Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
Published: 2010-09-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest in a series of reports on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. This report also responds to GAO's mandate to comment on the jobs estimated in recipient reports. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and interviewed federal officials.
section_title: What GAO Found
paragraphs: As of September 3, 2010, about $154.8 billion of the approximately $282 billion of total funds made available by the Recovery Act in 2009 for programs administered by states and localities had been paid out by the federal government. Of that amount, over 65 percent--$101.9 billion--had been paid out since the start of federal fiscal year 2010 on October 1, 2009. As of July 31, 2010, the 16 states and the District had drawn down $43.9 billion in increased FMAP funds. If current spending patterns continue, GAO estimates that these states and the District will draw down $56.2 billion by December 31, 2010--about 95 percent of their initial estimated allocation. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Congress recently passed legislation to extend the increased FMAP through June 2011, although at lower rates than provided by the Recovery Act. As of August 27, 2010, the District and states covered in GAO's review had drawn down 72 percent ($18.2 billion) of their awarded State Fiscal Stabilization Fund (SFSF) education stabilization funds; 46 percent ($3.0 billion) for Elementary and Secondary Education Act, Title I, Part A; and 45 percent ($3.4 billion) for Individuals with Disabilities Education Act, Part B. In the spring of 2010, GAO surveyed a nationally representative sample of local educational agencies (LEA) and found that job retention was the primary use of education Recovery Act funds in school year 2009-2010, with an estimated 87 percent of LEAs reporting that Recovery Act funds allowed them to retain or create jobs. Nationwide, the Federal Highway Administration (FHWA) obligated $25.6 billion in Recovery Act funds for over 12,300 highway projects, andreimbursed $11.1 billion as of August 2, 2010. The Federal Transit Administration obligated $8.76 billion of Recovery Act funds for about 1,055 grants, and reimbursed $3.6 billion as of August 5, 2010. Highway funds were used primarily for pavement improvement projects, and public transportation funds were used primarily for upgrading transit facilities and improving bus fleets. The EECBG program provides about $3.2 billion in grants to implement projects that improve energy efficiency; of this amount, approximately $2.8 billion has been allocated directly to recipients. As of August 2010, DOE has obligated about 99 percent of the $2.8 billion in direct formula grants to recipients, who have in turn, obligated about half to subrecipients. The majority of EECBG funds have been obligated for three purposes: energy efficiency retrofits to existing facilities, financial incentive programs, and buildings and facilities. As of August 7, 2010, housing agencies had obligated about 46 percent of the nearly $1 billion in Recovery Act Public Housing Capital Fund competitive grants allocated to them for projects such as installing energy-efficient heating and cooling systems in housing units. HUD officials anticipate that some housing agencies may not meet the September 2010 obligation deadline, resulting in those funds being recaptured. GAO believes HUD should continue to closely monitor agencies' progress in obligating remaining funds. As of July 31, 2010, HUD had outlayed about $733 million (32.6 percent) of TCAP funds and Treasury had outlayed about $1.4 billion (25.5 percent) of Section 1602 Program funds. GAO updates the status of agencies' efforts to implement GAO's 58 previous recommendations and makes 5 new recommendations to improve management and strengthen accountability to the Departments of Transportation (DOT), Housing and Urban Development (HUD), the Treasury, and the Office of Management and Budget (OMB).

section_title: Letter
paragraphs: In the over 18 months since the American Recovery and Reinvestment Act  of 2009 (Recovery Act) was enacted in February 2009, the Department of  the Treasury has paid out approximately $154.8 billion in Recovery Act  funds for use in states and localities. These funds have been used to  support and preserve services in a wide range of areas including health,  education, transportation, and housing.
The Recovery Act’s recurring mandate specifies several roles for GAO,  including conducting bimonthly reviews of how Recovery Act funds are  being used in selected states and whether they are achieving the stated  purposes of the act. Specifically, the stated purposes of the Recovery Act  are to    preserve and create jobs and promote economic recovery;   assist those most impacted by the recession;    provide investments needed to increase economic efficiency by  spurring technological advances in science and health;  invest in transportation, environmental protection, and other  infrastructure that will provide long-term economic benefits; and  stabilize state and local government budgets in order to minimize and  avoid reductions in essential services and counterproductive state and  local tax increases.
In this report, the seventh in a series in response to the act’s mandate, we  update and add new information on the following: (1) selected states’ and  localities’ uses of Recovery Act funds, (2) the approaches taken by the  selected states and localities to ensure accountability for Recovery Act  funds, and (3) states’ plans to evaluate the impact of the Recovery Act  funds they receive. As in our previous reports, we collected and reported  data on programs receiving substantial Recovery Act funds in 16 selected  states, certain localities, and the District of Columbia, and made  recommendations when changes could result in improvements. The  selected jurisdictions for our in-depth reviews contain about 65 percent of  the U.S. population and are estimated to receive collectively about two- thirds of the intergovernmental assistance available through the Recovery  Act. For this report, we visited a nonprobability sample of 167 entities  within the 16 states and the District for our program reviews. These  entities represented a range of types of governments and the program  areas shown in table 1. The local governments also varied by population  sizes and economic conditions (unemployment rates greater than or less  than the state’s overall unemployment rate).
As in past reports, the programs we selected for review were chosen  primarily because they have begun disbursing funds to states or have  known or potential risks. The risks can include existing programs  receiving significant amounts of Recovery Act funds or new programs. In  some cases, we have also collected data from all states, and from an array  of localities, to augment the in-depth reviews. This report focuses on the  following programs:    Federal Medical Assistance Percentage (FMAP);    State Fiscal Stabilization Fund (SFSF);    Title I, Part A of the Elementary and Secondary Act of 1965 as  amended (ESEA);    Parts B and C of the Individuals with Disabilities Education Act, as  amended (IDEA);    Federal-Aid Highway Surface Transportation and Transit Capital    State Energy Program (SEP);    Energy Efficiency and Conservation Block Grant (EECBG) Program;    Weatherization Assistance Program;    Public Housing Capital Fund;    Tax Credit Assistance Program (TCAP); and    Grants to States for Low-Income Housing Projects in Lieu of Low- Income Housing Credits Program under Section 1602 of division B of  the Recovery Act (Section 1602 Program).
The Recovery Act also requires us to comment on the estimates of jobs  created or retained reported by recipients. In this report, we provide  updated information concerning recipient reporting in accordance with  our mandate for quarterly reporting. The Recovery Act requires that  nonfederal recipients of Recovery Act funds, including grants, contracts,  and loans submit quarterly reports which are to include a list of each  project or activity for which Recovery Act funds were expended or  obligated and information concerning the amount and use of funds and  jobs created or retained by these projects and activities, among other  information. The latest of these recipient reports covered the activity as of  the Recovery Act’s passage through the quarter ending June 30, 2010.
In this report, we also discuss state and local budget use of Recovery Act  funds; federal requirements and guidance; and oversight, transparency,  and accountability issues related to the Recovery Act and its  implementation. The report provides overall findings, discusses agency  actions in response to the open recommendations we made in our prior  reports, and presents new recommendations. Our oversight of programs  funded by the Recovery Act has resulted in more than 62 Recovery Act  related products. See the GAO Related Products section of this report for a  list of these products.
Going forward to meet our reoccurring Recovery Act mandates, we will  continue to capitalize on the work we have done over the past 18 months  in the selected states and the District. However, our focus will shift from  reporting on the uses of funds by the selected states and the District for a  group of programs funded by the Recovery Act to providing enhanced  analysis of the use of Recovery Act funds by states and localities for a  single program funded by the Recovery Act in each bimonthly review. We  will also shift our review of recipient reporting to focus specifically on  implementation within that Recovery Act program. Given that, as of  September 3, 2010, more than half—about $154.8 billion of the  approximately $282 billion—of total Recovery Act funds for programs  administered by states and localities had been paid out by the federal  government, evolving to this approach is appropriate and will allow us to  provide Congress and other decision makers with more in-depth analyses  of programs funded by the Recovery Act and to be responsive to  congressional interest in the impact and outcomes of programs as  Recovery Act implementation moves forward.
In conducting our work for this report, we analyzed guidance and  interviewed officials at the Office of Management and Budget. We also  analyzed grant awards—as well as relevant regulations and federal agency  guidance on programs selected for this review—and spoke with relevant  program officials at the U.S. Departments of Health and Human Services  (Centers for Medicare and Medicaid Services), Education, Transportation,  Energy, and Housing and Urban Development. In addition, we spoke to  entities that play roles in oversight of Recovery Act spending, including  federal agency inspectors general, state and local auditors, as well as the  Recovery Accountability and Transparency Board (the Board), which was  established by the Recovery Act. We also integrated information from our  prior Recovery Act reports into this review where appropriate.
In addition, we continued our review of the use of Recovery Act funds for  the 16 selected states, the District, and selected localities. We conducted  interviews with state budget officials and reviewed proposed and enacted  budgets and revenue forecasts to update our understanding of the use of  Recovery Act funds in the 16 selected states and the District. To update  our understanding of local governments’ use of Recovery Act funds, we  met with finance officials and city administrators at the selected localities.
Where statements about state law are attributed to state officials, we did  not analyze state legal materials for this report but relied on state officials  and other state sources for description and interpretation of relevant state  constitutions, statutes, legislative proposals, and other state legal  materials. The information obtained from this review cannot be  generalized to all states and localities receiving Recovery Act funding. A  detailed description of our scope and methodology can be found in  appendix I.
We conducted this performance audit from May 27, 2010, to September 20,  2010, 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.
As shown in figure 1, actual federal outlays to states and localities under  the Recovery Act totaled approximately $154.8 billion through September  3, 2010. Of that amount, more than 65 percent—$101.9 billion—has been  paid out since the start of federal fiscal year 2010 on October 1, 2009. The  figure also shows the estimated federal outlays (in billions of dollars) to  states and localities for fiscal years 2009 through 2016.
subsections: section_title: States’ and Localities’ Uses of Recovery Act Funds Continue
subsections: section_title: Increased FMAP Continues to Fund Medicaid Enrollment Growth, and States Have Taken Steps to Sustain Their Programs
paragraphs: Medicaid is a joint federal-state program that finances health care for  certain categories of low-income individuals, including children, families,  persons with disabilities, and persons who are elderly. The federal  government matches state spending for Medicaid services according to a  formula based on each state’s per capita income in relation to the national  average per capita income. The rate at which states are reimbursed for  Medicaid service expenditures is known as the Federal Medical Assistance  Percentage (FMAP), which may range from 50 percent to no more than 83  percent. To obtain federal matching funds for Medicaid, states file a  quarterly financial report with the Centers for Medicare and Medicaid  Services (CMS) and draw down funds through an existing payment  management system used by the Department of Health and Human  Services (HHS).
The Recovery Act initially provided eligible states with an estimated $87  billion through increased FMAP rates for 27 months from October 1, 2008,  to December 31, 2010. On August 10, 2010, federal legislation was enacted  amending the Recovery Act and providing for an extension of increased  FMAP funding through June 30, 2011, but at a lower level. On February  25, 2009, CMS made increased FMAP grant awards to states, and states  may retroactively claim reimbursement for expenditures that occurred  prior to the effective date of the Recovery Act. Generally, for fiscal year  2009 through the third quarter of fiscal year 2011, the increased FMAP is  calculated on a quarterly basis and is comprised of three components: (1)  a “hold harmless” provision, which maintains states’ regular FMAP rates at  the highest rate of any fiscal year from 2008 through 2011; (2) a general  across-the-board increase of 6.2 percentage points in states’ regular  FMAPs through the first quarter of fiscal year 2011, which will then be  phased down until July 1, 2011; and (3) a further increase in the FMAPs  for those states that have a qualifying increase in unemployment rates.
For states to qualify for the increased FMAP, they must pay the state’s  share of Medicaid costs and comply with a number of requirements,  including the following:    States generally may not apply eligibility standards, methodologies, or  procedures that are more restrictive than those that were in effect  under their state Medicaid programs on July 1, 2008;  states must comply with prompt payment requirements;  states cannot deposit or credit amounts attributable (either directly or  indirectly) to certain elements of the increased FMAP in any reserve or  rainy-day fund of the state; and  states with political subdivisions—such as cities and counties—that  contribute to the nonfederal share of Medicaid spending cannot  require the subdivisions to pay a greater percentage of the nonfederal  share than would have been required on September 30, 2008.
In addition, CMS requires states to separately track and report on  increased FMAP funds. To help states comply with these requirements,  CMS provided the funds to states through a separate account in an  existing payment management system. CMS also provided guidance in the  form of State Medicaid Director letters and written responses to frequently  asked questions, and the agency continues to work with states on an  individual basis to resolve any compliance issues that may arise.
Despite these restrictions, states are able to make certain adjustments to  their Medicaid programs without risking their eligibility for increased  FMAP funds. For example, the Recovery Act does not prohibit states from  reducing or eliminating optional services, such as dental services, or  reducing provider payment rates. States also continue to have flexibility in  how they finance the nonfederal share of Medicaid payments, and may  implement new financing arrangements or alter existing ones—such as  provider taxes, intergovernmental transfers, and certified public  expenditures—to generate additional revenues to help finance the  nonfederal share of their Medicaid programs.
section_title: Increased FMAP Key to States’ Continued Efforts to Support Medicaid Enrollment Growth
paragraphs: The FMAP rates in the 16 states and the District increased substantially  immediately following enactment of the Recovery Act, and most states’  rates continued to increase, albeit at a slower pace, through the fourth  quarter of federal fiscal year 2010. During the fourth quarter of federal  fiscal year 2010, the increased FMAP averaged about 11 percentage points  higher than the regular 2010 FMAP rates, with increases ranging from  about 9 percentage points in Iowa to nearly 13 percentage points in  Florida. For all states and the District, the largest proportion of the  increased FMAP was the component attributable to the across-the-board  increase of 6.2 percentage points, followed by qualifying increases in  unemployment rates in each of the states. The “hold harmless”  component further contributed to the increased FMAP in five sample  states, although to a lesser extent. (See table 2.)
As of July 31, 2010, the 16 states and the District had drawn down $43.9  billion in increased FMAP funds, which is 75 percent of the total $58.9  billion in increased FMAP that we estimated would be allocated to these  states and the District through December 31, 2010. (See table 3.) If  current spending patterns continue, we estimate that the 16 states and the  District will draw down $56.2 billion by December 31, 2010—about 95  percent of the initial estimated allocation. The national drawdown mirrors  the experiences of our sample states, with the 50 states and the District  having drawn down 74 percent of their estimated total allocation of nearly  $87 billion through the end of 2010.
While the increased FMAP funds are for Medicaid services only, the  receipt of these funds may free up funds that states would otherwise have  had to use for their Medicaid programs. Similar to their reported uses in  fiscal year 2009 and the first half of fiscal year 2010, the 16 states and the  District most commonly reported using or planning to use these freed-up  funds to cover increased Medicaid caseloads, maintain program eligibility  levels, and to finance general budget needs. As with our last survey, most  states reported that increased FMAP funding continues to be a major  factor in their ability to cover enrollment growth, which has continued to  increase since our last Recovery Act report. Between February 2010 and  June 2010, overall enrollment across the 16 states and the District grew by  an average of nearly 2 percent, with a cumulative increase of 18 percent  since October 2007—a rate of increase that is significantly higher than in  years prior to the recession. The increase in Medicaid enrollment  continues to be attributable primarily to children, a population that is  sensitive to economic downturns. However, the highest rate of increase  during this period occurred among the nondisabled, nonaged adult  population—35 percent, compared to an increase of nearly 19 percent for  children.
In addition, 10 states and the District reported using freed up funds to  maintain benefits and services or to maintain payment rates for  practitioners or institutional providers. Six states reported using these  funds to meet prompt payment requirements, and five states and the  District reporting using the funds to help finance their State Children’s  Health Insurance Program or other local public health insurance  programs. While most states continue to report using freed-up funds for  multiple purposes, North Carolina and Ohio again reported that they use  these funds exclusively to finance general budget needs.
Despite increases in program enrollment since October 2007, state  responses were mixed when asked about changes in the time it takes to  process new Medicaid applications. While six states reported an increase  in the time it takes to process new applications—most commonly  attributing this change to an increase in the volume of new applications  and staff cutbacks—nine states and the District reported no change or a  decrease in the processing time. Most states and the District reported  processing applications, on average, within federally-required time  frames.
subsections: section_title: States Have Taken Actions to Sustain Their Medicaid Programs; Further Adjustments Will Depend on Federal Legislation
paragraphs: When asked about the long-term outlook for their Medicaid programs, the  District and all but three of the 16 states reported a concern about  sustaining their Medicaid programs once increased FMAP funding is no  longer available. When asked about the factors driving their concerns,  most states and the District reported (1) the increased share of the state’s  Medicaid payments in 2011; (2) the current projection of the state’s  economy and tax revenues; and (3) the current projected growth in the  state’s Medicaid enrollment for 2011. Mississippi, Ohio, and Texas did not  report concerns about their Medicaid programs’ sustainability once  increased FMAP funds are no longer available. Due to these concerns,  most states reported taking actions to adjust their Medicaid programs,  including reducing or freezing provider payment rates, implementing new  or increasing existing provider taxes, or reducing certain optional benefits.  Specifically, 12 states reported reducing or freezing provider payment  rates. When given a list of 13 types of providers, these states reported  implementing 55 payment rate reductions and 46 payment rate freezes, for  a total 101 different rate actions taken since February 2009; on average,  these states reduced or froze payment rates for 8 types of providers.  States frequently reduced or froze payment rates to nursing facilities,  clinics, and home health providers, among others. (See table 4.)
In addition, 10 states and the District reported implementing 28 new or  increased provider taxes. In contrast to states’ changes to provider  payment rates, however, states’ taxation efforts were concentrated among  a handful of provider types. Specifically, 21 of the 28 taxes were imposed  on inpatient hospitals, nursing facilities, and outpatient hospitals— providers for which most states reported paying on a cost basis. (See  figure 2.)
In some cases, states reported implementing payment rate reductions and  new taxes on the same providers. For example, at least half of the states  that implemented new or increased taxes for inpatient hospitals, nursing  facilities, or outpatient hospitals also reduced or froze payments to those  same providers. In addition to changes to payment rates and provider  taxes, eight states reported making reductions to optional benefits and  services, most commonly reducing or eliminating dental services for  adults. Several states provided estimates of savings or increased revenue  generated by actions they undertook. For example,    California estimated savings of nearly $600 million from payment rate  freezes for long-term care providers and other rate reductions, and the  discontinuation of dental and certain other optional services;    Michigan estimated savings of $152 million from an 8 percent  reduction in payment rates for all providers;    Pennsylvania projected that a new hospital provider tax will generate  $498 million in new revenue for the state; and    New York estimated that increases in various provider taxes will  generate an additional $184 million annually.
States were less certain when asked about future program changes that  may be necessary to sustain their Medicaid programs after Recovery Act  funding ends, and their uncertainty was likely due to questions  surrounding a potential extension of the increased FMAP, as well as  Patient Protection and Affordable Care Act (PPACA) provisions. At the  time of our survey, the legislation amending the Recovery Act to extend  the increased FMAP had been proposed but not yet enacted, and the  PPACA had just recently been enacted. Despite states’ uncertainties,  however, 12 states and the District reported on the survey that their 2011  budgets had assumed a full extension of the increased FMAP, and many of  these states had not developed a contingency plan in the event that such  legislation was not enacted. Nationally, 30 states assumed an extension of  increased FMAP in their 2011 budgets.
Under the recent amendments to the Recovery Act, states’ increased  FMAP rates will decrease by at least 3 percentage points beginning on  January 1, 2011, and continue to be phased down to their regular FMAP  rates by July 1, 2011. For states that had assumed a full extension of the  increased FMAP, the available federal funds will be less than anticipated.  The effect of these decreases in states’ FMAP rates will vary depending on  each state’s unique economic circumstances and the size of their Medicaid  population.
PPACA also includes several provisions that could affect states’ Medicaid  programs, and 12 states and the District reported that PPACA will be a  major factor in their ability to make future changes to their programs. For  example, the maintenance-of-eligibility requirement under PPACA  precludes states from receiving federal Medicaid funding if they apply  eligibility standards, methods, or procedures under their plan or waiver  that are more restrictive than those in effect on the date of PPACA’s  enactment until the date the Secretary of HHS determines that a health  insurance exchange established by the state is fully operational, which  must be no later than January 1, 2014. PPACA also requires states to  expand Medicaid eligibility by 2014 to cover all persons under age 65 who  are not already eligible under mandatory eligibility groups and with  incomes up to 133 percent of the federal poverty level, but states have the  option to expand eligibility immediately and to receive federal funds for  these individuals. While the District has already been approved by CMS to  expand eligibility to cover this group prior to 2014, and two other states— California and Colorado—reported that they are planning to do so, it  remains to be seen how all the states will respond to this option.
section_title: Local Educational Agencies Reported Using Recovery Act Funds for Job Retention and One- Time, Nonrecurring Purchases, While Education Continues Monitoring Efforts
subsections: section_title: As Many LEAs Reported Facing Budget Cuts and Fiscal Pressures, Job Retention Was the Primary Use of Recovery Act Education Funds
paragraphs: Our review of states’ use of Recovery Act funds covers three programs  administered by the U.S. Department of Education (Education)—the State  Fiscal Stabilization Fund (SFSF); Title I, Part A of the Elementary and  Secondary Education Act of 1965 (ESEA), as amended; and the Individuals  with Disabilities Education Act (IDEA), Part B, as amended. As part of this  review, we surveyed a nationally representative sample of local  educational agencies (LEA)—generally, school districts—about their uses  of Recovery Act funds for each of these programs. We also met with  program officials at the U.S. Department of Education to discuss ongoing  monitoring and technical assistance efforts for Recovery Act funds  provided through ESEA Title I, IDEA, and SFSF. At the state level, we  spoke with state ESEA Title I officials in five states and the District of  Columbia, which had relatively low drawdown rates of ESEA Title I  Recovery Act funds. We also interviewed state officials in five states and  the District of Columbia about their application for and implementation of  the School Improvement Grant program. Finally, we interviewed officials  in eight LEAs located in four states to understand how they were using  their Recovery Act funds.
Even with Recovery Act Funds, an Estimated One-Third of LEAs  Experienced Funding Cuts in School Year 2009-2010 and More  Anticipated Cuts in 2010-2011  Education funding in the United States primarily comes from state and  local governments. Prior to the influx of Recovery Act funding for  education from the federal government, LEAs, on average, derived about  48 percent of their fiscal year 2008 funding from state funds, 44 percent  from local funds, and 8 percent from federal funds. These percentages,  however, likely shifted due to increased federal funding through the  Recovery Act and reductions in some state budgets for education. While  the federal role in financing public education has historically been a  limited one, the federal funds appropriated under the Recovery Act  provide a significant, but temporary, increase in federal support for  education to states and localities, in part, to help them address budget  shortfalls. According to the Congressional Research Service, the Recovery  Act provided approximately $100 billion for discretionary education  programs in fiscal year 2009, which, when combined with regular  appropriations for discretionary education programs, represents about a  235 percent increase in federal funding compared to fiscal year 2008.
Over the last 2 years—a time period when many states have dealt with  decreasing revenues as a result of the sustained economic downturn—a  number of states in our review experienced K-12 education cuts. (See  table 5 below for expenditure changes for states in fiscal years 2008 and  2009.) Nationwide, 34 states reported that they cut K-12 education funding  in fiscal year 2010, including 12 of the 16 states in our review, according  to the Fiscal Survey of States. In some states, such as Arizona and  Georgia, these fiscal year 2010 cuts were in addition to expenditure cuts in  fiscal years 2009 or 2008. However, other states such as Colorado, Florida,  Massachusetts, and Michigan experienced cuts to education expenditures  in fiscal year 2009 but did not report cutting K-12 funding in 2010. Looking  forward to fiscal year 2011, cuts for K-12 education had been proposed in  10 of the 16 states in our review, according to data presented in the June  2010 Fiscal Survey of States report. Given that nearly half of LEA  funding, on average, is provided by the states, the impact of state-level cuts to education could significantly affect LEA budgets.
The funding condition of LEAs across the country is mixed, and districts  expected it to worsen in the 2010-2011 school year, even with Recovery  Act funding—however, the new Education Jobs Fund created in August  2010 will provide some additional funding. As shown in figure 3, an  estimated one-third of LEAs faced funding decreases in the 2009-2010  school year, but according to our survey conducted in March and April  2010, more than one-half of LEAs—56 percent—are expecting to face  funding decreases in the upcoming 2010-2011 school year. LEA officials  we spoke with in California and Massachusetts expect funding declines in  2010-2011 which come on top of cuts made in prior years, indicating that  state-level cuts to education have been the primary reason for their large  funding declines and continue to provide an uncertain landscape for  school funding in coming years. Public Law 111-226, enacted on August 10,  2010 provides $10 billion for the new Education Jobs Fund to retain and  create education jobs nationwide. The Fund will generally support  education jobs in the 2010-2011 school year and be distributed to states by  a formula based on population figures. States can distribute their funding  to LEAs based on their own primary funding formulas or LEAs’ relative  share of federal ESEA Title I funds.
However, while many LEAs reported worsening funding situations, the  overall funding levels of many other LEAs increased or remained the same  in the 2009-2010 school year; although before the new Education Jobs  Fund was created, a smaller proportion reported expecting funding  increases in 2010-2011. Specifically, around half of LEAs reported that  their overall funding level in the 2009-2010 school year had increased  compared to the previous year, and an estimated 12 percent reported that  their funding had remained the same. We contacted several school  officials who had reported on the survey that their district’s funding had  increased for the 2009-2010 school year, for the 2010-2011 school year, or  during both years. These officials offered a variety of explanations for  such funding increases, including increased enrollment numbers due to  having added a grade level, having won competitive grant awards, a  rebound in state tuition revenue, and having received state aid for a  previously approved capital project, including additions to a middle school  and high school.
Moreover, before the creation of the Education Jobs Fund, of those LEAs  experiencing funding decreases, the percentage of LEAs that anticipated  funding cuts greater than 5 percent is notably higher for the 2010-2011  school year than for the 2009-2010 school year. Specifically, as shown in  figure 4, an estimated 31 percent of LEAs expected funding reductions  greater than 5 percent in the 2010-2011 school year, compared to 18  percent of LEAs that experienced cuts of this magnitude during the 2009- 2010 school year. The percentage of LEAs who anticipated funding cuts of  10 percent or higher is also projected to increase somewhat, from 8  percent in the 2009-2010 school year to 14 percent in the 2010-2011 school  year. Officials in some of the school districts we visited in June and July  2010—before the creation of the Education Jobs Fund—noted that their  funding situation would likely be more dire in the 2011-2012 school year,  when Recovery Act funds are no longer available. For example, Boston  Public Schools in Massachusetts, which reported experiencing funding  decreases this year and the past 2 years, is already preparing for a  decreased budget in fiscal year 2012 and beginning to plan how to address  budget shortfalls. Additionally, fewer LEAs anticipate funding increases of  more than 5 percent for the 2010-2011 school year than for the 2009-2010  school year. Specifically, as shown in figure 4, only 5 percent of LEAs  reported anticipating overall funding levels to increase by more than 5  percent for the 2010-2011 school year compared to 17 percent in the 2009- 2010 school year.
We also found statistically significant differences between the fiscal  situations of urban and rural LEAs and between LEAs of different sizes.  For example, significantly more urban LEAs than rural LEAs experienced  total funding increases of over 5 percent in the 2009-2010 school year.  Specifically, an estimated 32 percent of urban LEAs experienced total  funding increases of over 5 percent in the 2009-2010 school year compared  to an estimated 8 percent of rural LEAs. We did not find a significant  difference between urban and rural LEAs for the 2010-2011 school year,  however. While urban LEAs generally fared better than rural LEAs, we  found that a larger percentage of the largest LEAs reported expecting a  budget decrease for the 2010-2011 school year when compared to all other  LEAs. Specifically, we found that 36 percent of the largest LEAs expected  funding to decrease by between 1 and 5 percent in the 2010-2011 school  year compared to 26 percent of all other LEAs.
To Address Expected Funding Decreases, in Spring 2010 Many  LEAs Reported Being Very Likely to Cut Teachers, Related Staff,  and Other Items  Of the 56 percent of LEAs expecting funding decreases, many reported  being likely (somewhat or very) to take personnel actions such as cutting  positions or freezing pay. However, this information was reported before  the $10 billion Education Jobs Fund was created. Our survey results also  show that some LEAs also reported being likely to furlough teachers.  Specifically, an estimated 76 percent of LEAs that expected funding  decreases reported they were likely to cut noninstructional positions and  an estimated 70 percent reported they were likely to cut instructional  positions. (See fig. 5.) For example, when we met with officials in  California’s Mountain View-Whisman School District in June 2010, before  the Education Jobs Fund had been created, they expected to cut 20  percent of their K-3 teaching staff in the upcoming school year in part due  to projected revenue decreases of between 6 to 10 percent. Given these  planned reductions in instructional staff, an estimated 70 percent of LEAs  reported being likely to increase class size in the coming school year. For  example, LEA officials in Mountain View-Whisman School District, Elk  Grove Unified School District in California, and Revere Public Schools in  Massachusetts said they were increasing class sizes to deal with budget  shortfalls. In addition to cutting positions, an estimated 61 percent of LEAs  expecting funding decreases are likely to reduce professional development  or teacher training. Approximately 55 percent of LEAs expecting funding  decreases reported being likely to freeze pay, and around one-third  reported being likely to furlough teachers. For example, officials at San  Bernardino City Unified School District and Elk Grove Unified School  District in California told us they had decided to furlough some employee  groups for at least 9 days in the 2010-2011 school year.
Similarly, many LEAs expecting funding decreases also reported being  likely (somewhat or very) to take nonpersonnel actions, such as reducing  instructional supplies and eliminating summer programs. Specifically, an  estimated 87 percent of LEAs expecting funding cuts are likely to reduce  instructional supplies or equipment, 73 percent are likely to defer  maintenance, 71 percent are likely to reduce energy consumption, and 50  percent are likely to reduce custodial services. (See figure 6.) For  example, LEA officials in Elk Grove Unified School District said they were  very likely to reduce the purchase of instructional supplies—or have  already reduced them—and noted that this may result in teachers and  parents voluntarily purchasing additional supplies for classrooms. In  addition, LEA officials in Kingston Community Schools, Plymouth  Educational Center in Michigan, Elk Grove Unified School District, and  Boston Public Schools told us they had been deferring maintenance and  would continue to defer it, though they would not defer any maintenance  that would compromise the safety of children. Examples of deferred  maintenance projects included painting rooms, replacing a roof, promptly  fixing air conditioners, and resurfacing parking lots. LEA officials in  Boston Public Schools and Elk Grove Unified School District said they  were very likely to reduce energy consumption through such efforts as  lowering the temperature in schools in winter months, offering incentives  to schools with lower energy consumption, and using more energy- efficient light bulbs. Officials in Boston Public Schools, San Bernardino  City Unified School District, and Elk Grove Unified School District said  they had reduced custodial services in their schools and some would likely  further reduce them. Smaller proportions of schools reported being likely  to reduce transportation, shorten the school year, or close or consolidate  schools. A Boston Public Schools official told us the district planned to  reduce transportation costs by creating smaller transportation zones, and  also hopes to close and consolidate up to 20 schools to reduce costs. In  addition, we found that significantly higher percentages of the largest  LEAs reported being likely to reduce transportation services. Specifically,  50 percent of large LEAs reported being likely to reduce transportation  services, compared to 35 percent of all other LEAs.
Recovery Act Funds Allowed Most LEAs to Retain or Create  Teaching Positions and Related Jobs, though Some Still Lost Jobs  in School Year 2009-2010  Recovery Act funds for education allowed over three-quarters of LEAs to  retain or create teaching positions and related jobs during the 2009-2010  school year, though some LEAs still reported losing jobs even with the  additional federal funding. The use of the Recovery Act funding for these  purposes is consistent with one of the primary goals of the Recovery Act,  which is to save and create jobs in order to help economic recovery. An  estimated 87 percent of LEAs across the country reported that Recovery  Act funding allowed them to retain or create jobs. Specifically, a higher  percentage of LEAs reported retaining staff positions—77 percent—than  creating new staff positions —39 percent—for the 2009-2010 school year.  In addition, a significantly higher percentage of large LEAs reported that  Recovery Act funding allowed them to retain school staff, with nearly all— 98 percent of the largest LEAs in the country—reporting using Recovery  Act funding for retention. While most LEAs were able to retain or create  jobs with Recovery Act funding, some of these LEAs—nearly 1 in 4—still  reported losing jobs overall in their LEA in the 2009-2010 school year. (See  fig. 7.)
Retaining jobs was top use of Recovery Act funds for three  education programs: LEAs used large portions of their Recovery Act  IDEA Part B; ESEA Title I, Part A; and SFSF education stabilization funds  toward staff retention in the 2009-2010 school year. According to our  survey, nearly 70 percent of LEAs spent more than half to all of their  Recovery Act SFSF education stabilization funds to retain jobs for the  2009-2010 school year. (See fig. 8.) Although a smaller percentage of LEAs  reported using half to all of their IDEA Part B and ESEA Title I, Part A  Recovery Act funding—25 percent and 27 percent, respectively—for job  retention, retaining staff was still the top use cited by LEAs for IDEA Part  B and ESEA Title I, Part A Recovery Act funding. For example, LEA  officials in Kingston Community School District told us they had used all  of their Recovery Act SFSF education stabilization funds and ESEA Title I,  Part A funds, and most of their Recovery Act IDEA Part B, funds to retain  staff.
A number of factors may explain why such a large percentage of LEAs  spent a significant amount of their Recovery Act funding for job retention.  For example, a large portion of school expenditures are employee-related  costs—with salaries and benefits accounting for more than 80 percent of  local school expenditures, according to Education’s most recent data.  Also, given the fiscal uncertainty and substantial budget shortfalls facing  states, federal funds authorized by the Recovery Act have provided LEAs  with additional flexibility to pay for the retention of education staff.  Overall, the impact of Recovery Act education funds on job retention may  be significant because K-12 public school systems employ about 6.2  million staff, based on Education’s estimates, and make up about 4 percent  of the nation’s workforce. In fact, through the reporting period ending  June 30, 2010, nearly two-thirds of full-time equivalent positions reported  on Recovery.gov have resulted from Recovery Act education programs.
Based on our visits to states and LEAs, we were told that Recovery Act  SFSF funds, in particular, have provided additional resources and  flexibility allowing LEAs to retain staff. For example, one state education  official noted that LEAs have more flexibility in spending SFSF funds for  general education expenses because ESEA Title I, Part A and IDEA Part B  programs target special populations—disadvantaged youth and students  with disabilities, respectively. This official said that because funding levels  for general education programs in his state have decreased while federal  funding levels for ESEA Title I, Part A and IDEA Part B programs have  increased, LEAs have used SFSF funds to shore up funding for general  education and, in particular, preserve jobs.
Instructional positions were more often retained and created than  noninstructional positions: Substantially more LEAs retained or created  positions for instructional staff compared to noninstructional staff  positions for the 2009-2010 school year. Instructional staff typically  includes classroom teachers and paraprofessionals and noninstructional  staff can include office support, janitorial staff, and school security staff.  Specifically, an estimated 74 percent of LEAs nationally retained jobs for  instructional staff, compared to 48 percent that retained them for  noninstructional staff. Furthermore, 33 percent of LEAs reported creating  new instructional staff positions with Recovery Act funding compared to  the 22 percent that created them for noninstructional staff. (See fig. 9).  According to a number of LEA officials we interviewed, LEAs often spent  Recovery Act funding in ways that would benefit students directly in the  classroom, thereby focusing on creating and retaining positions for  instructional staff before creating and retaining jobs for noninstructional  staff, such as administrative and auxiliary staff. For example, officials  from the Plymouth Educational Center said that in order to minimize the  impact on students, they have made or would consider making cuts to  administration, security guards, and paraprofessionals, and instituting  further pay cuts before letting go of teachers.
Fewer LEAs Used Large Portions of Their Recovery Act Funding to  Hire Staff Than to Retain Staff, although Fund Use for Hiring  Varied by Program  Although our survey results indicate that LEAs overall spent a significant  amount of their Recovery Act funding from all three programs to retain  jobs, LEAs also reported using Recovery Act funding to hire new staff. As  indicated in figure 10, the percentage of LEAs that reported using  Recovery Act funding to hire new staff varied across the three programs.  For example, 4 percent and 6 percent of LEAs reported spending half or  more of their Recovery Act IDEA Part B and SFSF funding, respectively, to  hire new staff, while 15 percent of LEAs reported the same use for their  Recovery Act ESEA Title I, Part A funds. Overall, nearly three-quarters of  LEAs did not use any of their Recovery Act SFSF funding to hire new staff,  concentrating instead on using that funding for staff retention.
Nearly One in Four LEAs Reported Losing Jobs, Even with  Recovery Act Funding, Due to Decreasing Budgets and Other  Factors  Even with the additional Recovery Act funding provided to LEAs in school  year 2009-2010, nearly one-quarter of LEAs reported losing jobs, primarily  due to decreasing overall budgets. Without Recovery Act funds, it is likely  that the magnitude of job losses in these LEAs would have been higher,  given that nearly all of the LEAs experiencing job loss overall also  reported retaining jobs. Specifically, an estimated 92 percent of LEAs  where LEA officials indicated the number of teachers had decreased also  said that Recovery Act funds had allowed them to retain jobs during the  school year. Also, almost 30 percent of LEAs used Recovery Act funds to  create new jobs during the 2009-2010 school year, even as their overall  number of jobs decreased. For example, according to a Boston Public  Schools official, the number of staff in the district had decreased in the  2009-2010 school year, but the district also used Recovery Act funds for  both retention and job creation. For example, the district hired 16 new  English as a Second Language teachers and specialists with ESEA Title I,  Part A Recovery Act funds even as they let go of teachers during school  closures.
Decreasing overall budgets at the LEA level was the main reason that  LEAs reported losing jobs in School Year 2009-2010. Specifically, 67  percent of LEAs that lost jobs reported that their budget was a factor to a  great or very great degree. (See fig. 11.) For example, officials from Elk  Grove Unified School District in California told us they laid off about 500  staff at the end of the 2009-2010 school year due to budgetary pressures,  after exhausting their reserves and spending Recovery Act funds. In  addition to budgetary factors, LEAs lost jobs because of staff attrition and  declining enrollment, although to a much lesser extent.
In addition to retaining and hiring staff, LEAs spent Recovery Act funds on  items that could help build long-term capacity, while also avoiding  creating recurring costs for LEAs. Overall, LEAs reported several one-time  expenditures such as purchasing computer technology, providing  professional development for instructional staff, and purchasing  instructional materials as among some of the highest uses of funds after  job retention and creation. (See fig. 12.)
LEA officials reported making one-time purchases with Recovery Act  funds to enhance district capacity. For example, at Plymouth Educational  Center in Michigan, officials told us that Recovery Act funds were used to  enhance computer technology for both students and teachers. Further,  several LEA officials told us they had used IDEA Part B Recovery Act  funds to purchase professional development and assistive technologies  that would help build the district’s capacity to serve more students with  disabilities. These officials told us that they will be able to educate  students with disabilities far more affordably within the district than by  paying external providers—a benefit they anticipate will continue even  after the Recovery Act funds are spent. For example, in rural Michigan,  officials told us that IDEA Part B funding has allowed the Kingston  Community Schools to build capacity by partnering, along with other  schools from the surrounding area, with the University of Kansas to  provide coaching and training to teachers who can then provide services  to more students with disabilities. In addition, LEA officials in Boston,  Massachusetts, said they had used these funds to obtain equipment and  provide professional development so they could serve more students with  autism within the district.
section_title: A Majority of LEAs Maintained the Same Level of Service as the Prior Year, but Some LEAs Reported Not Being Able to Maintain Service Levels
paragraphs: Although more than half of all LEAs reported being able to provide  students with the same level of service in 2009-2010 as in 2008-2009, a  number of LEAs reported they had not been able to maintain the same  level of service at their LEA for the same time frame. Specifically, an  estimated 63 percent of LEAs nationally reported that Recovery Act SFSF  funds allowed them to maintain the same level of service to students in  their LEA in school year 2009-2010 as compared to the previous school  year. However, 40 percent of the largest LEAs reported not being able to  maintain the same level of service compared to 16 percent of all other  LEAs. (See fig. 13.)
LEAs reported a range of areas in which there was a great or very great  reduction in the level of services, including instructional materials and  resources, staff development, and summer school programs. For example,  LEA officials from San Bernardino City Unified School District told us they  had applied cuts with the intent of having the least impact on children in  the classroom, and that these cuts included delay of new textbook  adoption, administrative reductions, and reduced maintenance. Further,  Boston Public Schools and Revere Public Schools pointed to cuts in  programming such as art and music as examples in how their service  levels had decreased.
A number of LEAs reported that Recovery Act SFSF funds allowed them  to raise their level of service in 2009-2010, with a lower percentage of the  largest LEAs reporting raising service levels compared to all other LEAs.
Based on our survey results for the 2009-2010 school year, 20 percent of all  LEAs indicated that the additional Recovery Act SFSF funding made it  possible to raise the level of services provided to students compared to  what the LEA was able to provide in the prior 2008-2009 school year. A  significantly lower percentage of the largest LEAs in the country—5  percent—specified that the SFSF funding raised service levels in their  schools.
section_title: Relatively Few LEAs Report Making Significant Progress in Four Core Education Reforms
paragraphs: Some LEAs report making modest progress in education reform, but  relatively few report they are making significant progress in advancing the  four core education reform areas states are required to address as a  condition of receiving SFSF funding. For example, an estimated 28 percent  of LEAs reported making modest progress and just 13 percent of LEAs  reported making significant progress in increasing teacher effectiveness— the highest percentage among the four areas. (See fig. 14.) However, some  of these goals, such as improving standards and assessments, are more  likely to be pursued at the state level than at the local level, while others,  such as supporting struggling schools, may not apply to all districts. In  order to receive SFSF funding, states had to submit an application to  Education that required each state to provide several assurances,  including that it would implement strategies to advance four core areas of  education reform, as described by Education: (1) increase teacher  effectiveness and address inequities in the distribution of highly qualified  teachers; (2) establish a pre-K-through-college data system to track  student progress and foster improvement; (3) make progress toward  rigorous college- and career-ready standards and high-quality assessments  that are valid and reliable for all students, including students with limited  English proficiency and students with disabilities; and (4) provide  targeted, intensive support and effective interventions to turn around  schools identified for corrective action or restructuring. Furthermore, in  order to receive the remainder of their SFSF allocations (Phase II), states  had to agree to collect and publicly report on more than 30 indicators and  descriptors related to the four core areas of education reform described  above. While states will be responsible for assuring advancement of these  reform areas, LEAs were generally given broad discretion in how to spend  the SFSF funds. It is not clear how LEA progress in advancing these four  reforms will affect states’ progress toward meeting their assurances.  Education officials noted that they were not surprised that fewer LEAs  reported expanding reform efforts in 2009-2010 given their budget  situation. Figure 14 depicts the extent to which LEAs reported making  modest or significant progress in each of the four reform areas.
Almost all LEAs we surveyed stated that ESEA Title I, Part A and IDEA  Part B Recovery Act funds allowed their LEAs to either expand or  maintain education reform efforts in 2009-2010, but a small and increasing  percentage of LEAs expect to reduce reform efforts in 2010-2011 than  reduced such efforts in 2009-2010. In addition to retaining and creating  jobs, Education officials reported they intended the use of Recovery Act  funds to spur education reform in LEAs to improve student achievement.  Education provided guidance to states and LEAs on ways to use the  Recovery Act funds to stimulate reform, as well as to retain jobs. Because  LEAs are required to obligate 85 percent of their Title I, Part A Recovery  Act funding by September 30, 2010, unless approved for a waiver, Title I,  Part A education reform efforts in districts without waivers could decrease  because fewer funds would be available in the upcoming school year.
ESEA Title I, Part A Recovery Act Funding Enhanced Education  Reform Efforts at Nearly Half of All LEAs and Helped Enhance or  Maintain Reform at Nearly All LEAs  Most LEAs report that Recovery Act funding for ESEA Title I, Part A  allowed them to either expand or maintain education reforms for  disadvantaged students in both 2009-2010 and 2010-2011, but the  percentage of districts that expect to expand reform is lower for 2010-2011  than for the 2009-2010. According to our survey results, an estimated 48  percent of LEAs indicated that the additional ESEA Title I, Part A  Recovery Act funding they received allowed their LEA to expand  education reform efforts in 2009-2010. For example, officials from one  Michigan LEA told us they used the ESEA Title I, Part A Recovery Act  funding to enhance a tutoring program for all at-risk students in math and  language arts. Officials at another LEA told us the ESEA Title I, Part A  Recovery Act funding allowed them to enhance their after-school tutoring  program targeted at English language learners. Moreover, an additional 48  percent of LEAs stated that the funding allowed them to maintain reform  efforts for ESEA Title I, Part A programs. However, the percentage of  districts anticipating ESEA Title I, Part A funding that will allow their  district to expand reform efforts is lower for the 2010-2011 school year  than for the 2009-2010 school year. (See fig. 15) While an estimated 3  percent of LEAs stated that even with the additional Recovery Act funding  provided under ESEA Title I, Part A, education reform efforts decreased in  the 2009-2010 school year, this percentage increased to 11 percent when  we asked LEAs to look ahead to the 2010-2011 school year. Title I, Part A  reform efforts could potentially decrease in the coming school year, in  part because LEAs are required to obligate 85 percent of ESEA Title I, Part  A Recovery Act funds by September 30, 2010, unless they receive a waiver.
IDEA Part B Recovery Act Funding Allowed Most LEAs to Either  Expand or Maintain Reform Efforts for Special Education Students  Most LEAs report that Recovery Act funding for IDEA Part B allowed them  to either expand or maintain education reform efforts for special  education students in both 2009-2010 and 2010-2011, but the percentage of  districts that expect to expand reform is lower for 2010-2011 than for the  previous year. Specifically, in 2009-2010, we estimate that 43 percent of  LEAs nationally expanded reform efforts for special education students  because of the additional IDEA Part B Recovery Act funding in 2009-2010.  (See fig. 16). For example, an official in Boston, Massachusetts, told us  that the Boston Public Schools has used some of its IDEA Part B Recovery  Act funding to train teachers and purchase equipment to enhance  classroom services for autistic students. In addition, 55 percent of LEAs  noted that the Recovery Act funding allowed them to maintain ongoing  education reform efforts targeted for special education students in the  same year. For example, in Michigan, one LEA official we interviewed  stated that the LEA had used Recovery Act funding to maintain  intervention services for special education students. Looking ahead to the  2010-2011 school year, however, a lower percentage of districts—28  percent—expect to expand reform.
Given the Increase in IDEA Recovery Act Funding in 2009-2010,  about 36 Percent of LEAs Exercised Flexibility to Decrease Local  Spending on Special Education, and Primarily Used Funds to  Retain Staff  In the 2009-2010 school year, among the 86 percent of LEAs that reported  receiving Recovery Act IDEA Part B funds, an estimated 36 percent  reported taking advantage of the maintenance-of-effort (MOE) flexibility  under IDEA that allows them to reduce their local, or state and local,  spending on students with disabilities. IDEA requires LEAs to budget at  least the same total or per capita amount of local funds for the education  of children with disabilities as the LEA spent in the most recent prior year  for which information is available. As provided for in IDEA, in any fiscal  year in which an LEA’s federal IDEA Part B allocation exceeds the amount  the LEA received in the previous year, an eligible LEA may reduce local  spending on students with disabilities by up to 50 percent of the amount of  the increase, as long as the LEA uses those freed-up funds for activities  authorized under ESEA, which supports activities for general education.  Because Recovery Act funds for IDEA Part B count as part of an LEA’s  overall federal IDEA allocation, in fiscal year 2009, the total increase in  IDEA Part B funding for LEAs was far larger than the increases in previous  years, which provided a greater incentive for many LEAs to take  advantage of the MOE flexibility in the 2009-2010 school year. Of the 36  percent of LEAs exercising the flexibility, an estimated 41 percent  reported spending more than half of the “freed-up” local funds on retaining  staff. Other uses of the freed-up funds included providing professional  development for instructional staff, purchasing computer technology, and  hiring new staff.
We also found an example of an LEA that planned to take advantage of the  MOE flexibility even though it was not eligible to do so. Based on our  review of budget documents and local officials’ statements, the Syracuse  City School District (SCSD) had reduced their 2009-2010 spending by  about $2.3 million. We determined, and local officials subsequently  agreed, that SCSD was not eligible for the MOE reduction because it was  not meeting performance indicators related to graduation and drop-out  rates among disabled students and it had a significantly high percentage of  students with disabilities being suspended for more than 10 days, among  other indicators. When we notified LEA officials of its ineligibility during  our visit in March 2010, they attributed their situation to  miscommunication among staff in the special education and finance  offices and a misunderstanding of the eligibility rules for reducing MOE.  LEA officials informed us that they would follow up on this issue and take  steps to ensure they met MOE requirements. SCSD subsequently provided  documentation showing that they were indeed meeting MOE  requirements.
While the decision by LEAs to decrease their local spending can free up  funds to address other needs in the current school year, it could also have  implications for future local spending on special education. Because LEAs  are required to maintain their previous year’s level of local spending on  special education and related services to continue to receive IDEA Part B  funds, LEAs taking advantage of the spending flexibility will only be  required to maintain these expenditures at the reduced level in subsequent  years. If LEAs that use the flexibility to decrease their local spending do  not voluntarily increase their spending in future years, and federal IDEA  Part B allocations decrease—specifically by returning to levels  comparable to those before the Recovery Act—the total federal, state, and  local spending for the education of students with disabilities will decrease  compared to overall spending before the Recovery Act. However, while  LEAs may maintain the lower level of spending, because of the IDEA  requirement that children with disabilities receive a “free appropriate  public education,” (FAPE) districts may not be able to maintain services  for students with disabilities at the lower levels of spending. For example,  in Elk Grove Unified School District (California), which reduced local  spending in 2009-2010, local officials reported that they have plans to  include in their budget for 2010-2011 an amount equal to or greater than  their 2008-2009 spending to ensure that services to students with  disabilities are maintained. Officials said they needed to do this in order to  maintain services for students with disabilities. In contrast, a charter  school in Michigan reported that it may not be able to restore funding to  previous years’ levels, given decreases in state funding, but would make  sure it provided services for students with disabilities.
section_title: States Vary in the Rate at Which They Draw Down Recovery Act Funds for Education Programs
paragraphs: As of August 27, 2010, states covered by our review had drawn down 72  percent ($18.2 billion) of the awarded SFSF education stabilization  funds; 46 percent ($3.0 billion) of Recovery Act funds for ESEA Title I,  Part A; and 45 percent ($3.4 billion) of Recovery Act funds for IDEA Part  B. Some states had drawn down a much larger portion of their funds than  other states. (See table 6.) For example, Arizona, Georgia, Illinois and New  Jersey had drawn down all of their SFSF education stabilization funds as  of August 27, 2010, while Florida, Mississippi, Pennsylvania, and Texas had  drawn down less than 55 percent of these funds.
