. Prime recipients and delegated subrecipients had to prepare and  enter their information by October 10, 2009. The days following up to  October 30, 2009, included the data review period, and as noted  previously, on October 30, 2009, the first round of recipient reported data  was made public. Over the course of three different interviews, two with  prime recipients of Recovery Act funding and one with subrecipients, we  visited the 16 selected states and the District of Columbia during late  September and October 2009. We discussed with prime recipients projects  associated with 50 percent of the total funds reimbursed, as of September  4, 2009, for that state, in the Federal-Aid Highway Program administered  by the Department of Transportation (DOT). Prior to the start of the  reporting period on October 1, we reviewed prime recipients’ plans for the  jobs data collection process. After the October 10 data reporting period,  we went back to see if prime recipients followed their own plans and  subsequently talked with at least two vendors in each state to gauge their  reactions to the reporting process and assess the documentation they were  required to submit.
We gathered and examined issues raised by recipients in these  jurisdictions regarding reporting and data quality and interviewed  recipients on their experiences using the Web site reporting mechanism.  During the interviews, we used a series of program reviews and  semistructured interview guides that addressed state plans for managing,  tracking, and reporting on Recovery Act funds and activities. In a similar  way, we examined a nonjudgmental sample of Department of Education  (Education) Recovery Act projects at the prime and subrecipient level. We  also collected information from transit agencies as part of our bimonthly  Recovery Act reviews. In addition, we interviewed federal agency officials  who have responsibility for ensuring a reasonable degree of quality across  their program’s recipient reports. We assessed the reports from the  Inspector Generals (IG) on Recovery Act data quality review from 15  agencies. We are also continuing to monitor and follow up on some of the  major reporting issues identified in the media and by other observers. For  example, a number of press articles have discussed concerns with the jobs  reporting done by Head Start grantees. According to a Health and Human  Services (HHS) Recovery Act official, HHS is working with the Office of  Management and Budget (OMB) to clarify the reporting policy as it applies  to Head Start grantees. We will be reviewing these efforts as they move  forward.
To address our second objective, we analyzed economic and fiscal data  using standard economic principles and reviewed the economic literature  on the effect of monetary and fiscal policies for stimulating the economy.  We also reviewed guidance that OMB developed for Recovery Act  recipients to follow in estimating the effect of funding activities on  employment, reviewed reports that the Council of Economic Advisers  (CEA) issued on the macroeconomic effects of the Recovery Act, and  interviewed officials from the CEA, OMB, and the Congressional Budget  Office (CBO).
We conducted this performance audit with field work beginning in late  September 2009 and began analysis of the recipient data that became  available on October 30, 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: In December 2007, the United States entered what has turned out to be its  deepest recession since the end of World War II. Between the fourth  quarter of 2007 and the third quarter of 2009, gross domestic product  (GDP) fell by about 2.8 percent, or $377 billion. The unemployment rate  rose from 4.9 percent in 2007 to 10.2 percent in October 2009, a level not  seen since April 1983. The CBO projects that the unemployment rate will  remain above 9 percent through 2011.
Confronted with unprecedented weakness in the financial sector and the  overall economy, the federal government and the Federal Reserve together  acted to moderate the downturn and restore economic growth. The  Federal Reserve used monetary policy to respond to the recession by  pursuing one of the most significant interest rate reductions in U.S.  history. In concert with the Department of the Treasury, it went on to  bolster the supply of credit in the economy through measures that provide  Federal Reserve backing for a wide variety of loan types, from mortgages  to automobile loans to small business loans. The federal government also  used fiscal policy to confront the effects of the recession. Existing fiscal  stabilizers, such as unemployment insurance and progressive aspects of  the tax code, kicked in automatically in order to ease the pressure on  household income as economic conditions deteriorated. In addition,  Congress enacted a temporary tax cut in the first half of 2008 to buoy  incomes and spending and created the Troubled Asset Relief Program in  the second half of 2008 to give Treasury authority to act to restore  financial market functioning.
The federal government’s largest response to the recession to date came in  early 2009 with the passage of the Recovery Act, the broad purpose of  which is to stimulate the economy’s overall demand for goods and  services, or aggregate demand. The Recovery Act is specifically intended  to preserve and create jobs and promote economic recovery; to assist  those most impacted by the recession; to provide investments needed to  increase economic efficiency by spurring technological advances in health  and science; to invest in transportation, environmental protection, and  other infrastructure that will provide long-term economic benefits; and to  stabilize the budgets of state and local governments. The CBO estimates  that the net cost of the Recovery Act will total approximately $787 billion  from 2009 to 2019.
The Recovery Act uses a combination of tax relief and government  spending to accomplish its goals. The Recovery Act’s tax cuts include  reductions to individuals’ taxes, payments to individuals in lieu of  reductions to their taxes, adjustments to the Alternative Minimum Tax,  and business tax incentives. Tax cuts encompass approximately one-third  of the Recovery Act’s dollars. Recovery Act spending includes temporary  increases in entitlement programs to aid people directly affected by the  recession and provide some fiscal relief to states; this also accounts for  about one third of the Recovery Act. For example, the Recovery Act  temporarily increased and extended unemployment benefits, temporarily  increased the rate at which the federal government matched states  Medicaid expenditures, and provided additional funds for the  Supplemental Nutrition Assistance and the Temporary Aid to Needy  Families programs, among other things. Other spending, also accounting  for about a third of the act falls into the category of grants, loans, and  contracts. This includes government purchases of goods and services,  grants to states through programs such as the State Fiscal Stabilization  Fund for education and other government services, and government  investment in infrastructure, health information technology, renewable  energy research, and other areas.
In interpreting recipient reporting data, it is important to recognize that  the recipient reporting requirement only covers a defined subset of the  Recovery Act’s funding. The reporting requirements apply only to  nonfederal recipients of funding, including all entities receiving Recovery  Act funds directly from the federal government such as state and local  governments, private companies, educational institutions, nonprofits, and  other private organizations. OMB guidance, consistent with the statutory  language in the Recovery Act, states that these reporting requirements  apply to recipients who receive funding through the Recovery Act’s  discretionary appropriations, not recipients receiving funds through  entitlement programs, such as Medicaid, or tax programs. Recipient  reporting also does not apply to individuals. In addition, the required  reports cover only direct jobs created or retained as a result of Recovery  Act funding; they do not include the employment impact on materials  suppliers (indirect jobs) or on the local community (induced jobs). Figure  1 shows the division of total Recovery Act funds and their potential  employment effects.
Tracing the effects of the Recovery Act through the economy is a  complicated task. Prospectively, before the act’s passage or before funds  are spent, the effects can only be projected using economic models that  represent the behavior of governments, firms, and households. While  funds are being spent, some effects can be observed but often relevant  data on key relationships and indicators in the economy are available only  with a lag, thereby complicating real-time assessments. When a full range  of data on outcomes becomes available, economic analysts undertake  retrospective analyses, where the findings are often used to guide future  policy choices and to anticipate effects of similar future policies. Stimulus  spending under the broad scope of the Recovery Act will reverberate at  the national, regional, state, and local levels. Models of the national  economy provide the most comprehensive view of policy effects, but they  do not provide insight, except indirectly, about events at smaller  geographical scales. The diversity and complexity of the components of  the national economy are not fully captured by any set of existing  economic models. Some perspective can be gained by contemporaneous  close observation of the actions of governments, firms, and households,  but a complete and accurate picture of the Recovery Act’s impact will  emerge only slowly.
Section 1512 of the Recovery Act requires recipients of recovery funds to  report on those funds each calendar quarter. These recipient reports are to  be filed for any quarter in which a recipient receives Recovery Act funds  directly from the federal government. The recipient reporting requirement  covers all funds made available by appropriations in division A of the  Recovery Act. The reports are to be submitted no later than 10 days after  the end of each calendar quarter in which the recipient received Recovery  Act funds. Each report is to include the total amount of Recovery Act  funds received, the amount of funds expended or obligated to projects or  activities, and a detailed list of those projects or activities. For each  project or activity, the detailed list must include its name and a  description, an evaluation of its completion status, and an estimate of the  number of jobs created or the number of jobs retained by that project or  activity. Certain additional information is also required for infrastructure  investments made by state and local governments. Also, the recipient  reports must include detailed information on any subcontracts or  subgrants as required by the Federal Funding Accountability and  Transparency Act of 2006. Section 1512(e) of the Recovery Act requires  GAO and CBO to comment on the estimates of jobs created or retained  reported by recipients.
In its guidance to recipients for estimating employment effects, OMB  instructed recipients to report only the direct employment effects as “jobs  created or retained” as a single number. Recipients are not expected to  report on the employment impact on materials suppliers (indirect jobs) or  on the local community (induced jobs). According to the guidance, “A job  created is a new position created and filled or an existing unfilled position  that is filled as a result of the Recovery Act; a job retained is an existing  position that would not have been continued to be filled were it not for  Recovery Act funding. Only compensated employment . . . should be  reported. The estimate of the number of jobs . . . should be expressed as  ‘full-time equivalents (FTE),’ which is calculated as total hours worked in  jobs created or retained divided by the number of hours in a full-time  schedule, as defined by the recipient.” Consequently, the recipients are  expected to report the amount of labor hired or not fired as result of  having received Recovery Act funds. It should be noted that one FTE does  not necessarily equate to the job of one person. Firms may choose to  increase the hours of existing employees, for example, which can certainly  be said to increase employment but not necessarily be an additional job in  the sense of adding a person to the payroll.
To implement the recipient reporting data requirements, OMB has worked  with the Recovery Accountability and Transparency Board (Recovery  Board) to deploy a nationwide data collection system at  www.federalreporting.gov (Federalreporting.gov), while the data reported  by recipients are available to the public for viewing and downloading on  www.recovery.gov (Recovery.gov). Recovery.gov, a site designed to  provide transparency of information related to spending on Recovery Act  programs, is the official source of information related to the Recovery Act.  The Recovery Board’s goals for the Recovery Act Web site include  promoting accountability by providing a platform to analyze Recovery Act  data and serving as a means of tracking fraud, waste, and abuse allegations  by providing the public with accurate, user-friendly information. In  addition, the site promotes official data in public debate, assists in  providing fair and open access to Recovery Act opportunities, and  promotes an understanding of the local impact of Recovery Act funding.
In an effort to address the level of risk in recipient reporting, OMB’s June  22, 2009, guidance on recipient reporting includes a requirement for data  quality reviews. OMB’s data quality guidance is intended to address two  key data problems—material omissions and significant reporting errors.  Material omissions and significant reporting errors are risks that the  information is incomplete and inaccurate. As shown in figure 2, OMB  gave specific time frames for reporting that allow prime recipients and  delegated subrecipients to prepare and enter their information on days 1  through 10 following the end of the quarter. During days 11 through 21,  prime recipients will be able to review the data to ensure that complete  and accurate reporting information is provided prior to a federal agency  review and comment period beginning on the 22nd day. During days 22 to  29 following the end of the quarter, federal agencies will perform data  quality reviews and will notify the recipients and delegated subrecipients  of any data anomalies or questions. The original submitter must complete  data corrections no later than the 29th day following the end of the  quarter. Prime recipients have the ultimate responsibility for data quality  checks and the final submission of the data. Since this is a cumulative  reporting process, additional corrections can take place on a quarterly  basis.
