Recovery Act: Initial Results on States' Use of and Accountability for Transportation Funds
Published: 2009-04-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Recovery and Reinvestment Act of 2009 (Recovery Act) provided $48.1 billion in additional spending at the Department of Transportation (DOT) for investments in transportation infrastructure, including highways, passenger rail, and transit. This statement provides a general overview of (1) selected states' use of Recovery Act funds for highway programs, (2) the approaches taken by these states to ensure accountability for these funds, and (3) the selected states' plans to evaluate the impact of the Recovery Act funds that they receive for highway programs. This statement is based on work in which GAO examined the use of Recovery Act funds by a core group of 16 states and the District of Columbia, representing about 65 percent of the U.S. population and two-thirds of the intergovernmental federal assistance available through the Act. GAO issued its first bimonthly report on April 23, 2009.
section_title: What GAO Found
paragraphs: According to DOT, as of mid-April, the 17 locations that GAO reviewed had obligated $3.3 billion of the over $15 billion (21 percent) in highway investment funds that DOT had apportioned to them. These funds will be used in about 900 projects. States are using existing statewide plans to quickly identify and obligate funding for Recovery Act transportation projects. Several states have generally focused on rehabilitation and repair projects, because these projects require lessenvironmental review or design work. For example, the New Jersey Department of Transportation selected 40 projects and concentrated mainly on projects that require little environmental clearance or extensive design work, such as highway and bridge painting and deck replacement. Some states also reported targeting funds toward projects with an emphasis on job creation and consideration of economically distressed areas. For example, Colorado Department of Transportation officials are emphasizing construction projects, such as highway bridge replacements, rather than projects in planning or design phases, in order to maximize job creation. The Illinois Department of Transportation reported that it is planning to spend a large share of its estimated $655 million in Recovery Act funds for highway and bridge projects in economically distressed areas. States are modifying systems to track Recovery Act funds but are concerned about tracking funds distributed directly to nonstate entities. Officials from all 16 of the states which GAO is reviewing and the District of Columbia stated that they have established or are establishing ways to identify, monitor, track, and report on the use of the Recovery Act funds. However, officials from many of these states and the District of Columbia have concerns about the ability of subrecipients, localities, and other non-state entities to separately monitor, track, and report on the Recovery Act funds these nonstate entities receive. Officials in several states also expressed concern about being held accountable for funds flowing directly to localities or other recipients and indicated that either their states would not be tracking Recovery Act funds going to the local levels or that they were unsure how much data would be available on the use of these funds. Our April 23rd report recommended that the OMB evaluate current reporting requirements before adding further data collection requirements. States vary in their responses to determining how to assess the impact of Recovery Act funds. For programs such as the Federal-aid Highway Surface Transportation Program, some states will use existing federal program guidance or performance measures to evaluate impact. However, a number of states have expressed concerns about definitions of "jobs retained" and "jobs created" under the act, as well as methodologies that can be used for the estimation of each. Given these concerns, GAO recommended in its first bimonthly report that the OMB continue to identify methodologies that can be used to determine jobs retained and created from projects funded by the Recovery Act.

section_title: Letter
paragraphs: I am pleased to be here today to discuss GAO’s work related to the  American Recovery and Reinvestment Act of 2009 (Recovery Act).  Congress and the administration have fashioned a significant response to  what is generally reported to be the nation’s most serious economic crisis  since the Great Depression. The Recovery Act’s combined spending and  tax provisions are estimated to cost $787 billion, including more than $48  billion in additional spending at the Department of Transportation (DOT)  for investments in transportation infrastructure, including highways,  passenger rail, and transit.
The Recovery Act directs GAO to conduct bimonthly reviews on the use of  funds by selected states and localities, among other things. We have  recently completed the first review, which examined a core group of 16  states, the District of Columbia, and selected localities. We expect to  track the activities of these 16 states and the District of Columbia over the  next few years to provide an ongoing longitudinal analysis of the use of  Recovery Act funds.
My statement today is based on our recently completed work in this area  and provides a general overview of (1) the selected states’ use of Recovery  Act funds primarily for highway programs, (2) the approaches taken by  these states to ensure accountability for these funds, and (3) the selected  states’ plans to evaluate the impact of the Recovery Act funds that they  receive for highway programs. We also discuss other Recovery Act  assessments that we plan to undertake or are already conducting and that  fall within the Committee’s interests. We conducted a performance audit  for our first bimonthly review from February 17, 2009, to April 20, 2009, in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: The vast majority of Recovery Act funding for transportation programs  goes to the Federal Highway Administration (FHWA), the Federal Railroad  Administration, and the Federal Transit Administration for the  construction, rehabilitation, or repair of highway, road, bridge, transit, and  rail projects. The remaining funds are allocated among other DOT  administrations. Over half of these funds are for highway infrastructure  investments. (See table 1).