As noted in a previous report, drawdowns typically lag behind actual  expenditures. For example, state officials in New Jersey stated that  drawdown figures lag expenditures because funds are only drawn down  once districts submit for reimbursement. However, because LEAs are  required to obligate 85 percent of ESEA Title I Recovery Act funds by  September 30, 2010, a low drawdown rate could indicate either that a large  percentage of districts have sought and obtained or will seek and obtain  waivers from this requirement or are at risk of not meeting this  requirement. To help mitigate the effects of the funding cliff—when  Recovery Act funding is no longer available—Education officials are  encouraging districts to use carryover waivers to spread ESEA Title I, Part  A funds over 2 years. Specifically, in a webinar Education officials hosted  on June 15, 2010, Education officials explained how districts could  minimize the impact of the funding cliff by strategically using carryover  waivers. Also, officials in states we contacted appeared to be following  Education’s suggested strategy to encourage the use of carryover waivers.  We spoke to state officials in five states and the District of Columbia with  relatively low drawdown rates and some of these officials told us they  were encouraging districts to spread the funds over the 2-year period  rather than try to obligate 85 percent of the funds by September 30, 2010.  For example, Massachusetts state officials told us they have encouraged  all districts receiving Recovery Act Title I funds to apply for a carryover  waiver to allow them the flexibility to use Recovery Act funds throughout  the two-year period. Similarly, officials in New York state told us they had  requested a blanket waiver for all districts in the state, which was  approved by Education.
section_title: Education Is Continuing to Provide Technical Assistance and Guidance and Is Monitoring States’ Use of Recovery Act Funds
paragraphs: Education has completed 16 of the 18 on site-monitoring visits it  scheduled for the 2009-2010 monitoring cycle (including 11 states and the  District of Columbia that are in our review), according to department  officials. The most frequent monitoring findings related to the Recovery  Act had to do with districts failing to follow fiscal and set-aside  requirements, such as the requirements to document time and effort of  employees paid with Title I, Part A funds and properly calculate how much  funding was required to be set aside for specific purposes, according to  Education officials. Regarding fiscal requirement findings, the most  frequent findings included districts’ failure to (1) determine whether  services provided in schools receiving ESEA Title I, Part A funding were  comparable to those services provided to students in other district schools  not receiving ESEA Title I, Part A funding, (2) determine whether federal  funding had been used to “supplant” local or state funds by paying for  services that had previously been provided using local or state funds, or  (3) document that employees funded through multiple funding sources  were dedicating the appropriate proportion of their time and effort to  serving disadvantaged students. Regarding set-aside calculations,  Education officials said that they found that some districts had not  included Recovery Act funding in their calculations as required. Education  officials provided examples of corrective actions state educational  agencies and LEAs with fiscal or set-aside calculation findings could take  to resolve these issues. For example, calculations for comparability or set- asides could be corrected to comply with requirements.
For the 2010-2011 monitoring cycle, Education officials plan to conduct  on-site visits in 11 states, including 2 in our review, and the Bureau of  Indian Education. During each of these 12 monitoring visits, Education  officials will assess state and local implementation of the School  Improvement Grant program in addition to the implementation of regular  and Recovery Act ESEA Title I, Part A requirements. Department officials  said that during the upcoming monitoring cycle, they will continue to shift  their monitoring focus away from strict audits towards providing technical  assistance. Department officials also told us that they will develop state- specific technical assistance for the states reviewed during the 2009-2010  monitoring cycle to help them resolve identified challenges.
Education officials told us they continue to engage state and local officials  using a variety of technical assistance efforts. Such efforts include issuing  written guidance, hosting webinars, and giving presentations at state  ESEA Title I conferences to explain and discuss federal guidance.  Education officials also noted that they constantly communicate with state  and local officials over the telephone and through email, and issue  frequently asked questions to share their answers to questions from state  and local officials. Department officials also noted that they have offered  state-specific technical assistance to state and local officials in several  states, particularly in states with new ESEA Title I leaders. Some of these  technical assistance efforts have been initiated as a direct result of the  Recovery Act, according to Education officials, who also said that the  increased technical assistance efforts have created a strain on their  resources and capacity.
Education Continues to Address Recovery Act Issues within Its  Ongoing IDEA Monitoring Efforts  Regarding IDEA, in the fall of 2009, Education officials reported that they  pursued their regular targeted monitoring visits and technical assistance,  which covers 16 states or territories, and in response to the Recovery Act,  Education’s Office of Special Education Programs (OSEP) is also  performing a desk review of all states. According to Education officials,  the department uses annual performance report information and focused  monitoring priorities to determine in which states it will conduct  monitoring visits. In the course of its monitoring visits, the department  verifies the effectiveness of state systems for general supervision, data  collection, and fiscal management, as well as reviews state progress  toward the goals from its state performance plan. In conducting site visits,  OSEP reviews state records, makes visits to selected LEAs for on-site  examination of student records, and assesses state special education  systems. Following these visits, Education issues a report on findings and,  when noncompliance is found, requires states to demonstrate correction  of the noncompliance.
For fall 2010, Education is pursuing some additional monitoring and  providing additional support to states in implementing the Recovery Act.  Specifically, in addition to its annual monitoring visits, OSEP is planning to  visit up to 10 additional states this year. These additional visits will be less  intensive than the regular monitoring visits, and will focus more on the  Recovery Act than the annual monitoring visits. Also in response to the  Recovery Act, the department has assigned four Recovery Act Facilitators,  who work with four teams that will provide support and guidance to states  regarding their Recovery Act monitoring efforts and the reporting of  accurate data for recipient reporting under the Recovery Act.
While they did not have any Recovery Act-specific findings in their most  recent monitoring visits, OSEP officials did report some areas on which  they will be focusing in their upcoming monitoring. OSEP officials  reported that one of the issues they have been focusing on for several  years is ensuring timely obligation and expenditure of funds. After finding  10 years ago that states had failed to obligate a total of $32.8 million in  IDEA funds before the end of the 27-month timeframe required under the  law, the department began to track state-level draw-downs, and now  works to remind states that have balances above a certain threshold when  the deadlines for obligating funds are approaching. OSEP officials  reported that in subsequent years, after they began tracking drawdowns,  the expired unobligated funds have declined to about $5.6 million. Also,  OSEP officials reported that some states were calculating their state-level  MOE spending without including spending on special education from  sources outside of the state educational agency. For example, if other  state departments are providing counseling or rehabilitation services, that  spending must be included. Finally, OSEP officials reported that while  state education agencies generally require LEAs to provide a budget for  their intended uses of IDEA funds, and require LEAs to attest that they are  complying with MOE requirements, states do not always perform  monitoring later to ensure that LEAs can document that they spent the  funds according to their budgets. In one example, in Iowa, we found  equipment purchases under IDEA larger than $5,000 for a single piece of  equipment that were not submitted to the state for approval as state  officials reported was required. In other examples, we found that the Des  Moines Public School District purchased equipment for about $25,000, and  the Marshalltown Community School District in Iowa purchased $8,400 in  communications equipment and software, without seeking review and  approval from the state prior to purchase, as state officials said was  required. As we completed our reviews, the LEAs were making changes in  their procedures to ensure state approval of IDEA equipment purchases  greater than $5,000.
Given State-Level Budget Situations, Education Has Approved  Waivers Allowing States to Decrease Their State Spending on  Special Education  Because of declines in state-level budgets, Education has approved waiver  applications from states to decrease their state-level spending on special  education. Under IDEA, the Secretary of Education may waive state-level  MOE requirements for equitable purposes due to “exceptional or  uncontrollable circumstances such as a natural disaster or a precipitous  and unforeseen decline in the financial resources of the State.” Education  approved a state-level waiver for one state in our review—Iowa—for  2009. Education officials said that the waiver will only apply for 1 year,  and, in 2010 Iowa must return its spending on special education to the  2009 level unless the state applies for and receives another waiver.
Education officials said that the department is considering each  application individually based on its own merits, and is reminding states in  its approval letters that they must provide services to students with  disabilities that would still meet the requirement under the law that the  state provide a free appropriate public education, despite any cuts. In a  June 2010 memorandum, Education said that it was considering the  impact of other sources of funding for special education, including those  from the Recovery Act, when making waiver decisions. Education  officials also told us that they want to ensure that cuts to special education  services are equitable when compared to other budget cuts, and therefore  they consider the percentage decrease in spending on special education in  relation to that of other items in the states’ budget, both education-related  and other items. Education’s guidance also notes that states that receive a  waiver may be subject to additional monitoring, and Education officials  told us that each of the waiver-approved states will be among the 16 states  chosen for full monitoring visits described above and subject to additional  monitoring to make sure that free appropriate public education was  provided.
Education Has Begun to Monitor SFSF Grantees and Address  Initial Challenges Associated with Monitoring Noneducation State  and Local Agencies  Education has begun to monitor SFSF grantees, and as of August 30, 2010  had conducted on-site monitoring of 1 state—New York—and Washington,  D.C. included in our review as well as desk reviews of two states in our  review—Georgia and North Carolina. Education has not yet completed  its monitoring reports to states, but department officials told us that its  findings were minor and that it would work with states to address any  findings. For example, Education officials told us that some of the minor  findings included not providing timely certification documents, ensuring  that all jobs were reported on required recipient reports, or adhering to  monitoring schedules of subrecipients. Education has 10 more on-site  monitoring visits planned between September and November 2010 and 10  planned for 2011.
Education officials reported some challenges they experienced during  their initial monitoring visits because of the differing types of  subrecipients and the amount of documentation to review. Education’s  Office of Elementary and Secondary Education (OESE) is charged with  administering and monitoring SFSF funds. While OESE is experienced  with monitoring LEAs, SFSF educational stabilization funds may also flow  to Institutions of Higher Education, which OESE has little or no  experience overseeing. Further, SFSF government services funds provide  funding to a broad range of state and local agencies that Education does  not normally monitor. For example, SFSF government services funds  subrecipients consist of a variety of noneducational entities including state  police forces, fire departments, corrections departments, and healthcare  facilities and hospitals. Since this is the first SFSF monitoring effort,  Education officials told us that it will take time for Education’s staff to  become familiar with these subrecipients and the types of documentation  they provide. In addition, Education officials reported that the amount of  information necessary to monitor SFSF funds was voluminous and  required more time than was expected, but they are continuing to work to  improve the SFSF monitoring process.
In September 2009, we reported that some states faced challenges in  developing monitoring plans for SFSF funds, and we recommended that  Education take action such as collecting and reviewing documentation of  state monitoring plans to ensure that states understand and fulfill their  responsibility to monitor subrecipients of SFSF funds. Education acted on  our recommendation and required states to submit SFSF monitoring plans  to Education by March 12, 2010. Education officials told us they are  reviewing the plans to ensure that states planned to adequately monitor  SFSF subrecipients.
Given State-Level Budget Situations, Education Has Approved  SFSF Waivers Allowing States to Decrease Their State Spending on  Education  The Secretary of Education has granted an SFSF MOE waiver to one state  in our review—New Jersey—allowing the state to reduce 2009 state  support for education below 2006 levels. The department grants these  waivers once a state certifies that state education spending did not  decrease as a percentage of total state revenues. As we reported in May,  the states we reviewed told us they met SFSF MOE levels in fiscal year  2009 or obtained waivers. Because of declines in state-level budgets, two  states in our review—Florida and New Jersey—requested a waiver from  Education to decrease their 2009 state-level spending on education. After  these states’ 2009 state education funding figures were finalized,  Education officials told us they reviewed waiver applications to ensure  that state education funding in 2009 met the requirements for an SFSF  waiver. Education officials reported that New Jersey’s and Rhode Island’s  waivers have been approved and that they are currently reviewing South  Carolina’s and Florida’s waivers.
Education Announced Race to the Top Grants and SFSF Phase II  Awards  Education has announced that the District of Columbia and 11 states,  including Florida, Georgia, Massachusetts, New York, North Carolina, and  Ohio, will receive Race to the Top grants. This program is a competitive  grant fund created by the Recovery Act as part of SFSF providing $4.35  billion in funding for statewide reform efforts and to develop common  academic assessments. In addition, Education officials reported that  almost all of the SFSF Phase II funds have been awarded to most states.  As such, states now have access to their entire allotment of SFSF funds  and all SFSF funds must be obligated by September 30, 2011.
Education Released New Clarifying Guidance on Recipient  Reporting   As in previous reporting periods, FTE positions funded by Education  grants accounted for a large proportion of all reported FTEs.  Specifically,  Education recipients reported around 450,000 FTEs, which represent 60  percent of the nearly 750,000 FTEs reported for the period ending June 30,  2010.  To improve the consistency of FTE data collected and reported, in  May and March 2010 GAO made several recommendations to Education,  including that Education re-emphasize the responsibility of sub-recipients  to include hours worked by vendors in their quarterly FTE calculations  and that Education provide clarifying guidance to recipients on how to  best calculate FTEs for education employees during quarters when school  is not in session.  Education implemented our recommendations by issuing  clarifying guidance on August 26, 2010, that specifies how education sub- recipients are to calculate FTEs for recipient reporting for Education- specific situations, such as how to calculate FTEs for teachers not  working during the summer months who are considered full-time  employees.
section_title: Though the Application Process Has Taken Longer Than Expected, States and LEAs Are Preparing to Implement School Improvement Grants as Soon as Applications Are Approved
paragraphs: Setbacks in issuing final written guidance and resource constraints at  Education have slowed the application process for School Improvement  Grants (SIG)—competitive awards to help turn around the lowest  performing schools—according to department officials. According to  Education officials, one reason that the state application process took  longer than expected was that the department had to revise the final  requirements it initially released in December 2009. According to  Education officials, some language in the Consolidated Appropriations  Act, 2010  necessitated changes to these requirements. Education  officials released revised guidance in late January 2010 and again in June  2010 with a few additional revisions. While the changes to the guidance  and other delays created a challenge for some states, Education assisted  states in moving their applications forward by responding to questions in a  timely manner. In addition, Education extended the application deadline  set in the initial guidance document to allow time for the department to  offer technical assistance and for states to revise their applications given  the changed requirements.
In addition to the delay caused by issuing revised guidance, department  officials said that staffing constraints had limited the department’s ability  to review state applications, which ranged from 200 to 400 pages in length,  and to help state officials revise these applications. They noted that, in  some cases, states had to revise the application, sometimes more than  once, in order to comply with SIG requirements. Because certain  compliance issues related to more than one part of the application  (depending on how states put their applications together), Education staff  had to reread each application in full after each resubmission to ensure  compliance. Overseeing the substantial influx of additional ESEA Title I  funds provided through the Recovery Act, including SIG funds,  substantially increased staff workload, particularly given that staffing  levels did not increase, said a senior Education official. While one staff  member works full-time to coordinate the SIG application process at the  department, the 17 other staff who were assigned to work on SIG  application reviews assumed these responsibilities in addition to their  other monitoring, technical assistance, and programmatic duties,  according to a senior Education official.
State officials in some states and the District of Columbia told us that  they had encountered various challenges in applying for and implementing  the School Improvement Grants and that timeframes have been tight.  These states were at different stages in the process of selecting LEAs to  receive SIG funds, but were taking various steps to address the tight  timeframes and work through challenges, and expected that districts  would be ready to use the grant funds in the 2010-2011 school year. For  example, officials in New York told us in late August that they had nearly  completed their review of districts’ SIG applications. They also noted  encountering challenges in New York City, where school districts are not  allowed to replace principals or close schools—steps required by certain  school turnaround models—and having to work through two specific  collective bargaining issues. In contrast, New Jersey officials said they had  completed their review of district applications and selected 12 schools,  representing 7 school districts to receive SIG funds, with some districts  receiving grants for multiple schools. To ease tight time frames, Michigan  officials told us that while awaiting approval from Education, they had  created an iterative application process for districts, whereby districts  were required to submit an initial statement of intent in June, followed by  a more detailed initial application in mid-July. State education officials  told us they reviewed these initial drafts and gave local officials feedback  before the final applications were due. As of late July, Education had  approved SIG applications for 48 states and the District of Columbia,  including all 16 of the states and the District of Columbia in our review.
section_title: Obligations for State Transportation Projects Are Nearly Complete, but Spending from Other Federal Transportation Sources Has Slowed
subsections: section_title: Use of Transportation Funds
paragraphs: Nationwide, the Federal Highway Administration (FHWA) obligated $25.6  billion in Recovery Act funds for over 12,300 highway projects and  reimbursed $11.1 billion as of August 2, 2010. The Federal Transit  Administration (FTA) obligated $8.76 billion of Recovery Act funds for  about 1,055 grants and reimbursed $3.6 billion as of August 5, 2010.  Figure 17 shows FHWA’s and FTA’s reimbursements during the Recovery  Act.
Nationally, 44 percent of funds obligated for highway projects had been  reimbursed as of August 2, 2010. Reimbursement rates varied widely  among the 16 states and the District—between 23 percent and 77 percent.  Illinois, Iowa, and Mississippi had the highest reimbursement rates—each  at 65 percent or more. Officials in all 3 states told us that in selecting  projects they emphasized projects that could be completed quickly, and  each undertook more pavement resurfacing projects—which can be  quickly initiated—than any of the other states we reviewed. Five states  had reimbursement rates below 30 percent—of particular note, California,  which received almost 1 out of every 10 Recovery Act highway dollars  apportioned nationwide, had the second lowest reimbursement rate  among the 16 states and the District at 26 percent ($633 million). Officials  from California noted that the state had undertaken a number of large  projects that had the potential to offer long-term benefits but for which  construction could not be initiated quickly. For example, California used  about $197 million in Recovery Act funds to partially finance the Caldecott  Tunnel improvement project (total estimated cost of $420 million).  California awarded a contract in November 2009 and began construction  of a new tunnel on a congested stretch of highway between Oakland and  Orinda in February 2010, nearly 1 year after the Recovery Act was enacted.  California officials also attributed the state’s lower reimbursement rates to  having a majority of its projects administered by local governments, which  are often reimbursed more slowly than state-administered projects.  According to California officials, as of June 30, 2010, about 62 percent or  $1.5 billion of California’s $2.5 billion are obligated for local government  projects. California officials stated that locally-administered highway  projects take longer to reach the reimbursement phase because of the  additional steps required to approve local highway projects and because  localities with relatively small projects tend to seek reimbursement in one  lump sum at the end of a project to minimize time and administrative  costs.
The effect of projects sponsored by local agencies on reimbursements is  not limited to California. Among all the 16 states and the District,  reimbursement of funds suballocated for metropolitan, regional, and local  use lagged behind state projects. Suballocated funds can be administered  through local transportation agencies such as city or county agencies that  can lack familiarity with federal requirements. As we have previously  reported, local agencies have had challenges selecting projects that will  meet these requirement and suballocated funds have generally taken  longer to obligate than nonsuballocated funds. Data show this pattern  extending to reimbursements as well. New Jersey and Arizona had the  lowest reimbursement rates on suballocated projects, 10 and 18 percent,  respectively. Our past reports have noted that New Jersey and Arizona  were among the slowest states to select projects for funding in  suballocated areas.
Table 7 shows the total reimbursement rates in the 16 states and the  District, as well as the reimbursement rates for state and suballocated  projects.
Recovery Act highway obligations were used primarily for pavement  improvement projects, such as resurfacing, reconstruction, and  rehabilitation of existing roadways. Recovery Act public transportation  funds were used primarily for upgrading transit facilities and improving  bus fleets (see fig. 18).
States Asked FHWA to Deobligate Funds after the 1-Year Deadline,  but Some Suballocated Areas Faced Challenges in Identifying  Additional Projects for Funding  As we have previously reported, an economic stimulus package should  assure that projects are undertaken quickly to provide a timely stimulus to  the economy. The Recovery Act included obligation deadlines to  facilitate the timely use of funds, including early March 2010 (1-year)  deadlines to obligate Recovery Act highway and transit funds. In our May  2010 report, we reported that the states met these deadlines.
Since the March 2010 deadline for obligating Recovery Act highway funds,  states have asked FHWA to deobligate some funds and are subsequently  asking FHWA to obligate these funds to new projects. To use states’ full  apportionments, those funds must be obligated again by September 30,  2010, after which all unobligated highway funds will no longer be available  to the states. As of August 2, 2010, about $397 million, or 2.6 percent, of  total Recovery Act highway funds remained to be obligated in the 16 states  and the District. Nationally, about $565 million remained. These amounts  have increased steadily since the March 2010 deadline—for example, in  the 1-month period between June 30, 2010, and August 2, 2010, the amount  available for obligation increased from about $509 million to $565 million  (see fig. 19).
Projects supported with suballocated funds generally had higher levels of  unobligated funds compared with projects using funds that are not  suballocated. As of August 2, 2010, $199 million of the $7.7 billion available  to suballocated areas nationwide remained to be obligated before the  September 30, 2010, deadline. Also, several of the states we reviewed had  unobligated suballocated funds that were roughly three to five times larger  than the national average (see table 8). FHWA officials told us that the  timely expenditure of funds on projects administered by local public  agencies remains an area of concern and that the agency is closely  monitoring these projects to ensure, on behalf of the states, that all funds  are obligated. These funds will be withdrawn after September 30, 2010, if  these funds are not obligated.
State officials identified several reasons projects might have been delayed  in suballocated areas. Officials from the Arizona Department of  Transportation, in which 12.4 percent of suballocated funds were  unobligated, said that many suballocated areas did not have projects ready  for federal-aid funding in part because of limited staff and other resources  to move projects through approvals and prepare documentation in a  manner consistent with federal requirements. Officials from North  Carolina, in which 8.9 percent of suballocated funding was deobligated,  told us that local agencies using suballocated funding faced challenges  completing environmental documents, acquiring rights-of-way, and  finalizing bid documents. As a result, many projects local agencies  considered to be “ready-to-go” did not meet various federal standards, and  agencies had to find other projects, which created delays.
Among the states we reviewed, most of the funds that the states asked  FHWA to deobligate were from contract award savings. From March 2,  2010, to June 7, 2010, the 16 states and the District that we are reviewing  requested FHWA to deobligate almost $457 million. About 85 percent of  those funds were deobligated due to contracts continuing to be awarded  below state cost estimates (see fig. 20).
Withdrawn projects accounted for only about $17 million, or 4 percent, of  deobligations from March 2 to June 7, 2010, less than 1 percent of the total  $15.2 billion available to the 16 states and the District for highways. Two  projects using suballocated funds in California accounted for about $9.7  million of the $17 million in withdrawn projects. In both cases, the project  was withdrawn and later established as a new project. California officials  told us they withdrew one $1.8 million project because local officials  wanted to expand the scope of the project. Another $7.9 million project  was withdrawn because it had an incorrect right-of-way certification.  Officials told us that the state subsequently resubmitted the project and  funding was obligated after correcting the certification.
Contract Data from FHWA’s Recovery Act Data System Continues  to Be Inaccurate  In May 2010, we reported that while progress has been made in awarding  Recovery Act contracts and initiating work, the accuracy of contract data  in FHWA’s Recovery Act Data System (RADS) is of concern. Among other  information, the Recovery Act requires the U.S. Department of  Transportation (DOT) to report to Congress on the number of projects for  which contracts have been awarded, for which work has begun, and for  which work had been completed, and the amount of federal funds  associated with these contracts. DOT established RADS because it had  not previously collected and reported such information for the regular  federal highway formula program. DOT relies on states to enter data into  RADS and uses automated data checks and rules, as well as periodic  reviews by FHWA Division office officials located in every state, to  improve the accuracy of state-reported data.
We continued to find problems with the accuracy of RADS contract data.  For example, more than 3,100 contracts were shown as having been  awarded on the same date the funds were obligated. We also found that  about 1,400 contracts were reported as awarded before FHWA obligated  the funds. Because contracts are normally awarded several weeks or  months after funds are obligated by FHWA, the numbers and amounts of  contracts awarded and work begun is likely overstated. Because FHWA  does not have accurate data from states in RADS, it is not able to use  RADS to meet the Recovery Act reporting requirements for contracts.
FHWA officials acknowledged that they cannot use data from RADS to  provide information on contract award amounts. Officials said they  instead use data from FHWA’s financial management system to meet the  Recovery Act reporting requirements for contracts because this system  receives more checks for data accuracy. However, using FHWA’s financial  management system can also overstate the amount of funds under  contract. FHWA reports data at the project level, not at the contract level;  this is important because one project can include several contracts. When  reporting at the project level, FHWA reports the entire project as being  under contract once one contract is awarded, even if several more remain  to be awarded. FHWA provided project-level data in its report to Congress  dated May 7, 2010, but these data were labeled in the report as contract  data. As noted above, the Recovery Act requires DOT to report not only  the number of projects, but also the total amount of federal funds  associated with contracts that have been awarded, work has begun, and  work is completed.
FHWA has taken some steps to improve data accuracy in RADS, but  officials said that there was no date for when they would implement  changes. These officials said they have assembled a state advisory group  to look at the challenges that exist in RADS and make recommendations  on improvements. FHWA officials said they have not had sufficient  resources to incorporate additional data checks into the software that  would check for errors. Such checks could ensure that milestones are  sequentially entered, thereby improving the accuracy of these data.
Many States Requested That FHWA Transfer Funds to FTA for  Public Transportation Projects and Many States and Transit  Agencies Elected to Use Some Funds for Operating Expenses,  Although Data on Operating Expenses Is Limited  As we reported in our prior Recovery Act work, states have the option to  request that FHWA transfer Recovery Act highway funds to FTA for use in  public transportation programs, just as they do in the regular Federal Aid  Highway Program. While most states transfer some funds each year to  address transit priorities, data from Recovery Act funds indicated that 21  states requested FHWA transfer some Recovery Act funds to the states’  public transportation program. Many states transferred funds shortly after  Recovery Act funds became available in February 2009. For example,  Caltrans transferred almost $2 million in July 2009. Caltrans officials told  us that their state has a robust transfer program because of the state’s  extensive public transportation system and the system’s many needs.  Caltrans’ subrecipients used this funding for two large projects identified  in the state’s transportation improvement plan but for which sufficient  funding had not been available. Specifically, one subrecipient is  purchasing two buses for a rural transit agency, and the second is  constructing a new intermodal transit hub that will serve the north Lake  Tahoe area. Caltrans officials said that the Recovery Act funding was  sufficient to complete these programs.
According to FTA data, many state departments of transportation (DOT)  and transit agencies also used a portion of Recovery Act funds for public  transportation operating expenses. In June 2009, Congress gave urbanized  areas and states the authority to use a maximum of up to 10 percent of  certain Recovery Act transit funds for operating expenses. Data provided  by FTA indicated that, nationwide, urbanized areas and states used about  $190 million, or about 2 percent of Recovery Act funding for public  transportation, toward operating expenses as of August 25, 2010. FTA  officials told us that urbanized areas and states determine how much  Recovery Act funds they spend on operating expenses. According to FTA  data, 169 grantees throughout the U.S. chose to use a portion of public  transportation funds for operating expenses. This represented  approximately 25 percent of total Recovery Act public transportation  grantees. These 169 grantees ranged from major urban transit agencies in  San Francisco and St. Louis to transit agencies in smaller cities such as  Charlottesville, Virginia, and Pocatello, Idaho. In addition, 18 states used a  portion of their Recovery Act funding to pay for operating expenses for  rural public transportation.
FTA provided us data on the dollar amounts that urbanized areas and  states obligated for operating expenses, but noted that they did not begin  to track at a national level the percent of funds each state or urbanized  area was using for operating expenses until August 2010.  FTA officials  also said that they rely on FTA’s regional offices—as part of the grant  approval and review process—to ensure that urbanized areas and states  plan to spend no more than the 10 percent threshold. However, they are  considering instituting a control in its electronic grants management  system so that staff could not award a grant if an urbanized area or state  was over the 10 percent threshold. FTA officials also noted that there is no  reporting requirement to make publicly available the percent of funds that  urbanized areas and states are using for operating expenses but that they  are considering placing summary information on the use of Recovery Act  transit funds for operating expenses on the FTA Web site.
We spoke with several states and transit agencies about whether they used  Recovery Act funds for operating expenses. For example, officials from  Michigan’s Department of Transportation, after asking nonurban transit  agencies for input, found that funding for operating expenses was a  priority. According to Michigan Department of Transportation officials,  the majority of nonurban transit systems in Michigan are demand  response—meaning that passengers are picked up and dropped off where  they want to go within a defined service area—and officials told us that  expenses for these services have been increasing annually. As a result,  officials said the state used the maximum 10 percent of Recovery Act  transit funds for this purpose.
Officials from Caltrans told us that they used 1.1 percent of their Recovery  Act funds for the operating expenses of their paratransit program. They  added that these expenses were already allowable as capital expenses  under both the Recovery Act as originally enacted and the regular federal  transit programs. Caltrans officials told us that if they had the option to  use transit funds for public transportation operating expenses when the  Recovery Act was first enacted, they would have used the full 10 percent.  However, because California had already identified and requested that  funds be obligated for capital projects prior to when the option to use  these funds for operating expenses became available, they chose to adhere  to their initial plan rather than risk that the funds be deobligated and  applied for another purpose.
Transit officials from Illinois and New Jersey said their states chose not to  use Recovery Act funds for operating expenses. Illinois DOT officials told  us they decided early in the process to devote all Recovery Act funds to  capital projects, so that the use of these funds was evident to the public.  Illinois also chose to use state funds to cover all administrative expenses  related to managing Recovery Act funds both to ensure maximum impact  on capital projects and minimize paperwork needed to clear  administrative charges for payments. New Jersey Transit officials told us  they used Recovery Act funds for preventive maintenance—such as bus  mechanical maintenance—which they said was considered a capital  expense but did not produce new infrastructure. Officials noted that this  reduced pressure on the transit agency’s budget, which freed up state  funds for operating expenses.
As we reported in May 2010, a portion of the highway money that was  transferred was not obligated by the Recovery Act’s March 2010 1-year  obligation deadline for highways and transit. We noted that the U.S.
Department of Transportation (DOT) did not treat these funds as subject  to the Recovery Act obligation deadline for either FHWA or FTA because  it concluded that once Recovery Act highway funds were transferred to  FTA, they were subject to the provisions of the law that apply generally to  the transfer of highway funds to FTA. At the time, we expressed no  opinion on DOT’s determination but stated that we were exploring this  issue further. On further review, we have no objection to DOT’s  interpretation of the applicability of the Recovery Act’s 1-year obligation  deadlines.
section_title: Impact of Transportation Funds
paragraphs: Obligation and Reimbursement of Regular FHWA Formula Funds  Slowed during the Recovery Act, Raising Questions about Whether  Recovery Act Funds Had the Full Economic Stimulative Effect  Intended  While states have been working to have FHWA obligate funds for  constructing Recovery Act projects, we found that, compared with  previous years, many states were slower in obligating and expending  regular federal highway formula funds. FHWA officials stated that with the  emphasis placed on the economic benefits to be gained, the obligation of  Recovery Act funds and meeting the act’s statutory deadlines have taken  priority. States are facing drastic fiscal conditions, and FHWA officials  noted economic and budget difficulties in many states have led to staffing  shortages. FHWA officials also suggested that uncertainty about future  program funding levels may have slowed spending because a long-term  reauthorization of federal programs has not yet been enacted.
Nationally, as of June 30, 2010 (the end of the third quarter of the fiscal  year), states had $19.7 billion remaining to be obligated, 63 percent more  funds than they did at the same time for the 3 previous years (see fig. 21).
In addition, while funding available to states for highways has increased in  each of the last 3 fiscal years, we found that as of July 31, 2010, the  reimbursement of regular federal highway formula program funds were  lower compared with the reimbursement at the same point in the 3  previous fiscal years (see fig. 22).
As Figure 23 shows, this trend was also true on a monthly average basis.  Specifically, the reimbursement of regular federal highway formula funds  for the first 10 months of fiscal year 2010 has been almost 18 percent (or  about $4.3 billion) less than the average reimbursement in the previous 3  fiscal years.
In the last 3 months of fiscal year 2010, state highway agencies not only  have to request FHWA obligate over $500 million in remaining Recovery  Act funds, but also $19.7 billion of regular federal highway formula funds.  The amount of unobligated regular federal highway formula funds varied  among states. For example, Illinois had none as of June 30, 2010, while  Utah had $178.4 million—almost 6 times as much compared with its  average balance of unobligated funds over the 3 previous years.  Nationally, we found 16 states with over twice the amount of unobligated  funds, while 5 states had fewer unobligated funds than in the past. Some  state officials told us they had not been obligating regular federal highway  formula funds as quickly because they had been focusing on meeting the  Recovery Act obligation deadlines and did not have the resources to do  both.
Because states did not spend regular federal highway formula funds at the  same pace as in previous years, while also spending Recovery Act funds,  the full economic benefits of Recovery Act funds are likely to be delayed.  Specifically, if states had awarded contracts and begun expending those  regular federal highway formula funds at the same rate as in previous  years and in conjunction with spending Recovery Act funds, states would  have experienced an earlier stimulus effect. Funding being obligated now  for projects will need up to several months to award contracts and initiate  construction, and the effect on the economy comes when construction is  initiated and workers are employed.
FHWA officials said they expect all regular program funds to be obligated  by the end of the fiscal year. To ensure that all authorized funds are  obligated nationally each year, FHWA redistributes obligation authority  from states that are not able to obligate their funds to other states that are.  Despite projects being obligated at a slower rate than in previous years, in  August 2010, when we completed our review, the 16 states and the District  all reported to FHWA that they would fully obligate fiscal year 2010  highway formula funds. We will continue to monitor the relationship of  obligations and reimbursements in both the regular federal highway  formula program and Recovery Act in future reviews.
DOT Is Developing Plans to Assess the Impact of the Recovery Act  but Has Not Committed to Assessing Long-Term Benefits  The goals of the Recovery Act were not only to promote economic  recovery and to preserve and create jobs but also to make investments in  transportation and other infrastructure that would provide long-term  economic benefits. However, the Recovery Act did not include  requirements that DOT or states measure the impact of funding on  highway and transit projects to assess whether these projects ultimately  produced long-term benefits. In our May 2010 report, we noted that,  although DOT developed performance plans to measure the impact of  Recovery Act transportation programs, these plans generally did not  contain an extensive discussion of specific goals and measures needed to  assess the impact of Recovery Act projects. As we have reported, it is  important for organizations to measure performance to understand the  progress they are making toward their goals. In our May 2010 report, we  noted several efforts DOT initiated to strengthen its capacity to assess the  impact of Recovery Act funds. For example, DOT is exploring  opportunities to link databases that stored information about road  smoothness and congestion, bridge structural sufficiency, and transit  performance with financial data.
Our May report recommended that DOT assess the results of Recovery Act  transportation investments and determine whether these investments  produced long-term benefits. We further recommended that, in the near  term, DOT determine the types of data and performance measures needed  to conduct such an assessment and, as appropriate, identify specific  authority DOT may need to collect and report on these measures. In its  response, DOT noted that it expected to be able to report on Recovery Act  outputs, such as the miles of road paved, bridges repaired, and transit  vehicles purchased, but not on outcomes, such as reductions in travel  time, nor did it commit to assessing whether transportation investments  produced long-term benefits. DOT further explained that limitations in its  data systems, coupled with the magnitude of Recovery Act funds relative  to the overall annual federal investment in transportation, would make  assessing the benefits of Recovery Act funds difficult. DOT indicated that,  with these limitations in mind, it is examining its existing data availability  and, as necessary, would seek additional data collection authority from  Congress if it became apparent that such authority were needed. While we  are encouraged that DOT plans to take some steps to assess its data needs,  it has not committed to assessing the long-term benefits of Recovery Act  investments in transportation infrastructure. We are therefore keeping our  recommendation on this matter open.
DOT Plans to Report on State Progress in Meeting Maintenance-of- Effort Provisions  As we have previously reported, timely information on the progress states  are making in meeting the Recovery Act maintenance-of-effort provisions  could better inform policymakers’ decisions on the usefulness and  effectiveness of the maintenance-of-effort requirements and of including  similar provisions in future legislation. The Recovery Act required  governors to certify that their states will maintain the level of spending for  the types of transportation projects funded by the Recovery Act that it  planned to spend the day the Recovery Act was enacted. As part of this  certification, the governor of each state was required to identify the  amount of state funds planned to be spent from February 17, 2009, through  September 30, 2010. Timely information is also important to assessing the  impact of Recovery Act funding and whether it achieves its intended  effects of providing countercyclical assistance and increasing overall  spending.
Our earlier reports have noted that DOT does not have current information  on the progress states are making toward meeting their certified amounts.  This is because the Recovery Act does not require states to report final  expenditures until February 2011. As a result, DOT will not make a  determination as to whether states have met their required program  expenditures until some 6 months after the maintenance-of-effort  provision time period expires on September 30, 2010. We have also  reported that the challenges to implementing a maintenance-of-effort  provision have been tremendous—as of mid-August 2010, for example,  DOT had not yet fully accepted the certifications of three states. As we  have reported, these implementation challenges, coupled with the fiscal  challenges states have faced, raise questions as to whether the  maintenance-of-effort provision will achieve its intended purpose of  preventing states from substituting federal funds for some of their planned  spending on transportation programs. That said, DOT and FHWA have  invested a significant amount of time and work to ensure consistency  across states on how compliance with the act is certified and reported. As  a result, DOT is in an advantageous position to understand lessons  learned—what worked, what did not, and what could be improved in the  future.
Our March 2010 report recommended that DOT gather timely information  on the progress states are making in meeting the maintenance-of-effort  requirements. Specifically, we recommended that DOT gather these data  and report preliminary information to Congress within 60 days of the  maintenance-of-effort period on (1) whether states met required program  expenditures as outlined in their maintenance-of-effort certifications; (2)  the reasons that states did not meet these certified levels, if applicable;  and (3) lessons learned from the process. In response, DOT officials stated  that DOT will encourage states to report preliminary data for the certified  period ending September 30, 2010, and deliver a preliminary report to  Congress within 60 days of the certified period. DOT officials said they  have developed a timeline for obtaining information to produce this report  and will issue guidance by October 1, 2010, requesting that states update  actual aggregate expenditure data and provide the data to DOT by  November 15, 2010. DOT officials said they will use this information to  develop the report to Congress, and it will submit the report no later than  November 30, 2010.
Publicly Available Information Continues to Overstate the Extent  to Which Recovery Act Funds Were Directed to Economically  Distressed Areas  Our previous reports have identified challenges DOT faced in  implementing the Recovery Act requirement that states give priority to  projects located in economically distressed areas. In July 2009, we  reported substantial variation in the extent to which states prioritized  projects in economically distressed areas and how they identified these  areas. Many states based their project selections on other factors and only  later identified whether these projects were in economically distressed  areas. We also found instances of states developing their own eligibility  requirements for economically distressed areas using data or criteria not  specified in the Public Works and Economic Development Act of 1965, as  amended. In response to our recommendation, FHWA, in consultation  with the Department of Commerce, issued guidance to the states in August  2009 that defined “priority,” and directed states to give priority to projects  that were located in an economically distressed area and could be  completed within the 3-year time frame over other projects. In addition,  FHWA’s guidance set out criteria for states to use to identify economically  distressed areas based on “special need.”
Three states—Arizona, California, and Illinois—developed their own  eligibility requirements or applied a special-need criterion that overstated  the number of counties, and thus the amount of funds, directed to  economically distressed areas. For example, California designated all  counties as economically distressed, and we identified 219 projects with  an estimated cost of $1.1 billion coded as being in economically distressed  areas that should not have been so coded. In early February 2010, FHWA  determined the documentation these states provided to justify these  additional designations was not consistent with FHWA guidance. In May  2010, we recommended that FHWA advise these states to correct the  designations, and in July 2010, FHWA instructed its division offices to  advise the states to revise their designations and to report these projects  as being in noneconomically distressed areas.
In December 2009, DOT testified to the House Committee on  Transportation and Infrastructure that 57 percent of projects were in  economically distressed areas—including 99 percent and 100 percent of  Recovery Act highway funding in California and Arizona, respectively.  However, as we noted above, these data had not yet been corrected by  DOT and therefore overstated the amount of funding, and this testimony is  DOT’s only public accounting of how states implemented this provision of  the Recovery Act. Because FHWA’s July guidance did not direct states  other than Arizona, California, and Illinois to correct existing entries, we  reviewed RADS data on projects in economically distressed areas. We  found about 2,300 projects that did not appear to meet FHWA’s guidance  for classifying projects in economically distressed areas and thus appeared  to contain errors that would result in an overstating of the funds directed  to these areas. For instance, over 2,100 of these entries did not include an  explanation justifying the designation of an area as economically  distressed. In response to this information, DOT officials told us that they  manually compared these entries with maps designating distressed area  and other data sources. When we completed our review, FHWA officials  said they were able to verify that most of these data were accurate;  however, they did not provide documentation of the analysis to us. DOT  stated it does not intend to correct this information because the Recovery  Act does not contain a specific requirement that DOT report on the extent  to which distressed areas prioritized and directed funds to economically  distressed areas. However, without accurate publicly available  information, it is difficult to determine the extent to which Recovery Act  funds were directed to areas most severely impacted by the recession or to  know the extent to which states prioritized these areas in selecting  projects for funding.
section_title: Although Recovery Act Provisions Do Not All Contain Reporting Requirements, Additional Reporting Would Help Decision Makers and the Public Better Understand If Its Goals Were Met
paragraphs: The Recovery Act included a number of requirements and provisions  designed to support the Act’s goals of promoting economic recovery,  creating jobs, and, in the case of transportation funds, making investments  that contribute to long-term economic benefits. Although the Act included  some reporting requirements to accompany these provisions, it did not  specify such requirements in all cases. Noting the large amount of federal  transportation funding provided in the Recovery Act, we have previously  made recommendations that DOT take additional steps to go beyond the  specific reporting requirements in the Act, and that DOT develop plans to  assess the long-term benefits of Recovery Act funds on the transportation  system. We have also made recommendations that DOT improve and  correct the data it is collecting to better facilitate a public accounting of  the use and impact of these funds. For instance, we have recommended  that DOT report on the extent to which states met maintenance-of-effort  requirements 60 days after the end of the certification period.
In his March 2009 memorandum to the heads of executive departments  and agencies, the President emphasized the need for providing public  transparency and accountability of these expenditures. We are making two  new recommendations to DOT because of the value such information can  offer policy decision makers and the public to better understand whether  the use of Recovery Act funds met intended goals. We plan to continue to  monitor these issues in our future work.
section_title: Recommendations
paragraphs: To ensure that Congress and the public have accurate information on the  extent to which the goals of the Recovery Act are being met, we  recommend that the Secretary of Transportation direct FHWA to take the  following two actions:    Develop additional rules and data checks in the Recovery Act Data  System, so that these data will accurately identify contract milestones  such as award dates and amounts, and provide guidance to states to  revise existing contract data.
Make publicly available—within 60 days after the September 30, 2010,  obligation deadline—an accurate accounting and analysis of the extent  to which states directed funds to economically distressed areas,  including corrections to the data initially provided to Congress in  December 2009.
section_title: DOE and Grant Recipients Are Working to Overcome Challenges in Spending, Monitoring, and Reporting Outcomes for New EECBG Program
paragraphs: The Energy Efficiency and Conservation Block Grant program (EECBG) is  administered by the Office of Energy Efficiency and Renewable Energy  within the Department of Energy (DOE). It was authorized in the Energy  Independence and Security Act (EISA) of 2007 and funded for the first  time by the Recovery Act. The EECBG program provides about $3.2 billion  in grants to develop, promote, implement, and manage projects to improve  energy efficiency and reduce energy use and fossil fuel emissions in local  communities. Of this amount, approximately $2.8 billion has been  allocated through formula grants to about 2,150 state, local, and tribal  governments (recipients) as of August 23, 2010. Funding is allocated to  state recipients based on their population and total energy consumption;  to city and county recipients based on their resident and commuter  populations; and to Native American tribes based on population and  climatic conditions. Eligible applicants for formula EECBG grants include  the 50 states; the District of Columbia (the District); five U.S. territories;  cities or city equivalents, such as towns or villages with populations of at  least 35,000; counties with populations of at least 200,000; and federally  recognized Native American tribes. Each state-level recipient must use at  least 60 percent of its allocation to provide subgrants to local government  units that are not eligible for direct formula grants. In addition to these  formula grants, the Recovery Act also includes approximately $400 million  in EECBG funding to be awarded on a competitive basis. Competitive  grants are designed to stimulate activities that can fundamentally and  permanently transform energy markets and sustain themselves beyond the  grant period. Our review focuses on the direct formula grants.
subsections: section_title: DOE Has Obligated Most Funds to Grant Recipients, Who Have Obligated about Half to Subrecipients; Overall Spending Rates Are at 11 Percent
paragraphs: The Recovery Act requires that DOE obligate $2.8 billion in formula  EECBG funds by September 30, 2010. DOE has obligated most of the  EECBG funds to recipients and has plans to obligate the remainder by the  September 30 deadline. As of September 13, 2010, DOE has obligated to  recipients more than 99 percent of this amount—$2.77 billion. Nearly all of  the approximately 2,150 recipients nationwide—approximately 1,700 cities  and counties, 56 states and territories, and 392 tribal communities—have  received EECBG funding, with about 68 percent (approximately $1.9  billion) going to cities and counties, 28 percent (approximately $767  million) to states, territories, and the District, and 2 percent  (approximately $55 million) to Native American tribes. Steps are being  taken to ensure that the remaining funds will be obligated to recipients by  the September 30 deadline, and the DOE Inspector General has recently  reported that there is nothing to indicate that DOE’s plan to obligate the  remaining Recovery Act funding by September 30 will not be effective.
DOE announced the opportunity for interested applicants to submit  applications for EECBG formula funding on March 26, 2009. As part of the  application process, interested states and local units of government were  required to submit an Energy Efficiency and Conservation Strategy  (EECS) that described their strategy for achieving the goals of the  program. DOE reviewed recipients’ EECS and had 120 days to approve or  disapprove EECS strategies. DOE officials report that as of July 2010, most  recipients have had their EECS plans approved and are now moving from  the application to the execution phase. Also, as of July 2010, DOE officials  report that EECBG grant recipients have obligated to subrecipients about  half ($1.3 billion) of the $2.8 billion awarded to recipients through formula  grants. While most recipients are moving to implement projects, recipients  awarded larger grant amounts have obligated about twice as much as  recipients awarded smaller grant amounts. As of July 2010, the 291  recipients receiving EECBG grants above $2 million have obligated to  subrecipients about half (approximately $1.1 billion) of the $1.9 billion  awarded to them by DOE through formula grants. The remaining 1,860 or  so smaller communities (communities with grants less than $2 million)  have obligated only about one-quarter of their EECBG awards  (approximately $0.2 billion) of the approximately $0.9 billion awarded to  them by DOE through formula grants. To facilitate increased obligations,  DOE has encouraged recipients to meet targets of obligating 90 percent or  more of their funds by June 25, 2010.
Regarding spending, DOE reports that as of August 2010, about 18 months  since the passage of the Recovery Act, recipients have spent about 11  percent (approximately $311 million) of the $2.8 billion authorized for  formula funding for the program. Consistent with this, many recipients we  visited had spent less than 8 percent of the amount awarded. While many  recipients have spent only a small part of their funding, DOE is taking  steps to accelerate spending. For example, DOE has encouraged recipients  to meet a spending target of 20 percent by September 30, 2010. DOE  officials believe this has had a positive impact on spending rates. In  particular, DOE officials note that many recipients receiving less than  $250,000 met DOE’s target of spending 20 percent as of June 30, 2010—3  months ahead of schedule. DOE officials also note that while spending  rates are at 11 percent, much more of the funding is obligated and projects  are in the process of being selected and started. They note that the actual  costing of the funds for projects is one of the last steps in the process.
section_title: EECBG Funds Are to Be Used for a Variety of Energy- Efficient Projects; the Majority of Funds Are Slated for Energy- Efficiency Retrofits, Financial Incentive Programs, and Revolving Loan Funds
paragraphs: DOE placed restrictions on the selection of projects in line with EISA and  the activities that funds are to be used for. DOE required that projects be  selected from the 14 eligible activities identified in EISA. As of July 28,  2010, as shown in table 9, more than 60 percent of EECBG funds have  been obligated for three purposes: energy-efficiency retrofits (35.3  percent), such as replacement of heating and cooling systems in fire  stations and libraries in the District; financial incentive programs, such as  the rebate program in New Jersey that pays for energy-efficiency retrofits  not already covered by existing incentives (15.6 percent); and building and  facilities (11.1 percent), such as a geothermal system at a new corrections  facility. In many of the communities we visited, energy-efficiency  improvements were made to public buildings, but the types of projects  selected for implementation in public buildings and facilities varied  considerably. For example, projects included improvements to a waste  treatment plant, occupancy sensor lighting at public schools, solar trash  compactors to reduce the frequency of trash pickup, solar parking meters,  and replacement of personal computer workstations with more energy- efficient virtual desktops that reduce both power consumption and  environmental waste.
