The National Guard Youth Challenge Program is a 17-month program that serves at-risk youth at 29 sites in 24 states and Puerto Rico. The purpose of the program is to improve the education, life skills, and employment potential of students by providing military-based training, supervised work experience, and knowledge in eight core program components. Students must be 16 to 18 years old, drug-free, unemployed, high school dropouts, and not in trouble with the law. NGB reports that more than 59,000 students have been graduated from the Challenge Program since it began as a pilot in 1993. The program was authorized by 32 U.S.C. §509 on a permanent basis in fiscal year 1998, at which time states were to begin paying a share of operating costs. Each Challenge Program site operates two residential classes per year, one of which begins in January and the other around July. A typical graduation goal is 100 students per class, or 200 per year, although several programs graduate more students. In 2004, for example, Illinois graduated almost 800 students in 2004, and Louisiana’s three sites combined graduated more than 950 students. The residential phase of the program runs 22 weeks and includes a 2-week Pre-Challenge phase. During Pre- Challenge, applicants are assessed for their ability and motivation to complete the remaining 20 weeks of the residential program. Those who successfully complete Pre-Challenge are then formally enrolled in the Challenge Program in numbers that equal each program’s graduation target plus normal program attrition rate. In the residential phase, students receive military-based training and supervised work experience. Additionally, each state develops a curriculum that incorporates the eight core components and the tasks, conditions, and standards that students must complete to demonstrate progress in those components. Each student must receive a score of at least 80 percent on each core component to be graduated from the program. During the 12-month post-residential phase, individuals who have successfully completed the residential phase are involved in placement activities, which include employment, education, volunteer activities, or any combination of the three or military service. The graduates work with adult mentors who were matched with them during the residential phase. These mentors provide guidance and support to the graduates and are required to contact the youths twice each month at a minimum. Program staff use the written, post-residential action plan that each student prepares and updates during the residential phase to monitor placement activities. Mentors also use this plan during their interactions with graduates. The Challenge Program reports youth placement activities at the end of the 12-month follow-up period. To further assess the long-term impact of the program, NGB has contracted with AOC Solutions to conduct a retrospective longitudinal study of program graduates as well as students who did not complete the program. Prior to 1998, the federal government, through DOD, completely funded the Challenge Program. In fiscal year 1998, Congress began requiring states to provide a minimum of 25 percent of their programs’ operating costs. The state cost share increased 5 percent each year until fiscal year 2001, when it reached the current funding requirement of 40 percent. Although some states had provided more funds than required in the past, program funding each year is now determined by the 40 percent share, which is based on $14,000 for each youth targeted for graduation. In addition to the federal and state funds used to operate the program sites, DOD also provides funds for NGB management expenses such as program evaluations, contractor-provided training, and travel for training and workshops. These NGB program management costs are not subject to the federal/state 60/40 cost share requirement. Each state submits a budget to NGB that is based on that state's target for number of graduates. Since the program’s inception, the funding provided by NGB has been based on a cost per student of $14,000. For example, if a state has a target of 100 students per class (200 per year) to graduate, the estimated program costs would be $2.8 million. The federal contribution, or 60 percent of the total, would be $1.68 million, while the state contribution would be $1.12 million. To receive federal funding, a state must certify that it has sufficient funds to provide its 40 percent share. State funds can be composed of cash, noncash supplies, services, or a combination of these sources. States are allowed to provide additional funding (over and above the 40 percent share) to the program from sources such as individual and corporate donations, additional moneys from the state general fund or other state revenue sources, or other federal funding. Some Challenge Program sites, for example, operate as alternative schools and are reimbursed by their state education agencies for portions of their program costs. Reserve Affairs, under the authority of the Under Secretary of Defense for Personnel and Readiness, is responsible for preparing the annual budget and reviewing state budgets and funding certifications. Reserve Affairs is to monitor program compliance with DOD policy, issue supplemental policy guidance, and submit the Challenge Program annual report to Congress. NGB provides day-to-day administration and