OMB guidance does not explicitly mandate a methodology for conducting  data quality reviews at the prime and delegated subrecipient level or by  the federal agencies. Instead, the June 22, 2009, guidance provides the  relevant party conducting the data quality review with discretion in  determining the optimal method for detecting and correcting material  omissions or significant reporting errors. The guidance says that, at a  minimum, federal agencies, recipients, and subrecipients should establish  internal controls to ensure data quality, completeness, accuracy, and  timely reporting of all amounts funded by the Recovery Act.
The Recovery Board published the results of the first round of recipient  reporting on Recovery.gov on October 30, 2009. According to the Web site,  recipients submitted 130,362 reports indicating that 640,329 “jobs” were  created or saved as a direct result of the Recovery Act. These data solely  reflect the direct FTEs reported by recipients of Recovery Act grants,  contracts, and loans for the period beginning when the act was signed into  law on February 17, 2009 through September 30, 2009. As shown in figure  3, grants, contracts, and loans account for about 27 percent, or $47 billion,  of the approximately $173 billion in Recovery Act funds paid out as of  September 30, 2009.
Recipients in all 50 states reported jobs created or retained with Recovery  Act funding provided through a wide range of federal programs and  agencies. Table 1 shows the distribution of jobs created or retained across  the nation as reported by recipients on Recovery.gov. Not surprisingly,  California, the most populous state, received the most Recovery Act  dollars and accounted for the largest number of the reported jobs created  or retained.
Table 2 shows the number and share of jobs created or retained by federal  program agencies as reported by recipients of Recovery Act funding. The  Department of Education accounted for nearly 400,000 or close to two- thirds of the reported jobs created or retained. According to the  Department of Education, this represents about 325,000 education jobs  such as teachers, principals, and support staff in elementary and  secondary schools, and educational, administrative, and support personnel  in institutions of higher education funded primarily through the State  Fiscal Stabilization Fund (SFSF). In addition, approximately 73,000 other  jobs (including both education and noneducation positions) were reported  saved or created from the SFSF Government Services Fund, the Federal  Work Study Program, and Impact Aid funds.
section_title: Recipients of Recovery Act Funds We Contacted Appear to Have Made Good Faith Efforts to Ensure Complete and Accurate Reporting, but It Will Take Time to Improve Data Quality
paragraphs: While recipients GAO contacted appear to have made good faith efforts to  ensure complete and accurate reporting, GAO’s fieldwork and initial  review and analysis of recipient data from www.recovery.gov, indicate  that there are a range of significant reporting and quality issues that need  to be addressed. Collecting information from such a large and varied  number of entities in a compressed time frame, as required by the  Recovery Act, is a huge task. Major challenges associated with the new  Recovery Act reporting requirements included educating recipients about  the reporting requirements and developing the systems and infrastructure  for collecting and reporting the required information. While recipients in  the states we reviewed generally made good faith efforts to report  accurately, there is evidence, including numerous media accounts, that the  data reporting has been somewhat inconsistent. Even recipients of similar  types of funds appear to have interpreted the reporting guidance in  somewhat different ways and took different approaches in how they  developed their jobs data. The extent to which these reporting issues  affect overall data quality is uncertain at this point. As existing recipients  become more familiar with the reporting system and requirements, these  issues may become less significant although communication and training  efforts will need to be maintained and in some cases expanded as new  recipients of Recovery Act funding enter the system. Because this effort  will be an ongoing process of cumulative reporting, our first review  represents a snapshot in time.
subsections: section_title: Initial Observations on Recipient Reporting Data Identify Areas Where Further Review and Guidance Are Needed
paragraphs: We performed an initial set of edit checks and basic analyses on the  recipient report data available for download from Recovery.gov on  October 30, 2009. Based on that initial review work, we identified recipient  report records that showed certain data values or patterns in the data that  were either erroneous or merit further review due to an unexpected or  atypical data value or relationship between data values. For the most part,  the number of records identified by our edit checks was relatively small  compared to the 56,986 prime recipient report records included in our  review.
As part of our review, we examined the relationship between recipient  reports showing the presence or absence of any FTE counts with the  presence or absence of funding amounts shown in either or both data  fields for amount of Recovery Act funds received and amount of Recovery  Act funds expended. Forty four percent of the prime recipient reports  showed an FTE value. As shown in table 3, we identified 3,978 prime  recipient reports where FTEs were reported but no dollar amount was  reported in the data fields for amount of Recovery Act funds received and  amount of Recovery Act funds expended. These records account for  58,386 of the total 640,329 FTEs reported.
As might be expected, 71 percent of those prime recipient reports shown  in table 3 that did not show any FTEs also showed no dollar amount in the  data fields for amount of Recovery Act funds received and amount  expended. There were also 9,247 reports that showed no FTEs but did  show some funding amount in either or both of the funds received or  expended data fields. The total value of funds reported in the expenditure  field on these reports was $965 million. Those recipient reports showing  FTEs but no funds and funds but no FTEs constitute a set of records that  merit closer examination to understand the basis for these patterns of  reporting.
Ten recipient reports accounted for close to 30 percent of the total FTEs  reported. All 10 reports were grants and the majority of those reports  described funding support for education-sector related positions. For  reports containing FTEs, we performed a limited, automated scan of the  job creation field of the report, which is to contain a narrative description  of jobs created or retained. We identified 261 records where there was  only a brief description in this job creation field and that brief text showed  such words or phrases as “none,” “N/A,” zero, or variants thereof. For most  of these records, the value of FTEs reported is small, but there are 10 of  these records with each reporting 50 or more FTEs. The total number of  FTEs reported for all 261 records is 1,776. While our scan could only  identify limited instances of apparently contradictory information between  the job description and the presence of an FTE number, we suspect that a  closer and more extensive review of the job description field in relation to  the count of FTEs would yield additional instances where there were  problems, and greater attention to this relationship would improve data  quality.
In our other analyses of the data fields showing Recovery Act funds, we  identified 132 records where the award amount was zero or less than $10.  There were also 133 records where the amount reported as received  exceeded the reported award amount by more than $10. On 17 of these  records, the difference between the smaller amount awarded and the  larger reported amount received exceeded $1 million. While there may be  a reason for this particular relationship between the reported award  amount and amount received, it may also indicate an improper keying of  data or an interpretation of what amounts are to be reported in which  fields that is not in accordance with the guidance.
We calculated the overall sum and sum by states for number of FTEs  reported, award amount, and amount received. We found that they  corresponded closely with the values shown for these data on  Recovery.gov. Some of the data fields we examined with known values  such as the Treasury Account Symbol (TAS) codes and Catalog of Federal  Domestic Assistance (CFDA) numbers showed no invalid values on  recipient reports. However, our analyses show that there is reason to be  concerned that the values shown for these data fields in conjunction with  the data field identifying who the funding or awarding agency is may not  be congruent. Both TAS and CFDA values are linked to specific agencies  and their programs. We matched the reported agency codes against the  reported TAS and CFDA codes. We identified 454 reports as having a  mismatch on the CFDA number—therefore, the CFDA number shown on  the report did not match the CFDA number associated with either the  funding or awarding agency shown on the report. On TAS codes, we  identified 595 reports where there was no TAS match. Included in the  mismatches were 76 recipient reports where GAO was erroneously  identified as either the funding or awarding agency. In many instances,  review of these records and their TAS or CFDA values along with other  descriptive information from the recipient report indicated the likely  funding or awarding agencies. These mismatches suggest that either the  identification of the agency or the TAS and CFDA codes are in error on the  recipient report.
Another potential problem area we identified was the provision of data on  the number and total amount of small subawards of less than $25,000.  There are data fields that collect information on small subawards, small  subawards to individuals, and small subawards to vendors. There were 380  prime recipient report records where we observed the same values being  reported in both small subawards and small subawards to individuals. We  also identified 1,772 other records where it could be clearly established  that these values were being reported separately. While we are able to  establish that these data are not being consistently reported, it is not  possible to assess from the data alone the full extent to which subaward  data are being combined or reported separately across all recipient  reports. Additionally, we noted 152 reports where, in either the subawards  or subawards to individuals data fields, the value for the number of  subawards and the total dollar value of subawards were exactly the same  and, as such, most likely erroneous.
While most recipient report records were not identified as potential  problems in these initial edit checks and analyses thus far, our results do  indicate the need for further data quality efforts.
section_title: Various Interpretations of How to Report FTEs Produced Questionable Data on Jobs Created or Retained
paragraphs: Under OMB guidance, jobs created or retained were to be expressed as  FTEs. We found that data were reported inconsistently even though  significant guidance and training was provided by OMB and federal  agencies. While FTEs should allow for the aggregation of different types of  jobs—part-time, full-time or temporary—differing interpretations of the  FTE guidance compromise the ability to aggregate the data.
In addition to issuing guidance, OMB and federal agencies provided  several types of clarifying information to recipients as well as  opportunities to interact and ask questions or receive help with the  reporting process. These included weekly phone calls between OMB and  groups representing the state budget and comptrollers offices, weekly  calls between all state reporting leads, webinars, a call center, and e-mail  outreach. State officials reported they took advantage of and appreciated  this outreach. For example, Ohio state officials said they were generally  satisfied with the technical assistance and guidance provided by OMB— specifically, the assistance it received from the Federalreporting.gov help  desk staff. OMB estimated that it had a better than 90 percent response  rate for recipient reporting and said that they answered over 3,500  questions related to recipient reporting.
The data element on jobs created or retained expressed in FTEs raised  questions and concerns for some recipients. OMB staff reported that  questions on FTEs dominated the types of questions they fielded during  the first round of recipient reporting. Although the recipient reports  provide a detailed account of individual projects, as Recovery.gov shows,  these projects represent different types of activities and start and end at  various points throughout the year, and recipients had various  understandings of how to report an FTE. 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 ‘full-time equivalents’ (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 section 5.3, OMB states that “reporting is cumulative across  the project lifecycle, and will not reset at the beginning of each calendar or  fiscal year.”
FTE calculations varied depending on the period of performance the  recipient reported on. For example, in the case of federal highways  projects, some have been ongoing for six months, while others started in  September 2009. In attempting to address the unique nature of each  project, DOT’s Federal Highway Administration (FHWA) faced the issue of  whether to report FTE data based on the length of time to complete the  entire project (project period of performance) versus a standard period of  performance such as a calendar quarter across all projects. According to  FHWA guidance, which was permitted by OMB, FTEs reported for each  highway project are expressed as an average monthly FTE. This means  that for a project that started on July 1, 2009, the prime recipient would  add up the hours worked on that project in the months of July, August,  and September and divide that number by . For a  project that started on August 1, 2009, the prime recipient should add up  the hours worked on that project in the months of August and September  and divide that number by . For a project that started  on September, 1, 2009, the prime recipient should add up the hours  worked on that project in the month of September and divide that number  by . The issue of a standard performance period is  magnified when looking across programs and across states. To  consistently compare FTEs, or any type of fraction, across projects, one  must use a common denominator. Comparison of FTE calculations across  projects poses challenges when the projects have used different time  periods as denominators. Tables 4 and 5 below provide more detail on the  problems created by not having a standard performance period for  calculating FTEs.