While not required, grant recipients were also encouraged to implement  programs and projects that leveraged other public or private resources,  enhanced workforce development, persisted beyond the funding period,  and promoted energy market transformation, such as revolving loans and  energy savings performance contracting. Recipients that we visited  indicated that their selection of projects was also based on a variety of  additional criteria, including: communities’ determination of energy  savings; job creation; availability of staff and other resources; the extent to  which communities could benefit after Recovery Act funds run out; the  ease with which projects could be easily implemented; the potential for  return on savings; and populations to be served. For example, the District  chose to focus on target populations that they had been unable to serve,  such as nonprofits and small businesses. Kent County, Michigan also  considered the availability of county staff to complete the project. Several  recipients have selected projects that leverage other state energy  efficiency programs. For example, in Arizona, EECBG funds were used to  take advantage of a program that encourages commercial and government  customers to implement energy efficiency projects for which a public  utility will pay up to 30 percent of the cost. In addition, a few of the  recipients we visited had developed a revolving loan fund to provide low- interest loans for energy-efficient improvements in businesses and  commercial buildings and facilities.
section_title: Unclear Guidance Has Hampered Project Implementation; DOE Is Taking Steps to Provide Greater Assistance
paragraphs: While many recipients we visited reported that technical assistance,  especially that provided by DOE project officers, was helpful, timely, and  sufficient, some recipients and DOE project officers we interviewed  reported that project implementation guidance, especially early in the  process, was unclear and overwhelming and that such guidance has  contributed to the delay of project implementation. In particular, several  recipients we visited indicated that DOE guidance regarding timeline  requirements, drawing down funds, and Buy American requirements was  at times unclear, duplicative, and ever-changing. DOE is working to  provide greater assistance to recipients that DOE officials believe will  increase responsiveness and clarify guidance. In particular, DOE is adding  staff in order to reduce the workload of project officers and monitors to  give them more time to assist recipients. DOE also recently issued  guidance that reduces reporting requirements, reduces workloads, and  streamlines communication with recipients.
Regarding timeline requirements, grant recipients reported that DOE’s  guidance on the timeline for obligating, spending, and drawing down  EECBG funds has been confusing. For example, DOE’s Funding  Opportunity Announcement, as well as its Program Notice 10-011 for the  EECBG program, states that EECBG recipients are to obligate all funds  within 18 months of the effective date of their award and expend all funds  within 36 months of the effective date of their award. Most recipients  had been awarded funding in the fall of 2009, and several of the recipients  we visited believed they were on track to obligate funds within 18 months  of the effective date of their award (by the spring of 2011). However, in  April 2010, DOE set internal milestones designed to help recipients ensure  that they are on track to meeting their obligation and expenditure  deadlines. Specifically, DOE requested that recipients have 90 percent of  their funds under contract and obligated by June 25, 2010, and to spend a  minimum of 20 percent of their funds by September 30, 2010. While DOE  reports that some recipients found the guidance useful and that the new  guidance was helpful in getting many recipients to obligate funds quickly,  several recipients we visited said they were confused by this new  guidance. These recipients expressed concern that because of the  milestones, they had to obligate funds sooner than expected—instead of  having 18 months to obligate funds, they had to have funds obligated in  half the time—approximately 9 months after funds had been awarded. In  addition, National Association of State Energy Officials (NASEO)  representatives said that DOE had not made clear to recipients that the  revised timelines were “milestones” and not deadlines and that several  recipients had the impression that funds could be taken away if recipients  did not meet the revised spending targets.
Regarding requirements on drawing down funds, while DOE reports that  many recipients found information on drawing down funds helpful, a few  recipients we visited were confused about when they needed to draw  down funds to their accounts. These recipients believed that based on  DOE guidance, they should draw down their entire award soon after it was  awarded. For example, Colorado Springs, Colorado, officials reported that  they drew down the entire $3.7 million award as of March 2010 based on  their understanding of the Funding Opportunity Announcement, even  though they were not yet ready to spend it. In April, a Colorado Springs  official realized the mistake, and the city paid back $3.1 million in mid-May  2010. However, in Jackson County, Michigan, local officials also  mistakenly drew down their award and told us that when they tried to  return the money, DOE required them to make interest payments on the  amount. DOE issued guidance on June 23, 2010, in response to recipient  questions on drawing down funds.
Regarding Buy American requirements, recipients report that guidance on  the Buy American requirement was difficult to understand and ever- changing. The Buy American requirement of the act generally requires that  grant recipients use iron, steel, and manufactured goods produced in the  United States on all Recovery Act-funded projects. However, some  recipients found that it was unclear how to comply with the Buy American  requirements in a reasonable way and that the guidance was lacking or  difficult to understand. For example, Colorado Springs officials said that  DOE did not have a list of eligible vendors and that trying to ensure  compliance with the Buy American requirement delayed their light  emitting diode (LED) street lighting-replacement projects by at least 4  months. For Berks County, Pennsylvania, officials, it was difficult to  determine the source of some components of a product and therefore  whether the product could be used. NASEO representatives said that  DOE’s guidance did not provide sufficient detail to enable officials to  determine the types of brands or goods they could purchase and that  recipients did not have the expertise to trace the supply chain of  manufactured goods to determine origin. In recent months, DOE has made  numerous attempts to help recipients understand Buy American  requirements, including guidance e-mailed to all recipients in May, a  webinar in June, and subsequent notice to recipients regarding the  guidance. DOE officials did note that they were concerned about providing  lists of vendors because that might be viewed as an endorsement of  particular vendors at the potential exclusion of other eligible vendors.  DOE officials said that DOE cannot recommend specific products, in part,  due to the large number of eligible products and because of the potential  ethical and liability concerns associated with a federal agency  recommending specific manufacturers.
While many recipients have not had problems understanding program  requirements and have successfully navigated requirements through  training and technical assistance provided by project officers, DOE is  working to give project officers the tools to better assist recipients in  navigating DOE guidance. In particular, since March and April 2010, DOE  has added staff in order to reduce the workload of project officers and  monitors, which DOE officials believe has increased its responsiveness to  recipients in clarifying guidance. In addition, as of July 2010, DOE is  providing project officers with the Automated Standard Application for  Payment (ASAP) reports, so that they can monitor the drawdown of funds.  DOE has also recently standardized e-mail distribution lists and provided  more frequent communication to recipients.
section_title: DOE and States Are Beginning to Monitor Grants, as Many Localities Rely on Existing Controls
paragraphs: DOE monitors grant recipients primarily through its project officers and  monitors. DOE project officers and monitors work directly with recipients  to provide guidance and evaluate performance. They also gather and  analyze information about project planning, implementation, and  outcomes to help ensure data quality and to ensure that statutory  requirements are met. There are three levels of review: desktop, on-site,  and work-site reviews. During desktop monitoring, monitors examine  recipients’ reports to assess progress and determine compliance with  federal rules and regulations, goals, and objectives of the grants and the  reporting and tracking of resources expended by the recipient and its  subrecipients. During on-site monitoring, monitors review deficiencies  identified through routine monitoring and how the recipient is resolving  the outstanding quality and operational issues. On-site monitoring may  also include interviews with contractors to determine whether follow-up  protocols were conducted and deficiencies were corrected. During work- site monitoring, monitors review the project, facility, or building being  completed. One of the project officers’ key functions is to conduct both  on-site and desktop monitoring. DOE monitoring is conducted at minimum  frequencies (see table 10), depending on the funding received by the  recipient, and can be increased if project officers have sufficient cause,  resources, time, and approval of management. In these reviews, project  officers evaluate both financial and project status by evaluating financial  records, activities, budgets, and spending plans to ensure sufficient  progress is being made against planned activities. The monitoring  questions were updated on July 30, 2010, downsizing the number of  questions asked from over 100 to about 30 questions in on-site reviews and  about 6 multi-part questions in quarterly reviews. Now, the desktop  monitoring quarterly checklist consists of financial questions such as “For  each activity, does the expenditure match, within reason, the amount of  work completed?” and programmatic questions such as “For each activity,  is the grantee on track to meet performance goals?” DOE is also  developing guidance that includes best practices for how states should  monitor their subrecipients.
As of July 28, 2010, DOE has conducted 3,985 desktop reviews of the  EECBG program, and about 170 on-site reviews. Through its monitoring,  DOE has found that smaller recipients have been more likely to fail to  complete quarterly programmatic and financial reporting to DOE. While 97  percent of larger recipients (recipients with grants greater than $2 million)  have completed required quarterly reports due April 30, only 79 percent of  recipients receiving less than $250,000 completed quarterly reports.
While DOE monitors its grant recipients (as well as conducts work-site  reviews of subrecipients as needed), grant recipients are expected to  monitor their subrecipients. While DOE does not expect grant recipients  to have a formal monitoring plan, DOE does require that state recipients  “develop a sub-granting process…that prevents fraudulent spending”  DOE is also developing guidance that includes best practices for how  states should monitor their subrecipients. Several of the states we visited  do have a formal plan in place for monitoring their subrecipients. A few of  the states we visited have begun monitoring their subrecipients. For  example, Colorado reviews monthly reports prepared by subrecipients,  Michigan project managers review detailed expenditure and employment  data submitted by subrecipients on a quarterly basis, and Massachusetts is  beginning to monitor subrecipients through regular interactions with  subrecipients.
DOE also expects localities to have a system for monitoring to ensure that  subrecipients comply with EECBG requirements. However, for localities  that received direct funding, and as we also found in our May 2010 report  on DOE’s Weatherization Assistance Program, DOE provides localities  with discretion in developing and implementing internal controls, and as a  result, several localities we visited did not have a formal monitoring plan  in place for monitoring subrecipients or work performed. Many of the  localities we visited have developed a system for monitoring, which may  include monitoring procedures such as evaluation of the reasonableness of  costs, monitoring of building improvements and post-improvement audits,  checking payroll for compliance with Davis-Bacon requirements, checking  the validity of expenses, and announced and unannounced site visits.  However, despite guidance on how to report jobs, it is unclear if all  localities’ systems for monitoring include measures to ensure the  reliability of reported data. For example, in one locality, an official  reported that there were no data quality steps to ensure the reliability of  the total job count. Another recipient said that it requested greater  clarification on what was expected from DOE regarding internal controls  but did not get more than a general answer about providing good  accountability for the use of funds.
section_title: Recipients Face Challenges as They Begin to Report Outcomes While DOE Works to Provide Guidance
paragraphs: EECBG recipients are required to report on outcomes quarterly to DOE on  three categories of activity and results metrics. The categories are jobs  created or retained; standard programmatic metrics, such as obligations,  outlays, and metrics associated with the EECBG activity undertaken;  and other critical metrics, such as energy savings and energy cost savings.  Recipients report to DOE through its Performance and Accountability for  Grants in Energy system (PAGE). In addition, recipients of grants greater  than $2 million must report to DOE monthly on funds spent and funds  obligated, amount of relevant activity completed, and additional  information as required per activity. Several recipients we visited were  reporting programmatic metrics such as obligations, expenditures, and  jobs created. In addition, several recipients we visited were just beginning  to implement projects. However, DOE officials have told us that they are  not required to report until the completion of their projects. As a result,  several recipients do not yet have data to report for critical outcome  metrics such as energy savings and emissions reductions.
Some recipients we visited experienced challenges reporting outcomes  using these metrics. For example, in one locality, officials said that they  planned to estimate jobs because they do not have hourly contracts.  Similarly, in another locality, officials were not aware of how to calculate  full-time equivalents (FTE) per OMB guidance. In addition, because they  experienced challenges in measuring impact metrics, recipients in Georgia  have a variety of methods for calculating a metric value. For example,  officials from Columbus, Georgia, stated that energy savings from  upgrades to traffic lights will be estimated by making assumptions on the  amount of energy used by the original lights compared to improved traffic  lights. A Warner Robins, Georgia, official explained the city intends to  report project impacts by comparing past monthly utility bills for the  water treatment plant to new monthly utility bills. To measure the impact  of energy efficiency improvements, Cobb County, Georgia, plans a mixed  approach. According to officials, the county will take field measurements  of the performance of old equipment prior to removal and replacement  equipment as well as use energy models or engineering estimates,  including estimates provided by the county’s energy audit consultant.  Cobb County also intends to use the new energy software procured  through the EECBG grant to benchmark and track energy use, cost, and  savings and revise calculations based on observed energy usage for each  facility. To help ensure consistency, Georgia has provided guidance from  DOE to its subrecipients detailing instructions on estimating and reporting  energy savings.
In addition, some recipients experienced challenges in the process for  reporting metrics, especially due to DOE’s reporting system, PAGE. DOE  provides resources to assist recipients in navigating the PAGE reporting  system on a Web site and offers assistance to recipients via a helpdesk.  However, several recipients described the reporting process as  overwhelming or frustrating and that reporting was time consuming and  required extensive resources. One DOE project official said he would like  to see the reporting process streamlined because it is too complicated for  recipients. An official from one EECBG locality in California said that if he  had known about the extent of the reporting burden, he may not have  applied for the grant. In particular, some recipients said the PAGE  reporting system was not user-friendly, and others were confused about  what to input into the PAGE system. Similarly, one DOE project officer  said that it seems that every time recipients log in, there is a new structure  or a new report that is required to be filled out. Other grant recipients said  that using OMB’s federalreporting.gov and DOE’s PAGE system is difficult  because the systems ask for information to be reported in different ways.  In addition, some officials have reported challenges in understanding for  how many quarters they are required to report some metrics, especially  energy saved once a project has been implemented.
Adding to recipients’ frustration about the reporting process has been the  volume of contact from various DOE offices about reporting requirements  or changes in reporting requirements. For example, one DOE project  officer that we spoke with said that grant recipients have expressed  frustration at having received so much e-mail about guidance or changes  to guidance received from different DOE offices. In addition, in Redding,  California, officials initially expressed frustration that questions about  reporting guidance required calls to several DOE staff to find the right  person to answer their questions. Kent County, Michigan, officials said  that reporting has been challenging because of the multiple guidance  released and because DOE’s PAGE system was not user-friendly.
DOE is beginning to take steps to deal with the amount of guidance and  requirements being provided to recipients. DOE plans to issue guidance in  August 2010 to assist recipients in navigating the PAGE system, how to  correctly categorize metrics and how to interpret and understand financial  reporting requirements. In addition, DOE expects to issue formal guidance  for the reporting period ending August 30, 2010, in which DOE will no  longer require recipients with formula awards greater than $2 million to  report obligations and performance metrics on a monthly basis. In  addition, all recipients will no longer report hours worked through  nonfederal funds or outlays of nonfederal funds on a quarterly basis. DOE  estimates that these changes will increase administrative reporting  efficiency by approximately 40 percent across the program. In addition, in  June 2010, DOE began an effort called “One Voice” that is intended to  improve and streamline communication with recipients. This effort will  entail the circulation of a weekly newsletter with announcements  regarding guidance, training, and events and will also include an effort to  streamline communication via e-mail. DOE is also working on developing  specific requirements for closing out EECBG grants that should clarify  when recipients can stop reporting, and a working group within DOE  plans to clarify the energy metrics reporting guidance.
section_title: Recipients of State Energy Program Funds Are Beginning to Obligate Funds, Monitor, and Report on Project Outcomes
paragraphs: The Recovery Act appropriated $3.1 billion to the State Energy Program  (SEP), which is to be administered by the Department of Energy (DOE)  and spent over a 3-year period by the states, U.S. territories, and the  District of Columbia (the District) for 56 recipients. The SEP provides  funds through formula grants to achieve national energy goals such as  increasing energy efficiency and decreasing energy costs. Created in 1996,  the SEP has typically received less than $50 million per year. As such, the  Recovery Act provided a substantial increase in funding for this program.
subsections: section_title: Recipients Are Making Progress Obligating Recovery Act Funds
paragraphs: Recipients are making progress obligating SEP funds, according to  August 30, 2010, data from DOE. As of August 30, 27 states, territories, and  the District of Columbia reported obligating at least 80 percent of their  funds, meeting a departmental goal, with another 24 states and territories  reporting obligating between 50 percent and 80 percent of their funds.  Some states and territories continued to lag in obligating funds—5 states  and territories reported obligating less than 50 percent of their funds.
Currently, a limited amount of national data is available on planned or  actual state spending trends. DOE officials noted that they would not have  final aggregate national spending data until the funds are fully obligated by  recipients in late 2010. Until that time, funding may still shift among  spending categories. The data provide information on different spending  categories that have been recommended by DOE to recipients. The most  recent data available in August 2010 indicated that the funds were directed  to the following:    buildings (50 percent)—programs such as school and government  improvements, energy-efficiency building code adoption and training,  and revolving loan programs.  electric power and renewable energy (30 percent)—examples include  wind turbine deployment, ground source heat pumps, and solar  generation.  industry (8 percent)—programs such as those for energy audits, waste  reduction management, water conservation, and manufacturing energy  efficiencies.    policy, planning, and energy security (4 percent), which includes  programs such as developing state energy strategic plans, energy  policy development, and legislative initiatives.  transportation (4 percent), which includes programs related to mass  transit use, bike to work, telecommuting, and street light replacement.  energy education (3 percent)—specific programs include those such as  curricula development and K-12 education, training workshops, and  technical and college course development.
section_title: Recipients Are Targeting Recovery Act Funds on a Variety of Different Projects
paragraphs: Nationally, as of August 25, 2010, approximately 75 percent ($2.31 billion)  of funds have been obligated by recipients and 10.8 percent ($332 million)  have been spent, out of the total $3.07 billion in SEP funds available for  grants. Individually, state recipients have reported targeting funds to meet  Recovery Act goals such as creating or retaining jobs while also  generating-long term benefits such as energy and cost savings. Recipients  have prioritized their spending priorities differently:    California allocated the largest portion of its $226 million in total  funds—$110 million—to improve various types of facilities, including  residential, municipal, and commercial buildings.
New York allocated the largest portion of its $123 million in funds— $74 million—for energy conservation projects: energy efficiency,  renewable energy, and clean fleets.
Pennsylvania targeted the largest share of its $99.7 million in funds— $22.8 million—to help leverage private investments from wind energy  developers and manufacturers to develop projects through a state  wind initiative.
section_title: Recipients Are Uncertain of DOE Funding Milestones and Deadlines
paragraphs: Though recipients are making progress meeting DOE funding goals, state  energy officials noted uncertainty with meeting changing DOE obligation  timetables. For example, in the initial funding announcement sent by DOE  on April 24, 2009, DOE stated that funds must be obligated by recipients  within 18 months of the award of the grant or face potential cancellation  by DOE and spent within 36 months. However, the same guidance also  indicates that 100 percent of funds must be obligated by September 30,  2010, to meet departmental and congressional goals. State energy officials  noted that DOE later provided an updated correspondence on April 21,  2010, informing states that they were encouraged to obligate 80 percent of  their funds by June 30, 2010, and spend 20 percent by September 30, 2010.  DOE officials stated that the June 30 date was meant to help keep states  on track to meet the September 30 goal. In many cases, however, states  interpreted these dates as new deadlines and were concerned that they  would lose access to funds partly because they had experienced pressure  from both the administration and the department to meet these new  funding milestones. DOE officials stated that they would be unable to  deobligate the funds from states if the funding milestones were not met  but also stated that they did not know whether funds could be  reappropriated if states are unable to obligate those funds by  September 30, 2010, as policy guidance has not been provided by the  administration and Congress. We have previously reported that DOE has  provided unclear funding deadlines for the Recovery Act weatherization  program, creating confusion among state recipients trying to meet DOE  Recovery Act deadlines.
section_title: Lack of Guidance and Other Obstacles Hampered Obligating and Spending Funds
paragraphs: State energy officials told us that delays by DOE in providing guidance  hampered early obligating and spending on Recovery Act projects. For  example, both Iowa and New York state energy officials noted that they  waited for DOE to provide guidance before moving forward on projects.  Additionally, other state energy officials we spoke with through the  National Association of State Energy Officials (NASEO) stated that while  DOE guidance has significantly improved, it was not always timely or  complete for issues such as the Recovery Act’s Buy American and Davis- Bacon requirements. For example, similarly to the problems noted by  EECBG funding recipients, several state energy officials said that while  DOE provided broad guidance for meeting Buy American requirements,  this guidance did not provide sufficient detail that would enable officials  to determine the types of brands or types of goods they could or could not  purchase. DOE officials stated that DOE is not capable of recommending  specific products requested by recipients partly because of the large  number of products requested. Further, DOE officials stated that there  were potential ethical and liability concerns associated with a federal  agency recommending specific manufacturers.
While the state officials stated that they did ask DOE for further advice,  the response was not always timely. As an example, several state energy  officials described one Recovery Act project that was held up several  weeks in order to determine if energy-efficient lights purchased for the  project met Buy American requirements. States further encountered  challenges with meeting National Environmental Policy Act (NEPA) and  National Historic Preservation Act policies. DOE officials acknowledged  that NEPA requirements had added significant time to the process but  stated that progress had been made through the use of categorical  exclusions for projects. As of August 23, 2010, 87 percent ($2.65 billion)  of all SEP Recovery Act-funded projects have been granted categorical  exclusions, and 75 percent ($2.31 billion) of funds have been obligated to  subrecipients for specific activities. Pennsylvania officials noted that  National Historic Preservation Act requirements had slowed some projects  but that the situation has improved through an agreement set up between  DOE and the state historic preservation offices. While DOE officials have  acknowledged they initially lacked the infrastructure necessary for rapid  implementation of a SEP, they noted that DOE has made significant  improvements in the level of guidance provided to recipients. For  example, DOE has developed a Web site to provide information and  guidance for recipients to comply with the Buy American requirements.  DOE officials further stated that in addition to their guidance, states can  also contact their DOE project officer for assistance on meeting Recovery  Act and program requirements and deadlines. Overall, state energy  officials spoke positively about their project officers, though DOE has only  recently filled many of these positions.
Several state energy officials also noted that other obstacles such as the  lack of energy management staff has made it more difficult to administer  SEP projects. Specifically, District officials stated it was difficult to hire  highly qualified people because potential staff did not want to leave a  current permanent position for a temporary Recovery Act position that  might only last 2 years. Similarly, Iowa officials noted that their efforts  were hindered by the loss of two key staff in 2010 and that they did not  want to hire staff for a limited duration. Additionally, California’s state  auditor reported in December 2009 that the state was not prepared to  administer Recovery Act funds for the SEP and listed insufficient staffing  as one cause for the lack of preparedness. The report also indicated that  the lack of preparedness raised the potential for misuse of Recovery Act  funds. California officials stated that following the state auditor’s report,  they have since taken actions to address inadequate staffing through the  hiring of additional contractors.
section_title: Tracking of Recovery Act Spending for SEP Can Take Place Significantly after the Funds Have Been Obligated
paragraphs: Both state recipients and DOE reported that the final reporting of  spending of state energy funds can take place significantly after the funds  have been obligated and work has begun. For example, District officials  told us that school improvements were scheduled for late June, but the  funds would not be reported as spent until significantly later because the  contractor would not be paid until the work was completed. District  officials also noted there would also be an additional delay in reporting the  final outlay because the work was being conducted though a sister agency.  Pennsylvania officials also reported delays between the time work was  performed and the final spending was reported. State officials told us that  they reimburse SEP subrecipients on a cost reimbursement system, after  work is completed and invoices and proof of payment have been  submitted, reviewed, and approved. District and Pennsylvania officials  both said that reimbursing costs only after work is completed helps to  ensure that the funds are spent appropriately. DOE officials stated that  they have tried to increase the speed at which invoices have been paid to  better demonstrate the timely use of Recovery Act funds. For example,  through program guidance, DOE has encouraged states to pay contractors  after specific work milestones have been achieved rather than after the  project has been completed.
section_title: DOE Is Beginning to Monitor Recovery Act Recipient Spending
paragraphs: DOE officials stated that they are currently on track to meet their  monitoring goals. The SEP Recovery Act Monitoring Plan developed by  DOE calls for each recipient to be visited twice a year. DOE officials stated  that the plan provides guidance for various classes of enhanced  monitoring and visitation, but leaves it to the discretion of the DOE field  office to plan these trips. DOE state project officers give priority, on a case  by case basis, to recipients facing special challenges. The frequency of  monitoring may be increased if prior monitoring reports uncovered  significant deficiencies in how a recipient is administering and managing  its program. Visits to recipients with low obligation or expenditure rates  are focused on providing technical assistance to help increase the rates.
Overall, DOE officials stated that on-site monitoring will increase as  payments grow larger.
DOE also conducts on-site monitoring visits at the subrecipient—local  agency—level. DOE’s target is to conduct on-site monitoring of about 10  percent of all subrecipients nationwide. However, if the risks to the  particular state are higher, then the state would be given closer attention  by DOE staff for potential assistance. While DOE does conduct some on- site monitoring of subrecipients, the officials clarified that the main  monitoring relationship is between the state recipient, the state energy  official, and the DOE project officer. DOE officials stated that they view  state recipient monitoring as DOE’s main responsibility.
DOE reported that it is on track to meet its monitoring goals:    As of late June 2010, DOE staffed a total of 29 project officers to 56  recipients, exceeding its goals of one officer per two recipients.  Though meeting their goal, DOE officials noted that 12 of these  officers had been hired in the past 6 weeks.
By the end of September 2010, DOE anticipates that all 56 recipients  will have received the first of their required annual site visits, with the  second follow-up site visit to be performed by the end of the calendar  year. In addition to on-site monitoring of the states, project officers are  also required to visit between 5 percent and 10 percent of all  subrecipients each year.
To date, DOE has not determined any projects that are “at variance,”  indicating a high risk for funding misuse.
DOE officials noted that the primary monitoring challenge facing project  officers and state recipients during desktop and on-site visits is gathering  the quantity of information and other process indicators needed for  compliance certification by the project officer. DOE officials stated that  assistance from the field offices, the technical assistance provider  network, and best practices from the state’s own NASEO peer  organization are helping to address this situation to assist states in  developing effective documentation in a timely manner.
section_title: Recipient Monitoring Practices Vary, and Some Recipients Are Just Starting Recovery Act Projects
paragraphs: Planned state recipient monitoring practices vary, and some recipients are  just beginning their monitoring activities because they are just starting  projects. For example, District officials plan to monitor projects via video  and desk monitoring but noted that they have not yet started monitoring in  the field. Planned monitoring will focus on ensuring that the work being  done is consistent with the agreed-upon scope of work. Additionally,  District officials have developed monitoring procedures that will include  monitoring checklists of programmatic and financial questions, desktop  monitoring, and financial monitoring by the District SEP/Recovery Act  financial Officer. Pennsylvania has also developed monitoring procedures;  project advisers from state regional offices are assigned to each SEP  project and, using an inspection form, conduct initial and final inspections  of projects and are encouraged to perform other inspections as needed.  Project advisers also communicate on a weekly basis with SEP recipients  and update project status in the agency’s reporting system.
Some state recipients in our review are also using independent contractors  to aid in grant monitoring at varying levels. For example, Colorado,  California, and New York all reported hiring outside contractors to  supplement their monitoring activities. Colorado hired an outside firm to  manage its rebate program for appliances, energy-efficient measures, and  renewable-energy systems, citing a need for expertise to handle the large  growth in the program due to the addition of Recovery Act funds.  Additionally, Colorado also recently issued a Request for Proposal for  measurement and verification activities for its grant funds. Due to the  significant increase in the size of Colorado energy programs, Colorado  officials determined that oversight by state program managers alone is no  longer sufficient. California officials set aside $6 million of its $226 million  grant to hire contractors to provide, among other things, monitoring,  verification, and audit support.
Though still in their early stages of oversight, some state energy officials  have noted monitoring challenges. For example, Arizona officials noted  that some rural grant recipients were more challenging to monitor due to  their remote location. Additionally, Colorado officials told us that  detecting fraud in rebate programs is difficult and that while the  contractor administering the program has procedures in place to detect  fraudulent rebate claims, it is not possible to ensure that 100 percent of the  claims will be legitimate. Colorado officials further noted that there was  not a clear standard for how to monitor certain programs such as rebate  programs. DOE officials have acknowledged that grant programs such as  revolving loan programs can require special skill sets to monitor and  reported that they are taking steps to provide recipients with technical  resources by early September 2010.
section_title: DOE and Recipients Have Reported Challenges in Meeting Recovery Act Outcome Reporting Requirements
paragraphs: DOE officials stated that recipients have experienced challenges with  meeting Recovery Act reporting requirements. Similar to EECBG, DOE  requires monthly and quarterly reporting by SEP recipients to DOE. DOE  officials stated that many state recipients have as many as 17 different  Recovery Act programs and must coordinate with many different state  agencies to fulfill their reporting requirements. In turn, state agencies must  also coordinate with local agencies. The officials said that they faced the  problem of balancing state and DOE needs with collecting information;  asking states to collect too much information would be overly  burdensome, while collecting insufficient information would not allow  states or DOE to track long-term outcomes. To help decrease the  administrative burden of reporting, DOE decreased both its monthly and  quarterly reporting requirements effective for the August 30, 2010,  reporting deadline. The changes will decrease the amount of job,  performance, and funding information reporting required and will help  states focus on expending Recovery Act funds.
Both DOE and state energy officials have noted that reporting on outcome  measures has been limited because SEP Recovery Act projects are in their  early stages. For example, DOE officials stated that SEP recipients first  had to report quarterly beginning in January 2010 but that the early reports  by recipients did not include many critical metrics, such as total energy  saved and dollars savings. DOE officials further stated that because  outcomes such as total energy cost savings take time to achieve, and  because the state energy offices were still in the initiation phases earlier in  2010, there are few outcomes to report. State officials have also noted that  outcome data are currently limited due to the early stage of SEP Recovery  Act projects. For example, District energy officials noted that they won’t  have data on calculating energy savings until projects are complete.  Specifically, the District plans to report on energy savings and greenhouse  gas emissions by calculating the building square footage, pre- and post- installation utility bills, as well as the energy-savings measures installed  and the dollars spent. On-site monitoring will be an important part of the  verification process.
State energy officials have indicated difficulties with reporting information  into DOE’s primary reporting system, PAGE. For example, Iowa noted that  PAGE was not compatible with their existing grant management system or  other federal reporting systems, which meant that data had to be input  twice. DOE’s Inspector General also described significant issues with  PAGE in a recent report. Along with other concerns, the report indicated  that DOE officials “did not seek input from grant recipients—the system’s  external users—related to the design of PAGE due to the limited time  before the system had to be operational.” To assist states with reporting, a  NASEO official stated that DOE has asked NASEO to work with each  recipient to complete the submissions through PAGE. Additionally, DOE  officials stated that the contractor that developed PAGE is providing  additional assistance and feedback to the recipients on data entry issues.
section_title: DOE’s Weatherization Assistance Program
paragraphs: The Recovery Act appropriated $5 billion for the Weatherization  Assistance Program, which the Department of Energy (DOE) is  distributing to each of the states, the District of Columbia (District), all  five territories, and two Indian tribes. According to DOE, during the past  33 years, weatherization has helped more than 6.4 million low-income  families by making long-term energy-efficiency improvements to their  homes such as installing insulation; sealing leaks; and modernizing heating  equipment, air circulation fans, and air conditioning equipment. These  improvements enable families to reduce energy bills, allowing them to  spend their money on more pressing needs. The Recovery Act  appropriation represents a significant increase for a program that has  received about $225 million per year in recent years.
During 2009, DOE obligated about $4.73 billion of the Recovery Act’s  weatherization funding to the states, territories, and tribes, while retaining  about 5 percent of funds to cover the department’s expenses. Initially,  DOE provided each recipient with the first 10 percent of its allocated  funds, which could be used for start-up activities such as hiring and  training staff, purchasing needed equipment, and performing energy audits  of homes, among other things. Before recipients could receive the next  40 percent of their funds, DOE required each to submit a weatherization  plan outlining how it would use its Recovery Act weatherization funds.  These plans identified the number of homes to be weatherized and  included strategies for monitoring and measuring performance. By the end  of 2009, DOE had approved the weatherization plans of all 58 recipients  and had provided all recipients with half of their weatherization funds  under the Recovery Act. According to DOE officials, as of June 30, 2010,  about 166,000 homes have been weatherized nationwide, or about 29  percent of the approximately 570,000 homes currently planned for  weatherization. To release the remaining 50 percent of funds, DOE  requires that recipients complete weatherizing 30 percent of the homes  identified in their weatherization plans and meet other requirements— namely, fulfilling the monitoring and inspection protocols established in  its weatherization plan; monitoring each of its local agencies at least once  each year to determine compliance with administrative, fiscal, and state  policies and guidelines; ensuring that local quality controls are in place;  inspecting at least 5 percent of completed units during the course of the  respective year; and submitting timely and accurate progress reports to  DOE, and monitoring reviews, to confirm acceptable performance.  Recovery Act funds are available for obligation by DOE until September  30, 2010, and DOE has indicated that the recipients are to spend their  Recovery Act weatherization funds by March 31, 2012.
subsections: section_title: Recipients’ Access to Recovery Act Funding for Weatherization Varies Due to Uneven Progress in Meeting DOE’s Requirements
paragraphs: Recipients’ ability to access all of their Recovery Act weatherization  funding by meeting DOE’s requirements varies considerably. DOE records  indicate that as of June 30, 2010, 29 states had weatherized at least 30  percent of their total planned units. As of August 2010, DOE reported it  had released the remaining 50 percent of funds to 22 states that had met  the other requirements. Of the 7 states and the District in our review for  the Recovery Act weatherization program, two states, Iowa and Arizona,  have been granted access to their remaining 50 percent. In Iowa, DOE  released about $40.4 million after the state reported its completion of  weatherizing 2,179 homes—more than 30 percent of its target of 7,196  homes. Similarly, in Arizona, officials reported the state had weatherized  1,930 homes, about 30 percent of its 6,414 total estimated homes, and  gained access to the remaining $28.5 million.
Additionally, other states, such as California and Florida, are close to  meeting their 30 percent production targets. Despite a delayed start in  spending Recovery Act funds, California reported weatherizing 8,679  homes out of its total estimated production target of 43,150 units as of  June 30, 2010. Similarly, Florida officials reported a total of 3,878 single- family residences had been weatherized, or about 20 percent of the total  19,090. Furthermore, both California and Florida officials report they are  on track to weatherize 30 percent of their total estimated units by  September 30, 2010.
Some recipients that we found to be behind schedule in our May 2010  report, such as the District and Georgia, have since increased their  weatherization of units; however, these recipients still have not met  production goals requested by DOE. For example, as of March 31, 2010,  we found service providers in the District and Georgia had weatherized  about 14 percent and 11 percent of homes identified in their state  weatherization plans, respectively. By the end of June 2010, although both  recipients’ production targets were still below DOE’s approved goal of 30  percent, the District and Georgia reported they have increased their  production to about 25 percent and about 22 percent, respectively.
section_title: Some Recipients Still Face Challenges with Implementing Internal Controls to Ensure Program Compliance
paragraphs: Some recipients are still challenged with establishing controls to ensure  compliance with weatherization program and Recovery Act requirements.  DOE has issued guidance requiring recipients of Recovery Act  weatherization funds to implement a number of internal controls to  mitigate the risk of fraud, waste, and abuse. In our May 2010 report, we  recommended that DOE should develop best practices for key internal  controls that should be present at the local weatherization agency level to  ensure compliance with key program requirements. DOE provides  recipients with the discretion to develop and implement these internal  controls in accordance with each state’s weatherization plan. Local  agencies use various methods to prevent fraudulent or wasteful use of  Recovery Act funds, such as conducting risk assessments.
Since our last report, we have identified challenges in the implementation  of internal controls for some local weatherization agencies. For example,  in the District, we conducted client file reviews and found that while some  weatherization project data were not present in the physical files, much,  but not all, of this data was in an online software system used to manage  weatherization projects. While the online system appeared to be a useful  tool in managing weatherization projects, it has not yet been fully  implemented and does not contain all of the data necessary to track  individual weatherization projects from start to finish. As a result, at the  time of our review, neither the physical files nor the online weatherization  management system presented a complete record of weatherization  projects. District officials reported that they conducted inspections of  local weatherization agencies in early July 2010—roughly 2 weeks after  our review—and found that all agencies they reviewed had copies of all  required documentation in the physical files. Additionally, District officials  reported they are continuing to fully implement the online reporting  system and address issues associated with incomplete data. In Florida, the  state agency responsible for administering the program had instituted  various management controls over the program, but our review of two  local weatherization agencies revealed internal control gaps and  compliance issues similar to those identified in our May 2010 report. For  example, weatherization work done was often not consistent with the  recommendations of home energy audits and no reasons were given for  the differences; in some instances, work was charged to the program but  not done or lacked quality; several potential health and safety issues were  not addressed; and contractors’ prices were not being compared to local  market rates, as required by the state weatherization agency. State officials  have acknowledged these problems and have taken steps to address the  problems, including changing procedures and guidelines and instructing  contract field monitors to be more attentive to these issues. The two local  weatherization agencies we reviewed also agreed to take corrective  actions.
section_title: Most States We Reviewed Have Varying Levels of Monitoring Procedures
paragraphs: Most of the states we reviewed have oversight procedures in place to  monitor local agencies; however, the level of monitoring varies  considerably. DOE requires state weatherization agencies to conduct on- site monitoring of all weatherization service providers to inspect the  management of funds and the production of weatherized homes at least  once a year. These monitoring visits consist of a financial review of the  service provider’s records pertaining to salaries, materials, equipment, and  indirect costs; program reviews of the service provider’s records,  contracts, and client files; and a production review, consisting of the  inspection of weatherized homes by the state agencies and by the service  provider. In our May 2010 report, we recommended that DOE set time  frames for development and implementation of state monitoring programs;  DOE generally agreed with this recommendation and indicated it will take  steps to address this issue.
We found in the states we reviewed that levels of monitoring varied  considerably. Some state monitoring plans are fully implemented. For  example, in Arizona, state officials reported program monitors conduct file  reviews of all completed units each month using a statewide database.  Also, program monitors visit each of the 10 service providers at least once  a month, exceeding DOE’s requirement of yearly visits to local service  providers. Iowa officials reported inspecting at least 5 percent of the  weatherized homes for each local agency and providing monitoring at 15  of 18 local agencies.
In contrast, monitoring procedures in other states have either just been  fully implemented or are still facing challenges. We identified some issues  in our May 2010 report related to weatherization monitoring in Georgia.  Some monitoring positions remained vacant, and oversight of the  providers had been slow to start. However, state officials at the agency  responsible for the weatherization assistance program have since taken  steps to address these issues. Specifically, they told us that their  contractor had filled all monitoring positions, and all 22 of its providers  have received monitoring visits. Additionally, Pennsylvania officials are  still facing challenges. For example, state officials reported weatherization  program monitors are not in compliance with some Recovery Act  monitoring procedures, and they are not getting about half of their  monitoring reports back to the agencies within 30 days of the site visit.  DOE reported the need for Pennsylvania’s department responsible for  administering the program to improve the financial management system to  better track actual costs for each unit weatherized on a service provider  basis. State officials reported they are working on corrective actions to  address these concerns by August 2010.
Finally, some recipients, such as California and the District, were delayed  in spending Recovery Act weatherization funds and have just begun to  implement monitoring efforts. For example, in California, program  officials recently began on-site monitoring of Recovery Act activity in June  2010, and by July 31, they visited seven of the 38 service providers.  Additionally, program officials also conduct quarterly performance visits  as needed for providers with production deficiencies, monthly Recovery  Act expenditure and performance analyses, fiscal monitoring, on-site  monitoring of whistleblower complaints and high-risk agencies, and Davis- Bacon on-site reviews to ensure employees are paid appropriately and  paperwork is in compliance. Similarly, District officials reported a number  of monitoring procedures are in place, such as annual monitoring reviews  of local weatherization agencies and site inspections of at least 10 percent  of weatherized units. District officials told us that, as of July 15, 2010, their  program managers had conducted monitoring visits of all seven local  weatherization agencies, and program auditors had begun conducting site  inspections for the quality assurance of work completed by contractors.
section_title: Some States Are Measuring Long-Term Energy Savings Resulting from the Recovery Act Weatherization Funds, While Others Are Still in Development
paragraphs: With respect to energy cost savings, some states are actively measuring  energy savings, while others are beginning to develop methods to do so.  As with EECBG and SEP, weatherization recipients are required to report  on different program metrics, both monthly and quarterly. A long-term  goal of the weatherization program is to increase energy efficiency  through cost-effective weatherization work, and DOE relies on its  recipients to ensure compliance with this cost-effectiveness requirement.  For example, in Arizona, the agency responsible for administering the  weatherization program calculates the estimated kilowatt hour usage  reduction and utility costs savings resulting from weatherization work  performed on homes. As of June 2010, officials estimated that Recovery  Act weatherization services have resulted in approximately $267,000 in  savings for the residents in the 1,930 homes weatherized. Florida officials  reported contracting with the University of Florida to conduct a study of  overall energy savings utilizing consumption data obtained from clients’  utility bills. Alternatively, District officials are still developing a  methodology to capture energy savings for weatherized homes. In July  2010, Georgia officials stated it had begun using a Web-based reporting  tool to track real-time information on energy savings. In addition, program  monitors will track and compare energy costs after weatherization work  has been completed for 3, 6, and 12 months. While California estimated  annual energy savings of about $1.5 million resulting from Recovery Act  funds, state officials currently do not anticipate attempting to calculate  actual energy savings and noted that they would like more guidance from  DOE on its effort to study energy savings.
section_title: DOE Generally Agreed with the Recommendations Issued in Our May 2010 Report and Has Taken Some Steps toward Implementation
paragraphs: In our May 2010 report, we provided eight recommendations and raised  concerns about whether program requirements were being met. DOE  generally agreed with all of our recommendations and has begun to take  several steps in response. For example, DOE reported that it has drafted  national workload standards to address our concerns regarding training,  certification, and accreditation. DOE plans to issue these standards to  recipients in October 2010. DOE is still in the process of considering our  recommendations and will provide additional information on how they  plan to fully implement our recommendations at a later date.
section_title: Housing Agencies Have Been Using Recovery Act Funds for a Variety of Projects, and HUD’s Initial Monitoring Efforts Have Identified Problems with Obligations for Some Projects
subsections: section_title: Competitive Grants for Public Housing Capital Fund Have Supported a Variety of Projects
paragraphs: The Recovery Act requires the U.S. Department of Housing and Urban  Development (HUD) to distribute 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. In September 2009, HUD  awarded 396 competitive grants in the amount of $995 million to 212  public housing agencies. (Subsequently, three housing agencies returned  competitive grants totaling approximately $14 million to HUD). The  Recovery Act required housing agencies that received competitive grants  to obligate 100 percent of their competitive grant funds within 1 year of  the date when competitive funds became available to agencies for  obligation, which means they have until September 2010 to obligate 100  percent of their funds. As of August 7, 2010, 179 housing agencies  reported obligations totaling about $460.1 million for 340 grants. This  reflects about 46.3 percent of the total Public Housing Capital Fund  competitive funds allocated to them (see fig. 24). In addition, there were  57 grants (14 percent) located at 39 housing agencies for which no  competitive funds had been obligated. Further, another 102 grants (26  percent) had less than 20 percent of their funds obligated. As the  September 2010 obligation deadline approaches, HUD officials said they  are working to ensure that housing agencies meet the deadline, but expect  that some housing agencies may not. HUD will recapture any funds not  obligated by the deadline and return them to the Department of the  Treasury. One hundred forty-four housing agencies had also drawn down  funds to pay for project expenses already incurred. As of August 7, 2010,  these 144 public housing agencies had drawn down about $93.5 million, or  about 9.4 percent of the total allocated to them. The Recovery Act required  housing agencies to expend 60 percent of obligated funds within 2 years  and expend 100 percent of Recovery Act funds within 3 years of the initial  date when funds were provided to agencies for obligation.
More specifically, housing agencies have been using their competitive  grants for the creation of energy-efficient communities, gap financing for  projects stalled because of financing issues, public housing  transformation, and improvements addressing the needs of the elderly or  persons with disabilities:    For the creation of energy-efficient communities, HUD awarded 36  grants totaling $299.7 million for substantial rehabilitation or new  construction and 226 grants totaling $305.8 million for moderate  rehabilitation. For example, in New Jersey funds are to be used to  incorporate green features in two new buildings with public housing  units. Some of the energy-efficient features of the project include  water conserving fixtures, Energy Star lighting packages in all interior  units, and Energy Star or high-efficiency commercial grade fixtures in  all common areas, as well as daylight sensors or timers on all outdoor  lighting. In Massachusetts, funds are to be used to reduce the annual  energy and water costs of more than $4,000 per unit in a physically  distressed site. The project will redevelop a portion of the site into  innovative, high-efficiency affordable housing for current residents  with the new construction of 96 affordable rental units and a  community center.
For gap financing for projects that were stalled due to financing issues,  HUD awarded 38 grants totaling $198.8 million. For example, in  Pennsylvania, $10 million in funds are to be used to construct 50 units  of a 101-unit development that will be a mixture of walk-up and duplex  apartments and three-scattered site buildings replacing a high-rise  building demolished in 2008.
For public housing transformation, HUD awarded 15 grants totaling  $95.9 million to revitalize distressed or obsolete public housing  projects. For example, in Illinois, funds are to be used on a multiphase,  mixed-finance project that will build public housing, rental, and for- sale apartments and houses on housing agency land and vacant city  lots.
For improvements addressing the needs of the elderly or persons with  disabilities, HUD awarded 81 grants totaling $94.8 million. For  example, in Texas, funds are to be used to complete work on common  areas to make them accessible and ADA-compliant, upgrade and  improve space used for supportive services, and add energy-efficient  lighting, heating, ventilating, and air conditioning in properties housing  the elderly. In California, funds are to be used to provide upgrades to  nine dwelling units for accessibility improvements for the elderly and  disabled, as well as improvements to common spaces used for  supportive services targeted to those residents.
As discussed above, HUD officials expect that some housing agencies may  not meet the September 2010 competitive grant obligation deadline. They  noted that among all the competitive grant projects nationwide, the 75  grants supported by mixed-financing have been at greatest risk of missing  the obligation deadline. HUD’s Office of Urban Revitalization has assigned  a grant manager to each of the mixed-finance competitive grant projects to  track and monitor their progress. Officials with 5 of the 10 housing  agencies we visited that had received competitive grants told us they were  experiencing challenges related to mixed-financing of their projects, but  they still anticipated meeting the deadline. Because funding for these  projects comes from multiple sources, if one financing party is not able to  finalize its part of the contract by the obligation deadline, the housing  agency will not be able to close on the contract. As a result, the housing  agency would not be able to obligate its competitive grant funds on time  and the funds would be recaptured. For example, one housing agency is  relying on a 4 percent low-income housing tax credit to pay for about $10  million of the $40 million cost for the first phase of its project. The 4  percent tax credit was contingent on the state selling tax-exempt bonds,  and according to HUD field office officials, the state’s difficulty doing so  had prevented the housing agency from securing the tax credit. State  officials told us they notified the project developer on August 5, 2010, that  the tax-exempt bonds, which will generate the tax credits, had been  approved, which would allow the housing agency to submit its final  paperwork to HUD by September 18, 2010.
Additionally, HUD field staff have taken several steps to assist public  housing agencies in obligating Recovery Act competitive grant funds by  the September 2010 deadline. HUD field officials told us that they have  been communicating regularly with housing agencies via e-mail and  telephone to address their questions, provide technical assistance, and  monitor their progress. For example, field staff in one field office in Texas  use weekly conference calls to communicate with all of the housing  agencies in their jurisdiction and answer their questions about obligation- related issues for competitive grants. The officials also told us they have  dedicated three staff to work with the five public housing agencies under  their jurisdiction that received 14 competitive grants. HUD field staff in  Illinois have contacted each competitive grant recipient in their region on  a weekly basis and use an internal tracking sheet to monitor progress.  HUD officials in Massachusetts have provided additional oversight to  smaller housing agencies to help them better understand federal  procurement policies. Based in part on these efforts, HUD field staff  believed that housing agencies in Massachusetts would meet the  September 2010 obligation deadline.
As we note in our May 2010 Recovery Act report, HUD plans to  redistribute $17.16 million of competitive and formula grant funds that  were rejected or returned by housing agencies by awarding a new set of  competitive grants. HUD plans to redistribute these funds to qualified  housing agencies that previously applied for competitive grants but did not  receive them because HUD had obligated all of the nearly $1 billion  allocated to the program. Given HUD’s emphasis on green, energy-efficient  housing, HUD will limit the redistribution of funds to those applications  for energy retrofit projects. Prior to funding any of the remaining  applications, HUD planned to verify that potential recipients still would be  able to complete the work outlined in their original applications and that  they currently are in compliance with Recovery Act requirements. Of the  23 public housing agencies that HUD has contacted and verified their  eligibility to receive additional competitive grant funds, 22 agencies  accepted the additional funds. According to HUD officials, they may be  able to redistribute these funds by the end of fiscal year 2010. According to  HUD officials, once the housing agencies receive the redistributed funds,  housing agencies must obligate 100 percent of the funds within 1 year,  expend 60 percent within 2 years, and expend 100 percent within 3 years.
section_title: Public Housing Capital Fund Formula Grants Have Also Supported a Variety of Projects
paragraphs: The Recovery Act required HUD to allocate $3 billion through the Public  Housing Capital Fund to public housing agencies using the same formula  for amounts made available in fiscal year 2008. HUD allocated Capital  Fund formula dollars to 3,134 public housing agencies shortly after  passage of the Recovery Act and, after entering into agreements with  housing agencies, obligated these funds on March 18, 2009. As we  previously reported, all housing agencies met the March 17, 2010,  obligation deadline for formula grants by either obligating all of their funds  or rejecting or returning a portion of the funds. The Recovery Act also  required that public housing agencies expend 60 percent of their formula  funds within 2 years from when the funds became available and expend  100 percent of their formula grant funds within 3 years from when the  funds became available. Housing agencies have been making progress in  drawing down funds in accordance with these deadlines. According to  HUD data, as of August 7, 2010, 3,075 housing agencies had drawn down  funds totaling more than $1.6 billion from HUD, or about 55 percent of the  total allocated to the housing agencies, to pay for project expenses already  incurred (see fig. 25).
Public housing agency officials said they have been using these funds to  support a variety of improvement projects at public housing sites,  including performing roofing and gutter work, replacing windows and  doors, rehabilitating unit interiors, and replacing heating, cooling, and hot  water systems. For example, a housing agency in California used formula  funds to rehabilitate vacant units at two sites quickly to make them  available for lease to prospective low-income tenants. Work at both sites  included repairing damaged walls, ceilings, and floors; removing old  plumbing fixtures; replacing tile and appliances; and painting the interiors  of units (see fig. 26).
In Pennsylvania, a housing agency is using formula funds to rehabilitate 23  row houses on the last remaining blighted block adjacent to a large  redevelopment the housing agency had already completed. Combined with  the previous redevelopment, once this project is complete, there will be  more than 700 total units in an approximate four square block area. Work  on the last block of the development began in March 2010 (see fig. 27).  According to housing agency officials, this redevelopment project not only  has provided additional public housing units, but also has increased  property values for row homes in the area from $40,000 or $50,000 to  asking prices of up to $125,000.
