Recovery Act: Planned Efforts and Challenges in Evaluating Compliance with Maintenance of Effort and Similar Provisions
Published: 2009-11-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To help prevent the substitution of federal funds for state, local, or private funds, the American Recovery and Reinvestment Act of 2009 (Recovery Act) contains maintenance of effort and similar provisions requiring that recipients maintain certain levels of spending for selected programs. This report provides information on selected programs in the Recovery Act with maintenance of effort or similar provisions, the guidance federal agencies have issued to implement these requirements, and how responsible federal agencies are determining whether recipients meet these requirements. To conduct this work, GAO identified eight programs in the Recovery Act that contain a new maintenance of effort or similar provision; account for at least $4 billion in appropriations by agency; and collectively account for about $100.5 billion of the $106.8 billion in Recovery Act appropriations with these provisions. The eight programs with maintenance of effort or similar provisions span the areas of education, highway, housing, rail, telecommunications, and transit. The specifics of each provision vary by responsible agency, such as whether a state must certify the amount of funding it will maintain, whether waivers are allowed, and the consequences (if any) of not meeting the provisions. The federal agencies responsible for these eight programs have issued guidance to states and other recipients on how to implement the maintenance of effort or similar provision requirements. However, federal and state officials have not completed key steps in implementing these provisions because of administrative and fiscal challenges.
section_title: What GAO Found
paragraphs: (1) The Department of Transportation (DOT) has begun to assess the highway and transit levels that states certified to maintain; however, it has not estimated a date for completing this assessment and has not finalized plans for determining states' compliance with their transit certifications. Furthermore, according to a DOT official, the department has not made a decision as to whether the Recovery Act requires states to maintain a total level of effort for covered programs or to maintain their level of effort for each covered program. Officials from several state departments of transportation told GAO that while they plan to meet their maintenance of effort requirements, decreasing state revenues and budgets pose a challenge to doing so. (2) The Department of Education (Education) has begun to draft a monitoring plan to oversee and enforce state compliance with maintenance of effort requirements under the State Fiscal Stabilization Fund. Because the State Fiscal Stabilization Fund is a new program under the Recovery Act, Education has yet to finalize monitoring plans and processes. In addition, Education has not issued guidance to states on how to document that they met their required maintenance of effort level. (3) Department of Housing and Urban Development (HUD) officials said they are monitoring Capital Fund formula grants through ongoing efforts. Officials further stated that they are still developing a strategy for monitoring Capital Fund competitive grants. (4) The Department of Commerce's (Commerce) review of broadband grant applications for funding has been delayed because of scheduling and staffing challenges. In particular, the broadband grant program involves more applications and far more funds than the agency formerly handled, raising concerns whether the department has sufficient staff resources to implement the program in accordance with Recovery Act priorities. While Commerce originally anticipated that this review would be completed by November 7, 2009, the agency now estimates that it will not complete this review process and award the first round of grants until February 2010.

section_title: Letter
paragraphs: The nation faces what is generally reported to be the most serious economic  crisis since the Great Depression. In response, the American Recovery and  Reinvestment Act of 2009 (Recovery Act) was enacted to promote economic  recovery, make investments, and minimize and avoid reductions in state and  local government services. The Recovery Act, like previous fiscal stimulus  packages, is designed to stimulate the economy through direct spending by  the government or spending by the recipients of tax cuts or government  transfers. The Congressional Budget Office estimated that the Recovery  Act’s combined spending and tax provisions will cost $787 billion over 10  years, of which more than $580 billion will be in additional federal spending.  The Recovery Act contains maintenance of effort and similar provisions to  ensure that recipients maintain certain levels of spending for certain  programs as a condition of receiving federal funds. Such provisions are  designed to prevent recipients from substituting federal funds for funds that  otherwise would have been spent for some aided programs—that is, to help  ensure that increased federal spending will supplement rather than replace  state, local, or private spending.
You asked us to provide information on maintenance of effort and similar  provisions in the Recovery Act. Accordingly, this report discusses  programs in the Recovery Act with new maintenance of effort or similar  provisions, the guidance federal agencies have issued to implement these  requirements, and how responsible federal agencies are determining  whether recipients meet these requirements.
To address these objectives, we reviewed the Recovery Act to identify the  programs with maintenance of effort or similar provisions. We identified  eight programs—administered by the Departments of Commerce,  Education, Housing and Urban Development, and Transportation—that (1)  contain a new maintenance of effort provision or similar language; (2)  account for at least $4 billion in appropriations, by agency; and (3) account  for a majority of the about $106.8 billion in Recovery Act appropriations  with new maintenance of effort or similar provisions. (See table 1.) The  eight programs we reviewed received about 94 percent—or $100.5 billion— of the Recovery Act appropriations for programs with new maintenance of  effort or similar provisions. We also analyzed documents from and  interviewed federal and state officials. These documents included federal  agency guidance on the eight programs in the Recovery Act that we selected  for this review and state certifications on spending levels. We also obtained  information from the state departments of education in 6 states and the  District of Columbia and state departments of transportation in 16 states  and the District of Columbia on their use of the guidance issued by the  Departments of Education and Transportation on maintenance of effort  requirements—specifically, the state certification process. We spoke with  state departments of education in Arizona, California, Florida, New Jersey,  New York, North Carolina, and the District of Columbia and state  departments of transportation in Arizona, California, Colorado, Florida,  Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New Jersey,  New York, North Carolina, Ohio, Pennsylvania, and Texas. In addition, we  gathered documents from and interviewed education and transportation  officials in these 16 states and the District of Columbia on the methodology  they used to calculate their spending levels and plans to monitor their  compliance with the maintenance of effort requirements. We also spoke  with officials from 27 public housing agencies in 10 states about  supplementing, not supplanting, funds from the Department of Housing and  Urban Development (HUD). These states are Arizona, Colorado, Georgia,  Illinois, Iowa, Massachusetts, Mississippi, New Jersey, North Carolina, and  Texas. We selected these states based on our ongoing Recovery Act  reporting effort—which covers a core group of 16 states and the District of  Columbia. Appendix I contains additional information about our scope and  methodology. We conducted this performance audit from August 2009 to  November 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: Enacted on February 17, 2009, to jump-start the economy and encourage  long-term economic growth, the Recovery Act makes more than $780  billion available in supplemental appropriated funds to eligible state, local,  and sometimes private recipients. These funds are intended to create and  save jobs, spur economic activity, and promote high levels of  accountability and transparency in government spending, among other  things. We reported that as of September 23, 2009, the Department of the  Treasury had outlayed about $48 billion of the estimated $49 billion in  Recovery Act funds projected for use in states and localities in federal  fiscal year 2009, which ran through September 30, 2009.