Table 4 is an application of the FHWA guidance for three projects with  varying start dates. This example illustrates the way FHWA applied the  OMB guidance and that the way FTEs are aggregated in  Federalreporting.gov could overstate the employment effects. In this  example, because the 30 monthly FTE data were aggregated without  standardizing for the quarter, FTEs would be overstated by 10 relative to  the OMB guidance. A standardized quarterly measure and job-years are  included as examples of a standard period of performance. A job-year is  simply one job for 1 year. Regardless of when the project begins, the total  hours worked is divided by a full years worth of time (12 months), which  would enable aggregation of employment effects across programs and  time.
Table 5 is an application of the OMB guidance for two projects with  varying start dates. In this example, the OMB guidance understates the  employment effect relative to the standardized measure. Cumulative FTE  per OMB guidance would result in 20 FTE compared with 30 FTE when  standardized on a quarterly basis. Both a standardized quarterly FTE  measure and a job-year measure are included as examples of a standard  period of performance. Regardless of when the project begins, the total  hours worked is divided by a full year’s worth of time (12 months), which  would enable aggregation of employment effects across programs and  time.
There are examples from other DOT programs 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 recipients 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 underway 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 in the report for nonurbanized  transit systems used 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.
The issue of variation in the period of performance used to calculate FTEs  also occurred in Education programs. Across a number of states we  reviewed, local education agencies and higher education institutions used  a different denominator to calculate the number of FTEs they reported on  their recipient reports for the period ending September 30, 2009. For  example, two higher education systems in California each calculated the  FTE differently. In the case of one, officials chose to use a two-month  period as the basis for the FTE performance period. The other chose to  use a year as the basis of the FTE. The result is almost a three-to-one  difference in the number of FTEs reported for each university system in  the first reporting period. Although Education provides alternative  methods for calculating an FTE, in neither case does the guidance  explicitly state the period of performance of an FTE.
Recipients were also confused about counting a job created or retained  even though they knew the number of hours worked that were paid for  with Recovery Act funds. For example, the Revere Housing Authority, in  administering one Recovery Act project, told us that they may have  underreported jobs data from an architectural firm providing design  services for a Recovery Act window replacement project at a public  housing complex. The employees at the architecture firm that designed the  window replacement project were employed before the firm received the  Recovery Act funded contract and will continue to be employed after the  contract has been completed, so from the Revere Housing Authority’s  perspective there were no jobs created or retained. As another example,  officials from one housing agency reported the number of people, by trade,  who worked on Recovery Act related projects, but did not apply the full- time equivalent calculation outlined by OMB in the June 22 reporting  guidance. Officials from another public housing agency told us that they  based the number of jobs they reported on letters from their contractors  detailing the number of positions rather than FTEs. OMB staff said that  thinking about the jobs created or retained as hours worked and paid for  with Recovery Act funds was a useful way to understand the FTE  guidance. While OMB’s guidance explains that in applying the FTE  calculation for measuring the number of jobs created or retained  recipients will need the total number of hours worked that are funded by  the Recovery Act, it could emphasize this relationship more thoroughly  throughout its guidance.
OMB’s decision to convert jobs into FTEs provides a consistent lens to  view the amount of labor being funded by the Recovery Act, provided each  recipient uses a standard time frame in considering the FTE. The current  OMB guidance, however, creates a situation where, because there is no  standard starting or ending point, an FTE provides an estimate for the life  of the project. Without normalizing the FTE, aggregate numbers should  not be considered, and the issue of a standard period of performance is  magnified when looking across programs and across states.
section_title: Technical Reporting and Processing Glitches Occurred, but Recipients Were Able to Report
paragraphs: Recipients we interviewed were able to report into and review data on  Federalreporting.gov. Particularly given the scale of the project and how  quickly it was implemented, within several months, the ability of the  reporting mechanisms to handle the volume of data from the range of  recipients represents a solid first step in the data collection and reporting  process for the fulfillment of the section 1512 mandate. Nonetheless, there  were issues associated with the functional process of reporting. For  example, state officials with decentralized reporting structures reported  problems downloading submitted information from Recovery.gov to  review top-line figures such as money spent and jobs created or retained.  The Iowa Department of Management, which did Iowa’s centralized  reporting into Federalreporting.gov, said that, overall, the system was very  slow. In addition to the slowness, as the system was processing input from  Iowa’s submission, every time it encountered an error, it kicked back the  whole submission—but it showed only the one error. After fixing the one  errant entry, the state resubmitted its information, which would then be  completely sent back the next time an error was encountered. Iowa  officials believe it would have been more efficient if the system identified  all errors in submission and sent back a complete list of errors to fix.  Other recipient reporters we interviewed highlighted issues around  DUNS numbers and other key identifiers, along with the inability to enter  more than one congressional district for projects that span multiple  districts. The expectation is that many of these entry and processing errors  were captured through the review process, but the probability that all  errors were caught is low.
Generally, state officials from our 17 jurisdictions reported being able to  work through technical reporting and processing glitches. For example,  Florida officials reported that they encountered many technical issues but  were able to solve the problems by contacting the Recovery Board. Ohio  officials noted that, although they were initially concerned, in spite of the  tremendous amount of data being submitted, Federalreporting.gov held up  well. While they faced some challenges, California officials reported that,  overall, they were successful in reporting the numbers into  Federalreporting.gov. They worked with the technical team at  Federalreporting.gov and performed a test on October 1, 2009, to see if the  upload of the job data was going to work. During the October reporting  time frame, New Jersey officials reported that they generally did not  experience significant recipient reporting problems. The few reporting  problems New Jersey experienced occurred in relation to issues uploading  the data onto Federalreporting.gov and issues requiring clarifying  guidance from the relevant federal agency.
Notwithstanding the concerns over the slowness of the reporting system  and error checks, Iowa officials also reported that the process worked  rather well, determining that most of their state reporting problems  seemed to stem from a few recipients not fully grasping all of the training  the state had provided and thus not knowing or having key information  like DUNS numbers and in some cases submitting erroneous information.  The state department of management plans to specifically address the 30  or so recipients associated with these issues—just about all of which were  school districts. As a follow-up from this first reporting cycle, several  states have developed a list of lessons learned to share with OMB and  other federal agencies. An example in appendix I illustrates problems  public housing authorities had with both the recipient reporting  processing functions and the FTE calculation.
In addition to the Federalreporting.gov Web site, the Recovery Board used  a revised Recovery.gov Web site to display reported data. The revised site  includes the ability to search spending data by state, ZIP code, or  congressional district and display the results on a map. The Recovery  Board also awarded a separate contract to support its oversight  responsibilities with the ability to analyze reported data and identify areas  of concern for further investigation. In addition, the board plans to  enhance the capabilities of Federalreporting.gov. However, the Recovery  Board does not yet use an adequate change management process to  manage system modifications. Without such a process, the planned  enhancements could become cost and schedule prohibitive. The board has  recognized this as a significant risk and has begun development of a  change management process. Finally, the board has recognized the need  to improve the efficiency of its help desk operation to avoid dropped calls  and is working on agreements to address this risk.
section_title: Processes Are in Place at the States and Federal Agencies for Recipient Reporting Data Quality Review
subsections: section_title: State Level Data Quality Review
paragraphs: Recipient reporting data quality is a shared responsibility, but often state  agencies have principal accountability because they are the prime  recipients. Prime recipients, as owners of the recipient reporting data,  have the principal responsibility for the quality of the data submitted, and  subrecipients delegated to report on behalf of prime recipients share in  this responsibility. In addition, federal agencies funding Recovery Act  projects and activities provide a layer of oversight that augments recipient  data quality. Oversight authorities including OMB, the Recovery Board,  and federal agency IGs also have roles to play in ensuring recipient  reported data quality, while the general public and nongovernmental  entities can help as well by highlighting data problems for correction.
All of the jurisdictions we reviewed had data quality checks in place for  the recipient reporting data, either at the state level or a state agency level.  State agencies, as entities that receive Recovery Act funding as federal  awards in the form of grants, loans, or cooperative agreements directly  from the federal government, are often the prime recipients of Recovery  Act funding. Our work in the 16 states and the District of Columbia  showed differences in the way states as prime recipients approach  recipient reporting data quality review. Officials from nine states reported  having chosen a centralized reporting approach meaning that state  agencies submit their recipient reports to a state central office, which then  submits state agency recipient reports to Federalreporting.gov. For  example, Colorado’s Department of Transportation provided its recipient  report to a central entity, the Colorado Office of Information Technology,  for submission to Federalreporting.gov. States with centralized reporting  systems maintain that they will be able to provide more oversight of  recipient reporting with this approach. Advocates of centralized reporting  also expect that method will increase data quality, decrease omissions and  duplicate reporting, and facilitate data cleanup.
Officials from the remaining eight jurisdictions reported using a  decentralized reporting system. In these cases, the state program office  administering the funds is the entity submitting the recipient report. In  Georgia, for example, the State Department of Transportation is  responsible for both reviewing recipient report data and submitting it to  Federalreporting.gov. Illinois, as is the case for four other decentralized  states, is quasidecentralized where the data are centrally reviewed and  reported in a decentralized manner. When the audit office informs the  Office of the Governor that its review is complete and if the Office of the  Governor is satisfied with the results, the Illinois state reporting agency  may upload agency data to Federalreporting.gov. Appendix I provides  details on California’s recipient reporting experiences.
As a centralized reporting state, Iowa officials told us that they developed  internal controls to help ensure that the data submitted to OMB, other  federal entities, and the general public, as required by section 1512 of the  Recovery Act, are accurate. Specifically, Iowa inserted validation  processes in its Recovery Act database to help reviewers identify and  correct inaccurate data. In addition, state agency and local officials were  required to certify their review and approval of their agency’s information  prior to submission. Iowa state officials told us that they are working on  data quality plans to include being able to reconcile financial information  with the state’s centralized accounting system. According to Iowa officials,  the number of Recovery Act grant awards improperly submitted was  relatively small.
As a decentralized reporting state, New Jersey officials reported that a  tiered approach to data quality checks was used for all Recovery Act  funding streams managed by the state. Each New Jersey state department  or entity was responsible for formulating a strategy for data quality  reviews and implementing that strategy. The New Jersey Department of  Community Affairs, for example, directed subrecipients to report data  directly into an existing departmental data collection tool modified to  encompass all of the data points required by the Recovery Act. This  system gave the Department of Community Affairs the ability to view the  data as it came in from each subrecipient. From this data collection tool,  the department uploaded prime and subrecipient data to  Federalreporting.gov. All departmental strategies were reviewed by the  New Jersey Governor’s office and the New Jersey Recovery Accountability  Task Force. The Governor’s office conducted a review of the reports as  they were uploaded to Federalreporting.gov on a program-by-program,  department-by-department basis to identify any outliers, material  omissions, or reporting errors that could have been overlooked by  departments.
section_title: Federal Agency Data Quality Review
paragraphs: To help ensure the quality of recipient report data, the Recovery Board  encouraged each federal Office of Inspector General overseeing an agency  receiving Recovery Act funds to participate in a governmentwide Recovery  Act Reporting Data Quality Review. The Recovery Board requested the IG  community to determine the following: (1) the existence of documentation  on the agencies’ processes and procedures to perform limited data quality  reviews targeted at identifying material omissions and significant reporting  errors, (2) the agencies’ plans for ensuring prime recipients report  quarterly, and (3) how the agencies intend to notify the recipient of the  need to make appropriate and timely changes. In addition, IGs reviewed  whether the agency had an adequate process in place to remediate  systemic or chronic reporting problems and if they planned to use the  reported information as a performance management and assessment tool.  We reviewed the 15 IG reports that were available as of November 12,  2009. Our review of these reports from a range of federal agencies found  that they had drafted plans or preliminary objectives for their plans for  data quality procedures.
