Trade Adjustment Assistance: One-Time Grants Awarded to Trade- Impacted Communities; Results Will Not Be Known until after 2013
Released: 2012-09-26T00:00:00

Letter

Background

CTAA is one of three programs under TAA for Communities. EDA administered the CTAA program and currently administers several other grant programs that promote economic growth throughout the United States, helping communities and regions prepare for growth and success in the global economy. The Department of Labor administers the other two TAA for Communities programs—the Community College and Career Training Grants and the Industry or Sector Partnership Grants. The Community College and Career Training Grants are ongoing. Congress did not appropriate funds for the Industry or Sector Partnership Grants and repealed the program in fiscal year 2012.

CTAA grants were aimed at helping small and medium-sized communities develop long-term strategic plans to address economic development challenges in regions experiencing the loss of firms and jobs due to competition from imports or to implement the projects in such plans. The CTAA program was designed to supplement other TAA programs by providing assistance specifically to trade-impacted communities. EDA awarded CTAA grants to 36 communities throughout the United States (see fig. 1). The grants, which totaled $36.8 million, are administered by EDA’s six regional offices located in Atlanta, Austin, Chicago, Denver, Philadelphia, and Seattle.

EDA awarded two types of CTAA grants—(1) grants to develop a strategic plan to help the community adjust to trade impacts and to promote economic diversification and (2) grants to implement projects or programs in an existing strategic plan. (See table 1 for examples of these grants.grants and 80 percent were implementation grants. ) About 20 percent of the 36 CTAA grants were strategic planning the Department of Labor’s TAA for Workers, the Department of Commerce’s TAA for Firms, and the Department of Agriculture’s TAA for Farmers (which also covers fishermen).

However, there were no certifications under the TAA for Farmers program from January 1, 2007, through January 31, 2010, and certifications under this program therefore were not a factor in identifying trade-impacted communities. According to the CTAA federal funding opportunity, EDA deemed communities significantly impacted by trade if they had at least 8.25 workers per 1,000 workers impacted by TAA program certifications.

EDA Awarded CTAA Grants Using Its Standard Grant Process but Reported Some Program- Specific Challenges

We found that EDA announced and reviewed CTAA grant applications using the standard process it uses for awarding other grants, with modifications related to CTAA program eligibility. EDA officials in each regional office conducted a merit review using six award criteria. Our file review and interviews with EDA regional offices show that EDA awarded the grants using the process outlined in the CTAA federal funding opportunity—the grant application announcement. While they followed a process that was standard for the agency, EDA officials reported several challenges in administering the program. First, officials highlighted the upfront effort required to set up the new program. Second, officials said they had a relatively short amount of time to conduct outreach to potential applicants and receive applications. Third, officials said they experienced problems in creating and maintaining an accurate list of counties that would be eligible for the program on the basis of TAA for Workers certifications.

EDA Used Its Standard Process to Announce, Review, and Award Grants

EDA outlined its process for awarding the CTAA grants in its federal funding opportunity and program regulations. EDA officials said that this process was similar to the standard process they use to administer other EDA grant programs, but with some modifications to address the unique aspects of the CTAA program. In our sample of 12 of the 36 CTAA grants, we found that EDA followed the process outlined in the federal funding opportunity to announce, review, and award CTAA grants.

After Congress established the CTAA program in February 2009, EDA took steps to start up the program and provide guidance to EDA regional office staff and applicants. EDA developed new regulations and designed the CTAA federal funding opportunity, which incorporated the key eligibility requirement that communities must be significantly impacted by trade. The agency issued program implementation regulations in August 2009 and announced the CTAA federal funding opportunity in January 2010. EDA regional office staff said that EDA headquarters officials provided guidance on program implementation by holding conference calls and providing training on how to assess the merits of the applications. In addition, EDA issued responses to a list of frequently asked questions to provide additional guidance to regional office staff and applicants.