HUD has employed multiple monitoring efforts for Recovery Act funds and  has found that only a few housing agencies had deficiencies relating to  their obligations. For the second year of implementation, HUD’s strategy  for monitoring Recovery Act formula and competitive grant funds includes  a combination of remote and on-site reviews of housing agencies’  administration of Recovery Act requirements, the same approach it used  for monitoring housing agencies during the first year of the Recovery Act.  Specifically for the formula grant funds, HUD developed a four-tier  monitoring approach that includes  quick-look reviews of all Recovery Act formula grant obligation  documents generated from February 26, 2010, to March 17, 2010, by  543 housing agencies that had obligated less than 90 percent of  formula grant funds as of February 26, 2010. HUD completed the quick- look reviews in July 2010;    on-site and remote reviews. Housing agencies currently designated as  troubled will have a minimum of one on-site review. Housing agencies  that are nontroubled may be subject to additional remote or on-site  reviews depending upon factors including having open audit findings,  failing to expend funds in prior years, and having procurement-related  deficiencies such as not revising procurement policies to reflect  Recovery Act requirements. HUD anticipates that about 25 percent of  grant recipients will be subject to these reviews, which the agency  plans to complete by February 2011;  quality assurance and quality control reviews by HUD’s Office of Field  Operations, which HUD plans to conduct between December 2010 and  March 2011; and  independent reviews (performed by an outside contractor) of housing  agencies that HUD identified as being the top 100 to 125 funded  agencies with the largest formula grant award amount. The  independent reviews are to be completed by June 2011.
According to HUD officials, as a result of its quick-look reviews of 543  housing agencies, HUD staff identified 26 housing agencies that were  potentially deficient in meeting HUD requirements for obligating formula  grant funds and required further review. For example, some housing  agencies signed contracts to obligate funds after the March 17, 2010,  deadline. HUD staff also determined that some housing agencies obligated  funds for products and services that were not approved for Recovery Act  use, such as paying the local police department to provide security  services. In addition, HUD staff identified 24 housing agencies with minor  deficiencies that did not warrant further review. Finally, there were 22  housing agencies that did not submit final documentation requested by  HUD staff for the quick-look reviews. HUD plans to conduct on-site  reviews of those housing agencies if they do not submit the requested  documentation.
HUD created a panel comprised of officials from its Office of Field  Operations, Office of Capital Improvements, and Office of General  Counsel to examine in greater detail those 26 housing agencies with  potential deficiencies identified via the quick-look reviews, as well as  potential deficiencies identified by other means. Of the 26 housing  agencies, the panel determined that deficiencies at 8 housing agencies  were significant and necessitated a recapture of funds. As of August 27,  2010, the panel reviews identified approximately $1 million in Recovery  Act funds that necessitated recapture. HUD is in the process of  recapturing these funds and will return them to the Department of the  Treasury. HUD plans to continue conducting panel reviews and will  recapture Recovery Act funds from any housing agency found to have  deficiencies.
HUD adopted a similar multireview approach for its second-year  monitoring of Recovery Act competitive grant funds. HUD has been  conducting remote reviews of all 393 competitive grants and had planned  to complete them by August 20, 2010. As of August 23, 2010, HUD field  staff reported having completed 371 remote reviews of competitive grants.  HUD officials are in the process of analyzing the results of these reviews.  While HUD officials have not completed their reviews, as of August 27,  2010, the agency may recapture approximately $12 million in competitive  grant funds based on remote review findings and other means. For  example, after reviewing one project’s proposed building site, HUD staff  found that the project would be located in an industrial space next to a  railroad track with little access to roadways, raising both transportation  and environmental concerns. HUD also plans to conduct quality assurance  and quality control reviews for a random sample of 20 to 25 percent of the  remote reviews, which HUD plans to complete by September 2010. In  October and November 2010, HUD also plans to review obligations made  by housing agencies that had not fully obligated their grant funds within 2  weeks of the September 2010 deadline. Finally, from January to March 17,  2011, HUD plans to conduct on-site reviews of all eight housing agencies  that received competitive grant funds and were designated as troubled as  of September 30, 2009. Given that less than half of the competitive grant  funds have been obligated to date, we believe that it is important for HUD  to continue to closely monitor progress in meeting the obligation deadline.  In addition, because HUD identified some deficiencies among those  housing agencies that obligated their formula grant funds near the  deadline, we believe it will be important for HUD also to review those  competitive grant obligations made by housing agencies just prior to the  deadline.
As part of its second-year strategy, HUD developed a management plan for  the administration of Recovery Act funds, including the need for an  additional 11 FTEs to carry out Recovery Act responsibilities. This was in  response to our March 2010 recommendation that HUD develop such a  plan to address its resource needs for both the Recovery Act funds and the  existing Capital Fund program. Similarly, HUD’s Office of Public and  Indian Housing also agreed to develop a management plan addressing the  activities and resources needed to administer its existing Capital Fund  program. In July 2010, HUD provided us with its management plan for the  Public Housing Capital Fund program. The plan summarized the key  activities HUD undertakes to monitor and facilitate the use of these funds  by program area, including rule and policy development, planning,  program awards, program management, technical assistance, and  reporting. The plan also included the specific activities, tasks, and  resources used for each of these existing program areas, identifying  approximately 91 existing FTEs in its headquarters and field offices to  support these activities. According to HUD’s management plan, HUD’s  current staffing level is sufficient to manage its existing Capital Fund  program, but the agency could more efficiently utilize its current  resources. As a result, HUD plans to realign current staff to focus on its  core missions, including Recovery Act responsibilities.
HUD’s management plan for its existing Capital Fund program states that  HUD currently has the staff and resources required to effectively  implement its core programs. However, officials in two HUD field offices  we visited stated that they revised their oversight strategies for their  regular programs to accommodate Recovery Act work. For example,  officials in one HUD field office told us that most of the field office’s  resources have been devoted to the Recovery Act and, as a result, staff  have done less on-site monitoring of non-Recovery Act grant recipients.  However, the officials noted that their staff still have been conducting  remote monitoring of all recipients, although staff have not conducted any  asset management reviews of grant recipients this year. At another HUD  field office, an official told us that since the Recovery Act was passed,  Recovery Act work has been a top priority for HUD nationwide. He noted  that other housing work, especially conducting on-site reviews, has been  deferred to meet Recovery Act requirements. According to HUD  headquarters officials, as a consequence of field office monitoring of  Recovery Act requirements, field staff conducted reviews (on-site or  remote) of every housing agency in the country, something they would not  have accomplished in the course of their routine monitoring activities.  HUD officials also stated that field staff were able to strengthen housing  agency officials’ knowledge of contract administration and forge stronger  relationships with a greater number of housing agencies as a result of their  Recovery Act oversight.
section_title: HUD Has Taken Additional Action to Improve Quality of Recipient Reported Data
paragraphs: HUD officials told us they have been using the same quality review  procedures for the fourth recipient reporting period as they did for the  third reporting period. However, HUD also issued additional guidance to  recipients to help them more accurately report job-related data. Although  HUD does not play a direct role in compiling the recipient data, officials  noted they continued to support recipients’ report preparation by  providing technical assistance, including issuing guidance, conducting  conference calls, manning a call center, and transmitting regular e-mail  correspondence. Officials also told us that their data quality reviews of  recipient reports continued to include automated data checks to flag  values in specific fields that were incorrect or that fell outside of  parameters that HUD had defined as reasonable and to generate  comments notifying housing agencies of the potential errors. HUD officials  told us that they also have been using the same processes from the third  reporting period for checking for and addressing errors in job-count totals  for the fourth reporting period. The officials noted that their on-time  reporting rate for the fourth reporting period was high and their error rate  continues to decline with each reporting cycle. We are in the process of  assessing the transparency of information reported in Recovery.gov for  three HUD Recovery Act programs, including formula grants awarded  through the Public Housing Capital Fund program.
As we reported in May 2010, officials with two housing agencies reported  using an out-of-date version of HUD’s jobs-counting calculator for the  third round reporting period. To ensure that housing agencies use the  correct jobs calculation, we recommended that HUD clearly emphasize to  housing agencies that they discontinue use of the outdated jobs calculator  provided by HUD in the first round of recipient reporting. In response to  our recommendation, HUD sent an e-mail to housing agencies on June 30,  2010, that explicitly instructed them not to use the outdated jobs-counting  calculator, as it was not correctly computing the FTE calculation per  updated OMB guidance. This e-mail also included a link to HUD’s new  online jobs-counting calculator and instructed housing agencies to use this  calculator for the July, and all future, reporting periods.
OMB’s December 2009 guidance states that to the maximum extent  practicable, job information should be collected from all subrecipients and  vendors in order to generate the most comprehensive and complete job  impact numbers available. As we reported in May 2010, for the third  reporting period, at least one housing agency did not report job  information for subcontractors even when the subcontractors were  providing essential goods and services for Recovery Act-funded projects.  We recommended that HUD issue guidance to housing agencies that  explains when the prime recipient should report FTEs attributable to  subcontractors. In response to our recommendation, HUD notified  housing agencies in a June 30, 2010, e-mail that it had developed additional  guidance for housing agencies to use when determining whether prime  recipients should report FTEs for subcontractors and provided a link to  the guidance on its Web site. The guidance noted that housing agencies  should include Recovery Act-funded hours that contractors and  subcontractors worked as part of their FTE calculation.
section_title: HUD and Treasury Continue Making Progress Outlaying TCAP and Section 1602 Program Funds, but Opportunities Exist to Improve Plans for Oversight and Meeting Challenging Project Spending Deadlines
paragraphs: The Recovery Act established two funding programs that provide capital  investments to Low-Income Housing Tax Credit (LIHTC) projects: (1) the  Tax Credit Assistance Program (TCAP) administered by HUD and (2) the  Grants to States for Low-Income Housing Projects in Lieu of Low-Income  Housing Credits Program under Section 1602 of the Recovery Act (Section  1602 Program) administered by the Department of the Treasury  (Treasury). Before the credit market was disrupted in 2008, the LIHTC  program provided substantial financing in the form of third-party investor  equity for affordable rental housing units. As the demand for tax credits  declined, so did the prices third-party investors were willing to pay for  them, which created funding gaps in projects that had received tax credit  allocations in 2007 and 2008. TCAP and the Section 1602 Program were  designed to fill financing gaps in planned tax credit projects and jumpstart  stalled projects.
For TCAP, the Recovery Act requires HUD to obligate $2.25 billion to 52  housing finance agencies (HFA) for gap financing of LIHTC projects that  included some LIHTCs. HFAs had to give priority to projects that were  “shovel ready” and expected to be completed by February 2012. HFAs and  project owners face three milestones for committing and disbursing TCAP  funds.
HFAs had to commit 75 percent of their TCAP awards by February 16,  2010. According to HUD officials, all HFAs met the February 16, 2010,  deadline except for South Carolina because it did not have enough  affordable housing projects that needed TCAP assistance.
The Recovery Act requires that HFAs disburse 75 percent of the TCAP  awards by February 16, 2011.
The Recovery Act requires that project owners spend all of their TCAP  funds by February 2012.
As of the end of July 2010, HUD had outlayed 32.6 percent (about $733  million) of the TCAP funds, up from 16.5 percent as of April 30, 2010, that  we reported in May (see fig. 28).
Although HUD originally made obligations of $2.25 billion to HFAs, HUD  officials told us that they have taken back TCAP funds from HFAs that  either did not commit 75 percent of funds by February 2010, did not have  enough demand for the funds, or both. South Carolina—which did not  meet the February deadline and did not have enough demand—returned  $13 million of its original $25.4 million TCAP allocation. Alabama, which  did meet the deadline, returned $3 million of its original $32 million  allocation because it did not have enough demand for TCAP funds and  would not be able to use all the funds. (We further discuss why some  HFAs were challenged to meet deadlines for TCAP and the Section 1602  Program later in this section.) HUD officials told us that they plan to  reallocate the $16 million through a competitive process and develop  criteria to be issued in a HUD notice this fall. HUD officials said they  expect only HFAs that have demonstrated program progress to be eligible  for consideration since the existing TCAP deadlines for disbursing 75  percent of funds by February 2011 still would apply. HUD officials told us  that they heard informally from about 20 HFAs interested in receiving  additional TCAP funds.
For the Section 1602 Program, Treasury had obligated $5.5 billion and  outlayed about 25.5 percent ($1.4 billion) as of July 31, 2010, up from the  13.6 percent outlayed as of April 30, 2010 (see fig. 29).
Unlike HUD, Treasury has not taken back any funds because the first  deadline for the HFAs to disburse funds is December 31, 2010. Specifically,  under Section 1602 Program rules, HFAs must commit the funding to  projects by December 2010 and can continue to disburse funds to awarded  projects through December 31, 2011, provided that the project owners  spend at least 30 percent of the eligible project costs by December 31,  2010. HFAs must disburse all Section 1602 Program funds by December  2011, or the funds the HFAs have not disbursed must be returned to  Treasury. Originally, Treasury’s guidance required that HFAs had to make  all Section 1602 Program disbursements by December 31, 2010, or return  the undisbursed funds to Treasury, but Treasury extended the  disbursement deadline to December 31, 2011.
In the six previous Recovery Act reports, we have collected and reported  data on programs receiving substantial Recovery Act funds in 16 selected  states and the District of Columbia. These 16 states and the District of  Columbia together have about 65 percent of the U.S. population and will  receive an estimated two-thirds of the TCAP funds and about 60 percent of  the Section 1602 Program funds. Figure 30 lists the TCAP and Section 1602  Program obligations and outlays for the 16 states and the District of  Columbia as of July 31, 2010.
According to HUD and Treasury data, nearly all the HFAs have made  progress in disbursing TCAP and Section 1602 Program funds to project  owners. Figure 30 shows HUD outlays to HFAs in the 16 selected states  and the District of Columbia. Because HFAs must disburse their TCAP and  Section 1602 Program funds to project owners within 3 days, these figures  would closely track disbursements. As shown in figure 30, Arizona, Iowa,  and the District of Columbia have drawn down more than 50 percent of  their TCAP funds, and Iowa, North Carolina, and Pennsylvania have drawn  down more than 50 percent of their Section 1602 Program funds as of July  31, 2010. When we reported in May, North Carolina was the only state out  of the 16 selected states and the District of Columbia to have drawn down  more than 50 percent of its funds from one of the programs.
However, the level of outlays, and therefore HFA spending, continues to  vary considerably across the states. We previously reported that the  difference in spending across the 16 states and the District of Columbia  depended on when the HFA requested Section 1602 Program funds, the  level of construction activity, and the HFA’s implementation timeline.  For example, Treasury officials told us that while 40 HFAs had requested  funds by September 2009, the Mississippi Home Corporation (MHC)  requested funds for the first time in February 2010. According to Treasury  officials, Treasury outlayed funds to MHC for the first time on August 12,  2010. MHC officials told us that they expect to close on most of their  projects in August and September 2010, which is when MHC will sign  agreements with project owners that will meet HFA requirements to begin  disbursing funds.
subsections: section_title: TCAP and the Section 1602 Program Have Had a Strong Impact on the LIHTC Market
paragraphs: HFA officials, project owners, and third-party investors that we  interviewed generally agreed that TCAP and the Section 1602 Program  provided funds to many stalled LIHTC projects and enabled them to move  forward. For example, some owners of stalled projects said that their  projects could not have continued without TCAP and Section 1602  Program funds. TCAP and Section 1602 Program funds also made some  rural projects and special needs population projects—such as farm worker  housing, housing for formerly homeless, and housing for the disabled— more feasible and attractive to third-party investors. Officials from one  HFA we interviewed told us that investors scrutinize the financial outlook  for rural projects because they expect that the income for these projects  will be tight or non-existent.  HFAs, project owners, and investors also told  us that in a difficult market, investors are less likely to risk investments in  these types of projects. We interviewed nine HFAs that awarded financing  to 385 projects—154 (40 percent) were rural and 37 (10 percent) were  special needs population projects—which may not have moved forward  without the assistance of the TCAP and Section 1602 Program.
LIHTC projects that received TCAP and Section 1602 Program funds  typically had less investor equity than LIHTC projects had prior to the  economic downturn. The decrease in investor equity varied for each  project and by state. The nine HFAs that we interviewed reported that  equity in LIHTC projects prior to the economic downturn generally ranged  from 50 to 80 percent of the total financing for a project. In contrast, for  projects receiving TCAP and Section 1602 Program funds from the nine  HFAs that we interviewed, investor equity represents on average 43  percent of a project’s overall financing. For LIHTC projects receiving  TCAP and Section 1602 Program funds, the decrease in investor equity has  been offset by the increase in federal funds.
Some HFA officials, project owners, and third-party investors that we  interviewed currently believe that demand for LIHTCs is re-emerging since  the credit markets were severely disrupted in 2008. However, some of  them said that third-party investor demand still was not at a level where  most projects were feasible. Investor demand and tax credit prices have  been picking up in some states and regions more than others. According to  some investors with whom we spoke, investor demand and tax credit  prices tended to be higher on the coasts than in the middle of the country.  Investors also preferred certain types of projects, such as those that were  larger, located in urban areas, and catered to seniors. Projects that were  smaller, located in rural areas, and targeted special needs populations  more often lacked third-party investors.
Since the economic downturn, the composition of third-party investors  also has changed. First, Fannie Mae and Freddie Mac, which according to  an investor, had bought the largest share of tax credits (40 percent in 2006)  and were the primary third-party investors in special population projects,  exited the marketplace. Second, according to another investor, the low tax  credit prices have resulted in higher yields that in turn have attracted  “yield-driven” investors, including insurance companies, large  corporations, and individuals. Banks, which had invested in the tax credit  markets primarily because of Community Reinvestment Act requirements,  have continued to do so. However, if tax credit prices continue to rise,  yields will decrease, which may cause “yield-driven” investors to exit the  market.
Because the LIHTC market is still rebounding and some states continue to  face challenges attracting investors, the majority of HFAs that we  interviewed support temporarily extending the Section 1602 Program. If  the Section 1602 Program were not extended, some project owners  anticipated scaling back development activities and being more selective  about which projects they develop. Some HFAs and project owners who  supported the extension of the Section 1602 Program believe the funds  would be most useful if used to fill financing gaps, to fund rural and  special needs population projects, and to provide grants or funds to  nonprofits that are developing projects that target such needs.
section_title: Some HFAs and Projects May Face Challenges in Meeting HUD and Treasury Deadlines for Using Funds
paragraphs: Some HFAs and projects may face challenges in meeting TCAP and  Section 1602 Program deadlines for reasons ranging from increased  workload to the time needed to assemble financing to construction delays.  Some HFAs reported that the addition of TCAP and Section 1602 Program  transactions this year has increased their workloads significantly. One  HFA reported that it typically closed from 18 to 22 projects annually, but  this year would close 60 projects. Two other HFAs reported that they  typically closed from 8 to 15 projects annually, but expected to close 50  and 85 projects this year, respectively.
Most HFAs Likely Will Meet TCAP Deadlines, but Those That Have  Delayed Disbursing TCAP Funds May Face Challenges  For TCAP, the potential challenges HFAs face appear to be related to how  they structured the timing of the TCAP disbursements. According to HUD  officials, it is difficult to determine which states may have difficulty  meeting TCAP spending deadlines because states took different  approaches to awarding funds.  A few HFAs may be at a disadvantage in  terms of meeting 2011 and 2012 deadlines because they chose to award  TCAP funds late in the development process to ensure that commitments  from other financing sources are in place and the projects will be  successfully completed. As a result, these HFAs have disbursed a small  percentage of their TCAP funds to date. The HFA officials we interviewed  in nine states did not believe the TCAP disbursement deadline was a  challenge for their projects.
Treasury Plans for Ensuring That Section 1602 Program Projects  Meet Spending Deadlines Remain Unclear  According to some HFA officials, some project owners may face  challenges meeting the 30 percent spending deadline (December 31, 2010)  for Section 1602 Program projects, due to reasons that affected some  projects allocated Section 1602 Program or TCAP funds, ranging from the  timing needed to assemble or disburse funding by HFAs, litigation, and  routine construction delays. According to HFA officials with whom we  spoke, some projects needed to wait for FHA mortgage insurance approval  or approval from other sources of subsidies before receiving final HFA  approval. Officials from one HFA with whom we spoke said that while all  their Section 1602 Program projects were shovel-ready, getting all parties  educated and comfortable about the requirements of the new program  took time. Some projects had been stalled for months, and it took time to  “ramp up” all parties engaged in the projects. In addition, some projects  encountered delays during the construction process due to weather or  other issues typical of development projects such as waiting for  construction permits from local agencies. Other projects were delayed due  to legal issues unrelated to the Section 1602 Program. For example,  Florida Housing Finance Corporation officials told us that as of August  2010, about $22.3 million in Section 1602 Program funds were allocated to  projects involved in litigation.
Furthermore, in HFAs that delayed the decision to participate in the  Section 1602 Program or that had a slow start to launching the Section  1602 Program projects have collectively had less time to spend eligible  funds than in other states where funds were awarded earlier. For example,  the MHC did not request Section 1602 Program funds from Treasury until  February 2010. MHC told us that it is concerned that each of its 17  projects receiving Section 1602 Program funds may not meet the 30  percent spending deadline. One HFA said that a typical LIHTC project  would take about 15 months from applying for funds to closing the project  and commencing construction. Our review of projects in nine states shows  that these HFAs had not yet awarded Section 1602 Program funds to 75  projects as of June 30, 2010. Further, as of June 30, 2010, about 39 percent  of Section 1602 Program projects (98 of 252 projects) that have been  awarded funds in these nine states have not yet closed, which is the first  step to being able to draw funds from entities that provide financing.
Treasury initially required HFAs to return all Section 1602 Program funds  not disbursed by December 31, 2010. In a regulation of August 31, 2009,  Treasury extended the deadline for disbursing Section 1602 Program funds  by 1 year, provided project owners met the 30 percent spending  requirement. Treasury had determined that completion of projects by  December 31, 2010, was too restrictive and would preclude funding of  otherwise eligible projects. Treasury officials told us that the new 30  percent requirement was put in place to assure that project owners were  making some progress by the original (December 31, 2010) deadline date.
Missing the deadline for the 30 percent spending requirement could have  significant implications for the viability of Section 1602 Program projects.  If project owners failed to meet this spending deadline, they would not be  eligible to receive any additional Section 1602 Program funds. If prevented  from receiving the rest of their Section 1602 Program award, project  owners might not be able to find replacement financing and committed  financing sources might withdraw their funds. If projects could not secure  replacement financing quickly, they would be unlikely to be completed in  accordance with Section 1602 Program and LIHTC requirements and  would be stalled again. Under such a scenario, the HFA would be  responsible for recapturing any Section 1602 Program funds that were  disbursed to the project prior to the 30 percent spending deadline.
Treasury officials told us that they plan to enforce the deadline  requirement, and would provide written guidance to HFAs that will  describe the kind and format of information to be reported to Treasury to  document whether projects have met the spending deadline. Treasury  officials told us that they do not plan to collect this information until after  the deadline has passed. Without a plan in place for handling projects that  do not meet the Section 1602 Program deadline, Treasury risks further  project interruptions, including the possible loss of any job creation  associated with projects that must be discontinued if alternate financing  cannot be found.
section_title: TCAP and the Section 1602 Program Impose More Oversight Responsibilities on HFAs Than the LIHTC Program Alone, and HFAs Have Developed Approaches for Such Oversight
paragraphs: TCAP and the Section 1602 Program require HFAs to assume a greater  project oversight role than in the standard LIHTC program. Under the  LIHTC program, HFAs need not monitor construction disbursements, but  must report that projects are completed and occupied in accordance with  LIHTC requirements and deadlines. For long-term monitoring under the  LIHTC program, third-party investors in the project perform long-term  asset management, and HFAs perform limited compliance reviews.
HFAs must review LIHTC projects at least annually to determine  project owner compliance with tenant qualifications and rent and  income limits.
Additionally, every 3 years the HFAs must conduct on-site inspections  of all buildings in each LIHTC project and inspect at least 20 percent of  the LIHTC units and resident files associated with those units.
However, under TCAP and the Section 1602 Program, HFAs must monitor  the disbursement and use of funds throughout the construction period.  HFAs also must perform long-term asset management, which imposes  ongoing responsibilities on the HFAs for the viability of each project.
An HFA’s asset management activities may include monitoring current  financial and physical aspects of project operations. For example, an  HFA may perform analyses or approvals of operating budgets, cash  flow trends, and reserve accounts and conduct physical inspections  more frequently than every 3 years.
Asset management activities also examine long-term issues related to  plans for addressing a project’s capital needs, changes in market  conditions, and recommendations and implementation of plans to  correct troubled projects.
HFAs also ensure compliance with LIHTC requirements as part of their  asset- management activities.
Moreover, HFAs are responsible for returning TCAP and Section 1602  Program funds to HUD and Treasury, respectively, if a project fails to  comply with LIHTC requirements.
Given the increase in responsibilities and risks to HFAs, HFAs have  developed approaches for oversight during the construction period as well  as long-term asset management over the 15-year tax credit compliance  period. These approaches are designed to monitor the physical and  financial health of projects and compliance with LIHTC affordability  restrictions.
In response to an open-ended question in our survey asking about what  changes in oversight activities HFAs planned to put in place to assure  compliance with the TCAP and Section 1602 Program, 37 HFAs said they  would make some changes in oversight activities, 11 said they would make  no changes in oversight activities, and 6 said they were not sure what  changes they would make or they did not answer the question. Changes  in activities varied across HFAs. For example, of the 37 HFAs that said  they would make some changes, 13 HFAs noted that they would make  changes to their disbursement process to more closely track the use of  TCAP and Section 1602 Program funds, 9 HFAs said they would increase  overall monitoring of projects or reporting required by project owners, and  7 HFAs planned to implement or increase the frequency of site visits or  inspections. Eleven HFAs said they would not change their oversight  activities, but 6 of those 11 HFAs noted that they would rely on their  experience in and established procedures for monitoring their lending  programs or disbursement of other federal funds.
HFAs Have Increased Oversight during Construction Phase of  TCAP and Section 1602 Program Projects  HFAs have been providing greater oversight during the construction  period for projects that receive TCAP and Section 1602 Program funds.  This oversight includes monitoring disbursements of the program funds,  overseeing the construction process, and ensuring compliance by TCAP  projects with federal cross-cutting requirements such as Davis-Bacon  wage requirements and the National Environmental Policy Act of 1969  (NEPA). For example, HFAs must review payrolls for all TCAP projects  to ensure that project owners and contractors are paying prevailing wages  to individuals employed in the construction of the projects. HFAs also had  to ensure that all TCAP projects complied with the NEPA environmental  review process prior to receiving any TCAP funds. However, according to  HUD officials, up to one-third of HFAs lacked prior experience in  overseeing compliance with these federal cross-cutting requirements.
Under TCAP and the Section 1602 Program, HFAs have been disbursing a  greater volume of funds than in the past and, as a result, have taken  additional steps to limit risk and increase monitoring. For example, one  HFA we interviewed expected to disburse the same amount of funds in 1  month as it previously disbursed annually. For standard LIHTC projects,  HFAs only allocate tax credits and do not disburse funds. HFAs assume  greater risk by disbursing TCAP and Section 1602 Program funds because  they are responsible for repaying funds to HUD and Treasury, respectively,  in the event of noncompliance. The nine HFAs we interviewed are  supporting an average of 23 to 62 percent of the total development costs of  projects through awards of TCAP or Section 1602 Program funds. Prior to  the Recovery Act, three of these HFAs typically did not provide loans or  grants to LIHTC projects, but now they are providing an average of 23 to  47 percent of total project financing through TCAP and Section 1602  Program project awards. The remaining six HFAs typically funded up to  about 33 percent of the total project financing for some LIHTC projects  through other loan programs prior to the Recovery Act. HFAs have  mitigated risks by broadening the scope of guarantees and by requiring  project owners to certify the accuracy of the information provided.
Approaches to overseeing the construction process varied across HFAs,  although most HFAs we interviewed planned to apply their existing  construction oversight framework to oversee TCAP and Section 1602  Program projects. These activities include site inspections of varying  frequency. For example, some HFAs we interviewed planned to conduct  monthly site inspections, while two HFAs said that construction  superintendents would visit project sites twice per month or more  frequently if needed. Site inspections help confirm whether work  performed on a project is carried out as planned and approved by the  HFA. One HFA also told us that it planned to facilitate communication  among project owners, investors, and other lenders by sharing information  or holding more frequent meetings with these stakeholders.
HFAs and project owners told us that meeting Davis-Bacon wage reporting  and NEPA environmental review requirements for TCAP projects required  time and resources, and it was easier for HFAs with prior experience to  meet the requirements. We previously reported that HFAs viewed Davis- Bacon and NEPA requirements as a challenge and followed up with HFAs  and project owners on ways that they have been meeting the requirements.  To comply with Davis-Bacon wage requirements, some HFAs developed  new processes for data collection and planned to apply additional scrutiny  to data received from project owners or more frequent reporting, and  other HFAs developed training for project owners. To comply with NEPA  requirements, some HFAs and project owners drew upon their experience  administering HOME funds, which also require NEPA compliance.  Project owners said that in some cases they allocated additional resources  to projects to complete environmental reviews ahead of project closings.
In Response to New Asset Management Responsibilities, HFAs  Have Increased Long-Term Monitoring and Put in Place Stricter  Requirements for Project Owners  In response to the new asset management responsibilities HFAs have  accepted under TCAP and the Section 1602 Program, all HFAs we  interviewed reported that they had strengthened their procedures for long- term monitoring to meet the program requirements, mitigate risks, and  help ensure projects’ long-term physical and financial viability.  Approaches to long-term asset management varied depending on an HFA’s  resources, workload, and asset management experience. However, all nine  of the HFAs we interviewed have implemented some oversight changes,  such as increasing the number of inspection visits over the 15-year tax  credit compliance period and the frequency of reporting, as well as  enhancing financial monitoring of projects receiving TCAP and Section  1602 Program funds when compared with standard LIHTC projects.
Of the nine HFAs we interviewed, four HFAs said that instead of  inspecting projects every 3 years as required by the LIHTC program, they  will inspect projects annually or more often. Seven HFAs said that they  will require reports from project owners on a monthly, quarterly, or as- requested basis that may include information such as project income  statements. Five of the nine HFAs we interviewed have the ability to  approve and remove the project’s management agent and general partner  of the project owner if the project is in noncompliance with LIHTC  requirements or the terms of the HFA’s agreement with the project owner.  Two HFAs said that they have new software systems in place to manage  asset management activities, and four said they plan to provide additional  training for staff to manage the monitoring and reporting for TCAP and  Section 1602 Program projects. HFAs said that they have also  strengthened financial requirements for project owners. All nine HFAs  require annual financial audits or reports. Other changes HFAs have made  include requiring or performing capital needs assessments to determine  the condition and expected life of the physical infrastructure, calculating  replacement costs, and assessing whether a project’s replacement reserve  will be adequate to meet the expected capital needs of a project. Some  HFAs also require project owners to provide guaranties that the project  owner will ensure compliance with program requirements or the project  owner will be personally liable to repay TCAP and Section 1602 Program  funds to the HFA. Some HFAs also have strengthened requirements for  financial reserves or changed how and when the reserves can be accessed  to ensure that there is a source of funds to draw upon in the event the  project encounters operating difficulties. Some project owners with whom  we spoke said that HFAs have been careful in structuring requirements to  protect the HFAs’ interests and that in some cases the HFAs’ requirements  and plans for monitoring were stricter than those typically required by  third-party investors.
Nearly all HFAs we interviewed noted that a third-party investor provides  additional oversight and monitoring or financial interest in a project. TCAP  requires tax credits to remain in transactions, and project owners typically  sell the tax credits to third-party investors. Therefore, most TCAP projects  have some level of private investment and oversight. In contrast, the  Section 1602 Program allows HFAs to exchange all of the tax credits  awarded to a project in return for Section 1602 Program funds. As a result,  many Section 1602 Program projects do not have third-party investor  oversight. However, some HFAs have required third-party investor  participation in all or the majority of their Section 1602 Program projects,  and they plan to work in coordination with investors on asset management  activities. Based on information from our survey, 32 HFAs expected to  have a total of 485 projects without third-party investors out of a total of  825 projects expected to be financed with Section 1602 Program funds.  In our survey, about half of the HFAs planned to outsource asset  management functions for TCAP and the Section 1602 Program. Based on  our interviews with nine HFAs, we found that HFAs with past asset  management experience and HFAs with a smaller volume of projects often  chose to conduct their own asset management activities over the 15-year  compliance period. In contrast, HFAs with little asset management  experience or many projects requiring oversight often chose to hire a  third-party contractor to perform asset management activities.  However,  one HFA in each of these categories chose to work in coordination with  individual investors on asset management activities rather than relying  solely on its own asset management efforts or the work of outsourced  asset managers.
Five of the nine HFAs we interviewed are conducting their own asset  management activities because they have significant experience managing  loan portfolios or because the number of projects is manageable. One HFA  we interviewed has 35 years of asset management experience, and two  have 20 years of asset management experience. One of these HFAs also  conducts asset management for HUD’s performance-based contract  administration program and has won awards for its asset management  systems. Six HFAs we interviewed said they have or are developing  policies, procedures, or “watch lists” to assess project performance and  identify projects that may be in need of additional monitoring.
One of the two HFAs we interviewed planning to outsource asset  management activities has contracted with a national syndicator to  provide asset management for its projects without private investment.  The syndicator has said that it will provide the same asset management  services to the HFA as it would provide to investors in its LIHTC  investment funds. The HFA has a staff person that is receiving an asset  management certification and will work closely with the syndicator to  ensure that asset management functions are performed in accordance with  the syndicator’s scope of work. The syndicator’s scope of work covers  both the leasing and asset management phases and includes activities such  as providing quarterly project performance reports that rate the risk of the  project based on market conditions and project owner capacity,  conducting annual property inspections, and performing annual long-term  financial analysis. The syndicator said that it helped the HFA structure a  more comprehensive scope of work because it felt that the asset  management activities started too late to ensure project success.
HFAs noted a range of challenges associated with asset management. One  HFA we interviewed said that explaining the HFA’s new asset management  role to developers has been a challenge because the HFA does not usually  act as a lender or party with long-term interests in the projects. Rather, the  agency’s primary role is that of tax credit allocation with compliance  monitoring as required by IRS. HFAs also noted the cost of asset  management as a challenge. A few HFAs are charging low or no fees for  asset management because of the stress the fee puts on the project  budgets. Other HFAs have estimated a fee based on market research and  costs associated with their current operations, but they are not sure the  fee will be sufficient to cover costs. Most HFAs we interviewed estimated  that their initial asset management costs would be highest during the first  years implementing TCAP and the Section 1602 Program, including the  initial construction monitoring period. For example, one HFA estimated  that 20 - 30 percent of its asset management costs would be incurred  within the first 2 years of overseeing TCAP and Section 1602 Program  projects. However, some HFAs and investors noted future challenges as  projects age. They said that between the fifth to twelfth year of a project’s  life, projects may begin to show signs of physical and financial stress due  to capital replacement needs, diminishing reserves, or resident turnover.  One investor said that HFAs may not have the financial resources to  support troubled projects in the same way as an investor would.
section_title: HUD Strategy for Monitoring TCAP Does Not Fully Consider Project Risks
paragraphs: HUD officials told us that the agency has been relying on existing  monitoring systems to determine whether funds have been spent properly  or to track projects that have not been complying with the terms and  conditions of TCAP agreements. The monitoring systems consist of HUD  Office of Inspector General (OIG) audits (thus far ongoing in three states),  HUD Office of Fair Housing and Equal Opportunity (OFHEO) reviews in  10 states, HOME reviews done by HUD field offices when projects include  both TCAP and HOME funds, and HFA reviews. HUD officials told us that  they can rely on existing Office of Community Planning and Development  (CPD) field staff to carry out HUD’s monitoring and also would plan to  look for patterns of problems identified by the OIG, OFHEO, CPD staff, or  HFAs during oversight and review activities. HUD officials noted that the  agency’s emphasis so far has been on the obligation, outlay, and tracking  of funds to the HFAs and their disbursement to project owners.
As well as HFAs, HUD officials also expect that third-party investors will  monitor TCAP projects for compliance in the same way that these  stakeholders have been responsible for monitoring LIHTC projects. TCAP  requires tax credits to remain in transactions, and project owners typically  sell the tax credits to third-party investors. However, we found that in  some cases projects included a limited amount of LIHTCs and project  owners chose not to sell these credits to a third-party, thereby limiting or  precluding third-party oversight of these projects. In traditional LIHTC  projects, third-party investors play an important role in ensuring  compliance with tax credit program requirements because they risk losing  their ability to claim the tax credits if the project is not in compliance with  these requirements. Some HFAs told us that they will coordinate with and  rely on reviews and audits that investors and private construction lenders  perform to satisfy the HFAs’ asset management obligations under TCAP.  In cases when an HFA is coordinating with a third-party investor, the  investor may provide early warning information that would be useful to  the HFA if the HFA had to act quickly to assist the project or ensure  compliance with TCAP requirements. But, some TCAP projects received a  nominal amount of tax credits, and project owners chose not to sell the  tax credits. These projects lack the additional oversight provided by third- party investors. In these cases, HFAs may be the sole monitor, other than  HUD, ensuring that funds are spent properly and that the project owners  comply with TCAP terms and conditions.
HUD officials acknowledged that in the absence of a significant third-party  investment, the amount of overall scrutiny a TCAP project would receive  is reduced; however, HUD officials told us that at this point in time they  were not aware of how many projects either had nominal LIHTC awards  or lacked third-party investors. Our limited review showed that some  TCAP projects in Florida received a nominal amount of tax credits and  lacked third-party investors that otherwise would provide an added layer  of oversight for compliance with TCAP requirements. Specifically, we  found that 13 of 25 projects (52 percent) that were allocated TCAP funds  in Florida had received a nominal amount of LIHTCs.  The Florida Housing  Finance Corporation (FHFC) explained that it had awarded $100 in  LIHTCs to each of these projects and that the project owners made $650  equity investments to the projects in return for the tax credit awards  instead of selling the tax credits to a third-party investor.  FHFC plans to  institute oversight activities for all of its TCAP and Section 1602 Program  projects.  Nonetheless, HUD has not required HFAs to enhance their  oversight or take other actions to account for the absence or limited  involvement of third-party investors. Without the oversight provided by  third-party investors and with the limited monitoring planned by HUD,  these TCAP projects may constitute a higher risk to HUD and to the HFAs  that they will become troubled or fall out of compliance with LIHTC  requirements.
In addition, although HUD’s monitoring strategy relies partly on  monitoring by third-party investors and HOME program reviews, HUD  officials told us that they will not know how many TCAP projects have  third-party investors or how many also have HOME funds until projects  are completed and HFAs submit final reports on the projects. Therefore,  HUD cannot currently determine the number of projects that are being  monitored by others. Additionally, HUD does not currently know how  many TCAP projects will be covered through HOME reviews. According to  HUD officials, once projects are complete and all project information has  been reported to HUD, it plans to use that information to tailor a  monitoring plan to these projects. It will be important for HUD’s TCAP  monitoring strategy to recognize the differences in risk for projects  without third-party investor oversight and those with investor oversight as  well as those projects not covered by HOME reviews.
As discussed above, HUD officials said they have been focused on getting  Recovery Act funds to HFAs. Since beginning TCAP, HUD has drawn upon  limited staff resources in headquarters to administer and track the  spending of TCAP funds—its Office of Affordable Housing Programs  administers TCAP, and four existing headquarters staff from the HOME  program work on TCAP (three part-time and one full-time). HUD officials  noted that the Recovery Act does not set aside administrative resources to  HUD to either implement the TCAP program, which was performed by  existing HOME program staff, or to monitoring HFAs for compliance. In  comparison, the Recovery Act provided additional resources for  monitoring under the Neighborhood Stabilization Program, which HUD’s  CPD also performs.
Without a plan for identifying projects without third-party investor  oversight and ensuring sufficient oversight when investors are absent,  HUD will face constraints in ensuring that TCAP projects remain in  compliance with program requirements, some of which apply for 15 years  or more. Furthermore, without knowing whether projects involve third- party investors, HUD cannot focus its limited monitoring resources on the  projects with the least oversight by others.
section_title: Treasury Developed a Risk- Based System for Monitoring HFAs
paragraphs: Unlike HUD, which relies on existing program oversight resources,  Treasury has developed a system to conduct compliance reviews to ensure  that the HFAs are following the terms and conditions of the Section 1602  Program agreement, and are providing oversight over the project owners  receiving the awards. Treasury officials told us that their Office of Fiscal  Assistant Secretary received $3 million to administer the Section 1602  Program and the Section 1603 Renewable Energy Program from the total  funds appropriated to Treasury for administrative expenses under the  Recovery Act.  According to Treasury officials, they have designed a risk- based system in which they plan to conduct compliance monitoring on-site  for 23 HFAs and remote monitoring for the remainder of the HFAs by the  end of calendar year 2010. Whether monitoring is conducted on-site or  remotely depends on factors such as identified risks and the size of the  grant. The review generally consists of an interview, followed by a review  of program files, a review of a sample of project files, a review of financial  management information, and a cross-check to the records held at  Treasury. After the review is completed, if there are any findings, staff  request a corrective action or action plan, depending on the nature and  severity of the noncompliance. According to Treasury officials, if staff  recommend a corrective action or action plan, Treasury will follow up to  ensure that the HFA takes the necessary corrective action. If the agency  fails to take the corrective action, Treasury will take steps to bring the  HFA into compliance and, if necessary, recapture funds.
As of August 2010, Treasury officials told us that they had completed nine  compliance monitoring reviews and have been conducting six additional  HFA reviews. Treasury officials said that the kinds of issues they found in  their reviews relate to failure to properly document files, lack of a policy  to handle fraud by project owners, and, in one case, unresponsiveness to  Treasury’s request for documentation. Treasury officials told us that these  issues were often resolved during the compliance review, but that some  issues required additional follow-up with the HFAs. In the case of the  unresponsive HFA, Treasury officials said they have put a hold on the  HFA’s Section 1602 Program funds until they are sure the HFA has  provided all materials required to satisfy Treasury’s requests.
section_title: TCAP Reporting Requirements Have Been More Complex Than Section 1602 Program Requirements
paragraphs: Recovery Act recipient reporting requirements are different and more  complex for TCAP than for the Section 1602 Program. More specifically,  the Recovery Act describes recipient reporting requirements, including  that of estimated jobs created and retained.
The Recovery Act recipient reporting requirements apply only to programs  under Division A of the Recovery Act, which includes TCAP. The Section  1602 Program is under Division B of the Recovery Act, and, therefore, not  subject to recipient reporting requirements.
As Recovery Act-funded recipients, HFAs must file quarterly reports  through FederalReporting.gov on a number of data elements, including the  number of full-time equivalent jobs funded by TCAP funds during that  quarter. Jobs must be counted in accordance with methodology provided  by OMB. OMB guidance limits the number of jobs reported to the actual  use of the funds in each quarter. In cases of construction funding based on  a mix of financing sources, HFAs can count the jobs created or retained  based on the proportion of TCAP funds. In addition to reporting through  FederalReporting.gov, HFAs report information on TCAP projects through  two HUD systems. HFAs use HUD’s Integrated Disbursement and  Information System to report on the selection of TCAP projects by HFAs  as well as disbursement of TCAP funds. HFAs also use the Recovery Act  Management and Performance System to report on project compliance  with environmental reviews.
Although not subject to recipient reporting, Treasury chose to collect  project information through quarterly performance reports submitted by  HFAs on an Excel spreadsheet. HFAs need only make one report of all  jobs created or retained by Section 1602 Program funds for each project.  HFAs submit estimated information on the number of FTE jobs to be  created or retained by the entire project with the first quarterly report for  each project. The number of jobs reported to Treasury need not be  reduced to reflect parts of the project not funded under the Section 1602  Program. Except for requiring the use of FTEs, Treasury has not issued  detailed guidance specifying job estimation methodology under the  Section 1602 Program.
Job counts between the programs and across HFAs are not comparable.  About two-thirds of the HFAs in our survey said that they will conduct a  review of the information being provided by the project owners, but others  said that they relied on signed statements from the project owners  attesting to the accuracy of the jobs estimates. Furthermore, because of  the differences in job reporting methodology for TCAP and the Section  1602 Program, job counts reported for the programs varied widely. We  previously reported that some HFAs were concerned about  underreporting jobs that TCAP funds created because of OMB’s  requirement that they count only jobs directly funded by TCAP. They  said that because projects funded under TCAP would not have moved  forward without TCAP funds, all the jobs associated with the projects  should be counted. For example, $2 million in TCAP funds could enable an  $8 million project to be constructed that otherwise would not have been  built, but only the jobs directly related to the $2 million TCAP expenditure  would be reported.
section_title: Conclusions
paragraphs: Although constrained by limited resources or time, HUD and Treasury  developed two new programs, TCAP and the Section 1602 Program,  respectively, that are designed to provide capital investment to LIHTC  projects hit hard by the economic crisis. TCAP and the Section 1602  Program have had a strong impact on the LIHTC market. However, our  review identified two areas of concern: one that relates to HUD’s  identification of higher-risk TCAP projects and another that relates to  challenges that some project owners may face in meeting a December  2010 deadline for spending funds in Treasury’s Section 1602 Program.
Under TCAP, HFAs have increased responsibilities for asset management  and monitoring compliance of project owners with the terms and  conditions of the program. However, some projects with a nominal  amount of tax credits may lack the benefit of oversight by third-party  investors.  Nonetheless, HUD has not identified projects that lack this  additional level of oversight and thus may be at higher risk of  noncompliance with TCAP and LIHTC requirements. Although HUD relies  in part on HFAs to provide oversight, HUD does not know the extent to  which the HFAs will provide additional oversight for projects that lack  third-party investors. HUD is relying on existing monitoring systems and  resources, but has not fully identified those projects that may be subject to  review under its existing system (such as TCAP projects that also have  HOME funds) or developed additional guidance or oversight of TCAP  projects where there is little or no third-party oversight. HUD could take a  more active role in monitoring TCAP projects—first by identifying those  projects that may present a higher risk of noncompliance, and second by  identifying those projects that also have HOME funds. HUD could also  more effectively use limited oversight resources by using a risk-based  approach that considers whether a TCAP project has third-party investors  and whether HFAs are providing enhanced oversight. Likewise, by  gathering information about the number of the projects that have TCAP  and HOME funding, HUD could more effectively plan reviews and deploy  staff. Without a more rigorous approach to oversight, HUD will be limited  in its efforts to ensure that TCAP projects meet program requirements and  continue to provide a source of affordable housing.
Treasury’s regulations require project owners to spend 30 percent of  eligible project costs by December 31, 2010, to continue receiving  additional Section 1602 Program funds in 2011. However, some of the  HFAs and project owners expressed concerns about meeting the 30  percent requirement because of unexpected delays stemming from the  time needed to assemble funding, litigation, or construction or permitting  issues. For instance, as of June 30, 2010, about 39 percent of Section 1602  Program projects that we reviewed have yet to close, leaving little time to  meet the spending deadline. Projects that do not meet the deadline would  not be eligible to receive any additional Section 1602 Program funds. In  response, other sources of funding might withdraw from the projects, and  project owners would face difficulty finding replacement financing. Thus,  the 30 percent spending requirement might stop projects already under  way—an unintended irony for a program designed to jumpstart stalled  projects. Should there be a significant number of such projects, Treasury  will be challenged in ensuring that the program achieves its intended  goals. Specifically, although Treasury has been developing guidance for  how HFAs should monitor project spending, it has yet to develop  contingency plans in the event that significant numbers of projects stall  again.
section_title: Recommendations for Executive Action
paragraphs: Because the absence of third-party investors reduces the amount of overall  scrutiny TCAP projects would receive and HUD is currently not aware of  how many projects lack third-party investors, HUD should develop a risk- based plan for its role in overseeing TCAP projects that recognizes the  level of oversight provided by others.
Treasury should expeditiously provide HFAs with guidance on monitoring  project spending and develop plans for dealing with the possibility that  projects could miss the spending deadline and face further project  interruptions.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HUD for review and comment.  HUD  responded by saying it will identify projects that are not funded by HOME  funds and projects that have a nominal tax credit award.  HUD said it will  make these identifications after projects are complete and develop a  monitoring plan tailored to these projects.  It will be important to ensure  that HUD’s approach includes a risk-based plan.  We revised our section to  recognize actions that HUD proposed in their response.  HUD also  provided technical comments that we incorporated as appropriate.
We provided a draft of this report to Treasury for review and comment.   Treasury responded by saying that it has taken a number of steps to  ensure HFAs and project owners have a complete understanding of the 30  percent deadline and are prepared to comply with that requirement.
Further, Treasury said it plans to continue monitoring the impact of the 30  percent spending deadline on the program and to provide additional  guidance necessary to address unforeseen or unexpected circumstances.   In our review of nine HFAs, we found that about 39 percent of the projects  awarded funds in those nine states had not yet closed, which is the first  step to being able to draw funds from entities that provide financing.   Treasury's development of timely guidance may be particularly important  because the December 31 deadline for spending 30 percent of program  funding is quickly approaching.  Treasury also provided technical  comments that we incorporated as appropriate.
section_title: Many Recipients Are Citing Greater Ease Meeting Recovery Act Reporting Requirements, but Some Recipients Continue to Face Difficulties Calculating Jobs
paragraphs: According to Recovery.gov, as of August 24, 2010, recipients reported on  close to 200,000 awards indicating that the Recovery Act funded  approximately 750,000 jobs during the quarter beginning April 1, 2010, and  ending June 30, 2010. As reported by the Recovery Accountability and  Transparency Board (the Board), the job calculations are based on the  number of hours worked in a quarter and funded under the Recovery Act  and expressed in FTEs. Officials from many states reported that the  recipient reporting process was, by this fourth round, becoming routine.  Given that no new reporting guidance was issued by OMB during the  quarter and that a time extension was again granted by the Board,  recipients indicated they had few problems reporting. The FTE  calculations, however, continue to be difficult for some recipients as  evidenced by our field work in selected jurisdictions covering two energy  programs.
subsections: section_title: Fourth Round Data Indicate Progress in Linking of Recipient Reports, Which Can Facilitate Tracking Across Quarters
paragraphs: We reviewed 74,249 prime recipient report records from Recovery.gov for  this fourth round. This was 3,592 more than submitted in the previous  quarter and represents about a 5 percent increase from round three. For  our analyses, in addition to the round four recipient report data, we also  used the round one, round two, and round three data as posted on  Recovery.gov as of July 30, 2010.