Of the $27.5 billion provided for highway and related infrastructure  investments, $26.7 billion is provided to the states for restoration, repair,  construction, and other activities allowed under FHWA’s Surface  Transportation Program and for other eligible surface transportation  projects, which apportions money to states for construction and  preventive maintenance of eligible highways and for other surface  transportation projects. The Act requires that 30 percent of these funds be  suballocated to metropolitan and other areas.
The Recovery Act generally requires that funds be invested in projects that  can be started and completed expeditiously and identifies several specific  deadlines for investing funds provided through several transportation  programs. For example, 50 percent of state-administered Federal-aid  Highway formula funds (excluding suballocated funds) must be obligated  within 120 days of apportionment (apportioned on March 2) and all must  be obligated within 1 year of apportionment.
Although highway funds are being apportioned to states and localities  through existing mechanisms, Recovery Act funding for highway  infrastructure investment differs from the usual practice in the Federal-aid  Highway Program in a few important ways. Most significantly, for projects  funded under the Recovery Act, the federal share is up to 100 percent  while the federal share under the Federal-aid Highway Program is usually  80 percent. Priority is also to be given to projects that are projected to be  completed within 3 years and are within economically distressed areas.  Furthermore, the governor must certify that the state will maintain its  current level of transportation spending with regard to state funding  (called maintenance of effort), and the governor or other appropriate chief  executive must certify that the state or local government to which funds  have been made available has completed all necessary legal reviews and  determined that the projects are an appropriate use of taxpayer funds. Any  amount of the funding that was apportioned on March 2 and is not  obligated within deadlines established by the Act (excluding suballocated  funds) will be withdrawn by DOT and redistributed to other states that  have obligated their funds in a timely manner.
Both the President and Congress have emphasized the need for  accountability, efficiency, and transparency in the allocation and  expenditure of Recovery Act funds. Accordingly, the Office of  Management and Budget (OMB) has called on federal agencies to (1)  award and distribute funds in a timely and fair manner, (2) ensure the  funding recipients and uses are transparent, and the resulting benefits are  clearly and accurately reported, (3) ensure funds are used for authorized  purposes, (4) avoid unnecessary project delays and cost overruns, and (5)  achieve specific program outcomes and improve the economy. For  transportation programs, DOT is required to report on the number of  direct and indirect jobs created or sustained by the Act’s funds for each  program and to the extent possible estimate of the number of indirect jobs  created or sustained by project or activity in the associated supplying  industries, including the number of job-years created and the total  increase in employment since the date of enactment of this Act.
In order to coordinate DOT’s efforts and help ensure accountability and  transparency, DOT established a team of senior officials across the  department—the Transportation Investment Generating Economic  Recovery (TIGER) team. According to DOT, this leadership team will  coordinate consistent implementation of the Act, exchange information,  provide guidance, and track transportation dollars spent. DOT established  individual stewardship groups as part of the TIGER team to gather  expertise from across the department to address common issues and  identify coordinated and appropriate actions. According to DOT, these  groups include financial stewardship, data collection, procurement and  grant management, job measurement, information technology and  communication, and accountability. The accountability stewardship group  meets biweekly with the department’s Office of the Inspector General and  us to improve transparency and provide an efficient forum for sharing  information between management and the auditing entities.
section_title: States Are Using Existing Plans to Identify Transportation Projects and Described Considering Recovery Act Requirements in Selecting Projects
paragraphs: As of April 16, DOT reported that nationally $6.4 billion in Recovery Act  highway infrastructure investment funding apportioned to the states had  been obligated—meaning that DOT and the states had executed  agreements on projects worth this amount. For the locations that we  reviewed, approximately $3.3 billion in highway funding has been  obligated with the percent of apportioned funds obligated to the states and  the District of Columbia, ranging from 0 to 65 percent. (See table 2.) For  two of the states, DOT had obligated over 50 percent of the states’  apportioned funds, for four states it had obligated 30 to 50 percent of the  funds, for eight states it had obligated fewer than 30 percent of the funds,  and for three states it had not obligated any funds.