To help coordinate assistance to communities through the implementation of the CTAA program, the TGAAA required EDA to establish and participate in an Interagency Community Assistance Working Group. The working group consisted of participants from EDA’s Trade Adjustment Assistance Division, the Department of Labor’s TAA for Workers Program, and the Department of Agriculture’s TAA for Farmers program. The working group held periodic discussions on CTAA implementation in 2010, with much of the focus on coordinating the process for certifying communities as eligible to apply for CTAA funding. Each agency also provided updates and shared best practices on implementation of the newly reauthorized TAA programs. EDA officials said that even though the program was repealed, they plan to continue to work closely and regularly with the TAA for Workers program, sharing information related to TAA for Firms and TAA for Workers certifications and providing referrals across programs to ensure that agency officials are aware of the benefits of each program.

We have previously reported on steps that agencies should take to improve oversight and internal controls in the grant management process, including steps within the preaward, award, implementation, and closeout stages. EDA’s grant management process is very similar to the grant management process described in our previous report. EDA regional office staff described the steps they took and provided documents that showed they followed their standard grant award process as outlined in the CTAA federal funding opportunity to administer the program. Each regional office reported having conducted outreach, provided technical assistance, received grant applications, and reviewed the applications in their respective states (see fig. 3).

Outreach and technical assistance. Because the eligibility requirements were different for the CTAA program than for EDA’s other grants programs, EDA headquarters officials developed a list of counties that were eligible for the program and notified elected state officials of the existence of the list. EDA regional staff also said that they conducted outreach through their network of Economic Development Districts. Some regional officials said that they also reached out directly to communities they knew were negatively affected by trade. EDA regional staff said that they provided technical assistance to applicants as needed.

Receipt of applications and technical review. EDA regional offices received more than 130 CTAA applications. Applicants were required to submit full applications by April 20, 2010. In our review of 12 grant files, we found that the applicants submitted their applications prior to this date. EDA regional staff said that they conducted a technical review of each application, verifying, among other things, the eligibility of the applicant as outlined in the federal funding opportunity. EDA regional staff said applications that did not pass the technical review did not move forward to the next stage, the merit review.

Merit review. According to EDA regional staff and training documents, EDA staff and other federal employees conducted a merit review of applications that passed the technical review and scored the applications on the basis of EDA’s award criteria (see table 2). According to EDA documentation of the final rankings that we reviewed, EDA used the scores to rank the applications within one of the following categories: below average, average, good, or excellent.

Grant award. EDA officials said that they awarded the CTAA grants in accordance with the review panel and selection process outlined in the federal funding opportunity. The Investment Review Committee at each regional office, consisting of the office’s managers, reviewed and discussed the merit review panel’s process and recommendations. Our review of each regional office’s committee meeting records showed that each committee approved the recommendations and forwarded the ranked list of applications to the selecting official—the Regional Director. The Regional Director in each office then reviewed applications and could select applicants outside of the ranked order, taking into consideration factors such as the availability of program funding, the geographic distribution of grants, and the diversity of applicants. After the Regional Director selected the grant award recipients, EDA notified the recipients and issued grant award documents.

EDA Officials Reported CTAA-Specific Challenges Related to the Grants Award Process

EDA officials cited several challenges that they faced in implementing the CTAA program. First, they highlighted difficulties associated with setting up the new program. EDA headquarters staff noted that setting up a new program required considerable effort because they were required to develop entirely new regulations instead of integrating CTAA funding into an existing EDA program. After the TGAAA established the program in February 2009, EDA issued program implementation regulations for comment in May 2009 and finalized the program regulations in August 2009. EDA then issued its federal funding opportunity for public comment in December 2009 and issued the final federal funding opportunity announcement in January 2010. EDA officials said that they had to incorporate the program’s complex trade-impact eligibility criteria into the new program regulations and the federal funding opportunity, which required that they modify standard processes and award criteria appropriately. They noted that determining significant trade impact on communities was complex and time consuming. Several EDA regional officials also mentioned that there was an administrative burden in having to learn the requirements and procedures of a new program. In addition, four of the six regional offices hired a combined total of six new staff members to administer the program, and EDA officials said existing staff were pulled away from working on other EDA programs to respond to the demands of administering CTAA.