We examined recipient reports to identify the extent to which progress  was being made in addressing several key limitations we had found in our  prior reports, including  the inability to link reports for the same project across quarters;  reporting errors;    unusual values, such as award amounts of zero, or relationships  between values requiring further review because they are unexpected;  or  flaws in the data logic and consistency, such as reports marked final  that show a significant portion of the award amount not spent.
subsections: section_title: Linking Reports for the Same Projects across Quarters
paragraphs: Our analysis showed better linkage of reports across quarters, but we still  found instances where it appears reporting on projects was discontinued  and may indicate possible issues with linking. The ability to link reports  across quarters is critical to tracking project funding and FTEs that are  key indicators of project results. For example, if two consecutive quarterly  reports on the same project are not linked, they become identified as two  separate records, having an impact on the cumulative funding calculation  and the ability to associate FTEs reported in the separate quarters with  one another. Similarly, mislinked reports would result in funding and FTEs  from two different projects being incorrectly associated with one another.  For the data in Recovery.gov, the award key data field is used to track  recipient reports across quarters.
In our previous report, we performed a series of matching operations  between the three rounds of prime recipient reports using the award key  data field. We extended these matches to the current fourth round of  prime recipient reports to continue reviewing the tracking of reports from  one quarter to the next and to identify potential mismatches of reports. We  identified 1,111 fourth round prime recipient reports—1.3 percent of the  fourth round prime recipient reports—that reflected a break in reporting  (e.g., recipient reports that appeared in rounds one and four but not  rounds two and three or, similarly, appeared in rounds two and four but  not round three, etc.). Even though the number of prime recipient reports  has increased for this fourth round, this is a smaller number of reports  showing a break in reporting than we observed in the previous quarter. In  our previous match across three rounds of reports, we identified 1,358  prime recipient reports that appeared in rounds one and three but not  round two.
We performed another analysis using the final report and project status  indicator fields that also suggested some concerns with missing linkages  or potential errors in one of the reporting fields. As before, we identified  recipient reports that only appeared in prior rounds, but not in round four.  For prime recipients whose last report appeared in one of the prior three  rounds, we examined the final report status and the project status fields,  as those would presumably be the last reports from these projects. As  shown in table 11, of the total 14,542 prime recipients that did not report in  round four, overall, 34 percent of their last prior round reports were not  marked as final and 27 percent showed project status as being less than 50  percent complete or not started. These data suggest that, among other  reasons, the projects may not have been completed, or they should have  been linked to a report in a subsequent quarter, or that recipients were  locked out of the reporting system.
The percentage not marked as final is less than we observed in our  previous analysis. However, the number of recipient reports from round  three that did not appear in round four, with no indication that the round  three report was final or that it was not close to completion, is quite  similar to the number of discrepancies found in our last report. Based on  these results showing projects that were not marked as final and  indicating that they were in the earlier stages of implementation, it seems  reasonable to expect that a fourth round quarterly report should have been  filed, but the necessary linkage has not been made. Alternatively, these  fields may not show the correct status.
During the most recent reporting quarter, recipients were able to  reorganize unlinked or mislinked reports between rounds three and four.  This may have facilitated the reduction in the proportion of reports that  did not appear in round four, but that were not marked as a final report.
section_title: Reporting Errors
paragraphs: In addition to our examination of report linking across quarters, we  continued our monitoring of errors or potential problems by repeating  many of the analyses and edit checks reported in our earlier reports using  the fourth reporting period data. The results of such analyses can help  improve the accuracy and completeness of the Recovery.gov data and  inform planning for analyses of recipient reports over time. In general, the  overall results were similar to what we observed in the previous round.
For example, we identified a mismatch of 128 reports for Treasury  Account Symbol (TAS) codes and 115 for Catalog of Federal Domestic  Assistance (CFDA) numbers. This is a small increase from the previous  round, where 117 reports for TAS codes and 112 reports for CFDA number  were mismatched to the agency name fields. We also checked the data  fields on the number and total amount of small subawards of less than  $25,000 and identified 443 reports where the amount reported in both  small subawards and small subawards to individuals were the same. This  may be an indicator of improper keying of data or inaccurate placement of  award data in a data field, both of which negatively affect data accuracy.  The 443 reports is a small increase from the 436 reports identified in the  previous round. However, the number of reports where the same value  was entered for the number of subawards and the total dollar value of  subawards was reduced, from 110 in round three to 101 in round four.
section_title: Unusual or Atypical Data Values
paragraphs: Unusual or atypical data values alert the analyst to potential inaccuracies.  We checked unusual or atypical data values by identifying reports where  the award amount was zero or less than $10. We know that it is highly  improbable that grants were awarded in these small amounts. Finding  numbers like these suggests improper keying of data or a  misinterpretation of the guidance for FederalReporting.gov, both of which  negatively affect data quality. We determined that the number of reports  where this occurred was reduced to 37 reports in this round out of the  74,249 prime recipient report records, down from 74 reports in round  three.
section_title: Flaws in Data Logic and Consistency
paragraphs: Data logic and consistency inform the analyst about whether the data are  believable, given program guidelines and objectives. To assess consistency  in the range between award amount and amounts reported as received or  expended, we repeated our analyses of reports marked as final to identify  possible over or underspending or misreporting by identifying final reports  where the amount received or expended by the recipient was less than 75  percent of the award amount or exceeded the award amount by 10 percent  or more. If the final report status is correct, this check can help agencies  identify where award funds were not being spent, which may indicate  project implementation problems. If more funds were spent than were  awarded, it may indicate problems with project financial accounts or  controls. Similar to round three, 3 percent of the round four reports  marked as final showed an amount received or expended that was not  within 75 percent of the award amount, and no reports exceeded the  award amount by 10 percent or more.
section_title: Many State Officials Cited Increased Ease Compiling and Reporting Recipient Data
paragraphs: Many state officials noted that the reporting process is starting to become  routine. They highlighted the fact that guidance remained stable for this  round of reporting and that the early decision to extend the reporting  deadline from July 10 to July 14 contributed to the success of the reporting  process. For example, officials in California stated that the fourth round of  recipient reporting went a lot smoother than prior rounds; further, the  extension of the deadline to July 14 allowed many of the state agencies to  obtain more complete data through the end of the month of June and  report this to FederalReporting.gov. Similarly, officials in Colorado  reported that the deadline extension to July 14 allowed for three additional  working days for recipients to review their submissions and make  necessary corrections, which they felt improved the data quality. Officials  in the District of Columbia reported that in general there are no difficulties  in the District’s recipient reporting process and the process has become  smoother with each subsequent reporting period, while officials in Illinois  stated that with the reporting guidance remaining the same, their agencies  are becoming familiar with the reporting process. Officials in Georgia  noted that they did not hear negative feedback from the state agencies  regarding the recipient reporting process or the FederalReporting.gov Web  site during this round.
subsections: section_title: A Few States Are Preparing for Changes in Leadership
paragraphs: A number of the states we reviewed are anticipating leadership changes in  the upcoming gubernatorial elections. In preparation, a few states noted  that they are planning or are undertaking changes in procedures to ensure  continuity during a transition. For example, Michigan Economic Recovery  Office officials told us that because of anticipated changes to the state’s  administration, they moved to a decentralized process during this round of  reporting to allow time for state agencies to adjust to reporting. Michigan  state agencies submitted quarterly recipient reports directly to the federal  government via FederalReporting.gov rather than to the state’s Economic  Recovery Office, which had previously served as a centralized reporting  point. The officials told us that the decentralized reporting process for the  quarter ending June 30, 2010, went as smoothly as they had anticipated,  and the quality of the data submitted by state agencies to  FederalReporting.gov has improved over time. The governor’s office in  Colorado is in the initial planning phase of transitioning to a new  administration. Colorado state officials commented that the recipient  reporting process has become a stable activity that should be able to move  into a new administration with relatively little disruption. Officials in  Georgia did not have any real concerns regarding a transition in  administration, as the state now has recipient reporting systems and  processes in place. California officials stated that steps have already been  taken to ensure continuity in recipient reporting for the duration of the  Recovery Act, while New Jersey officials noted that there were not many  challenges related to recipient reporting amid a transition to a new  administration in their state.
section_title: States Focus Their Recovery Act Web Sites on Providing Information to the Public and Continue to Enhance Web Site Features
paragraphs: Many states noted that their Web sites were designed to provide  information about Recovery Act programs, funding, and eligibility to the  people of their states. For example, officials in California commented that  the state Web site was designed for use by the average Californian to keep  citizens informed about the Recovery Act’s impact in California. Officials  in Arizona noted that their Web site was designed to provide transparency  to the public on how stimulus funds are being spent in the state. Several  state Web sites were also used to provide potential applicants information  on how to obtain grants, assistance, and contracts. For example, officials  in the District of Columbia noted that their Web site provides information  about Recovery Act funding received by the city and is a resource for  people and organizations who are seeking opportunities to apply for grant  funding, assistance, and potential contracts involving Recovery Act funds.
A number of state officials reported that they are continuing to add  content to their Web sites. For example, Ohio’s Recovery Act Web site  recently added an interactive searchable map of funds awarded by  location and enhanced information on the use of funds that are not  covered by recipient reporting requirements. Officials in Texas said that  enhancements in the past year have included new tracking reports to  follow dollars, an interactive county map, and disbursement information.  As another example, the Massachusetts Recovery and Reinvestment Office  recently created a new Recovery Act Web site using an outside firm to  help develop the most important features. An official from that office felt  that the Recovery Act data collection and reporting effort will positively  affect state government by improving policy and management discussions  through the use of data.
section_title: Most DOE EECBG and Weatherization Program Recipients We Interviewed Followed OMB’s FTE Calculation Guidance, and DOE’s Recovery Operations’ Data Quality Efforts Continue to Develop
subsections: section_title: EECBG Program
paragraphs: The EECBG program is administered within DOE and was funded for the  first time with the passage of the Recovery Act. Because over 2,300 state,  local, and tribal governments are eligible for direct formula EECBG grants  and the grants are also awarded on a competitive basis, the program has  many different types and sizes of recipients. For example, each state-level  recipient must use at least 60 percent of its allocation to provide subgrants  to local government units that are not eligible for direct grants, making the  state the prime recipient while the local government unit is a subrecipient.  Larger local government units receive grants directly from DOE, making  them prime recipients. For the fourth round of reporting, 2,116 prime  recipients of the program reported, as of July 30, 2010, that they created or  retained about 2,265 FTEs funded by the Recovery Act.
We interviewed 13 EECBG state-level and 19 local government recipients  from our 17 selected jurisdictions about their FTE calculations for the  fourth round of reporting. Given that the EECBG program is new, some of  them had not yet reported. For example, District of Columbia officials  from the District’s Department of the Environment told us that their work  under the EECBG program had not started in time for them to report for  the period that ended on June 30, 2010. California Energy Commission  officials noted that they had only a few EECBG recipients for the last  reporting round, but there were 50 or 60 recipients for this fourth round.  Another recipient commented that reporting was fairly easy now because  they were only reporting internal data they controlled, as compared to  contractor data, but the official anticipated more complexity as the  program expands.
Officials from all of the state-level government units we interviewed that  had FTEs to report said they followed OMB’s December 18, 2009, guidance  on FTE calculations. Specifically, they collected the number of hours  worked that were funded by the Recovery Act and divided that total by the  number of hours in a full-time work schedule, with defined processes in  place to collect the EECBG recipient reported data. For example, Arizona  Department of Commerce officials said that their office is responsible for  reporting EECBG recipient data to the state’s Office of Economic  Recovery centralized reporting team. The Office of Economic Recovery  works closely with the Arizona Department of Commerce to ensure that  the reporting data are accurate. Additionally, Arizona officials said there is  a review and approval process in place to check that the hours reported by  the program’s subrecipients are accurate. Officials in the Colorado state  energy office noted that it has been easier collecting hours worked from  EECBG subrecipients because DOE requires reporting the hours worked  and the same data is used to convert hours to FTEs for OMB reporting.  However, officials from a few other states said that generating the most  comprehensive and complete job numbers available from subrecipients is  still a challenge. The same challenge surfaced in education and housing  programs that we previously reviewed.
A few local government EECBG recipients we interviewed used methods  other than the OMB guidance to estimate their number of FTEs, possibly  resulting in over or undercounting. For example, while DOE guidance  explicitly states that the job-year estimate issued by the Council of  Economic Advisers for job creation potential is not appropriate in  determining direct jobs created or retained and should not be used for  reporting to either OMB or DOE, a New Jersey recipient informed us that  she planned to use this number to estimate her township’s FTEs. We  informed the recipient that this was incorrect. In New York, a county  official said that an EECBG contractor was conducting work under a  Recovery Act contract, but the county did not report any FTEs in its most  recent quarterly report because the official did not think the contractor  had any documented jobs created or saved. Related to the problem with  complete FTE numbers, several EECBG recipients reported confusion  about including data from subrecipients on jobs, which OMB guidance  states should be included. For example, officials from a county in  California stated they received conflicting information about including  jobs from subrecipients and vendors in their recipient reports. The  officials said that the conflicting information emanated from different  levels within DOE and between DOE’s and OMB’s guidance. The county  officials believed they did not get a clear answer from DOE as to the  difference between subrecipients and vendors. Deciding that it was better  to over report jobs than to under report jobs, they included subrecipient  and vendor hours that could be project-related in their recipient reports.
Based on the recipients we interviewed, there was some evidence that  larger EECBG direct grant recipients seemed to conduct more thorough  recipient reporting data quality reviews than smaller direct grant  recipients, possibly due to their enhanced administrative capacity. For  example, a large EECBG grant recipient in Georgia reported that it  improves data accuracy by prepopulating reports for subrecipients so they  only need to include job numbers and vendor disbursements. In some  instances, it also compares the subrecipient data to other documents, such  as invoices and Davis-Bacon reports. However, according to a city official  in Georgia, for their small grant, no specific data quality reviews are  conducted other than a city official reviewing the hours worked. Colorado  state officials said that communities that received under $2 million in  direct formula grants have more difficulty administering EECBG grants  and meeting the reporting requirements because they have limited staff  resources. As an example, they mentioned a Colorado city, which received  approximately $1 million in its EECBG grant. Because of limited  resources, the city has the person who administers its housing programs  also administer the EECBG grant. The Colorado state officials believed  that in the case of smaller communities, it would work better if the state  administered the EECBG grants and could report for the locality.
According to DOE officials, their EECBG program project officers have as  minimum responsibilities making sure the recipients that need to report  are reporting, reviewing the quality of the recipient reporting data  submitted, and ensuring that recipients correct the data if the project  officers detect errors. DOE monitors grant recipients primarily through its  project officers, and project officers work directly with recipients to  provide guidance and evaluate performance. Project officers also gather  and analyze information about project planning and implementation and  outcomes to help ensure data quality and to ensure that statutory  requirements are met. DOE stated that it has updated the checklist that  project officers use to monitor recipients, and it is also developing  guidance that includes best practices on how states should monitor their  subrecipients. Such increased attention to monitoring recipients, including  the quality of their data, could likely reduce the errors made by recipients.
section_title: Weatherization Assistance Program
paragraphs: During the fourth round of recipient reporting, 58 prime recipients of  DOE’s Weatherization Assistance Program submitted their quarterly data  to FederalReporting.gov, and as of July 30, 2010, reported approximately  12,980 FTEs funded by the Recovery Act. We interviewed 8 state-level and  17 local weatherization assistance recipients from our 17 selected  jurisdictions about their FTE calculations for the fourth round of  reporting. As with the EECBG grants, we found that most of the  weatherization assistance recipients we interviewed followed OMB’s  December 18, 2009, guidance regarding FTE calculations. A few recipients,  however, did not estimate the number of FTEs correctly for this round of  reporting, resulting in under or over counting. For example, in one case,  subrecipients in Florida did not include the hours worked by contractors  who performed weatherization work at individual homes, which they  attributed to a lack of awareness of the requirement to report the hours. In  California, a local weatherization assistance provider also expressed  confusion regarding reporting subcontractor hours. In Pennsylvania, a  state official indicated some weatherization subrecipients experienced  difficulties, at least in their initial reports, in submitting FTE information  through a new Web-based reporting system that collects and calculates  FTE information from the subrecipients. The Pennsylvania weatherization  recipients report hours through this system to the Department of  Community and Economic Development, but the system does not  currently provide a method for subrecipients to certify the accuracy of  what they report.
A few states had processes in place to help ensure weatherization  assistance recipient reporting accuracy. For example, a District of  Columbia official said the weatherization program staff and Recovery Act  grant managers review submitted recipient reporting data from  community-based organizations on a monthly basis before it is reported  into the District’s centralized reporting system. A New York official  reported reviewing data submitted by a sample of subrecipients and  comparing jobs data to contract and payment information in the program  base, while in Georgia, the state weatherization program officials reviewed  each provider’s submission and called each provider to discuss their  numbers. This process resulted in some changes to vendor information  and the number of jobs created or retained.
section_title: DOE’s Recipient Reporting Data Quality Review
paragraphs: According to DOE officials, during the quarter ending June 30, 2010, 3,988  DOE recipients submitted reports, an increase of about 7 percent from the  quarter ending March 31, 2010, and an increase of about 28 percent from  the 2009 year-end reporting period. DOE stated that only eight recipients  are considered nonreporters for this quarter, the majority of whom belong  to a group with consistent challenges in reporting.
According to a senior DOE official in the department’s Recovery  Operations Group, the department’s data quality review process for fourth  round recipient reports was enhanced by several factors. The DOE official  noted that access to FederalReporting.gov during the reporting period  helped DOE identify recipients who had not yet filed and helped assist  those who had unsuccessfully filed, entered the wrong awarding agency  code, or confused the reporting required by OMB with DOE’s system. In  addition, he said that communicating the extended time frame for  reporting before the reporting period actually began alleviated last-minute  confusion or frustration on the part of recipients or reviewers, causing  fewer recipients to wait until the last minute to file. Also, the official  commented that the July 14 to July 20, 2010, late submission period, during  which recipients were still allowed to file, allowed recipients experiencing  access issues to FederalReporting.gov to submit reports. During this time  period, DOE staff was also able to identify and assist with issues such as  Central Contractor Registration numbers and getting new passwords for  the last approximately 100 recipients filing reports. The DOE official noted  that while the continuous correction provision has added to the workload  of the DOE team, the period allows them greater time to review more  recipient reported data than previously, identify potential errors, and work  with agency reviewers and recipients to improve data quality.
The senior official listed a number of frustrations DOE encountered during  the fourth round of reporting, most of which are in areas where they felt  FederalReporting.gov is technologically limited. For example, according to  the official, FederalReporting.gov lacks some basic logic tests for  matching award numbers, with most of the mismatches resulting from  prefix differences. The lack of this matching capability creates extra work  for the DOE staff, but the Board declined to run separate matching  routines for each agency.
In an April 2010 audit report of DOE’s efforts to ensure the accuracy and  transparency of reported Recovery Act results, the DOE Inspector  General’s (IG) office found that the department had taken a number of  actions designed to do so and made two recommendations, which DOE  had already started to address. For example, recipient reported data  elements are compared to information maintained in the department’s  financial systems. The IG recommended that DOE adjust the quality  assurance process to include adding comparisons of other data elements,  and a senior DOE official reported that for this round of reporting, the  department has added several data elements to the original four that were  reviewed centrally by the headquarters Recovery Operations Group. Now  reviewers compare recipient reports in FederalReporting.gov against DOE  systems to identify recipient information that falls outside expected  results in seven different areas. According to DOE, these areas are key  project markers being tracked by the public, the administration, Congress,  and within the department to determine if the high-level goals of  stimulating the economy and creating jobs outlined in the Recovery Act  are being met. The DOE official said that increased attention has been  placed on data quality within DOE systems as a result of this review  process, which has created new communication channels and processes  to identify issues and correct them. In line with the other IG  recommendation, DOE developed a training program for officials  responsible for reviewing recipient data submissions that includes detailed  steps and procedures for officials to follow when reviewing recipient  quarterly data for significant reporting errors and material omissions.
section_title: The Inspector General Community Has a Series of Efforts Aimed at Increasing Recipient Reported Data Quality
paragraphs: The IG community is also performing data quality audits of federal  agencies’ data quality review efforts for their recipient reports. In June, an  IG-led Board review of the effectiveness of the agencies’ data quality  review processes was completed. To identify material omissions and  significant errors that were not identified by the reviewed agencies for the  quarter ending December 31, 2009, the IGs performed reviews of the  recipient reported data on FederalReporting.gov and attempted to  compare that data with the data available in the agency-owned systems. In  general, the IGs found that the agency systems were legacy systems that  had been developed, designed, and implemented prior to the Recovery  Act. As a result, data elements were not always consistent and at times  were nonexistent, making matching the data difficult if not impossible.  The final report provided three recommendations to the Board to pursue  discussions with the appropriate government entities regarding improving  the effectiveness of agency data quality reviews. These recommendations  included establishing a uniform and consistent governmentwide award  numbering system; making mandatory the suggested data logic checks  identified in OMB guidance; and issuing guidance to better define material  omissions and significant errors. Although consensus was not reached  among the IGs regarding the award numbering system, there was general  consensus regarding the logic checks and guidance recommendations. The  next effort aimed at recipient reported data quality includes a Board  review focusing on key data reporting elements and the factors  contributing to errors in the recipient reports.
section_title: Intergovernmental Interaction Is a Critical Component of Recovery Act Operations and Will Likely Have Implications beyond the Act
paragraphs: The new procedures and tools developed to implement the Recovery Act  are reshaping intergovernmental interactions and ways that governments  collect, maintain, and report information. For example, the federal  government built a huge data warehouse, FederalReporting.gov, which is  populated by thousands of governments and other Recovery Act fund  recipients, to ensure that the public receives as much information as  possible on the implementation of the Recovery Act. Because such a wide  variety of information is required and since some elements are being  reported for the first time, OMB used a variety of methods to train federal  agencies and recipients of Recovery Act funding on how to comply with  their reporting responsibilities. 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 state  reporting leads, webinars, a call center, and e-mail outreach. In addition,  the Board recently reported that, along with the IG community, they have  provided more than 2,000 training and outreach sessions to federal, state,  and local government employees and to private sector individuals involved  in Recovery Act implementation.
According to many of the state officials we interviewed, the Recovery  Act’s reporting requirements also promoted more interaction between  state and federal agencies, state agencies, and within departments of these  state agencies. For example, Ohio officials stated that the governor’s  stimulus office had established contacts with OMB, administration  officials, and other federal agency contacts through work on Recovery Act  implementation and monitoring. Officials from Illinois noted that recipient  reporting was one of the few efforts that brought their otherwise very  independent state agencies together. Colorado state officials reported that  the program and accounting staffs within each state agency are working  together closely to help ensure the accuracy and quality of the Recovery  Act data. A few state officials, however, commented that although  communication with federal agencies and other entities has increased due  to the recipient reporting requirements, the communication is aimed  primarily at dispelling confusion and is not necessarily positive. For  example, Texas state officials commented that the one change that has  been prompted by recipient reporting is the significant effort required to  communicate reporting requirements to subrecipients and to collect,  review, and submit the data.
Officials from a number of states expressed hopes that the increase in  intergovernmental interactions resulting from the Recovery Act reporting  requirements will continue after the act’s reporting requirements expire.  For example, District of Columbia Recovery Act coordinators schedule a  weekly teleconference for all District agencies receiving Recovery Act  funds to provide status updates and have discussions relating to the  Recovery Act. They intend to continue scheduling the meetings after the  Recovery Act funds are expended in order to maintain communication on  other grant-related topics. Michigan officials reported that state agencies  are working with each other in a way they have not before. They said the  Recovery Act has facilitated collaboration, citing that the act removed  some barriers to interaction between state agencies because the timeline  for complying with Recovery Act requirements has been so short that  agencies must work together to meet requirements, which has yielded  many positive effects. Michigan officials noted that they hope the changes  will be long-standing. As another example, a representative from a state  association described Recovery Act-related problem solving between the  audit and technology communities. These interactions included  discussions where there was a flow of information at the policy,  technological, and political levels that they would like to see continued.
A recent report issued by the National Association of State Budget Officers  echoed the responses from many of the state officials we interviewed.  The report noted that during the months before recipient reporting began  in October 2009 and in the months since, the Recovery Act helped to foster  movement toward a more open and communicative atmosphere between  both the federal government and states, as well as between individual  states, while also providing important lessons currently being used in the  implementation of the Federal Funding Accountability and Transparency  Act of 2006 and the recent health care legislation. The report maintained  that states have noted that increased transparency on government  spending is a worthy goal which they support, as long as the federal  government maintains a level of communication that allows for the  effective and efficient implementation of any accountability requirements.
section_title: Oversight and Accountability Efforts
subsections: section_title: Actions Are Needed to Improve Single Audit and Federal Follow-up as Oversight Accountability Mechanisms
paragraphs: OMB has indicated that Single Audits play a key role in the achievement of  its accountability objectives over Recovery Act funds, which include  helping to ensure whether Recovery Act funds are used for authorized  purposes and that risks of fraud, waste, error, and abuse are mitigated. A  Single Audit includes the auditor’s schedule of findings and questioned  costs, internal control and compliance deficiencies, and the auditee’s  corrective action plans along with a summary of prior audit findings that  includes planned and completed corrective actions. We identified  significant concerns with the Single Audit process that (1) diminish the  effectiveness of the Single Audit as an oversight accountability mechanism  and (2) could allow risks associated with Recovery Act funds to persist.  The Single Audit Act and related OMB Circular No. A-133 Audits of  States, Local Governments, and Non-Profit Organizations do not  adequately address the risks associated with the current environment in  which billions of dollars in federal awards are being expended quickly  through new and existing programs associated with the Recovery Act. In  our prior bimonthly reports, we made several recommendations to  improve OMB’s oversight of Recovery Act-funded programs through the  use of Single Audits. OMB has implemented some, but not all, of our  recommendations.
OMB’s Single Audit Internal Control Project (project) highlighted areas  where significant improvements in the Single Audit process are needed.  OMB encouraged auditors from states that volunteered to participate in  the project to communicate internal control deficiencies over  compliance for selected Recovery Act programs earlier than required  under statute. The project has been a collaborative effort between  volunteer states receiving Recovery Act funds, their auditors, and the  federal government. One of the project’s goals was to achieve more timely  communication of internal control deficiencies for higher-risk Recovery  Act programs so that corrective action can be taken more quickly. GAO  assessed the results of the project and found that it met several of its  objectives and that the project was helpful in identifying critical areas  where further OMB actions are needed to improve the Single Audit  process over Recovery Act funding. The project also required that auditee  management provide, 2 months earlier than required under statute, plans  for correcting internal control deficiencies to the cognizant agency for  audit for immediate distribution to the appropriate federal awarding  agency. The federal agency was then to have provided its concerns  relating to management’s plan of corrective actions in a written decision.
We found, however, that (1) most federal awarding agencies did not issue  their management decisions about the corrective actions within the  project’s required time frames, (2) the current reporting time frames for  the Single Audit process are not conducive to the timely identification and  correction of internal control deficiencies, and (3) OMB’s Single Audit  guidance is not timely—specifically for 2010 audits, as well as guidance for  a subsequent project. In our May 2010 bimonthly report, we recommended  that OMB issue its Single Audit guidance, including guidance for future  projects, in a timely manner so that auditors can efficiently plan their audit  work, and OMB concurred with our recommendation. According to  several state auditors who participated in the project, OMB’s issuance of  its guidance in an untimely manner adversely impacts the auditors’ ability  to plan and conduct their Single Audits. They added that untimely project  guidance would also hinder their ability to participate in future OMB  projects intended to provide earlier communication and correction of  internal control deficiencies identified in Recovery Act programs.
We recommend that the Director of OMB strengthen the Single Audit and  federal follow-up as oversight accountability mechanisms by (1)  shortening the timeframes required for issuing management decisions by  federal awarding agencies to grant recipients and (2) issuing the OMB  Circular No. A-133 Compliance Supplement no later than March 31 of each  year.
subsections: section_title: Single Audits as an Oversight Accountability Mechanism for Recovery Act Programs
paragraphs: OMB has indicated that Single Audits would serve as important oversight  accountability mechanism for Recovery Act programs, which have  considerable risks. The most significant of these risks are associated with    new programs that may not have the internal controls and accounting  systems in place to help ensure that funds are distributed and used in  accordance with program regulations and objectives,    Recovery Act funding increases for existing programs that may exceed  the capacity of existing internal controls and accounting systems,  the more extensive accountability and transparency requirements for  Recovery Act funds that require the implementation of new controls  and procedures, and  increased risks because of the need to spend funds quickly.
We reported in our previous bimonthly reports that we were concerned  that, as federal funding of Recovery Act programs accelerates, the Single  Audit process may not provide the timely accountability and focus needed  to assist recipients in making necessary adjustments to internal controls to  provide assurances that the money is being spent as effectively as possible  to meet program objectives. We also reported that the Single Audit  reporting deadline is too late to provide audit results in time for the  audited entity to take action on internal control deficiencies noted in  Recovery Act programs.
In those prior reports, we made several recommendations to OMB for  improving the Single Audit Process to address the increased risks by  helping ensure that Recovery Act funds are not used for unauthorized  purposes and that risks of fraud, waste, error, and abuse are mitigated.  OMB has implemented some, but not all, of these recommendations. In  response to one of our recommendations, in October 2009 OMB  implemented a project to encourage earlier reporting and timely  correction of internal control deficiencies identified in Single Audits that  included Recovery Act programs. OMB’s guidance for the project stated  that this earlier communication of internal control deficiencies over  compliance would allow participating auditees to correct internal control  deficiencies related to Recovery Act funds in a timely manner, thereby  reducing potential future unallowable costs.
We assessed the results of the project and found that the project met its  original objectives of (1) achieving more than 10 volunteer states  participating in the project, (2) having the participating auditors issue  interim internal control reports for the selected programs at least 3  months earlier, and (3) having auditee management issue corrective action  plans to resolve internal control deficiencies at least 2 months earlier than  required by OMB Circular No. A-133. The project also increased the level  of awareness by the auditors of some of the risks associated with  Recovery Act funds and, in some cases, increased the communication and  interaction between the auditors, program officials, and the cognizant  agency for audit concerning internal control deficiencies related to  Recovery Act funds. For example, many of the auditors who responded to  our survey stated that the project increased awareness of internal control  deficiencies and focused attention on the need for federal agencies to be  more involved in pursuing corrective actions to develop more timely  corrective action plans for internal control deficiencies related to  programs receiving Recovery Act funding.
The project also called for federal awarding agencies to actively work with  auditees to resolve high-risk findings in the most expeditious manner. One  of the project’s goals was to achieve more timely communication of  internal control deficiencies for higher-risk Recovery Act programs so that  corrective action could be taken more quickly. The implementation of  corrective actions of internal control deficiencies will help to ensure that  Recovery Act funds are used as intended.
section_title: Most Federal Awarding Agencies Did Not Provide Their Management Decisions within the Prescribed Time Frames
paragraphs: The project’s guidelines called for the federal awarding agencies to  complete two steps by April 30, 2010: (1) perform a risk assessment of the  internal control deficiency and identify those with the greatest risk to  Recovery Act funding, and (2) identify corrective actions taken or planned  by the auditee. OMB guidance called for this information to be included in  a management decision that the federal agency was to have issued to the  auditee’s management, the auditor, and the cognizant agency for audit. As  of April 30, 2010, most federal awarding agencies had not provided their  management decisions on the states’ corrective action plans as required  under the project’s guidelines. Several of the state auditors and state  program officials we surveyed emphasized the need for more timely  communication from the federal awarding agencies, which is important  for state agencies to gain a clear understanding of needed corrective  actions. It is also important for auditors so that they can monitor progress  towards addressing Single Audit results. OMB Circular No. A-133 requires  management decisions to be issued by federal awarding agencies within 6  months of receipt of the audit report. However, the project’s guidelines  required the federal awarding agencies to issue a management decision as  promptly as possible and not later than 90 days after the date that the  corrective action plan was received by the cognizant agency for audit.
The internal control reports for the project identified internal control  deficiencies in at least 24 Recovery Act programs awarded by seven  federal agencies by December 31, 2009. Moreover, under the project’s  guidelines, most corrective action plans were completed by January 31,  2010, 2 months earlier than the time frames under OMB Circular No. A-133  and were concurrently provided to the federal awarding agencies. Despite  the federal awarding agencies having the internal control reports and  corrective action plans in January 2010, only three of the seven federal  awarding agencies had submitted some of the relevant management  decisions on corrective actions by May 14, 2010. We asked OMB officials  to provide us with an update of the number of management decisions that  had been submitted by the federal awarding agencies through August 5,  2010. OMB provided a summarized list of the total number of management  decisions by agency where the auditee and the federal agency had agreed  on action to be taken to address the report findings but had not traced  these totals to the detailed documentation to verify the summary  information.
It is important to note that an awarding agency’s issuance of a  management decision does not mean that internal control deficiencies  have been corrected; rather, the management decision reflects the  agency’s approval of the auditee’s proposed corrective action. Although  some corrective actions can be implemented quickly, others can take  months or years to implement. The issuance of timely management  decisions by federal agencies is important because it can affect the  timeliness of the auditees’ implementation of corrective actions to address  internal control deficiencies concerning Recovery Act programs. For  example, according to an HHS Office of Inspector General official,  auditees sometimes wait until they receive a management decision before  taking corrective action on internal control deficiencies. On March 22,  2010, OMB issued memorandum M-10-14, Updated Guidance on the  American Recovery and Reinvestment Act, which among other things,  instructs federal agencies to take immediate action as appropriate to  review and act on Single Audit findings. However, as indicated by the  project’s results, further efforts by OMB are needed to help ensure that  federal agencies provide their management decisions on the corrective  action plans in a timely manner.
section_title: Time Frames of the Single Audit Process Do Not Facilitate the Timely Identification and Correction of Audit Findings in Recovery Act Programs
paragraphs: Under the current time frames for identifying and correcting audit findings  provided by the Single Audit Act and OMB Circular No. A-133, it could take  years to correct significant deficiencies and material weaknesses that  expose Recovery Act funds to misuse or fraud. For example, in  accordance with current requirements, a material weakness that has been  identified by the auditor for an entity that has a June 30, 2009, fiscal year- end is to be reported in the Single Audit report to be issued by March 31,  2010, along with the auditee’s corrective action plan. The federal awarding  agency would have 6 months or until September 30, 2010, from receipt of  the Single Audit report to communicate a written management decision to  the auditee. As a result, it may take 15 months or more since the end of  the fiscal year in which the audit finding was initially identified before any  work is begun. Auditee’s management reports their progress in taking  corrective action in the schedule of prior audit findings where the status of  the finding is reported as either corrected (closed) or not (open). The  auditor then reviews this schedule and it is included in the next Single  Audit reporting package. If the awarding agency delayed issuing a  management decision to the auditee, it is possible that corrective action on  the finding was also delayed, and, as a result, the finding may have  remained open. In addition, several state auditors have expressed  frustration regarding Single Audit findings that remain open years after  they were initially identified, without the auditee or the federal awarding  agency taking action. The lack of attention to ensuring prompt corrective  action impairs the federal government’s ability to ensure that unallowable  costs have been repaid or that internal control deficiencies have been  corrected. Shortening the timeframes required for issuing management  decisions by federal agencies and monitoring the auditee’s implementation  of timely corrective actions by the federal agency will help to ensure that  appropriate audit follow-up and resolution are achieved.
Figure 31 illustrates an example of the Single Audit reporting time frames.
As we reported in prior Recovery Act reports, the problem that the Single  Audit reports are not due until 9 months after the fiscal year-end was  exacerbated by the extensions to the deadline to file Single Audit reports.  The federal awarding agencies, consistent with OMB guidance, had  routinely granted such extensions. In February 2010, HHS, the cognizant  agency for audit, adopted a policy of no longer approving requests for such  extensions. Further, in March 2010, OMB issued a memorandum, in  response to our recommendation, that directed federal agencies to not  grant any requests made to extend the Single Audit reporting deadlines for  fiscal years 2009 through 2011. Despite this guidance, we found that the  Federal Audit Clearinghouse (FAC) did not receive Single Audit reporting  packages for fiscal year ending 2009 from 5 of the 16 selected states and  the District of Columbia within the 9-month time frame provided by  statute. Single Audit reporting packages include a schedule of internal  control deficiencies and the auditee’s plans for correcting them. Thus,  when submissions of reporting packages are late, the auditees’ efforts to  correct internal control deficiencies may be delayed. According to OMB  guidance, late submissions of the Single Audit to FAC in either of the 2  prior fiscal years would prevent the auditor from attaining low-risk auditee  status, which could likely result in an increase in the scope of audit  coverage to address the additional risk for the subsequent year’s audit of  the auditee. While the focus of our bi-monthly reports has been on  Recovery Act funds, in general, the Single Audit pertains to federal  expenditures awarded from the Recovery Act as well as from other federal  sources; thus, internal control deficiencies identified in a program  expending Recovery Act funds would generally affect all other sources of  federal funds for that program as well.
As of August 5, 2010, five of the states participating in the project did not  submit their completed fiscal year 2009 Single Audit reports to FAC by the  March 31 due date; one of these states had not yet submitted its fiscal year  2009 Single Audit Report as of August 24, 2010. While these states were  able to meet the project’s reporting deadline, they were not able to meet  the deadline to submit the state’s Single Audit reporting package.
section_title: Single Audit Guidance Continues to Be Issued in an Untimely Manner
paragraphs: We identified other concerns through our review of the project that point  to the need for OMB to issue all Single Audit guidance in a more timely  manner. Specifically, 12 of the 14 participating state auditors who  responded to our survey stated that guidance for any future OMB projects  should be more timely. In addition, more than half of the auditors  who  responded to our survey indicated that they had concerns with timeliness  issues relating to the release of OMB’s 2009 Circular No. A-133 Compliance  Supplement. OMB issued the Compliance Supplement in two stages, the  initial one in May 2009 and an addendum in August 2009. This guidance  was issued after the Single Audits for entities with a June 30, 2009, fiscal  year-end were already under way. Most of the participating auditors told  us that they needed the information as early as February 2009, or at least  by April 2009, to effectively plan their work. Some of these state auditors  stated that the OMB guidance was issued too late, causing inefficiencies  and disruptions in the planning of audit procedures.
OMB officials told us that they planned to issue the 2010 Compliance  Supplement in late May 2010. In our May 2010 bi-monthly report, we  recommended that OMB issue its Single Audit guidance, including  guidance for future projects, in a timely manner so that auditors can  efficiently plan their audit work. OMB concurred with our  recommendation. However, OMB issued the 2010 Compliance Supplement  on July 29, 2010—again after the audit planning and work for Single Audits  for entities with a June 30, 2010, fiscal year end was already under way.  OMB officials stated that the delay in issuing the 2010 Compliance  Supplement was primarily due to the additional attention needed to  include more Recovery Act programs in the Compliance Supplement and  information regarding the audit procedures for reviewing Recovery Act  reporting requirements. OMB had provided the American Institute of  Certified Public Accountants (AICPA) Governmental Audit Quality Center  and the National Association of State Auditors, Comptrollers and  Treasurers (NASACT) with draft Single Audit guidance in May 2010.  AICPA and NASACT posted the draft to its Web sites for auditors to use  for planning their work. However, some auditors we spoke with stated  that because the guidance was not in a final form, it still impacted their  ability to efficiently plan and conduct their work.
We also reported that OMB initiated the first project in October 2009 well  after most of the audit work had been underway, resulting in some of the  project’s benefits not being realized. The project’s guidance called for the  auditors to complete their internal control work as of November 30, 2009,  and to report internal control deficiencies by December 31, 2009. The  project’s guidelines included incentives to provide the participating  auditors with some relief in their workload to encourage them to  participate in the project. Under the project’s guidelines, auditors were not  required to perform risk assessments of smaller federal programs that they  would otherwise need to complete. However, since most of the auditors  had already completed the risk assessments by the time the project had  started, most of the participating auditors stated that they did not  experience any audit relief.
OMB has stated that it plans to have a second phase of the Single Audit  Internal Control Project for fiscal year 2010. However, as of August 5,  2010, OMB had not yet defined the parameters of the project and issued  guidance for potential volunteer participants. OMB has not provided  detailed guidance that would explain incentives for volunteering to  participate in the project, types of entities that will be permitted to  participate, the scope of the project (including the specific programs that  participants could select from), the number of participants it is seeking, or  the time frames for beginning and ending the project.
We continue to report concerns about the Single Audit process because it  does not provide a means for the timely identification and correction of  internal control deficiencies or other findings relating to Recovery Act  programs. This limits the effectiveness of the Single Audit process as an  oversight accountability mechanism and exposes Recovery Act funds to  increased risk of misuse or fraud. We recommend that the Director of  OMB strengthen the Single Audit and federal follow-up as oversight  accountability mechanisms by (1) shortening the timeframes required for  issuing management decisions by federal awarding agencies to grant  recipients, and (2) issuing the OMB Circular No. A-133 Compliance  Supplement no later than March 31 of each year.
section_title: Fraud, Waste, and Abuse Allegations GAO Has Received That Are Related to the Recovery Act
paragraphs: As of August 11, 2010, we have received 224 allegations of Recovery Act  wrongdoing from the public. We have closed 137 of these cases because  the allegations were nonspecific or lacked information about fraud, waste,  or abuse. Another 44 were investigated further and closed by us or the  appropriate agency inspector general (IG) when no violations were found.  Of allegations that are open, 16 are being handled by us and 27 by an IG.  We generally refer allegations to an IG when that office is already pursuing  the same or a similar complaint. We periodically contact the IGs to  determine the status of our referrals. We will continue to evaluate all  Recovery Act allegations received through FraudNet and provide updates  in future reports.
section_title: Recovery Accountability and Transparency Board Initiatives
paragraphs: The Recovery Accountability and Transparency Board (the Board)  continues to take steps to identify and report on potential areas for risk to  fraud, waste, and mismanagement of Recovery Act funds. The Board  recently published its third report in its series of reviews regarding  recipient reporting data quality. In addition, the Board continues to  augment its various initiatives for detecting potential instances of risk in  Recovery Act contracting and turn over information regarding such  instances to the appropriate inspectors general for further review. The  Board also continues to organize coordinated reviews performed by its  inspectors general working group aimed at further assessments of the  management and oversight of Recovery Act spending. The Board is also  planning to expand on some of its initiatives to strengthen future oversight  as implementation of the Recovery Act continues.
subsections: section_title: Board Reports Focus on Data Quality
paragraphs: In June 2010, the Board reported on the third of three phases of its  inspectors general working group’s review of actions taken by agencies to  improve the quality of data that recipients of Recovery Act funds are  providing for posting to the public Web site. Working in conjunction  with the Board, six inspectors general reported that their agencies had  issued policies and general procedures that follow OMB’s guidance;  however, the implementation of their respective guidance differed  significantly among the agencies and their subunits. We discuss the  results of the inspectors general work in more detail under the recipient  reporting section of this report.
section_title: Current Board Initiatives
paragraphs: The Board continues to use a variety of initiatives to monitor Recovery Act  spending in an effort to identify potential areas at risk for fraud, waste,  and abuse. The Board’s current oversight initiatives include the following:    maintaining a Fraud Hotline, which receives complaints of potential  fraud, waste, and abuse from the public, and referring potential cases  to the respective inspector general for further review.    performing data analyses on publicly available information about  Recovery Act recipients. The Board continues to modify its analytical  efforts to provide insights on potential risk areas for the oversight  community. The Board increased its staff, added more software, and  obtained new public data sources to provide for additional analyses.
As of July 31, 2010, the Board had received 2,398 Fraud Hotline  complaints. As a result of these complaints as well as the Board’s data  analyses, the Board had referred 184 leads to various inspectors general as  of July 31, 2010. Over half of these leads involved the potential  misappropriation of funds or nonperformance of services.
section_title: Board Coordination and Monitoring of Inspectors General Initiatives
paragraphs: The Board continues to coordinate audits carried out by the inspectors  general working group and monitor the independent efforts of the  inspectors general related to the Recovery Act. The inspectors general  working group has one audit under way reviewing the accuracy of selected  fields of recipient reporting data. In addition, the working group is  beginning a review of potential fraud indicators for grants programs in  September 2010.
The Board continues to review monthly reports submitted by the  inspectors general on the number and status of Recovery Act-related  audits and investigations each has initiated. As of July 31, 2010, the  inspectors general received 3,806 complaints related to the Recovery Act  and reported that they have 424 active investigations; 141 investigations  closed without action; and 474 audits, inspections, evaluations, or reviews  in process. The inspectors general also reported they have completed 689  work products on Recovery Act-related issues since the act was passed— 534 of which are published on Recovery.gov and 155 of which are not  publicly available since they contain proprietary or sensitive  information. In addition, the inspectors general, in conjunction with the  Board, reported that they have conducted 2,231 training and outreach  sessions related to Recovery Act issues.
section_title: Impact of the Board and Inspectors General Efforts
paragraphs: According to Board representatives, an outcome of the Board and its work  has been to shift the focus of the inspectors general community to the  prevention of fraud, rather than just the identification and correction of it.  As discussed earlier, the Board’s data analysis capabilities provides the  inspectors general with leads regarding potential risks associated with  Recovery Act funds and recipients. In addition, over half of the training  sessions provided have been focused on preventing fraudulent use of  Recovery Act funds. According to Board representatives, the Board’s work  has also resulted in changes in the data to provide for better visibility over  the use of federal funds. For example, a data field was added in  FedBizOpps for recording a company’s DUNS number; a DUNS number  is an important data element in tracking companies’ transactions with the  government, and including this information is expected to enhance data  matching capabilities.
section_title: Board Plans for the Future
paragraphs: Board representatives explained that the Board and its predictive analysis  capabilities are considered a template for changing how the government  does business. In the short-term, the Board would like to develop  predictive analysis tools for federal agencies’ use, such as a list of  databases to search and steps to be taken to identify risks. In addition, the  Board is considering plans for the transition of its analytic capabilities  elsewhere in the federal government when the Board’s authorization  expires at the end of fiscal year 2013.
section_title: Recovery Independent Advisory Panel
paragraphs: In February 2009, the Recovery Act provided for a Recovery Independent  Advisory Panel to make recommendations to the Board on ways to  prevent fraud, waste, and abuse relating to Recovery Act funds. Four  members of the Advisory Panel were appointed by the President in March  2010. At its first public meeting in Cambridge, Massachusetts, in August  2010, state and City of Boston officials presented information and  addressed the panel’s questions about their actions to prevent fraud,  waste, and abuse. In addition, they discussed the content and structure of  the state Recovery Act Web site, as well as continuity among state and  local Web sites with the federal government’s Recovery.gov Web site. The  panel also held a closed session to discuss techniques to investigate fraud.  Currently, the panel plans to hold a series of public meetings across the  United States, and has tentatively planned its next public meeting for  November 2010.
section_title: Audit Activities Involving Recovery Act Funds Continue at the State and Local Levels
paragraphs: State and local oversight and audit entities across the 16 selected states  and the District continue to actively audit Recovery Act funds. As  mentioned in our May 2010 report, many of these audits are conducted  through the state Single Audit process—an accountability mechanism for  overseeing federal funds at the state and local levels. These audits spanned  many programs and primarily focused on programs that have been  assessed as having higher risk of noncompliance with federal program  requirements, such as weatherization, transportation, and Medicaid.  However, according to officials from several of our selected states and the  District, budget and staffing constraints have limited the number of  Recovery Act audit reviews they could perform. Audit report findings have  covered various areas including financial management and compliance  laws or regulations. In some cases, the audits of Recovery Act funds  identified and reported audit findings that were subsequently addressed by  audited entities. In other cases, audits of Recovery Act funds did not  identify or report findings.
Examples of audit findings relating to financial management practices  identified in audits of Recovery Act funds include the following:  In California, the State Auditor found that cash management practices  were not in compliance with federal rules in the state’s Weatherization  Assistance Program.
The Illinois Office of Internal Audit reported on the failure of state  agencies to minimize the time between drawdowns of federal funds  and expenditure of those funds and failure to charge hours worked to  the proper federal grant at one agency.
In Iowa, auditors found that a local school district possibly  commingled Recovery Act funds with other school district revenue,  which led to the replacement of the district’s accounting supervisor.
In New Jersey, an audit of the Weatherization Assistance Program  found inadequate policies and controls in place to ensure that federal  financial reporting was properly completed, supported by adequate  documentation, and reviewed by a supervisor prior to submission.
In Ohio, the Auditor of the State identified deficiencies related to  unallowable expenditures and inadequate cash management in some  programs funded through the Recovery Act.
Examples of audit findings relating to program compliance with laws and  regulations that were identified in various audits of Recovery Act funds  include the following:  In Arizona, Single Audits found that the Arizona Department of  Education failed to have current central contractor registrations on file  prior to awarding Recovery Act ESEA Title I grants to LEAs but have  developed a corrective action plan to correct these findings.
In Colorado, a local government audit revealed that some Federal  Transit Formula Grant funds had been spent without a check on  whether the vendor had been suspended or debarred from  participating in federal programs.
In Florida, state auditors found that the program officials were unable  to document that certain individuals were eligible for Medicaid  benefits as required by law, and that their procedures did not ensure  that all health care providers receiving Medicaid payments had  provider agreements in effect.
In Massachusetts, the state auditors found that the actual number of  youths being reported as participating in the state’s WIA summer jobs  program was overstated, that the calculation of job numbers needed to  be monitored more closely, and that compliance with participation  levels needed to be reviewed.
In Michigan, the Single Audit of the Medicaid program found that the  Michigan Department of Community Health did not fully monitor its  Medicaid payments to ensure that such claims are paid promptly.  Failure to comply with the “prompt pay” requirements could result in  Michigan not being eligible to receive increased FMAP for certain  claims.
In Mississippi, auditors found many instances of noncompliance with  recipient reporting requirements. In these cases, state agencies were  not providing clear and consistent guidance to subrecipients.
In North Carolina, the state auditor’s office found that a state  department did not consistently perform effective monitoring to  ensure that subrecipients of Recovery Act funds were in compliance  with Davis-Bacon wage-rate requirements.
In Texas, the Single Audit for fiscal year 2009 identified program  weaknesses in determining eligibility in Medicaid, Temporary  Assistance for Needy Families, and the Supplementary Nutrition  Assistance Program.