To ensure that Recovery Act funds supplement rather than replace other  spending, the Recovery Act contains requirements that the federal funds  not be substituted for state, local, and private support for some aided  programs. State and local governments are to be held accountable for how  the Recovery Act funds are used to support those programs, and the  federal agencies that oversee the programs will be responsible for  reviewing states’ compliance with the requirements. These spending  requirements include the following:    Maintenance of effort. This requirement prohibits recipients from  replacing their own spending with federal dollars. In particular, a  maintenance of effort provision requires a state or its agency to maintain  certain levels of state spending for a certain program.
Supplement-not-supplant. This requirement does not hold recipients  responsible for maintaining their level of effort in supporting a program,  but it does require that funds provided for certain programs serve only to  supplement expenditures from other federal, state, or local sources or  from funds independently generated by the recipient.
But-for test. This requirement ensures appropriate use of Recovery Act  funds by requiring recipients to explain how a certain project would not  have been implemented during the grant period without the federal grant.  This requirement is described as the “but-for test” because, but for the  funds, the project would not be supported.
section_title: Efforts to Implement and Evaluate Compliance with Maintenance of Effort and Similar Provisions Are Ongoing and Proving to Be Challenging
paragraphs: Requirements for the programs that are subject to Recovery Act provisions  designed to guard against the substitution of federal funds for state funds  vary by responsible agency.  In general, the supplement-not-supplant  requirements for HUD and the “but-for test” for the Department of  Commerce are different from the maintenance of effort requirements for  the Departments of Education and Transportation. However, only  recipients of funds administered by the Department of Education can seek  a waiver from the maintenance of effort requirements. (See table 2.) The  federal agencies responsible for these programs have issued guidance to  recipients on how to implement the maintenance of effort or similar  provision requirements. In addition, the Department of Transportation  (DOT) continues to issue further guidance to clarify some requirements.  To determine whether recipients comply with maintenance of effort and  similar provisions, agencies are finalizing state certifications, reviewing  applications, and developing plans to review recipients’ compliance with  the provisions. However, some agencies and states face challenges in  implementing these provisions. For example, the Department of  Commerce’s review of applications to ensure that proposed projects  would not be feasible without federal funding has been delayed by  scheduling and staffing challenges. In addition, officials from several state  departments of transportation told us that while they plan to meet their  maintenance of effort requirements, decreasing state revenues and  budgets pose a challenge to doing so.
subsections: section_title: DOT Is Finalizing Plans for Determining State Compliance, and Some States Are Concerned about Meeting Maintenance of Effort Requirements
paragraphs: DOT maintenance of effort provision: The Recovery Act provided about  $43.9 billion for highway, transit, and rail projects. This funding is  administered through DOT’s operating administrations—the Federal  Highway Administration (FHWA), Federal Transit Administration (FTA),  and Federal Railroad Administration (FRA). To be eligible for these funds,  the Recovery Act specifies that the governor of each state must certify that  the state will maintain its current level of highway, transit, and rail  spending, among other things. The certification must include a statement  of the amount of funds the state plans to spend from state sources from  the date of enactment—February 17, 2009—through September 30, 2010,  for the types of projects that are funded by that appropriation. The  Recovery Act required that the Governor of each state submit this  certification no later than 30 days after enactment, or March 19, 2009. The  Recovery Act does not provide any waivers or exemptions for the states— for changes in economic conditions, for example—from the maintenance  of effort provision. The consequence for a state of not maintaining the  certified level of effort is that the state will be prohibited from  participating in the redistribution of federal-aid highway obligation  authority that will occur after August 1, 2011. According to a DOT official,  the department has not made a decision as to whether the Recovery Act  requires states to maintain a total level of effort for covered programs or  to maintain their level of effort for each covered program. For example, a  state might not maintain its certified level of effort for transit but might  exceed its certified level of effort for highways, thereby equaling or  exceeding its total certified level for transportation. How this question is  interpreted has significance for state flexibility in meeting maintenance of  effort requirements and for decisions about whether states will be eligible  for redistributed federal-aid highway obligations. According to this DOT  official, DOT plans to make a decision on this issue by the end of calendar  year 2009.
DOT guidance to states: Ten days after the enactment of the Recovery Act  on February 17, 2009, DOT issued guidance to the states on the FHWA,  FTA, and FRA programs, among others, with maintenance of effort  provisions. This guidance included the principal requirements for a  governor’s certification that a state will maintain its highway, transit, and  rail funding efforts, among others. Specifically, this guidance included a  sample form that states could complete to satisfy the Recovery Act’s  certification requirement. In March 2009, as required by the Recovery Act,  all states submitted their certifications; however, many states submitted  explanatory certifications—such as a statement that the certification was  based on “the best information available at the time”—or conditional  certifications, indicating that the certification was subject to conditions or  assumptions, future legislative action, future revenues, or other  conditions. In response, on April 22, 2009, DOT issued guidance requiring  such states to correct those problems through recertification.
All states that submitted conditional certifications submitted a second  maintenance of effort certification to DOT without conditions. Since April,  DOT has issued supplemental guidance to reduce the variations in how  states calculate their maintenance of effort certifications. This additional  guidance is as follows:    On May 13, 2009, DOT issued guidance in response to questions asked by  state representatives during a conference call. The majority of this  guidance addresses the types of expenditures to include in their  maintenance of effort calculation. For example, states should include in- kind contributions from state sources in the planned amount of the  expenditures.
In June and July 2009, FHWA posted several sets of frequently asked  questions to continue to provide states with information on the types of  expenditures to include in their maintenance of effort calculations—and  therefore reduce the variation in how states calculated their maintenance  of effort certifications. For example, states should include planned  expenditures from state sources regardless of which agency or political  subdivision in the state is responsible for overseeing the expenditure of  those funds. However, the maintenance of effort calculation does not  include any locally generated funds (i.e., funds produced by local taxes).
In September 2009, DOT issued guidance that requires states to include  grants-in-aid to local governments as part of their maintenance of effort  calculation, which states generally did not count in their previous  calculations. This guidance will require some (if not many) states to  complete another certification.
Of the 17 departments of transportation we spoke with, officials from 13  stated that they had received timely guidance from DOT on maintenance  of effort certification and that DOT has generally been responsive to their  questions. For example, Mississippi transportation officials told us that  they had spoken and met with DOT officials regularly since the enactment  of the Recovery Act to discuss Mississippi’s maintenance of effort  certification.
DOT plans for determining compliance with maintenance of effort  provision: DOT continues to work with state governments to finalize their  maintenance of effort certifications. As we reported in September 2009,  DOT has concluded that the form of the revised state certifications is  consistent with its April 22, 2009, guidance, but it is currently evaluating  whether the states’ method of calculating the amounts they planned to  expend for the covered programs is in compliance with DOT guidance. As  of November 30, 2009, FHWA, FTA, and FRA had reached different stages  in their reviews.