Published IG audits on agencies’ Recovery Act data quality reviews that  we examined indicated that federal agencies were using a variety of data  quality checks, which included automated or manual data quality checks  or a combination. Computer programs drive the automated processes by  capturing records that do not align with particular indicators determined  by the agency. Agencies may use a manual process where a designated  office will investigate outliers that surface during the automated test. For  example, the automated process for Education performs data checks to  validate selected elements against data in the department’s financial  systems. As part of its data quality review, Education officials are to  examine submitted reports against specific grant programs or contract  criteria to identify outliers for particular data elements. Of the IG reports  that we reviewed that mentioned systemic or chronic problems, 9 of the 11  found that their agencies had a process in place to address these  problems. Although some of the IGs were unable to test the  implementation of their agency’s procedures for reviewing the quarterly  recipient reports, based on their initial audit, they were able to conclude  that the draft plan or preliminary objectives for data quality review were in  place.
According to OMB’s guidance documents, federal agencies must work  with their recipients to ensure comprehensive and accurate recipient  reporting data. A September 11, 2009, memorandum from OMB directed  federal agencies to identify Recovery Act award recipients for each  Recovery Act program they administer and conduct outreach actions to  raise awareness of registration requirements, identify actual and potential  barriers to timely registration and reporting, and provide programmatic  knowledge and expertise that the recipient may need to register and enter  data into Federalreporting.gov. Federal agencies were also expected to  provide resources to assist state and select local governments in meeting  reporting requirements required by the Recovery Act. In addition, federal  agencies were to identify key mitigation steps to take to minimize delays in  recipient registration and reporting.
OMB also requires that federal agencies perform limited data quality  reviews of recipient data to identify material omissions and significant  reporting errors and notify the recipients of the need to make appropriate  and timely changes to erroneous reports. Federal agencies are also to  coordinate how to apply the definitions of material omissions and  significant reporting errors in given program areas or across programs in a  given agency to ensure consistency in the manner in which data quality  reviews are carried out. Although prime recipients and federal agency  reviewers are required to perform data quality checks, none are required  to certify or approve data for publication. However, as part of their data  quality review, federal agencies must classify the submitted data as not  reviewed by the agency; reviewed by the agency with no material  omissions or significant reporting errors identified; or reviewed by the  agency with material omissions or significant reporting errors identified. If  an agency fails to choose one of the aforementioned categories, the system  will default to not reviewed by the agency.
The prime recipient report records we analyzed included data on whether  the prime recipient and the agency reviewed the record in the OMB data  quality review time frames. In addition, the report record data included a  flag as to whether a correction was initiated. A correction could be  initiated by either the prime recipient or the reviewing agency. Table 6  shows the number and percentage of prime recipient records that were  marked as having been reviewed by either or both parties and whether a  correction was initiated. OMB’s guidance provided that, a federal agency,  depending on the review approach and methodology, could classify data  as being reviewed by the agency even if a separate and unique review of  each submitted record had not occurred.
As shown in table 6, more than three quarters of the prime recipient  reports were marked as having undergone agency review. Less than one  percent was marked as having undergone review by the prime recipient.  The small percentage reviewed by the prime recipients themselves during  the OMB review time frame warrants further examination. While it may be  the case that the recipients’ data quality review efforts prior to initial  submission of their reports precluded further revision during the review  time frame, it may also be indicative of problems with the process of  noting and recording when and how the prime recipient reviews occur and  the setting of the review flag. Overall, slightly more than a quarter of the  reports were marked as having undergone a correction during the OMB  review time frames.
section_title: Highway and Education Projects Illustrate State and Federal Agency Joint Responsibility for Data Quality
subsections: section_title: Highway Projects
paragraphs: The Federal-Aid Highway Program provided a good case study of federal  agency data quality reviews because the responsible federal agency,  FHWA, had previous experience estimating and reporting on the  employment effects of investment in highway construction. As a result,  FHWA would seem to be better positioned than some other federal  agencies to fulfill the job creation or retention reporting requirements  under the Recovery Act and may have data quality review processes that  other federal agencies could replicate. We met with officials and reviewed  available documentation including federal highway reporting documents  and payroll records at the selected state departments of transportation and  selected vendors. Overall, we found that the state departments of  transportation as prime recipients had in place plans and procedures to  review and ensure data quality. We followed up with the state departments  of transportation to confirm that these procedures were followed for  highway projects representing at least 50 percent of the Recovery Act  highway reimbursements as of September 4, 2009 in the 17 jurisdictions  where we are conducting bimonthly reviews and reviewed available  documentation. Appendix I illustrates recipient reporting processes and  data quality checks at the Florida Department of Transportation.
In addition to the section 1512 reporting requirements, recipients of  certain transportation Recovery Act funds, such as state departments of  transportation, are subject to the reporting requirements outlined in  section 1201(c) of the Recovery Act. Under section 1201(c), recipients of  transportation funds must submit periodic reports on the amount of  federal funds appropriated, allocated, obligated, and reimbursed; the  number of projects put out to bid, awarded, or work has begun or  completed; and the number of direct and indirect jobs created or  sustained, among other things. The Recovery Act section 1201(c)  requirement called for project level data to be reported twice before the  first Recovery Act section 1512 report was due. DOT is required to  collect and compile this information for Congress, and it issued its first  report to Congress in May 2009. Consequently, DOT and its modal  administrations, such as FHWA, and state departments of transportation  gained experience collecting and reporting job creation and retention  information before the first Recovery Act section 1512 report was due in  October 2009 and required FHWA to have its data collection and review  process in place in advance of October 1, 2009, the start of the section  1512 reporting.
To help fulfill these reporting requirements, FHWA implemented a  reporting structure that ties together the federal and state levels of  reporting, creating both a chain of evidence and redundancy in the review  of the reported data. Figure 4 shows the reporting structure. As part of t reporting structure, FHWA also created the Recovery Act Data System  (RADS), with the updated version of the system released in early  September 2009. RADS is primarily designed as a repository of data for  states, but it also serves as an important oversight tool for FHWA becaus it links federal financial data to project data reported by the states. The  system helps ensure consistent definitions of fields and enables FHWA to  auto-populate identification fields, including DUNS numbers, award  numbers, and total award amounts, to both reduce the burden at the  project level and to reduce the data entry errors. In addition, monthly  reporting requirements include payroll records, hours worked, and data  quality assurances, in individual contracts for highway projects funded  with Recovery Act funds. FHWA may withhold payments if a recipient is  found to be in noncompliance with the reporting requirements.  e  e with the reporting requirements. Appendi g examples for contractors in Georgia and  FHWA has taken several steps to help ensure the reliability of the  information contained in RADS. First, FHWA compared information states  recorded in RADS to the information states submitted to  Federalreporting.gov to identify inconsistencies or discrepancies. Second,  as part of an ongoing data reliability process, FHWA monitors select fields  in RADS, such as number of projects, types of projects, and where projec are located, and performs data validation and reasonableness tests. For  example, it checks if a rate of payment in dollars per hour is too high or  too low. When potential issues are identified, FHWA division offices work  with the state department of transportation or central office to make  necessary changes. ts  For this round of recipient reporting, FHWA used an automated process to  review all of the reports filed by recipients. These automated reviews  included various data validation and reasonableness checks. For example,  FHWA checked whether the range of FTEs reported were within its own  economic estimates. For any reports that were out of range, FHWA would  comment on these reports. As described earlier, only recipients could  make changes to the data. In making a comment, FHWA let the recipient  know there was potential concern with the record. The recipient then had  the opportunity to either change or explain the comment raised by FHWA.  According to FHWA officials, they reviewed 100 percent of more than  7,000 reports submitted by recipients of Recovery Act highway funds and  found that the final submissions were generally consistent with  department data. Although there were problems of inconsistent  interpretation of the guidance, the reporting process went well for  highway projects.
section_title: Education Projects
paragraphs: Education has engaged in numerous efforts to facilitate jobs reporting by  states and local educational agencies (LEA). States and LEAs have also  taken action to collect and report jobs data and to ensure data quality.  Despite these efforts, state and local officials we spoke with raised some  concerns about the quality of jobs data reported in October 2009, such as  insufficient time to incorporate updated guidance on estimating job  counts. To address these concerns, Education and many state officials we  interviewed said they plan to take steps to improve the reporting and data  quality processes before the next reports are due in January 2010. Our  review focused on the State Fiscal Stabilization Fund, as well as Recovery  Act grants made for the Elementary and Secondary Education Act of 1965,  Title I, Part A and for the Individuals with Disabilities Education Act, Part  B. To collect this information, we interviewed Education officials and  officials in 10 states—Arizona, California, Colorado, Florida, Georgia,  Illinois, Massachusetts, New Jersey, New York, and North Carolina—the  District of Columbia, and 12 LEAs, including a mix of LEAs in urban and  rural areas. States were selected from the 16 states and the District of  Columbia in which we conduct bi-monthly reviews of the use of Recovery  Act funds as mandated by the Recovery Act. We also reviewed federal and  state guidance and other documentation.
Education’s efforts to facilitate jobs reporting by states and LEAs include  coordinating with OMB, providing guidance and technical assistance to  states and LEAs, and reviewing the quality of the jobs data reported.  Education has coordinated its efforts regarding recipient reporting with  OMB in a number of ways, including participating in cross-agency  workgroups and clearing its guidance materials with OMB prior to  disseminating them. On August 10, 2009, Education hosted a web-based  technical assistance conference on reporting requirements that included  information on OMB’s guidance on estimating and reporting jobs data. On  September 11, the department issued guidance specifically related to  estimating and reporting jobs created or retained by states and LEAs  receiving Recovery Act grants. Education updated its jobs guidance and  hosted another web-based technical assistance conference on September  21, providing detailed instructions to states and LEAs on a range of topics,  such as how to estimate the number of hours created or retained for a  teacher who works less than 12 months in a year. In addition, according to  Education officials, the department developed and implemented a draft  plan to review the jobs data that states and LEAs reported to  Federalreporting.gov in October. This plan addresses the roles and  responsibilities of several Education offices to assist with the data quality  review throughout the 30-day reporting timeline (for example, Oct. 1  through Oct. 30, 2009). According to the plan, these responsibilities  include continuous evaluation of recipient and subrecipient efforts to meet  reporting requirements, as well as providing limited data quality reviews  and notifying the recipient of the need to make appropriate and timely  corrections. The plan says that reviewers are to conduct two types of data  quality checks – an automated and a manual review. The automated  review will validate various data elements for financial assistance against  its grant management system, such as prime award numbers, recipient  DUNS numbers, and amounts of awards. The manual review will identify  outliers in certain data elements, such as whether the reported number of  jobs created is reasonable. According to Education officials, upon their  initial review of recipient reported data, the most common errors were  relatively small—such as mistyped award numbers or incorrect award  amounts—and were easily addressed and corrected during the agency  review period. Department officials told us that they provided technical  assistance to states and were able to have states correct the errors such  that almost all of them were corrected before the October 30 deadline.  Furthermore, state officials generally provided positive feedback to the  department for these efforts, according to Education officials. Education’s  Office of Inspector General (OIG) examined Education’s process for  reviewing the quality of recipient reported data and found that Education’s  data review process was generally adequate. The OIG’s review  determined that Education has established a process to perform limited  data quality reviews intended to identify problems, such as questionable  expenditure patterns or job estimates. OIG also acknowledged that  Education developed a process to correct any issues that Education  officials find by contacting the recipients who submitted the report. In  addition, OIG noted that the department plans to review quarterly data at a  state level to determine whether there are systemic problems with  individual recipients and that Education plans to use the reported  information as a management tool.