In addition to audits of Recovery Act funds, several states took steps to  strengthen their accountability efforts to help to ensure appropriate uses  of Recovery Act funds by implementing new work groups or entities to  help manage and oversee Recovery Act-funded programs. In addition,  these new entities have helped state and local governments address the  new requirements associated with Recovery Act funding, coordinate  efforts among the accountability community, and inform the public. Other  activities performed by these entities included maintaining a Recovery Act  Web site, providing technical assistance, tracking the use of funds, issuing  advisories, conducting training on internal controls, and providing  assistance with recipient reporting. Examples of such activities are as  follows:  In California, the Recovery Task Force meets regularly with state  agencies receiving Recovery Act funds, maintains a Recovery Act Web  site as a central repository of information, and has issued more than 30  Recovery Act bulletins providing instructions and guidelines to state  agencies. Also, the Recovery Act Inspector General published an  advisory which included steps to ensure that contractors perform in  accordance with contract terms and to reduce the potential of fraud.
In Georgia, the State Accounting Office launched an internal control  initiative to enhance accountability for Recovery Act funds that began  in June 2010 and provided internal control training to 28 state  agencies. More specifically, these agencies completed a self-  assessment tool covering internal controls in areas such as financial  reporting, revenue, and Recovery Act funds.
In Massachusetts, the City of Boston contracted auditor is developing a  computerized worksheet in which Recovery Act fund recipients will  submit their reporting data in a standardized format that will be  centrally stored at the City Auditor’s office. According to city officials,  this will make the managing of subrecipients and the reporting process  easier and more efficient.
In New Jersey, the Recovery Accountability Task force is responsible  for monitoring the distribution of Recovery Act funds in the state and  promoting the effective and efficient use of those funds. The task force  discusses issues related to the oversight of Recovery Act funds and  receives updates from state agencies to ensure funds are dispersed  with the goals of the Recovery Act in mind.
In New York, the Governor created a Stimulus Oversight Panel which  meets biweekly to examine the use of Recovery Act funds by each of  the 22 state agencies designated to receive them. In addition to other  responsibilities, individual panel members also conduct reviews and  audits in their areas of expertise.
In North Carolina, the Office of Economic Recovery and Investment  (OERI) tracks, monitors, and reports on Recovery Act funds and  works with state agencies on corrective action plans to help resolve  Recovery Act-related findings. OERI also conducted several technical  assistance seminars around the state and provides resources such as  webinars and checklists on its Web site to help agencies comply with  Recovery Act requirements.
In Pennsylvania, the Governor appointed the Chief Accountability  Officer to help oversee reporting and transparency for Recovery Act  activities of state agencies. For the quarter ending June 30, 2010, the  office filed 371 recipient reports on behalf of state agencies and posted  them to the state’s Recovery Act Web site.
In Texas, the Governor’s Stimulus Working Group, which includes  representatives from state agencies receiving significant amounts of  Recovery Act funding, is a vehicle for sharing information. This group  has been used to inform state agencies about recipient reporting  requirements, help focus auditing and monitoring efforts, and address  program concerns.
section_title: Observations on States’ Use of Contracts and Contract Outcomes
paragraphs: During our Recovery Act reviews, we tracked and observed 208 contracts  awarded by state and local governments. While this is a small number of  contracts, our observations indicate that state and local governments  receiving Recovery Act funds reported that they are generally using  competition and fixed-price contracts, and are not facing major issues  with cost, schedule, or contractor performance.
subsections: section_title: State and Local Recovery Act Contracts Generally Are Reported to Use Competition and Fixed- Price Arrangements
paragraphs: Between July 2009 and March 2010, we selected and subsequently  analyzed contracts from a variety of programs and held discussions with  state and local officials to gain an understanding of the extent to which  they believe contracts were awarded competitively and used pricing  structures, particularly fixed-price contracts, which reduced the  government’s financial risk. The use of competition is generally  considered a fundamental tenant of public procurement. In addition, fixed- price contracting generally places the maximum amount of risk on the  contractor because the government pays a fixed price even if actual costs  of the product or service exceed the contract price. Of the 208 contracts  we reviewed, 86 percent were reported by state and local officials as being  competed and 79 percent were reported as fixed-price contracts.  Further, in five states all of the contracts we reviewed were reported as  being competed, and in four states all of the contracts we reviewed were  reported as being fixed-price contracts. Almost all contracts for highway  projects were reported as competed, and all public housing contracts as  fixed-price. Table 12 shows the number of contracts reported by officials  as being competed and awarded with fixed prices in the various programs  we are monitoring across the selected states.
State and local officials cited various reasons why some contracts were  awarded noncompetitively. For instance, officials reported that, for  several contracts, the contractors provided a unique service and were the  only source available. In another instance, officials said that the state was  granted a waiver of some competition requirements in order to, in part,  expedite the delivery of goods and services. Officials also gave various  reasons why some contracts were not awarded as fixed-price contracts.  For instance, officials reported that, for many contracts, fixed-price  contracts were not used because use of another contract type was the  agency’s standard practice for a particular type of project. In other cases,  officials stated that other contract types enabled the program to award a  contract and begin performance faster than a fixed-price contract would.
As part of our overall body of work on the Recovery Act, in July 2010 we  reported on the level of insight and oversight regarding the use of  noncompetitive Recovery Act contracts in 5 of the 16 states covered in our  bimonthly reviews: California, Colorado, Florida, New York, and Texas.  We found that the five states varied on the type and amount of data  routinely collected on noncompetitive Recovery Act contracts and that the  states do not routinely provide state-level oversight of contracts awarded  at the local level, where a portion of Recovery Act contracting occurs.  According to state officials, they were generally following the contracting  policies and practices for awarding and overseeing contracts that were in  place prior to passage of the Recovery Act. Officials from the selected  states’ audit organizations said that if they were to address Recovery Act  contracting issues, it could be done through the annual Single Audit or  other reviews of programs that involve Recovery Act funds.
section_title: Majority of State and Local Recovery Act Contracts Are Reported to Be on Cost and Schedule and Performing Satisfactorily
paragraphs: Between March and June 2010, we followed up with state and local  officials to understand whether the contracts we had selected were  achieving the key acquisition outcomes of delivering on cost, on schedule,  and with satisfactory performance. State and local officials reported that  most of the Recovery Act contracts we reviewed are meeting these goals.  According to state and local officials, of the 208 contracts we reviewed, 51  percent had no change to overall contract cost, 12 percent had decreased  costs, and 1 percent had changes to cost and prices but remained within  the contracts’ total cost permitted. Approximately one-third of the  contracts reported cost increases. In addition, officials reported that 52  percent of contracts had no change to schedule and 11 percent delivered  early. The remaining 36 percent of contracts reported schedule delays.  Thirty-six percent—or 74 contracts—had no changes to either cost or  schedule. Table 13 shows the number of contracts reported by officials  as having cost or schedule changes by the various programs we are  monitoring across the selected states.
For three-quarters of the 70 contracts where price increased, state and  local officials attributed these increases to conditions that were not  anticipated at the time of contract award. For example, officials reported  that total costs increased by over $300,000 for one public housing project  because materials containing asbestos were found on boilers, which had  to be taken apart to remove asbestos before they could be demolished,  and several boilers intended to be repaired or reused needed to be  replaced instead. The most common factors state and local officials  pointed to for schedule delays were circumstances beyond the control of  the contractor and conditions not anticipated at the time of contract  award. For instance, in several cases, officials noted that severe weather  caused schedule delays.
According to state and local officials, 91 percent of the contracts we  reviewed had no contractor work performance issues that adversely  impacted the work being performed or deliverables being provided. Only  14 of 208 contracts we reviewed reported that there had been issues with  contractor performance. Of those, seven were highway construction  projects at the state and local level and three of the contracts were for  public housing projects. While the nature of these issues varied, in most  cases officials reported that the contractor was able to satisfactorily  continue or complete the project. In some of these cases, the contractor  was assessed fees to compensate for the contractor’s performance issues.  Officials reported only two instances where the contractor ceased to  perform the remaining work, which will now be performed by another  contractor or the agency’s staff.
section_title: Local Governments’ Use of Recovery Act Funds
paragraphs: For this report, we continue our focus on the use of Recovery Act funds at  the local government level while updating our review of states’ uses of  Recovery Act funds in proposed and enacted budgets. As shown in figure  32, we visited 24 local governments in our 16 selected states and the  District to collect information regarding their use of Recovery Act funds.  Similar to the approach taken for our May 2010 report, we identified  localities representing a range of types of governments (cities and  counties), population sizes, and economic conditions (unemployment  rates greater and less than the state’s overall unemployment rate). We  balanced these criteria with other considerations, including other  scheduled Recovery Act work, local contacts established during prior  reviews, and the geographic proximity of the local government entities.  Officials from the 24 local governments we interviewed ranged in  population from 258 in Steward, Illinois, to approximately 2.5 million in  Miami-Dade County, Florida. Unemployment rates in our selected  localities ranged from 6.7 percent in Round Rock, Texas, to 13.4 percent in  Redding, California.
subsections: section_title: Local Governments Continue to Use Recovery Act Funds to Initiate One- Time Projects, Provide Services, and Support Staff, While Fiscal Challenges Persist
paragraphs: Local officials reported their governments’ continued use of Recovery Act  funds in a range of program areas such as public safety (Community  Oriented Policing Services (COPS) and Edward Byrne Memorial Justice  Assistance Grants (JAG)), energy (EECBG), housing (Homelessness  Prevention and Rapid Re-housing Program (HPRP) and Community  Development Block Grant (CDBG)), and transportation and transit. Other  Recovery Act funds received by the selected localities include grants for  lead mitigation, wastewater treatment, and airport improvement. Some  examples of the uses of Recovery Act funds appear in table 14.
Several local government officials said that Recovery Act funds were used  for projects including purchase of law enforcement and transit equipment  and investment in public works and infrastructure projects such as road  and sewer improvements. For example, Redding, California, officials said  Federal Transit Administration Recovery Act funds helped the Redding  Area Bus Authority (RABA) accelerate the purchase of three new buses  and nine new paratranist vans, thus allowing RABA to avoid implementing  service cuts and fare increases. Officials in Farmington Hills, Michigan,  reported using Recovery Act funds from the JAG program to purchase a  range of public safety equipment, such as radio equipment, digital  camcorders, undercover transmitters, and a Digital Eyewitness Media  Manager Server System that otherwise would not have been purchased.  Officials in Athens-Clarke County, Georgia, reported using Recovery Act  funds from the Clean Water State Revolving Fund program to help  construct four sewer inceptors. Columbus, Georgia, officials said they  were using Recovery Act funds to enhance the implementation of  transportation projects including the construction of a bike/pedestrian  trail and streetscape improvements.
The use of Recovery Act funds also helped several local governments  continue to provide local services. Philadelphia, Pennsylvania, officials  said that the use of Recovery Act funds from the COPS Hiring Recovery  Program (CHRP) grant helped support community policing and crime  prevention efforts by allowing the city to hire 50 additional police officers.  Similarly, officials in Colorado Springs, Colorado, reported using Recovery  Act funds from the JAG program to fund the salaries of community service  officers. Officials in Austin, Texas, reported using Recovery Act funds  from the Edward Byrne Memorial Justice Assistance Grant program to  fund 12 new emergency dispatchers. With regard to local services  provided, officials in Weld County, Colorado, and Boston, Massachusetts,  reported using Recovery Act funds from the Congregate Nutrition Services  program to provide meal deliveries to low-income senior citizens. Officials  in Berks County, Pennsylvania, said the county would not have been able  to provide rent and utility assistance to persons at risk of becoming  homeless without Recovery Act funds from the HPRP grant.
In most localities we visited, government officials reported working in  partnership with other local entities, such as nonprofit organizations, the  private sector, transit authorities, and other local jurisdictions to apply for  or administer Recovery Act funds. For example, officials in Round Rock,  Texas, said the city partnered with the Capital Area Metropolitan Planning  Organization to apply for a Transit Capital Assistance Recovery Act grant.  The application was successful with Round Rock receiving $2 million to  construct a transit facility consisting of bus lanes, a transit pavilion,  bicycle racks, and more than 100 parking spaces. Officials in  Marshalltown, Iowa, reported that the city worked extensively with  partners from surrounding counties, educational institutions, and other  agencies to administer funds for the Lead-Based Paint Hazard Control  Program. In Miami-Dade County, Florida, the local officials said the county  partnered with private commercial farmers to administer Recovery Act  funds from the National Clean Diesel Assistance Program. This program  provided $2 million to farmers to purchase approximately 300 more  efficient diesel motors used in portable and fixed irrigation equipment.
Most local governments we contacted for this review reported  experiencing fiscal challenges due to revenue declines or reductions in  state aid. In Jersey City, New Jersey, officials said the city faces an $80  million budget deficit and an estimated $27.5 million reduction in state aid  for fiscal year 2011. Officials in Steuben County, New York, reported a  decline in all categories of revenue receipts and state funding cuts of  $858,000. Officials also noted that delays in state reimbursements have  resulted in substantial use of county reserves. Officials in Miami-Dade  County, Florida, said a decrease in property and sales tax revenue  combined with a reduction in state funding contributed to a $426 million  budget gap for 2010. Officials in San José and Redding, California, also  cited budget gaps for the current fiscal year and reductions in revenue  from property taxes and other sources as examples of their governments’  fiscal challenges. In Colorado Springs, Colorado, officials said their fiscal  condition has slightly improved due to an unanticipated 4 percent increase  in 2010 sales tax revenue over actual 2009 revenue. Despite this increase,  Colorado Springs is not planning to expand services in 2010. Officials from  the city of Austin reported an increase in sales tax revenue and declines in  other revenue sources, such as fees and charges for commercial and  residential development. Specifically, Austin, Texas, officials reported a  3.2 percent sales tax revenue increase and anticipate using this revenue to  help address the city’s budget gap of between $11 million and $28 million.
Officials in several localities reported that they are developing plans to  continue funding Recovery Act programs using local government funds or  by pursuing other funds after Recovery Act funding ends. For example,  Cincinnati, Ohio, officials said the city hopes to continue funding the 50  police officers hired under the 3-year CHRP grant by using city revenues to  cover expenditures after 2012. Officials in Wilmington, North Carolina,  reported that the city intends to replace JAG funding for law enforcement  equipment and services with general funds and other grant funds. San  José, California, officials said the city plans to pursue other grant  opportunities in order to continue funding city infrastructure projects  currently benefiting from the use of Recovery Act funds. In contrast,  officials in a number of localities said that because Recovery Act funds  were primarily used for one-time projects they do not need to develop a  specific plan to prepare for the end of Recovery Act funding. For example,  officials in Farmington Hills, Michigan, reported that the city used  Recovery Act funds for one-time expenditures, such as equipment  purchases and energy-efficiency upgrades, and therefore does not need to  develop an exit strategy. Similarly, in Tupelo, Mississippi, officials said the  city used Recovery Act funds for infrastructure-related, “stand-alone”  projects requiring minimal or no long-term financial support and  specifically avoided applying for a CHRP grant because of the requirement  to retain officers hired under the grant after Recovery Act funding ends. A  few local governments reported that they plan to end Recovery Act-funded  projects or reduce staff or funding for these programs after Recovery Act  funding ends.
section_title: States’ Use of Recovery Act Funds for Programs and Services Continues to Prevent Deeper Budget Cuts
paragraphs: Recovery Act funds continued to help states maintain services in areas  such as education, health care, and transportation. A few states reported  that they recently received additional Recovery Act funding in other areas.  For example, New Jersey received $8 million for an energy rebate program  and $14 million for energy-efficiency programs. Michigan received $30  million in Recovery Act funds to provide energy-efficiency retrofits for  residential, commercial, industrial, and public buildings. Many of our  selected states, as well as the District, reported that the Recovery Act  continues to have a positive effect on their fiscal stability. As an example,  Arizona state officials told us that Recovery Act funds helped their state  through the worst part of the recession by preventing deeper cuts in social  programs, and giving officials breathing room to figure out what fiscal  steps to take in the long term. Officials in Ohio credit the over $7.9 billion  in Recovery Act funds they have received as of August 1, 2010, with  helping to protect jobs and continue services in their state. Officials in  Illinois and the District said that they would be in more dire fiscal  condition without SFSF and the increased FMAP funds from the Recovery  Act. In Iowa, Recovery Act funds received in fiscal year 2011 helped  officials balance their fiscal year 2011 budget while avoiding tax increases  and reducing the amount by which officials needed to draw down the  state’s reserve fund. Recovery Act funds also reduced the need in  Massachusetts to use more of the state’s authorized fiscal year 2010 rainy- day reserve funds to balance the budget, according to state officials. City  officials told us that Recovery Act funds helped the District maintain a  balanced budget for fiscal year 2011 without tapping into the city’s rainy- day fund.
Several states and the District contacted for this review reported that they  incorporated measures to prepare for the end of Recovery Act funding in  their fiscal year 2011 budget or in budgets in prior cycles. For example,  in Mississippi officials told us the legislature sharply reduced spending to  offset reductions in Recovery Act funding. According to city officials, the  District’s fiscal year 2010 budget, as well as the mayor’s proposed fiscal  year 2011 budget, reflects the reduction in revenues that will result from  the reduction in Recovery Act funds in fiscal year 2011. Officials in some  states reported they were planning for the end of Recovery Act funding.  For example, Florida officials told us they were in the early stages of  developing their fiscal year 2012 budget which will include a plan to  address the phasing out of Recovery Act funds. According to Michigan  officials, they have made some structural changes such as reforms to the  public school employees’ retirement plan and are working to devise  solutions for when the Recovery Act funds run out in fiscal year 2012. In  Georgia, officials said they are preparing for the cessation of Recovery Act  funds by planning additional budget reductions. They also are projecting  moderate revenue growth. New York officials told us that they will address  the phasing out of Recovery Act funds this fall when they develop the  budget for the next fiscal year.
State officials reported mixed assessments of changes to their states’ fiscal  conditions since we contacted them for our May 2010 report. Officials in  several states noted that they continue to face difficult budget challenges.  Several states told us that their fiscal condition has generally remained the  same since our May report. Some states have seen signs that their fiscal  condition is shifting and showing signs of improvement. For example,  state officials reported that tax revenue collections in Massachusetts  during the last 2 months of fiscal year 2010 were above revenue estimates  by $191 million and $149 million respectively, and the commonwealth  ended fiscal year 2010 with tax collections above budget estimates. State  officials in Pennsylvania also reported that revenues were $58 million  ahead of estimates in June—the first month since December 2007 that  revenues exceeded estimates. Arizona officials also told us that their April  and May revenues were much better than they had projected, however,  they noted that the trend did not continue in June and July. In another  example, Michigan officials told us that in June 2010, total wage and salary  employment was up 23,400 jobs compared to June 2009. This was the first  year-over-year increase in total wage and salary employment in Michigan  since March 2005. These signs of improvement, in contrast to revenue  declines, are consistent with national trends reported in the June 2010  Fiscal Survey of States issued by the National Governors Association and  the National Association of State Budget Officers. According to the  Fiscal Survey, states are projecting a slight rise of 3.9 percent in tax  collections for fiscal year 2011 recommended budgets relative to fiscal  year 2010 estimates. However, states estimate that their 2010 tax revenues  will represent an almost 12 percent decline in states’ sales, personal  income, and corporate income tax collections since fiscal year 2008, the  last fiscal year in which states were not significantly affected by the  national recession. The Fiscal Survey attributes reduced state sales,  personal income, and corporate income tax collections to the lack of  economic expansion and job losses.
section_title: New and Open Recommendations; Matters for Congressional Consideration
paragraphs: For this report, GAO both updates the status of agencies’ efforts to  implement GAO’s 25 open recommendations and makes 5 new  recommendations to the Departments of Transportation (DOT), Housing  and Urban Development (HUD), Labor, Energy (DOE), Health and Human  Services, and Treasury, and to the Environmental Protection Agency  (EPA), and to the Office of Management and Budget (OMB). Agency  responses to our new recommendations are included in the program  sections of this report. Lastly, we update the status of our Matters for  Congressional Consideration.
subsections: section_title: Department of Transportation
subsections: section_title: New Recommendations
paragraphs: To ensure that Congress and the public have accurate information on the  extent to which the goals of the Recovery Act are being met, we  recommend that the Secretary of Transportation direct FHWA to take the  following two actions:    Develop additional rules and data checks in the Recovery Act Data  System, so that these data will accurately identify contract milestones  such as award dates and amounts, and provide guidance to states to  revise existing contract data.
Make publicly available—within 60 days after the September 30, 2010,  obligation deadline—an accurate accounting and analysis of the extent  to which states directed funds to economically distressed areas,  including corrections to the data initially provided to Congress in  December 2009.
section_title: Open Recommendations
paragraphs: To better understand the impact of Recovery Act investments in  transportation, we believe that the Secretary of Transportation should  ensure that the results of these projects are assessed and a determination  made about whether these investments produced long-term benefits.  Specifically, in the near term, we recommend the Secretary direct FHWA  and FTA to determine the types of data and performance measures they  would need to assess the impact of the Recovery Act and the specific  authority they may need to collect data and report on these measures.
In its response, DOT noted that it expected to be able to report on  Recovery Act outputs, such as the miles of road paved, bridges repaired,  and transit vehicles purchased, but not on outcomes, such as reductions in  travel time, nor did it commit to assessing whether transportation  investments produced long-term benefits. DOT further explained that  limitations in its data systems, coupled with the magnitude of Recovery  Act funds relative to overall annual federal investment in transportation,  would make assessing the benefits of Recovery Act funds difficult. DOT  indicated that, with these limitations in mind, it is examining its existing  data availability and, as necessary, would seek additional data collection  authority from Congress if it became apparent that such authority were  needed. While we are encouraged that DOT plans to take some steps to  assess its data needs, it has not committed to assessing the long-term  benefits of Recovery Act investments in transportation infrastructure. We  are therefore keeping our recommendation on this matter open.
section_title: Open Recommendation
paragraphs: The Secretary of Transportation should gather timely information on the  progress they are making in meeting the maintenance-of-effort  requirement and to report preliminary information to Congress within 60  days of the certified period (September 30, 2010), (1) on whether states  met required program expenditures as outlined in their maintenance-of- effort certifications, (2) the reasons that states did not meet these certified  levels, if applicable, and (3) lessons learned from the process.
DOT concurred in part with our March 2010 recommendation that it gather  and report more timely information on the progress states are making in  meeting the maintenance-of-effort requirements. Because more timely  information could better inform policymakers’ decisions on the usefulness  and effectiveness of the maintenance-of-effort requirements and is  important to assessing the impact of Recovery Act funding in achieving its  intended effect of increasing overall spending, we are leaving this  recommendation open and plan to continue to monitor DOT’s actions.
In its August 2010 response, DOT officials stated that DOT will encourage  states to report preliminary data for the certified period ending September  30, 2010, and deliver a preliminary report to Congress within 60 days of the  certified period. DOT officials said they have developed a timeline for  obtaining information to produce this report and will issue guidance by  October 1, 2010, requesting that states update actual aggregate  expenditure data and provide the data to DOT by November 15, 2010. DOT  officials said they will use this information to develop the report to  Congress, and it will submit the report no later than November 30, 2010.
section_title: Department of Housing and Urban Development
subsections: section_title: New Recommendation
paragraphs: Because the absence of third-party investors reduces the amount of overall  scrutiny TCAP projects would receive and HUD is currently not aware of  how many projects lacked third-party investors, HUD should develop a  risk-based plan for its role in overseeing TCAP projects that recognizes the  level of oversight provided by others.
section_title: Department of Labor
subsections: section_title: Open Recommendations
paragraphs: To enhance Labor’s ability to manage its Recovery Act and regular WIA  formula grants and to build on its efforts to improve the accuracy and  consistency of financial reporting, we recommend that the Secretary of  Labor take the following actions:    To determine the extent and nature of reporting inconsistencies across  the states and better target technical assistance, conduct a one-time  assessment of financial reports that examines whether each state’s  reported data on obligations meet Labor’s requirements.
To enhance state accountability and to facilitate their progress in  making reporting improvements, routinely review states’ reporting on  obligations during regular state comprehensive reviews.
Labor agreed with both of our recommendations and has begun to take  some actions to implement them. To determine the extent of reporting  inconsistencies, Labor plans to conduct an assessment of state financial  reports to determine if the data reported is accurate and reflects Labor’s  guidance on reporting of obligations and expenditures. After the  assessment, Labor plans to provide technical assistance to states that need  further instruction and guidance. To enhance states’ accountability and  facilitate their progress in making improvements in reporting, Labor has  instructed all its regional offices to begin routinely reviewing state’s  reporting on obligations during state comprehensive reviews. In addition,  Labor plans to issue guidance on the definitions of key financial terms  such as obligations, provide online training to ensure that the terms are  accurately and consistently applied, and conduct workshops on financial  and administrative management.
section_title: Open Recommendation
paragraphs: Our September 2009 bimonthly report identified a need for additional  federal guidance in two areas—measuring the work readiness of youth  and defining green jobs —and we made the following two  recommendations to the Secretary of Labor:    To enhance the usefulness of data on work readiness outcomes,  provide additional guidance on how to measure work readiness of  youth, with a goal of improving the comparability and rigor of the  measure.
To better support state and local efforts to provide youth with  employment and training in green jobs, provide additional guidance  about the nature of these jobs and the strategies that could be used to  prepare youth for careers in green industries.
Labor agreed with both of our recommendations and has begun to take  some actions to implement them. With regard to the work readiness  measure for WIA Youth summer employment activities, Labor issued  guidance on May 13, 2010 for the WIA Youth Program that builds on the  experiences and lessons learned during implementation of Recovery Act- funded youth activities in 2009. Labor broadly identified some additional  requirements for measuring work readiness of youth that it plans to  address in future guidance. This includes having the employer observe and  assess workplace performance and determine what worksite skills are  necessary to be successful in the workplace.
Regarding our recommendation on the green jobs, Labor told us that the  Bureau of Labor Statistics published a Federal Register Notice on March  16, 2010 for comment on a proposed definition for measuring green jobs,  which includes an approach for identifying environmental industries and  counting associated jobs. Labor officials hope this will inform state and  local workforce development efforts to identify and target green jobs and  their training needs. In addition, Labor is using the Recovery Act-funded  green jobs training grants to document lessons learned on designing and  providing green jobs training.
section_title: Department of Energy
subsections: section_title: Open Recommendations
paragraphs: Given the concerns we have raised about whether program requirements  are being met, we recommend that DOE, in conjunction with both state  and local weatherization agencies, develop and clarify weatherization  program guidance that  establishes best practices for how income eligibility should be  determined and documented and issues specific guidance that does  not allow the self-certification of income by applicants to be the sole  method of documenting income eligibility.  clarifies the specific methodology for calculating the average cost per  home weatherized to ensure that the maximum average cost limit is  applied as intended.  accelerates current DOE efforts to develop national standards for  weatherization training, certification, and accreditation, which is  currently expected to take 2 years to complete.    develops a best practice guide for key internal controls that should be  present at the local weatherization agency level to ensure compliance  with key program requirements.  sets time frames for development and implementation of state  monitoring programs.  revisits the various methodologies used in determining the  weatherization work that should be performed based on the  consideration of cost-effectiveness and develops standard  methodologies that ensure that priority is given to the most cost- effective weatherization work. To validate any methodologies created,  this effort should include the development of standards for accurately  measuring the long-term energy savings resulting from weatherization  work conducted.  considers and addresses how the weatherization program guidance is  impacted by the introduction of increased amounts of multifamily  units.
In addition, given that state and local agencies have felt pressure to meet a  large increase in production targets while effectively meeting program  requirements and have experienced some confusion over production  targets, funding obligations, and associated consequences for not meeting  production and funding goals, we recommend that DOE clarify its  production targets, funding deadlines, and associated consequences while  providing a balanced emphasis on the importance of meeting program  requirements.
In our May 2010 report, we provided eight recommendations and raised  concerns about whether program requirements were being met. DOE  generally agreed with all of our recommendations and has begun to take  several steps in response. For example, DOE reported that it has drafted  national workload standards to address our concerns regarding training,  certification, and accreditation. DOE plans to issue these standards to  recipients in October 2010. DOE is still in the process of considering our  recommendations and will provide additional information on how they  plan to fully implement our recommendations at a later date.
section_title: Environmental Protection Agency
subsections: section_title: Open Recommendation
paragraphs: We recommend that the EPA Administrator work with the states to  implement specific oversight procedures to monitor and ensure  subrecipients’ compliance with the provisions of the Recovery Act-funded  Clean Water and Drinking Water SRF program.
In response to our recommendation, EPA provided additional guidance to  the states regarding their oversight responsibilities, with an emphasis on  enhancing site specific monitoring and inspections. Specifically, in June  2010, the agency developed and issued an oversight plan outline for  Recovery Act projects that provides guidance on the frequency, content,  and documentation related to regional reviews of state Recovery Act  programs and regional and state reviews of specific Recovery Act projects.  For example, EPA’s guidance states that regions and states should be  reviewing the items included on the EPA “State ARRA Inspection  Checklist” or use a state equivalent that covers the same topics. The plan  also describes EPA headquarters role in ongoing Recovery Act oversight  and plans for additional webcasts. EPA also reiterated that contractors are  available to provide training and to assist with file reviews and site  inspections.
section_title: Department of Health and Human Services: Office of Head Start
paragraphs: Our May 2010 bimonthly report identified the need for improved  management information on regional offices and grantees’ decisions and  activities to consistently oversee the rapid expansion and program  performance of Head Start and Early Head Start under the Recovery Act.  We made three recommendations to the Director of the Office of Head  Start (OHS), part of the Department of Health and Human Services’  Administration for Children and Families. In May, HHS disagreed with our  conclusion that a lack of management information limits its ability to  consistently oversee the rapid expansion of Head Start and Early Head  Start under the Recovery Act. We provided a draft of all materials related  to Head Start and Early Head Start to OHS and HHS for comment, but they  did not provide comments in time for us to consider them in this report.
subsections: section_title: Open Recommendation
paragraphs: To provide grantees with appropriate guidelines on their use of Head Start  and Early Head Start grant funds, and enable OHS to monitor the use of  these funds, the Director of OHS should direct regional office staff to stop  allocating all grant funds to the “other” budget category, and immediately  revise all financial assistance awards (FAAs) in which all funds were  allocated to the “other” category.
section_title: Open Recommendation
paragraphs: To facilitate understanding of whether regional decisions regarding  waivers of the program’s matching requirement are consistent with  Recovery Act grantees’ needs across regions, the Director of OHS should  regularly review waivers of the nonfederal matching requirement and  associated justifications.
section_title: Open Recommendation
paragraphs: To oversee the extent to which grantees are meeting the program goal of  providing services to children and families and to better track the  initiation of services under the Recovery Act, the Director of OHS should  collect data on the extent to which children and pregnant women actually  receive services from Head Start and Early Head Start grantees.
section_title: Department of Treasury
subsections: section_title: New Recommendation
paragraphs: Treasury should expeditiously provide HFAs with guidance on monitoring  project spending and develop plans for dealing with the possibility that  projects could miss the spending deadline and face further project  interruptions.
section_title: Executive Office of the President: Office of Management and Budget (OMB)
subsections: section_title: New Recommendation
paragraphs: To strengthen the Single Audit and federal follow up as oversight  accountability mechanisms, we recommend that the Director of OMB (1)  shorten the timeframes required for issuing management decisions by  federal awarding agencies to grant recipients, and (2) issue the OMB  Circular No. A-133 Compliance Supplement no later than March 31 of each  year.
section_title: Open Recommendation
paragraphs: To leverage Single Audits as an effective oversight tool for Recovery Act  programs, in our prior bimonthly reports, we recommended that the  Director of OMB should  1.  provide more direct focus on Recovery Act programs through the  Single Audit to help ensure that smaller programs with higher risk have  audit coverage in the area of internal controls and compliance;  2.  take additional efforts to provide more timely reporting on internal  controls for Recovery Act programs for 2010 and beyond; and  3.  evaluate options for providing relief related to audit requirements for  4. low-risk programs to balance new audit responsibilities associated  with the Recovery Act.  issue Single Audit guidance in a timely manner so that auditors can  efficiently plan their audit work; and  5.  explore alternatives to help ensure that federal awarding agencies  provide their management decisions on the corrective action plans in a  timely manner.
OMB has taken several steps in response to our recommendations. Its  efforts, however, are ongoing, and further actions are needed to fully  implement our recommendations to help mitigate risks related to  Recovery Act funds. We include a summary of OMB’s efforts to implement  these recommendations.
To focus auditor risk assessments on Recovery Act-funded programs and  to provide guidance on internal control reviews for Recovery Act  programs, OMB worked within the framework defined by existing  mechanisms—Circular No. A-133 and the Circular No. A-133 Compliance  Supplement (Compliance Supplement). In this context, OMB has made  limited adjustments to its Single Audit guidance. OMB issued the  Compliance Supplement in May 2009, which focused risk assessments on  Recovery Act-funded programs. In August 2009, OMB issued the Circular  No. A-133 Compliance Supplement Addendum I, which provided  additional guidance for auditors and modified the Compliance Supplement  to, among other things, focus on new Recovery Act programs and new  program clusters.
In October 2009, OMB began a Single Audit Internal Control Project  (project), which is nearing its completion as of May 14, 2010. One of the  project’s goals is to encourage auditors to identify and communicate  significant deficiencies and material weaknesses in internal control over  compliance for selected major Recovery Act programs 3 months sooner  than the 9-month time frame currently required under OMB Circular No. A- 133. OMB plans to analyze the results to identify the need for potential  modifications to improve OMB guidance related to Single Audits.
Although OMB noted the increased responsibilities falling on those  responsible for performing Single Audits, it has yet to issue proposals or  plans to address this issue. States that volunteered to participate in the  project were eligible for some relief in their workloads because OMB  modified the requirements under Circular No. A-133 to reduce the number  of low-risk programs for inclusion in the Single Audits.
section_title: Open Recommendation
paragraphs: To provide more direct focus on Recovery Act programs through the  Single Audit with regard to smaller programs with higher risk, OMB  provided guidance in the 2009 OMB Circular No. A-133 Compliance  Supplement that required auditors to consider all federal programs with  expenditures of Recovery Act awards to be considered higher risk  programs when performing the standard risk-based tests for selection of  programs to be audited. OMB also issued clarifying information on  determining risk for programs with Recovery Act expenditures. However,  since most of the funding for Recovery Act programs will be expended in  2010 and beyond, we remain concerned that some smaller programs with  higher risk would not likely receive adequate audit coverage. One  approach for OMB to consider in helping to ensure that smaller programs  with higher risk have audit coverage is to explore various options to  provide auditors with the flexibility needed to select programs that are  considered high risk, even though the federal expenditures for a smaller  program may be less than the expenditure threshold provided under the  Single Audit Act.
With regard to taking additional efforts to provide more timely reporting  on internal controls for Recovery Act programs for 2010 and beyond, OMB  has not yet put into place measures to achieve earlier communication of  the reporting of internal control deficiencies for fiscal years 2010 and  beyond—years where considerable amounts of Recovery Act funds will be  expended. OMB officials have stated in August 2010, that they plan to  initiate a subsequent Single Audit Internal Control Project for fiscal year  2010. Similar to the 2009 project, one of the project’s goals will be to  encourage more timely identification and earlier communication of  internal control deficiencies in selected programs expending Recovery Act  funding.
OMB designed its Single Audit Internal Control Project to grant some relief  to the auditors for the states that volunteered to encourage participation in  the project. Specifically, participating auditors were not required to  perform risk assessments of smaller federal programs. OMB had also  modified the requirements under Circular No. A-133 to reduce the number  of low-risk programs that must be included in some project participants’  Single Audits. Although the project which began in October 2009, was  designed to provide the auditors some relief in their workload, many  auditors had already completed their risk assessment for audits with fiscal  years ending June 30, 2009. As a result, the auditors did not experience the  audit relief intended by the project.
With regard to issuing Single Audit Guidance in a timely manner, we  reported in May 2010 that OMB officials told us that they had planned to  issue the Compliance Supplement in late May 2010. However, OMB did not  issue the Compliance Supplement until July 29, 2010. Several of the  auditors that we surveyed stated that they needed the information as early  as February, or at least by April, to effectively plan their work. OMB  officials stated that the delay in issuing the 2010 compliance supplement  was primarily due to the additional attention needed to include more  Recovery Act programs in the Compliance Supplement and information  regarding the audit procedures for reviewing Recovery Act reporting  requirements. In May 2010, OMB provided the American Institute of  Certified Public Accountants (AICPA) Governmental Audit Quality Center  and the National Association of State Auditors, Comptrollers and  Treasurers (NASACT) with draft Single Audit guidance in May 2010.  AICPA and NASACT posted the draft to its Web sites for auditors to use  for planning their work. However, some auditors we spoke with stated  that because the guidance was not in a final form, it still impacted their  ability to efficiently plan and conduct their work. In addition, OMB has  stated that it plans to have a second phase of the Single Audit Internal  Control Project for fiscal year 2010. However, as of August 5, 2010, OMB  had not yet defined the parameters of the project and issued guidance for  potential volunteer participants. OMB also has not provided detailed  guidance that would explain incentives for volunteering to participate in  the project, types of entities that will be permitted to participate, the scope  of the project (including the specific programs that participants could  select from), the number of participants it is seeking, or the timeframes for  beginning and ending the project.
OMB officials have stated that they have discussed alternatives for helping  to ensure that federal awarding agencies provide their management  decisions on the corrective action plans in a timely manner but have yet to  decide on the course of action that they will pursue to implement this  recommendation.
section_title: Open Recommendation
paragraphs: As we noted in our July 2009 report, reporting on Recovery Act  performance results is broader than the employment-related reporting  required by the act. We continue to recommend that the Director of  OMB—perhaps through the Senior Management Councils—clarify what  other program performance measures recipients are expected to report on  to demonstrate the impact of Recovery Act funding.
section_title: Matters for Congressional Consideration
subsections: section_title: Matter
paragraphs: To the extent that appropriate adjustments to the Single Audit process are  not accomplished under the current Single Audit structure, Congress  should consider amending the Single Audit Act or enacting new legislation  that provides for more timely internal control reporting, as well as audit  coverage for smaller Recovery Act programs with high risk.
GAO continues to believe that Congress should consider changes related  to the Single Audit process.
section_title: Matter
paragraphs: To the extent that additional coverage is needed to achieve accountability  over Recovery Act programs, Congress should consider mechanisms to  provide additional resources to support those charged with carrying out  the Single Audit Act and related audits.
GAO continues to believe that Congress should consider changes related  to the Single Audit process.
section_title: Matter
paragraphs: To provide housing finance agencies (HFA) with greater tools for  enforcing program compliance, in the event the Section 1602 Program is  extended for another year, Congress may want to consider directing  Treasury to permit HFAs the flexibility to disburse Section 1602 Program  funds as interest-bearing loans that allow for repayment.
GAO continues to believe that Congress should consider directing  Treasury to permit HFAs the flexibility to disburse Section 1602 Program  funds as interest-bearing loans that allow for repayment.
We are sending copies of this report to the Office of Management and  Budget and the Departments of Health and Human Services (Centers for  Medicare and Medicaid Services), Education, Transportation, Energy, and  Housing and Urban Development. In addition, we are sending sections of  the report to officials in the 16 states and the District and the 24 local  governments covered in our review. The report is 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  me 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 V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This appendix describes our objectives, scope, and methodology for this  seventh of our bimonthly reviews on the American Recovery and  Reinvestment Act of 2009 (Recovery Act). A detailed description of the  criteria used to select the core group of 16 states and the District of  Columbia (District) and programs we reviewed is found in appendix I of  our April 2009 Recovery Act bimonthly report.
subsections: section_title: Objectives and Scope
paragraphs: The Recovery Act specifies several roles for GAO, including conducting  bimonthly reviews of selected states’ and localities’ use of funds made  available under the act. As a result, our objectives for this report were to  assess (1) selected states’ and localities’ uses of and planning for Recovery  Act funds, (2) the approaches taken by the selected states and localities to  ensure accountability for Recovery Act funds, and (3) state activities to  evaluate the impact of the Recovery Act funds they have received to date.  We selected programs for review primarily because they have begun  disbursing funds to states or because they have known or potential risks.  The risks can include existing programs receiving significant amounts of  Recovery Act funds or new programs. In some cases, we have also  collected data from all states and from a broader array of localities to  augment the in-depth reviews.
Our teams visited the 16 selected states, the District, and a nonprobability  sample of entities (e.g., state and local governments, local educational  agencies, public housing authorities) during the period from May 2010  through September 2010. As with our previous Recovery Act reports, our  teams met with a variety of state and local officials from executive-level  and program offices. During the discussions with state and local officials,  teams used a series of program review and semistructured interview  guides that addressed state plans for management, tracking, and reporting  of Recovery Act funds and activities. We also reviewed state statutes,  legislative proposals, and other state legal materials for this report. Where  attributed, we relied on state officials and other state sources for  descriptions and interpretation of state legal materials. Appendix IV details  the states and localities visited by GAO. Criteria used to select localities  within our selected states follows below.
The act requires that nonfederal recipients of Recovery Act-funded grants,  contracts, or loans submit quarterly reports on each project or activity  including information concerning the amount and use of funds and jobs  created or retained. The first of these recipient reports covered  cumulative activity since the Recovery Act’s passage through the quarter  ending September 30, 2009. The Recovery Act requires us to comment on  the estimates of jobs created or retained after the recipients have reported.  We issued our initial report related to recipient reporting, including  recommendations for recipient report improvements, on November 19,  2009. A second major focus of the current report is to provide updated  information concerning recipient reporting in accordance with our  mandate for quarterly reporting.
section_title: States’ and Localities’ Uses of Recovery Act Funds
paragraphs: Using criteria described in our earlier bimonthly reports, we selected the  following streams of Recovery Act funding flowing to states and localities  for review during this report: Medicaid Federal Medical Assistance  Percentage (FMAP) grant awards; the State Fiscal Stabilization Fund  (SFSF); Title I, Part A of the Elementary and Secondary Education Act of  1965 (ESEA); Parts B and C of the Individuals with Disabilities Education  Act (IDEA); the Federal-Aid Highway Surface Transportation and Transit  Capital Assistance programs; the State Energy Program (SEP); the Energy  Efficiency and Conservation Block Grant program (EECBG); the  Weatherization Assistance Program; the Public Housing Capital Fund; the  Tax Credit Assistance Program (TCAP); and Grants to States for Low- Income Housing Projects in Lieu of Low-Income Housing Credits Program  under Section 1602 of the Recovery Act (Section 1602 Program). We also  reviewed how Recovery Act funds are being used by states and localities.  In addition, we analyzed www.Recovery.gov data on federal spending.
section_title: Federal Medical Assistance Percentage
paragraphs: To examine Medicaid enrollment, states’ efforts to comply with the  provisions of the Recovery Act, states’ uses of the grant awards, and other  related information, we conducted a Web-based survey, asking the 16  states and the District to provide new information, as well as to update  information they had previously provided to us. To establish the reliability  of our Web-based survey data, we pretested the survey with Medicaid  officials in two states and also conducted follow-up with sample states as  needed. For the increased FMAP grant awards, we obtained increased  FMAP grant and draw down figures for each state in our sample and the  District from the Centers for Medicare & Medicaid Services (CMS). We  discussed with CMS issues related to the agency’s oversight of increased  FMAP grant awards and its guidance to states on Recovery Act provisions.  To assess the reliability of increased FMAP draw down figures, we  previously interviewed CMS officials on how these data are collected and  reported. Based on these steps, we determined that the data provided by  CMS and submitted by states were sufficiently reliable for the purposes of  our engagement.
section_title: SFSF, ESEA Title I, and IDEA
paragraphs: To obtain national level information on how Recovery Act funds made  available by the U.S. Department of Education under SFSF, ESEA Title I,  and IDEA were used at the local level, we designed and administered a  Web-based survey of local education agencies (LEAs) in the 50 states and  the District of Columbia. We surveyed school district superintendents  across the country to learn how Recovery Act funding was used and what  impact these funds had on school districts. We conducted our survey  between March and April 2010, with a 78 percent final weighted response  rate. We selected a stratified random sample of 575 LEAs from the  population of 16,065 LEAs included in our sample frame of data obtained  from Education’s Common Core of Data (CCD) in 2007-08.
We took steps to minimize nonsampling errors by pretesting the survey  instrument with officials in 5 LEAs in January and February 2010. Because  we surveyed a sample of LEAs, survey results are estimates of a  population of LEAs and thus are subject to sampling errors that are  associated with samples of this size and type. Our sample is only one of a  large number of samples that we might have drawn. As each sample could  have provided different estimates, we express our confidence in the  precision of our particular sample’s results as a 95 percent confidence  interval (e.g., plus or minus 10 percentage points). We excluded 16 of the  sampled LEAs for various reasons – because they were no longer  operating in the 2009-10 school year, were a duplicate entry, or were not  an LEA — and therefore were considered out of scope. All estimates  produced from the sample and presented in this report are representative  of the in-scope population and have margins of error of plus or minus 7  percentage points or less for our sample, unless otherwise noted.
To obtain specific examples of how LEAs are using Recovery Act funds,  we selected LEAs in each of the following states: California,  Massachusetts and Michigan to visit and interview LEA officials. We  selected these states from among the 16 states and the District of  Columbia in our review based on geographic diversity and varying state  budget situations for K-12 education.
Within the selected states, we identified a mix of local districts that would  represent urban, rural, and suburban districts, LEAs among the 100 largest  LEAs as well as districts that were not as large, and local districts with  different budget situations. We also obtained selected additional  information from LEA officials in New York. In addition to interviewing  local officials, we interviewed selected state officials. Specifically, we  interviewed ESEA Title I officials in states with relatively low Recovery  Act Title I drawdown rates to assess to what extent state officials in these  states are monitoring LEA obligations and also discussed implementation  of School Improvement Grants. We also interviewed officials at the U.S.  Department of Education (Education) and reviewed relevant laws,  guidance, and communications to the states. Further, we obtained  information from Education’s website about the amount of funds these  states have drawn down from their accounts with Education. We also  reviewed data on state level funding changes from the National  Association of State Budget Officers (NASBO). To assess the reliability of  the NASBO data, we (1) reviewed existing documentation related to the  data sources and (2) interviewed knowledgeable agency officials about the  data. We determined that the data are sufficiently reliable for the purposes  of this report.
section_title: Federal-Aid Highway Surface Transportation Program
paragraphs: For highway infrastructure investment, we reviewed status reports and  guidance to the states and discussed these with the U.S. Department of  Transportation and Federal Highway Administration (FHWA) officials. We  obtained funding data for each of the 16 states and the District in our  review. We also reviewed data related to contracts and economically  distressed areas—submitted by states—in the FHWA Recovery Act Data  System (RADS) for completeness and compliance with FHWA guidance.  We also interviewed or obtained information from state department of  transportation officials in Arizona, California, Florida, Illinois,  Massachusetts, Mississippi, North Carolina, Pennsylvania, and Texas.  Specifically, we discussed rates of deobligations in suballocated and  nonsuballocated areas, accuracy of contract data entered into RADS, and  rates of spending from regular FHWA highway program during the period  of the Recovery Act.
section_title: Transit Capital Assistance Program
paragraphs: For public transit investment, we reviewed status reports and guidance to  the states and transit agencies and discussed these with U.S. Department  of Transportation and Federal Transit Administration (FTA) officials as  part of our review of the Transit Capital Assistance Program and Fixed  Guideway Infrastructure Investment program. We obtained funding data  on the amounts of funding transferred from FHWA to FTA and funding  levels used for transit operating expenses for each of our urbanized and  nonurbanized areas. We also interviewed FTA officials about operating  expense data. Finally we interviewed or obtained information from state  and transit agency officials in California, Illinois, Massachusetts, Michigan,  New Jersey, and Texas regarding these issues.
section_title: State Energy Program, Energy Efficiency Conservation Block Grant, and Weatherization Assistance Program
paragraphs: For the State Energy Program (SEP), the Energy Efficiency and  Conservation Block Grant program (EECBG), and Weatherization  Assistance Program, we reviewed relevant regulations and federal  guidance and interviewed Department of Energy officials who administer  the programs at the federal level. Specifically, for the SEP and the EECBG  programs, we collected information from 6 and 12 of our selected states  and the District, respectively. Also, we conducted semistructured  interviews of officials in state and local agencies that administer the  programs and with local subrecipients who received Recovery Act funds.  These interviews covered the respective state’s and locality’s usage of  funds, internal controls, and reporting procedures. We also collected data  on the number and types of projects funded with Recovery Act money for  the SEP and EECBG programs. In addition, for this report, we collected  updated information from seven of our selected states and the District on  their weatherization programs. We conducted semistructured interviews  of officials in the states’ agencies that administer the weatherization  program and with local service providers responsible for weatherization  production. We interviewed officials at local service providers in the  District and the seven states, and reviewed local agencies’ client case files  for homes weatherized with Recovery Act funds. We also conducted site  visits to interview local providers of weatherization and to observe  weatherization activities. For all three programs, we collected data about  each state’s total allocation under the Recovery Act, as well as the  allocation already provided to the states and the obligations and  expenditures-to-date.
section_title: Public Housing Capital Fund
paragraphs: For public housing, we obtained data from HUD’s Electronic Line of  Credit Control System on the amount of Recovery Act funds that have  been obligated and expended by each housing agency in the country that  received Public Housing Capital Funds. To monitor progress on how  housing agencies are using these funds, we visited 12 housing agencies in  nine states. For each state, we selected at least 1 public housing agency  from a list of 47 housing agencies visited for previous Recovery Act  reports to update the status of their grant projects. At the selected housing  agencies, we interviewed housing agency officials and conducted site  visits of Recovery Act projects. We also interviewed officials of the U.S.  Department of Housing and Urban Development (HUD) to follow up on  HUD’s efforts in monitoring public housing agency obligations and uses of  Recovery Act funds and to understand HUD’s capacity to administer  Recovery Act funds. Further, we interviewed HUD officials to understand  their procedures for reviewing data that housing agencies reported to  FederalReporting.gov.
section_title: Tax Credit Assistance Program
paragraphs: To further assess state implementation of the Tax Credit Assistance  Program (TCAP) and Section 1602 program, we asked managers of state  housing finance agencies in all 50 states, the District, Puerto Rico, Guam,  and the U.S. Virgin Islands to complete a Web survey. Our questionnaire  asked about the status of program delivery, program design, safeguards  and controls, expected results, and challenges to implementation. We  designed and tested the self-administered questionnaire in consultation  with experts, representatives of housing finance stakeholders, and state  agency managers. Survey data collection took place in November and  early December of 2009. We received usable responses from all 54  agencies.