A second challenge cited by EDA officials was having to obligate all program funds by the end of fiscal year 2010. EDA officials said they had a relatively short amount of time—a little over 3 months—to conduct outreach to potential applicants in the period between the federal funding opportunity announcement in January 2010 and the application deadline of April 20, 2010. EDA officials from some of the regional offices said that the short time frame may have led to EDA’s receiving fewer applications than if the application period had been longer. They said that as a result, some applicants may not have had enough time and resources to develop their proposal, identify funds to meet the cost share requirements, and build regional partnerships required to produce a complete application.

Third, EDA headquarters officials expressed concern over the reliability of a list of more than 450 eligible counties that they compiled and published to assist communities in demonstrating trade impact. EDA used the list to notify the communities that they were eligible to apply for the grant. However, EDA reported in issuing an updated version of the list that some eligible communities may not have been included, and the list may have included some ineligible communities. EDA subsequently required all counties that appeared on the list to provide TAA certification data to establish eligibility. An EDA official said the list of eligible counties was difficult to create. For example, the list depended on Department of Labor data on TAA for Workers certifications; however, these data include city and state information but not county information. In 9 of the 12 grant files we reviewed, the applicants provided evidence that they were on the list to show their eligibility, in addition to evidence of TAA for Workers certifications. Despite the concerns that EDA identified with the list, we noted that all 12 files we reviewed showed evidence of trade impact and that EDA had determined that they were eligible for the program.

EDA Continues to Monitor Grants but Will Not Be Able to Assess Effectiveness until after 2013

EDA continues to monitor CTAA grants through its standard process of reviewing periodic progress and financial reports that grantees are required to submit. In our review of a sample of EDA grant files, we found no gaps in the regional offices’ collection of required progress and financial reports. Seven of the 36 projects had been completed as of the publication of this report, with an additional 6 slated to conclude by the end of September 2012. Grantees with construction projects are required to report on certain EDA performance measures—such as the number of jobs created and retained—3, 6, and 9 years after the award. In 2013, those grantees will be required to report measures relating to jobs created, jobs retained, and level of new private investment. At that point, according to agency officials, EDA will have more information about whether the projects are on track to meet their goals for jobs created, jobs retained, and the amount of private investment leveraged. EDA noted in its agency comments that it will not know the outcomes of the grants until 2019, when the grantees will submit final nine-year reports on project impact.

EDA Continues to Monitor Grants through Standard EDA Monitoring Mechanisms

EDA has begun to disburse the funds associated with the 36 CTAA grants and continues to monitor their progress by using a standard process in which grantees must submit periodic progress and financial reports (see fig. 4). After awarding the grants from July to October 2010, EDA began disbursing CTAA funds in late 2010. Adhering to its standard process, EDA provides CTAA funds in response to disbursement requests from the grantees and will continue to disburse funds until the projects are completed. EDA’s standard terms and conditions for any grant specify that the communities will be reimbursed with grant funds after grantees document payments of approved project expenses, up to the full amount of the cost that EDA has agreed to share. As of the publication of this report, 7 of the 36 projects had been completed, and another 6 were expected to be completed by the end of September 2012.

EDA regional officials said that they monitor grants in several ways, which are consistent with EDA grants management guidance and procedure. For example, they receive financial reports, performance reports, budget documents, and requests for disbursement from the grantee. The requirements for each grant are specified in the conditions of the grant award contracts. EDA officials reported that they review all of these documents, which contain information such as whether the design of the project is complete or construction has started and whether the grantees are able to fund their portion of the project. EDA officials said that they stay in contact with grantees mostly through phone calls and e-mails and that they conduct site visits, although these are relatively limited due to budget constraints. Within the EDA regional offices, engineers perform the monitoring of CTAA grants for construction projects, and EDA project managers monitor the grants for development of strategic plans. CTAA grant monitoring has been absorbed into the routine workload of these regional office officials. One engineer told us that on average he monitors about 50 EDA grants at any given time, of which just one is a CTAA grant. Another engineer agreed that this is a fairly standard monitoring workload. In our review of 12 of the 36 grant files, we found no evidence of deficiencies in the required performance and financial reports that EDA regional offices received from grantees. The documentation also corroborated the descriptions of follow-up activity provided by staff at each regional office.