State educational agencies (SEA) also have taken action to collect and  report jobs data and to ensure data quality. State officials in Arizona,  Massachusetts, New Jersey, and New York and officials in the District of  Columbia told us that they adapted their existing data systems or created  new ones to track and report jobs data. For example, Massachusetts  Department of Education officials created an online quarterly reporting  web site to collect jobs data from its LEAs and detailed information on  personnel funded by Recovery Act grants. In addition, many SEA and LEA  officials we spoke with reported taking steps to ensure data quality, such  as pre-populating data fields (that is, inserting data, such as DUNS  numbers, into the recipient reporting template for the LEAs), checking the  reasonableness of data entered, and looking for missing data. In addition  to tracking and reporting jobs data and taking steps to ensure data quality,  SEA officials reported providing technical assistance, such as written  guidance and Web-based seminars, that explain how LEAs should report  job estimates. For example, California state officials had LEAs submit  their data through a new web-based data reporting system and, prior to  implementing the new system, provided written guidance and offered a  web-based seminar to its LEAs.
Despite efforts to ensure data quality, state and local officials we spoke  with raised some concerns about the quality of jobs data reported in  October 2009. For example, LEAs were generally required to calculate a  baseline number of hours worked, which is a hypothetical number of  hours that would have been worked in the absence of Recovery Act funds.  LEA officials were to use this baseline number to determine the number of  hours created or retained and to subsequently derive the number of FTEs  for job estimates. Each LEA was responsible for deriving its own estimate.  New Jersey state officials we interviewed told us that it was likely that  LEAs used different methods to develop their baseline numbers, and as a  result, LEAs in the same state may be calculating FTEs differently. (See  appendix II for a complete description of the calculations used to  determine baseline number of hours worked, number of hours created or  retained, and FTEs for jobs created or retained). According to Illinois state  officials, some of their LEAs had double-counted the number of positions,  attributing the positions to both state fiscal year 2009 (which ended on  June 30, 2009) and fiscal year 2010 (beginning July 1, 2009), in part  because the reporting period covered both of the state’s fiscal years. Also,  according to Illinois officials, other school districts estimated that zero  positions were attributable to the Recovery Act. In those cases, LEA  officials received Recovery Act funds before finalizing staff lay-offs. Since  they had not officially laid off any staff, Illinois officials told us that LEA  officials were unsure as to whether those jobs would count as “jobs saved”  and believed it best to report that no jobs had been saved because of  Recovery Act funding. Illinois officials told us that Education reviewed  Illinois’ data, but did not ask them to make any corrections, but instead  asked the state to disaggregate the job estimates by type of position, such  as teachers and administrators. Also, one LEA official from New York  reported that he did not have enough time to conduct the necessary data  quality checks he wanted to perform. Education officials acknowledged  that many state and local officials reported various challenges in  understanding the instructions and methodology that Education suggested  they use to calculate job estimates. According to Education officials,  when states contacted the department to report these problems,  Education officials provided technical assistance to resolve the state’s  specific issues.
States faced challenges due to the timing of guidance or changes in  guidance on how to estimate jobs attributable to the Recovery Act,  according to Education officials and several state officials we interviewed.  For example, Colorado officials reported that, based on June 22, 2009  guidance from OMB, they believed that subrecipient vendors’ jobs would  be considered “indirect jobs” and therefore LEAs would not have to  provide estimates of their vendors’ jobs in their reports. Colorado officials  told us they received guidance at Education’s August technical assistance  conference indicating that subrecipients (in this case, LEAs) are supposed  to include vendor job estimates based on those jobs directly funded by  Recovery Act grants. However, Education’s guidance did not clearly  distinguish between direct and in-direct vendor jobs, according to state  officials, making it difficult for LEAs to determine which vendor jobs to  include in their section 1512 reports. State officials also reported receiving  further guidance on estimating jobs from Education on September 15 and  attending a related technical assistance conference on September 21. On  September 16, the Colorado SEA issued guidance stating that LEAs would  be responsible for including vendor jobs in the job estimates they would  be reporting. (Colorado’s LEA reports were due to the SEA on September  25, because the SEA was required to submit its data to the state  controller’s office on September 29 for centralized reporting.) Also,  officials in California—where LEAs had to report to the SEA on September  23—said they were not notified until Education’s September 21 conference  that all LEAs that received Recovery Act funds had to register in the  Central Contractor Registration. They told us that this contradicted  previous guidance from Education and would have required LEAs to  register within 2 days to meet their state’s September 23 deadline.  California officials advised federal officials that the state would implement  this requirement for the second quarterly reporting period.
Education officials and officials in two states mentioned actions that might  improve the reporting and data quality processes before the next reports  are due in January 2010. Education officials suggested a number of  possible changes in Federalreporting.gov, such as allowing Education to  pre-populate some basic state data, such as grant award numbers and  amounts, would decrease the workload for states and help avoid some  technical errors. Also, in response to problems such as LEAs counting jobs  in two fiscal years, Education plans to provide more guidance in early  December 2009 to states on calculating job estimates. At the state level,  officials in Georgia reported plans to make changes to the state’s  processes, such as adding internal edit checks so that those who enter the  data will have to make corrections as part of the data entry process. Also,  Illinois has created an office to work with state agencies to improve their  data reporting processes, according to a state official. The state also plans  to build in more checks to its review of agency data, for example, a check  that would compare jobs data against existing employment data to confirm  that districts are not reporting more positions than exist in the district.
section_title: GAO Will Continue to Follow These Issues and Highlight Concerns in Subsequent Reports
paragraphs: As recipient reporting moves forward, we will continue to review the  processes that federal agencies and recipients have in place to ensure the  completeness and accuracy of data, including reviewing a sample of  recipient reports across various Recovery Act programs to assure the  quality of the reported information. As existing recipients become more  familiar with the reporting system and requirements, these issues may  become less significant; however, communication and training efforts will  need to be maintained and in some cases expanded as new recipients of  Recovery Act funding enter the system. In addition to our oversight  responsibilities specified in the Recovery Act, we are also reviewing how  several federal agencies collect information and provide it to the public for  selected Recovery Act programs, including any issues with the  information’s usefulness. Our subsequent reports will also discuss actions  taken on the recommendations in this report and will provide additional  recommendations, as appropriate.
section_title: Recommendations for Executive Action
paragraphs: We are making two recommendations to the Director of OMB. To improve  the consistency of FTE data collected and reported, OMB should continue  to work with federal agencies to increase recipient understanding of the  reporting requirements and application of the guidance. Specifically, OMB  should  clarify the definition and standardize the period of measurement for  FTEs and work with federal agencies to align this guidance with  OMB’s guidance and across agencies,  given its reporting approach consider being more explicit that “jobs  created or retained” are to be reported as hours worked and paid for  with Recovery Act funds, and  continue working with federal agencies and encourage them to  provide or improve program specific guidance to assist recipients,  especially as it applies to the full-time equivalent calculation for  individual programs.
OMB should work with the Recovery Board and federal agencies to  reexamine review and quality assurance processes, procedures, and  requirements in light of experiences and identified issues with this round  of recipient reporting and consider whether additional modifications need  to be made and if additional guidance is warranted.
section_title: Despite Limitations, Economic Methods and Recipient Reports Together Can Provide Insight into the Employment Effects of Fiscal Stimulus
paragraphs: The jobs data reported by recipients of Recovery Act funds provide  potentially useful information about a portion of the employment effect of  the act. At this point, due to issues in reporting and data quality including  uncertainty created by varying interpretations of the guidance on FTEs,  we cannot draw a conclusion about the validity of the data reported as a  measure of the direct employment effect of spending covered by the  recipient reports. Even after data quality issues are addressed, these data  will represent only a portion of the employment effect. Beyond the jobs  that are reported, further rounds of indirect and induced employment  gains result from government spending. The Recovery Act also includes  entitlement spending and tax benefits, which themselves create  employment. Therefore, both the data reported by recipients and other  macroeconomic data and methods are necessary to understand the overall  employment effects of the stimulus.
Economists will use statistical models to estimate a range of potential  effects of the stimulus program on the economy. In general, the estimates  are based on assumptions about the behavior of consumers, business  owners, workers, and state and local governments. Against the  background of these assumptions, themselves based on prior research, the  effects of different policies can be estimated. Any such estimate is  implicitly a comparison between alternative policies. The reliability of any  alternative scenario that is constructed depends on its underlying  assumptions and the adequacy of evidence in support of those  assumptions, as well as on the accuracy of the data that form the basis for  what is observed and on how well the model reflects actual behavior.
In the broadest terms, economic research using macroeconomic models  suggests general rules of thumb for approximating the job impact and the  GDP increase for a given amount of stimulus spending. In constructing  their estimates of the employment impacts of the act, CEA observed that a  one percent increase in GDP has in the past been associated with an  increase in employment of approximately 1 million jobs, about three  quarters of 1 percent of national employment. Similarly, CBO economists  have assumed that a one percent increase in output generates somewhere  between 600,000 and 1.5 million jobs. As a result, projections of the  employment impact of the Recovery Act can be generated from  macroeconomic models that estimate output, providing the basis for  estimates of changes in employment.
CEA estimates of the employment effects of the Recovery Act have been  based on statistical projections and allocations using historical  relationships. In January 2009, the incoming administration projected the  anticipated effects of fiscal stimulus on output and employment in the  economy, specifying a prototypical spending package of tax cuts,  payments to individuals, and direct spending by federal and state  government. The effects of such additional spending on output (GDP)  were projected using multipliers, values based on historical experience  that estimate the output change per unit of different types of changes in  government spending. These output increases were translated into  employment effects using a rule of thumb, again based on history, that a 1  percent rise in GDP yields 1 million jobs.
The incoming administration’s January 2009 analysis of a prototypical  stimulus package found that it would be expected to increase GDP by 3.7  percent and increase jobs by 3,675,000 by the fourth quarter of 2010. The  analysis compared the unemployment rate with and without the stimulus.  At that time, the unemployment rate for 2009 was projected to be 8  percent with a stimulus and closer to 9 percent without. In May 2009, CEA  reported on the anticipated employment effects of the actual Recovery Act  as passed by Congress and signed into law by the President. That analysis  was consistent with the January projections that the Recovery Act (which  was deemed to closely resemble the prototypical package earlier  assumed) would result in approximately 3.5 million jobs saved or created  by the end of 2010, compared to the situation expected to exist in the  absence of the act. Later, when the actual unemployment rate rose beyond  9 percent, the administration acknowledged that its earlier projections of  unemployment were too low but asserted that, without the Recovery Act,  the rate would have been even higher than observed.
In September 2009 CEA reported on the effects of Recovery Act spending  through the end of August. It noted that statistical analysis of actual  economic performance compared to that which might have been expected  in the absence of the Recovery Act suggested that the Recovery Act had  added “roughly” 2.3 percentage points to GDP in the second quarter and  was likely to add even more in the third. Translating that output gain into  employment, CEA surmised that employment in August was 1 million jobs  higher than it would have been without the act.