In June 2009, FHWA began to review each state’s maintenance of effort  calculation to ensure that the state included the correct planned  expenditures for highway investment. For example, FHWA division offices  evaluated, among other things, whether the amount certified (1) covered  the period from February 17, 2009, through September 30, 2010, and (2)  included in-kind contributions, as required. FHWA division staff then  determined whether the state certification needed (1) no further action,  (2) further assessment, or (3) additional information. In addition,  according to FHWA officials, their assessments indicated that FHWA  needed to clarify the types of projects funded by the appropriations and  the types of state expenditures that should be included in the maintenance  of effort certifications. As a result of these findings, DOT issued the June,  July, and September 2009 guidance and plans to issue additional guidance  on these issues.
Our review of FHWA division assessments for the 16 states and the  District of Columbia included in this study showed that 6 states needed  further assessment. In August 2009, FHWA staff in headquarters reviewed  the FHWA division staff findings for each state and proceeded to work  with each FHWA division office to make sure their states submit revised  certifications that will include the correct planned expenditures for  highway investment—including aid to local agencies. FHWA officials said  that of the 16 states and District of Columbia that we reviewed for this  study, they currently expect to have 12 states submit revised certifications  for state highway spending, while an additional 2 states are currently  under review and may have to revise their certifications. DOT officials  stated that they have not determined when they will require the states to  submit their revised consolidated certification. According to these  officials, they want to ensure that the states have enough guidance to  ensure that all programs with Recovery Act maintenance of effort  provisions have completed their maintenance of effort assessments and  that the states have enough guidance to ensure that this is the last time  that states have to amend their certifications.
FTA officials told us the agency plans to review each state’s maintenance  of effort calculation to ensure that states included the correct planned  expenditures for transit projects covered under the Recovery Act.  According to FTA officials, FTA has begun this review, but it is not  complete. In October 2009, FTA officials compared each state’s certified  transit maintenance of effort with the state funding levels in that state’s  plans, specifically the Statewide Transportation Improvement Program  (STIP) and Transportation Improvement Program (TIP). FTA found  discrepancies between states’ transit maintenance of effort certifications  and their STIPs and TIPs, and determined that these state plans did not  provide the best mechanism for comparison as it was unclear what types  of expenditures were included in the states’ STIP and TIP funding  numbers. According to FTA officials, they will work directly with these  states to determine the methodology the states used to calculate their  transit maintenance of effort amount and, subsequently, decide whether  amended certifications are needed. According to FTA officials, they have  not established a timeline for completing these reviews.
FRA officials told us that the agency plans to review states’ maintenance  of effort calculations to ensure that states included the correct planned  expenditures for rail projects covered under the Recovery Act. However,  the officials said they are still determining the logistics and timeline for  this process. Whereas FRA received certifications that 12 states planned to  spend state funds on rail projects, FHWA received certifications from 50  states and the District of Columbia that planned to spend state funds on  highway projects and FTA received certifications from 38 states and the  District of Columbia that planned to spend state funds on transit projects.  However, FRA plans to work with other states to determine whether they  should have certified that they planned to spend state funds for rail  projects. FRA officials said they expect to complete their review by  February 2010.
FHWA has begun to monitor states’ compliance with their certifications,  while FTA and FRA are developing monitoring plans. As of September  2009, FHWA was tracking every state’s spending of state funds for the  kinds of projects funded under the Highway Infrastructure Investment  appropriation, while FTA and FRA were determining how they would  track state spending on covered transit and rail projects. Many of the state  departments of transportation we spoke to told us that they are tracking  their state expenditures on a monthly basis to determine if their  maintenance of effort requirements are being met; however, most said  they do not expect to determine whether they met their maintenance of  effort levels until sometime between September and October of 2010.  Following are examples illustrating these points:    FHWA officials stated that FHWA has been using information from  Recovery Act reporting requirements to get a sense of whether states are  on track to meet their highway certifications. Ninety days after the  enactment of the Recovery Act, states were required to report the amounts  outlayed under each covered program. Then, states submitted an update  to this report 180 days after enactment and are required to submit  additional reports 1 year, 2 years, and 3 years after the date of enactment.  These reports track the actual aggregate expenditures by each state,  among other things. Using the 180 day report, FHWA has been tracking  each state’s certified highway maintenance of effort levels against its  reported actual expenditures. According to FHWA officials, this exercise  provides FHWA with an estimate of each state’s rate of spending on  highway investment and has allowed the agency to identify states that  appeared to have abnormally high or low spending rates. FHWA officials  have worked with such states to understand whether the reasons are  acceptable. For example, from this spreadsheet, FHWA officials were able  to determine that California’s spending rate on highway investment  appeared to be much higher than would have been expected based on the  percentage of the maintenance of effort time period that had elapsed.  Upon further investigation, including discussions with California, FHWA  determined that that the state’s rate was higher because improvements in  the bond market had allowed California to issue bonds it had not planned  to issue as of the February 17, 2009, maintenance of effort calculation  date. The expenditure of these bond proceeds on projects caused a higher  expenditure rate than expected. FHWA concluded that California’s  explanation of its post-February 17, 2009, decision to issue the bonds was  acceptable and it provided a reason for a relatively higher spending rate. In  addition to using the Recovery Act reports, FHWA officials stated that  FHWA division staff will continue to work closely with states to  understand spending rates on highway investment and help states address  any potential problems states might have in complying with their certified  highway spending levels. FHWA officials stated they will not be able to  make a final determination as to whether states have fully complied with  their highway maintenance of effort levels until after the maintenance of  effort period concludes on September 30, 2010.
FTA and FRA officials told us they do not know when they will begin to  determine states’ compliance with their transit and rail maintenance of  effort certifications. According to FTA and FRA officials, to determine  state compliance, they first need to assess each state’s transit and rail  maintenance of effort certifications. FTA and FRA officials told us that by  September 30, 2010, they will work with each state to determine its  spending on eligible transit and rail projects and thus determine if each  state has complied with its transit and rail certifications.
State challenges in meeting DOT maintenance of effort requirement:  Most states we spoke with are committed to trying to meet their  maintenance of effort requirements, but some states are concerned about  meeting the requirements. As we have previously reported, states face  drastic fiscal challenges, and most states are currently estimating that  their fiscal year 2009 and 2010 revenue collections will be well below  previously estimated amounts. In the face of these challenges, some states  told us that meeting the maintenance of effort requirements over time  poses significant challenges. In addition, according to the DOT Deputy  Assistant Secretary for Transportation Policy, the department recognizes  that many states may not be able to maintain the level of effort specified in  their certifications, given the continual decline in their economy. If a state  is not able to maintain its certified level of effort, it will not be allowed to  participate in the redistribution of federal-aid highway obligations that will  occur after August 1, 2011.