Because many of the CTAA grants funded construction projects that are still in progress, EDA regional offices continue to monitor these grants (see fig. 5 below). Several of the strategic planning projects have been completed and were closed out by EDA regional offices. EDA closes out a grant after it receives the final progress, financial, and audit reports.

EDA officials noted one challenge they experienced in implementing the CTAA grants. All CTAA grant funds had to be obligated by the end of fiscal year 2010, though they could be disbursed over several years. Thus, EDA had to award its grants during a single fiscal year, which limited the agency’s ability to amend grants, because any changes had to be consistent with the original project intent, scope, and budget. EDA officials stated that since other community grant program funding does not expire at the end of the fiscal year, they can make changes to grants for construction projects as long as these changes relate to the original scope and are properly documented. Officials indicated the stricter conditions on changing the terms of CTAA grant awards pose a particular challenge with construction-related projects, because unforeseen circumstances such as delays or changes in management may require major changes in such projects. Officials stated that because EDA cannot change CTAA grants, communities with construction projects that require major changes may not be able to spend their grant money in time, which could result in deobligated funds.

EDA Will Collect Performance Data on Projects, but It Is Too Early to Determine Their Effectiveness

All EDA grant recipients, including recipients of CTAA grants for implementation projects, are required to provide data on jobs created, jobs retained, and the amount of private investment leveraged. They provide these data at 3, 6, and 9 years after the date of the grant award. CTAA grantees with implementation projects will begin to report on these measures starting in 2013. Consequently, EDA will not be able to determine the effectiveness of the program until then or later. Using estimates in the grant applications for the 36 CTAA awards, EDA projects that the program will result in 6,586 jobs being created and 1,892 jobs being saved once all the projects are implemented. EDA noted that it does not have job creation projections for strategic planning grants, although it expects those strategic plans to lead to job creation in the future. EDA’s fiscal year 2011 annual report to Congress notes the results of EDA’s economic development investments are often realized years after the initial investment.

EDA provided some examples of projected potential job creation through CTAA grant projects:

200 jobs may be created as a result of a project to develop a business park in Lincoln County, North Carolina;

300 jobs may be created as a result of a project to expand and improve facilities at a former Air Force Base in Blytheville, Arkansas; and

311 jobs may be created and 255 retained as a result of a project to create a business center to assist entrepreneurs in Boise, Idaho.

In its agency comments, Commerce noted that they will not know the outcome of the projects until 2019, when the grantees submit their final nine-year reports on project impact.

CTAA Targeted Trade- Impacted Communities; Some May Not Have Qualified for Other EDA Programs, and Some May Have

Our review of how the CTAA program compared with other EDA grant programs shows that while the CTAA grants targeted trade-impacted communities, some grantees might have been eligible for other EDA grant programs. EDA officials identified two other programs that target economically distressed communities—EDA’s Economic Adjustment Assistance (EAA) and Public Works—which may have been able to provide assistance to CTAA communities. We found that EDA, through CTAA grants, assisted some trade-impacted communities that may not have qualified for EDA’s other community grant programs due to differences in eligibility and cost-share requirements. However, EDA officials also provided some specific examples of CTAA grantees that may have qualified for the EAA or Public Works programs. Although officials credited the CTAA program with providing additional funding to assist more communities, some officials suggested that funding for trade- impacted communities could have been designated within, and similar services could have been delivered through, EDA’s existing programs.

CTAA Grants Targeted Some Trade-Impacted Communities That May Not Have Qualified for Other EDA Programs

EDA officials said that the CTAA grants targeted some trade-impacted communities that may not have qualified for EDA’s other community grant programs—EAA and Public Works. While CTAA and the EAA and Public Works programs all funded similar activities, such as construction projects, there are differences between CTAA’s eligibility and cost-share requirements and those of the other two programs, which have the same requirements. Table 3 provides a comparative overview of the three programs.