The recipient reports are not estimates of the impact of the Recovery Act,  although they do provide a real-time window on the results of Recovery  Act spending. Recipients are expected to report accurately on their use of  funds; what they are less able to say is what they would have done without  the benefit of the program. For any disbursement of federal funds,  recipients are asked to report on the use of funds to make purchases from  business and to hire workers. These firms and workers spend money to  which they would not otherwise have had access. Recipients could not be  expected to report on the expansionary effects of their use of funds, which  could easily be felt beyond local, state, or even national boundaries.  Neither the recipients nor analysts can identify with certainty the impact  of the Recovery Act because of the inability to compare the observed  outcome with the unobserved, counterfactual scenario (in which the  stimulus does not take place). At the level of the national economy,  models can be used to simulate the counterfactual, as CEA and others  have done. At smaller scales, comparable models of economic behavior  either do not exist or cover only a very small portion of all the activity in  the macroeconomy.
The effect of stimulus on employment depends on the behavior of the  recipient of aid. For consumers, it depends on the extent to which their  total spending increases. For business firms, it depends on the increase, if  any, in their purchases from other business firms or their payrolls. For  state and local governments, it is the increase in their purchases of goods  and services and their own employment rolls. Within any given group of  recipients, choices to spend or save will vary. For example, a consumer  with a large credit card balance may use a tax cut to pay down the balance  or save more rather than increasing spending. Given that the personal  savings rate fell to essentially zero before the recession, households may  well choose to rebuild savings rather than spend. A business firm might  not see additional capital spending or hiring as advantageous. A state  government might decide to bolster its reserves where permitted under  law rather than increase its outlays or cut its taxes. In each case, the  strength of the program as immediate stimulus is weakened to the extent  that all funds are not spent.
The extent to which the initial spending reverberates throughout the  economy is summarized by a multiplier, a measure of the cumulative  impact on GDP over time of a particular type of spending or tax cut. The  resulting change in output translates into a change in employment. In the  context of the Recovery Act recipient reports, the output and employment  effects will likely vary with the severity of the economic downturn in a  recipient’s location (as reflected by distress in labor markets and the fiscal  positions of governments), and the amount of funds received by the  recipient. The nature of the projects or activities to which the recipient  applies its funds also matters, whether the projects use labor intensively  and whether those who are hired will themselves spend or save their  earnings.
subsections: section_title: Potential Effect of Different Types of Fiscal Stimulus
paragraphs: Economists use computer models of the U.S. economy with historical data  on employment, GDP, public spending, taxes, and many other factors to  study the effects of monetary (e.g., changes in interest rates) and fiscal  policies (e.g., changes in government taxing and spending) designed to  affect the trajectory of the economy. In general, a fiscal stimulus program  like the Recovery Act is aimed at raising aggregate demand – the spending  of consumers, business firms, and governments. This may be  accomplished by means of tax cuts, grants-in-aid, or direct Federal  spending. In response, the recipients may purchase more goods and  services than they would have otherwise. This could lead to governments  and business firms refraining from planned dismissal of employees or to  hiring additional workers. The stimulus may lead to an overall, net  increase in national employment and economic output. Models of the  nation’s economy can provide estimates of changes in GDP and  employment that result from changes in monetary or fiscal policies.  In assessing the effects of fiscal policies such as additional government  spending or tax cuts on GDP, macroeconomic models can be used to  estimate “multipliers,” which represent the cumulative impact on GDP  over time of a particular type of spending or tax cut. Multipliers translate  the consequences of a change in one variable, such as in the demand for  goods and services brought about by economic stimulus, on other  variables, such as the supply of those goods and services and employment,  taking into account “ripple effects” that occur throughout the economy.
The size of the multiplier depends on the extent to which changes in  additional government spending or revenue translates into changes in  spending by recipients and beneficiaries of the additional spending.  Spending increases the multiplier, and saving reduces it. The multiplier is  also larger when there is slack in the economy (unemployed persons and  idle productive capacity). Also, the expansionary effects of government  spending are greater when stimulus funds are borrowed rather than raised  by taxation. Finally, the multiplier effect in the U.S. will be greater to the  extent that new spending, whether by government or individuals, is  devoted to domestically-produced goods and services.
In general, macroeconomic models and estimated multipliers can provide  insights on the potential effect of different types of public spending.  Because of the limited historical experience with fiscal stimulus of the  magnitude of the Recovery Act, there is uncertainty about the extent to  which the multipliers estimated using historical data about the effect of  previous business cycles will accurately reflect the stimulus effect this  time around. Economic research, however, has developed a basis for  constructing reasonable ranges of values. In projecting the anticipated  effect of the Recovery Act on national output, the CBO grouped the act’s  provisions according to the size of the multiplier—that is, the magnitude of  the effect of a particular provision’s spending on GDP (see table 7).  Drawing on analyses based on past experience with the results of  government spending, CBO has identified a range of 1.0 to 2.5 for  multipliers. For example, a multiplier of 1.0 means a dollar of stimulus  financed by borrowing results in an additional dollar of GDP. CBO  assumes larger multipliers for grants to state and local governments for  infrastructure spending, and lower values—0.7 to 1.9—for transfers not  related to infrastructure investment. Figure 5 shows the distribution of  Recovery Act funds by multiplier.
section_title: State Labor Market Conditions Will Affect Results of Recovery Act Spending
paragraphs: The employment effects of Recovery Act funds will likely vary with the  strength of the labor market in a recipient’s location. Recipients located in  areas where labor markets are weak, that is, where unemployment is high,  may find it easier to hire people and may be able to do so at lower wages  than those located in areas where the recession has had little effect on  labor markets. Consequently, recipients located in areas with weak labor  markets may be able to employ more people than those located in areas  with strong labor markets, all else being equal.
The percentage of the nation’s labor force that is unemployed has reached  a level not seen in decades. For example, the unemployment rate reached  10.2 percent in October 2009, its highest rate since April 1983. The national  unemployment rate was 4.9 percent in December 2007, the month that  marked the end of the last business cycle and the beginning of the current  recession. In general, the unemployment rate rises and falls over the  course of the business cycle, generally increasing during a recession and  decreasing during an expansion. Cyclical changes in the national  unemployment rate reflect changes in state unemployment rates. State  unemployment rates vary over time in much the same way that the  national unemployment rate varies—increasing during recessions,  decreasing during expansions, but changing direction at different times.
Estimates of current labor market strength, as measured by the  unemployment rate, differ across states. Figure 6 ranks states according to  the most recent available unemployment data—September 2009. While the  national unemployment rate at the time was 9.8 percent, state  unemployment rates ranged from a minimum of 4.2 percent in North  Dakota to a maximum of 15.3 percent in Michigan. Twenty-seven states  had unemployment rates in September 2009 that were less than the  national unemployment rate by one percentage point or more, and nine  states and the District of Columbia had unemployment rates that exceeded  the national unemployment rate by one percentage point or more, and 14  states had unemployment rates that were within one percentage point of  the national unemployment rate.
Labor markets in every state weakened over the course of the recession,  but the degree to which this has occurred varies widely across states.  Figure 7 shows the geographic distribution of the magnitude of the  recession’s impact on unemployment as measured by the percent change  in unemployment between December 2007 and September 2009. Alabama’s  unemployment rate has grown the most over this period, increasing by  about 182 percent. Other states with relatively high unemployment rate  growth over this period include Florida, Hawaii, Wyoming, Idaho, and  Nevada, all of which have seen their unemployment rates increase by more  than 120 percent. At the other end of the spectrum are states like  Minnesota, Mississippi, Arkansas, North Dakota, and Alaska.  Unemployment rates in these states have grown by less than 60 percent  between December 2007 and September 2009. Alaska’s unemployment rate  growth during this period has been the slowest, measuring only about 33  percent.
While the recession has weakened labor markets in every state, those in  some states may be showing signs of recovering. Table 8 lists the states for  which unemployment rates in September 2009 are less than their peak  unemployment rates. The unemployment rate peaked in some states as  early as May 2009. In several additional states, the unemployment rate was  higher in June or July than it was in September. Although unemployment  rates in these states may start to increase again in the future, for the  moment it seems that labor markets in these states are getting stronger.
section_title: State and Sectoral Employment Trends
paragraphs: Table 9 shows the change in employment between December 2007 and  September 2009. Employment in Arizona, Florida, Georgia, Michigan,  Nevada, and Oregon in September 2009 was over 7 percent lower than it  was in December 2007 in each state. On the other hand, employment in  Louisiana and South Dakota fell by less than two percent over the same  period, and employment in Alaska, North Dakota, and the District of  Columbia has increased during that time.
Employment has declined since December 2007, when the current  recession began. However, some signs have appeared that the losses in  employment are slowing. Job losses in October 2009 numbered 190,000.  This number is about equal to average job losses of about 188,000 per  month in August, September, and October 2009. The rate at which  employment has declined over the past three months is thus lower than  the rate at which it declined in May, June, and July 2009, when job losses  averaged about 357,000 per month. The rate at which employment has  declined over the past three months is thus also lower than the rate at  which it declined between November 2008 and April 2009, when job losses  averaged about 645,000 per month.
The current employment contraction has been more pronounced in the  goods-producing sector, in which employment fell by about 17 percent  between December 2007 and October 2009, than the service-providing  sector, in which employment fell by about three percent over the same  period. The goods-producing sector includes the construction and  manufacturing industries, in which employment has fallen by about 21  percent and 15 percent, respectively, between December 2007 and October  2009. The goods-producing sector also includes the mining and logging  industry, which lost about 6 percent of its jobs during the same time.  Service-providing industries include financial activities, information,  professional and business services, and trade, transportation, and utilities,  all of which had employment declines of more than six percent between  December 2007 and October 2009. Employment declines in the leisure and  hospitality industry were about three percent, and employment in  education and health services increased by about 4 percent at the same  time.
section_title: Fiscal Condition of States Will Affect the Results of Recovery Act Spending
paragraphs: The employment effects of Recovery Act funds allocated to state and local  governments will also likely vary with their degree of fiscal stress, as well  as with the factors mentioned above. Because recessions manifest in the  form of lower output, employment, and income, among other things,  reductions in output, employment, and income lead state and local  governments to collect less tax revenue and at the same time cause  households’ demand for publicly provided goods and services to increase.  State governments often operate under various constraints, such as  balanced budget requirements, so they generally must react to lower tax  revenues by raising tax rates, cutting publicly provided programs and  services, or drawing down reserve funds, all but the last of which amplify  recessionary pressure on households and businesses. Local governments  must do the same unless they can borrow to make up for lost tax revenue.  By providing funds to state and local governments, the Recovery Act  intends to forestall, or at least moderate, their program and service cuts,  reserves liquidation, and tax increases.
In addition to the type of spending undertaken, the size of the multiplier  and resultant employment effects will depend on the extent to which aid is  not diverted to reserves. Generally speaking, states with weaker  economies and finances will be more likely to spend Recovery Act dollars.  States that may suffer little or no harm from a national downturn are less  motivated to make full use of any federal assistance. Rather than  increase spending, they may choose to cut taxes or, where permitted by  law, add to their reserves. Tax cuts would have some simulative effect, bu additions to reserves would reduce any multiplier effect. The increase FMAP available under the Recovery Act is for state expenditures for d  Medicaid services. However, the receipt of this increased FMAP may  reduce the state share for the Medicaid programs. States are prohibited from using any funds directly or indirectly attributable to the increased  but states have reported using funds  FMAP for state rainy day funds, made available a result of the increased FMAP for a variety of purposes  including offset of general fund deficits and tax revenue shortfall.