Most states we visited, while they had not yet expended significant funds,  were planning to solicit bids in April or May. They also stated that they  planned to meet statutory deadlines for obligating the highway funds. A  few states had already executed contracts. As of April 1, the Mississippi  Department of Transportation, for example, had signed contracts for 10  projects totaling approximately $77 million. These projects include the  expansion of State Route 19 in eastern Mississippi into a four-lane  highway. This project fulfills part of the state’s 1987 Four-Lane Highway  Program which seeks to link every Mississippian to a four-lane highway  within 30 miles or 30 minutes. Most often however, we found that highway  funds in the states and the District of Columbia have not yet been spent  because highway projects were at earlier stages of planning, approval, and  competitive contracting. For example, the Florida Department of  Transportation plans to use the Recovery Act funds to accelerate road  construction programs in its preexisting 5-year plan. This resulted in some  projects being reprioritized and selected for earlier completion. On April  15, the Florida Legislative Budget Commission approved the Recovery Act- funded projects that the Florida Department of Transportation had  submitted.
As required by the Act, states have used existing planning processes and  plans to quickly identify and obligate funds for projects. For example, as  of April 16, FHWA had obligated $261 million of Recovery Act  transportation funding for 20 projects from California’s State Highway  Operation and Protection Program. These projects involve rehabilitating  roadways, pavement, and rest areas as well as upgrading median barriers  and guardrails. Some states reported that the use of existing plans has  enabled them to quickly distribute transportation funds. As of April 16,  FHWA had obligated about $277million to New York state for 108  transportation projects. Officials reported that the state was able to move  quickly on these projects largely because New York State Department of  Transportation, as required by federal surface transportation legislation,  has a planning mechanism that routinely identifies needed transportation  projects and performs preconstruction activities, such as completing  environmental permitting requirements.
Selected states reported that they targeted transportation projects that can  be started and completed expeditiously, in accordance with Recovery Act  requirements. Several selected states have generally focused on initiating  preventive maintenance projects, because these projects require less  environmental review or design work and can be started quickly. For  example, the New Jersey Department of Transportation selected 40  projects and concentrated mainly on replacement projects that require  little environmental clearance or extensive design work, such as highway  and bridge painting and deck replacement. Officials from the New York  State Department of Transportation reported that they will target most  Recovery Act transportation funds to infrastructure rehabilitation,  including preventive maintenance and reconstruction, such as bridge  repairs and replacement, drainage improvement, repaving, and roadway  construction. State officials emphasized that these projects extend the life  of infrastructure and can be contracted for and completed relatively easily  within the 3-year time frame required by the Act. The state will also target  some Recovery Act highway dollars to more typical “shovel ready”  highway construction projects for which there were previously insufficient  funds.
Some states also reported targeting funds toward projects with an  emphasis on job creation and consideration of economically distressed  areas. For example, the North Carolina Department of Transportation  plans to award 70 highway and bridge stimulus projects between March  and June, which are estimated to cost $466 million (of an expected $735  million). According to North Carolina Department of Transportation  officials, these projects were identified based on Recovery Act criteria that  priority be given to projects that are expected to be completed within 3  years and are located in economically distressed areas, among other  factors. According to Colorado Department of Transportation officials,  they are emphasizing construction projects rather than projects in  planning or design phases, in order to maximize job creation. These  projects include resurfacing and highway bridge replacements in the  Denver metropolitan area, as well as improvements to mountain highways.  The Illinois Department of Transportation reported that it is planning to  spend a large share of its estimated $655 million in Recovery Act funds for  highway and bridge projects in economically distressed areas. In March  2009, FHWA directed its field offices to ensure that states give adequate  consideration to economically distressed areas in selecting projects.  Specifically, field offices were directed to discuss this issue with the states  and to document FHWA oversight. We plan to review states’ consideration  of economically distressed areas and FHWA’s oversight in our subsequent  reports on the Recovery Act.
Several of the locations that we are reviewing have submitted  certifications that they have maintained their level of state funding of  projects (maintenance-of-effort certifications) with explanations or  conditions attached.  Seven states and the District of Columbia submitted  “explanatory” certifications—certifications that used language that  articulated assumptions or stated the certification was based on the best  information available at the time. Six states submitted “conditional”  certifications because their certifications were subject to conditions or  assumptions, future legislative action, future revenues, or other  conditions.  The remaining three states—Arizona, Michigan, and New  York—submitted certifications free of explanatory or conditional  language. On April 22, DOT informed governors that the Recovery Act  does not authorize the use of conditional or qualified certifications. The  Secretary of Transportation provided the states the opportunity to amend  their maintenance-of-effort certifications by May 22, 2009, as needed. In  future bimonthly reports, we expect to report on FHWA’s oversight of  states’ efforts to comply with the maintenance of effort requirements and  why states indicated that they believe that conditions in their states may  change such that they may not be able to maintain their levels of effort.