In August 2008, states received about $1.2 billion through the federal-aid  highway redistribution. By way of context, this sum represents about 5  percent of the nearly $27 billion states received through the Recovery Act,  or about 3 percent of the roughly $35 billion states receive annually  through the regular Federal Aid Highway Program. However, of the 17  departments of transportation we spoke with, officials from 15 stated that  this prohibition on participating in the fiscal year 2011 redistribution  provides an incentive for their state to meet its certified maintenance of  effort level. For example, Ohio officials stated they have received an  average of $43 million in redistributed obligation authority over the past 3  years, and they intend to meet the maintenance of effort levels and receive  additional funding. In addition, according to Georgia officials, the potential  addition of $40 million in redistributed funds is an incentive for the state to  meet its requirements.
Although the states we spoke with are committed to trying to meet the  maintenance of effort requirements, 7 state departments of transportation  told us the current decline in state revenues creates major challenges in  doing so. For example, Iowa, North Carolina and Pennsylvania  transportation officials said that a decline in state gas tax and other  revenues, used for state and state-funded local highway projects, may  make it more difficult for them to maintain their levels of transportation  spending. In addition, Georgia officials stated that the current decline in  the state’s gas tax revenues is a challenge to meeting its certified level of  effort. Lastly, Mississippi and Ohio transportation officials stated that if  their state legislatures reduce their respective department’s budget for  fiscal year 2010 or 2011, the department may have difficulty maintaining its  certified spending levels.
section_title: Education’s Guidance Allows States Flexibility in Defining Maintenance of Effort Levels, and the Department Is Developing Plans to Monitor and Enforce State Compliance
paragraphs: Education maintenance of effort provision: The Recovery Act created the  State Fiscal Stabilization Fund (SFSF), which included approximately  $48.6 billion to award to governors by formula and another $5 billion to  award to states or school districts as competitive grants. The Recovery  Act requires that each state meet maintenance of effort requirements for  elementary and secondary (K-12) education and public institutions of  higher education (IHE) as a condition of receiving SFSF funds. The  Department of Education (Education) required governors in their SFSF  application to provide assurances that their state will meet maintenance of  effort requirements or that it will be able to comply with waiver  provisions. Specifically, in order to meet maintenance of effort  requirements, a state must maintain state support for K-12 education and  IHEs at least at fiscal year 2006 levels in fiscal years 2009, 2010, and 2011.  After maintaining state support at no less than fiscal year 2006 levels,  states must use education stabilization funds to restore state funding to  the greater of fiscal year 2008 or 2009 levels for state support to K-12  school districts and IHEs in fiscal years 2009 through 2011.
Education guidance to states: Education disseminated several guidance  documents to states in the spring and summer of 2009 to assist them in  defining their maintenance of effort amounts. In determining, for  maintenance of effort purposes, the state level of support for K-12  education in fiscal year 2006, Education guidance said states must include  funding provided through their primary formulas for distributing funds to  school districts. However, Education also allowed states some flexibility  in choosing the basis they use to measure maintenance of effort, as well as  in what they include or exclude in their maintenance of effort definition.  For example, state support for education can be measured on the basis of  either aggregate or per-pupil expenditures. Measuring on a per-pupil basis  gives more flexibility to states with forecasts of declining student  enrollment because they can reduce aggregate state support for education  but still meet maintenance of effort requirements on a per-pupil basis.  Also, states have the flexibility to include or exclude additional state  funding such as state appropriations to local governments that support K- 12 education or other support that is not provided through primary  funding formulas. By not including education spending beyond funding  distributed through primary funding formulas in their definitions of  maintenance of effort, states maintain flexibility to reduce expenditures on  other categories of education spending and not affect their ability to  comply with the maintenance of effort requirement. For IHEs, states have  some discretion in how they establish the state level of support, with the  provision that they cannot include support for capital projects, research  and development, or amounts paid in tuition and fees by students.
If states fail to meet the maintenance of effort requirements for K-12  education or IHEs, Education’s guidance directed states to certify that  they will meet requirements for receiving a waiver—that is, that total state  revenues used to support education would not decrease relative to total  state revenues. Because the measure used to determine eligibility for a  waiver from maintenance of effort requirements—state revenues used to  support education—can be defined differently from the maintenance of  effort measure—state support for education—states may have to track  both measures to make sure they can meet their assurances. States that  need a waiver are directed to submit a separate waiver application to  Education.
While states generally are required to maintain state spending at or above  fiscal year 2006 levels of state support for education, we found that five  states and the District of Columbia reported in the approved applications  we reviewed that they would maintain state support above that level in  fiscal years 2009 and 2010. This gives them flexibility to reduce state  support in fiscal year 2010 to an amount below the fiscal year 2009 level or  in fiscal year 2011 below the fiscal year 2009 or 2010 level and still meet  the maintenance of effort requirement. Arizona, for example, reported it  would maintain state support in 2009 at about $500 million above the fiscal  year 2006 levels. Because Florida reported it could not meet maintenance  of effort requirements in fiscal year 2009, the state has applied for a  waiver. While New York did not provide estimates of state support for  fiscal year 2009, 2010, or 2011 in its application, its governor provided an  assurance that the state would maintain state support for education at or  above its fiscal year 2006 maintenance of effort level. Table 3 shows, for  the states we reviewed and the District of Columbia, the level of state  support for elementary and secondary education as required by the state’s  maintenance of effort calculation. Specifically, the table provides the fiscal  year 2006 maintenance of effort level for the states we reviewed and the  anticipated amount of state support for education for fiscal years 2009 and  2010 included by states in their application for SFSF.
Most of the states we reviewed reported additional education spending  beyond what was included in maintenance of effort requirements. For  example, North Carolina officials told us that in fiscal year 2009 the state  spent about $2 billion on K-12 education programs above its state support  for K-12 education based on maintenance of effort calculations. Since  these funds do not count as state education support for maintenance of  effort determinations, states can reduce these funds without affecting their  compliance with SFSF maintenance of effort requirements. However,  these other funds would be factored into a state’s revenues to support  education as a percentage of total state revenues if the state needs to  request a waiver from maintenance of effort requirements.
Education officials reported they have already received several revised  SFSF applications and they expect that the majority of all states will  resubmit their SFSF application because most states used their governor’s  budget proposal, as allowed, in their original application, which often  differs from final enacted spending levels. While every state, as part of its  initial application for SFSF, had to assure it would either meet the  maintenance of effort levels or waiver requirements, Education directed  states to amend their SFSF applications to reflect any final budget changes  and, in the amended applications, provide a final assurance that they will  meet maintenance of effort levels. Specifically, according to Education  guidance, a state must amend its SFSF application if there are changes to  the reported levels of state support for education that were used to  determine the maintenance of effort amount or to calculate the amounts  needed to restore state support for education to the fiscal year 2008 or  2009 level. Education officials reported they are continually reviewing the  resubmissions to ensure they contain the required assurances from the  governor and comply with other requirements. Of the 6 states and the  District of Columbia we reviewed, 6 have either resubmitted or plan to  resubmit their SFSF application because their level of support for fiscal  year 2006 or 2009 had changed.