While all state agencies returned questionnaires, and thus our data is not  subject to sampling or overall questionnaire nonresponse error, the  practical difficulties of conducting any survey may introduce other errors  in our findings. We took steps to minimize errors of measurement,  question-specific nonresponse, and data processing. In addition to the  questionnaire development activities listed above, and pretesting the  questionnaire with four state agency officials before the survey, GAO  analysts also recontacted selected respondents to follow up on answers  that were missing or that required clarification. In addition, GAO analysts  resolved respondent difficulties in answering our questions during the  survey. Before the survey, we also contacted each agency to determine  whether our originally identified respondent was the most appropriate and  knowledgeable person to answer our questions, and made changes to our  contact list as necessary. Finally, analysis programs and other data  analyses were independently verified.
section_title: Head Start and Early Head Start
paragraphs: Owing to the focus on Early Head Start expansion under the Recovery Act,  we visited nine Early Head Start expansion grantees in four states: Florida,  Georgia, North Carolina, and Ohio. Due to time and resource  considerations, we chose these states based on GAO staff expertise in  Head Start. For each state, all but one Early Head Start grantee selected  had received a grant above the median for all Recovery Act expansion  funds awarded in each state in order to focus our limited resources on  relatively sizable grants. We also included four grantees that had been  awarded expansion funds for constructing or renovating facilities. The  grantees we visited included grantees that had not previously provided an  Early Head Start program but that had provided Head Start, as well as  experienced Early Head Start grantees. For each selected grantee, we  reviewed federal assistance award information, enrollment data, proposals  for the use of Quality Improvement funds, and facilities under  construction or renovation. We conducted structured interviews with  grantee officials covering updates on the use of Recovery Act funds,  challenges to spending funds within Office of Head Start (OHS) deadlines,  OHS monitoring of grantees, and grantees’ interpretation of enrollment  and attendance requirements. We also reviewed files on-site at each  grantee on enrollment, income eligibility, and health screening. The  grantees we visited were purposefully chosen and are not a representative  sample of all expansion grantees. The information gathered from these site  visits is not generalizable to the population of Early Head Start expansion  grantees.
section_title: Recipient Reporting
paragraphs: The recipient reporting section of this report responds to the Recovery  Act’s mandate that we comment on the estimates of jobs created or  retained by direct recipients of Recovery Act funds. For our review of the  fourth submission of recipient reports, covering the period from April 1,  2010, through June 30, 2010, we built on findings from our three prior  reviews of the reports, covering the period from February 2009 through  March 30, 2010. We performed edit checks and basic analyses on the  fourth submission of recipient report data that became publicly available  at Recovery.gov on July 30, 2010. We interviewed federal agency officials  from the Department of Energy, who have responsibility for ensuring a  reasonable degree of quality across their programs’ recipient reports. We  also interviewed representatives from a variety of state associations, such  as the National Association of State Auditors, Comptrollers, and  Treasurers and the National Association of State Budget Officers, to obtain  their views on whether the process of recipient reporting has had an effect  on intergovernmental interactions.
From the fourth submission of recipient reports, we reviewed reports for  two energy programs, EECBG and the Weatherization Assistance Program,  to determine whether they had used Office of Management and Budget  (OMB) guidance for calculating their full-time equivalents (FTE) funded by  the Recovery Act. We interviewed 13 EECBG state-level and 19 local  government recipients from our 17 selected jurisdictions about their FTE  calculations for the fourth round of reporting. We also interviewed 8 state- level weatherization assistance recipients and 17 local government  weatherization assistance subrecipients from our 17 selected jurisdictions  about their FTE calculations. In some instances, we reviewed supporting  documentation with quarterly FTE reports, and assessed the validity of  those calculations in complying with OMB guidance. Due to the limited  number of recipients reviewed and the judgmental nature of the selection,  GAO’s FTE findings are not generalizable beyond the programs examined.  In addition, state teams also interviewed government officials from our 16  selected states and the District to discuss issues that arose in the fourth  reporting period statewide, specifically related to any difficulties they  encountered during the fourth round of reporting, development of their  state Web sites, and their views on whether the recipient reporting  requirements have affected intergovernmental interactions. We also asked  these officials about ongoing state plans for managing, tracking, and  reporting on Recovery Act funding and activities and solicited feedback  from state officials regarding how states are using data generated from the  recipient reporting effort and ways the recipient reporting process could  be improved.
section_title: Single Audit as an Accountability and Oversight Mechanism
paragraphs: To perform our audit work, we interviewed federal officials, state auditors,  and officials from the cognizant agency for audit from the Department of  Health and Human Services (HHS). We examined documents related to  Single Audits, including the 2010 OMB Circular No. A-133 Audits of States,  Local Governments, and Non-Profit Organizations Compliance  Supplement, OMB’s and HHS’s evaluations of the OMB Single Audit  Internal Control project, and related federal agency management  decisions. We reviewed Federal Audit Clearinghouse documents, such as  selected Single Audit reports. We also conducted a survey of the state  auditors and state program and finance officials that participated in the  OMB Internal Control Single Audit Project. We analyzed and summarized  the responses to our survey. We conducted our surveys in March 2010  and interviewed several state auditors, officials from the Department of  Health and Human Services, which is the cognizant agency for audit, and  officials from awarding federal agencies whose programs were selected  for audit under the project. We also participated in an OMB-led discussion  of the project’s participants to obtain their views on the project.
section_title: Recovery Accountability and Transparency Board Initiatives
paragraphs: To determine the status and results of oversight activities of the Recovery  Accountability and Transparency Board (the Board), we met with  representatives of the Board to discuss the initiatives they have taken to  coordinate and monitor the efforts of the inspectors’ general oversight  activities as well as the Board’s initiatives to prevent and detect fraud,  waste, and abuse of Recovery funds. We reviewed available  documentation related to the Board’s efforts.
section_title: Observations on States’ Use of Contracts and Contract Outcomes
paragraphs: To provide observations on selected states’ use of competitive procedures  and fixed prices in awarding contracts for Recovery Act funds, between  July 2009 and March 2010, we met with state and local officials to discuss  the contract award process for a sample of 208 contracts in 16 states and  the District. Between March and June 2010, we met again with the officials  responsible for these same contracts to discuss the extent to which there  had been cost or schedule changes or contractor performance issues. The  contracts we reviewed with state officials were selected based on a  combination of several factors to obtain a mix of various programs and  dollar values that varied among the states. Our methodology for selecting  these contracts does not allow for reported information to be generalized.
section_title: State and Local Accountability
paragraphs: To assess actions taken by the state and local audit community to monitor  the use of Recovery Act funds, we have interviewed selected state and  local auditors and state inspectors general about their ongoing and  planned audit activities. We have also reviewed state and local audit  reports. We have also spoken to some of the Recovery Act oversight  entities created in many of the selected states such as New Jersey’s  Recovery Accountability Task Force and the Recovery Task Force in  California. In addition, in an effort to update the audit community  concerning our Recovery Act work and participate in information sharing  about Recovery Act issues, we are working with state and local auditors  and their associations to facilitate routine telephone conference calls to  discuss Recovery Act issues with a broad community of interested parties.  The conference call participants include the Association of Government  Accountants; the Association of Local Government Auditors; the National  Association of State Auditors, Comptrollers, and Treasurers; OMB; the  Board; federal inspectors general; the National Governors Association; and  the National Association of State Budget Officers. In an effort to ensure  information sharing about allegations of fraud, we are also working with  state and local auditors to develop plans for routine sharing of  information.
section_title: State and Local Budget
paragraphs: We continued our review of the use of Recovery Act funds for the 16  selected states, the District, and selected localities. We conducted  interviews with state budget officials and reviewed proposed and enacted  budgets and revenue forecasts to update our understanding of the use of  Recovery Act funds in the 16 selected states and the District. To update  our understanding of local governments’ use of Recovery Act funds, we  met with finance officials and city administrators at the selected local  governments.
The topics covered in our meetings included what Recovery Act funds the  states and localities received, how they used the funds, and their exit  strategy to prepare for the phasing out of Recovery Act funding. In the  course of our discussions with officials we explored the extent to which  the receipt of Recovery Act funds has stabilized state and local  government budgets. We also reviewed reports and analyses regarding the  fiscal conditions of states and localities.
The selected states and the District for our review contain about 65  percent of the U.S. population and are estimated to receive collectively  about two-thirds of the intergovernmental grant funds available through  the Recovery Act. To select local governments for our review, we  identified localities representing a range of jurisdictions (cities and  counties) and variations in population sizes and economic conditions  (unemployment rates greater than or less than the state’s overall  unemployment rate). In making our selections, we also considered  proximity to our other scheduled Recovery Act work and local contacts  established during prior reviews. The GAO teams visited a total of 24 local  governments in our 16 selected states that ranged in population from  approximately 258 in Steward, Illinois, to approximately 2.5 million in  Miami-Dade County, Florida. Unemployment rates in our selected  localities ranged from 6.7 percent in Round Rock, Texas, to 13.4 percent in  Redding, California. Due to the small number of jurisdictions visited and  judgmental nature of their selection, GAO’s findings are not generalizable  to all local governments.
The list of local governments selected in each state is found in appendix  IV.
section_title: Data and Data Reliability
paragraphs: We collected funding data from www.Recovery.gov and federal agencies  administering Recovery Act programs for the purpose of providing  background information. We used funding data from www.Recovery.gov— which is overseen by the Board—because it is the official source for  Recovery Act spending. Except as may be noted with regard to specific  analyses appearing in other sections of this report and based on our  examination of this information thus far, we consider these data  sufficiently reliable with attribution to official sources for the purposes of  providing background information on Recovery Act funding for this  report. Our sample of states, localities, and entities has been purposefully  selected and the results of our reviews are not generalizable to any  population of states, localities, or entities.
We conducted this performance audit from May 27, 2010, to September 20,  2010, 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.
section_title: Appendix II: Implemented and Closed Recommendations
paragraphs: The following are 31 GAO recommendations that Departments of  Transportation (DOT), Housing and Urban Development (HUD),  Education, Treasury, and the Office of Management and Budget (OMB)  have implemented since we began conducting bimonthly reviews in April  2009. We have also closed 2 recommendations.
subsections: section_title: Department of Transportation
subsections: section_title: Implemented Recommendation
paragraphs: To ensure that the public has accurate information regarding economically  distressed areas, we also recommend that the Secretary of Transportation  direct FHWA to issue guidance to the states advising them to update  information in the Recovery Act Data System to reflect current DOT  decisions concerning the special-need criteria. Projects in areas currently  lacking documentation showing that the areas meet the criteria to be  designated as economically distressed should be reported as a project in a  noneconomically distressed area.
In July 2010, FHWA directed Arizona, California, and Illinois to revise their  designations and to report these projects as being in noneconomically  distressed areas. FHWA also directed all states to ensure that future  Recovery Act Data System entries be coded as economically distressed  only if FHWA division and headquarters offices had approved the  designation.
section_title: Implemented Recommendation
paragraphs: Recipients of highway and transit Recovery Act funds, such as state  departments of transportation and transit agencies, are subject to multiple  reporting requirements. Both DOT and OMB have issued implementation  guidance for recipient reporting. Despite these efforts, state and local  highway and transit officials expressed concerns and challenges with  meeting the Recovery Act reporting requirements. We recommended in  our September 2009 report that the Secretary of Transportation should  continue the department’s outreach to state departments of transportation  and transit agencies to identify common problems in accurately fulfilling  reporting requirements and provide additional guidance, as appropriate.
In September 2009, in responding to our recommendation, DOT said that it  had conducted outreach, including providing technical assistance,  training, and guidance to recipients, and will continue to assess the need  to provide additional information. For example, in February 2010, FTA  continued three training webinars to provide technical assistance in  complying with reporting requirements under section 1201(c) of the  Recovery Act. In addition, on February 1, 2010, FTA issued guidance to  transit agencies instructing them to use the same methodology for  calculating jobs retained through vehicles purchased under section 1201 as  they had been for the recipient reporting. This reversed previous guidance  that had instructed transit agencies to use a different methodology for  vehicle purchases under sections 1201 and recipient reporting.
section_title: Implemented Recommendation
paragraphs: DOT and FHWA have yet to provide clear guidance regarding how states  are to implement the Recovery Act requirement that economically  distressed areas (EDA) are to receive priority in the selection of highway  projects for funding. We found substantial variation both in how states  identified EDAs and how they prioritized project selection for these areas.  To ensure states meet Congress’s direction to give areas with the greatest  need priority in project selection, we recommended in our July 2009 report  that the Secretary of Transportation develop clear guidance on identifying  and giving priority to EDAs that are in accordance with the requirements  of the Recovery Act and the Public Works and Economic Development Act  of 1965, as amended, and more consistent procedures for FHWA to use in  reviewing and approving states’ criteria.
In August 2009, in response to our recommendation, FHWA, in  consultation with the Department of Commerce, developed guidance that  addresses our recommendation. In particular, FHWA’s August 2009  guidance defines “priority,” directing states to give priority to projects that  are located in an economically distressed area and can be completed  within the 3-year time frame over other projects. In addition, FHWA’s  guidance sets out criteria that states may use to identify economically  distressed areas based on “special need.” The criteria align closely with  special need criteria used by the Department of Commerce’s Economic  Development Administration in its own grant programs, including factors  such as actual or threatened business closures (including job loss  thresholds), military base closures, and natural disasters or emergencies.
section_title: Department of Housing and Urban Development
subsections: section_title: Implemented Recommendation
paragraphs: To ensure housing agencies use the correct job calculation, we  recommend that the Secretary of Housing and Urban Development clearly  emphasize to housing agencies that they discontinue use of the outdated  jobs calculator provided by HUD in the first round of recipient reporting.
In response to our recommendation, HUD sent an e-mail to housing  agencies on June 30, 2010, that explicitly instructed them not to use the  outdated jobs-counting calculator, as it was not correctly computing the  FTE calculation per updated OMB guidance. This e-mail also included a  link to HUD’s new online jobs-counting calculator and instructed housing  agencies to use this calculator for the July and all future reporting periods.
section_title: Implemented Recommendation
paragraphs: To help clarify the recipient reporting responsibilities of housing agencies  and to improve the consistency and completeness of jobs data reported by  housing agencies, we recommend that the Secretary of Housing and Urban  Development issue guidance that explains when FTEs attributable to  subcontractors should be reported by the prime recipient.
In response to our recommendation, HUD notified housing agencies in a  June 30, 2010, e-mail that it had developed additional guidance for housing  agencies to use when determining whether prime recipients should report  FTEs for subcontractors and provided a link to the guidance on its Web  site. The guidance noted that housing agencies should include Recovery  Act-funded hours that contractors and subcontractors worked as part of  their FTE calculation.
section_title: Implemented Recommendation
paragraphs: To help HUD achieve Recovery Act objectives and address challenges with  its continued administration of Recovery Act funds, we recommend that  the Secretary of Housing and Urban Development develop a management  plan to determine the adequate level of agency staff needed to administer  both the Recovery Act funds and the existing Capital Fund program going  forward, including identifying future resource needs and determining  whether current resources could be better utilized to administer these  funds.
In response to our recommendation, HUD developed a management plan  for administration of Recovery Act funds, including the need for an  additional 11 FTEs to carry out Recovery Act responsibilities. In July 2010,  HUD also provided us with its management plan for the Public Housing  Capital Fund program. The plan summarized the key activities HUD  undertakes to monitor and facilitate the use of these funds by program  area, including rule and policy development, planning, program awards,  program management, technical assistance, and reporting. The plan also  included the specific activities, tasks, and resources used for each of these  existing program areas, identifying approximately 91 existing FTEs in its  headquarters and field offices to support these activities. According to  HUD’s management plan, HUD’s current staffing level is sufficient to  manage its existing Capital Fund program, but the agency could more  efficiently utilize its current resources. As a result, HUD plans to realign  current staff to focus on its core missions including Recovery Act  responsibilities.
section_title: Implemented Recommendation
paragraphs: We recommended on March 3, 2010 that the Secretary of Housing and  Urban Development instruct housing agencies to discontinue use of the  jobs calculator provided by HUD in the first round of recipient reporting  for subsequent rounds of reporting to ensure the correct job calculation is  used.
In a March 26, 2010, e-mail to housing agencies, HUD included instructions  to discontinue use of the jobs calculator originally posted on the HUD  Recovery Act Web site in October 2009. HUD reiterated these instructions  in a subsequent e-mail it sent to housing agencies on March 31, 2010.
section_title: Implemented Recommendation
paragraphs: To enhance HUD’s ability to prevent, detect, and correct noncompliance  with the use of Recovery Act funds, we recommended in September 2009  that the Secretary of Housing and Urban Development expand the criteria  for selecting housing agencies for on-site reviews to include housing  agencies with open Single Audit findings that may affect the use of and  reporting on Recovery Act funds.
In October 2009, HUD expanded its criteria for selecting housing agencies  for on-site reviews to include all housing agencies with open 2007 and  2008 Single Audit findings as of July 7, 2009, relevant to the administration  of Recovery Act funds. HUD has identified 27 such housing agencies and  planned to complete these on-site reviews by February 15, 2010.
section_title: Department of Education
subsections: section_title: Implemented Recommendation
paragraphs: To ensure that FTEs are properly accounted for over time, we recommend  that the Secretary of Education clarify how LEAs and IHEs should report  FTEs when additional Recovery Act funds are received in a school year  and are reallocated to cover costs incurred in previous quarters,  particularly when the definite term methodology is used.
In response to our recommendation, Education issued clarifying guidance  on August 26, 2010, that addressed how FTEs should be reported when  funds are expended in one quarter to cover costs incurred in previous  quarters.
section_title: Implemented Recommendation
paragraphs: To ensure that subrecipients do not underreport vendor FTEs directly paid  with Recovery Act funds, we recommend that the Secretary of Education  re-emphasize the responsibility of subrecipients to include hours worked  by vendors in their quarterly FTE calculations to the maximum extent  practicable.
In response to our recommendation, Education issued clarifying guidance  on August 26, 2010, that re-emphasized the responsibility of subrecipients  to include hours worked by vendors in their quarterly FTE calculations.
section_title: Implemented Recommendation
paragraphs: To improve consistency in how FTEs generated using the definite term are  calculated, we recommend that the Secretary of Education and the  Director of OMB clarify whether IHE and LEA officials using this  methodology should include the cost of benefits in their calculations.
In response to our recommendation, Education issued clarifying guidance  on August 26, 2010, that addressed whether benefits should be included in  the calculation of jobs under the OMB guidance released December 18,  2009.
section_title: Implemented Recommendation
paragraphs: To improve the consistency of FTE data collected and reported, we  recommend that the Secretary of Education and the Director of OMB  provide clarifying guidance to recipients on how to best calculate FTEs for  education employees during quarters when school is not in session.
In response to our recommendation, Education issued clarifying guidance  on August 26, 2010, that explained that the length of a full-time contract  (i.e., 10 or 12 months) should not affect FTE calculations.
section_title: Implemented Recommendation
paragraphs: We recommended in September 2009 that the Secretary of Education take  further action such as collecting and reviewing documentation of state  monitoring plans to ensure that states understand and fulfill their  responsibility to monitor subrecipients of SFSF funds and consider  providing training and technical assistance to states to help them develop  and implement state monitoring plans for SFSF.
In February 2010, Education instructed states to submit to Education for  review their plans and protocols for monitoring subrecipients of SFSF  funds. Education also issued its plans and protocols for monitoring state  implementation of the SFSF program. The plan includes on-site visits to  about half the states and desk reviews of the other states to be conducted  over the next year.
section_title: Implemented Recommendation
paragraphs: We recommended in November 2009 that the Secretary of Education take  further action to enhance transparency by requiring states to include an  explanation of changes to maintenance-of-effort levels in their SFSF  funding application resubmissions.
Education notified states that, if states made changes to their  maintenance-of-effort data in their State Fiscal Stabilization Fund  applications, they must provide a brief explanation of the reason the data  changed.
section_title: Department of the Treasury
subsections: section_title: Implemented Recommendation
paragraphs: In order to increase the likelihood that state Housing Finance Agencies  (HFA) will comply with Treasury’s requirements for recapturing funds, the  Secretary of the Treasury should define what it considers appropriate  actions by HFAs to recapture funds in order to avoid liability when they  are unable to collect funds from project owners that do not comply.
Treasury agreed with our recommendation and in response to our  recommendation, Treasury provided additional guidance to state HFAs to  clarify what constitutes appropriate actions by HFAs to recapture funds in  order to avoid liability in the event of project owner noncompliance.  Specifically, in August 2010, the agency developed and issued a Recapture  Guidance for Recovery Act projects that receive Section 1602 Program  funds that defines a recapture event, specifies the amount of funds owed  in the event of recapture, describes an HFA’s obligation and  responsibilities in avoiding project owner noncompliance, sets forth the  kinds of recapture actions an HFA may take in the event of  noncompliance, and directs HFAs on how to report noncompliance.
section_title: Executive Office of the President: Office of Management and Budget (OMB)
subsections: section_title: Implemented Recommendation
paragraphs: We were concerned that since the scope of Single Audit workloads due to  Recovery Act programs being subject to Single Audits will increase,  consideration should be given to determining what funds can be used to  support Single Audit efforts related to Recovery Act programs, including  whether legislative changes are needed to specifically direct resources to  cover incremental audit costs related to Recovery Act programs. We  recommended that the Director of OMB develop mechanisms to help fund  the additional Single Audit costs and efforts for auditing Recovery Act  programs.
OMB addressed our recommendation by issuing guidance to executive  departments and agencies to help states with various approaches to  recover administrative costs associated with the wide range of activities to  comply with the Recovery Act. Administrative costs include, but are not  limited to, oversight and audit costs and the costs of performing additional  Single Audits. OMB issued the guidance to clarify actions (within the  existing legal framework for identifying allowable reimbursable costs) that  states could take to recover administrative costs in a more timely manner.  In addition to our recommendation to OMB, as we previously noted in our  bimonthly reports, it is our view that, to the extent that additional audit  coverage is needed to achieve accountability over Recovery Act programs,  Congress should consider mechanisms to provide additional resources to  support those charged with carrying out the Single Audit Act and related  audits.
section_title: Implemented Recommendation
paragraphs: We reported in July 2009 that OMB was encouraging communication of  weaknesses to management early in the audit process, but did not add  requirements for auditors to take these steps. This step did not address  our concern that internal controls over Recovery Act programs should be  reviewed before significant funding is expended. Under the current Single  Audit framework and reporting timelines, the auditor evaluation of  internal control and related reporting will occur too late—after significant  levels of federal expenditures have already occurred. As a result of our  recommendation, OMB implemented a Single Audit Internal Control  Project under which a limited number of voluntarily participating auditors  performing the Single Audits for states would communicate in writing  internal control deficiencies noted in the single audit within 6 months of  the 2009 fiscal year-end, rather than the 9 months required by the Single  Audit Act. We recommended that the Director of OMB take steps to  achieve sufficient participation and coverage in OMB’s Single Audit  Internal Control Project that provides for early written communication of  internal control deficiencies to achieve the objective of more timely  accountability over Recovery Act funds.
OMB implemented its Single Audit Internal Control Project in October  2009. The project called for a minimum of 10 participants. OMB solicited  the 50 states, the District of Columbia, Puerto Rico, and Guam, from which  16 states volunteered to participate. The volunteer states were diverse in  geographic characteristics and population and included states that use  auditors within state government as well as external auditors to conduct  Single Audits. In addition, the volunteer states included California and  Texas, which are among the top three states with the highest levels of  Recovery Act obligations from the federal government. Each state selected  at least two Recovery Act programs from a list of 11 high-risk Recovery  Act programs for internal control testing. OMB designed the project to be  voluntary and OMB officials stated that, overall, they were satisfied with  the population and geographic diversity among the states that volunteered.  Although the project’s coverage could be more comprehensive to provide  greater assurance over Recovery Act funding, the results of the project  could provide meaningful insight for making improvements to the Single  Audit process.
section_title: Implemented Recommendation
paragraphs: The Single Audit Act requires that recipients submit their financial  reporting packages, including the Single Audit report, to the federal  government no later than 9 months after the end of the period being  audited. As a result, an audited entity may not receive feedback needed to  correct an identified internal control or compliance weakness until the  latter part of the subsequent fiscal year. The timing problem is  exacerbated by the extensions to the 9-month deadline that are routinely  granted by the awarding agencies, consistent with OMB guidance. We  made two recommendations in this area. First, we recommended that the  Director of OMB formally advise federal cognizant agencies to adopt a  policy of no longer approving extensions of the due dates of Single Audit  reporting package submissions beyond the 9-month deadline. Second, we  also recommended that the Director of OMB widely communicate this  revised policy to the state audit community and others who have  responsibility for conducting Single Audits and submitting the Single Audit  reporting package.
On March 22, 2010, OMB addressed these two recommendations by issuing  memorandum M-10-14, Updated Guidance on the American Recovery and  Reinvestment Act. This guidance directed federal agencies to not grant any  requests made to extend the Single Audit reporting deadlines for fiscal  years 2009 to 2011. OMB further stated that to meet the criteria for a low- risk auditee in the current year, the auditee must have submitted the prior  2 years’ audit reports by the required due dates. OMB communicated this  revised policy though the OMB Web site, the American Institute of  Certified Public Accountants, and the National Association of State  Auditors, Comptrollers, and Treasurers.
section_title: Implemented Recommendation
paragraphs: OMB should work with the Recovery Accountability and Transparency  Board (the Board) and federal agencies, building on lessons learned, to  establish a formal and feasible framework for review of recipient changes  during the continual update period and consider providing more time for  agencies to review and provide feedback to recipients before posting  updated reports on Recovery.gov.
In our March 3, 2010 report, we recommended that OMB work with the  Board and federal agencies to establish a formal and feasible framework  for review of recipient changes during the new continuous review period  and consider providing more time for federal agencies to review and  provide feedback to recipients before posting updated reports on  Recovery.gov. On March 22, 2010, OMB issued updated guidance which  highlighted the steps federal agencies must take to review data quality of  recipient reports during the continuous review period. The guidance  specified that federal agencies must, at a minimum, conduct a final review  of the data upon the close of the continuous corrections period. In  addition, now the Recovery Board reflects corrected data on Recovery.gov  approximately every 2 weeks, allowing federal agencies time to review and  provide feedback in the interim period.
section_title: Implemented Recommendation
paragraphs: States have been concerned about the burden imposed by new  requirements, increased accounting and management workloads, and  strains on information systems and staff capacity at a time when they are  under severe budgetary stress. We recommended in April 2009 that the  Director of OMB clarify what Recovery Act funds can be used to support  state efforts to ensure accountability and oversight, especially in light of  enhanced oversight and coordination requirements.
On May 11, 2009, OMB released M-09-18, Payments to State Grantees for  Administrative Costs of Recovery Act Activities, clarifying how state  grantees could recover administrative costs of Recovery Act activities.
section_title: Implemented Recommendation
paragraphs: States and localities are expected to report quarterly on a number of  measures, including the use of funds and an estimate of the number of jobs  created and the number of jobs retained as required by Section 1512 of the  Recovery Act. We recommended in our July 2009 report that to increase  consistency in recipient reporting of jobs created and retained, the  Director of OMB should work with federal agencies to have them provide  program-specific examples of the application of OMB’s guidance on  recipient reporting of jobs created and retained.
OMB has issued clarifications and frequently asked questions (FAQ) on  Recovery Act reporting requirements. During the first reporting period,  OMB also deployed regional federal employees to serve as liaisons to state  and local recipients in large population centers and established a call  center for entities that did not have an on-site federal liaison. In addition,  federal agencies issued additional guidance that builds on the OMB June  22 recipient reporting guidance for their specific programs. This guidance  is in the form of FAQs, tip sheets, and more traditional guidance that  builds on what was provided on June 22, 2009. Federal agencies have also  taken steps to provide additional education and training opportunities for  state and local program officials on recipient reporting, including Web- based seminars.
section_title: Implemented Recommendation
paragraphs: To foster timely and efficient communications, we recommended in April  2009 that the Director of OMB should continue to develop and implement  an approach that provides easily accessible, real-time notification to (1)  prime recipients in states and localities when funds are made available for  their use and (2) states—where the state is not the primary recipient of  funds but has a statewide interest in this information.
In response to our recommendation, OMB has made important progress in  notifying recipients when Recovery Act funds are available,  communicating the status of these funds at the federal level through  agency Weekly Financial Activity reports, and disseminating Recovery Act  guidance broadly while actively seeking public and stakeholder input.  OMB has taken the additional step of requiring federal agencies to notify  Recovery Act coordinators in states, the District of Columbia,  commonwealths, and territories within 48 hours of an award to a grantee  or contractor in their jurisdiction.
section_title: Implemented Recommendation
paragraphs: Responsibility for reporting on jobs created and retained falls to  nonfederal recipients of Recovery Act funds. As such, states and localities  have a critical role in determining the degree to which Recovery Act goals  are achieved. Given questions raised by many state and local officials  about how best to determine both direct and indirect jobs created and  retained under the Recovery Act, we recommended in April 2009 that the  Director of OMB continue OMB’s efforts to identify appropriate  methodologies that can be used to (1) assess jobs created and retained  from projects funded by the Recovery Act; (2) determine the impact of  Recovery Act spending when job creation is indirect; and (3) identify those  types of programs, projects, or activities that in the past have  demonstrated substantial job creation or are considered likely to do so in  the future. We also recommended that the Director of OMB consider  whether the approaches taken to estimate jobs created and retained in  these cases can be replicated or adapted to other programs.
On June 22, 2009, OMB issued additional implementation guidance on  recipient reporting of jobs created and retained, (OMB memoranda M-09- 21, Implementing Guidance for the Reports on Use of Funds Pursuant to  the American Recovery and Reinvestment Act of 2009). This guidance is  responsive to much of what we recommended. The June 2009 guidance  provided detailed instructions on how to calculate and report jobs as  FTEs. It also describes in detail the data model and reporting system to be  used for the required recipient reporting on jobs. It clarifies that the prime  recipient and not the subrecipient is responsible for reporting information  on jobs created or retained. Federal agencies have issued guidance that  expanded on the OMB June 22 governmentwide recipient reporting  guidance and provided education and training opportunities for state and  local program officials. Agency-specific guidance includes FAQs and tip  sheets. Additionally, agencies are expected to provide examples of  recipient reports for their programs, which is also consistent with what we  recommended. In addition to the federal agency efforts, OMB has issued  FAQs on Recovery Act reporting requirements. The June 22 guidance and  subsequent actions by OMB are responsive to much of what we said in our  recommendation.
section_title: Implemented Recommendation
paragraphs: We have noted in prior reports that in order to achieve the delicate  balance between robust oversight and the smooth flow of funds to  Recovery Act programs, states may need timely reimbursement for these  activities. We recommended in September 2009 that to the extent that the  Director of OMB has the authority to consider mechanisms to provide  additional flexibilities to support state and local officials charged with  carrying out Recovery Act responsibilities, it is important to expedite  consideration of alternative administrative cost reimbursement proposals.
In response to this recommendation, OMB issued a memorandum on  October 13, 2009, to provide guidance to address states’ questions  regarding specific exceptions to OMB Circular A-87, Cost Principles for  State, Local and Indian Tribal Governments. In the memorandum, OMB  provided clarifications for states regarding specific exceptions to OMB  Circular A-87 that are necessary in order for the states to perform timely  and adequate Recovery Act oversight, reporting, and auditing. We believe  the October 2009 OMB guidance provides the additional clarification  needed for states and localities to proceed with their plans to recoup  administrative costs.
section_title: Implemented Recommendation
paragraphs: To improve the consistency of FTE data collected and reported, we  recommended in November 2009 that OMB clarify the definition and  standardize the period of measurement for the FTE data element in the  recipient reports.
After the first round of reporting by states on their use of Recovery Act  funds in October 2009, OMB updated the recipient reporting guidance on  December 18, 2009. According to the agency, this guidance aligns with  GAO’s recommendation by requiring recipients to report job estimates on  a quarterly rather than a cumulative basis. As a result, recipients will no  longer be required to sum various data on hours worked across multiple  quarters of data when calculating job estimates. The December guidance  incorporated lessons learned from the first round of recipient reporting  and also addressed recommendations we made in our November 2009  report on recipient reporting. According to OMB, the December guidance  is intended to help federal agencies improve the quality of data reported  under Section 1512 and simplifies compliance by revising the definitions  and calculations needed to define and estimate the number of jobs saved.
section_title: Implemented Recommendation
paragraphs: To improve the consistency of FTE data collected and reported, we also  recommended in November 2009 that OMB consider being more explicit  that “jobs created or retained” are to be reported as hours worked and  paid for with Recovery Act funds.
In response to our recommendation, OMB issued guidance on December  18, 2009, that no longer requires recipients make a subjective judgment of  whether jobs were created or retained as a result of the Recovery Act.  Instead, recipients will more easily and objectively report on jobs funded  with Recovery Act dollars.
section_title: Implemented Recommendation
paragraphs: To improve the consistency of FTE data collected and reported, we also  recommended in our November 2009 report that OMB continue working  with federal agencies to provide or improve program-specific guidance to  assist recipients, especially as it applies to the full-time equivalent  calculation for individual programs.
In response to our recommendation, OMB issued guidance on December  18, 2009, that required federal agencies to submit their guidance  documents to OMB for review and clearance to ensure consistency  between federal agency guidance and the guidance released by OMB.
section_title: Implemented Recommendation
paragraphs: To improve the consistency of FTE data collected and reported, we  recommended in November 2009 that OMB work with the Recovery  Accountability and Transparency Board and federal agencies to re- examine review and quality assurance processes, procedures, and  requirements in light of experiences and identified issues with the initial  round of recipient reporting and consider whether additional  modifications need to be made and if additional guidance is warranted.
In response to our recommendation, on December 18, 2009, OMB issued  updated guidance on data quality, nonreporting recipients, and reporting  of job estimates. The agency stated that the updated guidance  incorporates lessons learned from the first reporting period and further  addresses GAO’s recommendations. The guidance also provides federal  agencies with a standard methodology for effectively implementing  reviews of the quality of data submitted by recipients.
section_title: Implemented Recommendation
paragraphs: In our July 2009 report we recommended that to strengthen the effort to  track the use of funds, the Director of OMB should (1) clarify what  constitutes appropriate quality control and reconciliation by prime  recipients, especially for subrecipient data, and (2) specify who should  best provide formal certification and approval of the data reported.
Although OMB clarified that the prime recipient is responsible for  FederalReporting.gov data in its June 22 guidance, no statement of  assurance or certification will be required of prime recipients on the  quality of subrecipient data. Moreover, federal agencies are expected to  perform data quality checks, but they are not required to certify or  approve data for publication. We continue to believe that there needs to be  clearer accountability for the data submitted and during the subsequent  federal review process. OMB agreed with the recommendation in concept  but questioned the cost/benefit of data certification given the tight  reporting time frames for recipients and federal agency reviewers. OMB  staff stated that grant recipients are already expected to comply with data  requirements appropriate to the terms and conditions of a grant.  Furthermore, OMB will be monitoring the results of the quarterly recipient  reports for data quality issues and would want to determine whether these  issues are persistent problems before concluding that certification is  needed.
Through issuance of additional guidance and clarification we are now  satisfied OMB has implemented this recommendation.
section_title: Implemented Recommendation
paragraphs: In consultation with the Recovery Accountability and Transparency Board  and states, the Director of OMB should evaluate current information and  data collection requirements to determine whether sufficient, reliable, and  timely information is being collected before adding further data collection  requirements. As part of this evaluation, OMB should consider the cost  and burden of additional reporting on states and localities against  expected benefits.
OMB has taken steps to ensure data quality through issuance of additional  guidance. OMB has also worked with the states to minimize to the extent  possible the new reporting burdens under the Recovery Act.
section_title: Closed Recommendation
paragraphs: We recommended in our April report the addition of a master schedule for  anticipated, new, or revised federal Recovery Act program guidance and a  more structured, centralized approach to making this information  available, such as what is provided at Recovery.gov on recipient reporting.
This recommendation is closed because it is no longer applicable.
section_title: Closed Recommendation
paragraphs: In addition to providing additional types of program-specific examples of  guidance, the Director of OMB should work with federal agencies to use  other channels to educate state and local program officials on reporting  requirements, such as Web- or telephone-based information sessions or  other forums.
In addition to the federal agency efforts, OMB has issued FAQs on  Recovery Act reporting requirements. The June 22 guidance and  subsequent actions by OMB are responsive to much of what we said in our  April 2009 report. OMB deployed regional federal employees to serve as  liaisons to state and local recipients in large population centers. The  objective was to provide on-site assistance and, as necessary, direct  questions to appropriate federal officials in Washington, D.C. OMB  established a call center for entities that do not have an on-site federal  liaison. These actions by OMB, together with an overall increase in state  and local program officials’ knowledge of reporting requirements, have  made this recommendation inapplicable.
section_title: Appendix III: Program Descriptions
paragraphs: Within the Department of Transportation, the Federal Aviation  Administration’s Airport Improvement Program provides formula and  discretionary grants for the planning and development of public-use  airports. The Recovery Act provides $1.1 billion for discretionary Grant-in- Aid for Airports under this program with priority given to projects that can  be completed within 2 years. The Recovery Act requires that the funds  must supplement, not supplant, planned expenditures from airport- generated revenues or from other state and local sources for airport  development activities.
subsections: section_title: Assistance to Rural Law Enforcement to Combat Crime and Drugs Program
paragraphs: The Recovery Act Assistance to Rural Law Enforcement to Combat Crime  and Drugs Program is administered by the Bureau of Justice Assistance  (BJA), a component of the Office of Justice Programs, Department of  Justice. The purpose of this program is to help rural states and rural areas  prevent and combat crime, especially drug-related crime, and provides for  national support efforts, including training and technical assistance  programs strategically targeted to address rural needs. The Recovery Act  provides $125 million for this program, and BJA has made 212 awards.
section_title: Brownfields Program
paragraphs: The Recovery Act provides $100 million to the Brownfields Program,  administered by the Office of Solid Waste and Emergency Response within  the Environmental Protection Agency, for cleanup, revitalization, and  sustainable reuse of contaminated properties. The funds will be awarded  to eligible entities through job training, assessment, revolving loan fund,  and cleanup grants.
section_title: Broadband Technology Opportunities Program
paragraphs: The Broadband Technology Opportunities Program (BTOP), funded by the  Recovery Act and administered by the Department of Commerce’s  National Telecommunications and Information Administration provides  grants to increase broadband infrastructure in unserved and underserved  areas of the country. BTOP grants fund projects for new or improved  internet facilities in schools, libraries, hospitals, and public safety  facilities, projects to establish or upgrade public computer facilities that  provide broadband access to the general public or vulnerable populations,  and projects that increase broadband internet usage among populations  where broadband technology has been underutilized. Projects may include  training and outreach activities that will increase broadband activities in  people’s everyday lives.
section_title: Build America Bonds
paragraphs: Build America Bonds (BAB) administered by the Internal Revenue Service  within the Department of the Treasury are taxable government bonds  created by the Recovery Act that can be issued with federal subsidies for a  portion of the borrowing costs delivered either through nonrefundable tax  credits provided to holders of the bonds (tax credit BAB) or as refundable  tax credits paid to state and local governmental issuers of the bonds  (direct payment BAB). Direct payment BABs are a new type of bond that  provide state and local government issuers with a direct subsidy payment  equal to 35 percent of the bond interest they pay. Tax credit BABs provide  investors with a nonrefundable tax credit of 35 percent of the net bond  interest payments (excluding the credit), which represents a federal  subsidy to the state or local governmental issuer equal to approximately 25  percent of the total return to the investor. State and local governments  may issue an unlimited number of BABs through December 31, 2010, and  all BAB proceeds must be used for capital expenditures.
section_title: Capital Improvement Program
paragraphs: The Department of Health and Human Services’ Health Resources and  Services Administration has allocated $862.5 million in Recovery Act funds  for Capital Improvement Program grants to health centers to support the  construction, repair, and renovation of more than 1,500 health center sites  nationwide, including purchasing health information technology and  expanding the use of electronic health records.
section_title: Child Care and Development Block Grants
paragraphs: Administered by the Administration for Children and Families within the  Department of Health and Human Services, Child Care and Development  Block Grants, one of the funding streams comprising the Child Care and  Development Fund, are provided to states, according to a formula, to  assist low-income families in obtaining child care, so that parents can  work or participate in education or training activities. The Recovery Act  provides $1.9 billion in supplemental funding for these grants.
section_title: Clean Cities Program
paragraphs: The Department of Energy’s Clean Cities program, administered by the  Office of Energy Efficiency and Renewable Energy, is a government- industry partnership that works to reduce America’s petroleum  consumption in the transportation sector. The Department of Energy is  providing nearly $300 million in Recovery Act funds for projects under the  Clean Cities program, which provide a range of energy-efficient and  advanced vehicle technologies, such as hybrids, electric vehicles, plug-in  electric hybrids, hydraulic hybrids, and compressed natural gas vehicles,  helping reduce petroleum consumption across the United States. The  program also supports refueling infrastructure for various alternative fuel  vehicles, as well as public education and training initiatives, to further the  program’s goal of reducing the national demand for petroleum.
section_title: Clean and Drinking Water State Revolving Funds
paragraphs: The Recovery Act appropriated $4 billion for the Clean Water State  Revolving Fund (SRF) programs and $2 billion for the Drinking Water SRF  programs. These amounts are a significant increase compared to federal  funds awarded as annual appropriations to the SRF programs in recent  years. From fiscal years 2000 through 2009, annual appropriations  averaged about $1.1 billion for the Clean Water SRF program and about  $833 million for the Drinking Water SRF program. The Environmental  Protection Agency (EPA) distributed the Recovery Act funds to the 50  states, the District of Columbia, and Puerto Rico to make loans and grants  to subrecipients—local governments and other entities awarded Recovery  Act funds—for eligible wastewater and drinking water infrastructure  projects and “nonpoint source” pollution projects intended to protect or  improve water quality by, for example, controlling runoff from city streets  and agricultural areas. The Clean Water and Drinking Water SRF  programs, established in 1987 and 1996 respectively, provide states and  local communities independent and permanent sources of subsidized  financial assistance, such as low or no-interest loans, for projects that  protect or improve water quality and that are needed to comply with  federal drinking water regulations and protect public health.
In addition to providing increased funds, the Recovery Act included  specific requirements for states beyond those that are part of base Clean  Water and Drinking Water SRF programs. For example, states were  required to have all Recovery Act funds awarded to projects under  contract within 1-year of enactment—which was February 17, 2010—and  EPA was directed to reallocate any funds not under contract by that date.
Further, states were required to use at least 50 percent of Recovery Act  funds to provide assistance in the form of principal forgiveness, negative  interest loans, or grants. States were also required to use at least 20  percent of funds as a “green reserve” to provide assistance for green  infrastructure projects, water or energy efficiency improvements, or other  environmentally innovative activities.
section_title: Communities Putting Prevention to Work
paragraphs: The Recovery Act provides $650 million to carry out evidence-based  clinical and community-based prevention and wellness strategies  authorized by the Public Health Service Act that deliver specific,  measurable health outcomes that address chronic disease rates. In  response to the act, the Department of Health and Human Services  launched the Communities Putting Prevention to work initiative on  September 17, 2009. The goals of the initiative, which is to be administered  by the Centers for Disease Control and Prevention, are to increase levels  of physical activity, improve nutrition, decrease obesity rates, and  decrease smoking prevalence, teen smoking initiation, and exposure to  second-hand smoke through an emphasis on policy and environmental  change at both the state and local levels. Of the $650 million appropriated  for this initiative, approximately $450 million will support community  approaches to chronic disease prevention and control; $120 million will  support the efforts of states and territories to promote wellness, prevent  chronic disease, and increase tobacco cessation; $32.5 million is allocated  for state chronic disease self-management programs; and $40 million is  allocated to establish a National Prevention Media Initiative and a National  Organizations Initiative to encourage the development of prevention and  wellness messages and advertisements.
section_title: Community Development Block Grants
paragraphs: The Community Development Block Grant (CDBG) program, administered  by the Office of Community Planning and Development within the  Department of Housing and Urban Development, enables state and local  governments to undertake a wide range of activities intended to create  suitable living environments, provide affordable housing, and create  economic opportunities, primarily for persons of low and moderate  income. Most local governments use this investment to rehabilitate  affordable housing and improve key public facilities. The Recovery Act  includes $1 billion for the CDBG.
section_title: Community Services Block Grants
paragraphs: Community Services Block Grants (CSBG), administered by the  Administration for Children and Families within the Department of Health  and Human Services, provide federal funds to states, territories, and tribes  for distribution to local agencies to support a wide range of community- based activities to reduce poverty. The Recovery Act appropriated $1  billion for CSBG.
section_title: Community Oriented Policing Services Hiring Recovery Program
paragraphs: The Recovery Act provided $1 billion through the Department of Justice’s  (DOJ) Community Oriented Policing Service’s (COPS) Hiring Recovery  Program (CHRP) for competitive grant funding to law enforcement  agencies to create and preserve jobs and to increase community policing  capacity and crime-prevention efforts. CHRP grants provide 100 percent  funding for 3 years to cover approved entry-level salaries and benefits for  newly-hired, full-time sworn officers, including those who were hired to  fill positions previously unfunded, as well as rehired officers who had  been laid off. CHRP funds can also be used in the same manner to retain  officers who were scheduled to be laid off as a result of local budget cuts.  There is no local funding match requirement for CHRP. When the grant  term expires after 3 years, grantees must retain all sworn officer positions  awarded under the CHRP grant for at least 1 additional year.
The DOJ COPS office selected local law enforcement agencies to receive  funding based on fiscal health factors—such as changes in budgets for law  enforcement, poverty, unemployment, and foreclosure rates—and  reported crime and planned community policing activities. DOJ awards 50  percent of CHRP funds to local law enforcement agencies with  populations greater than 150,000 and awards the remaining 50 percent to  local law enforcement agencies with populations of less than 150,000.  Awards were capped at no more than 5 percent of the applicant agency’s  actual sworn force strength (up to a maximum of 50 officers) and a  minimum of $5 million was allocated to each state or eligible territory.
section_title: Diesel Emission Reduction Act Grants
paragraphs: The program objective of the Diesel Emission Reduction Act Grants,  administered by the Office of Air and Radiation in conjunction with the  Office of Grants and Debarment, within the U.S. Environmental Protection  Agency (EPA), is to reduce diesel emissions. EPA will award grants to  address the emissions of in-use diesel engines by promoting a variety of  cost-effective emission reduction strategies, including switching to cleaner  fuels, retrofitting, repowering or replacing eligible vehicles and equipment,  and idle reduction strategies. The Recovery Act appropriated $300 million  for the Diesel Emission Reduction Act Grants. In addition, the funds  appropriated through the Recovery Act for the program are not subject to  the State Grant and Loan Program Matching Incentive provisions of the  Energy Policy Act of 2005.
section_title: Education
subsections: section_title: Elementary and Secondary Education Act of 1965, Title I, Part A
paragraphs: The Recovery Act provides $10 billion to help local educational agencies  (LEA) educate disadvantaged youth by making additional funds available  beyond those regularly allocated through Title I, Part A of the Elementary  and Secondary Education Act of 1965 (ESEA), as amended. These  additional funds are distributed through states to LEAs using existing  federal funding formulas, which target funds based on such factors as high  concentrations of students from families living in poverty. In using the  funds, LEAs are required to comply with applicable statutory and  regulatory requirements and must obligate 85 percent of the funds by  September 30, 2010. The Department of Education is advising LEAs to use  the funds in ways that will build the agencies’ long-term capacity to serve  disadvantaged youth, such as through providing professional development  to teachers. The Recovery Act also appropriated $3 billion for ESEA Title I  School Improvement Grants (SIG), which provides funds to states for use  in ESEA Title I schools identified for improvement in order to  substantially raise the achievement of their students. These funds are  awarded by formula to states, which will then make competitive grants to  LEAs. State applications for the $3 billion in Recovery Act SIG funding, as  well as an additional $546 million in regular fiscal year 2009 SIG funding,  were due to the Department of Education on February 28, 2010. SIG  regulatory requirements effective in February 2010, prioritize the use of  SIG funds in each state’s persistently lowest-achieving Title I schools.
To receive funds, states must identify their persistently lowest-achieving  schools, and an LEA that wishes to receive SIG funds must submit an  application to its state educational agency (SEA) identifying which schools  it commits to serve and how it will use school improvement funds to  implement one of four school intervention models: (1) turnaround model,  which includes replacing the principal and rehiring no more than 50  percent of the school’s staff; (2) restart model, in which an LEA converts  the school or closes and reopens it as a charter school or under an  education management organization; (3) school closure, in which an LEA  closes the school and enrolls the students who attended the school in  other, higher-achieving schools in the LEA; or (4) the transformation  model, which addresses four specific areas intended to improve schools.
section_title: Individuals with Disabilities Education Act, Parts B and C
paragraphs: The Recovery Act provided supplemental funding for programs authorized  by Part B and C of the Individuals with Disabilities Education Act (IDEA)  as amended, the major federal statute that supports early intervention and  special education and related services for children and youth with  disabilities. Part B funds programs that ensure preschool and school-age  children with disabilities access to a free and appropriate public education  and is divided into two separate grants—Part B grants to states (for  school-age children) and Part B preschool grants. Part C funds programs  that provide early intervention and related services for infants and  toddlers with disabilities—or at risk of developing a disability—and their  families.
section_title: State Fiscal Stabilization Fund
paragraphs: The State Fiscal Stabilization Fund (SFSF) included approximately $48.6  billion to award to states by formula and up to $5 billion to award to states  as competitive grants. The Recovery Act created the SFSF in part to help  state and local governments stabilize their budgets by minimizing  budgetary cuts in education and other essential government services, such  as public safety. Stabilization funds for education distributed under the  Recovery Act must first be used to alleviate shortfalls in state support for  education to LEAs and public institutions of higher education (IHE).  States must use 81.8 percent of their SFSF formula grant funds to support  education (these funds are referred to as education stabilization funds)  and must use the remaining 18.2 percent for public safety and other  government services, which may include education (these funds are  referred to as government services funds). The SFSF funds are being  provided to states in two phases. Phase 1 funds—at least 67 percent of  education stabilization funds and all government services funds—were  provided to each state after the Department of Education (Education)  approved the state’s Phase 1 application for funds. Phase 2 funds are being  awarded to states as Education approves each state’s Phase 2 application.  The Phase 1 application required each state to provide several assurances,  including that the state will meet maintenance-of-effort requirements (or  will be able to comply with the relevant waiver provisions); will meet  requirements for accountability, transparency, reporting, and compliance  with certain federal laws and regulations; and that it will implement  strategies to advance four core areas of education reform. The Phase 2  application requires each state to explain the information the state makes  available to the public related to the four core areas of education reform  or provide plans for making information related to the education reforms  publicly available no later than September 30, 2011. States must use  education stabilization funds to restore state funding to the greater of  fiscal year 2008 or 2009 levels for state support to LEAs and public IHEs.  When distributing these funds to LEAs, states must use their primary  education funding formula, but they can determine how to allocate funds  to public IHEs. In general, LEAs maintain broad discretion in how they can  use education stabilization funds, but states have some ability to direct  IHEs in how to use these funds.
section_title: Edward Byrne Memorial Justice Assistance Grant Program
paragraphs: The Recovery Act provided $2 billion through the Department of Justice’s  (DOJ) Edward Byrne Memorial Justice Assistance Grant (JAG) Program  for grants to state and local governments for law enforcement and  criminal justice activities. JAG funds can be used to support a range of  activities in seven broad program areas: (1) law enforcement; (2)  prosecution and courts; (3) crime prevention and education; (4)  corrections; (5) drug treatment and enforcement; (6) program planning,  evaluation, and technology improvement; and (7) crime victim and witness  programs. Within these areas, JAG funds can be used for state and local  initiatives, training, personnel, equipment, supplies, contractual support,  research, and information systems for criminal justice.