The availability of reserves and the possibility of borrowing points out the  difficulties of gauging the impact of federal policy by the observed timing  of aid flows. The expectation of aid could encourage governments to draw  more out of reserves or to borrow more than they would otherwise. The  rationale is that the expected aid would replace the reserves or liquidate  the new debt. In this way, the timing of aid could postdate the impact.  Research on individual consumption has long wrestled with the problem  of how expectations influence household decisions. State and local  governments must also look forward in making fiscal decisions.
The recession has substantially affected the states’ fiscal conditions. In  recessions, state and local governments are motivated to enact “pro- cyclical” measures that aggravate the downturn. Balanced budget  requirements and other constraints cause them to reduce spending and  raise taxes, generating what is called “fiscal drag.” Federal assistance can  reduce the need for such measures. In this way, the negative employment  effects of fiscal drag can be precluded and existing jobs can be saved. With  sufficient aid, it is possible for state and local governments to go beyond  saving existing jobs to creating additional ones. However, there are likely  to be limits to the abilities of governments to spend aid quickly enough to  affect employment  The recession has substantially reduced states’ and local governments’  combined tax revenues. Figure 8 indicates that tax revenue collected in  the second quarter of 2009 fell from the peak in the second quarter of 2008  by more than $130 billion.
State and local revenues are not likely to return to their previous levels  until well after the recession has ended. After the 2001 recession, tax  receipts did not begin to recover until after second quarter of 2003, well  after the ‘official’ end of the recession in fourth quarter of 2001. However,  the fall in receipts after the second quarter of 2008 is dramatic. In a survey  of the nation’s state governments, the National Governors Association  reported that outlays for current services provided through states’ general  funds decreased by 2.2 percent in fiscal year 2009, which ended in June  2009 for most states. Spending for fiscal year 2010 is projected to fall by  2.5 percent. In light of average annual increases of five percent for total  state and local government outlays, any decrease is a significant  adjustment.
Most states have some sort of requirement to balance operating budgets.   However, most state governments are able to establish reserve funds.  Maintenance of a baseline of five percent of annual outlays for a state’s  fund is regarded by state budget officers as prudent. A lower level could  increase a state’s borrowing costs. Since 2006 these funds have decreased.  In the wake of the 2001 recession, according to an analyst at the  Rockefeller Institute of Government, state governments in fiscal year 2002  drew as much as 4.8 percent of their revenues from fund balances. The  National Governors Association reports that fund balances peaked in 2006  at $69 billion, at 11 percent of general fund expenditures. The funds  declined to 9.1 percent by 2008 and were estimated at 5.5 percent—$36.7  billion—in June 2009. However, by fiscal year 2010, these funds are  projected to fall to 5.3 percent of outlays.
In addition, for 2009 there is variation in state government reserves. For  example, 11 states had total reserves in excess of 10 percent of outlays,  while others, such as California, had total reserves less than 1 percent of  outlays. This may be seen in figure 9.
Diversity in the economic and fiscal conditions of the states and  differences in the size and composition of Recovery Act funds they receive  suggest that the potential for employment gains varies across states. We  will continue work in this area, along with our other work on federal-state  fiscal interactions.
section_title: Agency Comments
paragraphs: In commenting on a draft of our report, OMB staff told us that OMB  generally accepts the report’s recommendations. It has undertaken a  lessons learned process for the first round of recipient reporting and will  generally address the report’s recommendations through that process.
We are sending copies of this report to the Office of Management and  Budget and to the Departments of Education, Housing and Urban  Development, and Transportation. The report will be available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact J.  Christopher Mihm or Susan Offutt at (202) 512-5500. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix III.
section_title: Appendix I: Calculating Full-Time Equivalent Data—Examples of Guidance and Challenges
paragraphs: The Office of Management and Budget (OMB) and federal agencies have  provided wide-ranging guidance to states on how to report full-time  equivalent (FTE) data—that is, jobs created or retained. OMB staff  reported that questions on FTEs dominated the inquiries they fielded  during the first round of recipient reporting, and recipients had various  understandings of how to report an FTE. Following are selected examples  of the challenges of reporting and calculating FTEs, as seen through public  housing agencies and four states—California, Florida, Georgia, and  Massachusetts.
subsections: section_title: Public Housing Agencies Experienced Problems with the Process of Recipient Reporting and the FTE Calculation
paragraphs: As we reported in September 2009, the Department of Housing and Urban  Development (HUD) is using two methods to satisfy reporting  requirements for public housing agencies under the Recovery Act. First,  OMB and the Recovery Act Board have created and manage  www.Federalreporting.gov (Federalreporting.gov), a Web site where all  Recovery Act recipients can report on the nature of projects undertaken  with Recovery Act funds and on jobs created or retained. Second, HUD  developed the Recovery Act Management and Performance System  (RAMPS) in response to reporting requirements outlined in section 1609 of  the Recovery Act. HUD officials said approximately 96 percent of housing  agencies had successfully reported into Federalreporting.gov. Initial  reports suggested a lower reporting rate, but this was due to a substantial  number of housing agencies incorrectly entering values into certain  identification fields, such as the award ID number, the awarding agency,  or the type of funding received. HUD officials said that the system did not  have validation measures in place to ensure the correct award ID numbers  were entered. In addition, housing agencies could not edit the award ID  number without submitting a new report. According to a HUD official,  OMB initially classified reports that could not be matched with a federal  agency as “orphaned.” The HUD official told us HUD program and  Recovery team staff reviewed reports submitted with nonmatching award  ID numbers and OMB’s list of reports that could not be matched to  determine if they matched HUD awards.
According to HUD officials, public housing agencies encountered  challenges related to registration and system accessibility. For example, a  HUD official said the registration process for Federalreporting.gov  requires several steps such as obtaining a DUNS number, registering with  the Central Contractor Registration (CCR) and obtaining a Federal  Reporting Personal Identification Number (FRPIN). The HUD official told  us these steps are necessary for validating the recipient reports because  they ensure the appropriate points of contact at the appropriate  organizations—in this case, public housing agencies—are reporting for  each program. The Federalreporting.gov Web site states that each  recipient’s point of contact information is taken directly from the CCR and  if an organization changes its point of contact information it will take 48  hours for Federalreporting.gov to receive the change and e-mail the FRPIN  and temporary password to the new point of contact. According to the  HUD official, a housing agency’s contact information in CCR is sometimes  outdated and the systems are often not updated in time for access to be  correctly transferred. Additionally, one housing agency official reported he  saved his data entry as a draft before being timed out of the system, but  was unable to retrieve the data when he reentered the reporting Web site.  A HUD official said in the future, HUD and OMB will need to improve the  function of the system and the official said that they are working to ensure  all housing agencies have access to the reporting systems.
According to a HUD official, there was widespread misunderstanding by  public housing agencies about OMB’s methodology for calculating the  number of jobs created or retained by the Recovery Act, in part because  housing agencies are not familiar with reporting jobs information. In a few  cases, we found that public housing agencies had reported the number of  jobs created or retained into Federalreporting.gov without converting the  number into full-time equivalents. For example, officials from one housing  agency reported the number of people, by trade, who worked on Recovery  Act related projects, but did not apply the full-time equivalent calculation  outlined by OMB in the June 22 reporting guidance. Additionally, officials  from another public housing agency told us that they based the number of  jobs they reported into Federalreporting.gov on letters from their  contractors detailing the number of positions rather than full-time  equivalents created as a result of their Recovery Act-funded projects. In  another case, a housing agency official reported having difficulty locating  guidance on calculating job creation. As a result, the housing agency may  have underreported jobs data from an architectural firm providing design  services for a Recovery Act window replacement project at a public  housing complex.
HUD officials cited the fact that OMB and HUD provided additional  clarification and guidance close to the deadline for recipient reporting as a  factor in housing agencies’ confusion about the methodology for counting  jobs. According to a HUD official, HUD was in discussions with OMB  about finalizing and clarifying portions of the June 22, 2009, job guidance  right up to the end of September. In early September, HUD posted the  OMB guidance to its Web site and provided information by e-mail to  housing agencies on registration for Federalreporting.gov, as well as links  to Web seminars and training provided by OMB. HUD issued further  guidance to public housing agencies by e-mail on September 25, 2009,  approximately 2 weeks before the October 10, 2009, deadline for recipient  reporting, providing templates and data dictionaries tailored to the Public  Housing Capital Fund. The guidance also reiterated the recipient reporting  responsibilities for public housing agencies.
HUD officials told us they did not have enough time to translate some of  the terminology into concrete terms that would be clearer to housing  agency officials. For example, HUD posted a jobs calculator spreadsheet  to its Web site, and HUD field staff would direct housing agencies to this  guidance when they asked specific questions about how to calculate jobs.  Nonetheless, greater instruction may be needed beyond what was  provided to housing agencies on the job calculator’s instructions page. A  HUD official said it seemed like some housing agencies may have pulled  information for the recipient reports from the wrong fields in the job  calculator, which produced errors. A HUD official stated they will work  with OMB to improve housing agencies’ understanding of the methodology  for reporting in full-time equivalents prior to the next round of recipient  reporting in January 2010.
section_title: California’s Experiences with Recipient Reporting Requirements
paragraphs: State officials from the California Recovery Task Force and the California  Office of the State Chief Information Officer (CIO) explained that while  the centralized reporting structure had several benefits, challenges with  changing reporting requirements from federal agencies and technological  glitches still occurred.
As a centralized reporting state, each state agency reported directly to the  CIO through the California ARRA Accountability tool. The Task Force is  responsible for uploading the data to Federalreporting.gov. However,  according to state officials, local government agencies that received direct  Recovery Act dollars from the federal government are not under the Task  Force’s purview of the state officials and report to Federalreporting.gov on  their own. State officials stated that a centralized reporting structure  allows the CIO to act as a liaison between OMB and the state for faster  reconciliation of issues. The CIO, on behalf of the task force, was  responsible for collecting, validating, and uploading data from state  agencies to Federalreporting.gov. The state officials believed the process  went well overall and commended their state team for successfully  reporting into Federalreporting.gov. The Task Force officials believed the  reporting process could be improved if OMB provided a comprehensive  list of awards to better crosscheck reporting. California officials stated  that many of the challenges in reporting did not come from the additional  information requested during October 11 to 20, but from changes  immediately prior to the September 30 cut-off date. These changes  included issues such as the Department of Education’s request to include  Central Contract Registration numbers on September 21, and FHWA’s  changes to four of the data elements, including the award amounts.
California officials have a greater appreciation of what to expect during  the reporting process. They believe that the continuous communication  with the state agencies, including weekly data group meetings at which as  many as 60 people attended, contributed to the overall success of the  reporting process. They also have been developing their own internal logic  checks to assist with data validation. California officials continue to be  concerned that problems at Federalreporting.gov and changing agency  requirements will cause subrecipient data, initially correctly collected in  accordance with federal guidance, to be rejected, which will result in  penalties for late submissions.
section_title: Florida Department of Transportation’s Experiences with Reporting and Data Quality Reviews
paragraphs: The Florida Department of Transportation (FDOT) has reporting  requirements under both sections 1512 and 1201 of the Recovery Act.  Although the state had an existing system in place that could be used for  section 1201 reporting, officials decided to develop two additional systems  for 1512 reporting. One system was created to assist FDOT in reporting  information to the state Recovery Czar and a second system for  employment reporting was created to allow subrecipients to enter total  number of employees, payroll, and employee hours for Recovery Act- funded highway projects. According to state officials, the system was  launched on May 29, 2009, and is currently in use. FDOT officials  experienced no significant reporting problems while submitting more than  400 reports.