Two states we reviewed have lowered their calculated fiscal year 2006  level of education support for maintenance of effort purposes. For  example, North Carolina officials told us they revised their fiscal year 2006  level of support for maintenance of effort determination from nearly $7  billion down to about $5.3 billion, based on guidance from Education, to  reflect a change made in the definition of the state’s primary funding  formula in the state’s fiscal year 2010 budget legislation, so that the state  has comparable measures of support in both years. California amended its  application in May 2009 because the state had originally included about $2  billion in one-time funds that were actually appropriated in fiscal year 2007  and reduced its maintenance of effort level of support for fiscal year 2006  by this amount. California amended its application again in August 2009 to  change its maintenance of effort level from an aggregate measure to a per- pupil basis. California’s resubmitted application did not state why the  change to a per-pupil basis was made. Officials from California did not  offer an explanation of the changes.
Education officials told us they are allowing states to revise their fiscal  year 2006 maintenance of effort support levels and will review them to see  that they are in compliance with Recovery Act requirements and  Education’s guidance. However, current guidance from Education does  not direct states to include an explanation for changes made to state fiscal  year 2006 maintenance of effort support levels and calculations in their  resubmitted application. Rather, states are directed to provide information  about what is included in its measure of state support for education.  Consequently, revised applications report maintenance of effort support  levels and provide information about how states are defining state  support, but it may not be readily apparent what funds have been added or  removed from one application to the next. For example, California’s  August revision shows that maintenance of effort is defined on a per-pupil  basis, but there is no explanation why they changed this basis or how it  compares to its previous maintenance of effort measure.
Education officials said adjustments are being made to fiscal year 2006  maintenance of effort levels because, as state fiscal year 2009 budgets  become final, states are attempting to develop equivalent information for  both their fiscal year 2006 levels of support calculation and their  calculations for fiscal year 2009. Also, according to Education officials,  states were initially unsure of precisely what information to include in  their maintenance of effort calculations because SFSF is a new program,  and, now, given more time, they are making adjustments to their  maintenance of effort calculations. Education officials told us that once  states submit their final audited fiscal year 2009 figures, they will not be  allowed to change their fiscal year 2006 maintenance of effort calculations  again.
Education officials told us that four states—Florida, New Jersey, Rhode  Island, and South Carolina—have requested maintenance of effort waivers  for fiscal year 2009. Florida has requested Education waive maintenance  of effort requirements for elementary and secondary education, and New  Jersey has requested Education waive maintenance of effort requirements  for public IHEs. Education officials told us states will get final waiver  approval in the form of a written letter of approval after the states submit  final maintenance of effort amounts to Education. Education officials also  told us they will work closely with states on a case–by-case basis to ensure  that the information submitted complies with the waiver criteria under the  Recovery Act.
While four of the six states and the District of Columbia we reviewed  reported maintaining state support for education above the required fiscal  year 2006 maintenance of effort level, a recent Alert Memorandum by   Education’s Inspector General shows that some states have lowered state  support for education while continuing to meet maintenance of effort  requirements. The report noted that Education agreed with this finding  and took steps to discourage states from reducing such support. For  example, in the proposed application requirements for the Race to the Top  program—a competitive grant program under the Recovery Act providing  up to $4.35 billion in funding to states for education reform efforts— Education said that, in making award determinations, it would take into  consideration whether states reduced their percentage of total revenues  used to support public education for fiscal year 2009 as compared to fiscal  year 2008. The Education Inspector General’s recommendations to  Education included that it should implement a process to track state  support for elementary and secondary education, as well as for public  IHEs, to determine the extent to which state funding of public education is  being reduced.
Education plans for determining compliance with maintenance of effort  provision: Education has begun to draft a monitoring plan to oversee and  enforce state compliance with maintenance of effort requirements under  SFSF. Because SFSF is a new program established under the Recovery  Act, Education has yet to finalize monitoring plans and processes.  Education officials said they are developing an approach to monitor SFSF  maintenance of effort that will include site visits to states to review state  documentation of compliance with maintenance of effort requirements. In  the interim, Education officials said they are taking several steps both to  monitor information they are receiving from states and to provide  technical assistance to states. For example, according to Education  officials, prior to approving SFSF awards, Education reviewed each state’s  application to ensure the state complied with statutory requirements to  receive the funds.
Education has not yet released guidance to states on the information  states need to collect to prove they have met their required maintenance of  effort level. Education officials told us that once the monitoring plan is  finalized, the guidance will be released to states. However, previously  released guidance to states on maintenance of effort instructed that states  must maintain adequate documentation that substantiates the levels of  state support the state has used in making maintenance of effort  calculations. Officials in most states we reviewed for this report told us  they plan to document that the state met its maintenance of effort  requirements through its state budget and accounting procedures. They  said these data would be available when accounting for fiscal year 2009 is  closed or finalized.
Education has authority under the General Education Provisions Act to  take various actions against states that fail to the meet maintenance of  effort requirements—even in future years. For example, Education could  recover funds if a state is found to be out of compliance with the  maintenance of effort requirements. However, Education officials told us  they have been working closely with states to ensure compliance with  maintenance of effort provisions in an effort to ensure that no state is out  of compliance.
section_title: HUD Plans to Determine Compliance with Supplement-Not-Supplant Provision through Ongoing Monitoring Efforts
paragraphs: HUD supplement-not-supplant provision: The Recovery Act provided $4  billion for the Public Housing Capital Fund, a program administered by  HUD for the capital and management activities of public housing  agencies—$3 billion to be allocated by formula and $1 billion to be  awarded by competition. HUD allocated nearly $3 billion to public housing  agencies using the same formula for amounts made available in fiscal year  2008 and obligated these funds to housing agencies in March 2009. Then,  in September 2009, HUD awarded nearly $1 billion to public housing  agencies based on competition for priority investments, including  investments that leverage private sector funding or financing for  renovations and energy conservation retrofitting. The Recovery Act  requires that these funds be used to supplement and not supplant  expenditures from other federal, state, or local sources or funds  independently generated by the grantees. In contrast to the DOT and  Education programs that distribute Recovery Act funds to the states, the  Public Housing Capital Fund distributes grants directly to public housing  agencies. As a result, the Recovery Act does not have state certification,  waiver, or noncompliance provisions as part of the Public Housing Capital  Fund’s supplement-not-supplant provision.