section_title: States Are Modifying Systems to Track Recovery Act Funds but Are Concerned about Tracking Funds Distributed Directly to Nonstate Entities
paragraphs: States’ and localities’ tracking and accounting systems are critical to the  proper execution and accurate and timely recording of transactions  associated with the Recovery Act. Officials from all 16 states and the  District of Columbia told us they have established or are establishing  methods and processes to separately identify (i.e., tag), monitor, track, and  report on the use of the Recovery Act funds they receive. The states and  localities generally plan on using their current accounting systems for  recording Recovery Act funds, but many are adding identifiers to account  codes to track Recovery Act funds separately. Many said this involved  adding digits to the end of existing accounting codes for federal programs.  In California, for instance, officials told us that while their plans for  tracking, control, and oversight are still evolving, they intend to rely on  existing accountability mechanisms and accounting systems, enhanced  with newly created codes, to separately track and monitor Recovery Act  funds that are received by and pass through the state. The Pennsylvania  Department of Transportation issued an administrative circular in March  2009 that established specific Recovery Act program codes to track  highway and bridge construction spending, including four new account  codes for Recovery Act fund reimbursements to local governments.  Several officials told us that the state’s accounting system should be able  to track Recovery Act funds separately.
State officials reported a range of concerns on the federal requirements to  identify and track Recovery Act funds going to subrecipients, localities  and other non-state entities. These concerns include their inability to track  these funds with existing systems, uncertainty regarding state officials’  accountability for the use of funds which do not pass through state  government entities, and their desire for additional federal guidance to  establish specific expectations on sub-recipient reporting requirements.  Additionally, FHWA has identified eight major risks in implementing the  Recovery Act, including states’ oversight of local public agencies and these  agencies’ lack of experience in handling federal-aid projects. Officials from  many of the 16 selected states and the District of Columbia told us that  they had concerns about the ability of subrecipients, localities, and other  nonstate entities to separately tag, monitor, track, and report on the  Recovery Act funds they receive. Given that governors have certified the  use of funds in their states, officials in many states also expressed concern  about being held accountable for funds flowing directly from federal  agencies to localities or other recipients. For example, officials in  Colorado expressed concern that they will be held accountable for all  Recovery Act funds flowing to the state, including those flowing directly to  nonstate entities, such as transportation districts, for which they do not  have oversight or information about. Officials in several states indicated  that either their states would not be tracking Recovery Act funds going to  the local levels or that they were unsure how much data would be  available on the use of these funds. For example, Pennsylvania officials  said that the state will rely on subrecipients to meet reporting  requirements at the local level. Recipients and subrecipients can be local  governments or other entities such as transit agencies. For example, about  $367 million in Recovery Act money for transit capital assistance and fixed  guideway (such as commuter rails and trolleys) modernization was  apportioned directly to areas such as Philadelphia, Pittsburgh, and  Allentown. State officials also told us that the state would not track or  report Recovery Act funds that go straight from the federal government to  localities and other entities. We will discuss these issues with local  governments and transit entities as we conduct further work.
OMB and FHWA continue to develop guidance and communication  strategies for Recovery Act implementation as it relates to non-state  recipients. To mitigate risks, such as local public agencies’ lack of  experience in handling federal-aid projects, FHWA outlined eight  mitigation strategies, including (1) providing Recovery Act guidance and  monitoring strategies for risk areas, such as sub-recipient guidance and  checklists to assist local monitoring and oversight, and (2) sharing risks  through agreement and contract modifications to help ensure oversight  and reporting of funds. To foster efficient and timely communications, in  our first bimonthly report on the Recovery Act, we recommended that  OMB develop an approach that provides dependable notification to (1)  prime recipients in states and localities when funds are made available for  their use, (2) states, where the state is not the primary recipient of funds,  but has a statewide interest in this information, and (3) all non-federal  recipients, on planned releases of federal agency guidance and, if known,  whether additional guidance or modifications are expected.
Some states also expressed concerns about the Recovery Act reporting  requirements. State officials and others are uncertain about the ability of  reporting systems to roll up data from multiple sources and synchronize  state level reporting with Recovery.gov. Some officials are concerned that  too many federal requirements will slow distribution and use of funds and  others have expressed reservations about the capacity of smaller  jurisdictions and nonprofit organizations to report data. Even those who  are confident about their own systems are uncertain about the cost and  speed of making any required modifications needed for Recovery.gov  reporting or any further data collection requirements. Some state  transportation agencies also noted concerns about the burden and  redundancy of Recovery Act reporting, including reporting for the state,  DOT and its modal offices, and Congress. In response to states’ concerns  about Recovery Act reporting requirements, in our first bimonthly report  we recommended that OMB, in consultation with the Recovery  Accountability and Transparency Board and states, evaluate current  information and data collection requirements to determine whether  sufficient, reliable, and timely information is being collected before adding  further data collection requirements. We also recommended that OMB  consider the cost and burden of additional reporting on states and  localities against expected benefits.
section_title: States’ Plans to Assess Impact of Recovery Act Funds Are in the Initial Stages
paragraphs: States vary in how they plan to assess the impact of Recovery Act funds.  Some states will use existing federal program guidance or performance  measures to evaluate impact, particularly for ongoing programs, such as  FHWA’s Surface Transportation Program. Other states are waiting for  additional guidance on how and what to measure to assess impact. Some  states indicated that they have not determined how they will assess  impact.