As shown in table 3, CTAA targeted trade-impacted communities, and EAA and Public Works targeted economically distressed communities. Communities that were eligible for the CTAA program had workers or firms certified as trade-impacted by other TAA programs.EAA and Public Works assistance, communities must demonstrate economic distress by documenting high unemployment levels or low per capita incomes.

Some officials stated that CTAA funds were needed for trade-impacted communities because those communities are not necessarily a subset of economically distressed communities. For example, officials said communities in western Montana that received CTAA grants might not have been eligible for the EAA and Public Works programs, because they have low unemployment levels. However, due to the increase in timber imports from Canada, many communities in western Montana were trade impacted. EDA officials also noted it takes time for trade impacts to be reflected in the unemployment rates or per capita incomes, particularly in urban areas. As a result, the city of Chicago or Orange County, California, may have been less likely to receive grants under the other programs, but EDA officials did award CTAA grants to these locations on the basis of trade impacts.

The CTAA program also required recipients to contribute a much lower percentage of their own funds to their projects. As shown in table 3, EDA required communities in the CTAA program to provide between 5 and 25 percent of the costs of the grants, while EDA requires communities in the EAA and Public Works programs to provide up to 50 percent of the costs. The higher level of EDA funding provided through the CTAA program may have led some communities to apply for grants and to implement projects that they would not otherwise have been able to carry out.

EDA Officials Said CTAA Assisted Some Communities That Could Have Qualified for Other EDA Grant Programs

EDA officials said that some of the trade-impacted communities assisted by the CTAA program could have qualified for and received similar assistance from the EAA and Public Works programs. Although EDA officials credited the CTAA program with providing a funding stream to assist more communities, some officials suggested that funding for trade- impacted communities could have been designated within, and similar services could have been delivered through, EDA’s existing programs, for the following reasons:

CTAA communities met the primary eligibility requirements. Many of the communities that applied for CTAA program assistance demonstrated sufficiently high unemployment rates or low per capita incomes. For example, EDA officials said one CTAA grantee was located in one of the nation’s most economically depressed areas, which also happened to be impacted by trade.

CTAA communities could qualify under the special need category. In addition to the main eligibility requirements, the EAA and Public Works programs can provide grants in special circumstances, which can include the closing or restructuring of an industrial firm or loss of a major employer and the negative effects from changing trade patterns.

CTAA communities could implement similar projects. The EAA program offers nonconstruction grants and the Public Works program offers construction grants similar to those offered by the CTAA program. For example, one grantee applied for both CTAA and Public Works grants to make infrastructure improvements to a multitenant manufacturing building. The grantee was eligible for both programs, but EDA awarded the community a CTAA grant.

Additionally, EDA said that CTAA was duplicative of the EAA and Public Works programs, since these programs could have met the needs of trade-impacted communities. As noted above, the administration proposed to discontinue the CTAA program in 2012, contending that EDA could provide similar assistance to communities at a lower cost through its EAA program (see table 4 for more on the funding of these programs). Congress responded by repealing the CTAA program in 2012.

Agency Comments

We provided a draft of this report to the Department of Commerce for comment. We received written comments from Commerce, which are reprinted in appendix IV. In its comments, Commerce concurred with this report and provided additional information clarifying that the outcomes of the CTAA grants may not be known until 2019, when the final nine-year reports on impact will be provided by the grantees. Commerce also provided further information on planned improvements to EDA’s performance measures.

We also received technical comments from Commerce that were incorporated into the report.

We are sending copies of this report to the appropriate congressional committees, the Department of Commerce, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-4101 or gomezj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.

Appendix I: Scope and Methodology

To determine how Commerce made grant award decisions, we reviewed relevant laws and regulations, the CTAA federal funding opportunity, and grant files. We interviewed responsible EDA officials at headquarters and in the six regional offices and conducted a site visit to the Philadelphia Regional Office to gain an understanding of their grant solicitation, approval, and oversight processes. We interviewed agency officials at headquarters to gain an understanding of the agency’s establishment of and participation in the Interagency Community Assistance Working Group.