HUD information to housing agencies: Public housing agencies were to  sign an amendment to their annual contributions contracts (ACC), which  includes a supplement-not-supplant provision, in order to receive the  Recovery Act formula funds. All but 13 of the 3,134 housing agencies  offered formula grants under the Recovery Act signed their ACC  amendments, enabling HUD to obligate the formula grant funds to them.  HUD provided information to housing agencies through a notice and  questions included in two sets of frequently asked questions to clarify the  supplement-not-supplant provision in the Recovery Act. According to this  information, public housing agencies with Public Housing Capital Fund  formula grants are to avoid using Recovery Act funds to supplant funds  from other sources that have already been obligated when, for example, an  agency is accelerating or expanding a project that is already under way.  One HUD official stated that the distinction between funds that have  already been obligated and funds that have not yet been obligated should  be clear to housing agencies. If they had already obligated non-Recovery  Act funds for a project, they could not replace those funds with Recovery  Act funds.
In addition, the applications for competitive grants included a certification  by the housing agencies that they would not use Recovery Act grant funds  to supplant other federal, state, or local funds, including tax credit equity,  loans, or other nonpublic housing funds. The notice of funding availability  also instructed applicants to provide sufficient detail in their project  description about how they planned to ensure that Public Housing Capital  Funds received as competitive grants would not supplant funds from other  sources. In order to receive the competitive grant funds, HUD also had  public housing agencies sign a separate ACC amendment that included a  supplement-not-supplant provision.
HUD plans for determining compliance with supplement-not-supplant  provision: HUD officials stated that monitoring compliance with the  supplement-not-supplant provision was included in ongoing monitoring  efforts for formula funds provided under the Recovery Act. Specifically,  HUD is implementing strategies for monitoring all public housing agencies  that received Capital Fund formula grants under the Recovery Act. HUD  field staff are using checklists that contain questions about supplementing  and not supplanting other sources of funds. These staff are conducting  remote reviews (that is, reviews that do not involve visits to the agency) of  all 3,121 housing agencies that received Recovery Act funds using these  checklists, as well as on-site reviews of 172 housing agencies designated as  troubled performers and of 533 nontroubled housing agencies identified  through a risk-based strategy. Remote reviews are to focus on grant  initiation activities, the annual statement, environmental compliance,  procurement, and Recovery Act grant performance, including compliance  with the supplement-not-supplant provision. Specifically, the remote  review questions related to supplement-not-supplant bring attention to  projects that use both Recovery Act funds and other funds and flag them  for further review to ensure Recovery Act funds are supplementing the  other funds. On-site reviews, which HUD teams conduct on the premises  of housing agencies, are to include following up on outstanding items from  the remote review. In addition, on-site reviews are to assess whether the  housing agency is appropriately and effectively administering its Recovery  Act Capital Fund grant. HUD officials stated that all remote reviews of  troubled housing agencies have been completed, as have on-site reviews of  troubled agencies deemed high risk and medium risk. On-site reviews of  troubled agencies deemed low risk are ongoing and will be completed by  December 31, 2009, according to HUD officials. HUD officials stated that  remote and on-site reviews of nontroubled housing agencies are under  way. They said the remote reviews will be completed by January 15, 2010,  and the on-site reviews will be completed by February 15, 2010.  The  results of the reviews of both troubled and nontroubled housing agencies  are to be evaluated and summarized in the coming months.
In addition to these monitoring strategies, HUD officials pointed to other  opportunities to oversee housing agencies’ compliance with the  supplement-not-supplant requirement. For example, public housing  agencies submitted annual statements outlining their planned uses of  Recovery Act funds before being granted access to the funds, which HUD  reviewed and approved. In addition, HUD officials told us that  development projects are the types of projects that may rely on financing  from multiple sources, increasing the risk that a portion of the financing  might be supplanted by Recovery Act funds. However, housing agency  plans that include funds for development activities trigger a special review  by HUD staff, which requires additional levels of approval. As part of that  review, the staff examine the plans for funding from outside the Capital  Fund to ensure the housing agency is not using Recovery Act funds to  supplant other funds. HUD’s Office of Inspector General is also conducting  reviews of housing agencies’ capacity for administering Recovery Act  funds. One recent report raised questions about whether one housing  agency had used Recovery Act funds to supplant other funds. HUD  officials that administer the Capital Fund stated they are investigating this  case to make a separate determination.
HUD officials said they are currently developing a strategy for monitoring  the competitive grants that were awarded in September 2009. Monitoring  compliance with the supplement-not-supplant provision will be part of that  effort. According to HUD officials, in reviewing applications, HUD staff  were to examine applicants’ plans for ensuring they would not supplant  other funds. The monitoring strategy will follow up on the specific  commitments each housing agency made in its application, including  compliance with what each housing agency said it would do to ensure it  was not supplanting other funds. HUD officials said they are currently  reviewing the different projects to be funded by Capital Fund Recovery  Competition grants to ensure that the appropriate HUD offices are  involved in developing and implementing the monitoring strategy.
HUD officials told us they will determine consequences for housing  agencies found to be supplanting funds on a case-by-case basis. Possible  consequences include recapturing funds, requiring reimbursement of  Recovery Act funds from sources that were supplanted, and halting work  on projects. Several housing agency officials noted that the potential  consequences of failing to comply with the supplement-not-supplant  provision were severe enough for them to take care in selecting projects  rather than be found in violation of the provision.
Housing agency officials we spoke with at 27 agencies generally did not  see supplanting as a major challenge for their housing agency and have not  had trouble abiding by the requirement. Officials at several housing  agencies noted that because they had many more projects that needed to  be done than could be completed with only their regular Capital Fund  grants, it was not difficult to identify projects that did not have any other  funding. For example, the Boston Housing Authority selected some  projects from the second year of its 5-year plan that could now be started  earlier than previously planned. Officials from the Housing Authority of  LaSalle County in Illinois stated that the Recovery Act funds allowed them  to complete more projects from their 5-year plan in less time than they  would have completed with regular Capital Fund dollars alone.
In addition, some housing agency officials told us they were keeping track  of their Recovery Act funds separately from their regular Capital Fund  grants in order to make clear that the Recovery Act funds were not  supplanting other funds that had already been obligated. Furthermore,  Atlanta Housing Authority officials said they went so far as to closely  examine their capital improvement plans and documents for 2008 and  2009 looking for evidence that they had previously planned to use other  funds for any of the proposed Recovery Act projects. They found two  projects they thought might raise questions and decided to pay for them  with other funds. Other housing agency officials stated that annual  statements and 5-year plans are reviewed multiple times—by the public,  by the housing agency’s board, and by HUD—and that these layers of  review serve as a check to ensure that supplanting does not occur.
section_title: NTIA Faces Scheduling and Staffing Challenges in Reviewing Applications to Determine If Projects Meet the “But-For” Test
paragraphs: NTIA “but-for” provision: The Recovery Act provided $4.7 billion for the  Broadband Technology Opportunities Program (BTOP), administered by  the Department of Commerce’s National Telecommunications and  Information Administration (NTIA). BTOP provides grants for  infrastructure projects to support the deployment of broadband  infrastructure to unserved and underserved areas, to enhance broadband  capacity at public computer centers, and to encourage sustainable  adoption of broadband service. To be eligible for a BTOP grant, an  applicant must, among other things, pass the “but-for test,” meaning that  the applicant must demonstrate that, but for federal assistance, the project  would not have been implemented during the grant period.