Florida began preparing for reporting early and conducted extensive  training to assist contractors, consultants, and local agencies in the  collection of employment data required by the Recovery Act. For example,  FDOT’s Office of Inspector General (OIG) developed five computer-based  training modules to assist department staff and external partners in the  use of the electronic reporting system. FDOT also partnered with its OIG  and the Florida Division of the Federal Highway Administration (FHWA)  to conduct town hall presentations for its seven District Offices and  Florida’s Turnpike Enterprise. The presentations were designed to ensure  consistent use of the electronic employment data application. In  September, OIG followed up with a survey to local agencies to determine  the levels of proficiency for using the department’s electronic employment  reporting system and to solicit feedback.
FDOT’s electronic employment data reporting system provides for several  levels of data review and approval. For example, once the subrecipient  enters their monthly employment data into the electronic system, the data  is available for review and subsequent approval by the local agency project  manager. Once approved, the data is available for review and approval by  the department’s district office project manager. The district office project  manager performs a reasonableness check of the submitted data prior to  electronically approving the same.
The electronic employment data is then available for review by OIG where  two types of analyses are performed. First, OIG identifies whether the  subrecipient should be reporting job data by comparing submitted data  (and subrecipient identifiers) against the master list of awarded Recovery  Act transportation projects. Second, OIG compares previously submitted  subrecipient information against information contained in its current  submission to determine any data anomalies or variances. Should any  significant data anomalies or variances occur, OIG will contact the  appropriate district and local agency.
FDOT did not require subrecipients to submit verification of their job data  but subrecipients were advised by FDOT to maintain documentation for  review. For two subrecipients we visited, we found the extent to which  documentation was being maintained varied. For example, one  subrecipient kept time-sheets for all employees associated with Recovery  Act projects, while another had documentation for its hourly employees  but not its management employees.
section_title: Reporting from a Georgia Highway Contractor’s Perspective
paragraphs: Reporting Process: In Georgia, one of the highway contractors we visited  noted that it was responsible for reporting on about 30 Recovery Act- funded projects with approximately 10 subrecipients for each project. The  contractor stated that they are required to fill out a monthly report (FHWA  Form 1589) indicating the number of employees, the hours worked, and  the dollars charged to the job through a direct portal created by Georgia  Department of Transportation (GDOT). According to the contractor, this  reporting requirement is in the contract, and GDOT will withhold payment  if this report is not completed. As the general contractor, the firm is also  responsible for collecting the 1589 information from its subcontractors on  each job. Officials with the firm stated that they would withhold payment  from the subcontractors if they fail to provide the information. We  examined these contracts and confirmed these requirements. In addition  to the 1589 report, the contractor also submits certified payroll to GDOT  on a monthly basis.
Guidance and Challenges: In terms of guidance, the contractor noted  that there was not a lot of training provided but that they did not  necessarily need much training. The main challenges raised were issues  with making changes within the GDOT system and the DUNS number  field. For example, officials explained once a report was submitted into  GDOT’s system, it could not be edited, which made errors in entry or  reporting difficult to correct. The contractor has discussed this issue with  GDOT and hopes a solution will be reached for the next reporting cycle.
The DUNS number requirement was an issue for several subrecipients  since they did not have a number and they were under the impression that  a cost was involved in obtaining a number, which there was not. After  discussions with GDOT, it was determined that subrecipients did not need  a DUNS number, but the field could not be blank. Therefore, GDOT  advised the contractor to have its subrecipients complete the file by  entering “not applicable.” The contractor suggested that improvements in  reporting could be achieved by delaying the reporting date to GDOT to  allow more time to handle delays in payroll and obtaining supporting  information. Overall, the contractor felt that the September report was the  most accurate month reported to date and believed greater accuracy will  be achieved over time.
Data Quality: Officials of the highway contractor told us they think they  have a handle on the process and were confident in the data submitted. In  their words, “if it’s inaccurate, we paid somebody wrong” since the report  comes out of their payroll system. In terms of data from subcontractors,  the officials noted that their confidence varied somewhat across  subcontractors. Officials explained that information varied, based on the  capacity and expertise of the subcontractor (that is, experience in  reporting and if a certified payroll is in place). Officials explained they had  greater confidence in subcontractors that had certified payroll. They  provided several examples of subrecipients who were truckers or haulers  who are not familiar with reporting and often are a small operation of one  employee. Officials noted that the number of truckers or haulers on a  project is often large in order to meet disadvantaged business  requirements. Officials questioned if truckers and haulers should be part  of the job creation or retained count since similar positions may not be  counted for subcontractors that provide materials such as pipe. Officials  believed over time, subcontractors would become more comfortable and  familiar with the process.
section_title: Reporting from a Massachusetts Highway Contractor’s Perspective
paragraphs: Reporting Process: An official at a major highway contractor we  interviewed in Massachusetts explained that one of his primary  responsibilities as the Construction Cost Accountant is to certify payroll  records and ensure compliance with federal labor standards. This  company is the general contractor (or prime contractor) on six Recovery  Act highway construction projects.
A company official stated that that there was no additional burden  associated with filing the quarterly recipient reports because they  routinely report employment data to the Massachusetts Department of  Transportation (MassDOT), Highway Division for federal-highway funded  projects through the MassDOT Highway Division’s Equitable Business  Opportunities (EBO) system. Although there were additional data  elements required for Recovery Act projects, the company official noted  that FHWA Form 1589 specifies these additional reporting elements, and  they have been added to the EBO system to make it easier for contractors  and subcontractors to report on a monthly basis.
According to the company official, the process was very straightforward.  Contractors and subcontractors log into the EBO system and can see  detailed information on all the projects they are working on for the  MassDOT Highway Division. Typically, by the 15th day of each month,  contractors and subcontractors upload their certified payroll files into the  EBO system. However, for the September submission, MassDOT’s  Highway Division required contractors to submit their employment reports  early by October 9, so that they could meet the state’s October 10 deadline  of submitting the quarterly Recovery Act report.
Guidance and Challenges: The official noted that the only guidance he  received came from the MassDOT Highway Division in the form of training  on the EBO system, which he said helped contractors and subcontractors  transition from the old employment reporting system to the EBO system.  He noted that for contractors that were used to working with complex  accounting systems, this training was adequate, but for smaller  contractors with little computer experience, the training could have been  better. In general, the official observed that most contractors and  subcontractors are very pleased with the new system because it interfaces  so well with their existing accounting and certified payroll databases and  because the cost is low.
Data Quality: There are several steps for ensuring data quality. First, a  company official explained that most large contractors and many  subcontractors have accounting and payroll data systems that interface  with the EBO database well, so they are able to upload data from these  systems directly into the EBO system, eliminating the need to reenter  employment data. However, some smaller contractors don’t have these  systems and thus must enter the data by hand each month. The company  official stated that he is not concerned with the quality of data because it is  verified both internally and by the MassDOT Highway Division.
The official explained that the MassDOT Highway Division puts the  responsibility for ensuring that subcontractors file monthly reports with  the general contractor, and his company ensures subcontractor  compliance by withholding their reimbursements. Although it is rarely  needed, the official noted that withholding payments to subcontractors is  a very effective tool for getting subcontractors to submit their monthly  reports. Furthermore, all subcontractor employment reports are verified  against the daily duty log that is kept by the project supervisor, who is an  employee of the company. The MassDOT Highway Division also posts  resident engineers at each job site on a daily basis, and they keep a daily  diary of employment and work status that is used to verify the data  submitted by general contractors in the MassDOT Highway Division  project management system. This is the same system that is used to  generate contractor invoices for reimbursement.
section_title: Appendix II: Department of Education Calculations to Determine Full-Time Equivalents (FTE) for Jobs Created or Retained
paragraphs: According to Education’s clarifying guidance on jobs estimation, local  educational agencies (LEA) are generally required to calculate a baseline  number of hours worked, consisting of a hypothetical number of hours  that would have been worked in the absence of Recovery Act funds. Once  LEA officials derive this number, they then deduct the number from actual  hours worked by individuals whose employment is attributable to  Recovery Act funding to determine the number of hours created or  retained. They then derive the number of full-time equivalents (FTE) for  jobs created or retained, as shown in table 10.
Then, they divide the resulting number of hours created or retained by the  number of FTE hours in the quarter or reporting period to determine the  number of FTEs to report. For example, in the table above, Employees 3  and 6 went from being unemployed (0 hours of employment) in the  hypothetical situation where no Recovery Act funds are available to full- time (520 hours) and part-time (300 hours) employment, respectively.  Employee 2 went from part-time (300 hours) to full-time (520 hours).  Employee 5 remained a part-time employee, but works an additional 100  hours in the reporting quarter. Taking the sum of actual hours worked in  the reporting quarter (2460) and subtracting the hours worked in the  hypothetical baseline quarter (1320), we are left with 1140 created or  retained hours. For the first reporting quarter, LEA officials divided the  result by the number of FTE hours in that quarter (520). The total FTEs  created or retained in Quarter 1 is 2.19.
Results should be reported cumulatively, so in the second reporting  quarter (Q2), the total hours worked in Q2 will be added to the hours  worked in Q1 and divided by the hours in a full-time schedule for two  quarters (1040 hours). For example, if in quarter 2, all employees reported  in quarter 1 are retained and the baseline remains unchanged, we would  again have 1140 hours created or retained. To get the final cumulative   FTE created or retained, officials would sum 1140 for quarter 1 with 1140  for quarter 2 to get 2280 total hours created or retained. Recipients should  divide this by the sum of the hours in a full-time schedule for those   two quarters (1040). The result is again 2.19 FTE created or retained in  quarter 2.
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
paragraphs: J. Christopher Mihm or Susan Offutt at (202) 512-5500.
section_title: Staff Acknowledgments
paragraphs: The following staff contributed to this report: J. Christopher Mihm, Nancy  Kingsbury, and Katherine Siggerud (Managing Directors); Susan Offutt  (Chief Economist); Susan Irving, Yvonne Jones, Thomas McCool, and  Mathew Scire (Directors); Angela Clowers (Acting Director); Robert J.  Cramer (Associate General Counsel); Thomas Beall, James McTigue, Max  Sawicky (Assistant Directors); Judith C. Kordahl (Analyst-in-Charge); and  Jaime Allentuck, Darreisha Bates, Don Brown, Stephen Brown, Tina  Cheng, Andrew Ching, Steven Cohen, Michael Derr, Robert Dinkelmeyer,  Shannon Finnegan, Timothy Guinane, Philip Heleringer, Don Kiggins,  Courtney LaFountain, John McGrail, Donna Miller, Elizabeth Morrison,  Jason Palmer, Beverly Ross, Tim Schindler, Paul Schmidt, Jennifer  Schwartz, Jonathan Stehle, Andrew J. Stephens, James Sweetman, and  William Trancucci. The state teams for the bimonthly Recovery Act letter  reports also contributed to this report.