A number of states have expressed concerns about definitions of jobs  created and jobs retained under the Act, as well as methodologies that can  be used for the estimation of each. Officials from several of the states we  met with expressed a need for clearer definitions of “jobs retained” and  “jobs created.” Officials from a few states expressed the need for  clarification on how to track indirect jobs, while others expressed concern  about how to measure the impact of funding that is not designed to create  jobs.
Some of the questions that states and localities have raised about the  Recovery Act implementation may have been answered in part via the  guidance provided by OMB for the data elements, as well as by guidance  issued by federal departments. For example, OMB provided draft  definitions for employment, as well as for jobs retained and jobs created  via Recovery Act funding. However, OMB did not specify methodologies  such as some states have sought for estimating jobs retained and jobs  created. Data elements were presented in the form of templates with  section-by-section data requirements and instructions. OMB provided a  comment period during which it is likely to receive many questions and  requests for clarification from states, localities, and other entities that can  directly receive Recovery Act funding. OMB plans to update this guidance  again in the next 30 to 60 days. 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 our  first bimonthly report that OMB continue its efforts to identify appropriate  methodologies that can be used to assess jobs created and retained from  projects funded by the Recovery Act, determine the Recovery Act  spending when job creation is indirect, and 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.
Some states are also pursuing a number of different approaches for  measuring the effects of Recovery Act funding for transportation projects.  For example, the Iowa Department of Transportation tracks the number of  worker hours by highway project based on contractor reports and will use  these reports to estimate jobs created. New Jersey Transit is using an  academic study that examined job creation from transportation  investment to estimate the number of jobs that are created by contractors  on its Recovery Act-funded construction projects. In addition, Mississippi  hired a contractor to conduct an economic impact analysis of  transportation projects.
section_title: Other Recovery Act Initiatives
paragraphs: As previously mentioned, we will be reporting further on states’ and  localities’ use of Recovery Act funds, including maintenance of effort and  projects in economically distressed areas. In addition, we plan to  undertake or are already conducting these other assessments of Recovery  Act activities that fall within the Committee’s interests:    Supplementary discretionary grants: The Act provides $1.5 billion to be  awarded competitively to state and local governments and transit agencies  for surface transportation projects that will have a significant impact on  the nation, a metropolitan area, or a region. This is a new program and the  Act requires that DOT publish its grant selection criteria by mid-May. We  expect to assess how DOT developed its criteria and plan to report several  weeks after the criteria are published.
High-speed rail: The Act provides about $8 billion for projects that  support intercity high-speed rail service. This is also a new program. Our  work will likely focus on assessing how DOT is developing a program that  will increase the chances of viable high-speed rail projects, consistent with  recommendations we recently made on the development of high-speed  rail. We expect to start this work later this year.
Federal buildings: The Act provides about $5.6 billion for the General  Services Administration (GSA) to spend on projects related to its federal  buildings, primarily to convert existing buildings to high-performance  green buildings. As a part of our ongoing work to report on agencies’  implementation of the Energy Independence and Security Act of 2007,  which among other things calls for agencies to increase the energy  efficiency and the availability of renewable energy in federal buildings, we  plan to assess the impact of Recovery Act funding on GSA’s ability to meet  the 2007 energy act’s high-performance federal building requirements. In  addition, in coordination with GSA’s Office of Inspector General, this  summer, we plan to review GSA’s conversion of existing federal buildings  to high-performance green buildings.
We will work with this Committee as we begin work in these areas and in  other areas in which the Committee might be interested.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or other Members of the Committee  might have.
section_title: Contact and Acknowledgments
paragraphs: For further information regarding this statement, please contact Katherine  Siggerud at (202) 512-2834 or siggerudk@gao.gov. Contact points for our  Congressional Relations and Public Affairs offices may be found on the  last page of this statement. Individuals who made key contributions to this  statement are Daniel Cain, Steven Cohen, Heather Krause, Heather  Macleod, and James Ratzenberger.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.