NTIA guidance to applicants: NTIA provided guidance to applicants on  how to comply with this provision through their applications for BTOP.  Applications and supporting documentation were due by August 20, 2009,  for the first round of funding. NTIA’s Notice of Funds Availability (NOFA)  for BTOP grants, issued on July 9, 2009, requires grant applicants to  provide documentation demonstrating that the project would not have  been implemented during the grant period without federal grant  assistance. This documentation includes, but is not limited to, a denial of  funding from a lending institution or the Rural Utilities Service (RUS), a  current fiscal year budget that shows a lack of sufficient funding for the  project, or a business case that shows the project’s viability depends on  grant financing. In addition, the July 31, 2009, grant guidelines for BTOP  reiterate that grantees must submit the above documentation to  demonstrate that the project would not have been implemented during the  grant period without federal assistance. Furthermore, NTIA and RUS held  10 informational workshops, throughout the country to explain the  program and the application process and to answer questions. At each of  these events, NTIA highlighted the “but-for” requirement for attendees.  Also, NTIA’s Web site includes a list of frequently asked questions about  BTOP grants that does not provide information on the “but-for test”;  according to NTIA officials, this information does not appear because  applicants did not frequently inquire about it.
NTIA plans for determining compliance with “but-for” provision: NTIA  originally planned to award the $4.7 billion in BTOP grant funding through  three rounds of applications. However, the agency has combined the  second and third rounds in order to expedite the process of awarding  grants, as well as give applicants and the agency additional time to prepare  and review proposals for the second round. The agency has begun the  second phase of a two-step rolling process for reviewing applications for  its first round of funding; this second phase includes determining whether  applicants have adequately documented that the project would not have  been implemented without Recovery Act funds. In the first step of the  review process, NTIA will evaluate and score applications based on the  criteria set forth in the July 9 Notice of Funds Availability, such as project  purpose and project viability. During this initial step, the agency will  review BTOP applications and will select those applications that will  proceed to the second step. The second step—due diligence—involves  requesting extra documentation from applicants to confirm and verify  information contained in an application, including documentation of the  “but-for” test. This two-step process is designed both to reduce the burden  of providing unnecessary documentation for applicants that do not meet  the basic project purpose and viability criteria and to meet NTIA’s need to  efficiently evaluate applications.
We recently reported that NTIA and RUS face scheduling and staffing  challenges that have delayed the agency’s review of applications. In order  to award the $4.7 billion appropriated for BTOP by September 30, 2010,  NTIA and RUS must, within 18 months, establish their respective  programs, solicit and evaluate applications, and award funds. In addition  under BTOP, NTIA will for the first time award grants to commercial  entities. The compressed time frame is complicated by the fact that NTIA  and RUS also face an increase in the number of applications that they  must review and evaluate in comparison to similar programs. BTOP  involves more applications and far more funds than the agency formerly  handled through other programs (see fig. 1). For example, the 1,770  applications that NTIA intends to review in the first application round for  BTOP far exceeds the annual average of 838 applications for the largest  grant program the agency previously administered—the  Telecommunications Opportunities Program. Furthermore, the $4.7 billion  that NTIA must award for BTOP is more than three times as much as the  about $1.5 billion that the agency has heretofore awarded annually for all  other grant programs combined. NTIA’s initial risk assessment indicated  that a lack of experienced and knowledgeable staff was a key risk to  properly implementing the program in accordance with the priorities of  the Recovery Act. Due to limited staff, NTIA may have an inability to  thoroughly review applications and therefore the agency risks funding  projects that might not meet the objectives of the Recovery Act’s “but-for”  test. In its fiscal year 2010 budget request to Congress, NTIA estimated  that it would need 30 full-time-equivalent staff in fiscal year 2009 and an  additional 40 staff for fiscal year 2010 to review applications and  administer BTOP. To address this issue, we recently recommended that  the Departments of Commerce and Agriculture develop contingency plans  to ensure sufficient resources for oversight of Recovery Act-funded  projects beyond fiscal year 2010, among other things. Officials from both  departments have agreed with our recommendation and plan to take all  to take all  appropriate steps to address our concern.  appropriate steps to address our concern.
While NTIA originally anticipated that it would begin announcing awards  on or about November 7, 2009, the agency now estimates that it will begin  in December 2009 and will not finish awarding the first round of grants  until February 2010. NTIA is taking several steps to address these  challenges. According to NTIA officials, the two-step application review  process conserves scarce staff resources by screening applications and  eliminating those that do not meet the program’s criteria, thereby reducing  the number of applications subject to a comprehensive review. NTIA has  also enlisted the aid of contractors and independent experts to review  applications and announced that it will award all funds in two rounds of  applications, rather than three rounds as originally anticipated. We  recently reported that, while these steps address some challenges, the  upcoming deadline for awarding funds may pose risks to the thoroughness  of the application evaluation process. In particular, NTIA may lack time  to apply lessons learned from the first funding round and to thoroughly  evaluate applications for the remaining rounds.
section_title: Conclusions
paragraphs: Maintenance of effort and similar provisions are important mechanisms  for helping ensure that federal spending achieves its intended effect.  Without such spending provisions, recipients may simply substitute  federal funds for some of their planned spending for a given program.  Therefore this would not increase the overall spending for the program.  While these spending provisions are important, our review illustrates the  administrative and fiscal challenges in implementing them, both from  federal and state perspectives. More than 9 months have elapsed since the  passage of the Recovery Act, but federal and state officials have not  completed key steps in the implementation of the maintenance of effort or  similar provisions, including finalizing state transportation certifications  and ensuring transparency of state education support levels, for the  covered programs under the Recovery Act with maintenance of effort  provisions. These challenges, coupled with the varying requirements of the  maintenance of effort and similar provisions we reviewed, raise questions  as to whether the provisions will achieve their intended purpose.