To provide an in-depth review of the grant award process and monitoring, including whether EDA followed its procedures, we obtained and reviewed supporting documentation for the program. We selected a nonprobability sample of 12 grant recipients for a file review. We used a data collection instrument to review the sample of grant files against the process and requirements outlined in the CTAA federal funding opportunity, or the grant application announcement. In each file, we reviewed applications, agency reviews of the applications, documentation of the award process and decisions, and progress and financial reports. Because we selected a nonprobability sample of grant recipients, the information we obtained from these reviews cannot be generalized to the whole group of 36 grant recipients. We selected the sample of 12 grant recipients to provide a variety of grant awards on the basis of region, grant amount, and grant type—whether the purpose of the grant was to help a community develop a strategic plan or implement part of an existing strategic plan. The characteristics of our sample are listed below.

To determine the number of grant files to select from each regional office, we considered the distribution of CTAA funding. As a result, we selected four grant files from Chicago; three from Atlanta; two from Philadelphia; and one each from Seattle, Austin, and Denver.

We selected grants representing the range of grant award amounts.

The 36 CTAA grant award amounts ranged from $53,000 to $3.5 million. The grant award amounts in our sample ranged from $75,000 to $3 million.

To determine the number of implementation grants versus strategic planning grants to select, we considered the proportion of each type receiving grant awards. For the implementation grants, we also selected recipients according to the proportion of implementation grants with construction projects. As a result, we selected 10 implementation grants—4 with construction projects and 6 with nonconstruction projects—and 2 strategic planning grants.

In addition, our sample contained a mix of urban and rural communities as well as a mix of grantee types. The sample included three grant recipients that were an Economic Development District, five counties, three cities or towns, and one that was a combined recipient of a county and an Economic Development District.

To identify the mechanisms that EDA established to monitor the grants and evaluate their effectiveness, we reviewed program information, agency documentation, and data on the status of the grants. We reviewed monitoring documents, such as progress and financial reports, in our grant file review. We also interviewed EDA regional officials regarding their grant monitoring procedures, challenges they encountered in monitoring the grants, and their plans for evaluating the effectiveness of the program.

To determine how the CTAA program compared with other EDA community grant programs, we obtained agency information on the goals, eligibility, activities, and targeted recipients of the CTAA program and other EDA community grant programs. We interviewed EDA officials to gain an understanding of the client base for each program and to identify examples of CTAA grantees that may have qualified and those that may not have qualified for multiple programs.

We conducted this review from March 2012 through September 2012 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.

Appendix II: CTAA Grant Awards: Grantees, Amounts, and Grant Purpose

Grantee

Appendix III: TAA Programs at a Glance: Responsible Agencies, Service Structures, Types of Assistance, Number Assisted

Service structure State and local workforce agencies provide assistance to workers covered by certified petitions.

Type of assistance Provides funds for services and benefits including: training, case management and reemployment services, income support, job search and relocation allowances, wage supplement allowance for older workers, and eligibility for health coverage tax credit.

The National Institute of Food and Agriculture develops and delivers training and technical assistance to groups of farmers or fisheries.

Provides funds for technical assistance (training and business plan development) and cash payments to implement business plans.

EDA provides funding to 11 Trade Adjustment Assistance Centers. The Centers provide funds for consultants, engineers, designers or industry experts to work with firms.

Provides funds to develop adjustment proposals (business recovery plans) including work in such areas as engineering, information technology, management, market development, quality improvement, and sales.

The Economic Development Administration awards grants to communities.

Provides grant funding for strategic planning or implementing a project or program as part of a strategic plan.

The Employment & Training Administration awards grants to institutions of higher education.

Provides grant funding to institutions of higher education to develop or improve education and career training programs for persons eligible for the Workers program.

2011: 32 institutions of higher education or consortia Congress repealed the CTAA program in fiscal year 2012. Congress did not fund the Industry Sector Partnership grant program and repealed it in fiscal year 2012.

Appendix IV: Comments from the Economic Development Administration

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Kim Frankena (Assistant Director), Christina Bruff, David Dayton, Leah DeWolf, David Dornisch, Etana Finkler, Bradley Hunt, Ernie Jackson, Erin Preston and Jeremy Sebest made key contributions to this report.