Although each state is guaranteed a minimum allocation of JAG funding,  states and localities therein must apply to DOJ’s Bureau of Justice  Assistance (BJA) to receive their grant awards. BJA applies a statutory  formula based on population and violent crime statistics to determine  annual funding levels. After applying the formula, BJA distributes each  state’s allocation in two ways:    BJA awards 60 percent directly to the state, and the state must in turn  allocate a formula-based share of these funds—considered a “variable  pass-through,” to its local governments; and    BJA awards the remaining 40 percent directly to eligible units of local  government within the state.
section_title: Electronic Baggage Screening Program
paragraphs: Administered by the Transportation Security Administration (TSA) of the  Department of Homeland Security, the Electronic Baggage Screening  Program provides funding to strengthen screening of checked baggage in  airports. The Recovery Act provided approximately $1 billion to invest in  the procurement and installation of checked baggage explosives detection  systems and checkpoint explosives detection equipment. According to  TSA, it has allocated over $700 million to its Electronic Baggage Screening  Program for purposes that include facility modifications; equipment  purchase and installation; and programmatic, maintenance, and  technological support.
section_title: Emergency Food and Shelter Program
paragraphs: The Emergency Food and Shelter Program (EFSP), which is administered  by the Federal Emergency Management Agency (FEMA) within the  Department of Homeland Security, was authorized in July 1987 by the  Stewart B. McKinney Homeless Assistance Act to provide food, shelter,  and supportive services to the homeless. The program is governed by a  National Board composed of a representative from FEMA and six  statutorily designated national nonprofit organizations. Since its first  appropriation in fiscal year 1983, EFSP has awarded over $3.4 billion in  federal aid to more than 12,000 local private, nonprofit and government  human service entities in more than 2,500 communities nationwide.
section_title: Energy Efficiency and Conservation Block Grants
paragraphs: The Energy Efficiency and Conservation Block Grants (EECBG),  administered by the Office of Energy Efficiency and Renewable Energy  within the Department of Energy, provides funds through competitive and  formula grants to units of local and state government and Indian tribes to  develop and implement projects to improve energy efficiency and reduce  energy use and fossil fuel emissions in their communities. The Recovery  Act includes $3.2 billion for the EECBG. Of that total, $400 million is to be  awarded on a competitive basis to grant applicants.
section_title: Green Capacity Building Grants
paragraphs: Under the Recovery Act, the Green Capacity Building Grants program,  administered by the Employment and Training Administration within the  Department of Labor, provides funds to build the green training capacity  of current Department of Labor (Labor) grantees. Grants will help  individuals in targeted groups acquire the skills needed to enter and  advance in green industries and occupations by building the capacity of  active Labor-funded training programs. Grantees are required to give  priority to targeted groups, including workers impacted by national energy  and environmental policy, individuals in need of updated training related  to energy-efficiency and renewable energy industries, veterans,  unemployed individuals, and individuals with criminal records.
section_title: Health Information Technology Extension Program
paragraphs: The Department of Health and Human Services’ Health Information  Technology Extension Program, administered by the Office of the National  Coordinator for Health Information Technology, allocated $643 million to  establish 60 Health Information Technology Regional Extension Centers  (REC) and $50 million to establish a national Health Information  Technology Research Center (HITRC). The first cycle of awards,  announced February 12, 2010, provided $375 million to create 32 RECs,  while the second cycle of awards, announced April 6, 2010, provided $267  million to establish 28 RECs. RECs offer technical assistance, guidance,  and information on best practices for the use of Electronic Health Records  (EHR) to health care providers. The HITRC supports RECs’ efforts by  collecting information on best practices from a wide variety of sources  across the country and by acting as a virtual community for RECs to  collaborate with one another and with relevant stakeholders to identify  and share best practices for the use of EHRs. The goal of the RECs and  HITRC is to enable nationwide health information exchange through the  adoption and meaningful use of secure EHRs.
section_title: Head Start/Early Head Start
paragraphs: The Head Start program, administered by the Office of Head Start of the  Administration for Children and Families within the Department of Health  and Human Services, provides comprehensive early childhood  development services to low-income children, including educational,  health, nutritional, social, and other services, intended to promote the  school readiness of low-income children. Federal Head Start funds are  provided directly to local grantees, rather than through states. The  Recovery Act provided an additional $2.1 billion in funding for Head Start  and Early Head Start programs. The Early Head Start program provides  family-centered services to low-income families with very young children  designed to promote the development of the children, and to enable their  parents to fulfill their roles as parents and to move toward self-sufficiency.
section_title: High-Speed Intercity Passenger Rail Program
paragraphs: The High-Speed Intercity Passenger Rail Program (HSIPR) is administered  by the Federal Railroad Administration, within the Department of  Transportation (DOT). The purpose of the HSIPR Program is to build an  efficient, high-speed passenger rail network connecting major population  centers 100 to 600 miles apart. In the near-term, the program will aid in  economic recovery efforts and lay the foundation for this high-speed  passenger rail network through targeted investments in existing intercity  passenger rail infrastructure, equipment, and intermodal connections. In  addition to the $8 billion provided in the Recovery Act, the HSIPR Program  also included approximately $92 million in fiscal year 2009 and remaining  fiscal year 2008 funds appropriated under the existing State Grant Program  (formally titled, Capital Assistance to States—Intercity Passenger Rail  Service). The fiscal year 2010 DOT appropriation included $2.5 billion for  high speed rail and intercity passenger rail projects.
section_title: Homelessness Prevention and Rapid Re-Housing Program
paragraphs: The Homelessness Prevention and Rapid Re-Housing Program,  administered by the Office of Community Planning and Development  within the Department of Housing and Urban Development, awards  formula grants to states and localities to prevent homelessness and  procure shelter for those who have become homeless. Funding for this  program is being distributed based on the formula used for the Emergency  Shelter Grants program. According to the Recovery Act, program funds  should be used for short-term or medium-term rental assistance; housing  relocation and stabilization services, including housing search, mediation  or outreach to property owners, credit repair, security or utility deposits,  utility payments, and rental assistance for management; or appropriate  activities for homeless prevention and rapid re-housing of persons who  have become homeless. The Recovery Act includes $1.5 billion for this  program.
section_title: Highway Infrastructure Investment Program
paragraphs: The Recovery Act provides funding to states for restoration, repair, and  construction of highways and other activities allowed under the Federal  Highway Administration’s Federal-Aid Highway Surface Transportation  Program and for other eligible surface transportation projects. The  Recovery Act requires that 30 percent of these funds be suballocated,  primarily based on population, for metropolitan, regional, and local use.  Highway funds are apportioned to states through federal-aid highway  program mechanisms, and states must follow existing program  requirements. While the maximum federal fund share of highway  infrastructure investment projects under the existing federal-aid highway  program is generally 80 percent, under the Recovery Act, it is 100 percent.
Funds appropriated for highway infrastructure spending must be used in  accordance with Recovery Act requirements. States were given a 1-year  deadline (March 2, 2010) to ensure that all apportioned Recovery Act  funds—including suballocated funds—were obligated. The Secretary of  Transportation was to withdraw and redistribute to eligible states any  amount that was not obligated by that time. Additionally, the governor of  each state was required to certify that the state would maintain its level of  spending for the types of transportation projects funded by the Recovery  Act it planned to spend the day the Recovery Act was enacted. As part of  this certification, the governor of each state was required to identify the  amount of funds the state planned to expend from state sources from  February 17, 2009, through September 30, 2010.
On March 2, 2009, the Federal Highway Administration apportioned $799.8  million in Recovery Act funds to states for its Transportation  Enhancement program. States may use program funds for qualifying  surface transportation activities, such as constructing or rehabilitating off- road shared use paths for bicycles and pedestrians; conducting  landscaping and other beautification projects along highways, streets, and  waterfronts; and rehabilitating and operating historic transportation  facilities such as historic railroad depots. The Recovery Act requires that  3 percent of Highway Infrastructure Investment funds provided to states  must be used for Transportation Enhancement activities. Additionally,  states may decide to use additional Recovery Act Transportation  Enhancement funds, beyond the 3 percent requirement, for qualifying  activities such as those mentioned above. States determine the share of  federal funds used for qualifying Transportation Enhancement projects up  to 100 percent of the projects’ costs.
section_title: Increased Demand for Services
paragraphs: The Department of Health and Human Services’ Health Resources and  Services Administration (HRSA) has allocated Recovery Act funds for  Increased Demand for Services (IDS) grants to health centers to increase  health center staffing, extend hours of operations, and expand existing  services. The Recovery Act provided $500 million for health center  operations. HRSA has allocated $343 million for IDS grants to health  centers.
section_title: Internet Crimes Against Children Initiatives
paragraphs: Internet Crimes Against Children Initiatives (ICAC), administered by the  Department of Justice, Office of Justice Programs’ Office of Juvenile  Justice and Delinquency Prevention, seeks to maintain and expand state  and regional ICAC task forces to address technology-facilitated child  exploitation. This program provides funding to states and localities for  salaries and employment costs of law enforcement officers, prosecutors,  forensic analysts, and other related professionals. The Recovery Act  appropriated $50 million for ICAC.
section_title: Lead-Based Paint Hazard Control Grants and Lead Hazard Reduction Demonstration Grant Program
paragraphs: The Recovery Act provided approximately $78 million to the Lead-Based  Paint Hazard Control Grant Program through the Department of Housing  and Urban Development to assist states and localities in undertaking  programs to identify and control lead-based paint hazards in eligible  privately owned housing for rental or owner-occupants. Funds will be  used to perform lead-based paint inspections, soil and paint-chip testing,  risk assessments, and other activities that are in support of lead hazard  abatement work. An additional $2.6 million was provided for the Lead  Hazard Reduction Demonstration Grant Program which will assist urban  areas with the greatest lead paint abatement needs to identify and control  lead-based paint hazards in eligible privately owned single- family housing  units and multifamily buildings occupied by low-income families.
section_title: Local Energy Assurance Planning Initiative
paragraphs: The Recovery Act provided funding to support Local Energy Assurance  Planning (LEAP) Initiatives to help communities prepare for energy  emergencies and disruptions. The Department of Energy will award funds  to cities and towns to develop or expand local energy assurance plans that  will improve electricity reliability and energy security in their  communities. LEAP aims to facilitate recovery from disruptions to the  energy supply and enhance reliability and quicker repairs following energy  supply disruptions.
section_title: Medicaid Federal Medical Assistance Percentage
paragraphs: Medicaid is a joint federal-state program that finances health care for  certain categories of low-income individuals, including children, families,  persons with disabilities, and persons who are elderly. The federal  government matches state spending for Medicaid services according to a  formula based on each state’s per capita income in relation to the national  average per capita income. The Centers for Medicare and Medicaid  Services, within the Department of Health and Human Services, approves  state Medicaid plans, and the amount of federal assistance states receive  for Medicaid service expenditures is determined by the Federal Medical  Assistance Percentage (FMAP). The Recovery Act’s temporary increase in  FMAP funding will provide all 50 states and the District with  approximately $87 billion in assistance. Federal legislation was recently  enacted amending the Recovery Act to provide for an extension of  increased FMAP funding through June 30, 2011, but at a lower level.
section_title: National Clean Diesel Funding Assistance Projects
paragraphs: The Recovery Act provided $156 million in new funding to the National  Clean Diesel Funding Assistance Program to support the implementation  of verified and certified diesel emission reduction technologies. The  competitive grant program funded projects that would achieve significant  reductions in diesel emissions, especially from fleets operating in areas  designated as having poor air quality. This is one of the Recovery Act-  funded National Clean Diesel Campaign programs which have the goal to  accelerate emission reductions from older diesel engines to provide air  quality benefits and improve public health.
section_title: National Endowment for the Arts Recovery Act Grants
paragraphs: The Recovery Act provides $50 million to be distributed in direct grants by  the National Endowment for the Arts to fund arts projects and activities  that preserve jobs in the nonprofit arts sector threatened by declines in  philanthropic and other support during the current economic downturn.
section_title: Neighborhood Stabilization Program 2
paragraphs: The Neighborhood Stabilization Program (NSP), administered by the  Office of Community Planning and Development within the Department of  Housing and Urban Development, provides assistance for the  redevelopment of abandoned and foreclosed homes and residential  properties in order that such properties may be returned to productive use  or made available for redevelopment purposes. The $2 billion in NSP2  funds appropriated in the Recovery Act are competitively awarded to  states, local governments, and nonprofit organizations. NSP is  considered to be a component of the Community Development Block  Grant (CDBG) program and basic CDBG requirements govern NSP.
section_title: Port Security Grant Program
paragraphs: The Port Security Grant Program (PSGP) provides grant funding to port  areas for the protection of critical port infrastructure from terrorism. The  Recovery Act provides $150 million in stimulus funding for the PSGP  administered by the Federal Emergency Management Agency (FEMA), an  agency of the Department of Homeland Security. PSGP funds are primarily  intended to assist ports in enhancing maritime domain awareness,  enhancing risk management capabilities to prevent, detect, respond to,  and recover from attacks involving improvised explosive devices, weapons  of mass destruction and other nonconventional weapons, as well as  training and exercises and Transportation Worker Identification  Credential implementation. Ports compete for funds and priority is given  to cost-effective projects that can be executed expeditiously and have a  significant and near-term impact on risk mitigation.
section_title: Public Housing Capital Fund
paragraphs: The Public Housing Capital Fund provides formula-based grant funds  directly to public housing agencies to improve the physical condition of  their properties; to develop, finance, and modernize public housing  developments; and to improve management. Under the Recovery Act, the  Office of Public and Indian Housing within the Department of Housing and  Urban Development (HUD) allocated nearly $3 billion through the Public  Housing Capital Fund 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.
HUD was also required to award 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. In September 2009, HUD  awarded competitive grants for the creation of energy-efficient  communities, gap financing for projects stalled due to financing issues,  public housing transformation, and improvements addressing the needs of  the elderly or persons with disabilities.
section_title: Public Transportation Program
paragraphs: The Recovery Act appropriated $8.4 billion to fund public transit  throughout the country through existing Federal Transit Administration  (FTA) grant programs, including the Transit Capital Assistance Program,  and the Fixed Guideway Infrastructure Investment Program. Under the  Transit Capital Assistance Program’s formula grant program, Recovery Act  funds were apportioned to large and medium urbanized areas—which in  some cases include a metropolitan area that spans multiple states— throughout the country according to existing program formulas. Recovery  Act funds were also apportioned to states for small urbanized areas and  nonurbanized areas under the Transit Capital Assistance Program’s  formula grant programs using the program’s existing formula. Transit  Capital Assistance Program funds may be used for such activities as  vehicle replacements, facilities renovation or construction, preventive  maintenance, and paratransit services. Recovery Act funds from the Fixed  Guideway Infrastructure Investment Program were apportioned by  formula directly to qualifying urbanized areas, and funds may be used for  any capital projects to maintain, modernize, or improve fixed guideway  systems.  As they work through the state and regional transportation  planning process, designated recipients of the apportioned funds— typically public transit agencies and metropolitan planning  organizations—develop a list of transit projects that project sponsors  (typically transit agencies) submit to FTA for approval.
Funds appropriated for the Transit Capital Assistance Program and the  Fixed Guideway Infrastructure Investment Program must be used in  accordance with Recovery Act requirements. States were given a 1-year  deadline (March 5, 2010) to ensure that all apportioned Recovery Act  funds were obligated. The Secretary of Transportation was to withdraw  and redistribute to each state or urbanized area any amount that was not  obligated within these time frames. Additionally, the governor of each  state was required to certify that the state would maintain its level of  spending for the types of transportation projects funded by the Recovery  Act it planned to spend the day the Recovery Act was enacted. As part of  this certification, the governor of each state was required to identify the  amount of funds the state planned to expend from state sources from  February 17, 2009, through September 30, 2010.
The Transit Investments for Greenhouse Gas and Energy Reduction  (TIGGER) Grant program, administered by FTA within the Department of  Transportation, is a discretionary program to support transit capital  projects that result in greenhouse gas reductions or reduced energy use.  The Recovery Act provides $100 million for the TIGGER program, and  each submitted proposal must request a minimum of $2 million.
section_title: Race to the Top Fund
paragraphs: The Recovery Act includes up to $5 billion for the Race to the Top Fund,  administered by the Office of Elementary and Secondary Education within  the Department of Education (Education). According to Education,  awards in Race to the Top will go to states that are leading the way with  ambitious yet achievable plans for implementing coherent, compelling,  and comprehensive educational reform. Through Race to the Top,  Education asks states to advance reforms in four specific areas: adopting  standards and assessments that prepare students to succeed in college and  the workplace and to compete in the global economy; building data  systems that measure student growth and success, and inform teachers  and principals about how they can improve instruction; recruiting,  developing, rewarding, and retaining effective teachers and principals,  especially where they are needed most; and turning around our lowest- achieving schools.
section_title: Recovery Act Assistance to Firefighters Fire Station Construction Grants
paragraphs: The Recovery Act Assistance to Firefighters Fire Station Construction  Grants, also known as fire grants or the FIRE Act grant program, is  administered by the Department of Homeland Security, Federal  Emergency Management Agency, Assistance to Firefighters Program  Office. The program provides federal grants directly to fire departments on  a competitive basis to build or modify existing nonfederal fire stations in  order for departments to enhance their response capability and protect the  communities they serve from fire and fire-related hazards. The Recovery  Act includes $210 million for this program and provides that no grant shall  exceed $15 million.
section_title: Recovery Act Impact on Child Support Incentives
paragraphs: The Child Support Enforcement (CSE) Program (Title IV-D of the Social  Security Act) is a joint federal-state program administered by the  Administration for Children and Families (ACF), within the Department of  Health and Human Services. The program provides federal matching funds  to states to carry out their child support enforcement programs, which  enhance the well-being of children by, among other things, establishing  paternity, establishing child support orders, and collecting child support.  Furthermore, ACF makes additional incentive payments to states based in  part on their child support enforcement programs meeting certain  performance goals. States must reinvest their incentive fund payments into  the CSE program or an activity to improve the CSE program; however,  incentive funds reinvested in the CSE program are not eligible for federal  matching funds. Funds for the federal matching payments and incentive  payments are appropriated annually, and the Recovery Act does not  appropriate funds for either of them. However, the Recovery Act  temporarily provides for incentive payments expended by states for child  support enforcement to count as state funds eligible for the federal match.  This change is effective October 1, 2008, through September 30, 2010.
section_title: Recovery Zone Bonds
paragraphs: Recovery Zone Bonds are administered by the Internal Revenue Service  within the Department of the Treasury and come in two types: Recovery  Zone Economic Development Bonds (RZEDB) and Recovery Zone Facility  Bonds. RZEDB are a type of direct payment Build America Bond (BAB),  created under the Recovery Act. Direct payment BABs allow issuers the  option of receiving a federal payment instead of allowing a federal tax  exemption on the interest payments. RZEDBs provide a 45 percent credit  instead of a 35 percent credit like other types of BABs and must meet  certain requirements. RZEDBs are targeted to economically distressed  areas meeting certain criteria and are to be used for qualified forms of  economic development. Recovery Zone Facility Bonds are exempt facility  bonds which may be used to finance certain designated recovery zone  property. The Recovery Act authorized up to $10 billion for RZEDBs and  up to $15 billion for Recovery Zone Facility Bonds to be allocated to  states, the District of Columbia, and territories, based to the their  employment declines in 2008.
section_title: Renewable and Distributed Systems Integration
paragraphs: The Renewable and Distributed Systems Integration (RDSI) program,  administered by the Office of Electricity Delivery and Energy Reliability  within the Department of Energy (DOE), focuses on integrating renewable  and distributed energy technologies into the electric distribution and  transmission system. In April 2008, DOE announced plans to invest up to  $50 million over 5 years (fiscal years 2008 to 2012) in nine projects aimed  at demonstrating the use of RDSI technologies to reduce peak load  electricity demand by at least 15 percent at distribution feeders—the  power lines delivering electricity to consumers. The program goal is to  reduce peak load electricity demand by 20 percent at distribution feeders  by 2015.
Retrofit Ramp-Up Program  The Recovery Act’s Retrofit Ramp-Up program will provide funding to  projects to “ramp-up” energy efficiency building retrofits. The program  will target community-scale retrofit projects that make significant, long- term impacts on energy use and can serve as national role models for  energy-efficiency efforts. These programs should result in retrofits that  lead to significant efficiency improvements to a large number of buildings  in communities or neighborhoods. The retrofits must reduce the total  monthly operating costs of the buildings including any repayments of  loans. The Retrofit Ramp-Up projects are the competitive portion of DOE’s  Energy Efficiency and Conservation Block Grant Program and are part of  the Recovery Act investment in clean energy and energy efficiency.
section_title: Senior Community Service Employment Program
paragraphs: The Senior Community Service Employment Program (SCSEP),  administered by the Employment and Training Administration within the  Department of Labor, is a community service and work-based training  program which serves low-income persons who are 55 years or older and  have poor employment prospects by placing them in part-time community  service positions and by assisting them to transition to unsubsidized  employment. The Recovery Act provides $120 million for SCSEP.
section_title: Senior Nutrition Programs
paragraphs: The Recovery Act provides $100 million to the Senior Nutrition Programs,  administered by the Administration on Aging (AoA) within the Department  of Health and Human Services. AoA distributed funds to 56 States and  Territories and 246 tribes and Native Hawaiian organizations to fund three  programs at senior centers and other community sites. The Recovery act  awarded $65 million for congregate nutrition services provided at senior  centers and other community sites, $32 million for home-delivered  nutrition services delivered to elders at home, and $3 million for Native  American nutrition programs. The Congregate Nutrition Services and  Home-delivered Nutrition Services programs specifically targets  vulnerable seniors, such as low-income minorities and those residing in  rural areas, and aims to help elderly individuals avoid hospitalization and  nursing home placement by maintaining their health through meals. The  Nutrition Services for Native Americans provides congregate and home- delivered meals and related nutrition services to American Indian, Alaskan  Native, and Native Hawaiian elders.
section_title: Services*Training*Officers *Prosecutors Violence Against Women Formula Grants Program
paragraphs: Under the Services*Training*Officers*Prosecutors (STOP) Violence  Against Women Formula Grants Program, the Office on Violence Against  Women within the Department of Justice, has awarded over $139 million  in Recovery Act funds to promote a coordinated, multidisciplinary  approach to enhance services and advocacy to victims, improve the  criminal justice system’s response, and promote effective law  enforcement, prosecution, and judicial strategies to address domestic  violence, dating violence, sexual assault, and stalking.
section_title: Smart Grid Investment Grant Program
paragraphs: Under the Recovery Act, states will receive $3.4 billion to deploy and  integrate advanced digital technology to modernize the electric delivery  network through the Smart Grid Investment Grant Program, administered  by the Office of Electricity Delivery and Energy Reliability within the  Department of Energy. The program funds a broad range of projects aimed  at applying smart grid technologies to existing electric system equipment,  consumer products and appliances, meters, electric distribution and  transmission systems, and homes, offices, and industrial facilities.
section_title: Staffing for Adequate Fire and Emergency Response
paragraphs: The Staffing for Adequate Fire and Emergency Response (SAFER) grants  program, administered by the Federal Emergency Management Agency  within the Department of Homeland Security, was created to provide  funding directly to volunteer, combination, and career fire departments  to help them increase staffing and enhance their emergency deployment  capabilities. The goal of SAFER is to ensure departments have an adequate  number of trained, frontline active firefighters capable of safely  responding to and protecting their communities from fire and fire-related  hazards. SAFER provides 2-year grants to fire departments to pay the  salaries of newly hired firefighters or to rehire recently laid-off firefighters.  Fire departments using SAFER funding to hire new fire fighters commit to  retaining the SAFER-funded firefighters for 1 full year after the 2-year  grant has been expended. The retention commitment does not extend to  previously laid-off firefighters who have been rehired. In addition,  volunteer and combination firefighter departments are eligible to apply for  SAFER funding to pay for activities related to the recruitment and  retention of volunteer firefighters.
section_title: State Broadband Data and Development Program
paragraphs: The Recovery Act appropriated $7.2 billion to extend access to broadband  throughout the United States. Of the $7.2 billion, $4.7 billion was  appropriated to the Department of Commerce’s National  Telecommunications and Information Administration (NTIA) and $2.5  billion to the Department of Agriculture’s Rural Utilities Service. Of the  $4.7 billion, up to $350 million was available pursuant to the Broadband  Data Improvement Act (BDIA) for the purpose of developing and  maintaining a nationwide map featuring the availability of broadband  service. BDIA directs the Secretary of Commerce to establish the State  Broadband Data and Development Grant Program and to award grants to  eligible entities to develop and implement statewide initiatives to identify  and track the adoption and availability of broadband services within each  state. To accomplish the joint purposes of the Recovery Act and BDIA,  NTIA has developed the State Broadband Data and Development projects  that collect comprehensive and accurate state-level broadband mapping  data, develop state-level broadband maps, aid in the development and  maintenance of a national broadband map, and fund statewide initiatives  directed at broadband planning.
section_title: State Energy Program
paragraphs: Under the Recovery Act, states will receive $3.1 billion for energy projects  through the State Energy Program (SEP), administered by the Office of  Energy Efficiency and Renewable Energy within the Department of  Energy (DOE). States should prioritize the grants toward funding energy- efficiency and renewable energy programs, including expanding existing  energy-efficiency programs, renewable energy projects, and joint activities  between states. The SEP’s 20 percent cost match is not required for grants  made with Recovery Act funds. DOE estimates that SEP funding will have  an annual costs savings of $256 million.
section_title: State Health Information Exchange Cooperative Agreement Program
paragraphs: Under the Department of Health and Human Services’ State Health  Information Exchange (HIE) Cooperative Agreement Program, $564  million has been allocated to support states’ efforts to develop the  capacity among health care providers and hospitals in their jurisdiction to  exchange health information across health care systems through the  meaningful use of Electronic Health Records (EHR). The meaningful use  of EHRs aims to improve the quality and efficiency of patient care. In  order to ensure secure and effective use of HIE technology within and  across state borders, grant recipients are expected to use their authority  and resources to implement HIE privacy and security requirements,  coordinate with Medicaid and state public health programs in using HIE  technology, and enable interoperability through the creation of state-level  directories and technical services and the removal of barriers. The state  HIE program uses a cooperative agreement, or partnership between the  grant recipient and the federal government, to administer the awards  (when the federal government has a substantial stake in the outcomes or  operation of the program). The state HIE cooperative agreements are 4- year agreements and recipients will be required to match grant awards  beginning in the second year of the award, 2011.
section_title: Statewide Longitudinal Data Systems
paragraphs: The Statewide Longitudinal Data Systems grant program, administered by  the Department of Education’s Institute of Education Sciences, awards  competitive grants to state educational agencies for the design,  development, and implementation of statewide longitudinal data systems.  These systems are intended to enhance the ability of states to efficiently  and accurately manage, analyze, and use education data, including  individual student records, while protecting student privacy. The first  grants were awarded to 14 states in November 2005; 12 states and the  District of Columbia were awarded grants in 2007, and 27 states were  awarded grants in 2009. The Recovery Act appropriated $250 million for  this program.
section_title: Supplemental Nutrition Assistance Program (formerly the Food Stamp Program)
paragraphs: The Supplemental Nutrition Assistance Program (SNAP), administered by  the Food and Nutrition Service within the Department of Agriculture,  serves more than 35 million people nationwide each month. SNAP’s goal,  in part, is to help raise the level of nutrition and alleviate the hunger of  low-income households. The Recovery Act provides for a monthly  increase in benefits for the program’s recipients. The increases in benefits  under the Recovery Act are estimated to total $20 billion over the next 5  years.
section_title: Tax Credit Assistance Program (TCAP) and Section 1602 Program
paragraphs: The Tax Credit Assistance Program administered by the Department of  Housing and Urban Development (HUD) provides gap financing to be used  by state Housing Finance Agencies (HFA) in the form of grants or loans  for capital investment in low-income housing tax credits (LIHTC) projects  through a formula-based allocation to HFAs.
HUD obligated $2.25 billion in TCAP funds to HFAs. The HFAs were to  award the funds competitively according to their qualified allocation  plans, which explain selection criteria and application requirements for  housing tax credits (as determined by the states and in accordance with  Section 42 of the Internal Revenue Code). Projects that were awarded low- income housing tax credits in fiscal years 2007, 2008, or 2009 were eligible  for TCAP funding, but HFAs had to give priority to projects that were  “shovel-ready” and expected to be completed by February 2012. Also,  TCAP projects had to include some low-income tax credits and equity  investment. HFAs must commit 75 percent of their TCAP awards by  February 2010 and disburse 75 percent by February 2011. Project owners  must spend all of their TCAP funds by February 2012. HUD can recapture  TCAP funds from any HFA whose projects do not comply with TCAP  requirements. In these cases, HFAs are responsible for recapturing funds  from project owners. Furthermore, because TCAP funds are federal  financial assistance, they are subject to certain federal requirements, such  as Davis-Bacon and the National Environmental Policy Act (NEPA). These  acts, respectively, require that projects receiving federal funds pay  prevailing wages and meet federal environmental requirements.
The Section 1602 Program allows HFAs to exchange returned and unused  tax credits for a payment from Treasury at the rate of 85 cents for every  tax credit dollar. HFAs can exchange up to 100 percent of unused 2008  credits and 40 percent of their 2009 allocation. HFAs may award Section  1602 Program funds to finance the construction or acquisition and  rehabilitation of qualified low-income buildings in accordance with the  HFA’s Qualified Allocation Plan, which establishes criteria for selecting  LIHTC projects. Section 1602 Program funds may be committed to project  owners that have not sold their LIHTC allocation to private investors, as  long as the project owner has made good faith efforts to find an investor.  However, some HFAs have required Section 1602 Program projects to  include some tax credit equity from private investors. Section 1602  Program funds are subject to the same requirements as the standard  LIHTC program, and like TCAP funds, may be recaptured if a project does  not comply with the requirements. HFAs may submit applications to  Treasury for Section 1602 Program funds through 2010. The last day for  HFAs to commit funds to project owners is December 31, 2010, but they  can continue to disburse funds for committed projects through December  31, 2011, provided that the project owners paid or incurred at least 30  percent of eligible project costs by the end of 2010. Congress appropriated  ‘such sums as may be necessary’ for the operation of the Section 1602  Program. The Joint Committee on Taxation originally estimated the budget  impact of this program at $3 billion. As of the end of April 2010, however,  Treasury had obligated more than $5 billion to HFAs in Section 1602  Program funds. Section 1602 Program funds are not considered by  Treasury to be federal financial assistance and, therefore, the Section 1602  Program is not subject to many of the requirements placed on TCAP.
section_title: Title IV-E Adoption Assistance and Foster Care Programs
paragraphs: Administered by the Administration for Children and Families within the  Department of Health and Human Services, the Foster Care Program helps  states to provide safe and stable out-of-home care for children until the  children are safely returned home, placed permanently with adoptive  families, or placed in other planned arrangements for permanency. The  Adoption Assistance Program provides funds to states to facilitate the  timely placement of children, whose special needs or circumstances  would otherwise make placement difficult, with adoptive families. Federal  Title IV-E funds are paid to reimburse states for their maintenance  payments using the states’ respective Federal Medical Assistance  Percentage (FMAP) rates. The Recovery Act temporarily increased the  FMAP rate effective October 1, 2008, through December 31, 2010, resulting  in an estimated additional $806 million that will be provided to states for  the Adoption Assistance and Foster Care Programs.
section_title: Transportation Investment Generating Economic Recovery Discretionary Grants
paragraphs: Administered by the Department of Transportation’s Office of the  Secretary, the Recovery Act provides $1.5 billion in competitive grants,  generally between $20 million and $300 million, to state and local  governments and transit agencies. These grants are for capital investments  in surface transportation infrastructure projects that will have a significant  impact on the nation, a metropolitan area, or a region. Projects eligible for  funding provided under this program include, but are not limited to,  highway or bridge projects, public transportation projects, passenger and  freight rail transportation projects, and port infrastructure investments.
section_title: Water and Waste Disposal Loan and Grant Program
paragraphs: The Water and Environmental Programs administered by the Department  of Agriculture’s Rural Development, provides loans, grants, and loan  guarantees for drinking water, sanitary sewer, solid waste, and storm  drainage facilities in rural areas and cities and towns of 10,000 or less. The  Recovery Act provided nearly $3.3 billion in Rural Water and Waste  Disposal funding for these programs. Loans, grants and loan guarantees to  rural water and waste systems will be used to construct, improve,  rehabilitate, or expand existing water and waste disposal systems to areas  initially excluded because service was not economically feasible.
section_title: Water Quality Management Planning Grants
paragraphs: The Environmental Protection Agency (EPA) awarded $39.3 million in  Recovery Act funding for Water Quality Management Planning Grants to  assist states in water quality management planning. Funds are used to  determine the nature and extent of point and nonpoint source water  pollution and to develop water quality management plans. Funded  activities also include green infrastructure planning and integrated water  resources planning. The fund is administered by the Office of Water, EPA.
section_title: Weatherization Assistance Program
paragraphs: The Recovery Act appropriated $5 billion for the Weatherization  Assistance Program, which the Department of Energy (DOE) is  distributing to each of the states, the District of Columbia, and seven  territories and Indian tribes, to be spent by March 31, 2012. The program,  administered by the Office of Energy Efficiency and Renewable Energy  within DOE, enables low-income families to reduce their utility bills by  making long-term energy-efficiency improvements to their homes by, for  example, installing insulation; sealing leaks; and modernizing heating  equipment, air circulation fans, and air conditioning equipment. Over the  past 33 years, the Weatherization Assistance Program has assisted more  than 6.2 million low-income families. By reducing the energy bills of low- income families, the program allows these households to spend their  money on other needs, according to DOE. The Recovery Act appropriation  represents a significant increase for a program that has received about  $225 million per year in recent years. DOE has approved the  weatherization plans of the 16 states and the District of Columbia that are  in our review and has provided at least half of the funds to those areas.
section_title: Wildland Fire Management Program
paragraphs: The Department of Agriculture’s Forest Service administers the Wildland  Fire Management Program funding for projects on federal, state, and  private land. The goals of these projects include ecosystem restoration,  research, and rehabilitation; forest health and invasive species protection;  and hazardous fuels reduction. The Recovery Act provided $500 million for  the Wildland Fire Management program.
section_title: Workforce Investment Act of 1998 Title I-B Grants
paragraphs: The Workforce Investment Act of 1998 (WIA) Youth, Adult, and Dislocated  Worker Programs, administered by the Employment and Training  Administration within the Department of Labor (Labor), provide job  training and related services to unemployed and underemployed  individuals. The Recovery Act provides an additional $2.95 billion in  funding for Youth, Adult, and Dislocated Worker employment and training  activities under Title I-B of WIA. These funds are allotted to states, which  in turn allocate funds to local entities pursuant to formulas set out in WIA.  The adult program provides training and related services to individuals  ages 18 and older, the youth program provides training and related  services to low-income youth ages 14 to 21, and dislocated worker funds  provide training and related services to individuals who have been laid off  or notified that they will be laid off.
Recovery Act funds can be used for all activities allowed under WIA,  including core services, such as job search and placement assistance;  intensive services, such as skill assessment and career counseling; and  training services, including occupational skills training, on-the-job training,  registered apprenticeship, and customized training. For the youth  program, Labor encouraged states and local areas to use as much of these  funds as possible to expand summer youth employment opportunities. In  addition, Labor advised states that training for adults and dislocated  workers should be a significant focus for Recovery Act funds, and  encouraged states to establish policies to make supportive services and  needs-related payments available for individuals who need these services  to participate in job training. To facilitate increased training for high- demand occupations, the Recovery Act expanded the methods for  providing training under WIA and allowed local workforce boards to  directly enter into contracts with institutions of higher education and  other training providers, if the local board determines that it would  facilitate the training of multiple individuals and the contract does not  limit customer choice.
section_title: Appendix IV: Entities Visited by GAO in Selected States and the District of Columbia
paragraphs: Appendix IV: Entities Visited by GAO in  Selected States and the District of Columbia Total local government entities visited by GAO is 24.
Total entities visited is 167.
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: The following staff contributed to this report: Stanley Czerwinski, Denise  Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas James, and  Michelle Sager, (Assistant Directors); Sandra Beattie (Analyst-in-Charge);  and Marie Ahearn, David Alexander, Judith Ambrose, Peter Anderson,  Thomas Beall, Noah Bleicher, Jessica Botsford, Anthony Bova, Richard  Cambosos, Ralph Campbell Jr., Virginia Chanley, Tina Cheng, Andrew  Ching, Marcus Corbin, Robert Cramer, Fran Davison, Michael Derr, Helen  Desaulniers, Ruth “Eli” DeVan, Alexandra Dew, David Dornisch, Kevin  Dooley, Abe Dymond, Holly Dye, Janet Eackloff, Lorraine Ettaro, James  Fuquay, Alice Feldesman, Alexander Galuten, Ellen Grady, Anita  Hamilton, Geoffrey Hamilton, Tracy Harris, Kristine Hassinger, Lauren  Heft, David Hooper, Bert Japikse, Mitchell Karpman, Karen Keegan, John  Krump, Jon Kucskar, Hannah Laufe, Jean K. Lee, Natalie Maddox,  Stephanie May, Sarah M. McGrath, John Mc Grail, Jean McSween, Donna  Miller, Kevin Milne, Marc Molino, Mimi Nguyen, Ken Patton, Anthony  Pordes, Brenda Rabinowitz, Carl Ramirez, James Rebbe, Beverly Ross,  Sylvia Schatz, Sidney Schwartz, Don Springman, Andrew J. Stephens,  Esther Toledo, Alyssa Weir, Crystal Wesco, Craig Winslow, Elizabeth  Wood, William T. Woods, and Kimberly Young.
section_title: Program Contributors
paragraphs: Federal Medical Assistance Percentage  (FMAP)
State Energy Program (SEP) and Energy  Efficiency Conservation Block Grant  (EECBG)
Jennifer Alpha, Heather Chartier, Swetha Doraiswamy, Andrew Finkel, John McGrail,  Marc Molino, Roberto Piñero, Carl Ramirez, Barbara Roesmann, and Mathew Scire.
section_title: Contributors to the Selected States and the District
section_title: Related GAO Products
paragraphs: Recovery Act: Further Opportunities Exist to Strengthen Oversight of  Broadband Stimulus Programs. GAO-10-823. Washington, D.C.: August 4,  2010.
Recovery Act: States Could Provide More Information on Education  Programs to Enhance the Public’s Understanding of Fund Use.   GAO-10-807. Washington, D.C.: July 30, 2010.
Recovery Act: Most DOE Cleanup Projects Appear to Be Meeting Cost and  Schedule Targets, but Assessing Impact of Spending Remains a  Challenge. GAO-10-784. Washington, D.C.: July 29, 2010.
Recovery Act: Contracting Approaches and Oversight Used by Selected  Federal Agencies and States. GAO-10-809. Washington, D.C.: July 15, 2010.
GAO Review of LEA Controls over and Uses of Recovery Act Education  Funds (Avery County Schools). GAO-10-746R. Washington, D.C.: July 9,  2010.
GAO Review of LEA Controls over and Uses of Recovery Act Education  Funds (Winston-Salem/Forsyth County Schools). GAO-10-747R.  Washington, D.C.: July 9, 2010.
Independent Oversight of Recovery Act Funding for Mississippi’s  Weatherization Assistance Program. GAO-10-796R. Washington, D.C.:  June 30, 2010.
High Speed Rail: Learning From Service Start-ups, Prospects for  Increased Industry Investment, and Federal Oversight Plans.   GAO-10-625. Washington, D.C.: June 17, 2010.
Federal Energy Management: GSA’s Recovery Act Program Is on Track,  but Opportunities Exist to Improve Transparency, Performance  Criteria, and Risk Management. GAO-10-630. Washington, D.C.: June 16,  2010.
GAO Proactive Testing of ARRA Tax Credits for COBRA Premium  Payments. GAO-10-804R. Washington, D.C.: June 14, 2010.
Temporary Assistance for Needy Families: Implications of Recent  Legislative and Economic Changes for State Programs and Work  Participation Rates. GAO-10-525. Washington, D.C.: May 28, 2010.
Recovery Act: Increasing the Public’s Understanding of What Funds Are  Being Spent on and What Outcomes Are Expected. GAO-10-581.  Washington, D.C.: May 27, 2010.
Recovery Act: Clean Water Projects Are Underway, but Procedures May  Not Be in Place to Ensure Adequate Oversight. GAO-10-761T. Washington,  D.C.: May 26, 2010.
Recovery Act: States’ and Localities’ Uses of Funds and Actions Needed  to Address Implementation Challenges and Bolster Accountability.   GAO-10-604. Washington, D.C.: May 26, 2010.
Recovery Act: States’ and Localities’ Uses of Funds and Actions Needed  to Address Implementation Challenges and Bolster Accountability  (Appendixes). GAO-10-605SP. Washington, D.C.: May, 26, 2010.
Head Start: Undercover Testing Finds Fraud and Abuse at Selected Head  Start Centers. GAO-10-733T. Washington, D.C.: May 18, 2010.
Health Coverage Tax Credit: Participation and Administrative Costs.  GAO-10-521R. Washington, D.C.: April 30, 2010.  2010 Census: Plans for Census Coverage Measurement Are on Track, but  Additional Steps Will Improve Its Usefulness. GAO-10-324. Washington,  D.C.: April 23, 2010.
Energy Star Program: Covert Testing Shows the Energy Star Program  Certification Process Is Vulnerable to Fraud and Abuse. GAO-10-470.  Washington, D.C.: March 5, 2010.
Recovery Act: California’s Use of Funds and Efforts to Ensure  Accountability. GAO-10-467T. Washington, D.C.: March 5, 2010.
Recovery Act: Factors Affecting the Department of Energy’s Program  Implementation. GAO-10-497T. Washington, D.C.: March 4, 2010.
Recovery Act: One Year Later, States’ and Localities’ Uses of Funds and  Opportunities to Strengthen Accountability. GAO-10-437. Washington,  D.C.: March 3, 2010.
State and Local Governments’ Fiscal Outlook March 2010 Update.   GAO-10-358. Washington, D.C.: March 2, 2010.
Recovery Act: Officials’ Views Vary on Impacts of Davis-Bacon Act  Prevailing Wage Provision. GAO-10-421. Washington, D.C.: February 24,  2010.
Electronic Personal Health Information Exchange: Health Care Entities’  Reported Disclosure Practices and Effects on Quality of Care.   GAO-10-361. Washington, D.C.: February 17, 2010.
Recovery Act: Project Selection and Starts Are Influenced by Certain  Federal Requirements and Other Factors. GAO-10-383. Washington, D.C.:  February 10, 2010  Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting  and Enforcement Improvements Are Needed. GAO-10-349. Washington,  D.C.: February 10, 2010.
Status of the Small Business Administration’s Implementation of  Administrative Provisions in the American Recovery and Reinvestment  Act of 2009. GAO-10-298R. Washington, D.C.: January 19, 2010.
Recovery Act: States’ Use of Highway and Transit Funds and Efforts to  Meet the Act’s Requirements. GAO-10-312T. Washington, D.C.: December  10, 2009.
Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts  to Ensure Accountability. GAO-10-231. Washington, D.C.: December 10,  2009.
Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts  to Ensure Accountability (Appendixes). GAO-10-232SP. Washington,  D.C.: December 10, 2009.
Recovery Act: Planned Efforts and Challenges in Evaluating Compliance  with Maintenance of Effort and Similar Provisions. GAO-10-247.  Washington, D.C.: November 30, 2009.
Recovery Act: Contract Oversight Activities of the Recovery  Accountability and Transparency Board and Observations on Contract  Spending in Selected States. GAO-10-216R. Washington, D.C.: November  30, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into  Use of Recovery Act Funding, but Data Quality and Reporting Issues  Need Attention. GAO-10-223. Washington, D.C.: November 19, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into  Use of Recovery Act Funding, but Data Quality and Reporting Issues  Need Attention. GAO-10-224T. Washington, D.C.: November 19, 2009.
Recovery Act: Agencies Are Addressing Broadband Program Challenges,  but Actions Are Needed to Improve Implementation. GAO-10-80.  Washington, D.C.: November 16, 2009.
Recovery Act: Preliminary Observations on the Implementation of  Broadband Programs. GAO-10-192T. Washington, D.C.: October 27, 2009.
First-Time Homebuyer Tax Credit: Taxpayers’ Use of the Credit and  Implementation and Compliance Challenges. GAO-10-166T. Washington,  D.C.: October 22, 2009.
Federal Energy Management: Agencies Are Taking Steps to Meet High- Performance Federal Building Requirements, but Face Challenges.   GAO-10-22. Washington, D.C.: October 30, 2009.
High Speed Passenger Rail: Developing Viable High Speed Rail Projects  under the Recovery Act and Beyond. GAO-10-162T. Washington, D.C.:  October 14, 2009.
Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer  Service and Enforcement for the 2010 Filing Season. GAO-09-1026.  Washington, D.C.: September 23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and  Localities, While Accountability and Reporting Challenges Need to Be  Fully Addressed. GAO-09-1016. Washington, D.C.: September 23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and  Localities, While Accountability and Reporting Challenges Need to Be  Fully Addressed (Appendixes). GAO-09-1017SP. Washington, D.C.:  September 23, 2009.
Recovery Act: States’ and Localities’ Current and Planned Uses of Funds  While Facing Fiscal Stresses. GAO-09-908T. Washington, D.C.: September  10, 2009.
Recovery Act: States’ Use of Highway Infrastructure Funds and  Compliance with the Act’s Requirements. GAO-09-926T. Washington,  D.C.: July 31, 2009.
Unemployment Insurance Measures Included in the American Recovery  and Reinvestment Act of 2009, as of July 2009. GAO-09-942R.  Washington, D.C.: July 27, 2009.
Grants Management: Grants.gov Has Systematic Weaknesses That  Require Attention. GAO-09-589. Washington, D.C.: July 15, 2009.
Recovery Act: States’ and Localities’ Current and Planned Uses of Funds  While Facing Fiscal Stresses. GAO-09-829. Washington, D.C.: July 8, 2009.
Recovery Act: States’ and Localities’ Current and Planned Uses of Funds  While Facing Fiscal Stresses. GAO-09-831T. Washington, D.C.: July 8,  2009.
Recovery Act: States’ and Localities’ Current and Planned Uses of Funds  While Facing Fiscal Stresses (Appendixes). GAO-09-830SP. Washington,  D.C.: July 8, 2009.
Recovery Act: The Department of Transportation Followed Key Federal  Requirements in Developing Selection Criteria for Its Supplemental  Discretionary Grants Program. GAO-09-785R. Washington, D.C.: June 30,  2009.
High Speed Passenger Rail: Effectively Using Recovery Act Funds for  High Speed Rail Projects. GAO-09-786T. Washington, D.C.: June 23, 2009.
Recovery Act: GAO’s Efforts to Work with the Accountability Community  to Help Ensure Effective and Efficient Oversight. GAO-09-672T.  Washington, D.C.: May 5, 2009.
Recovery Act: Consistent Policies Needed to Ensure Equal Consideration  of Grant Applications. GAO-09-590R. Washington, D.C.: April 29, 2009.
Recovery Act: Initial Results on States’ Use of and Accountability for  Transportation Funds. GAO-09-597T. Washington, D.C.: April 29, 2009.
Recovery Act: As Initial Implementation Unfolds in States and  Localities, Continued Attention to Accountability Issues Is Essential.  GAO-09-580. Washington, D.C.: April 23, 2009.
Recovery Act: As Initial Implementation Unfolds in States and  Localities, Continued Attention to Accountability Issues Is Essential.  GAO-09-631T. Washington, D.C.: April 23, 2009.
Small Business Administration’s Implementation of Administrative  Provisions in the American Recovery and Reinvestment Act.   GAO-09-507R. Washington, D.C.: April 16, 2009.
American Recovery and Reinvestment Act: GAO’s Role in Helping to  Ensure Accountability and Transparency for Science Funding.   GAO-09-515T. Washington, D.C.: March 19, 2009.
American Recovery and Reinvestment Act: GAO’s Role in Helping to  Ensure Accountability and Transparency. GAO-09-453T. Washington,  D.C.: March 5, 2009.
Estimated Adjusted Medicaid Funding Allocations Related to the  Proposed American Recovery and Reinvestment Act. GAO-09-371R.  Washington, D.C.: February 5, 2009.
Estimated Temporary Medicaid Funding Allocations Related to Section  5001 of the American Recovery and Reinvestment Act. GAO-09-364R.  Washington, D.C.: February 4, 2009.