The SFSF funds provided under the Recovery Act are intended to play a  critical role in helping state and local governments stabilize their budgets  by minimizing budgetary cuts in education. The maintenance of effort  requirement written into the Recovery Act requires states to maintain a  minimum level of state spending on education while addressing  educational reforms. The Department of Education has taken important  steps to ensure that states are maintaining their maintenance of effort  levels. For example, the department provides technical assistance and  reviews state applications to ensure compliance with legal requirements.  Education does not currently require states to explain why their  maintenance of effort levels change—even when states change their fiscal  year 2006 maintenance of effort levels, which serve as the states’ baseline  level for the maintenance of effort requirement in the law. Given that  states’ changes to their fiscal year 2006 maintenance of effort levels affect  how much funding states are required to provide to education, providing  explanations of why the changes occurred enhances transparency. Since  some states have planned to decrease their fiscal year 2006 maintenance  of effort funding by over a billion dollars, the public and policymakers  alike would benefit from knowing why the decreases occurred and what  funding was impacted by the change. Although Education reviews  maintenance of effort changes with state officials, it is difficult to monitor  changes effectively without explanations. Given the large investment in  funding involved, efforts to reinforce transparency could play a crucial  role in ensuring that states fulfill their responsibility to maintain state  spending on Education.
section_title: Recommendation for Executive Action
paragraphs: We recommend that the Secretary of Education take further action to  enhance transparency by requiring states to include in their State Fiscal  Stabilization Fund applications an explanation of the changes and why  they want to change their 2006 maintenance of effort calculations or levels  when they resubmit these applications to the Department of Education.
section_title: Agency Comments
paragraphs: We provided copies of our draft report to DOT, Education, HUD, and  Commerce for review and comment. All four agencies provided e-mail  comments.
DOT agreed with our findings and provided technical comments on our  discussion of FHWA’s plans for finalizing state compliance with  maintenance of effort levels. We incorporated DOT’s technical comments  where appropriate.
Education agreed with our recommendation that it take further action to  enhance transparency by requiring states to include an explanation for  why they want to change their fiscal year 2006 maintenance of effort  calculations or levels when they resubmit applications for the SFSF.   Education noted that it has already asked each state amending its SFSF  application with regard to level of support to provide a description of the  reasons it is changing its level of support for any year covered, and a table  showing the revisions across years.  In addition, Education officials  reported they are revising guidance on amending an application and  applying for a maintenance of effort waiver to indicate that a state is  expected to provide such a description of its reasons for changing its data  on the level of support for any year covered by the SFSF maintenance of  effort requirements.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies to the appropriate  congressional committees, the Director of the Office of Management and  Budget, and the Departments of Commerce, Education, Housing and  Urban Development, and Transportation. In addition, we are sending  sections of the report to the officials in the 16 states and the District of  Columbia covered in our review. The report is also available at no charge  on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about issues in this report related to  the U.S. Departments of Commerce or Transportation, please contact A.  Nicole Clowers at (202) 512-2834 or clowersa@gao.gov; for questions  about U.S. Department of Education issues, please contact Cornelia Ashby  at (202) 512-8403 or ashbyc@gao.gov; and for questions about U.S.  Department of Housing and Urban Development issues, please contact  Mathew Scirè at (202) 512-8678 or sciremj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To determine the programs in the American Recovery and Reinvestment  Act of 2009 (Recovery Act) with maintenance of effort or similar  requirements, we searched the Recovery Act for maintenance of effort and  similar provisions. From this search, we identified 16 programs in the  Recovery Act with such provisions. These programs received a total of  about $106.8 billion in appropriations. (See table 4.) We did not include  any program with a pre-existing maintenance of effort or similar  requirement, and we did not factor in language applying to programs that  fall under a maintenance of eligibility clause. Twelve federal agencies  administer these 16 programs.
To identify those agencies that received a significant amount of Recovery  Act appropriations and whose programs are subject to a maintenance of  effort or similar provision, we selected the agencies that received  Recovery Act appropriations totaling $4 billion or more. This threshold  captures about 94 percent of the total Recovery Act appropriations—about  $100.5 billion—for programs with maintenance of effort or similar  provisions. Eight programs—administered by the Departments of  Commerce, Education, Housing and Urban Development, and  Transportation—met our selection criteria and in total received Recovery  Act appropriations of about $100.5 billion. Within the Department of  Transportation (DOT), four agencies—the Federal Highway  Administration (FHWA), the Federal Railroad Administration, and the  Federal Transit Administration—administer five of these programs. To  describe the maintenance of effort or similar provisions that apply to these  eight programs, we reviewed and analyzed the Recovery Act.
To describe the steps that agencies have taken to implement these  requirements, we reviewed guidance from the six agencies, including  notices published by the Departments of Commerce and Housing and  Urban Development (HUD) on funding availability, guidance issued by  DOT in February, May, and September 2009 on maintenance of effort  requirements to governors and FHWA division offices, and the Department  of Education’s guidance to states on the State Fiscal Stabilization Fund  program’s maintenance of effort requirements. In addition, we interviewed  officials at these departments about their guidance and plans, if any, to  issue supplemental guidance on maintenance of effort or similar  requirements.
To determine how responsible federal agencies are determining whether  recipients meet maintenance of effort or similar requirements, we  reviewed documents on actions taken by the Departments of Commerce,  Education, Housing and Urban Development, and Transportation to  monitor state certifications and grant applications. Specifically, we  reviewed all 50 states’ and the District of Columbia’s certification  applications to the Secretary of Transportation; State Fiscal Stabilization  Fund applications from 6 states and the District of Columbia; and  nonprofit organizations’ grant applications to the Broadband Technology  Opportunities Program. In addition, we reviewed the procedures that  these departments used to ensure that the state certifications and grant  applications met the maintenance of effort or similar requirements. We  also interviewed officials from these departments about their plans for  implementing and overseeing states’, public housing agencies’, and other  grantees’ compliance with the maintenance of effort or similar  requirements in the Recovery Act. Additionally, we interviewed these  agencies about their plans to address noncompliance with these  requirements.
We also obtained information from selected state departments of  education and transportation on their use of the guidance issued by the  Departments of Education and Transportation on maintenance of effort  requirements—specifically, the state certification process. In addition, we  gathered documents from and interviewed state education and  transportation officials on the methodology they used to calculate their  spending levels and plans to monitor their compliance with the  maintenance of effort requirements. We selected the states based on our  ongoing Recovery Act bimonthly reporting effort. This effort includes a  core group of 16 states and the District of Columbia that we plan to follow  over the next few years to provide an ongoing longitudinal analysis of the  use of funds provided in conjunction with the Recovery Act. These 16  states and the District of Columbia 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. From these 16 states and the District of Columbia, we  obtained information from 17 departments of transportation, 7  departments of education, and 27 public housing agencies in 10 states.  These states were selected from our 16 states based on the time  constraints of our ongoing Recovery Act bimonthly reporting effort.
section_title: Appendix II: GAO Contacts and Staff Acknowledgments
paragraphs: A. Nicole Clowers, (202) 512-2834 or clowersa@gao.gov (U.S. Departments  of Commerce and Transportation issues); Cornelia Ashby at (202) 512-8403  or ashbyc@gao.gov (U.S. Department of Education issues); and Mathew  Scirè at (202) 512-8678 or sciremj@gao.gov (U.S. Department of Housing  and Urban Development issues).
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Sara Vermillion, Assistant  Director; Donald Brown; Jay Cherlow; Alexander Galuten; Byron Gordon;  Sonya Harmeyer; Cheryl Harris; David Hooper; John McGrail; Sara Ann  Moessbauer; Paul Schmidt; and Carrie Wilks made key contributions to  this report.