oversight of the Challenge Program, issuing regulations, and submitting budgets and annual report drafts to Reserve Affairs. NGB has contracted with AOC Solutions to assist with the oversight of the Challenge Program. AOC Solutions performs the annual operational evaluations and the biennial resource management reviews. This contractor also pulls together the program information for the annual report and maintains and oversees the Data Management and Reporting System (DMARS), which is used to collect student data and report on individual and program activities. NGB has also contracted with Dare Mighty Things to provide training and technical assistance to Challenge Program staff. Finally, NGB has United States property and fiscal officers in each state who are responsible for receiving and accounting for all federal Challenge Program funds and property under control of the National Guard in that state. The property and fiscal officers are also responsible for ensuring that federal funds are properly obligated and expended. NGB enters into cooperative agreements with governors of states approved to participate in the Challenge Program. The cooperative agreements describe the responsibilities of the states and NGB as well as the funding, costs, and regulations for operating National Guard Youth Programs. The cooperative agreements also define the eight core components and provide guidance on how to run the residential and post- residential phases and other aspects of the Challenge Program. Each Challenge Program state is also required to submit state plans and budget estimates for their state. These state plans must include details on the state’s procedures and be consistent with overall program guidance provided by DOD. For example, state plans include information on application and selection procedures, staffing and staff training, and a detailed budget. According to NGB, Challenge Program expenditures and state participation have increased since the program began, and the program has achieved positive program performance outcomes over time. Since the program’s inception, total expenditures have increased from about $63 million to about $107 million per year. The number of states participating in the Challenge Program has also increased, and several states have expressed interest in adding a program or expanding existing ones. Challenge sites must account for their activities throughout the year, and NGB has reported positive performance outcomes over time. NGB reports that overall federal expenditures for the Challenge Program have increased over time, but states have also increased their expenditures since the program was permanently authorized in fiscal year 1998. Between fiscal years 1998 and 2004, total expenditures for the Challenge Program, including funds spent to cover the federal and state cost shares and federal management expenses, have increased from about $63 million to about $107 million. For fiscal year 2004, for example, NGB expenses included $61.6 million for the federal cost share and $5.8 million for NGB management costs, while states contributed approximately $40.5 million. In addition, in 2000 and 2001, the Challenge Program received $5 million and $7,483,500 respectively from the Department of Justice. Reserve Affairs stated that the primary use of these funds has been to start new Challenge Program sites. Since 2001, four programs were established using these funds and three programs’ operations were maintained in 2002. In total, approximately $5.97 million remain unspent in a nonexpiring account. Officials at Reserve Affairs and NGB told us that these funds remain unspent because no new Challenge Programs have started. According to these officials, new programs have not been established because state governments have not committed the required 40 percent match. (See fig. 1 for total program expenditures from fiscal year 1998 to 2004, broken down by federal and state cost share and NGB management expenses.) When the pilot program began in 1993, there were 10 Challenge Program sites in 10 states. The program has now grown to 29 sites in 24 states and Puerto Rico. In fiscal year 2005, Wyoming received funds to start up a program site. According to NGB, Wyoming will begin its first class in January 2006. In addition to those states currently operating Challenge Program sites, there are also nine states that have expressed interest in establishing new programs. For example, according to NGB officials, representatives from Washington and Indiana National Guard units have visited some existing program sites and are in the process of developing state programs. Other states are interested in expanding their programs to serve more youth at existing sites or to open new locations. On the other hand, for various reasons including difficulty meeting the state match requirement, lack of state support, and substandard facilities, four states have discontinued their Challenge Programs. Connecticut, a pilot program state, dropped its program in 1994 after two classes. Colorado discontinued its program after 1999, Missouri after 2002, and New York after 2003. Figure 2 describes the number of Challenge Program sites for each year since the program began. Appendix II identifies the individual states with Challenge Program sites. Student participation in and graduation from the Challenge Program have also increased over time.